What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-15 compared with 2021-02-17 · 321 added, 1562 removed, 86 unchanged (96% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of

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

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

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

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

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

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

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

to, those discussed in

this Annual Report on Form 10-K, and in particular the risks discussed under

the caption “Risk Factors” in Item 1A

of this report and those that may be discussed in other documents we file with

the Securities and Exchange

Commission (SEC).

Forward looking statements include the overall impact of the Novel Coronavirus

(COVID-19) on the Company, its results of operations, liquidity, and financial condition (including any estimates

of the impact on these items), the rate and consistency with which dental

and other practices resume or maintain

normal operations in the United States and internationally, expectations regarding personal protective equipment

(“PPE”) and COVID-19 related product sales and inventory levels and whether

additional resurgences of the virus

will adversely impact the resumption of normal operations, the impact

of restructuring programs as well as of any

future acquisitions, and more generally current expectations regarding

performance in current and future periods.

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

to make additional testing available, the

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

and the timing for availability, the nature

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

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

and (ii) potential for the

Company to distribute the COVID-19 vaccines and ancillary supplies.

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

current and historical results

include, but are not limited to:

risks associated with COVID-19,

as well as other disease outbreaks, epidemics,

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

disasters or acts of terrorism;

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

our ability to develop or acquire and

maintain and protect new products (particularly technology products) and

technologies that achieve market

acceptance with acceptable margins;

transitional challenges associated with acquisitions,

dispositions and joint

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

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;

In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein.

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

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

These statements are generally identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to make” or other comparable terms.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, and in particular the risks discussed under the caption “Risk Factors” in Item 1A of this report and those that may be discussed in other documents we file with the Securities and Exchange Commission (SEC) .

Forward looking statements include the overall impact of the Novel Coronavirus Disease 2019 (COVID-19) on the Company, its results of operations, liquidity and financial condition (including any estimates of the impact on these items), the rate and consistency with which dental and other practices resume or maintain normal operations in the United States and internationally, expectations regarding personal protective equipment (“PPE”) and COVID-19 related product sales and inventory levels, whether additional resurgences or variants of the virus will adversely impact the resumption of normal operations, whether vaccine mandates will adversely impact the Company (by disrupting our workforce and/or business), whether supply chain disruptions will adversely impact our business, the impact of restructuring programs as well as of any future acquisitions, and more generally current expectations regarding performance in current and future periods.

Forward looking statements also include the (i) ability of the Company to have continued access to a variety of test types, expectations regarding COVID-19 test sales, demand and inventory levels, as well as the efficacy or relative efficacy of the test results given that the test efficacy has not been, or will not have been, independently verified under normal FDA procedures and (ii) potential for the Company to distribute the COVID-19 vaccines and ancillary supplies.

Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to:

risks associated with COVID-19 and any variants thereof, as well as other disease outbreaks, epidemics, pandemics, or similar wide-spread public health concerns and other natural disasters;

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

our ability to develop or acquire and maintain and protect new products (particularly technology products) and technologies that achieve market acceptance with acceptable margins;

transitional challenges associated with acquisitions, dispositions and joint ventures, including the failure to achieve anticipated synergies/benefits;

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

certain provisions in our governing documents that may discourage third-party acquisitions of us;

effects of a highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating market;

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

changes in the health care industry;

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;

comply with existing and future regulatory

requirements;

risks from expansion of customer purchasing power and multi-tiered costing structures;

increases in shipping costs for our products or other service issues with our third-party shippers;

general global macro-economic and political conditions, including international trade agreements, potential trade barriers and terrorism;

failure to comply with existing and future regulatory requirements;

risks associated with the EU Medical Device Regulation;

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;

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

failure to comply with laws and regulations relating to the collection, storage and processing of sensitive personal information or standards in electronic health records or transmissions;

changes in tax legislation;

risks related to product liability, intellectual property and other claims;

litigation risks;

new or unanticipated litigation

developments and the status of litigation

new or unanticipated litigation developments and the status of litigation matters;

risks associated with customs policies or legislative import restrictions;

cyberattacks or other privacy or data security breaches;

risks associated

with our global operations;

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

and disruptions in financial

The order in which these factors appear should not be construed

to indicate their relative importance or

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

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

of actual results.

risks associated with our global operations;

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

and disruptions in financial markets.

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

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.

Can Find Important Information

Where You Can Find Important Information

We may disclose important information through one or more of the following channels:

SEC filings, public

conference calls and webcasts, press releases, the investor relations

page of our website (www.henryschein.com)

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

SEC filings, public conference calls and webcasts, press releases, the investor relations page of our website (www.henryschein.com) and the social media channels identified on the Newsroom page of our website.

Recent Developments

1 unchanged sentence

In March 2020, the World Health Organization declared COVID-19 a pandemic.

The COVID-19 pandemic has

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

disruption of global financial markets.

In response, many countries implemented

business closures and restrictions,

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

to combat the pandemic, which significantly

impacted global business and dramatically reduced demand for dental

products and certain medical products

beginning in the second quarter

Demand increased in the second half of 2020 resulting

in slight growth

over the prior year driven by sales of PPE and COVID-19 related products.

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

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

The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of global financial markets.

In response, many countries implemented business closures and restrictions, stay-at-home and social distancing ordinances and similar measures to combat the pandemic, which significantly impacted global business and dramatically reduced demand for dental products and certain medical products in the second quarter of 2020.

Demand increased in the second half of 2020 and continued throughout 2021 resulting in growth over the prior year driven by sales of PPE, COVID-19 tests and other COVID-19 related products.

Our consolidated financial statements reflect estimates and assumptions made by us that affect, among other things, our goodwill, long-lived asset and definite-lived intangible asset valuation;

inventory valuation;

equity investment

equity investment valuation;

assessment of the annual effective tax rate;

valuation of deferred income

taxes and income tax

contingencies;

valuation of deferred income taxes and income tax contingencies;

the allowance for doubtful accounts;

hedging activity;

measurement of

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

and pension plan

Due to the significant uncertainty surrounding the future impact of

COVID-19, our judgments

regarding estimates and impairments could change in the future.

In addition, the impact of COVID-19 had a

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

the second quarter of

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

continued to do so during the second half of 2020.

However, patient volumes have remained below pre-COVID-19

levels and certain regions in the U.S.

and internationally are experiencing an

increase in COVID-19 cases.

there is an ongoing risk that the COVID-19 pandemic may again materially

adversely effect our business, results of

operations and cash flows and may result in a material adverse effect on our financial

condition and liquidity.

supplier rebates;

measurement of compensation cost for certain share-based performance awards and cash bonus plans;

and pension plan assumptions.

Due to the significant uncertainty surrounding the future impact of COVID-19, our judgments regarding estimates and impairments could change in the future.

In addition, the impact of COVID-19 pandemic had a material adverse effect on our business, results of operations and cash flows in the second quarter of 2020.

In the latter half of the second quarter of 2020, dental and medical practices began to re-open worldwide, and continued to do so during the second half of 2020.

During the year ended December 25, 2021, patient traffic levels returned to levels approaching pre-pandemic levels.

There is an ongoing risk that the COVID-19 pandemic may again have a material adverse effect on our business, results of operations and cash flows and may result in a material adverse effect on our financial condition and liquidity.

However, the extent of the potential impact cannot be reasonably estimated at this time.

As part of a broad-based effort to support plans for the long-term health of our business

and to strengthen our

financial flexibility, we implemented cost reduction measures that included certain reductions in payroll,

substantially decreased capital expenditures, reduced corporate spending

and eliminated certain non-strategic

targeted expenditures.

As our markets began to recover,

we substantially ended most of those temporary expense-

reduction initiatives during the second half of 2020.

Policies, rules and regulations relating to vaccine mandates currently vary by jurisdiction and by customer.

In the United States, the vaccine mandate requiring that all federal contractors be vaccinated was stayed in December 2021 and is currently pending litigation.

In addition, in January 2022, the United States Supreme Court blocked a federal mandate that would require businesses with more than 100 employees to make their employees receive a COVID-19 vaccination or undergo weekly COVID-19 testing.

In addition, state governments and some customers have also issued vaccine requirements for workers in their jurisdictions or who may service their accounts, and some state regulations contradict the contemplated federal vaccine mandates.

Also, various international jurisdictions have, or may in the future impose vaccine mandates or additional COVID-19 regulations.

The imposition of government or customer mandated vaccination or testing mandates may impact our ability to retain current employees, attract new employees and retain certain product and service contracts.

It is possible that a significant number of our employees have not been vaccinated, and in the event of a vaccine mandate some of those employees may seek exemptions or otherwise resist vaccination.

The implementation of vaccine mandates could potentially cause labor shortages if employees refuse to get vaccinated and their employment is terminated, either voluntarily or involuntarily.

Such labor shortages could also affect our ability to retain certain specific contracts to which the mandates may apply, reduce our sales and/or affect our ability to fulfill customer orders, impacting our revenue and profitability.

Furthermore, managing and tracking vaccination status and ongoing testing for exempt and/or unvaccinated employees could potentially increase our costs, as could addressing inconsistent mandates.

COVID-19 vaccine mandates and similar regulations have the potential to significantly adversely affect our business, as the nature and effect of such mandates are uncertain at this time.

Corporate Transactions

During the fourth quarter of 2019, we sold an equity investment

in Hu-Friedy Mfg.

Co., LLC (“Hu-Friedy”), a

manufacturer of dental instruments and infection prevention solutions.

Our investment was non-controlling, we

were not involved in running the business and had no representation

on the board of directors.

During the fourth

quarter of 2019, we also sold certain other equity investments.

In the aggregate, the sales of these investments

resulted in a pre-tax gain in 2019 of approximately $250.2 million and an after-tax

gain of approximately $186.8

In the fourth quarter of 2020 we received contingent proceeds of

$2.1 million from the 2019 sale of Hu-

Friedy resulting in the recognition of an additional after-tax gain of $1.6

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

(the “Separation”) and subsequent

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

with Direct Vet Marketing, Inc.

First Choice, “Vets First Choice”) (the “Merger”).

This was accomplished by a series of transactions

among us, Vets

First Choice, Covetrus, Inc.

During the fourth quarter of 2019, we sold an equity investment in Hu-Friedy Mfg.

Co., LLC (“Hu-Friedy”), a manufacturer of dental instruments and infection prevention solutions.

Our investment was non-controlling, we were not involved in running the business and had no representation on the board of directors.

During the fourth quarter of 2019, we also sold certain other equity investments.

In the aggregate, the sales of these investments resulted in a pre-tax gain in 2019 of approximately $250.2 million and an after-tax gain of approximately $186.8 million.

During 2020 and 2021, we received contingent proceeds of $2.1 million and $9.8 million from the 2019 sale of Hu-Friedy resulting in the recognition of additional after-tax gains of $1.6 million and $7.3 million, respectively.

On February 7, 2019 (the “Distribution Date”), we completed the separation (the “Separation”) and subsequent merger of our animal health business (the “Henry Schein Animal Health Business”) with Direct Vet Marketing, Inc.

(d/b/a Vets First Choice, “Vets First Choice”) (the “Merger”).

This was accomplished by a series of transactions 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

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

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

“Covetrus”), a wholly owned subsidiary of ours prior to the Distribution Date, and HS Merger Sub, Inc., a wholly owned subsidiary of Covetrus (“Merger Sub”).

In connection with the Separation, we contributed, assigned and transferred to Covetrus certain applicable assets, liabilities and capital stock or other ownership interests relating to the Henry Schein Animal Health Business.

On the Distribution Date, we received a tax-free distribution of $1,120 million from Covetrus pursuant to certain debt financing incurred by Covetrus.

On the Distribution Date and prior to the Animal Health Spin-off, Covetrus issued shares of Covetrus common stock to certain institutional accredited investors (the “Share Sale Investors”) for $361.1 million (the “Share Sale”).

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

Subsequent to the Share Sale, we distributed, on a pro rata basis, all of the shares of the common stock of Covetrus held by us to our stockholders of record as of the close of business on January 17, 2019 (the “Animal Health Spin-off”).

After the Share Sale and Animal Health Spin-off, Merger Sub consummated the Merger whereby it merged with and into Vets First Choice, with Vets First Choice surviving the Merger as a wholly owned subsidiary of Covetrus.

Immediately following the consummation of the Merger, on a fully diluted basis, (i) approximately 63% of the shares of Covetrus common stock were (a) owned by our stockholders and the Share Sale Investors, and (b) held by certain employees of the Henry Schein Animal Health Business (in the form of certain equity awards), and (ii) approximately 37% of the shares of Covetrus common stock were (a) owned by stockholders of Vets First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First Choice (in the form of certain equity awards).

After the Separation and the Merger, we no longer beneficially owned any shares of Covetrus common stock and, following the Distribution Date, will not consolidate the financial results of Covetrus for the purpose of our financial reporting.

Following the Separation and the Merger, Covetrus was an independent, publicly traded company on the Nasdaq Global Select Market.

Executive-Level Overview

We believe we are the world’s largest

provider of health care products and services primarily to office-based dental

and medical practitioners, as well as alternate sites of care.

We serve more than one million customers worldwide

including dental practitioners and laboratories and physician practices, as well

as government, institutional health

care clinics and other alternate care clinics.

We believe that we have a strong brand identity due to our more than

88 years of experience distributing health care products.

We are headquartered in Melville, New York,

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

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

including the

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

the Czech Republic, France, Germany,

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

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

Thailand, United Arab Emirates

and the United Kingdom.

We have established strategically located distribution centers to enable us to better serve our customers and

increase our operating efficiency.

This infrastructure, together with broad product and service offerings at

competitive prices, and a strong commitment to customer service, enables us

to be a single source of supply for our

customers’ needs.

Our infrastructure also allows us to provide convenient ordering

and rapid, accurate and

complete order fulfillment.

Henry Schein, Inc.

is a solutions company for health care professionals powered by a network of people and technology.

We believe we are the world’s largest provider of health care products and services primarily to office-based dental and medical practitioners, as well as alternate sites of care.

We serve more than one million customers worldwide including dental practitioners, laboratories, physician practices, and ambulatory surgery centers, as well as government, institutional health care clinics and other alternate care clinics.

We believe that we have a strong brand identity due to our more than 89 years of experience distributing health care products.

We have established strategically located distribution centers around the world to enable us to better serve our customers and increase our operating efficiency.

This infrastructure, together with broad product and service offerings at competitive prices, and a strong commitment to customer service, enables us to be a single source of supply for our customers’ needs.

While our primary go-to-market strategy is in our capacity as a distributor, we also manufacture certain dental specialty products and solutions in the areas of implants, orthodontics and endodontics.

We have achieved scale in these global businesses primarily through acquisitions as manufacturers of these products typically do not utilize a distribution channel to serve customers.

We conduct our business through two reportable segments:

(i) health care distribution and (ii) technology and

value-added services.

(i) health care distribution and (ii) technology and value-added services.

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

The health care distribution reportable segment aggregates our global dental

and medical operating segments.

segment distributes consumable products, small equipment, laboratory products,

large equipment, equipment repair

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

tests, infection-control

products and vitamins.

Our global dental group serves office-based dental practitioners, dental laboratories, schools

and other institutions.

Our global medical group serves office-based medical practitioners, ambulatory

centers, other alternate-care settings and other institutions.

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

technology and other value-added

services to health care practitioners.

Our technology group offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include financial services on a

non-recourse basis, e-services, practice technology, network and hardware services, as well as continuing education

services for practitioners.

Our global dental businesses serve office-based dental practitioners, dental laboratories, schools and other institutions.

Our global medical businesses serve office-based medical practitioners, ambulatory surgery centers, other alternate-care settings and other institutions.

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

This segment distributes consumable products, dental specialty products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic products), diagnostic tests, infection-control products, PPE and vitamins.

Our global technology and value-added services business provides software, technology and other value-added services to health care practitioners.

Our technology business offerings include practice management software systems for dental and medical practitioners.

Our value-added practice solutions include practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, practice technology, network and hardware services, as well as consulting, and continuing education services for practitioners.

A key element to grow closer to our customers is our One Schein initiative, which is a unified go-to-market approach that enables practitioners to work synergistically with our supply chain, equipment sales and service and other value-added services, allowing our customers to leverage the combined value that we offer through a single program.

Specifically, One Schein provides customers with streamlined access to our comprehensive offering of national brand products, our private label products and proprietary specialty products and solutions (including implant, orthodontic and endodontic products).

In addition, customers have access to a wide range of services, including software and other value-added services.

Industry Overview

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

This trend has benefited

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

It also has accelerated the

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

groups, which, in addition to

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

capable of providing

specialized management information support.

We believe that the trend towards cost containment has the potential

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

enhance the efficiency and

facilitation of practice management.

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

and transactions that we

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

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

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

Our current and future results have been and could be impacted by the current

economic environment and

uncertainty, particularly impacting overall demand for our products and services.

This trend has benefited distributors capable of providing a broad array of products and services at low prices.

It also has accelerated the growth of HMOs, group practices, other managed care accounts and collective buying groups, which, in addition to their emphasis on obtaining products at competitive prices, tend to favor distributors capable of providing specialized management information support.

We believe that the trend towards cost containment has the potential to favorably affect demand for technology solutions, including software, which can enhance the efficiency and facilitation of practice management.

Our operating results in recent years have been significantly affected by strategies and transactions that we undertook to expand our business, domestically and internationally, in part to address significant changes in the health care industry, including consolidation of health care distribution companies, health care reform, trends toward managed care, cuts in Medicare and collective purchasing arrangements.

Our current and future results have been and could be impacted by the COVID-19 pandemic, the current economic environment and continued economic and public health uncertainty.

Since the onset of the COVID-19 pandemic in early 2020, we have been carefully monitoring its impact on our global operations and have taken appropriate steps to minimize the risk to our employees.

We have seen and expect to continue to see changes in demand trends for some of our products and services, supply chain challenges and labor challenges, as rates of infection fluctuate, new strains or variants of COVID-19 emerge and spread, vaccine uptake and mandates increase and change, governments adapt their approaches to combatting the virus (including without limitation, vaccine mandates), and local conditions change across geographies.

For example, vaccine mandates affecting our workforce, whether imposed through government regulations or contracts with governmental authorities or other customers, could potentially cause staffing shortages if employees choose not to comply as well as other consequences to our business or operations, managing and tracking vaccination status and ongoing testing for exempt employees could potentially increase our costs, as could addressing inconsistent COVID-19 vaccination mandates.

As a result, we expect to see continued volatility through at least the duration of the pandemic.

Industry Consolidation

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

The industry ranges from sole practitioners working out of

relatively small offices to group practices

or service organizations ranging in size from a few practitioners to a large

number of practitioners who have

combined or otherwise associated their practices.

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

large quantities of supplies

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

care practitioners

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

reliable and substantially complete

order fulfillment.

The purchasing decisions within an office-based health care practice are typically

practitioner or an administrative assistant.

Supplies and small equipment are generally purchased from more

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

The trend of consolidation

extends to our customer base.

Health care practitioners are increasingly seeking to

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

hospital organizations.

In many cases, purchasing decisions for consolidated groups

are made at a centralized or

professional staff level;

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

The industry ranges from sole practitioners working out of relatively small offices to group practices or service organizations ranging in size from a few practitioners to a large number of practitioners who have combined or otherwise associated their practices.

Due in part to the inability of office-based health care practitioners to store and manage large quantities of supplies in their offices, the distribution of health care supplies and small equipment to office-based health care practitioners has been characterized by frequent, small quantity orders, and a need for rapid, reliable and substantially complete order fulfillment.

The purchasing decisions within an office-based health care practice are typically made by the practitioner or an administrative assistant.

Supplies and small equipment are generally purchased from more than one distributor, with one generally serving as the primary supplier.

The trend of consolidation extends to our customer base.

Health care practitioners are increasingly seeking to partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician hospital organizations.

In many cases, purchasing decisions for consolidated groups are made at a centralized or professional staff level;

however, orders are delivered to the practitioners’ offices.

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

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

combine with larger companies that can

provide growth opportunities.

This consolidation also may continue to result in distributors seeking

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

opportunities to serve a broader

customer base.

Our trend with regard to acquisitions and joint ventures has been to expand

our role as a provider of products and

services to the health care industry.

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

existing operations and provide opportunities for us to develop synergies with, and

thus strengthen, the acquired

As industry consolidation continues, we believe that we are positioned

to capitalize on this trend, as we believe we

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

there can be no assurances

that we will be able to successfully accomplish this.

We also have invested in expanding our sales/marketing

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

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

candidates for merger and joint

venture or acquisition and intend to continue to seek opportunities to expand

our role as a provider of products and

services to the health care industry.

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

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

consummated, we would incur merger and/or acquisition-related costs, and there

can be no assurance that the

integration efforts associated with any such transaction would be successful.

In response to the COVID-19

pandemic, we had taken a range of actions to preserve cash, including

the temporary suspension of significant

acquisition activity.

During the third and fourth quarters of 2020, as global conditions

improved, we resumed our

acquisition strategy.

We believe that consolidation within the industry will continue to result in a number of distributors, particularly those with limited financial, operating and marketing resources, seeking to combine with larger companies that can provide growth opportunities.

This consolidation also may continue to result in distributors seeking to acquire companies that can enhance their current product and service offerings or provide opportunities to serve a broader customer base.

Our trend with regard to acquisitions and joint ventures has been to expand our role as a provider of products and services to the health care industry.

This trend has resulted in our expansion into service areas that complement our existing operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired businesses.

As industry consolidation continues, we believe that we are positioned to capitalize on this trend, as we believe we have the ability to support increased sales through our existing infrastructure, although there can be no assurances that we will be able to successfully accomplish this.

We also have invested in expanding our sales/marketing infrastructure to include a focus on building relationships with decision makers who do not reside in the office-based practitioner setting.

As the health care industry continues to change, we continually evaluate possible candidates for joint venture or acquisition and intend to continue to seek opportunities to expand our role as a provider of products and services to the health care industry.

There can be no assurance that we will be able to successfully pursue any such opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or consummated, we would incur merger and/or acquisition-related costs, and there can be no assurance that the integration efforts associated with any such transaction would be successful.

In response to the COVID-19 pandemic, we had taken a range of actions to preserve cash, including the temporary suspension of significant acquisition activity.

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

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacology treatments

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

In addition, the physician market continues to benefit from

the shift of procedures and diagnostic testing

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

The health care products distribution industry continues to experience growth due to the aging population, increased health care awareness, the proliferation of medical technology and testing, new pharmacology treatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance coverage.

In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing from acute care settings to alternate-care sites, particularly physicians’ offices.

According to the U.S.

Census Bureau’s International Data Base, in 2020 there were more than six and a half`

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

care services.

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

approximately 19 million.

population aged 65 to 84 years is projected to increase by approximately 36%

during the same time period.

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

services continue to increase in the

United States.

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

current and future operating, economic and industry conditions.

The Centers for Medicare and Medicaid Services,

published “National Health Expenditure Projections 2019-2028”

indicating that total national health care

spending reached approximately $3.6 trillion in 2018, or 17.7% of the

nation’s gross domestic product, the

benchmark measure for annual production of goods and services in the United

Health care spending is

projected to reach approximately $6.2 trillion in 2028,

approximately 19.7%

of the nation’s projected gross

domestic product.

Census Bureau’s International Database, in 2021 there were more than six and a half million Americans aged 85 years or older, the segment of the population most in need of long-term care and elder-care

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

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

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

We believe that demand for our products and services will grow while continuing to be impacted by current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services, or CMS, published “National Health Expenditure Data” indicating that total national health care spending reached approximately $4.1 trillion in 2020, or 19.7% of the nation’s gross domestic product, the benchmark measure for annual production of goods and services in the United States.

Health care spending is projected to reach approximately $6.2 trillion in 2028, approximately 19.7% of the nation’s projected gross domestic product.

The latest projections begin after the latest historical year 2018 and go through 2028.

These projections do not take into account the impacts of COVID-19 because of the timing of the report and the highly uncertain nature of the pandemic.

Our businesses are generally subject to numerous laws and regulations that could impact our financial performance, and failure to comply with such laws or regulations could have a material adverse effect on our business.

See “ Item 1.

Business – Governmental Regulations ” for a discussion of laws, regulations and governmental activity that may affect our results of operations and financial condition.

Results of Operations

The following tables summarize the significant components of our operating

results and cash flows from continuing

operations for each of the three years ended December 26, 2020, December

28, 2019 and December 29, 2018 (in

Refer to Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2020 compared to fiscal year 2019.

The following tables summarize the significant components of our operating results and cash flows from continuing operations (in thousands):

Operating results:

2 unchanged sentences

Selling, general and administrative

Litigation settlements

Restructuring costs

1 unchanged sentence

Other expense, net

Net gain on sale of equity investments

Gain on sale of equity investments, net of tax

Net income from continuing operations

Income (loss) from discontinued operations

Income (loss) from discontinued operations, net of tax

Net income attributable to Henry Schein, Inc.

3 unchanged sentences

Plans of Restructuring

On July 9, 2018, we committed to an initiative to rationalize our operations and

provide expense

efficiencies.

These actions allowed us to execute on our plan to reduce our cost structure

and fund new initiatives

to drive growth under our 2018 to 2020 strategic plan.

This initiative resulted in the elimination of approximately

4% of our workforce and the closing of certain facilities.

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

to mitigate stranded costs associated

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

These activities

were originally expected to be completed by the end of 2020.

As a result of the business environment brought on

by the COVID-19 pandemic, we are continuing our restructuring activities

We are currently unable in

good faith to make a determination of an estimate of the amount or range of

amounts expected to be incurred in

connection with these activities in 2021, both with respect to each major

type of cost associated therewith and with

respect to the total cost, or an estimate of the amount or range of amounts

that will result in future cash

expenditures.

During the years ended December 26, 2020, December 28, 2019, and December

29, 2018 we recorded restructuring

charges of $32.1 million, $14.7 million and $54.4 million, respectively.

The costs associated with these

restructurings are included in a separate line item, “Restructuring costs” within

our consolidated statements of

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

In light of the changes to the business environment brought on by the COVID-19 pandemic, we extended such activities to the end of 2021.

During the years ended December 25, 2021, December 26, 2020, and December 28, 2019 we recorded restructuring charges of $7.9 million, $32.1 million and $14.7 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 costs” within our consolidated statements of income.

Our restructuring activities under this initiative are now complete and we do not expect to report any restructuring costs separately in 2022.

2021 Compared to 2020

Net sales for 2020 and 2019 were as follows (in thousands):

Net sales were as follows (in thousands):

Increase / (Decrease)

4 unchanged sentences

Corporate TSA revenues (3)

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

pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, personal protective equipment and vitamins.

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.

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

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

The 1.3% increase in net sales for the year ended December 26, 2020

includes an increase of 1.4% local currency

growth (0.8% increase in internally generated revenue and 0.6% growth

from acquisitions) partially offset by a

decrease of 0.1% related to foreign currency exchange.

Excluding sales of products under the transition services

agreement with Covetrus, our net sales increased 1.4%, including local

currency growth of 1.5% (0.9% increase in

internally generated revenue and 0.6%

growth from acquisitions) partially offset by a decrease of 0.1% related

foreign currency exchange.

Sales for the year ended December 26, 2020 benefited from sales of

PPE and COVID-

19 related products of approximately $1,298 million, an increase of approximately

208% versus the prior year.

Future PPE and COVID-19 related product sales may be lower than what

we have experienced in 2020, which were

driven by rising positive COVID-19 cases and practices seeking to ensure

adequate supply.

The 7.8% decrease in dental net sales for the year ended December

26, 2020 includes a decrease of 7.6% in local

currencies (8.0% decrease in internally generated revenue,

partially offset by 0.4%

growth from acquisitions) and a

decrease of 0.2% related to foreign currency exchange.

The 7.6% decrease in local currency sales was due to

decreases in dental equipment sales and service revenues of 12.5%,

all of which is attributable to a decrease in

internally generated revenue and a decrease in dental consumable merchandise

sales of 6.1% (6.5% decrease in

internally generated revenue,

partially offset by 0.4% growth from acquisitions).

The COVID-19 pandemic

adversely impacted our dental business beginning in mid-March of 2020

as many dental offices progressively

closed or began seeing a limited number of patients, resulting in a decrease

of 41.2% in second quarter dental

revenues versus the same period in the prior year.

However, in the second half of the year ended December 26,

2020, our dental sales began to improve as dental practices resumed activities

and patient traffic increased.

dental sales for the year ended December 26, 2020 benefited from sales of

PPE and COVID-19 related products of

approximately $491 million, an increase of approximately 72% versus the

The 21.6% increase in medical net sales for the year ended December

26, 2020 includes an increase of 21.6% local

currency growth (20.7% increase in internally generated revenue and 0.9%

growth from acquisitions).

COVID-19 pandemic adversely impacted our medical business beginning in

mid-March of 2020, but not as

significantly as our dental business as the decrease in second quarter

medical revenues was only 11.2% versus the

same period in the prior year.

Our medical business rebounded strongly in the second half of the year in part

continued strong sales of PPE, such as masks, gowns and face shields,

and COVID-19 related products, such as

diagnostic test kits.

Global medical sales for the year ended December 26, 2020 benefited

from sales of PPE and

COVID-19 related products of approximately $807 million, an

increase of approximately 490% versus the prior

The 0.2% decrease in technology and value-added services net sales

for the year ended December 26, 2020 includes

a decrease of 0.3% local currency growth (3.2% decrease in internally generated

revenue, partially offset by 2.9%

growth from acquisitions) partially offset by an increase of 0.1% related to foreign

currency exchange.

of dental and medical offices beginning in mid-March of 2020 due to the COVID-19 pandemic

resulted in a

decrease of 15.9% in second quarter technology and value-added services

revenues versus the same period in the

As dental and medical practice operations, resumed in the second

half of the year, the trend for

transactional software revenues improved as more patients visited practices

Although dental and medical practices continued to re-open globally

in the second half of the year, patient volumes

remain below pre-COVID-19 levels.

As such, there is an ongoing risk that the COVID-19 pandemic may

have a material adverse effect on our net sales in future periods.

Gross profit and gross margins for 2020 and 2019 by segment and in total were as follows

(in thousands):

Health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues

Corporate TSA revenues

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

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

software products and

services, as well as certain financial services.

The software industry

typically realizes higher gross margins to

recover investments in research and development.

In connection with the completion of the Animal Health Spin-off (see

Note 2 – Discontinued Operations

additional details), we entered into a transition services agreement with

Covetrus, pursuant to which Covetrus

purchased certain products from us.

The agreement, which ended in December 2020, provided that these products

would be sold to Covetrus at a mark-up that ranged from 3% to 6%

of our product cost to cover handling costs.

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

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

been the most significant drivers affecting

our gross profit margin.

For example, sales of pharmaceutical products are generally

at lower gross profit margins

than other products.

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

than average.

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

gross margins due to the higher volumes sold as opposed to the gross

margin on sales to office-based practitioners,

who normally purchase lower volumes at greater frequencies.

Health care distribution gross profit decreased $268.6 million, or 9.9%,

for the year ended December 26, 2020

compared to the prior year period, due primarily to the COVID-19

Health care distribution gross profit

margin decreased to 25.7% for the year ended December 26, 2020 from 28.9% for the comparable

The overall decrease in our health care distribution gross profit is

attributable to a $232.2 million decline in

gross profit due to the decrease in the gross margin rates and a $48.3 million gross profit

decrease in internally

generated revenue, partially offset by $11.9 million of additional gross profit from acquisitions.

margin was negatively affected by significant adjustments recorded for PPE inventory and COVID-19

products caused by volatility of pricing and demand experienced during the

year, which conditions may recur and

adversely impact gross profit margins in future periods, although we do not expect

material inventory adjustments

to continue into 2021.

During the year, we continued to earn lower vendor rebates, due to lower purchase volumes,

in our health care distribution segment, which also contributes to the lower gross

profit margin.

Technology and value-added services gross profit decreased $7.6 million, or 2.1%, for the year ended December

26, 2020 compared to the prior year period.

and value-added services gross profit margin decreased to

70.6% for the year ended December 26, 2020 from 72.0%

for the comparable prior year period.

decrease in our Technology and value-added services gross profit is attributable to a decrease of $11.5 million in

internally generated revenue and a decrease of $8.8 million in gross profit

due to the decrease in the gross margin

rates, partially offset by $12.7 million additional gross profit from acquisitions.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in

total for 2020 and 2019 were as follows (in

Consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, dental specialty products (including implant, orthodontic and endodontic products), diagnostic tests, infection-control products, PPE and vitamins.

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

Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in connection with the Animal Health Spin-off, which ended in December 2020.

See Note-23 Related Party Transactions for further information.

The 22.6% increase in net sales consists of an increase of 21.1% in local currency revenue (16.9% increase in internally generated revenue and 4.2% growth from acquisitions) and an increase of 1.5% related to foreign currency exchange.

Excluding sales of products under the transition services agreement with Covetrus, our net sales increased 23.5%, consisting of an increase in local currency revenue of 22.0% (17.8% increase in internally generated revenue and 4.2% growth from acquisitions) and an increase of 1.5% related to foreign currency exchange.

We estimate that sales for the year ended December 25, 2021 of PPE and COVID-19 related products were approximately $1,744.2 million, an estimated increase of 34.2% versus the prior year.

Excluding PPE and COVID-19 related products, the estimated increase in internally generated local currency sales excluding Corporate TSA revenues was 16.7%.

The 27.6% increase in dental net sales consists of an increase of 25.2% in local currency revenue (20.7% increase in internally generated revenue and 4.5% growth from acquisitions) and an increase of 2.4% related to foreign currency exchange.

The 25.2% increase in local currency sales was attributable to an increase in dental consumable merchandise revenue of 26.2% (20.6% increase in internally generated revenue and 5.6% growth from acquisitions), and an increase in dental equipment sales and service revenues of 21.9% (21.1% increase in internally generated revenue and 0.8% growth from acquisitions).

The COVID-19 pandemic began to adversely impact our worldwide dental revenue beginning in mid-March of 2020 as many dental offices progressively closed or began seeing a limited number of patients.

However, in the second half of the quarter ended June 27, 2020 and continuing through the year ended December 25, 2021, patient traffic stabilized and approached pre-pandemic levels.

The growth in dental revenues reflects this recovery.

Additionally, we estimate that global dental sales for the year ended December 25, 2021 of PPE and COVID-19 related products were approximately $680.9 million, an estimated increase of 38.2% versus the prior year.

Excluding PPE and COVID-19 related products, the estimated increase in internally generated local currency dental sales was 21.3%.

The 16.6% increase in medical net sales is attributable to an increase of 16.5% in local currency growth (13.7% increase in internally generated revenue and 2.8% growth from acquisitions) and an increase of 0.1% related to foreign currency exchange.

Our medical business has continued to have strong sales of PPE, such as masks, gowns and face shields, and other COVID-19 related products, such as diagnostic kits.

Globally, we estimate our medical business recorded sales of approximately $1,063.3 million of such PPE and other COVID-19 related products for the year ended December 25, 2021, an increase of approximately 31.8% compared to the prior year.

Excluding PPE and other COVID-19 related products, the estimated increase in internally generated local currency medical sales was 8.7%.

The 24.6% increase in technology and value-added services net sales is attributable to an increase of 23.5% in local currency revenue (13.0% increase in internally generated revenue and 10.5% growth from acquisitions) and 1.1% related to foreign currency exchange.

The closure of dental and medical offices beginning in mid-March of 2020 due to the COVID-19 pandemic resulted in lower technology and value-added services revenues in 2020, especially in the second quarter of that year.

The growth in revenues in 2021 reflects the recovery of activity approaching pre-pandemic levels in our practice management business, as well as strong financial services revenue, which benefitted from dental equipment sales growth.

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

Increase / (Decrease)

1 unchanged sentence

Technology and value-added services

Selling, general and administrative expenses (including restructuring costs

in the years ended December 26, 2020

and December 28, 2019) decreased $93.6 million, or 3.9%, to $2,279.0 million

for the year ended December 26,

2020 from the comparable prior year period.

The $113.7 million decrease in selling, general and administrative

expenses within our health care distribution segment for the year ended December

26, 2020 as compared to the

prior year period was attributable to a reduction of $151.5 million of operating

costs, primarily as a result of cost-

saving measures taken in response to the COVID-19 pandemic, partially offset by

$20.8 million of additional costs

from acquired companies and an increase of $17.0 million in restructuring

The $20.1 million increase in

selling, general and administrative expenses within our technology and value-added

services segment for the year

ended December 26, 2020 as compared to the prior year period was

attributable to $10.5 million of additional costs

from acquired companies and an increase of $9.6 million of operating costs.

As a percentage of net sales, selling,

general and administrative expenses decreased to 22.5% from 23.8% for

the comparable prior year period.

savings achieved from measures taken in response to the COVID-19

pandemic are expected to diminish in future

periods as most of these measures were temporary and substantially ended

during the second half of 2020.

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

expenses decreased $86.4 million, or

5.9%, to $1,375.2 million for the year ended December 26, 2020 from

the comparable prior year period, primarily

as a result of cost-saving measures taken in response to the COVID-19

As a percentage of net sales,

selling expenses decreased to 13.6% from 14.7% for the comparable prior

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

and administrative expenses

decreased $7.2 million, or 0.8%, to $903.8 million for the year ended

December 26, 2020 from the comparable

prior year period.

As a percentage of net sales, general and administrative expenses

decreased to 8.9% from 9.1%

for the comparable prior year period.

Other Expense, Net

Other expense, net for the years ended 2020 and 2019 was as follows

(in thousands):

Interest income

Interest expense

Other expense, net

Interest income decreased $5.9 million primarily due to lower interest rates

and reduced late fee income.

expense decreased $9.4 million primarily due to lower interest rates and

lower average debt balances for the year

ended December 26, 2020 as compared to the prior year.

For the year ended December 26, 2020, our effective tax rate was 19.1%

compared to 23.4%

for the prior year

In 2020, our effective tax rate was primarily impacted by the agreement with the U.S Internal

Service on our Advanced Pricing Agreement (APA), other audit resolutions, and state and foreign income taxes and

interest expense.

In 2019, our effective tax rate was primarily impacted by state and

foreign income taxes and

interest expense.

Net Gain on Sale of Equity Investments

In the fourth quarter of 2020 we received contingent proceeds of $2.1

million from the 2019 sale of Hu-Friedy

resulting in the recognition of an additional after-tax gain of $1.6 million.

2019 Compared to 2018

Net sales for 2019 and 2018 were as follows (in thousands):

Health care distribution

Total health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues

Corporate TSA revenues

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.

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.

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

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

The 6.0% increase in net sales for the year ended December 28, 2019

includes an increase of 7.7% local currency

growth (4.4% increase in internally generated revenue and 3.3% growth

from acquisitions) partially offset by a

decrease of 1.7% related to foreign currency exchange.

Excluding sales of products under the transition services

agreement with Covetrus, our net sales increased 5.2%, including local

currency growth of 6.9% (3.5% increase in

internally generated revenue and 3.4% growth from acquisitions) partially

offset by a decrease of 1.7% related to

foreign currency exchange.

The 1.1% increase in dental net sales for the year ended December 28, 2019

includes an increase of 3.4% in local

currencies (2.0% increase in internally generated revenue and 1.4% growth

from acquisitions) partially offset by a

decrease of 2.3% related to foreign currency exchange.

The 3.4% increase in local currency sales was due to

increases in dental equipment sales and service revenues of 1.0%, all of which

is attributable to an increase in

internally generated revenue and dental consumable merchandise sales growth

of 4.2% (2.3% increase in internally

generated revenue and 1.9% growth from acquisitions).

The 11.7% increase in medical net sales for the year ended December 28, 2019 includes an

increase of 11.9% local

currency growth (7.0% increase in internally generated revenue and

4.9% growth from acquisitions) partially offset

by a decrease of 0.2% related to foreign currency exchange.

The 26.1% increase in technology and value-added services net sales for the

year ended December 28, 2019

includes an increase of 27.0% local currency growth (4.3% increase in

internally generated revenue and 22.7%

growth from acquisitions) partially offset by a decrease of 0.9% related to foreign

currency exchange.

Gross profit and gross margins for 2019 and 2018 by segment and in total were as follows

(in thousands):

Health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues

Corporate TSA revenues

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

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

software products and

services, as well as certain financial services.

The software industry typically

realizes higher gross margins to

recover investments in research and development.

In connection with the completion of the Animal Health Spin-off (see

Note 2 – Discontinued Operations

additional details), we entered into a transition services agreement with

Covetrus, pursuant to which Covetrus

purchased certain products from us.

The agreement, which ended in December 2020, provided that these products

would be sold to Covetrus at a mark-up that ranged from 3% to 6%

of our product cost to cover handling costs.

As a result of different practices of categorizing costs associated with distribution networks throughout our industry, our gross margins may not necessarily be comparable to other distribution companies.

Additionally, we realize substantially higher gross margin percentages in our technology and value-added services segment than in our health care distribution segment.

These higher gross margins result from being both the developer and seller of software products and services, as well as certain financial services.

The software industry typically realizes higher gross margins to recover investments in development.

During December 2020, our transition services agreement with Covetrus, in connection with the completion of the Animal-Health Spin-off, concluded.

Under this agreement, Covetrus had agreed to purchase certain products from us at a mark-up that ranged from 3% to 6% of our product cost to cover handling costs.

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

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

been the most significant drivers affecting

our gross profit margin.

For example, sales of pharmaceutical products are generally

at lower gross profit margins

than other products.

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

than average.

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

gross margins due to the higher volumes sold as opposed to the gross

margin on sales to office-based practitioners,

who normally purchase lower volumes at greater frequencies.

Health care distribution gross profit increased $88.8 million, or 3.4%, for

the year ended December 28, 2019

compared to the prior year period.

Health care distribution gross profit margin decreased to 28.9% for the year

ended December 28, 2019 from 29.2% for the comparable prior year period.

The overall increase in our health care

distribution gross profit is attributable to $73.1 million of additional gross

profit from acquisitions and $30.9

million gross profit increase from growth in internally generated revenue.

These increases were partially offset by

a $15.2 million decline in gross profit due to the decrease in the gross

margin rates.

Technology and value-added services gross profit increased $88.9 million, or 31.5%, for the year ended December

28, 2019 compared to the prior year period.

Technology and value-added services gross profit margin increased to

72.0% for the year ended December 28, 2019 from 69.0% for the comparable

prior year period.

accounted for $80.2 million of our gross profit increase within our technology

and value-added services segment

for the year ended December 28, 2019 compared to the prior year period

and also accounted for the increase in the

gross profit margin.

The remaining increase of $8.7 million in our technology

and value-added services segment

gross profit was primarily attributable to growth in internally generated

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 increased $791.7 million, or 32.3% primarily due to the increase in net sales discussed above.

Health care distribution gross profit margin increased to 27.6% from 25.7%.

Although we recorded significant adjustments to inventory in 2021, primarily related to PPE inventory, these adjustments were less than in 2020 and contributed to the improved gross profit margin.

Such adjustments to inventory may recur and adversely impact gross profit margins in future periods, although we do not expect further significant inventory adjustments.

The increase in the health care distribution gross profit margin is also attributable to an increase in supplier rebates during 2021 due to increased purchase volumes.

The overall increase in our health care distribution gross profit is attributable to a $500.7 million increase in internally generated revenue, $176.9 million in gross profit due to the increase in the gross margin rates and $114.1 million additional gross profit from acquisitions.

Technology and value-added services gross profit increased $68.4 million, or 18.8%, due to an increase of $50.9 million in internally generated revenue and $31.6 million additional gross profit from acquisitions, partially offset by a $14.1 million decrease due to the lower gross profit margin.

Technology and value-added services gross profit margin decreased to 67.3% from 70.6% primarily due to lower gross margins of recently acquired companies in the business services sector and certain transactions with the U.S.

federal government.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in

total for 2019 and 2018 were as follows (in

Increase / (Decrease)

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

Health care distribution

Technology and value-added services

Selling, general and administrative expenses (including restructuring

costs in the years ended December 28, 2019

and December 29, 2018, and litigation settlements in the year ended December

29, 2018) increased $62.5 million,

or 2.7%, to $2,372.6 million for the year ended December 28, 2019 from

the comparable prior year period.

$9.2 million decrease in selling, general and administrative expenses within

our health care distribution segment for

the year ended December 28, 2019 as compared to the prior year period was

attributable to a reduction of $73.7

million of operating costs (primarily due to $38.5 million of litigation

settlement costs recorded in 2018 and a $39.7

million decrease in restructuring costs) partially offset by $64.5 million of additional

costs from acquired

The $71.7 million increase in selling, general and administrative

expenses within our technology and

value-added services segment for the year ended December 28, 2019 as

compared to the prior year period was

attributable to $70.5 million of additional costs from acquired companies and $1.2

million of additional operating

As a percentage of net sales, selling, general and administrative expenses

decreased to 23.8% from 24.5%

for the comparable prior year period.

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

expenses increased $33.5 million, or

2.3%, to $1,461.6 million for the year ended December 28, 2019 from

the comparable prior year period.

percentage of net sales, selling expenses decreased to 14.7%

from 15.1% for the comparable prior year period.

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

and administrative expenses

decreased $29.0 million, or 3.3%, to $911.0 million for the year ended December 28, 2019 from

the comparable

prior year period primarily due to $38.5 million of litigation settlement

costs recorded in 2018 and a $39.7 million

decrease in restructuring costs partially offset by increases in general and administrative

As a percentage

of net sales, general and administrative expenses decreased to 9.1% from 9.4%

for the comparable prior year

Selling, general and administrative expenses (including restructuring costs) increased $541.7 million, or 23.8%.

In the prior year, there were significant cost-saving measures taken in response to the COVID-19 pandemic.

These cost-saving measures were temporary and substantially ended during the third quarter of 2020.

The $497.8 million increase in selling, general and administrative expenses within our health care distribution segment was attributable to an increase of $411.5 million of operating costs and an increase of $111.3 million of additional costs from acquired companies, partially offset by a decrease of $25.0 million in restructuring costs.

The $43.9 million increase in selling, general and administrative expenses within our technology and value-added services segment was attributable to an increase of $28.8 million of additional costs from acquired companies, an increase of $14.3 million of operating costs and an increase of $0.8 million in restructuring costs.

As a component of total selling, general and administrative expenses, selling expenses increased $294.8 million, or 21.7% to $1,655.6 million, primarily due to an increase in payroll and payroll related costs.

As a percentage of net sales, selling expenses decreased to 13.4% from 13.5%.

As a component of total selling, general and administrative expenses, general and administrative expenses increased $246.9 million, or 26.9% to $1,165.0 million, primarily due to an increase in payroll and payroll related costs.

As a percentage of net sales, general and administrative expenses increased to 9.4% from 9.1%.

Other Expense, Net

Other expense, net for the years ended 2019 and 2018 was as follows

(in thousands):

Other expense, net was as follows (in thousands):

Interest income

1 unchanged sentence

Other expense, net

Interest expense decreased $25.2 million primarily due to decreased

borrowings under our bank credit lines.

For the year ended December 28, 2019, our effective tax rate was 23.4% compared to 20.0%

for the prior year

In 2019, our effective tax rate was primarily impacted by state and foreign income

taxes and interest

In 2018, our effective tax rate was primarily impacted by a reduction in the estimate

of our transition tax

associated with the Tax Cuts and Jobs Act, tax charges and credits associated with legal entity reorganizations

outside the U.S., and state and foreign income taxes and interest expense.

Within our consolidated balance sheets, transition tax of $9.9 million was included in “Accrued taxes” for 2019

2018, and $94.9 million and $104.2 million were included in “Other liabilities”

for 2019 and 2018 respectively.

Net Gain on Sale of Equity Investments

On October 1, 2019, we sold an equity investment in Hu-Friedy, a manufacturer of dental instruments and infection

prevention solutions.

Our investment was non-controlling, we were not involved in

running the business and had

no representation on the board of directors.

During the fourth quarter of 2019, we also sold certain other investments.

In the aggregate, the sales of these

investments resulted in a pre-tax gain of approximately $250.2 million

and an after-tax gain of approximately

$186.8 million.

Interest expense decreased $13.8 million primarily due to reduced credit line borrowings.

For the year ended December 25, 2021, our effective tax rate was 23.8% compared to 19.1% for the prior year period.

In 2021, our effective tax rate was primarily impacted by state and foreign income taxes and interest expense.

In 2020, our effective tax rate was primarily impacted by the agreement with the U.S Internal Revenue Service on our Advanced Pricing Agreement (APA), other audit resolutions, and state and foreign income taxes and interest expense.

Gain on Sale of Equity Investment

In the third quarter of 2021 we received contingent proceeds of $9.8 million from the 2019 sale of Hu-Friedy resulting in the recognition of an additional after-tax gain of $7.3 million.

We also received contingent proceeds in 2020 of $2.1 million resulting in the recognition of an additional gain of $1.6 million after-tax.

No further proceeds are expected from this sale.

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases

of additional noncontrolling

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

purchases of fixed assets and

repurchases of common stock (which have been temporarily suspended).

Working capital requirements generally

result from increased sales, special inventory forward buy-in opportunities and

payment terms for receivables and

Historically, sales have tended to be stronger during the third and fourth quarters and special inventory

forward buy-in opportunities have been most prevalent just before the

end of the year, and have caused our working

capital requirements to be higher from the end of the third quarter to

the end of the first quarter of the following

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

effect on our cash flows in the second

quarter of 2020.

In the latter half of the second quarter and continuing

through year-end, dental and medical

practices began to re-open worldwide.

However, patient volumes remain below pre-COVID-19 levels and certain

regions in the U.S.

and internationally are experiencing an increase in COVID-19

As such, there is an

ongoing risk that the COVID-19 pandemic may again have a material

adverse effect on our cash flows in future

periods and may result in a material adverse effect on our financial condition and

However, the extent of

the potential impact cannot be reasonably estimated at this time.

As part of a broad-based effort to support plans for the long-term health of our business

and to strengthen our

financial flexibility, we implemented cost reduction measures that included certain reductions in payroll,

substantially decreased capital expenditures, reduced corporate

spending and the elimination of certain non-

strategic targeted expenditures.

As our markets have begun to recover, we ended most of those temporary expense-

reduction initiatives during the second half of 2020.

As the COVID-19 pandemic continues to unfold, we will

continue to evaluate appropriate actions for the business.

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

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.

Our principal capital requirements have included funding of acquisitions, purchases of additional noncontrolling interests, repayments of debt principal, the funding of working capital needs, purchases of fixed assets and repurchases of common stock (which had been temporarily suspended in April 2020, but were resumed in early March 2021).

Working capital requirements generally result from increased sales, special inventory forward buy-in opportunities and payment terms for receivables and payables.

Historically, sales have tended to be stronger during the second half of the year and special inventory forward buy-in opportunities have been most prevalent just before the end of the year, and have caused our working capital requirements to be higher from the end of the third quarter to the end of the first quarter of the following year.

The pandemic and the governmental responses to it had a material adverse effect on our cash flows in the second quarter of 2020.

In the latter half of the second quarter of 2020 and continuing through 2021, dental and medical practices began to re-open worldwide.

During 2021, patient traffic levels returned to levels approaching pre-pandemic levels.

However, the extent of the potential impact cannot be reasonably estimated at this time.

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

Please see Note 12 – Debt for further information.

Our ability to generate sufficient cash flows from operations is dependent on the continued demand of our customers for our products and services, and access to products and services from our suppliers.

Our business requires a substantial investment in working capital, which is susceptible to fluctuations during the year as a result of inventory purchase patterns and seasonal demands.

Inventory purchase activity is a function of sales activity, special inventory forward buy-in opportunities and our desired level of inventory.

We anticipate future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months.

Funding requirements are based on

forecasted profitability and working capital needs, which, on occasion, may change.

Consequently, we may change

our funding structure to reflect any new requirements.

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

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

We have no off-balance sheet arrangements.

On February 7, 2019, we completed the Animal Health Spin-off.

On the Distribution Date we received a tax free

distribution of $1,120 million from Covetrus, which has been used to

pay down our debt, thereby generating

additional debt capacity that can be used for general corporate purposes, including

share repurchases and mergers

and acquisitions.

Net cash provided by operating activities was $593.5 million for the

year ended December 26, 2020, compared to

$820.5 million for the prior year.

The net change of $227.0 million was primarily attributable to lower net income

and lower distributions from equity affiliates,

both resulting from the sale of our equity investment in Hu-Friedy

the fourth quarter of 2019, and increased working capital requirements,

specifically an increase in inventories due

to stocking of PPE and COVID-19 related products, and an increase in accounts

receivable due to higher sales

These working capital increases were partially offset by greater growth

in accounts payable and accrued

Net cash used in investing activities was $115.0 million for the year ended December 26, 2020,

compared to $422.3

million for the prior year.

The net change of $307.3 million was primarily due to decreased payments

investments and business acquisitions, partially offset by decreased proceeds from

sales of equity investments.

Net cash used in financing activities was $181.8 million for the

year ended December 26, 2020, compared to

$363.4 million for the prior year.

The net change of $181.6 million was primarily

due to increased net proceeds

from bank borrowings and lower repurchases of our common stock,

partially offset by proceeds received during the

prior year related to the Animal Health Spin-off.

The following table summarizes selected measures of liquidity and capital

resources (in thousands):

Funding requirements are based on forecasted profitability and working capital needs, which, on occasion, may change.

Consequently, we may change our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets, and our available funds under existing credit facilities provide us with sufficient liquidity to meet our currently foreseeable short-term and long-term capital needs.

Net cash from continuing operations provided by operating activities was $709.6 million for the year ended December 25, 2021, compared to net cash from continuing operations provided by operating activities of $593.5 million for the prior year.

The net change of $116.1 million was primarily attributable to higher net income, partially offset by increased working capital requirements, specifically an increase in inventories due to ongoing stocking of PPE and COVID-19 related products, and reduced accounts payable and accrued expenses.

These working capital increases were partially offset by lower growth in accounts receivable as days sales outstanding were lower than in the prior year.

Net cash from continuing operations used in investing activities was $677.2 million for the year ended December 25, 2021, compared to $115.0 million for the prior year.

The net change of $562.2 million was primarily attributable to increased payments for equity investments and business acquisitions.

Net cash from continuing operations used in financing activities was $333.0 million for the year ended December 25, 2021, compared to net cash used in financing activities of $181.8 million for the prior year.

The net change of $151.2 million was primarily due to increased repurchases of common stock partially offset by decreased net proceeds from bank borrowings.

The following table summarizes selected measures of liquidity and capital resources (in thousands):

Cash and cash equivalents

Working capital (1)

Bank credit lines

3 unchanged sentences

Non-current operating lease liabilities

Includes $0.0 million and $127.0 million of accounts receivable which serve as security for U.S.

trade accounts receivable

securitization at December 26, 2020 and December 28, 2019, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turnover

Our accounts receivable days sales outstanding from operations

increased to 46.0 days as of December 26, 2020

from 44.5 days as of December 28, 2019.

During the years ended December 26, 2020 and December 28,

wrote off approximately $7.8 million and $5.9 million, respectively, of fully reserved accounts receivable against

our trade receivable reserve.

Our inventory turnover from operations was 5.1 as of December

26, 2020 and 5.0 as

of December 28, 2019.

Our working capital accounts may be impacted by current

and future economic conditions.

Includes $138.0 million and $0.0 million of certain accounts receivable which serve as security for U.S.

trade accounts receivable securitization at December 25, 2021 and December 26, 2020, respectively.

Our cash and cash equivalents consist of bank balances and investments in money market funds representing overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations decreased to 41.8 days as of December 25, 2021 from 46.0 days as of December 26, 2020.

During the years ended December 25, 2021 and December 26, 2020, we wrote off approximately $8.5 million and $7.8 million, respectively, of fully reserved accounts receivable against our trade receivable reserve.

Our inventory turnover from operations was 5.2 as of December 25, 2021 and 5.1 as of December 26, 2020.

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

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations,

including interest (assuming a weighted average interest

rate of 3.3%), as well as

inventory purchase commitments and operating lease obligations as of December

The following table summarizes our contractual obligations related to fixed and variable rate long-term debt and finance lease obligations, including interest (assuming a weighted average interest rate of 3.2%), as well as inventory purchase commitments and operating lease obligations as of December 25, 2021:

Payments due by period (in thousands)

5 unchanged sentences

Finance lease obligations, including interest

Bank Credit Lines

Bank credit lines consisted of the following:

Revolving credit agreement

Other short-term bank credit lines

Revolving Credit Agreement

On April 18, 2017, we entered into a $750 million revolving credit

agreement (the “Credit Agreement”), which

matures in April 2022.

The interest rate is based on the USD LIBOR

plus a spread based on our leverage ratio at

the end of each financial reporting quarter.

We expect the LIBOR rate to be discontinued at some point

during 2021, which will require an amendment to our debt agreements to

reflect a new reference rate.

expect the discontinuation of LIBOR as a reference rate in our debt agreements

to have a material adverse effect on

our financial position or to materially affect our interest expense.

The Credit Agreement also requires, among other

things, that we maintain maximum leverage ratios.

Additionally, the Credit Agreement contains customary

representations, warranties and affirmative covenants as well as customary negative

covenants, subject to

negotiated exceptions on liens, indebtedness, significant corporate changes

(including mergers), dispositions and

certain restrictive agreements.

As of December 26, 2020 and December 28, 2019, we had no borrowings

revolving credit facility.

As of December 26, 2020 and December 28, 2019, there

were $9.5 million and $9.6

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

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

things, (i) modify the financial covenant

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

the pricing grid to reflect the net leverage

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

through March 31, 2021.

364-Day Credit Agreement

On April 17, 2020, we entered into a new $700 million 364-day credit agreement,

with JPMorgan Chase Bank,

Bank National Association as joint lead arrangers and joint

This facility matures on

April 16, 2021.

As of December 26, 2020, we had no borrowings under this credit

We have the ability to

borrow up to an additional $200 million, from the original facility amount

of $700 million, under this credit facility

on a revolving basis as needed, subject to the terms and conditions of

the credit agreement.

The interest rate for

borrowings under this facility will fluctuate based on our net leverage

At December 26, 2020, the interest

rate on this facility was 2.50%.

The proceeds from this facility can be used for working capital requirements

general corporate purposes, including, but not limited to, permitted refinancing

of existing indebtedness.

terms of this agreement, we are prohibited from repurchasing our common stock

until we report our financial

results for the second quarter of 2021.

Other Short-Term Credit

As of December 26, 2020 and December 28, 2019, we had various other

short-term bank credit lines available, of

which $73.4 million and $24.0 million, respectively, were outstanding.

At December 26, 2020 and December 28,

2019, borrowings under all of these credit lines had a weighted average

interest rate of 4.14% and 3.45%,

respectively.

Long-term debt

Long-term debt consisted of the following:

Private placement facilities

trade accounts receivable securitization

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

at December 26, 2020

collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

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

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

Finance lease obligations (see Note 7)

Less current maturities

Total long-term debt

Private Placement Facilities

Our private placement facilities, with three insurance companies, have a

total facility amount of $1 billion, and are

available on an uncommitted basis at fixed rate economic terms to be agreed upon

at the time of issuance, from

time to time through June 23, 2023.

The facilities allow us to issue senior promissory notes to the

lenders at a fixed

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

the time of issuance.

The term of each

possible issuance will be selected by us and can range from five to

15 years (with an average life no longer than 12

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.

The agreements provide, among other things, that we maintain

certain maximum leverage ratios, and contain restrictions relating

to subsidiary indebtedness, liens, affiliate

transactions, disposal of assets and certain changes in ownership.

These facilities contain make-whole provisions in

the event that we pay off the facilities prior to the applicable due dates.

On June 23, 2020, we amended the private placement facilities to, among

other things, (i) temporarily modify the

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

ratio until March 31, 2021, (ii) increase

the maximum maintenance leverage ratio through March 31, 2021, but with

a 1.00% interest rate increase on the

outstanding notes if the net leverage ratio exceeds 3.0x, which will remain

in effect until we deliver financials for a

four-quarter period ending on or after June 30, 2021 showing compliance with

the total leverage ratio requirement,

and (iii) make certain other changes conforming to the Credit Agreement, dated

as of April 18, 2017, as amended.

The components of our private placement facility borrowings as

of December 26, 2020 are presented in the

following table (in thousands):

January 20, 2012

January 20, 2022

January 20, 2012

January 20, 2024

December 24, 2012

December 24, 2024

June 16, 2017

June 16, 2027

September 15, 2017

September 15, 2029

January 2, 2018

January 2, 2028

September 2, 2020

September 2, 2030

Deferred debt issuance costs

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

On September 2, 2020, we refinanced our $100 million private placement borrowing at 3.79%, originally due on September 2, 2020,

with a similar 10-year borrowing at 2.35% maturing on September 2, 2030.

Trade Accounts Receivable Securitization

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

trade accounts

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

committed for up to three years.

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

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

June 12, 2023 and was amended to adjust certain

covenant levels for 2020.

As of December 26, 2020 and December 28, 2019, the borrowings outstanding

securitization facility were $0.0 million and $100 million, respectively.

At December 26, 2020, the interest rate on

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

paper rate of 0.22% plus 0.95%, for a

combined rate of 1.17%.

At December 28, 2019, the interest rate on borrowings under this facility

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.

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

and certain equipment.

Our leases have remaining terms of less than one year to 16 years, some

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

As of December 26, 2020, our right-of-use assets related to

operating leases were $288.8 million and our current and non-current operating

lease liabilities were $64.7 million

and $238.7 million, respectively.

For information relating to our debt please see Note 12 – Debt .

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 20 years, some of which may include options to extend the leases for up to 10 years.

As of December 25, 2021, our right-of-use assets related to operating leases were $325.0 million and our current and non-current operating lease liabilities were $76.4 million and $267.8 million, respectively.

Please see Note 6 – Leases for further information.

Stock Repurchases

From June 21, 2004 through December 26, 2020, we repurchased $3.6

billion, or 75,563,289 shares, under our

common stock repurchase programs, with $201.2 million available as of

December 26, 2020 for future common

stock share repurchases.

On October 30, 2019, our Board of Directors authorized the repurchase of

up to an additional $400 million in

shares of our common stock.

As a result of the COVID-19 pandemic, as previously announced, we have

temporarily suspended our share

repurchase program in an effort to preserve cash and exercise caution during this

uncertain period and due to

certain restrictions related to financial covenants in our credit facilities.

Redeemable Noncontrolling interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Account Standards Codification (“ASC”) 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling interest

holder under the terms of a put

option contained in contractual agreements.

The components of the change in the Redeemable noncontrolling

interests for the years ended December 26, 2020, December 28, 2019 and December

29, 2018 are presented in the

following table:

Balance, beginning of period

Decrease in redeemable noncontrolling interests due to

Increase in redeemable noncontrolling interests due to

business acquisitions

Net income attributable to redeemable noncontrolling interests

Dividends declared

Effect of foreign currency translation loss attributable to

On March 8, 2021, we announced the reinstatement of our share repurchase program, which had been temporarily suspended in April of 2020.

From June 21, 2004 through December 25, 2021, we repurchased $4.0 billion, or 81,068,993 shares, under our common stock repurchase programs, with $200.0 million available as of December 25, 2021 for future common stock share repurchases.

Redeemable Noncontrolling Interests

Change in fair value of redeemable securities

Balance, end of period

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

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

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

consideration if certain financial targets are met.

Any adjustments to these accrual amounts are recorded in our

consolidated statement of income.

For the years ended December 26, 2020 and December 28, 2019,

there were no

material adjustments recorded in our consolidated statements of income

relating to changes in estimated contingent

purchase price liabilities.

On July 1, 2018, we closed on a joint venture with Internet Brands,

a provider of web presence and online

marketing software, to create a newly formed entity, Henry Schein One, LLC.

The joint venture includes Henry

Schein Practice Solutions products and services, as well as Henry Schein’s international dental practice

management systems and the dental businesses of Internet Brands.

Internet Brands originally held a 26%

noncontrolling interest in Henry Schein One, LLC that is accounted

for within stockholders’ equity, as well as a

freestanding and separately exercisable right to put its noncontrolling

interest to Henry Schein, Inc.

for fair value

following the fifth anniversary of the effective date of the formation of the joint venture.

Beginning with the

second anniversary of the effective date of the formation of the joint venture, Henry

Schein One began issuing a

fixed number of additional interests to Internet Brands, which increased

Internet Brands interest to 27% effective

July 1, 2020.

Henry Schein One will continue issuing additional interests

to Internet Brands annually through the

fifth anniversary, ultimately increasing Internet Brands’ ownership to approximately 33.6%.

Internet Brands is also

entitled to receive a fixed number of additional interests, in the aggregate up

to approximately 1.6% of the joint

venture’s ownership, if certain operating targets are met by the joint venture in its fourth, fifth and sixth operating

These additional shares are considered contingent consideration

that are accounted for within stockholders’

however, these shares will not be allocated any net income of Henry Schein One until the

shares vest or are

earned by Internet Brands.

A Monte Carlo simulation was utilized to value the additional contingent

interests that

are subject to operating targets.

Key assumptions that were applied to derive the fair value of

the contingent

interests include an assumed equity value of Henry Schein One, LLC

at its inception date, a risk-free interest rate

based on U.S.

treasury yields, an assumed future dividend yield, a risk-adjusted

discount rate applied to projected

future cash flows, an assumed equity volatility based on historical stock price

returns of a group of guideline

companies, and an estimated correlation of annual cash flow returns to

equity returns.

As a result of this transaction

with Internet Brands, we recorded $567.6 million of noncontrolling

interest within stockholders’ equity.

Noncontrolling Interests

Noncontrolling interests represent our less than 50% ownership interest

in an acquired subsidiary.

Our net income

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

to noncontrolling interests.

Some minority stockholders in certain of our consolidated subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities.

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.

As of December 25, 2021 and December 26, 2020 our balance for redeemable noncontrolling interests was $613.3 million and $327.7 million, respectively.

Please see Note 17 – Redeemable Noncontrolling Interests for further information.

Unrecognized tax benefits

As more fully disclosed in Note 14 of “Notes to Consolidated Financial

Statements,” we cannot reasonably estimate

the timing of future cash flows related to the unrecognized tax benefits,

including accrued interest, of $84.0 million

as of December 26, 2020.

As more fully disclosed in Note 13 – Income Taxes of “Notes to Consolidated Financial Statements,” we cannot reasonably estimate the timing of future cash flows related to the unrecognized tax benefits, including accrued interest, of $83.5 million as of December 25, 2021.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to

make estimates and judgments that affect the

reported amounts of assets, liabilities, revenues and expenses and

related disclosures of contingent assets and

We base our estimates on historical data, when available, experience, industry and market trends, and on

various other assumptions that are believed to be reasonable under the circumstances,

the combined results of

which form the basis for making judgments about the carrying values

of assets and liabilities that are not readily

apparent from other sources.

However, by their nature, estimates are subject to various assumptions and

uncertainties.

Reported results are therefore sensitive to any changes in our assumptions,

judgments and estimates,

including the possibility of obtaining materially different results if different assumptions were

to be applied.

Our financial results for the year ended December 26, 2020 were

affected by certain estimates we made due to the

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

During the year ended December 26, 2020,

we recorded incremental bad debt reserves of approximately $10.0

million for our global dental business.

stock compensation expense during the year ended December 26, 2020

was lower than in the years ended

December 28, 2019 and December 29, 2018 due to our estimate that a lower amount

of performance shares granted

in 2018, 2019 or 2020 would ultimately vest as a result of the lower-than-normal earnings

Additionally, in

the year ended December 26, 2020, we recorded total impairment charges on intangible assets

of approximately

$20.3 million.

Although our selling, general and administrative expenses

for the year ended December 26, 2020

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

Furthermore, during the year ended December 26, 2020, our gross profit

margin was negatively affected by

significant adjustments recorded for PPE inventory and COVID-19 related

products reflecting changes in our

estimates of net realizable value brought on by volatility of pricing and changes

in demand experienced during the

Such conditions may recur and adversely impact gross profit margins in future periods, although we do not

expect material inventory adjustments to continue into 2021.

We believe that the following critical accounting policies, which have been discussed with the Audit Committee of

the Board of Directors, affect the significant estimates and judgments used in the

preparation of our financial

Revenue Recognition

We generate revenue from the sale of dental and medical consumable products, equipment (health care distribution

revenues), software products and services and other sources (technology

and value-added services revenues).

Provisions for discounts, rebates to customers, customer returns and other

contra revenue adjustments are included

in the transaction price at contract inception by estimating the most likely

amount based upon historical data and

estimates and are provided for in the period in which the related sales are

Revenue derived from the sale of consumable products is recognized at a point

in time when control transfers to the

Such sales typically entail high-volume, low-dollar orders shipped

using third-party common carriers.

We believe that the shipment date is the most appropriate point in time indicating control has transferred to the

customer because we have no post-shipment obligations and this is when

legal title and risks and rewards of

ownership transfer to the customer and the point at which we have an

enforceable right to payment.

Revenue derived from the sale of equipment is recognized when control

transfers to the customer.

when the equipment is delivered.

Such sales typically entail scheduled deliveries of large equipment primarily

equipment service technicians.

Some equipment sales require minimal

installation, which is typically completed at

the time of delivery.

Our product generally carries standard warranty terms provided by the manufacturer, however,

in instances where we provide warranty labor services, the warranty

costs are accrued in accordance with ASC 460

“Guarantees”.

Revenue derived from the sale of software products is recognized when

products are shipped to customers or made

available electronically.

Such software is generally installed by customers and does not require extensive training

due to the nature of its design.

Revenue derived from post-contract customer

support for software, including annual

support and/or training, is generally recognized over time using time elapsed

as the input method that best depicts

the transfer of control to the customer.

Revenue derived from other sources, including freight charges, equipment repairs

and financial services, is

recognized when the related product revenue is recognized or when

the services are provided.

practical expedient to treat shipping and handling activities performed after

the customer obtains control as

fulfillment activities, rather than a separate performance obligation in the contract.

Sales, value-add and other taxes we collect concurrent with revenue-producing

activities are excluded from

Certain of our revenue is derived from bundled arrangements that include

multiple distinct performance obligations

which are accounted for separately.

When we sell software products together with related services (i.e.,

and technical support), we allocate revenue to software using the residual

method, using an estimate of the

standalone selling price to estimate the fair value of the undelivered

There are no cases where revenue is

deferred due to a lack of a standalone selling price.

Bundled arrangements that

include elements that are not

considered software consist primarily of equipment and the related installation

We allocate revenue for

such arrangements based on the relative selling prices of the goods or services.

an observable selling price is not

available (i.e., we do not sell the goods or services separately), we use one

the following techniques to estimate

the standalone selling price:

adjusted market approach;

cost-plus approach;

or the residual

specific hierarchy for the use of these methods, but the estimated selling

price reflects our best estimate of what the

selling prices of each deliverable would be if it were sold regularly on

a standalone basis taking into consideration

the cost structure of our business, technical skill required, customer

location and other market conditions.

Accounts Receivable

Accounts receivable are generally recognized when health care distribution

and technology and value-added

services revenues are recognized.

In accordance with the “expected credit loss” model, the carrying amount

accounts receivable is reduced by a valuation allowance that reflects

our best estimate of the amounts that will not

be collected.

In addition to reviewing delinquent accounts receivable, we consider

many factors in estimating our

reserve, including types of customers and their credit worthiness, experience

and historical data adjusted for current

conditions and reasonable supportable forecasts.

Sales Returns

Sales returns are recognized as a reduction of revenue by the amount

of expected returns and are recorded as refund

liability within current liabilities.

We estimate the amount of revenue expected to be reversed to calculate the sales

return liability based on historical data for specific products, adjusted

as necessary for new products.

allowance for returns is presented gross as a refund liability and we

record an inventory asset (and a corresponding

adjustment to cost of sales) for any products that we expect to be returned.

Our accounting policies are more fully described in Note 1 – Basis of Presentation and Significant Accounting Policies of the consolidated financial statements.

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available, experience, industry and market trends, and on various other assumptions that are believed to be reasonable under the circumstances, the combined results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

However, by their nature, estimates are subject to various assumptions and uncertainties.

Therefore, reported results may differ from estimates and any such differences may be material to our consolidated financial statements.

We believe that the following critical accounting policies, which have been discussed with the Audit Committee of our Board of Directors, affect the significant estimates and judgments used in the preparation of our financial statements:

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or market.

Cost is determined by

the first-in, first-out method for merchandise or actual cost for large equipment and

high tech equipment.

accordance with our policy for inventory valuation, we consider many

factors including the condition and salability

of the inventory, historical sales, forecasted sales and market and economic trends.

From time to time, we may adjust our assumptions for anticipated changes

in any of these or other factors expected

to affect the value of inventory.

Although we believe our judgments, estimates and/or

assumptions related to

inventory and reserves are reasonable, making material changes to such

judgments, estimates and/or assumptions

could materially affect our financial results.

We account for business acquisitions and combinations under the acquisition method of accounting, where the net

assets of businesses purchased are recorded at their fair value at

the acquisition date and our consolidated financial

statements include their results of operations from that date.

Any excess of acquisition consideration over the fair

value of identifiable net assets acquired is recorded as goodwill.

The major classes of assets and liabilities that we

generally allocate purchase price to, excluding goodwill, include identifiable

intangible assets (i.e., trademarks and

trade names, customer relationships and lists, non-compete agreements and

product development), property, plant

and equipment, deferred taxes and other current and long-term assets and

The estimated fair value of

identifiable intangible assets is based on critical estimates, judgments

and assumptions derived from:

market conditions;

Inventories consist primarily of finished goods and are valued at the lower of cost or net realizable value.

Cost is determined by the first-in, first-out method for merchandise or actual cost for large equipment and high tech equipment.

In estimating carrying value of inventory, we consider many factors including the condition and

salability of the inventory by reviewing on-hand quantities, historical sales, forecasted sales and market and economic trends.

Certain of our products, specifically PPE and COVID-19 related items have experienced changes in net realizable value, due to volatility of pricing and changes in demand for these products.

Business Combinations

The estimated fair value of acquired identifiable intangible assets (trademarks and trade names, customer relationships and lists, non-compete agreements and product development) is based on critical estimates, judgments and assumptions derived from:

analysis of market conditions;

discount rates;

discounted cash flows;

retention rates;

projected cash flows;

customer retention rates;

and estimated useful lives.

Some prior owners of such acquired subsidiaries are eligible to receive additional

purchase price cash consideration

if certain financial targets are met.

While we use our best estimates and assumptions to accurately value

assets acquired and liabilities assumed at the acquisition date as well

as contingent consideration, where applicable,

our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period we

may record adjustments to the assets acquired and liabilities assumed with

the corresponding offset to goodwill

within our consolidated balance sheets.

At the end of the measurement period or final determination

of the values

of such assets acquired or liabilities assumed, whichever comes first,

any subsequent adjustments are recognized in

our consolidated statements of operations.

Goodwill is not amortized, but is subject to impairment analysis at least

once annually, or if an event occurs or

circumstances change that would more likely than not reduce the fair value

of a reporting unit below its carrying

Such impairment analyses for goodwill require a comparison of the

fair value to the carrying value of

reporting units.

Please see Note 4 – Business Acquisitions and Divestitures for further discussion of our acquisitions.

Goodwill is subject to impairment analysis at least once annually as of the first day of our fourth quarter, or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Such impairment analyses for goodwill require a comparison of the fair value to the carrying value of reporting units.

We regard our reporting units to be our operating segments:

global dental, global medical,

technology and value-added services.

Goodwill was allocated to such reporting units, for the purposes

our impairment analyses, based on a specific identification basis.

Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit.

The fair value of

each reporting unit is calculated by applying

the discounted cash flow methodology and confirming with a market approach.

This analysis requires judgments,

including estimation of detailed future cash flows based on budget

expectations, and determination of comparable

companies to develop a weighted average cost of capital for each reporting

The estimates used to calculate the

fair value of a reporting unit change from year to year based on operating results,

market conditions, and other

Changes in these estimates and assumptions could materially affect the determination

of fair value and

goodwill impairment for each reporting unit.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized

over the period they are earned.

factors we consider in estimating supplier rebate accruals include forecasted

inventory purchases and sales in

conjunction with supplier rebate contract terms which generally provide

for increasing rebates based on either

increased purchase or sales volume.

Although we believe our judgments, estimates and/or assumptions

supplier rebates are reasonable, making material changes to such judgments,

estimates and/or assumptions could

materially affect our financial results.

Long-Lived Assets

Long-lived assets, other than goodwill and other definite-lived intangibles,

are evaluated for impairment whenever

events or changes in circumstances indicate that the carrying amount

of the assets may not be recoverable through

the estimated undiscounted future cash flows to be derived from such

Definite-lived intangible assets primarily consist of non-compete agreements,

trademarks, trade names, customer

relationships and lists, and product development.

For long-lived assets used in operations, impairment losses

only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted

future cash flows.

We measure the impairment loss based on the difference between the carrying amount and the

estimated fair value.

When an impairment exists, the related assets are written down to fair value.

believe our judgments, estimates and/or assumptions used in estimating

cash flows and determining fair value are

reasonable, making material changes to such judgments, estimates and/or

assumptions could materially affect such

impairment analyses and our financial results.

During the year ended December 26, 2020, we recorded total impairment charges

on intangible assets of

approximately $20.3 million, nearly all of which was recorded in our

technology and value-added services segment.

Stock-Based Compensation

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

to employees and non-

employee directors.

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

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

expense on a straight-line basis

over the requisite service period.

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

administrative expenses in our consolidated statements of income.

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

under the terms of our 2020

Stock Incentive Plan (formerly known as the 2013 Stock Incentive Plan),

and our 2015 Non-Employee Director

Stock Incentive Plan (together, the “Plans”).

The Plans are administered by the Compensation Committee of

Board of Directors.

Equity-based awards are granted solely in the form of restricted

stock units, with the exception

of providing stock options to employees pursuant to certain pre-existing

contractual obligations.

Grants of restricted stock units are stock-based awards granted to recipients with

specified vesting provisions.

the case of restricted stock units, common stock is generally delivered

on or following satisfaction of vesting

We issue restricted stock units that vest solely based on the recipient’s continued service over time

(primarily four year cliff vesting, except for grants made under the 2015 Non-Employee

Director Stock Incentive

Plan, which are primarily 12 month cliff vesting) and restricted stock units that vest

based on our achieving

specified performance measurements and the recipient’s continued service over time (primarily three year cliff

With respect to time-based restricted stock units, we estimate the fair value on the date of grant based on

closing stock price.

With respect to performance-based restricted stock units, the number of shares that ultimately

vest and are received by the recipient is based upon our performance as measured

against specified targets over a

specified period, as determined by the Compensation Committee of

the Board of Directors.

Although there is no

guarantee that performance targets will be achieved, we estimate the fair value of performance-based

stock units based on our closing stock price at time of grant.

The Plans provide for adjustments to the performance-based restricted

stock units targets for significant events,

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

certain capital transactions

(including share repurchases), restructuring costs, if any, certain litigation settlements or payments, if any, changes

in tax rates in certain countries, changes in accounting principles or in applicable

laws or regulations and foreign

exchange fluctuations.

Over the performance period, the number of shares of common

stock that will ultimately

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

or downward based upon our

estimation of achieving such performance targets.

The ultimate number of shares delivered to recipients

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

actual performance metrics as defined

under the Plans.

Although we believe our judgments, estimates and/or assumptions

related to stock-based compensation are

reasonable, making material changes to such judgments, estimates and/or

assumptions could materially affect our

financial results.

Unrecognized Tax

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in

accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected

to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely

than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

benefit that is greater than 50% likely of being realized upon ultimate audit

In the normal course of

business, our tax returns are subject to examination by various taxing

Such examinations may result in

future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect of certain

global dental, global medical, and technology and value-added services.

Goodwill is allocated to such reporting units, for the purposes of preparing our impairment analyses, based on a specific identification basis.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities that are considered shared services to the reporting units, and ultimately the determination of the fair value of each reporting unit.

The fair value of each reporting unit is calculated by applying the discounted cash flow methodology and confirming with a market approach.

There are inherent uncertainties, however, related to fair value models, the inputs and our judgments in applying them to this analysis.

The most significant inputs include estimation of detailed future cash flows based on budget expectations, and determination of comparable companies to develop a weighted average cost of capital for each reporting unit.

On an annual basis, we prepare annual and medium-term financial projections.

These projections are based on input from our leadership and are presented annually to our Board of Directors.

Influences on this year's forecasted financial information and the fair value model include:

the impact of planned strategic initiatives, the continued integration of recent acquisitions and overall market conditions.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors.

Our third-party valuation specialists provide inputs into our determination of the discount rate.

The rate is dependent on a number of underlying assumptions, including the risk-free rate, tax rate, equity risk premium, debt to equity ratio and pre-tax cost of debt.

Long-term growth rates are applied to our estimation of future cash flows.

The long-term growth rates are tied to growth rates we expect to achieve beyond the years for which we have forecasted operating results.

We also consider external benchmarks, and other data points which we believe are applicable to our industry and the composition of our global operations.

Based on our quantitative assessment, we believe the fair value of each of our reporting units sufficiently exceeds the carrying values.

As part of our analysis, we performed a sensitivity analysis on the discount rate and long-term growth rate assumptions.

The sensitivities led us to the same conclusion that no impairment exists.

Definite-Lived Intangible Assets

Annually, definite-lived intangible assets such as non-compete agreements, trademarks, trade names, customer relationships and lists, and product development are reviewed for impairment indicators.

If any impairment indicators exist, quantitative testing is performed on the asset.

The quantitative impairment model is a two-step test under which we first calculate the recoverability of the carrying value by comparing the undiscounted, probability-weighted value of the projected cash flows associated

with the asset or asset group, including its estimated residual value, to the carrying amount.

If the cash flows associated with the asset or asset group are less than the carrying value, we would perform a fair value assessment of the asset, or asset group.

If the carrying amount is found to be greater than the fair value, we record an impairment loss for the excess of book value over the fair value.

In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate.

Although we believe our judgments, estimates and/or assumptions used in estimating cash flows and determining fair value are reasonable, making material changes to such judgments, estimates and/or assumptions could materially affect such impairment analyses and our financial results.

During the years ended December 25, 2021 and December 26, 2020, we recorded total impairment charges on definite-lived intangible assets of approximately $0.7 and $20.3 million respectively, nearly all of which was recorded in our technology and value-added services segment.

When determining if the realization of the deferred tax asset is likely by assessing the need for a valuation allowance, estimates and judgement are required.

We consider all available evidence, both positive and negative, including estimated future taxable earnings, ongoing planning strategies, future reversals of existing temporary differences and historical operating results.

Additionally, changes to tax laws and statutory tax rates can have an impact on our determination.

Our intention is to evaluate the realizability of our deferred tax assets quarterly.

ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate audit settlement.

In the normal course of business, our tax returns are subject to examination by various taxing authorities.

Such examinations may result in future tax and interest assessments by these taxing authorities for uncertain tax positions taken in respect of certain tax matters.

Please see Note 13 – Income Taxes for further discussion.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Significant Accounting Policies

included under Item 8.

For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please see Note 1 – Basis of Presentation and Significant Accounting Policies included under Item 8.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis