What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-15 compared with 2021-02-17 · 1136 added, 2693 removed, 439 unchanged (90% of the section changed)

2 unchanged sentences

HENRY SCHEIN, INC.

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP;

New York, NY;

PCAOB ID# 243 )

Consolidated Financial Statements :

9 unchanged sentences

Notes to Consolidated Financial Statements

Note 1 – Significant Accounting Policies

Note 2 – Discontinued Operations

Note 1 – Basis of Presentation and Significant Accounting Policies

Note 2 – Revenue from Contracts with Customers

Note 3 – Segment and Geographic Data

Note 4 – Business Acquisitions and Divestitures

Note 5 – Property and Equipment, Net

Note 6 – Leases

Note 7 – Goodwill and Other Intangibles, Net

Note 8 – Investments and Other

Note 9 – Fair Value Measurements

Note 10 – Concentrations of Risk

Note 11 – Derivatives and Hedging Activities

Note 12 – Debt

Note 7 – Leases

Note 13 – Income Taxes

Note 14 – Commitments and Contingencies

Note 15 – Stock-Based Compensation

Note 16 – Employee Benefit Plans

Note 17 – Redeemable Noncontrolling Interests

Note 18 – Comprehensive Income

Note 10 – Fair Value Measurements

Note 11 – Business Acquisitions Divestitures

Note 19 – Discontinued Operations

Note 20 – Plans of Restructuring

Note 21 – Earnings Per Share

Note 14 – Income Taxes

Note 15 – Concentrations of Risk

Note 16 – Derivatives and Hedging Activities

Note 17 – Revenue from Contracts with Customers

Note 18 – Segment and Geographic Data

Note 19 – Employee Benefit Plans

Note 20 – Commitments and Contingencies

Note 21 – Quarterly Information (Unaudited)

Note 22 – Supplemental Cash Flow Information

2 unchanged sentences

December 26, 2020 and December 28, 2019

All other schedules are omitted because the required information is either

inapplicable or is included in the consolidated

financial statements or the notes thereto.

All other schedules are omitted because the required information is either inapplicable or is included in the consolidated financial statements or the notes thereto .

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

Opinion on the Consolidated Financial Statements

December 26, 2020 and December 28, 2019, the related consolidated statements of income, comprehensive income,

stockholders’ equity,

and cash flows for each

of the three years in

the period ended December 26, 2020,

(collectively

“consolidated

statements”).

consolidated financial

statements present

respects, the

financial position

December 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for each of the three

ended December

in conformity

with accounting

principles generally

United States of America.

Organizations

expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements,

effective on December 30, 2018, the Company

changed its method of accounting for leases due to the adoption of Accounting

Standards Codification Topic

We have audited the accompanying consolidated balance sheets of Henry Schein, Inc.

(the “Company”) as of December 25, 2021 and December 26, 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 25, 2021, the related notes and schedule (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company on December 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 15, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s

Our responsibility is

consolidated financial

statements based

Exchange Commission and the PCAOB.

conducted our

accordance with

the standards

Those standards

and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of

material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the

presentation of the consolidated financial

believe that our audits provide

a reasonable basis for our

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated

financial statements that was communicated or

required to be communicated to the

Audit Committee

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit Committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements;

and (2) involved our especially challenging, subjective or complex judgments.

The communication of

critical audit

consolidated financial

statements, taken

communicating

critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Position

the consolidated

financial statements the

Company operates in

multiple jurisdictions

The resolution

of these audits may span multiple

determination

considerations

determination

interpretation

jurisdictions, (ii)

technical merits

more-likely-than-not

length outcomes,

assessing the

adjustments to

the liability

for unrecognized

including involvement

with specialized

The primary procedures we performed to address this critical audit matter

Assessing the design and implementation and testing operating effectiveness of

certain controls over

the recognition and measurement of uncertain tax positions related

to transfer pricing.

Utilizing personnel with specialized knowledge and skill in taxation to evaluate

the appropriateness of

management’s methods and assumptions used to estimate uncertain tax positions related to transfer

(i) verifying our understanding of the relevant facts by

reading the Company’s

correspondence with the relevant tax authorities and third-party advice obtained

by the Company, (ii)

evaluating the reasonableness of technical merits, management’s judgments and assumptions and

assessing the overall reasonableness of conclusions reached, (iii)

evaluating the ranges of arm’s length

outcomes and pricing conclusions reached within management’s transfer pricing studies, and (iv)

reviewing settlement activity or agreements with income tax authorities.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue growth rates utilized in the determination of the fair values of acquired customer relationships for certain acquisitions

As described in Note 4 of the consolidated financial statements, the Company acquired several companies in the current year.

As a result of the acquisitions, management was required to determine estimated fair values of the assets acquired and liabilities assumed, including certain identifiable intangible assets.

In some instances, management utilized third-party valuation specialists to assist in the preparation of the valuation of certain identifiable intangible assets.

Management exercised significant judgment to develop and select revenue growth rates in the measurement of the fair value of the customer relationships.

We identified the revenue growth rates utilized in the determination of the fair values of acquired customer relationships for certain acquisitions, as a critical audit matter.

The principal considerations for our determination included the following:

(i) management utilizes significant unobservable inputs and assumptions in determining the projected revenue growth rates and (ii) changes in the revenue growth rates could have a significant impact on the fair value of acquired customer relationships for certain acquisitions.

Auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

Assessing the design and implementation of controls over the development of projected revenue growth rates used to determine the fair values of certain customer relationships.

Assessing the reasonableness of the projected revenue growth rates through:

(i) evaluating historical performance, (ii) comparing historical revenue growth rates to audited financial statements, and (iii) assessing financial projections against industry metrics and peer-group companies.

/s/ BDO USA, LLP

1 unchanged sentence

February 15, 2022

See accompanying notes.

HENRY SCHEIN, INC.

3 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of reserves of $

Accounts receivable, net of reserves of $ 67,168 and $ 88,030

Inventories, net

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Stockholders' equity:

Preferred stock, $

shares authorized,

Common stock, $

shares authorized,

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized,

none outstanding

Common stock, $ 0.01 par value, 480,000,000 shares authorized,

137,145,558 outstanding on December 25, 2021 and

7 unchanged sentences

Total stockholders' equity

Total liabilities, redeemable noncontrolling

interests and stockholders' equity

Total liabilities, redeemable noncontrolling interests and stockholders' equity

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

2 unchanged sentences

Selling, general and administrative

Litigation settlements

Restructuring costs

6 unchanged sentences

Equity in earnings of affiliates

Net gain on sale of equity investments

Gain on sale of equity investments

Net income from continuing operations

1 unchanged sentence

Net income attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

from discontinued operations

6 unchanged sentences

Henry Schein, Inc.:

Earnings (loss) per share from discontinued operations attributable to

Henry Schein, Inc.:

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

Earnings per share attributable to Henry Schein, Inc.:

-average common shares outstanding:

Weighted-average common shares outstanding:

See accompanying notes.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

12 unchanged sentences

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In thousands, except share and per share data)

6 unchanged sentences

Cumulative impact of adopting new accounting standards

Net income (excluding $

attributable to Redeemable

noncontrolling interests)

Net income (excluding $ 14,838 attributable to Redeemable

noncontrolling interests from continuing operations

and ($ 366 ) from discontinued operations)

Foreign currency translation loss (excluding loss of $ 2,335

attributable to Redeemable noncontrolling interests

Unrealized gain from foreign currency hedging activities,

and $ 592 gain from discontinued operations)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $ 1,035

Unrealized investment loss, net of tax benefit of $

Pension adjustment gain, net of tax of $

Unrealized investment gain, net of tax of $ 2

Pension adjustment loss, net of tax benefit of $ 1,806

Dividends paid

Other adjustments

Purchase of noncontrolling interests

Change in fair value of redeemable securities

Initial noncontrolling interests and adjustments related to

Noncontrolling interests and adjustments related to

business acquisitions

Adjustment for Animal Health Spin-off

Repurchase and retirement of common stock

4 unchanged sentences

Settlement of stock-based compensation awards

Deferred tax benefit arising from acquisition of

noncontrolling interest in partnership

Share Sale related to Animal Health business

Separation of Animal Health business

Transfer of charges in excess of capital

1 unchanged sentence

Cumulative impact of adopting new accounting standards

Net income (excluding $

attributable to Redeemable

Net income (excluding $ 13,363 attributable to Redeemable

noncontrolling interests from continuing operations)

from discontinued operations)

Foreign currency translation loss (excluding loss of $

Foreign currency translation gain (excluding loss of $ 4,279

attributable to Redeemable noncontrolling interests)

gain from discontinued operations)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $ 2,768

Unrealized investment gain, net of tax of $

Pension adjustment loss, net of tax benefit of $

Unrealized investment loss, net of tax benefit of $ 1

Pension adjustment gain, including tax benefit of $ 676

Dividends paid

Other adjustments

Purchase of noncontrolling interests

Change in fair value of redeemable securities

Initial noncontrolling interests and adjustments related to

Noncontrolling interests and adjustments related to

business acquisitions

Adjustment for Animal Health Spin-off

Repurchase and retirement of common stock

( 1,200,000 )

Stock issued upon exercise of stock options

Stock-based compensation expense

1 unchanged sentence

Settlement of stock-based compensation awards

Share Sale related to Animal Health business

Separation of Animal Health business

1 unchanged sentence

Balance, December 26, 2020

Cumulative impact of adopting new accounting standards

Net income (excluding $

attributable to Redeemable

Net income (excluding $ 23,358 attributable to Redeemable

noncontrolling interests from continuing operations)

Foreign currency translation gain (excluding loss of $

Foreign currency translation gain (loss) (excluding loss of $ 6,005

attributable to Redeemable noncontrolling interests)

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

Unrealized gain from foreign currency hedging activities,

net of tax of $ 3,275

Unrealized investment loss, net of tax benefit of $ 3

Pension adjustment gain, including tax benefit of $

Pension adjustment gain, including tax of $ 2,426

Dividends paid

Purchase of noncontrolling interests

Change in fair value of redeemable securities

Initial noncontrolling interests and adjustments related to

Noncontrolling interests and adjustments related to

business acquisitions

4 unchanged sentences

Settlement of stock-based compensation awards

Separation of Animal Health business

Transfer of charges in excess of capital

2 unchanged sentences

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except per share data)

Cash flows from operating activities:

1 unchanged sentence

Income from continuing operations

Adjustments to reconcile net income to net cash provided

by operating activities:

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

Depreciation and amortization

2 unchanged sentences

Stock-based compensation expense

Provision for losses on trade and other accounts receivable

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

Benefit from deferred income taxes

2 unchanged sentences

Changes in unrecognized tax benefits

Benefit from transition tax

Changes in operating assets and liabilities, net of acquisitions:

2 unchanged sentences

Accounts payable and accrued expenses

Net cash provided by operating activities from continuing

Net cash provided by (used in) operating activities from

discontinued operations

Net cash provided by operating activities from continuing operations

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

Net cash provided by operating activities

4 unchanged sentences

Proceeds from sale of equity investment

Repayments from (borrowings for) loan to affiliate

Proceeds from (repayments to) loan to affiliate

Net cash used in investing activities from continuing operations

9 unchanged sentences

Payments for repurchases of common stock

Payments for taxes related to shares withheld for employee

Payments for taxes related to shares withheld for employee taxes

Distribution received related to Animal Health Spin-off

2 unchanged sentences

Acquisitions of noncontrolling interests in subsidiaries

Proceeds from (payments) to Henry Schein Animal Health

Proceeds from (payments) to Henry Schein Animal Health Business

Net cash used in financing activities from continuing operations

Net cash provided by (used in) financing activities from

discontinued operations

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

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents from continuing

Effect of exchange rate changes on cash and cash equivalents from discontinued

Net change in cash and cash equivalents from continuing

Net change in cash and cash equivalents from discontinued

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

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

Net change in cash and cash equivalents from continuing operations

Net change in cash and cash equivalents from discontinued operations

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

See accompanying notes.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 1 –Significant Accounting Policies

Note 1 –Basis of Presentation and Significant Accounting Policies

Nature of Operations

We distribute health care products and services primarily to office-based health care practitioners with operations or

affiliates in the United States, Australia, Austria, Belgium, Brazil, Canada, Chile,

China, the Czech Republic,

France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, the

Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa, Spain,

Sweden, Switzerland, Thailand,

United Arab Emirates and the United Kingdom.

We distribute health care products and services primarily to office-based dental and medical practitioners, across dental practices, laboratories, physician practices, and ambulatory surgery centers, as well as government, institutional health care clinics and alternate care clinics.

We also provide software, technology and other value-added services to health care practitioners.

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

Our medical businesses serve physician offices, urgent care centers, ambulatory care sites, emergency medical technicians, dialysis centers, home health, federal and state governments and large enterprises, such as group practices and integrated delivery networks, among other providers across a wide range of specialties.

We have operations or affiliates in the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, United Arab Emirates and the United Kingdom.

Principles of Consolidation

Our consolidated financial statements include the accounts of Henry

and all of our controlled

subsidiaries.

All intercompany accounts and transactions are eliminated in

consolidation.

Investments in

unconsolidated affiliates, which are greater than or equal to 20% and less than or equal

to 50% owned or

investments in unconsolidated affiliates of less than 20% in which we have the ability

to influence the operating or

financial decisions, are accounted for under the equity method.

Certain prior period amounts have been reclassified

to conform to the current period presentation.

We consolidate a Variable

Interest Entity (“VIE”) where we hold a variable interest

and are the primary

The VIE is a trade accounts receivable securitization.

We are the primary beneficiary because we

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

and have the obligation

to absorb the majority of the losses or benefits.

The results of operations and financial position of this VIE

included in our consolidated financial statements.

For the consolidated VIE, the trade accounts receivable transferred

to the VIE are pledged as collateral to the

related debt.

The creditors have recourse to us for losses on these trade

accounts receivable.

At December 26,

2020 and December 28, 2019, trade accounts receivable that can only

be used to settle obligations of this VIE were

million and $

million, respectively, and the liabilities of the VIE where the creditors have recourse to us

million and $

million, respectively.

Our consolidated financial statements include the accounts of Henry Schein, Inc.

and all of our controlled subsidiaries.

All intercompany accounts and transactions are eliminated in consolidation.

Investments in unconsolidated affiliates in which we have the ability to influence the operating or financial decisions, are accounted for under the equity method.

Certain prior period amounts have been reclassified to conform to the current period presentation.

We consolidate the results of operations and financial position of a trade accounts receivable securitization which we consider a Variable Interest Entity (“VIE”) because we are the primary beneficiary, and we have the power to direct activities that most significantly affect the economic performance and have the obligation to absorb the majority of the losses or benefits.

For this VIE, the trade accounts receivable transferred to the VIE are pledged as collateral to the related debt.

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

At December 25, 2021 and December 26, 2020, certain trade accounts receivable that can only be used to settle obligations of this VIE were $ 138.0 million and $ 0.0 million, respectively and the liabilities of this VIE where the creditors have recourse to us were $ 105.0 million and $ 0.0 million, respectively.

Use of Estimates

The preparation of financial statements in conformity with accounting principles

generally accepted in the United

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

assets and liabilities and

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

statements and the reported amounts of

revenues and expenses during the reporting period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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

The COVID-19 pandemic has negatively impacted the global

economy, disrupted global supply chains

and created significant volatility and disruption of global financial markets.

In response, many countries

implemented business closures and restrictions, stay-at-home and social

distancing ordinances and similar measures

to combat the pandemic, which significantly impacted global business

and dramatically reduced demand for dental

products and certain medical products in the second quarter of 2020.

Demand increased in the second half of the

year resulting in growth over the prior year driven by sales of personal

protective equipment (PPE) and COVID-19

related products.

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

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

In 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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Our consolidated financial statements reflect estimates and assumptions

made by us that affect, among other things,

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

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 in the

second quarter of 2020.

latter half of the year, dental and medical practices began to re-open worldwide, and continued to do so

remainder of the year.

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

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 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.

We report our results of operations and cash flows on a

week basis ending on the last Saturday of December.

The years ended December 26, 2020, December 28, 2019 and December

29, 2018 consisted of

supplier rebates;

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

and pension plan assumptions.

Due to the significant uncertainty surrounding the future impact of COVID-19, our judgments regarding estimates and impairments could change in the future and may result in a material adverse effect on our financial condition and liquidity.

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

We report our results of operations and cash flows on a 52 - 53 week basis ending on the last Saturday of December.

The years ended December 25, 2021, December 26, 2020 and December 28, 2019 consisted of 52 weeks.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods

or services in an amount that reflects the

consideration that we expect to receive for those goods or services.

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services.

To recognize revenue, we do the following:

4 unchanged sentences

• recognize revenue when, or as, the entity satisfies a performance obligation.

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

revenues), software products and services and other sources (Technology and value-added services revenues).

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

contra revenue adjustments are included

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

amount based upon historical data and

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

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

Accounting Standards Codification (“ASC”) 460 “Guarantees”.

We generate revenue from the sale of dental and medical consumable products, equipment (Health care distribution revenues), software products and services and other sources (Technology and value-added services revenues).

Provisions for discounts, rebates to customers, customer returns and other contra revenue adjustments are included in the transaction price at contract inception by estimating the most likely amount based upon historical data and estimates and are provided for in the period in which the related sales are recognized.

Revenue derived from the sale of consumable products is recognized at a point in time when control transfers to the customer.

Such sales typically entail high-volume, low-dollar orders shipped using third-party common carriers.

We believe that the shipment date is the most appropriate point in time indicating control has transferred to the customer because we have no post-shipment obligations and this is when legal title and risks and rewards of ownership transfer to the customer and the point at which we have an enforceable right to payment.

Revenue derived from the sale of equipment is recognized when control transfers to the customer.

This occurs when the equipment is delivered.

Such sales typically entail scheduled deliveries of large equipment primarily by equipment service technicians.

Most equipment requires minimal installation, which is typically completed at the time of delivery.

Our product generally carries standard warranty terms provided by the manufacturer, however, in instances where we provide warranty labor services, the warranty costs are accrued in accordance with Accounting Standards Codification (“ASC”) 460 “Guarantees”.

At December 25, 2021 and December 26, 2020, we had accrued approximately $ 8.1 million and $ 6.9 million, respectively, for warranty costs.

Revenue derived from the sale of software products is recognized when products are delivered to customers or made available electronically.

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Revenue derived from the sale of software products is recognized when products

are shipped to customers or made

available electronically.

Such software is generally installed by customers and does

not require extensive training

due to the nature of its design.

Revenue derived from post-contract customer support for software,

including annual

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

as the input method that best depicts

the transfer of control to the customer.

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

and financial services, is

recognized when the related product revenue is recognized or when

the services are provided.

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

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 service.

We allocate revenue for

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

If an observable selling price is not

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

use one of the following techniques to estimate

the standalone selling price:

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 software sold on Software-as-a -Service basis is recognized ratably over the subscription period as control is transferred to the customer.

Revenue derived from other sources, including freight charges, equipment repairs and financial services, is recognized when the related product revenue is recognized or when the services are provided.

We apply the practical expedient to treat shipping and handling activities performed after the customer obtains control as fulfillment activities, rather than a separate performance obligation in the contract.

Sales, value-add and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Certain of our revenue is derived from bundled arrangements that include multiple distinct performance obligations, which are accounted for separately.

When we sell software products together with related services (i.e., training and technical support), we allocate revenue to software using the residual method, using an estimate of the standalone selling price to estimate the fair value of the undelivered elements.

Bundled arrangements that include elements that are not considered software consist primarily of equipment and the related installation service.

We allocate revenue for such arrangements based on the relative selling prices of the goods or services.

If an observable selling price is not available (i.e., we do not sell the goods or services separately), we use one of the following techniques to estimate the standalone selling price:

adjusted market approach;

cost-plus approach;

or the residual

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.

Note 17 – Revenue from Contracts with Customers

for additional disclosures of disaggregated net sales and

Note 18 – Segment and Geographic Data

for disclosures of net sales by segment and geographic data.

Contract Balances

Contract balances represent amounts presented in our consolidated balance

sheet when either we have transferred

goods or services to the customer or the customer has paid consideration to us

under the contract.

These contract

balances include accounts receivable, contract assets and contract liabilities.

Accounts Receivable

Accounts receivable are generally recognized when health care distribution

and technology and value-added

services revenues are recognized.

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

accounts receivable is reduced by a valuation allowance that reflects

our best estimate of the amounts that we do

not expect to collect.

In addition to reviewing delinquent accounts receivable, we consider many

estimating our reserve, including types of customers and their credit worthiness,

experience and historical data

adjusted for current conditions and reasonable supportable forecasts.

Contract Assets

Contract assets include amounts related to any conditional right to consideration

for work completed but not billed

as of the reporting date and generally represent amounts owed to us by

customers, but not yet billed.

Contract assets

are transferred to accounts receivable when the right becomes unconditional.

The contract assets primarily relate to

our bundled arrangements for the sale of equipment and consumables and

sales of term software licenses.

contract assets are included in Prepaid expenses and other and the non-current

contract assets are included in

or the residual method.

There is no specific hierarchy for the use of these methods, but the estimated selling price reflects our best estimate of what the selling prices of each deliverable would be if it were sold regularly on a standalone basis taking into consideration the cost structure of our business, technical skill required, customer location and other market conditions.

See Note 2 – Revenue from Contracts with Customers for additional disclosures of disaggregated net sales and Note 3 – Segment and Geographic Data for disclosures of net sales by segment and geographic data.

Cost of Sales

The primary components of cost of sales include the cost of the product (net of purchase discounts, supplier chargebacks and rebates) and inbound and outbound freight charges.

Costs related to purchasing, receiving, inspections, warehousing, internal inventory transfers and other costs of our distribution network are included in selling, general and administrative expenses along with other operating costs.

Total distribution network costs were $ 89.2 million, $ 71.7 million and $ 72.3 million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Sales Returns

Sales returns are recognized as a reduction of revenue by the amount of expected returns and are recorded as refund liability within current liabilities.

We estimate the amount of revenue expected to be reversed to calculate the sales return liability based on historical data for specific products, adjusted as necessary for new products.

The allowance for returns is presented gross as a refund liability and we record an inventory asset (and a corresponding adjustment to cost of sales) for any products that we expect to be returned.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Investments and other within our consolidated balance sheets.

Current and non-current contract asset balances as of

December 26, 2020 and December 28, 2019 were not material.

Contract Liabilities

Contract liabilities are comprised of advance payments and upfront payments

for service arrangements provided

over time that are accounted for as deferred revenue amounts.

Contract liabilities are transferred to revenue once

the performance obligation has been satisfied.

Current contract liabilities are included in Accrued expenses:

and the non-current contract liabilities are included in Other liabilities within

our consolidated balance sheets.

December 28, 2019, the current portion of contract liabilities of $

million was reported in Accrued expenses:

million related to non-current contract liabilities were reported

in Other liabilities.

During the year

ended December 26, 2020,

we recognized substantially all of the current contract liability amounts

previously deferred at December 28, 2019.

At December 26, 2020, the current and non-current portion of contract

liabilities were $

million and $

million, respectively.

Deferred Commissions

Sales commissions earned by our sales force that relate to long term

arrangements are capitalized as costs to obtain

a contract when the costs incurred are incremental and are expected to be recovered.

Deferred sales commissions

are amortized over the estimated customer relationship period.

We apply the practical expedient related to the

capitalization of incremental costs of obtaining a contract, and recognize such costs as an expense when incurred if

the amortization period of the assets that we would have recognized is one year or less.

Our deferred commission

balances as of December 26, 2020 and December 28, 2019 were not

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.

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at

the lower of cost or net realizable value.

determined by the first-in, first-out method for merchandise or actual cost

for large equipment and high tech

In accordance with our policy for inventory valuation, we

consider many factors including the

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

time to time, we adjust our assumptions for anticipated changes in any

of these or other factors expected to affect

the value of inventory.

Cash and Cash Equivalents

We consider all highly liquid short-term investments with an original maturity of three months or less to be cash

Due to the short-term maturity of such investments, the

carrying amounts are a reasonable estimate of

Outstanding checks in excess of funds on deposit of $

million and $

million, primarily related to

payments for inventory, were classified as accounts payable as of December 26, 2020 and December 28, 2019.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized over the period they are earned.

The factors we consider in estimating supplier rebate accruals include forecasted inventory purchases and sales, in conjunction with supplier rebate contract terms, which generally provide for increasing rebates based on either increased purchase or sales volume.

Direct Shipping and Handling Costs

Freight and other direct shipping costs are included in cost of sales.

Direct handling costs, which represent

primarily direct compensation costs of employees who pick, pack and otherwise

prepare, if necessary, merchandise

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

for shipment to our customers are reflected in selling, general and administrative

Direct shipping and

handling costs were $

million and $

million for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

Direct handling costs, which represent primarily direct compensation costs of employees who pick, pack and otherwise prepare, if necessary, merchandise for shipment to our customers are reflected in selling, general and administrative expenses.

Direct handling costs were $ 96.7 million, $ 79.2 million and $ 73.8 million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Advertising and Promotional Costs

We generally expense advertising and promotional costs as incurred.

Total advertising and promotional expenses

million and $

million for the years ended December 26, 2020, December 28, 2019

and December 29, 2018.

Supplier Rebates

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

over the period they are earned.

factors we consider in estimating supplier rebate accruals include forecasted

inventory purchases and sales, in

conjunction with supplier rebate contract terms, which generally provide

for increasing rebates based on either

increased purchase or sales volume.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation or amortization.

Depreciation is

computed primarily under the straight-line method

Note 3 – Property and Equipment, Net

for estimated useful

Amortization of leasehold improvements is computed using

the straight-line method over the lesser of the

useful life of the assets or the lease term.

Capitalized software costs consist of costs to purchase and develop

Costs incurred during the application

development stage for software bought and further customized by outside suppliers

for our use and software

developed by a supplier for our proprietary use are capitalized.

Costs incurred for our own personnel who are

directly associated with software development are capitalized.

We account for income taxes under an asset and liability approach that requires the recognition of deferred income

tax assets and liabilities for the expected future tax consequences of events

that have been recognized in our

financial statements or tax returns.

In estimating future tax consequences, we generally consider all expected

events other than enactments of changes in tax laws or rates.

The effect on deferred income tax assets and

liabilities of a change in tax rates is recognized as income or expense in

the period that includes the enactment date.

We file a consolidated U.S.

federal income tax return with our

% or greater owned U.S.

subsidiaries.

Foreign Currency Translation

and Transactions

The financial position and results of operations of our foreign subsidiaries

are determined using local currency as

the functional currency.

Assets and liabilities of these subsidiaries are translated at the exchange

rate in effect at

each year-end.

Income statement accounts are translated at the average rate

of exchange prevailing during the year.

Translation adjustments arising from the use of differing exchange rates from period to period are included

Accumulated other comprehensive income in stockholders’ equity.

Gains and losses resulting from foreign

currency transactions are included in earnings.

Risk Management and Derivative Financial Instruments

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

objective is to manage the impact that foreign currency exchange rate fluctuations

could have on recognized asset

and liability fair values, earnings and cash flows, as well as our net

investments in foreign subsidiaries.

Total advertising and promotional expenses were $ 45.9 million, $ 30.8 million and $ 25.2 million for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Stock Compensation Costs

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 for time-based restricted stock units and on a graded vesting basis for the option awards.

For performance-based awards, the Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense when achievement of the performance condition is probable.

Our stock-based compensation expense is reflected in selling, general and administrative expenses.

Cash and Cash Equivalents

We consider all highly liquid short-term investments with an original maturity of three months or less to be cash equivalents.

Due to the short-term maturity of such investments, the carrying amounts are a reasonable estimate of fair value.

Outstanding checks in excess of funds on deposit of $ 2.0 million and $ 1.3 million, primarily related to payments for inventory, were classified as accounts payable as of December 25, 2021 and December 26, 2020.

Contract Balances

Contract balances represent amounts presented in our consolidated balance sheets when either we have transferred goods or services to the customer or the customer has paid consideration to us under the contract.

These contract balances include accounts receivable, contract assets and contract liabilities.

Accounts Receivable and Allowance for Credit Losses

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 of accounts receivable is reduced by a valuation allowance that reflects our best estimate of the amounts that we do not expect to collect.

In addition to reviewing delinquent accounts receivable, we consider many factors in estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current conditions and reasonable supportable forecasts.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

management policy requires that derivative contracts used as hedges be

effective at reducing the risks associated

with the exposure being hedged and be designated as a hedge at the inception

of the contract.

We do not enter into

derivative instruments for speculative purposes.

Our derivative instruments primarily include foreign currency

forward agreements related to certain intercompany loans, certain forecasted

inventory purchase commitments with

foreign suppliers and foreign currency forward contracts to hedge a portion of our

euro-denominated foreign

operations which are designated as net investment hedges.

Foreign currency forward agreements related to forecasted inventory

purchase commitments with foreign suppliers

and foreign currency swaps related to foreign currency denominated debt are designated

as cash flow hedges.

derivatives that are designated and qualify as cash flow hedges, the

changes in the fair value of the derivative is

recorded as a component of Accumulated other comprehensive income

in stockholders’ equity and subsequently

reclassified into earnings in the period(s) during which the hedged transaction

affects earnings.

We classify the

cash flows related to our hedging activities in the same category on our consolidated

statements of cash flows as the

cash flows related to the hedged item.

Foreign currency forward contracts related to our euro-denominated

foreign operations are designated as net

investment hedges.

For derivatives that are designated and qualify as net investment

hedges, the changes in the fair

value of the derivative is recorded in the foreign currency translation

gain (loss) component of Accumulated other

comprehensive income in stockholders’ equity until the net investment

is sold or substantially liquidated.

Our foreign currency forward agreements related to foreign currency

balance sheet exposure provide economic

hedges but are not designated as hedges for accounting purposes.

For agreements not designated as hedges, changes in the value of the derivative,

along with the transaction gain or

loss on the hedged item, are recorded in earnings.

Total return swaps are entered into for the purpose of economically hedging our unfunded non-qualified

supplemental retirement plan (“SERP”) and our deferred compensation

plan (“DCP”).

This swap will offset

changes in our SERP and DCP liabilities.

This swap is expected

to be renewed on an annual basis.

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;

discount rates;

discounted cash flows;

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.

For the years

ended December 26, 2020, December 28, 2019 and

December 29, 2018, there were no material adjustments recorded in our consolidated

statement of income relating

to changes in subsequent adjustments or estimated contingent purchase price

We record allowances for credit losses based upon a specific review of all significant outstanding invoices.

For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable, the collection history associated with the geographic region that the receivable was recorded in, current economic trends and reasonable supportable forecasts.

We write-off a receivable and charge it against its recorded allowance when we deem them uncollectible.

Contract Assets

Contract assets include amounts related to any conditional right to consideration for work completed but not billed as of the reporting date and generally represent amounts owed to us by customers, but not yet billed.

Contract assets are transferred to accounts receivable when the right becomes unconditional.

The contract assets primarily relate to our bundled arrangements for the sale of equipment and consumables and sales of term software licenses.

Current contract assets are included in Prepaid expenses and other and the non-current contract assets are included in investments and other within our consolidated balance sheets.

Current and non-current contract asset balances as of December 25, 2021 and December 26, 2020 were not material.

Contract Liabilities

Contract liabilities are comprised of advance payments and upfront payments for service arrangements provided over time that are accounted for as deferred revenue amounts.

Contract liabilities are transferred to revenue once the performance obligation has been satisfied.

Current contract liabilities are included in accrued expenses:

other and the non-current contract liabilities are included in other liabilities within our consolidated balance sheets.

At December 26, 2020, the current portion of contract liabilities of $ 71.5 million was reported in accrued expenses:

other, and $ 8.2 million related to non-current contract liabilities were reported in other liabilities.

During the year ended December 25, 2021, we recognized substantially all of the current contract liability amounts that were previously deferred at December 26, 2020.

At December 25, 2021, the current and non-current portion of contract liabilities were $ 89.2 million and $ 9.7 million, respectively.

Inventories and Reserves

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

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

In accordance with our policy for inventory valuation, we consider many factors including the condition and salability of the inventory, historical sales, forecasted sales and market and economic trends.

From time to time, we adjust our assumptions for anticipated changes in any of these or other factors expected to affect the value of inventory.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation or amortization.

Depreciation is computed primarily under the straight-line method

(see Note 5 – Property and Equipment, Net for estimated useful lives).

Amortization of leasehold improvements is computed using the straight-line method over the lesser of the useful life of the assets or the lease term.

Capitalized Software Development Costs

Capitalized internal-use software costs consist of costs to purchase and develop software.

For software to be used solely to meet internal needs and cloud-based applications used to deliver our services, we capitalize costs incurred during the application development stage and include such costs within property and equipment, net within our consolidated balance sheets.

For software to be sold, leased, or marketed to external users, we capitalize software development costs when technological feasibility is reached and include such costs in Investments and other within our consolidated balance sheets .

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Their interests in these subsidiaries are classified outside

permanent equity on our consolidated balance sheets and are carried

at the estimated redemption amounts.

redemption amounts have been estimated based on expected future earnings

and cash flow and, if such earnings and

cash flow are not achieved, the value of the redeemable noncontrolling

interests might be impacted.

Changes in the

estimated redemption amounts of the noncontrolling interests subject

to put options are reflected at each reporting

period with a corresponding adjustment to Additional paid-in capital.

Future reductions in the carrying amounts are

subject to a “floor” amount that is equal to the fair value of the redeemable

noncontrolling interests at the time they

were originally recorded.

The recorded value of the redeemable noncontrolling interests cannot

go below the floor

These adjustments do not impact the calculation of earnings

Noncontrolling Interests

Noncontrolling interests represent our less than 50% ownership interest

in an acquired subsidiary.

Our net income

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

to noncontrolling interests.

Goodwill is not amortized, but is subject to impairment analysis annually or

more frequently if there is a triggering

event or if an event occurs or circumstances change that would

more likely than not reduce the fair value of a

reporting unit below its carrying value.

Such impairment analyses for goodwill requires a comparison of

value to the carrying value of reporting units.

We determine if an arrangement contains a lease at inception.

An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration.

As a lessee, we include operating leases in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and non-current operating lease liabilities in our consolidated balance sheets.

Finance leases are included in property and equipment, current maturities of long-term debt, and long-term debt in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term.

As most of our leases do not provide an implicit interest rate, we generally use our incremental borrowing rate based on the estimated rate of interest for fully collateralized and fully amortizing borrowings over a similar term of the lease payments at commencement date to determine the present value of lease payments.

When readily determinable, we use the implicit rate.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Expenses associated with operating leases and finance leases are included in “selling, general and administrative” and “interest expense”, respectively within our consolidated statement of income.

Short-term leases with a term of 12 months or less are not capitalized.

During the years ended December 25, 2021, December 26, 2020, and December 28, 2019, such short-term lease expense was $ 3.9 million, $ 1.9 million, and $ 0.9 million, respectively.

We have lease agreements with lease and non-lease components, which are generally accounted for as a single lease component, except non-lease components for leases of vehicles, which are accounted for separately.

When a vehicle lease contains both lease and non-lease components, we allocate the transaction price based on the relative standalone selling price.

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired, including the amount assigned to identifiable intangible assets.

Goodwill is subject to impairment analysis annually or more frequently if needed.

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

We regard our reporting units to be our operating segments:

global dental;

global medical;

and technology and value-added services.

Goodwill was allocated to such reporting units,

for the purposes of preparing our impairment analyses, based on a specific

identification basis.

On December 29, 2019 we adopted Account Standards Update (“ASU”)

2017-04 Intangibles-Goodwill and Other

Simplifying the Test

for Goodwill Impairment, which eliminated step two from the goodwill

impairment test, thereby eliminating the requirement to calculate the

implied fair value of a reporting unit.

perform our annual goodwill impairment test by comparing the fair value of

our reporting units to the carrying

value of those units.

Goodwill as of December 26, 2019 and December 29, 2018

were tested under the prior

For the year ended December 26, 2020 we tested goodwill for impairment,

on the first day of the fourth quarter,

using a quantitative analysis comparing the carrying value of our reporting

units, including goodwill, to the

estimated fair value of our reporting units using a discounted cash flow

If the fair value of a reporting

unit exceeds its carrying amount, goodwill of the reporting unit is considered

not impaired.

impairment loss would be equivalent to the excess of a reporting unit’s carrying value over its fair value limited

the total amount of goodwill allocated to that reporting unit.

For the years ended December 26, 2019 and December 29, 2018 we tested

goodwill for impairment on the first day

of the fourth quarter, using a quantitative analysis which consisted of a two-step approach.

The first step of our

quantitative analysis consisted of a comparison of the carrying value of

our reporting units, including goodwill, to

the estimated fair value of our reporting units using a discounted cash

flow methodology.

If step one resulted in the

carrying value of the reporting unit exceeding the fair value of such reporting

unit, we would have then proceeded

to step two which would have required us to calculate the amount of impairment

loss, if any, that we would have

recorded for such reporting unit.

The calculation of the impairment loss in step two would have been

equivalent to

the reporting unit’s carrying value of goodwill less the implied fair value of such goodwill.

Our use of a discounted cash flow methodology includes estimates of future

revenue based upon budget projections

and growth rates which take into account estimated inflation rates.

We also develop estimates for future levels of

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

For the years ended December 25, 2021 and December 26, 2020 we tested goodwill for impairment, on the first day of the fourth quarter, using a quantitative analysis comparing the carrying value of our reporting units, including goodwill, to the estimated fair value of our reporting units using a discounted cash flow methodology.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

Conversely, impairment loss would be equivalent to the excess of a reporting unit’s carrying value over its fair value limited to the total amount of goodwill allocated to that reporting unit.

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 future cash flows based on budget expectations, and determination of comparable companies to develop a weighted average cost of capital for each reporting unit.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

gross and operating profits and projected capital expenditures.

Our methodology also includes the use of estimated

discount rates based upon industry and competitor analysis as well as

other factors.

The estimates that we use in our

discounted cash flow methodology involve many assumptions by

management that are based upon future growth

Some factors we consider important that could trigger an interim

impairment review include:

significant underperformance relative to expected historical or projected

future operating results;

changes in the manner of our use of acquired assets or the strategy for

our overall business (e.g., decision to divest a

or significant negative industry or economic trends.

If we determine through the impairment review process that goodwill

is impaired, we record an impairment charge

in our consolidated statements of income.

For the years ended December 28, 2019 and December 29, 2018,

results of our goodwill impairment analysis did

t result in any impairments.

Long-Lived Assets

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

are evaluated for impairment whenever

events or changes in circumstances indicate that the carrying amount

of the assets may not be recoverable through

the estimated undiscounted future cash flows to be derived from such

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

trademarks, trade names, customer

lists, customer relationships and intellectual property.

For long-lived assets used in operations, impairment losses

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

future cash flows.

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

estimated fair value.

For the years ended December 25, 2021 and December 26, 2020, the results of our goodwill impairment analysis did no t result in any impairments.

Intangible Assets

Intangible assets, other than goodwill, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows to be derived from such assets.

Definite-lived intangible assets primarily consist of non-compete agreements, trademarks, trade names, customer lists, customer relationships and product development.

For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows.

We measure the impairment loss based on the difference between the carrying amount and the estimated fair value.

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

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

charges on intangible assets of

approximately $

million, nearly all of which was recorded in our technology and

value-added services segment.

Cost of Sales

The primary components of cost of sales include the cost of the product

(net of purchase discounts, supplier

chargebacks and rebates) and inbound and outbound freight charges.

Costs related to purchasing, receiving,

inspections, warehousing, internal inventory transfers and other costs of

our distribution network are included in

selling, general and administrative expenses along with other operating

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

throughout our

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

Total distribution

network costs were $

million and $

million for the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

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

We account for income taxes under an asset and liability approach that requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in tax laws or rates.

The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

We file a consolidated U.S.

federal income tax return with our 80% or greater owned U.S.

subsidiaries.

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), which allows the reclassification of stranded income tax effects, resulting from U.S.

tax reform, from accumulated other comprehensive income (AOCI) to retained earnings.

The adoption of this ASU in the first quarter of 2019 did not have a material impact on our consolidated financial statements.

We applied an individual item basis approach for releasing income tax effects from AOCI.

Redeemable 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 at fair value.

Their interests in these subsidiaries are classified outside permanent equity on our consolidated balance sheets and are carried at the estimated redemption amounts.

The redemption amounts have been estimated based on expected future earnings and cash flow and, if such earnings and cash flow are not achieved, the value of the redeemable noncontrolling interests might be impacted.

Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are reflected at each reporting period with a corresponding adjustment to Additional paid-in capital.

Future reductions in the carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable noncontrolling interests at the time they were originally recorded.

The recorded value of the redeemable noncontrolling interests cannot go below the floor level.

Adjustments to the carrying amount of a noncontrolling interests to

reflect a fair value redemption feature do not impact the calculation of earnings per share.

Our net income is reduced by the portion of the subsidiaries’ net income that is attributable to redeemable noncontrolling interests.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Noncontrolling Interests

Non-controlling interest represents the ownership interests of certain minority owners of our consolidated subsidiaries.

Our net income is reduced by the portion of the subsidiaries net income that is attributable to noncontrolling interests.

Comprehensive Income

Comprehensive income includes certain gains and losses that, under accounting

principles generally accepted in the

United States, are excluded from net income as such amounts are recorded

directly as an adjustment to

stockholders’ equity.

Our comprehensive income is primarily comprised of net income,

foreign currency

translation gain (loss), unrealized gain (loss) from foreign currency

hedging activities, unrealized investment gain

(loss) and pension adjustment gain (loss).

On December 30, 2018, we adopted ASC Topic 842, Leases, using a modified retrospective approach, whereby

we continue to apply existing lease guidance during the comparative

periods and apply the new lease

requirements through a cumulative-effect adjustment in the period of adoption.

We elected the package of

Comprehensive income includes certain gains and losses that, under accounting principles generally accepted in the United States, are excluded from net income as such amounts are recorded directly as an adjustment to stockholders’ equity.

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

Risk Management and Derivative Financial Instruments

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

Our objective is to manage the impact that foreign currency exchange rate fluctuations could have on recognized asset and liability fair values, earnings and cash flows, as well as our net investments in foreign subsidiaries.

Our risk management policy requires that derivative contracts used as hedges be effective at reducing the risks associated with the exposure being hedged and be designated as a hedge at the inception of the contract.

We do not enter into derivative instruments for speculative purposes.

Our derivative instruments primarily include foreign currency forward agreements related to certain intercompany loans, certain forecasted inventory purchase commitments with foreign suppliers and foreign currency forward contracts to hedge a portion of our euro-denominated foreign operations which are designated as net investment hedges.

Foreign currency forward agreements related to forecasted inventory purchase commitments with foreign suppliers and foreign currency swaps related to foreign currency denominated debt are designated as cash flow hedges.

For derivatives that are designated and qualify as cash flow hedges, the changes in the fair value of the derivative is recorded as a component of Accumulated other comprehensive income in stockholders’ equity and subsequently reclassified into earnings in the period(s) during which the hedged transaction affects earnings.

We classify the cash flows related to our hedging activities in the same category on our consolidated statements of cash flows as the cash flows related to the hedged item.

Foreign currency forward contracts related to our euro-denominated foreign operations are designated as net investment hedges.

For derivatives that are designated and qualify as net investment hedges, the changes in the fair value of the derivative is recorded in the foreign currency translation gain (loss) component of Accumulated other comprehensive income in stockholders’ equity until the net investment is sold or substantially liquidated.

Our foreign currency forward agreements related to foreign currency balance sheet exposure provide economic hedges but are not designated as hedges for accounting purposes.

For agreements not designated as hedges, changes in the value of the derivative, along with the transaction gain or loss on the hedged item, are recorded in earnings .

Total return swaps are entered into for the purpose of economically hedging our unfunded non-qualified supplemental retirement plan (“SERP”) and our d eferred compensation plan (“DCP”) .

This swap will offset changes in our SERP and DCP liabilities.

This swap is expected to be renewed on an annual basis.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

practical expedients permitted under the transition guidance within

the new standard, which, among other things,

allowed us to carry forward the historical lease classification.

related to leases as of December 28,

2019 is presented under Topic 842, while prior period amounts are not adjusted and continue to be reported under

legacy guidance in ASC Topic 840, Leases.

The most significant impact was the recognition of ROU assets and lease liabilities

for operating leases, while our

accounting for finance leases remained substantially unchanged.

of the new standard resulted in the

recording of additional net operating lease assets of $

million and operating lease liabilities of $

and a decrease of $

million and $

million in prepaid rent and deferred rent liabilities, respectively.

standard did not materially impact our consolidated net income and had

no impact on cash flows.

We determine if an arrangement contains a lease at inception.

An arrangement contains a lease if it implicitly or

explicitly identifies an asset to be used and conveys the right to control

the use of the identified asset in exchange

for consideration.

As a lessee, we include operating leases in Operating lease right-of-use

(“ROU”) assets,

Operating lease liabilities, and Non-current operating lease liabilities in our

consolidated balance sheet.

leases are included in Property and equipment, Current maturities of

long-term debt, and Long-term debt in our

consolidated balance

ROU assets represent our right to use an underlying asset for the lease

term and lease liabilities represent our

obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized

upon commencement of the lease based on the present value of the lease payments

over the lease term.

our leases do not provide an implicit interest rate, we generally use our incremental

borrowing rate based on the

estimated rate of interest for fully collateralized and fully amortizing borrowings

over a similar term of the lease

payments at commencement date to determine the present value of

lease payments.

When readily determinable, we

use the implicit rate.

Our lease terms may include options to extend or terminate the lease when it is reasonably

certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line

over the lease term.

Expenses associated with operating leases and finance leases

are included in “Selling, general

and administrative” and “Interest expense”, respectively within our Consolidated

Statement of Income.

with a lease term of 12 months or less are not capitalized.

We have lease agreements with lease and non-lease components, which are generally accounted for as a single

lease component, except non-lease components for leases of vehicles, which

are accounted for separately.

vehicle lease contains both lease and non-lease components, we allocate

the transaction price based on the relative

standalone selling price.

Foreign Currency Translation and Transactions

The financial position and results of operations of our foreign subsidiaries are determined using local currency as the functional currency.

Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end.

Income statement accounts are translated at the average rate of exchange prevailing during the year.

Translation adjustments arising from the use of differing exchange rates from period to period are included in Accumulated other comprehensive income in stockholders’ equity.

Gains and losses resulting from foreign currency transactions are included in earnings.

Accounting Pronouncements Adopted

On December 27, 2020 we adopted ASU No.

2017-04, “Intangibles-Goodwill

and Other” (Topic 350) (“ASU

ASU 2017-04 eliminates step two from the goodwill impairment

test, thereby eliminating the

requirement to calculate the implied fair value of a reporting unit.

ASU 2017-04 requires us to perform our annual

goodwill impairment test by comparing the fair value of our reporting

units to the carrying value of those units.

the carrying value exceeds the fair value, we will be required to recognize

an impairment charge;

impairment charge should not exceed the amount of goodwill allocated to such reporting

Our adoption of

ASU 2017-04 did not have a material impact on our consolidated

financial statements.

On December 29, 2019, we adopted ASU No.

2016-13, "Financial Instruments-Credit

Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments" which requires the

measurement and recognition of

expected credit losses for financial assets held at amortized cost.

We adopted Topic

326 using the modified-

retrospective method and recorded an immaterial cumulative-effect adjustment

to the opening balance of retained

Based upon the level and makeup of our financial asset portfolio,

including accounts receivable, past loan

loss activity and current known activity regarding our outstanding loans,

the adoption of this ASU resulted in a

decrease of $

million to retained earnings.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes” (Topic 740):

Simplifying the Accounting

for Income Taxes (“ASU 2019-12”).

ASU 2019-12 will simplify the accounting for income taxes by

certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of

and simplify U.S.

Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify U.S.

GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

is effective for fiscal years beginning after December 15, 2020.

We do not expect that the requirements of this

ASU will have a material impact on our consolidated financial statements.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2020-06, “Debt—Debt with

Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging—

in Entity’s Own Equity”

(Subtopic 815-40):

Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity (“ASU 2020-

ASU 2020-06 simplifies the accounting for convertible instruments.

In addition to eliminating certain

accounting models, this ASU includes improvements to the disclosures

for convertible instruments and earnings-

per-share (EPS) guidance and amends the guidance for the derivatives scope exception

for contracts in an entity’s

ASU 2020-06 is effective for fiscal years beginning after December

We do not expect that

the requirements of this ASU will have a material impact on our consolidated

financial statements.

Our adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued because of reference rate reform.

The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”).

ASU 2021-01 provides temporary optional expedients and exceptions to certain guidance in U.S.

GAAP to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.

The guidance is effective upon issuance, on January 7, 2021, and can be applied through December 31, 2022.

We do not expect that the requirements of this guidance will have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021 – 08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Subtopic 805).

ASU 2021 – 08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.

ASU 2021 – 08 is effective for fiscal year beginning after December 15, 2022.

Early adoption is permitted.

We expect to adopt this ASU on December 26, 2021.

We do not expect that the requirements of this ASU will have a material impact on our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 2 – Discontinued Operations

Animal Health Spin-off

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

(the “Separation”) and subsequent

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

Marketing, Inc.

(d/b/a Vets First Choice, “Vets

First Choice”).

This was accomplished by a series of transactions

among us, Vets

First Choice, Covetrus, Inc.

(f/k/a HS Spinco, Inc.

“Covetrus”), a

wholly owned subsidiary of ours

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

of Covetrus (“Merger

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 $

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 $

million (the “Share Sale”).

The proceeds of the Share Sale were paid to Covetrus and

distributed to us.

Subsequent to the Share Sale, we distributed, on a pro rata basis,

all of the shares of the common

stock of Covetrus held by us to our stockholders of record as of the close of

business on January 17, 2019 (the

“Animal Health Spin-off”).

After the Share Sale and Animal Health Spin-off, Merger Sub consummated the

Merger whereby it merged with and into Vets

First Choice, with Vets First Choice surviving the Merger as a

wholly owned subsidiary of Covetrus.

Immediately following the consummation of the Merger, on a fully diluted

basis, (i) approximately

% of the shares of Covetrus common stock were (a) owned by our stockholders

Share Sale Investors, and (b) held by certain employees of the Henry Schein

Animal Health Business (in the form

of certain equity awards), and (ii) approximately

% of the shares of Covetrus common stock were (a) owned by

stockholders of Vets

First Choice immediately prior to the Merger, and (b) held by certain employees of Vets First

Choice (in the form of certain equity awards).

After the Separation and the Merger, we no longer beneficially

owned any shares of Covetrus common stock and, following the Distribution

Date, will not consolidate the

financial results of Covetrus for the purpose of our financial reporting.

Following the Separation and the Merger,

Covetrus was an independent, publicly traded company on the Nasdaq Global Select

In connection with the completion of the Animal Health Spin-off, we entered into

a transition services agreement,

which ended in December 2020, with Covetrus under which we agreed to provide

certain transition services for up

to twenty-four months in areas such as information technology, finance and accounting,

human resources, supply

chain, and real estate and facility services.

As a result of the Separation, the financial position and results of operations

of the Henry Schein Animal Health

Business are presented as discontinued operations and have been excluded

from continuing operations and segment

results for all periods presented.

The accompanying Notes to the Consolidated

Financial Statements have been

revised to reflect the effect of the Separation and all prior year balances have been

revised accordingly to reflect

continuing operations only.

The historical statements of Comprehensive Income

(Loss) and Shareholders' Equity

have not been revised to reflect the Separation and instead reflect the Separation

as an adjustment to the balances at

Note 2 – Revenue from Contracts with Customers

Revenue (Net sales) is recognized in accordance with the policies discussed in Note 1 – Basis of Presentation and Significant Accounting Policies .

Disaggregation of Net sales

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

December 25, 2021

North America

International

Health care distribution

Total health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues (1)

Corporate TSA revenues (1)

Total revenues

December 26, 2020

North America

International

Health care distribution

Total health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues (1)

Corporate TSA revenues (1)

Total revenues

December 28, 2019

North America

International

Health care distribution

Total health care distribution

Technology and value-added services

Total excluding Corporate TSA revenues (1)

Corporate TSA revenues (1)

Total revenues

Corporate TSA revenues represents sales of certain animal health products to Covetrus under the transition services agreement

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Summarized financial information for our discontinued operations

is as follows:

Cost of goods sold

Selling, general and administrative

Operating income (loss)

Income tax expense (benefit)

Income (loss) from discontinued operations

Net (income) loss attributable to noncontrolling interests

Net income (loss) from discontinued operations

attributable to Henry Schein, Inc.

The operating loss from discontinued operations for the year ended

December 26, 2020 was primarily attributable

to costs directly related to the Animal Health Spin-off.

Note 23 – Related Party Transactions

for additional

The net income from discontinued operations for the year ended December

26, 2020 was primarily attributable to a

reduction in a liability for tax indemnification and a tax refund received

during 2020 by a holding company

previously part of our Animal Health legal structure and other

favorable tax resolutions.

The financial information above, for the year ended December

28, 2019, represents activity of the discontinued

operations during year-to-date through the Distribution Date.

The loss from discontinued operations for the year

ended December 28, 2019 was primarily attributable to the inclusion of

the transaction costs directly related to the

Animal Health Spin-off.

Note 3 – Segment and Geographic Data

We conduct our business through two reportable segments:

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

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

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

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

Our global dental and medical groups serve practitioners in 32 countries worldwide.

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, diagnostic tests, infection-control product, PPE and vitamins.

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

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

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

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

Health care distribution (1)

Total health care distribution

Technology and value-added services (2)

Total excluding Corporate TSA revenues

Corporate TSA revenues (3)

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.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following are the amounts of assets and liabilities that were

transferred to Covetrus as of February 7, 2019.

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses and other

Total current

assets of discontinued operations

Property and equipment, net

Operating lease right-of-use asset, net

Other intangibles, net

Investments and other

Total long-term assets of

discontinued operations

Total assets of discontinued

Accounts payable

Current maturities of long-term debt

Operating lease liabilities

Accrued expenses:

Payroll and related

Total current

liabilities of discontinued operations

Long-term debt

Deferred income taxes

Operating lease liabilities

Other liabilities

Total long-term liabilities

of discontinued operations

Total liabilities of discontinued

Operating Income:

Health care distribution

Technology and value-added services

Income from continuing operations before taxes

and equity in earnings of affiliates:

Health care distribution

Technology and value-added services

Depreciation and Amortization:

Health care distribution

Technology and value-added services

Interest Income:

Health care distribution

Technology and value-added services

Interest Expense:

Health care distribution

Technology and value-added services

Income Tax Expense:

Health care distribution

Technology and value-added services

Purchases of Fixed Assets:

Health care distribution

Technology and value-added services

Total Assets:

Health care distribution

Technology and value-added services

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table presents information about our operations by geographic area as of and for the three years ended December 25, 2021.

Net sales by geographic area are based on the respective locations of our subsidiaries.

No country, except for the United States, generated net sales greater than 10 % of consolidated net sales.

There were no material amounts of sales or transfers among geographic areas and there were no material amounts of export sales.

Long-Lived Assets

United States

Consolidated total

Note 4 – Business Acquisitions and Divestitures

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

Goodwill is an asset presenting the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized, such as future customers and technology, as well as the assembled workforce.

Excluding goodwill, the major classes of assets and liabilities to which we generally allocate acquisition consideration include identifiable intangible assets (i.e., customer relationships and lists, trademarks and trade names, product development, and non-compete agreements), inventory and accounts receivable.

The estimated fair value of identifiable intangible assets is based on critical judgments and assumptions derived from analysis of market conditions, including discount rates, projected revenue growth rates (which are based on historical trends and assessment of financial projections), estimated customer attrition and projected cash flows.

These assumptions are forward-looking and could be affected by future economic and market conditions.

If certain financial targets are met after the date of acquisition, certain prior owners of acquired subsidiaries are eligible to receive additional purchase price cash consideration, or we may be entitled to recoup a portion of purchase price cash consideration if certain financial targets are met.

We accrue the estimated fair value of such contingent consideration at the time of the acquisition, using the income approach, including a probability-weighted discounted cash flow method or an option pricing method, where applicable.

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, within 12 months following the date of acquisition, or 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.

We completed acquisitions during the year ended December 25, 2021, which were immaterial to our financial statements individually, and in which our ownership interests ranged from approximately 51 % to 100 %.

Acquisitions within our health care distribution segment included companies that specialize in the distribution and manufacturing of dental and medical products, a provider of home medical supplies, and a provider of product kitting and sterile packaging.

Within our technology and value-added services segment, we acquired companies that focus on dental marketing and website solutions, practice transition services, revenue cycle management, and

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

business analytics and intelligence software.

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

The following table aggregates the estimated fair value, as of the date of acquisition, of consideration paid and net assets acquired for acquisitions during the year ended December 25, 2021.

Acquisition consideration:

Deferred consideration

Estimated fair value of contingent consideration receivable

Fair value of previously held equity method investment

Redeemable noncontrolling interests

Total consideration

Identifiable assets acquired and liabilities assumed:

Current assets

Intangible assets

Other noncurrent assets

Current liabilities

Deferred income taxes

Other noncurrent liabilities

Total identifiable net assets

Total net assets acquired

The following table summarizes the identifiable intangible assets acquired during the year ended December 25, 2021 and their estimated useful lives as of the date of the acquisition:

Trademark / Tradename

Non-compete agreements

Customer relationships and lists

Product development

At December 25, 2021 we have recorded a contingent consideration receivable of $ 4.9 million relating to the timing of government approval of a certain product.

The accounting for certain of our acquisitions during the year ended December 25, 2021 has not been completed in several areas, including but not limited to pending assessments of accounts receivable, inventory, operating leases, accrued and contingent liabilities and income and non-income based taxes.

The pro forma financial information has not been presented because the impact of the acquisitions during the year ended December 25, 2021 to our consolidated financial statements was immaterial.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

We completed acquisitions during the year ended December 26, 2020, which were immaterial to our financial statements individually.

In the aggregate, these transactions resulted in consideration of $ 57.8 million in 2020 related to business combinations, for net assets amounting to $ 32.8 million.

As of December 26, 2020, we had recorded $ 36.9 million of identifiable intangibles, $ 23.9 million of goodwill and $ 26.4 million of non-controlling interest, related to these acquisitions.

We completed acquisitions during the year ended December 28, 2019, which were immaterial to our financial statements individually.

In the aggregate, these transactions resulted in consideration of $ 652.9 million in 2019 related to business combinations, for net assets amounting to $ 19.7 million.

As of December 28, 2019, we had recorded $ 310.4 million identifiable intangibles, $ 395.3 million of goodwill and $ 72.5 million of non-controlling interest, related to these acquisitions.

For the years ended December 25, 2021, December 26, 2020 and December 28, 2019, there were no material adjustments recorded in our consolidated balance sheets relating to accounting for acquisitions incomplete in prior periods, or in our consolidated statements of income relating to changes in estimated contingent consideration assets or liabilities.

During the years ended December 25, 2021, December 26, 2020, and December 28, 2019 we incurred $ 6.6 million, $ 5.9 million and $ 4.5 million in acquisition costs reported within income from continuing operations.

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

Co., LLC, a manufacturer of dental instruments and infection prevention solutions.

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

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

In the aggregate, the sales of these investments resulted in a pre-tax gain of approximately $ 250.2 million, net of taxes of approximately $ 63.4 million.

In the 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.

During the fourth quarter of 2020 we received contingent proceeds of $ 2.1 million from the 2019 sale of Hu-Friedy resulting in the recognition of an additional after-tax gain of $ 1.6 million.

For the year ended December 28, 2019 we recognized approximately $ 6.0 million of equity in earnings from these affiliates.

We do expect to receive any additional proceeds from the sale of Hu-Friedy.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 5 – Property and Equipment, Net

Property and equipment, including related estimated useful lives, consisted

of the following:

Property and equipment, including related estimated useful lives, consisted of the following:

Buildings and permanent improvements

11 unchanged sentences

Computer equipment and software

Property and equipment related depreciation expense for the years

ended December 26, 2020, December 28, 2019

and December 29, 2018 was $

million and $

Amortization of leasehold improvements is computed using the straight-line method over the lesser of the useful life of the assets or the lease term.

Property and equipment related depreciation expense for the years ended December 25, 2021, December 26, 2020 and December 28, 2019 was $ 70.4 million, $ 64.3 million and $ 64.4 million.

Please see Note 6 – Leases for finance lease amounts included in property and equipment, net within our consolidated balance sheets.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 6 – Leases

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

Our leases have remaining terms of less than one year to approximately 20 years, some of which may include options to extend the leases for up to 10 years.

The components of lease expense were as follows:

Operating lease cost:

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Includes variable lease expenses.

Operating lease cost for the years ended December 25, 2021, December 26, 2020, and December 28, 2019, include amortization of right-of-use assets of $ 0.0 million, $ 0.6 million, and $ 0.6 million, respectively, related to facility leases recorded in “Restructuring costs” within our consolidated statements of income.

Supplemental balance sheet information related to leases is as follows:

Operating Leases:

Operating lease right-of-use assets

Current operating lease liabilities

Non-current operating lease liabilities

Total operating lease liabilities

Finance Leases:

Property and equipment, at cost

Accumulated depreciation

Property and equipment, net of accumulated depreciation

Current maturities of long-term debt

Long-term debt

Total finance lease liabilities

Weighted Average Remaining Lease Term in Years:

Operating leases

Finance leases

Weighted Average Discount Rate:

Operating leases

Finance leases

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Supplemental cash flow information related to leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

Operating cash flows for finance leases

Financing cash flows for finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Finance leases

Maturities of lease liabilities are as follows:

December 25, 2021

Total future lease payments

Less imputed interest

As of December 25, 2021, we have additional operating leases with total lease payments of $ 7.3 million for buildings and vehicles that have not yet commenced.

These operating leases will commence subsequent to December 25, 2021, with lease terms of two years to five years .

Certain of our facilities related to our acquisitions are leased from employees and minority shareholders.

These leases are classified as operating leases and have a remaining lease term ranging from 6 months to 10 years.

The present value of lease payments under these related party leases is not material to our consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 7 – Goodwill and Other Intangibles, Net

The changes in the carrying amount of goodwill for the years ended December

26, 2020 and December 28, 2019

were as follows:

The changes in the carrying amount of goodwill for the years ended December 25, 2021 and December 26, 2020 were as follows:

Health Care Distribution

Technology and Value-Added Services

Balance as of December 28, 2019

8 unchanged sentences

December 26, 2020

Non-compete agreements

Trademarks / trade names - definite lived

Customer relationships and lists

Trademarks / trade names - definite lived

Product Development

Non-compete agreements represent amounts paid primarily to key employees

and prior owners of acquired

businesses, as well as certain sales persons, in exchange for placing restrictions

on their ability to pose a

competitive risk to us.

Such amounts are amortized, on a straight-line basis over the

respective non-compete

period, which generally commences upon termination of employment

or separation from us.

The weighted-average

non-compete period for agreements currently being amortized was approximately

years as of December 26,

Trademarks, trade names, customer lists and customer relationships were established through

business acquisitions.

Definite-lived trademarks and trade names are amortized on a straight-line

basis over a weighted-average period of

approximately

years as of December 26, 2020.

Customer relationships and customer lists are definite-lived

intangible assets that are amortized on a straight-line basis over a weighted-average

period of approximately

years as of December 26, 2020.

Product development is a definite-lived intangible asset that is amortized

straight-line basis over a weighted-average period of approximately

years as of December 26, 2020.

Amortization expense related to definite-lived intangible assets for the years ended

December 26, 2020, December

28, 2019 and December 29, 2018 was $

million and $

During the year ended

December 26, 2020, we recorded total impairment charges on intangible assets of

approximately $

The annual amortization expense expected to be recorded for existing

intangibles assets for the years 2021 through

million and $

Non-compete agreements

Trademarks, trade names, customer lists and customer relationships were established through business acquisitions.

Definite-lived trademarks and trade names are amortized on a straight-line basis over a weighted-average period of approximately 8.4 years as of December 25, 2021.

Customer lists and customer relationships are definite-lived intangible assets that are amortized on a straight-line basis over a weighted-average period of approximately 10.0 years as of December 25, 2021.

Product development is a definite-lived intangible asset that is amortized on a straight-line basis over a weighted-average period of approximately 7.9 years as of December 25, 2021.

Non-compete agreements represent amounts paid primarily to prior owners of acquired businesses, as well as certain sales persons, in exchange for placing restrictions on their ability to pose a competitive risk to us.

Such amounts are amortized, on a straight-line basis over the respective non-compete period, which generally commences upon termination of employment or separation from us.

The weighted-average non-compete period for agreements currently being amortized was approximately 5.2 years as of December 25, 2021.

Amortization expense related to definite-lived intangible assets for the years ended December 25, 2021, December 26, 2020 and December 28, 2019 was $ 123.8 million, $ 105.9 million and $ 108.3 million.

During the years ended December 25, 2021 and December 26, 2020, we recorded total impairment charges on intangible assets of approximately $ 0.7 million and $ 20.3 million, respectively.

The annual amortization expense expected to be recorded for existing intangibles assets for the years 2022 through 2026 is $ 122.8 million, $ 114.5 million, $ 91.5 million, $ 80.1 million and $ 63.4 million.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

4 unchanged sentences

Notes receivable (1)

Capitalized costs for internally generated software for resale

Capitalized costs for software to be sold, leased or marketed to external users

Security deposits

1 unchanged sentence

Other long-term assets

Long-term notes receivable carry interest rates ranging from

and are due in varying installments through

Long-term notes receivable carry interest rates ranging from 3.0 % to 14.2 % and are due in varying installments through

September 30, 2027 .

Amortization expense related to other long-term assets for the years ended December

Amortization expense, primarily related to capitalized costs for software to be sold, leased, or marketed to external users, for the years ended December 25, 2021, December 26, 2020 and December 28, 2019 was $ 15.3 million, $ 15.3 million and $ 12.3 million.

Note 9 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

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

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

• Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include:

quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability;

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

The following section describes the fair values of our financial instruments and the methodologies that we used to measure their fair values.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Investments and notes receivable

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

however, we believe the carrying amounts are a reasonable estimate of fair value based on the interest rates in the applicable markets.

The fair value of our debt (including bank credit lines) is classified as Level 3 within the fair value hierarchy as of December 25, 2021 and December 26, 2020 was estimated at $ 872.5 million and $ 699.0 million, respectively.

Factors that we considered when estimating the fair value of our debt include market conditions, such as interest rates and credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and significant other observable inputs.

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

Our derivative instruments primarily include foreign currency forward agreements related to certain intercompany loans, certain forecasted inventory purchase commitments with foreign suppliers, foreign currency forward contracts to hedge a portion of our euro-denominated foreign operations which are designated as net investment hedges and a total return swap for the purpose of economically hedging our unfunded non-qualified SERP and our DCP.

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

See Note 11-Derivatives and Hedging Activities for further information.

Redeemable noncontrolling interests

The values for Redeemable noncontrolling interests are classified within Level 3 of the fair value hierarchy and are based on recent transactions and/or implied multiples of earnings.

See Note 17 – Redeemable Noncontrolling Interests for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table presents our assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 25, 2021 and December 26, 2020:

December 25, 2021

and December 29, 2018 was $

million and $

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return swap

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

December 26, 2020

Derivative contracts designated as hedges

Derivative contracts undesignated

Total return swap

Derivative contracts designated as hedges

Derivative contracts undesignated

Total liabilities

Redeemable noncontrolling interests

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 10 – Concentrations of Risk

Certain financial instruments potentially subject us to concentrations of credit risk.

These financial instruments consist primarily of cash equivalents, trade receivables, long-term investments, notes receivable and derivative instruments.

In all cases, our maximum exposure to loss from credit risk equals the gross fair value of the financial instruments.

We routinely maintain cash balances at financial institutions in excess of insured amounts.

We have not experienced any loss in such accounts and we manage this risk through maintaining cash deposits and other highly liquid investments in high quality financial institutions.

We continuously assess the need for reserves for such losses, which have been within our expectations.

We do not require collateral or other security to support financial instruments subject to credit risk, except for long-term notes receivable.

We limit our credit risk with respect to our cash equivalents, short-term and long-term investments and derivative instruments, by monitoring the credit worthiness of the financial institutions who are the counter-parties to such financial instruments.

As a risk management policy, we limit the amount of credit exposure by diversifying and utilizing numerous investment grade counter-parties.

With respect to our trade receivables, our credit risk is somewhat limited due to a relatively large customer base and its dispersion across different types of health care professionals and geographic areas.

For each of the years ended December 25, 2021, and December 26, 2020, two customers accounted for approximately 3 % of our net sales.

With respect to our sources of supply, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 30 % and 4 %, respectively, of our aggregate purchases in each of the years ended December 25, 2021 and December 26, 2020.

Our long-term notes receivable primarily represent strategic financing arrangements with certain affiliates.

Generally, these notes are secured by certain assets of the counterparty;

however, in most cases our security is subordinate to other commercial financial institutions.

While we have exposure to credit loss in the event of non-performance by these counter-parties, we conduct ongoing assessments of their financial and operational performance.

Note 11 – Derivatives and Hedging Activities

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

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

We attempt to minimize these risks by primarily using foreign currency forward contracts and by maintaining counter-party credit limits.

These hedging activities provide only limited protection against currency exchange and credit risks.

Factors that could influence the effectiveness of our hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure.

We do not enter into such contracts for speculative purposes and we manage our credit risks by diversifying our counterparties, maintaining a strong balance sheet and having multiple sources of capital.

During 2019 we entered into foreign currency forward contracts to hedge a portion of our euro-denominated foreign operations which are designated as net investment hedges.

These net investment hedges offset the change in the U.S.

dollar value of our investment in certain euro-functional currency subsidiaries due to fluctuating foreign exchange rates.

Gains and losses related to these net investment hedges are recorded in accumulated other comprehensive loss within our consolidated balance sheets.

Amounts excluded from the assessment of hedge effectiveness are included in interest expense within our consolidated statements of income.

The aggregate notional value of this net investment hedge, which matures on November 16, 2023 , is approximately € 200 million.

During the years ended December 25, 2021 and December 26, 2020, we recorded gains (losses) of ($ 11.4 ) million and $ 13.9 million, respectively, within other comprehensive income related to these foreign currency forward contracts.

See Note 9 – Fair Value Measurements for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

On March 20, 2020 , we entered into a total return swap for the purpose of economically hedging our unfunded non-qualified SERP and our DCP.

This swap will offset changes in our SERP and DCP liabilities.

At the inception, the notional value of the investments in these plans was $ 43.4 million.

At December 25, 2021, the notional value of the investments in these plans was $ 88.7 million.

At December 25, 2021, the financing blended rate for this swap was based on LIBOR of 0.09 % plus 0.46 %, for a combined rate of 0.55 %.

For the years ended December 25, 2021 ended and December 26, 2020, we have recorded a gain, within selling, general and administrative in our consolidated statement of income, of approximately $ 12.1 million and $ 21.2 million, respectively, net of transaction costs, related to this undesignated swap.

During the years ended December 25, 2021 and December 26, 2020, the swap resulted in a neutral impact to our results of operations.

This swap is expected to be renewed on an annual basis after its current expiration date of March 29, 2022, and is expected to result in a neutral impact to our results of operations.

See Note 16 – Employee Benefit Plans for additional information.

Fluctuations in the value of certain foreign currencies as compared to the U.S.

dollar may positively or negatively affect our revenues, gross margins, operating expenses and retained earnings, all of which are expressed in U.S.

Where we deem it prudent, we engage in hedging programs using primarily foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings.

We purchase short-term (i.e., generally 18 months or less) foreign currency forward contracts to protect against currency exchange risks associated with intercompany loans due from our international subsidiaries and the payment of merchandise purchases to our foreign suppliers.

We do not hedge the translation of foreign currency profits into U.S.

dollars, as we regard this as an accounting exposure, not an economic exposure.

Amounts related to our hedging activities are recorded in prepaid expenses and other and/or accrued expenses:

other within our consolidated balance sheets.

Our hedging activities have historically not had a material impact on our consolidated financial statements.

Accordingly, additional disclosures related to derivatives and hedging activities required by ASC 815 have been omitted.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 12 – Debt

4 unchanged sentences

Revolving Credit Agreement

April 18, 2017

, we entered into a $

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

borrowings on this

revolving credit facility.

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

million and $

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.

On August 20, 2021 , we entered into a new $ 1 billion revolving credit agreement (the “Credit Agreement”).

This facility, which matures on August 20, 2026 , replaced our $ 750 million revolving credit facility, which was scheduled to mature in April 2022.

The interest rate is based on the USD LIBOR plus a spread based on our leverage ratio at the end of each financial reporting quarter.

We expect most LIBOR rates to be discontinued immediately after December 31, 2021, while the remaining LIBOR rates will be discontinued immediately after June 30, 2023.

We do not expect the discontinuation of LIBOR as a reference rate in our debt agreements to have a material adverse effect on our financial position or to materially affect our interest expense.

The Credit Agreement also requires, among other things, that we maintain certain 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 25, 2021, and December 26, 2020, we had no borrowings under this revolving credit facility.

As of December 25, 2021, and December 26, 2020, there were $ 9.1 million and $ 9.5 million of letters of credit, respectively, provided to third parties under the credit facility.

364-Day Credit Agreement

April 17, 2020

, we entered into a new $

-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

borrowings under this credit facility.

We have the ability to

borrow up to an additional $

million, from the original facility amount of $

million, under this credit facility

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

the credit agreement.

The interest rate for

borrowings under this facility will fluctuate based on our net leverage ratio.

At December 26, 2020, the interest

rate on this facility was 2.50 %.

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

general corporate purposes, including, but not limited to, permitted refinancing of existing indebtedness

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

million and $

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

respectively.

On March 4, 2021, we repaid the outstanding obligations and terminated the lender commitments under our $ 700 million 364-day credit agreement, which was entered into on April 17, 2020 .

This facility was originally scheduled to mature on April 16, 2021 .

Other Short-Term Credit Lines

As of December 25, 2021 and December 26, 2020, we had various other short-term bank credit lines available, of which $ 50.5 million and $ 73.4 million, respectively, were outstanding.

At December 25, 2021 and December 26, 2020, borrowings under all of these credit lines had a weighted average interest rate of 10.44 % and 4.14 %, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

3 unchanged sentences

trade accounts receivable securitization

Note payable due in

with an interest rate of

at December 26, 2020

collateralized and uncollateralized loans payable with interest,

in varying installments through

at interest rates

% at December 26, 2020 and

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

at December 26, 2020

Various collateralized and uncollateralized loans payable with interest,

in varying installments through 2023 at interest rates

ranging from 2.45 % to 4.27 % at December 25, 2021 and

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

Finance lease obligations (see Note 6)

Less current maturities

Less current maturities of long-term debt

Total long-term debt

Private Placement Facilities

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

total facility amount of $

billion, and are

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

at the time of issuance, from

time to time through

June 23, 2023

The facilities allow us to issue senior promissory notes to the

lenders at a fixed

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

the time of issuance.

The term of each

possible issuance will be selected by us and can range from

(with an average life no longer than

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 3.0 x, 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.

Our private placement facilities were amended on October 20, 2021 , to include four (previously three) insurance companies, have a total facility amount of $ 1.5 billion (previously $ 1.0 billion), and are available on an uncommitted basis at fixed rate economic terms to be agreed upon at the time of issuance, from time to time through October 20, 2026 (previously June 23, 2023 ).

The facilities allow us to issue senior promissory notes to the lenders at a fixed rate based on an agreed upon spread over applicable treasury notes at the time of issuance.

The term of each possible issuance will be selected by us and can range from five to 15 years (with an average life no longer than 12 years ).

The proceeds of any issuances under the facilities will be used for general corporate purposes, including working capital and capital expenditures, to refinance existing indebtedness, and/or to fund potential acquisitions.

The agreements provide, among other things, that we maintain certain maximum leverage ratios, and contain restrictions relating to subsidiary indebtedness, liens, affiliate transactions, disposal of assets and certain changes in ownership.

These facilities contain make-whole provisions in the event that we pay off the facilities prior to the applicable due dates.

On March 5, 2021, we amended the private placement facilities to, among other things, (a) modify the financial covenant from being based on a net leverage ratio to a total leverage ratio and (b) restore the maximum maintenance total leverage ratio to 3.25 x and remove the 1.00 % interest rate increase triggered if the net leverage ratio were to exceed 3.0 x.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The components of our private placement facility borrowings as

of December 26, 2020 are presented in the

following table (in thousands):

The components of our private placement facility borrowings as of December 25, 2021 are presented in the following table (in thousands):

January 20, 2012 (1)

13 unchanged sentences

Deferred debt issuance costs

repayments of approximately $

million for this borrowing commenced on

January 20, 2016

September 2, 2020

, we refinanced our $

million private placement borrowing at

%, originally due on September 2, 2020,

with a similar

10-year borrowing

% maturing on

September 2, 2030

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

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

Our current facility, which has a purchase limit of $

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 $

million and $

million, respectively.

At December 26, 2020, the interest rate on

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

paper rate of

combined rate of

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

this facility was based on

the asset-backed commercial paper rate of

%, for a combined rate of

If our accounts receivable collection pattern changes due to customers

either paying late or not making payments,

our ability to borrow under this facility may be reduced.

We are required to pay a commitment fee of

basis points depending upon program utilization.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

As of December 26, 2020,

the aggregate amounts of long-term debt, including finance lease obligations

deferred debt issuance costs of $

million, maturing in each of the next five years and thereafter are

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 7 – Leases

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

and certain equipment.

Our leases have remaining terms of less than

to approximately

which may include options to extend the leases for

up to 10 years

The components of lease expense were as

Operating lease cost:

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total finance

Includes variable lease expenses.

Operating lease cost for each of the years ended December 26, 2020, and December 28, 2019, includes amortization of right-of-use

million, related to facility leases recorded in “Restructuring costs” within our consolidated statements of income.

Supplemental balance sheet information related to leases is as follows:

Operating Leases:

Operating lease right-of-use assets

Current operating lease liabilities

Non-current operating lease liabilities

Total operating lease liabilities

Finance Leases:

Property and equipment, at cost

Accumulated depreciation

Property and equipment, net of accumulated depreciation

Current maturities of long-term debt

Long-term debt

Total finance

lease liabilities

Weighted Average

Remaining Lease Term in

Operating leases

Finance leases

Weighted Average

Discount Rate:

Operating leases

Finance leases

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Supplemental cash flow information related to leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

Operating cash flows for finance leases

Financing cash flows for finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Finance leases

Maturities of lease liabilities are as follows:

December 26, 2020

lease payments

Less imputed interest

As of December 26, 2020, we have additional operating leases with total lease

payments of $

buildings and vehicles

that have not yet commenced.

These operating leases will commence subsequent to

December 26, 2020, with lease terms of

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 8 – Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

ASC 480-10 is applicable for noncontrolling interests where

we are or may be required to purchase all or a portion of the outstanding

interest in a consolidated subsidiary from

the noncontrolling interest holder under the terms of a put option

contained in contractual agreements.

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

redeemable noncontrolling interests

Change in fair value of redeemable securities

Balance, end of period

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 9 – Comprehensive Income

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

are excluded from net income as

such amounts are recorded directly as an adjustment to stockholders’

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

applicable taxes as of:

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

Attributable to noncontrolling interests:

Foreign currency translation adjustment

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

Unrealized loss from foreign currency hedging activities

Unrealized investment gain (loss)

Pension adjustment loss

Accumulated other comprehensive loss

Total Accumulated

other comprehensive loss

The following table summarizes the components of comprehensive income, net of

applicable taxes as follows:

Foreign currency translation gain (loss)

Unrealized gain (loss) from foreign currency hedging activities

Unrealized investment gain (loss)

Pension adjustment gain (loss)

Comprehensive income

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Our financial statements are denominated in the U.S.

Dollar currency.

Fluctuations in the value of foreign

currencies as compared to the U.S.

Dollar may have a significant impact

on our comprehensive income.

foreign currency translation gain (loss) during the years ended December

26, 2020, December 28, 2019 and

December 29, 2018 was impacted by changes in foreign currency exchange

rates of the Euro, Brazilian Real,

British Pound and Australian Dollar

The following table summarizes our total comprehensive income, net of

applicable taxes as follows:

Comprehensive income attributable to

Henry Schein, Inc.

Comprehensive income attributable to

noncontrolling interests

Comprehensive income attributable to

Redeemable noncontrolling interests

Comprehensive income

Note 10 – Fair Value Measurements

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

paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

The hierarchy for determining that distinguishes

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

from independent sources

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

the best information available in the circumstances (unobservable inputs).

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

highest priority to unadjusted quoted prices

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

to unobservable inputs (Level 3).

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

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

or liabilities that are accessible at the

measurement date.

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

for the asset or liability,

either directly or indirectly.

Level 2 inputs include:

quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets

that are not active;

inputs other than quoted

prices that are observable for the asset or liability;

and inputs that are

derived principally from or corroborated by

observable market data by correlation or other means.

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

The following section describes the fair values of our financial instruments

and the methodologies that we used to

measure their fair values.

Investments and notes receivable

There are no quoted market prices available for investments in unconsolidated

affiliates and notes receivable;

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

applicable markets.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

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

Level 3 within the fair value hierarchy and as

of December 26, 2020 and December 28, 2019 was estimated at $

million and $

million, respectively.

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

include market conditions, such as interest

rates and credit spreads.

Derivative contracts

Derivative contracts are valued using quoted market prices and

significant other observable and unobservable

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

Our derivative instruments primarily include foreign currency forward

agreements related to certain

intercompany loans, certain forecasted inventory purchase commitments with

foreign suppliers and foreign

currency forward contracts to hedge a portion of our euro-denominated

foreign operations which are designated as

net investment hedges;

and a total return swap for the purpose of economically hedging

our unfunded non-qualified

SERP and our DCP.

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

are obtained by comparing our contract

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

is based on market rates for comparable

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

Note 16 – Derivatives and Hedging

for additional information.

Redeemable noncontrolling interests

The values for Redeemable noncontrolling interests are classified within

Level 3 of the fair value hierarchy and are

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

Note 8 – Redeemable Noncontrolling

for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table presents our assets and liabilities that are measured and

recognized at fair value on a recurring

basis classified under the appropriate level of the fair value hierarchy as of

December 26, 2020 and December 28,

December 26, 2020

Derivative contracts

Total liabilities

Redeemable noncontrolling interests

December 28, 2019

Derivative contracts

Total liabilities

Redeemable noncontrolling interests

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 11 – Business Acquisitions and Divestitures

The operating results of all acquisitions are reflected in our financial statements from their

respective acquisition

We completed acquisitions during the year ended December 26, 2020, which were immaterial to our financial

statements individually.

In the aggregate, these transactions resulted in consideration of $

million in 2020

related to business combinations, for net assets amounting to $

As of December 26, 2020, we had

million of identifiable intangibles, $

million of goodwill and $

million of non-controlling

interest, related to these acquisitions.

Some prior owners of acquired subsidiaries are eligible to receive additional

purchase price cash consideration if

certain financial targets are met.

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

price consideration at the time of the acquisition,

none of which are material.

Any adjustments to these accrual

amounts are recorded in our consolidated statements of income.

For the years ended December 26, 2020,

December 28, 2019 and December 29, 2018, there were no material adjustments

recorded in our consolidated

statement of income relating to changes in estimated contingent purchase

price liabilities.

Divestitures of Investments

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

in Hu-Friedy Mfg.

Co., LLC, a manufacturer of

dental instruments and infection prevention solutions.

Our investment was non-controlling, we were not involved

in running the business and had no representation on the board of directors.

During the fourth quarter of 2019, we

also sold certain other equity investments.

In the aggregate, the sales of these investments resulted in a pre-tax

of approximately $

million, net of taxes of approximately $

In the fourth quarter of 2020 we

received contingent proceeds of $

million from the 2019 sale of Hu-Friedy resulting in the recognition of an

additional after-tax gain of $1.6 million.

For the years ended December 28, 2019 and December 29,

recognized approximately $

million and $

million of equity in earnings from these affiliates.

Acquisition Costs

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

29, 2018 we incurred $

million and $

million in acquisition costs from continuing operations.

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

During the years ended December 26, 2020,

December 28, 2019, and December 29, 2018, we incurred $

million and $

transaction costs associated with this transaction.

do not expect to incur additional spin-off related transaction

costs after December 26, 2020.

All transaction costs related to the Animal Health Spin-off have been included

results from discontinued operations.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 12 – Plans of Restructuring

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

provide expense

efficiencies.

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

and fund new initiatives

to drive growth under our 2018 to 2020 strategic plan.

This initiative resulted in the elimination of approximately

% of our workforce and the closing of certain facilities.

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

to mitigate stranded costs associated

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

These activities

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

As a result of the business environment brought on

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

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

million and $

million, respectively.

The costs associated with these

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

our consolidated statements of

The following table shows the amounts expensed and paid for restructuring

costs that were incurred during our

2020, 2019 and 2018 fiscal years and the remaining accrued balance

of restructuring costs as of December 26,

2020, which is included in Accrued expenses:

Other and Other liabilities

within our consolidated balance sheet:

Balance, December 30, 2017

Payments and other adjustments

Balance, December 29, 2018

Payments and other adjustments

Balance, December 28, 2019

Payments and other adjustments

Balance, December 26, 2020

The following table shows,

by reportable segment, the amounts expensed and paid for restructuring costs

incurred during our 2020, 2019 and 2018 fiscal years and the remaining accrued

balance of restructuring costs as of

December 26, 2020:

Balance, December 30, 2017

Payments and other adjustments

Balance, December 29, 2018

Payments and other adjustments

Balance, December 28, 2019

Payments and other adjustments

Balance, December 26, 2020

We have a facility agreement, based on the securitization of our U.S.

trade accounts receivable that is structured as an asset-backed securitization program with pricing committed for up to three years .

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

On October 20, 2021, we amended our U.S.

trade accounts receivable securitization facility to increase the purchase limit to $ 450 million with two banks as agents and extend the expiration date to October 18, 2024.

As of December 25, 2021 and December 26, 2020, the borrowings outstanding under this securitization facility were $ 105 million and $ 0 , respectively.

At December 25, 2021, the interest rate on borrowings under this facility was based on the asset-backed commercial paper rate of 0.19 % plus 0.75 %, for a combined rate of 0.94 %.

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 %.

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 30 to 35 basis points depending upon program utilization.

As of December 25, 2021, the aggregate amounts of long-term debt, including finance lease obligations and net of deferred debt issuance costs of $ 1.0 million, maturing in each of the next five years and thereafter are as follows:

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 13 – Earnings Per Share

Basic earnings per share is computed by dividing net income attributable

to Henry Schein, Inc.

by the weighted-

average number of common shares outstanding for the period.

Our diluted earnings per share is computed similarly

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

for presently unvested

restricted stock and restricted stock units and upon exercise of stock options,

using the treasury stock method in

periods in which they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and

diluted share follows:

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

Note 13 – Income Taxes

9 unchanged sentences

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were

The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were as follows:

Deferred income tax asset:

Investment in partnerships

Net operating losses and other carryforwards

Inventory, premium

coupon redemptions and accounts receivable

Inventory, premium coupon redemptions and accounts receivable

valuation allowances

2 unchanged sentences

Operating lease right of use asset

Total deferred income

allowance for deferred tax assets

Total deferred income tax asset

Valuation allowance for deferred tax assets (1)

Net deferred income tax asset

3 unchanged sentences

Property and equipment

Total deferred tax

Total deferred tax liability

Net deferred income tax asset (liability)

Primarily relates to operating losses, the benefits of which are uncertain.

Any future reductions of such valuation allowances will be

reflected as a reduction of income tax expense.

The assessment of the amount of value assigned to our deferred tax assets under

the applicable accounting rules is

We are required to consider all available positive and negative evidence in evaluating the likelihood

that we will be able to realize the benefit of our deferred

tax assets in the future.

Such evidence includes scheduled

reversals of deferred tax liabilities, projected future taxable income, tax planning

strategies and the results of recent

Since this evaluation requires consideration of events that

may occur some years into the future, there

is an element of judgment involved.

Realization of our deferred tax assets is dependent on generating sufficient

taxable income in future periods.

We believe that it is more likely than not that future taxable income will be

sufficient to allow us to recover substantially all of the value assigned to our deferred

However, if future

events cause us to conclude that it is not more likely than not that we will be

able to recover all of the value

assigned to our deferred tax assets, we will be required to adjust our valuation

allowance accordingly.

As of December 26, 2020, we had federal, state, and foreign net operating

loss carryforwards of approximately

million and $

million, respectively.

The federal, state and foreign net operating loss

carryforwards will begin to expire in various years from

The amounts of state and foreign net

operating losses that can be carried forward indefinitely are $

million and $

million, respectively.

Any future reductions of such valuation allowances will be reflected as a reduction of income tax expense.

The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is judgmental.

We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future.

Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations.

Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved.

Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods.

We believe that it is more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value assigned to our deferred tax assets.

However, if future events cause us to conclude that it is not more likely than not that we will be able to recover all of the value assigned to our deferred tax assets, we will be required to adjust our valuation allowance accordingly.

As of December 25, 2021, we had federal, state, and foreign net operating loss carryforwards of approximately $ 32.7 million, $ 35.6 million and $ 170.7 million, respectively.

The federal, state and foreign net operating loss carryforwards will begin to expire in various years from 2024 through 2039.

The amounts of state and foreign net operating losses that can be carried forward indefinitely are $ 9.5 million and $ 169.6 million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The tax provisions differ from the amount computed using the federal statutory income

tax rate as follows:

The tax provisions differ from the amount computed using the federal statutory income tax rate as follows:

Income tax provision at federal statutory rate

State income tax provision, net of federal income tax effect

Foreign income tax benefit

Foreign income tax provision (benefit)

Pass-through noncontrolling interest

Valuation allowance

Unrecognized tax benefits and audit settlements

Interest expense related to loans

Excess tax benefits related to stock compensation

Transition tax on deemed repatriation of

foreign earnings

Revaluation of deferred tax assets and liabilities

Tax on global

intangible low-taxed income ("GILTI")

Tax benefit related

to legal entity reorganization outside the U.S.

related to reorganization of legal entities related

to forming Henry Schein One

(credit) related to reorganization of legal entities

Tax on global intangible low-taxed income ("GILTI")

Tax benefit related to legal entity reorganization outside the U.S.

Tax credit related to reorganization of legal entities

completed in preparation for the Animal Health spin-off

tax provision

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

% compared to

% for the prior year

Our effective tax rate in 2020 was primarily impacted by an Advance Pricing

Agreement (“APA”) with the

U.S Internal Revenue Service (the “IRS”) in the U.S., other audit resolutions,

state and foreign income taxes and

interest expense.

The positive effect of the APA and the other audit resolutions are not expected to be recurring and,

as a result, we expect our effective tax rate in future periods to be higher.

In 2019, our effective tax rate of

% was primarily impacted by state and foreign income taxes and interest

In 2018, our effective tax rate of

% was primarily impacted by a reduction in the estimate of our

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

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

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

(“CARES Act”) was enacted in

response to the COVID-19 pandemic.

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

provisions that modify the Section 163(j) limitation of business interest and Net

Operating Loss (“NOL”) carryover

and carryback rules.

The modifications to Section 163(j) increase the allowable business

interest deduction from

% of adjusted taxable income to

% of adjusted taxable income for years beginning in 2019 and 2020.

CARES Act eliminated the NOL income limitation for years beginning

before 2021 and it extended the carryback

period to five years for losses incurred in 2018, 2019 and 2020.

We have analyzed the income tax provisions of the

CARES Act and have accounted for the impact in the year ended December 26,

2020, which did not have a

material impact on our consolidated financial statements.

There are certain other non-income tax benefits available

to us under the CARES Act that require further clarification or interpretation

that may affect our consolidated

financial statements in the future.

On December 27, 2020, the Consolidated Appropriations Act was

law and extended certain non-income tax benefits under the CARES

Total income tax provision

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 of 19.1 % was primarily impacted by an Advance Pricing Agreement with the U.S Internal Revenue Service (the “IRS”) in the U.S., other audit resolutions, state and foreign income taxes and interest expense.

In 2019, our effective tax rate of 23.4 % was primarily impacted by state and foreign income taxes and interest expense.

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

The ARPA included a corporate income tax provision to further limit the deductibility of compensation under Section 162(m) for tax years starting after December 31, 2026.

Section 162(m) generally limits the deductibility of compensation paid to covered employees of publicly held corporations.

Covered employees include the CEO, CFO and the three highest paid officers.

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic.

The CARES Act includes, but is not limited to, certain income tax provisions that modify the Section 163(j) limitation of business interest and net operating loss carryover and carryback rules.

The modifications to Section 163(j) increase the allowable business interest deduction from 30 % of adjusted taxable income to 50 % of adjusted taxable income for years beginning in 2019 and 2020.

The CARES Act eliminated the NOL income limitation for years beginning before 2021 and it extended the carryback period to five years for losses incurred in 2018, 2019 and 2020.

We have analyzed the income tax provisions of the CARES Act and have accounted for the impact in the year ended December 26, 2020, which did not have a material impact on our consolidated financial statements.

There are certain other non-income tax benefits available to us under the CARES Act that require further clarification or interpretation that may affect our consolidated financial statements in the future.

On December 27, 2020, the Consolidated Appropriations Act was enacted into law and extended certain non-income tax benefits under the CARES Act.

On July 20, 2020, the IRS issued final regulations related to the Tax Cuts and Jobs Act enacted in 2017 (the “Act”).

The final regulations concern the global intangible low-taxed income (“GILTI”) and subpart F income provisions of the Tax Act.

To provide flexibility to taxpayers, the IRS is permitting the application of these final

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

On July 20, 2020, the IRS issued final regulations related to the Tax Act.

The final regulations concern the global

intangible low-taxed income (“GILTI”) and subpart F income provisions of the Tax Act.

To provide flexibility to

taxpayers, the IRS is permitting the application of these final regulations to

prior tax years, if the taxpayer elects to

We have analyzed the final regulations, which do not have a material impact to our consolidated financial

regulations to prior tax years, if the taxpayer elects to do so.

We have analyzed the final regulations, which do not have a material impact to our consolidated financial statements.

On December 22, 2017, the U.S.

government passed the Tax Act.

The Tax Act is comprehensive tax legislation

that implemented complex changes to the U.S.

tax code including, but not

limited to, the reduction of the corporate

tax rate from

%, modification of accelerated depreciation, the repeal of the domestic

manufacturing

deduction and changes to the limitations of the deductibility of interest.

Additionally, the Tax

Act moved from a

global tax regime to a modified territorial regime, which requires U.S.

to pay a mandatory one-time

transition tax on historical offshore earnings that have not been repatriated to the U.S.

The transition tax is payable

over eight years.

In the fourth quarter of 2017, we recorded provisional amounts

for any items that could be

reasonably estimated at the time.

This included the one-time transition tax that we estimated to

and a net deferred tax expense of $

million attributable to the revaluation of deferred taxes due to the lower

enacted federal income tax rate of 21%.

We completed our analysis in the year ended December 29, 2018 and

recorded a net $

million reduction to the one-time transition tax and an additional $

million net deferred tax

benefit from the revaluation of deferred

taxes to reflect the new tax rate.

Within our consolidated balance sheets, transition tax of $

million was included in “Accrued taxes” for 2020 and

million and $

million were included in “Other liabilities” for 2020 and 2019, respectively.

The FASB Staff Q&A, Topic

5, Accounting for Global Intangible Low-Taxed Income, states that an entity

can make an accounting policy election to either recognize deferred

taxes for temporary differences expected to

reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.

elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

We recorded a current

tax expense for the GILTI provision of $

million and $

million for 2020, 2019, and 2018,

respectively.

Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings

will no longer be subject to U.S.

government passed the Tax Act, which requires U.S.

companies to pay a mandatory one-time transition tax on historical offshore earnings that have not been repatriated to the U.S.

The transition tax is payable over eight years.

Within our consolidated balance sheets, transition tax of $ 14.1 million and $ 9.9 million were included in “accrued taxes” for 2021 and 2020, respectively, and $ 42.4 million and $ 74.5 million were included in “other liabilities” for 2021 and 2020, respectively.

The FASB Staff Q&A, Topic 740 No.

5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.

We elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

We recorded a current tax expense for the GILTI provision of $ 4.9 million, $ 2.4 million, and $ 3.9 million for 2021, 2020, and 2019 , respectively.

Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings will no longer be subject to U.S.

federal income tax;

however, there could be U.S.

state and/or foreign withholding

taxes upon distribution of such unremitted earnings.

Determination of the amount of unrecognized deferred tax

liability with respect to such earnings is not practicable.

ASC 740 prescribes the accounting for uncertainty in income taxes recognized

in the financial statements in

accordance with other provisions contained within this guidance.

This topic prescribes a recognition threshold and

a measurement attribute for the financial statement recognition and measurement

of tax positions taken or expected

to be taken in a tax return.

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

than not to be

sustained upon examination by the taxing authorities.

The amount recognized is measured as the largest amount of

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

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 to certain

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

liabilities” within our consolidated

balance sheets as of December 26, 2020 was approximately $

million, of which $

million would affect the

effective tax rate if recognized.

It is possible that the amount of unrecognized tax benefits

may change in the next

12 months, which may result in a material impact on our consolidated statement of

The tax years subject to examination by major tax jurisdictions include

the years 2012 and forward by the IRS, as

well as the years 2008 and forward for certain states and certain foreign

jurisdictions.

All tax returns audited by the

IRS are officially closed through 2011 and 2014 through 2016.

All IRS audit fieldwork has been completed for the

however, there could be U.S., state, and/or foreign withholding taxes upon distribution of such unremitted earnings.

Determination of the amount of unrecognized deferred tax liability with respect to such earnings is not practicable.

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

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

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

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

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

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

The total amount of unrecognized tax benefits, which are included in “other liabilities” within our consolidated balance sheets, as of December 25, 2021 and December 26, 2020 was approximately $ 83.5 million and $84.0 million, respectively of which $ 69.0 million and $70.1 million, respectively would affect the effective tax rate if recognized.

It is possible that the amount of unrecognized tax benefits will change in the next 12 months, which may result in a material impact on our consolidated statements of income.

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

The tax years subject to examination by the IRS include years 2017 and forward.

During the quarter ended December 25, 2021, we were notified by the IRS that tax year 2019 was selected for examination.

During the quarter ended June 26, 2021 we reached a resolution with the Appellate Division for all remaining outstanding issues for 2012 and 2013.

Regarding transfer pricing matters, in the quarter ended December 28, 2019, we reached a settlement with the U.S.

Competent Authority to resolve transfer pricing matters related to 2012 and 2013.

During the quarter ended September 26, 2020 we reached an agreement with the Advanced Pricing Division on an appropriate transfer pricing methodology for the years 2014-2025.

The objective of this resolution was to mitigate future transfer pricing audit adjustments.

In the fourth quarter of 2020, we reached a resolution with the IRS for the 2014-2016 audit cycle.

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

The amount of tax interest expense (credit) was approximately $( 0.4 ) million, $( 3.3 ) million, and $ 2.2 million in 2021,

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

years 2012 and 2013.

In the quarter ended December 28, 2019, we reached a settlement with

Authority to resolve certain transfer pricing issues related to 2012 and 2013.

For all remaining outstanding issues

for 2012 and 2013, we have provided all necessary documentation to

the Appellate Division to date and are waiting

for responses.

We do not believe the final resolution will have a material impact to our consolidated financial

During the quarter ended September 26, 2020 we finalized negotiations

with the Advance Pricing

Division and reached an agreement on an appropriate transfer pricing

methodology for the years 2014-2025.

objective of this resolution is to mitigate future transfer pricing audit

In the fourth quarter of 2020, we

reached a favorable resolution with the IRS relating to select audit years.

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

the provision for income taxes.

amount of tax interest expense (credit) was approximately $(

million, and $

million in 2020,

2020 and 2019, respectively.

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

approximately $

million as of December 26, 2020 and $

million as of December 28, 2019.

were accrued for the periods presented.

The total amount of accrued interest is included in “other liabilities”, and was approximately $ 12.4 million as of December 25, 2021 and $ 14.0 million as of December 26, 2020.

No penalties were accrued for the periods presented.

The following table provides a reconciliation of unrecognized tax benefits:

6 unchanged sentences

Balance, end of period

Note 15 – Concentrations of Risk

Certain financial instruments potentially subject us to concentrations of credit

These financial instruments

consist primarily of cash equivalents, trade receivables, long-term investments,

notes receivable and derivative

In all cases, our maximum exposure to loss from credit

risk equals the gross fair value of the financial

We routinely maintain cash balances at financial institutions in excess of insured amounts.

not experienced any loss in such accounts and we manage this risk through

maintaining cash deposits and other

highly liquid investments in high quality financial institutions.

We continuously assess the need for reserves for

such losses, which have been within our expectations.

We do not require collateral or other security to support

financial instruments subject to credit risk, except for long-term notes receivable.

We limit our credit risk with respect to our cash equivalents, short-term and long-term investments and derivative

instruments, by monitoring the credit worthiness of the financial institutions who are

the counter-parties to such

financial instruments.

As a risk management policy, we limit the amount of credit exposure by diversifying and

utilizing numerous investment grade counter-parties.

With respect to our trade receivables, our credit risk is somewhat limited due to a relatively large customer base

its dispersion across different types of health care professionals and geographic areas.

For the year ended

December 26, 2020, two customers accounted for slightly more than

% of our net sales from continuing

For the year ended December 28, 2019, one customer accounted

for slightly less than

sales from continuing operations.

With respect to our sources of supply, our top 10 health care distribution

suppliers from continuing operations and our single largest supplier from continuing

operations accounted for

approximately

%, respectively, of our aggregate purchases in 2020 and approximately

respectively, of our aggregate purchases in 2019.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Our long-term notes receivable primarily represent strategic financing arrangements

with certain industry affiliates

and amounts owed to us from sales of certain businesses.

Generally, these notes are secured by certain assets of the

counterparty;

however, in most cases our security is subordinate to other commercial financial institutions.

we have exposure to credit loss in the event of non-performance by these counter-parties,

we conduct ongoing

assessments of their financial and operational performance.

Note 16 – Derivatives and Hedging Activities

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

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

We attempt to minimize these

risks by primarily using foreign currency forward contracts and by

maintaining counter-party credit limits.

hedging activities provide only limited protection against currency exchange

and credit risks.

Factors that could

influence the effectiveness of our hedging programs include currency markets and

availability of hedging

instruments and liquidity of the credit markets.

All foreign currency forward contracts that we enter into are

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

of hedging an existing or anticipated

currency exposure.

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

diversifying our counterparties, maintaining a strong balance sheet and having

multiple sources of capital.

During 2019 we entered into foreign currency forward contracts to hedge a portion of our euro-denominated

foreign operations which are designated as net investment hedges.

These net investment hedges offset the change

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

exchange rates.

Gains and losses related to these net investment hedges are recorded

Accumulated other

comprehensive loss

within our consolidated balance sheets.

Amounts excluded from the assessment of hedge

effectiveness are included in interest expense within our consolidated statements

The aggregate

notional value of this net investment hedge, which matures on

November 16, 2023

, is approximately €

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

recognized approximately $

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

March 20, 2020

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

qualified SERP and DCP.

This swap will offset changes in our SERP and DCP liabilities.

At the inception, the

notional value of the investments in these plans was $

At December 26, 2020, the notional value of

the investments in these plans was $

At December 26, 2020, the financing rate for this swap is based

%, for a combined rate of

From March 20, 2020, the effective date of the

swap, to December 26, 2020, we have recorded a gain, within the selling,

general and administrative line item in

our consolidated statement of income, of approximately $

million, net of transaction costs, related to this

undesignated swap for the year ended December 26, 2020.

This gain was partially offset by the change in fair

value adjustment of $

million in the SERP and the DCP, which occurred prior to the inception of the swap on

March 20, 2020.

This swap is expected to be renewed on an annual basis and

is expected to result in a neutral

impact to our results of operations.

Note 19 – Employee Benefit Plans

for additional information.

Fluctuations in the value of certain foreign currencies as compared

dollar may positively or negatively

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

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

foreign currency forward

contracts aimed at limiting the impact of foreign currency exchange

rate fluctuations on earnings.

short-term (i.e., generally

or less) foreign currency forward contracts to protect against

exchange risks associated with intercompany loans due from our international

subsidiaries and the payment of

merchandise purchases to our foreign suppliers.

We do not hedge the translation of foreign currency profits into

dollars, as we regard this as an accounting exposure, not an

economic exposure.

Our hedging activities have

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

Accordingly, additional disclosures

related to derivatives and hedging activities required by ASC 815 have

been omitted.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 17 – Revenue from Contracts with Customers

Revenue (Net sales) is recognized in accordance with the policies discussed

Note 1 – Significant Accounting

Disaggregation of Net sales

The following table disaggregates our Net sales by reportable segment and

geographic area:

December 26, 2020

North America

International

Health care distribution

Total health care distribution

and value-added services

Total excluding

Corporate TSA revenues

Total revenues

December 28, 2019

North America

International

Health care distribution

Total health care distribution

and value-added services

Total excluding

Corporate TSA revenues

Total revenues

Corporate TSA revenues represents sales of certain animal health products to Covetrus under the transition services agreement

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 18 – Segment and Geographic Data

We conduct our business through

reportable segments:

(i) health care distribution and (ii) technology

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 dental and medical groups serve

practitioners in

countries worldwide.

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

technology and other value-added

services to health care practitioners.

Our technology group offerings include practice management software

systems for dental and medical practitioners.

Our value-added practice solutions include financial services on a

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

services for practitioners.

The following tables present information about our reportable and operating

Health care distribution

Total health care distribution

and value-added services

Total excluding

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, personal protective equipment and

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.

Note 14 – Commitments and Contingencies

Purchase Commitments

In our health care distribution business, we sometimes enter into long-term purchase commitments to ensure the availability of products for distribution.

Future minimum annual payments for inventory purchase commitments as of December 25, 2021 were:

Total minimum inventory purchase commitment payments

Employment, Consulting and Non-Compete Agreements

We have employment, consulting and non-compete agreements that have varying base aggregate annual payments for the years 2022 through 2026 and thereafter of approximately $ 24.6 million, $ 4.7 million, $ 0.9 million, $ 0.8 million, $ 0.8 million, and $ 0.0 million, respectively.

We also have lifetime consulting agreements that provide for current compensation of $ 0.4 million per year, increasing $ 25 every fifth year with the next increase in 2022.

In addition, some agreements have provisions for additional incentives and compensation.

Henry Schein has been named as a defendant in multiple lawsuits (currently less than one-hundred and seventy-five (175);

in less than half of those cases one or more of Schein’s affiliated companies is also named as a defendant), which allege that manufacturers of prescription opioid drugs engaged in a false advertising campaign to expand the market for such drugs and their own market share and that the entities in the supply chain (including Henry Schein, Inc.) reaped financial rewards by refusing or otherwise failing to monitor appropriately and restrict the improper distribution of those drugs.

These actions consist of some that have been consolidated within the MultiDistrict Litigation (“MDL”) proceeding In Re National Prescription Opiate Litigation (MDL No.

17-md-2804) and are currently abated for discovery purposes, and others which remain pending in state courts and are proceeding independently and outside of the MDL.

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

the action filed by Mobile County Board of Health, et al., in Alabama state court, which is currently set for a jury trial on January 9, 2023;

and the action filed by DCH Health Care Authority, et al.

in Alabama state court, which is currently scheduled for a jury trial on March 20, 2023.

The court for the pending cases filed by hospitals in West Virginia

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Operating Income:

Health care distribution

and value-added services

Income from continuing operations before

and equity in earnings of affiliates:

Health care distribution

and value-added services

Depreciation and Amortization:

Health care distribution

and value-added services

Interest Income:

Health care distribution

and value-added services

Interest Expense:

Health care distribution

and value-added services

Health care distribution

and value-added services

Purchases of Fixed Assets:

Health care distribution

and value-added services

Health care distribution

and value-added services

Discontinued operations

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

However, as of this filing, the West Virginia hospital cases against Henry Schein have not been set for trial.

Of Henry Schein’s 2021 revenue of approximately $ 12.4 billion from continuing operations, sales of opioids represented less than two-tenths of 1 percent.

Opioids represent a negligible part of our business.

We intend to defend ourselves vigorously against these actions.

On February 5, 2021, Jack Garnsey filed a putative shareholder derivative action on behalf of Covetrus, Inc.

District Court for the Eastern District of New York, naming as defendants Benjamin Shaw, Christine T.

Komola, Steven Paladino, Betsy Atkins, Deborah G.

Ellinger, Sandra L.

Helton, Philip A.

Laskaway, Mark J.

Manoff, Edward M.

McNamara, Ravi Sachdev, David E.

Shaw, Benjamin Wolin, and Henry Schein, Inc., with Covetrus, Inc.

named as a nominal defendant.

The complaint alleges that the individual defendants breached their fiduciary duties under state law in connection with the same allegations asserted in the City of Hollywood securities class action described in our prior filings with the SEC and further alleges that Henry Schein aided and abetted such breaches.

The complaint also asserts claims for contribution under the federal securities laws against Henry Schein and other defendants, also arising out of the allegations in the City of Hollywood lawsuit.

The complaint seeks declaratory, injunctive, and monetary relief.

A second similar complaint, Stegmann v.

Wolin, was filed in the same court on March 30, 2021, which did not name the Company as a defendant.

Plaintiffs agreed to dismiss Henry Schein from the consolidated amended complaint without prejudice;

and the court “so ordered” the stipulation dismissing Henry Schein as a defendant on December 13, 2021.

From time to time, we may become a party to other legal proceedings, including, without limitation, product liability claims, employment matters, commercial disputes, governmental inquiries and investigations (which may in some cases involve our entering into settlement arrangements or consent decrees), and other matters arising out of the ordinary course of our business.

While the results of any legal proceeding cannot be predicted with certainty, in our opinion none of these other pending matters are currently anticipated to have a material adverse effect on our consolidated financial position, liquidity or results of operations.

As of December 25, 2021, we had accrued our best estimate of potential losses relating to claims that were probable to result in liability and for which we were able to reasonably estimate a loss.

This accrued amount, as well as related expenses, was not material to our financial position, results of operations or cash flows.

Our method for determining estimated losses considers currently available facts, presently enacted laws and regulations and other factors, including probable recoveries from third parties.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table presents information about our operations by geographic

area as of and for the three years

ended December 26, 2020.

Net sales by geographic area are based on the respective locations

of our subsidiaries.

No country, except for the United States, generated net sales greater than

% of consolidated net sales.

were no material amounts of sales or transfers among geographic areas

and there were no material amounts of

export sales.

United States

Consolidated total

Note 19 – Employee Benefit Plans

Stock-based Compensation

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

compensation expense of $

million after-tax) for the year ended December 26, 2020, and pre-tax share-based

million after-tax) and $

million after-tax) for the years ended December 28, 2019

and December 29, 2018.

Our accompanying consolidated statements of cash flows present our

stock-based compensation expense as an

adjustment to reconcile net income to net cash provided by operating

activities for all periods presented.

accompanying consolidated statements of cash flows, there were

benefits associated with tax deductions in

excess of recognized compensation as a cash inflow from financing

activities for the years ended December 26,

2020, December 28, 2019 and December 29, 2018.

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

to employees and non-

employee directors.

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

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

expense on a straight-line basis

over the requisite service period.

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

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.

As of December

26, 2020, there were

shares authorized and

shares available to be granted under the 2020 Stock

Incentive Plan and

shares authorized and

shares available to be granted under the 2015 Non-Employee

Director Stock Incentive Plan.

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

specified vesting provisions.

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

on or following satisfaction of vesting

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

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

Note 15 – Stock-Based Compensation

Stock-based awards are provided to certain employees and non-employee directors under the terms of our 2020 Stock Incentive Plan and our 2015 Non-Employee Director Stock Incentive Plan (together, the “Plans”).

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

Historically, equity-based awards have been granted solely in the form of time-based and performance-based restricted stock units (“RSUs”).

However, beginning in 2021, our equity-based awards have been granted in the form of time-based RSUs and non-qualified stock options.

As of December 25, 2021, there were 70,943 shares authorized and 9,368 shares available to be granted under the 2020 Stock Incentive Plan and 1,893 shares authorized and 229 shares available to be granted under the 2015 Non-Employee Director Stock Incentive Plan.

Grants of RSUs are stock-based awards granted to recipients with specified vesting provisions.

In the case of RSUs, common stock is generally delivered on or following satisfaction of vesting conditions.

We issue RSUs 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 RSUs that vest based on our achieving specified performance measurements and the recipient’s continued service over time (primarily three -year cliff vesting).

For these RSUs, we recognize the cost as compensation expense on a straight-line basis.

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

With respect to performance-based RSUs, the number of shares that ultimately vest and are received by the recipient is based upon our performance as measured against specified targets over a specified period, as determined by the Compensation Committee.

Although there is no guarantee that performance targets will be achieved, we estimate the fair value of performance-based RSUs based on our closing stock price at time of grant.

The Plans provide for adjustments to the performance-based RSU 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 accounting principles or in applicable laws or regulations, changes in income tax rates in certain markets and foreign exchange fluctuations.

Over the performance period, the number of shares of common stock that will ultimately vest and be issued and the related compensation expense is adjusted upward or downward based upon our estimation of achieving such performance targets.

The ultimate number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on our actual performance metrics as defined under the Plans.

During the three months ended March 27, 2021, as a result of the continuing economic risk and uncertainty resulting from the ongoing COVID-19 pandemic, the Compensation Committee decided to adjust the form of awards granted under our 2021 long-term incentive program for our 2021 fiscal year in a manner that focuses on our long-term value by granting non-qualified stock options and time-based RSUs rather than performance-based RSUs.

Stock options are awards that allow the recipient to purchase shares of our common stock at a fixed price following vesting of the stock options.

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

Stock options issued during 2021 vest one-third per year based on the recipient’s continued service, subject to the terms and conditions of the Plans, are fully vested three years from the grant date and have a contractual term of ten years from the grant date, subject to earlier termination of the term upon certain events.

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

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

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

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 restricted

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

The Plans provide for adjustments to the performance-based restricted

stock units targets for significant events,

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

certain capital transactions

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

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

in applicable laws or regulations and foreign

exchange fluctuations.

Over the performance period, the number of shares of common

stock that will ultimately

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

or downward based upon our

estimation of achieving such performance targets.

The ultimate number of shares delivered to recipients

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

actual performance metrics as defined

under the Plans.

As a result of the Separation, the number of our unvested (as of the

date of the Separation) equity-based awards

from previous grants made under our Long-term Incentive Program under the

Plans was increased by a factor of

approximately

, along with a corresponding

in our price per share.

We record deferred income tax assets for awards that will result in future deductions on our income tax returns

based on the amount of compensation cost recognized and our statutory tax

rate in the jurisdiction in which we will

receive a deduction.

Stock-based compensation grants for the three years ended December 26,

2020 consisted of restricted stock/unit

Certain stock-based compensation granted may require us

to settle in the form of a cash payment.

the year ended December 26, 2020, we recorded a liability of $

million relating to the grant date fair value of

stock-based compensation to be settled in cash.

The weighted-average grant date fair value of stock-based awards

granted before forfeitures was $

per share during the years ended December 26, 2020,

December 28, 2019 and December 29, 2018.

Total unrecognized compensation cost related to non-vested awards as of December 26, 2020 was $

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

approximately

In addition to equity-based awards under the 2021 long-term incentive program under the 2020 Stock Incentive Plan, the Compensation Committee granted a Special Pandemic Recognition Award under the 2020 Stock Incentive Plan to recipients of performance-based RSUs under the 2018 long-term incentive program.

These time-based RSU awards vest 50 % on the first anniversary of the grant date and 50 % on the second anniversary of the grant date, based on the recipient’s continued service and subject to the terms and conditions of the Plans, and are recorded as compensation expense using a graded vesting method.

Our accompanying consolidated statements of income reflect pre-tax share-based compensation expense of $ 78.4 million ($ 59.8 million after-tax), $ 8.8 million ($ 7.1 million after-tax) and $ 44.9 million ($ 34.4 million after-tax) for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Total unrecognized compensation cost related to non-vested awards as of December 25, 2021 was $ 79.8 million, which is expected to be recognized over a weighted-average period of approximately 2.0 years.

The weighted-average grant date fair value of stock-based awards granted before forfeitures was $62.72, $60.23 and $56.83 per share during the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

Certain stock-based compensation granted may require us to settle in the form of a cash payment.

During the year ended December 25, 2021, we recorded a liability of $ 0.9 million relating to the grant date fair value of stock-based compensation to be settled in cash.

We record deferred income tax assets for awards that will result in future deductions on our income tax returns based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which we will receive a deduction.

Our accompanying consolidated statements of cash flows present our stock-based compensation expense as an adjustment to reconcile net income to net cash provided by operating activities for all periods presented.

In the accompanying consolidated statements of cash flows, there were no benefits associated with tax deductions in excess of recognized compensation as a cash inflow from financing activities for the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

The following weighted-average assumptions were used in determining the most recent fair values of stock options using the Black-Scholes valuation model:

Expected dividend yield

Expected stock price volatility

Risk-free interest rate

Expected life of options (years)

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

The expected stock price volatility is based on implied volatilities from traded options on our stock, historical volatility of our stock, and other factors.

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

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

The six -year expected life of the options was determined using the simplified method for estimating the expected term as permitted under SAB Topic 14.

Estimates of fair value are not intended to predict actual future events or the value ultimately realized by recipients of stock options, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

A summary of the stock option activity under the Plans is presented below:

The following table summarizes the stock option activity for the year ended December 25, 2021:

Stock Options

Weighted Average

Remaining Contractual

Life in Years

Outstanding at beginning of year

1 unchanged sentence

Options exercisable at end of year

The following table represents the intrinsic values of:

Stock options outstanding

Stock options exercisable

The total cash received as a result of stock option exercises for the year ended

December 29, 2018 was

approximately $

In connection with these exercises, we did

t realize any tax benefits for the years

ended December 26, 2020, December 28, 2019 and December 29, 2018.

We settle employee stock option exercises

with newly issued common shares.

The total intrinsic value per share of restricted stock/units that vested

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

The following table summarizes the

status of our non-vested restricted stock/units for the year ended December

(in thousands)

Life (in years)

(in thousands)

Vested or expected to vest

The following tables summarize the activity of our unvested RSUs for the year ended December 25, 2021:

Time-Based Restricted Stock Units

12 unchanged sentences

Outstanding at end of period

The total intrinsic value per share of RSUs that vested was $ 73.99 , $ 61.49 and $ 64.31 during the years ended December 25, 2021, December 26, 2020 and December 28, 2019.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

qualified 401(k) plans to substantially all our domestic full-time employees.

As determined by our Board

of Directors, matching contributions to these plans generally do not

% of the participants’ contributions

% of their base compensation, subject to applicable legal limits.

Matching contributions consist of cash and

were allocated entirely to the participants’ investment elections on file,

% allocation limit to the

Henry Schein Stock Fund.

Due to the impact of COVID-19, as part of our initiative to generate cash savings,

suspended the matching contribution for the second half of 2020.

Forfeitures attributable to participants whose

employment terminates prior to becoming fully vested are used to

reduce our matching contributions and offset

administrative expenses of the 401(k) plans.

Assets of the 401(k) and other defined contribution plans are held

in self-directed accounts enabling participants to

choose from various investment fund options.

Matching contributions related to these plans charged to operations

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

29, 2018 amounted to $

million and $

million, respectively.

Note 16 – Employee Benefit Plans

Defined benefit plans

Certain of our employees in our international markets participate in various noncontributory defined benefit plans.

These plans are managed to provide pension benefits to covered employees in accordance with local regulations and practices.

Our unfunded liability for these plans are recorded in accrued expenses:

other and other liabilities within our consolidated balance sheets.

The following table presents the changes in projected benefit obligations, plan assets, and the funded status of our defined benefit pension plans:

Obligation and funded status:

Change in benefit obligation

Projected benefit obligation, beginning of period

Service costs

Interest cost

Past service cost

Actuarial gain (loss)

Benefits (paid) received (1)

Participant contributions

Effect of foreign currency translation

Projected benefit obligation, end of period

Change in plan assets

Fair value of plan assets at beginning of period

Actual return on plan assets

Employer contributions

Plan participant contributions

Expected return on plan assets

Benefit (paid) received (1)

Effect of foreign currency translation

Fair value of plan assets at end of period

Unfunded status at end of period

Includes regular benefit payments and amounts transferred in by new participants.

The majority of our defined benefit plans are unfunded, with the exception of one plan in one country where the amount of assets exceeds the projected benefit obligation by approximately $ 5.8 million.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table provides the amounts recognized in our consolidated balance sheets for our defined benefit pension plans:

Current liabilities

Non-Current liabilities

Accumulated other comprehensive loss, pre-tax

The following table provides the net periodic pension cost for our defined benefit plans:

Interest cost

Expected return on plan assets

Employee contributions

Amortization of prior service credit

Recognized net actuarial loss

Net periodic pension cost

The following tables present the weighted-average actuarial assumptions used to determine our pension benefit obligation and our net periodic pension cost for the periods presented:

Pension Benefit Obligation

Weighted average discount rate

Net Periodic Pension Cost

Discount rate-pension benefit

Expected return on plan assets

Rate of compensation increase

Pension increase rate

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

The following table presents the estimated pension benefit payments that are payable to the plan’s participants as of December 25, 2021:

We offer qualified 401(k) plans to substantially all our domestic full-time employees.

As determined by our Board of Directors, matching contributions to these plans generally do not exceed 100 % of the participants’ contributions up to 7 % of their base compensation, subject to applicable legal limits.

Matching contributions consist of cash and were allocated entirely to the participants’ investment elections on file, subject to a 20 % allocation limit to the Henry Schein Stock Fund.

Due to the impact of COVID-19, as part of our initiative to generate cash savings, we suspended the matching contribution for the second half of 2020.

The matching contribution has been reinstated for 2021.

Forfeitures attributable to participants whose employment terminates prior to becoming fully vested are used to reduce our matching contributions and offset administrative expenses of the 401(k) plans.

Assets of the 401(k) and other defined contribution plans are held in self-directed accounts enabling participants to choose from various investment fund options.

Matching contributions related to these plans charged to operations during the years ended December 25, 2021, December 26, 2020 and December 28, 2019 amounted to $ 37.5 million, $ 20.5 million and $ 35.4 million, respectively.

Supplemental Executive Retirement Plan

an unfunded, non-qualified SERP to eligible employees.

This plan generally covers officers and certain

highly compensated employees after they have reached the maximum

IRS allowed pre-tax 401(k) contribution

Our contributions to this plan are equal to the 401(k) employee-elected

contribution percentage applied to

base compensation for the portion of the year in which such employees are

not eligible to make pre-tax

contributions to the 401(k) plan.

Due to the impact of COVID-19, as part of our initiative to

generate cash savings,

we suspended contributions under the SERP for the second half of

The amounts charged to operations during

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

29, 2018 amounted to $

million and $

million, respectively.

Note 16 – Derivatives and Hedging Activities

for additional

We offer an unfunded, non-qualified SERP to eligible employees.

This plan generally covers officers and certain highly compensated employees after they have reached the maximum IRS allowed pre-tax 401(k) contribution limit.

Our contributions to this plan are equal to the 401(k) employee-elected contribution percentage applied to base compensation for the portion of the year in which such employees are not eligible to make pre-tax contributions to the 401(k) plan.

Due to the impact of COVID-19, as part of our initiative to generate cash savings, we suspended contributions under the SERP for the second half of 2020.

Contributions to the SERP were restored in 2021.

The amounts charged to operations during the years ended December 25, 2021, December 26, 2020 and December 28, 2019 amounted to $ 2.4 million, $ 2.8 million and $ 4.0 million, respectively.

Please see Note 11 – Derivatives and Hedging Activities for additional information.

Deferred Compensation Plan

During 2011, we began to offer DCP to a select group of management or highly compensated employees of

Company and certain subsidiaries.

This plan allows for the elective deferral of base salary, bonus and/or

commission compensation by eligible employees.

The amounts charged (credited) to operations during the years

ended December 26, 2020, December 28, 2019 and December 29, 2018 were

approximately $

million and $

million, respectively.

Note 16 – Derivatives and Hedging Activities

for additional

During 2011, we began to offer DCP to a select group of management or highly compensated employees of the Company and certain subsidiaries.

This plan allows for the elective deferral of base salary, bonus and/or commission compensation by eligible employees.

The amounts charged to operations during the years ended December 25, 2021, December 26, 2020 and December 28, 2019 were approximately $ 8.4 million, $ 7.8 million and $ 8.3 million, respectively.

Please see Note 11 – Derivatives and Hedging Activities for additional information.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 20 – Commitments and Contingencies

Purchase Commitments

In our health care distribution business, we sometimes enter into long-term purchase

commitments to ensure the

availability of products for distribution.

Future minimum annual payments for inventory purchase commitments

of December 26, 2020 were:

Total minimum

inventory purchase commitment payments

Employment, Consulting and Non-Compete Agreements

We have definite-lived employment, consulting and non-compete agreements that have varying base aggregate

annual payments for the years 2021 through 2025 and thereafter of approximately

million, and $

million, respectively.

We also have lifetime consulting agreements

that provide for current compensation of $

million per year, increasing $

every fifth year with the next

increase in 2022.

In addition, some agreements have provisions for additional

incentives and compensation.

August 31, 2012

Archer and White Sales, Inc.

filed a complaint against

Note 17 – Redeemable 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 at fair value.

ASC 480-10 is applicable for noncontrolling interests where we are or may be required to purchase all or a portion of the outstanding interest in a consolidated subsidiary from the noncontrolling interest holder under the terms of a put option contained in contractual agreements.

The components of the change in the redeemable noncontrolling interests for the years ended December 25, 2021, December 26, 2020 and December 28, 2019 are presented in the following table:

Balance, beginning of period

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

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

redeemable noncontrolling interests

Change in fair value of redeemable securities

Balance, end of period

HENRY SCHEIN, INC.

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

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

District Court for the Eastern District of Texas, Civil Action No.

2:12-CV-00572-JRG, styled as an antitrust

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

Archer alleges a

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

Archer’s distribution rights

August 1, 2017

filed an amended complaint, adding

Patterson Companies,

(“Patterson”) and Benco Dental Supply Co.

as defendants, and

alleging that Henry Schein,

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

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

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

terminating, their price-cutting competing distributor Archer.

Archer seeks damages in an amount to be proved at

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

October 30, 2017

filed a second amended complaint,

to add additional allegations that it believes

support its claims.

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

On October 1, 2012, we filed a motion for an order:

(i) compelling Archer

to arbitrate its claims against us;

staying all proceedings pending arbitration;

and (3) joining the Danaher

Defendants’ motion to arbitrate and stay.

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

and stayed proceedings pending arbitration.

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

On December 7, 2016, the

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

Defendants appealed the

District Court’s order.

On December 21, 2017, the U.S.

Court of Appeals for the Fifth Circuit

affirmed the District

Court’s order denying the motions to compel arbitration.

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

granted defendants’ petition for writ of certiorari.

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

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

the judgment of the Fifth Circuit and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 18 – Comprehensive Income

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

GAAP, are excluded from net income as such amounts are recorded directly as an adjustment to stockholders’ equity.

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

Attributable to Redeemable noncontrolling interests:

Foreign currency translation adjustment

Attributable to noncontrolling interests:

Foreign currency translation adjustment

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

Unrealized loss from foreign currency hedging activities

Unrealized investment gain (loss)

Pension adjustment loss

Accumulated other comprehensive loss

Total Accumulated other comprehensive loss

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

Foreign currency translation gain (loss)

Unrealized gain (loss) from foreign currency hedging activities

Unrealized investment gain (loss)

Pension adjustment gain (loss)

Comprehensive income

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

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

the Supreme Court’s opinion.

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

resolution by the Fifth Circuit.

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

The Fifth Circuit

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

Defendants filed a petition for rehearing en banc before the Fifth

The Fifth Circuit denied that

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

on February 3, 2020, which was subsequently

moved to January 29, 2020.

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

the District Court

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

was filed on January 31, 2020.

Archer conditionally cross petitioned for certiorari on an arbitration issue

on March 2, 2020.

On June 15, 2020, the

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

petition for certiorari, and

thus the District Court proceedings remained stayed.

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

argued before the Supreme Court on December 8, 2020.

On January 25, 2021, the Supreme Court dismissed the

writ of certiorari as improvidently granted.

That action dissolved the stay the Supreme Court had previously

granted, and thus the trial of the lawsuit may proceed.

District Court for the Eastern District of Texas has

scheduled a Status Conference for February 19, 2021.

Patterson and the Danaher Defendants settled with Archer

and they have been dismissed from the case with prejudice.

Benco is still a defendant.

We intend to defend

ourselves vigorously against this action.

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

proceeding In Re

National Prescription Opiate Litigation (MDL No.

in an action entitled

The County of

Summit, Ohio et al

Purdue Pharma, L.P.,

et al., Civil Action No.

1:18-op-45090-DAP (“County of

Action”), in the U.S.

District Court for the Northern District of Ohio, adding Henry

Schein, Inc.,

Medical Systems, Inc.

and others as defendants

Summit County alleged that manufacturers of prescription opioid

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

that the entities in the supply chain (including Henry Schein, Inc.

and Henry Schein Medical Systems, Inc.) reaped

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

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

Henry Schein,

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

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

In addition to the County of Summit Action,

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

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

allege claims

similar to those alleged in the County of Summit Action.

These actions consist of some that have been consolidated

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

remain pending in state courts

and are proceeding independently and outside of the MDL.

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

Judicial Circuit in and for Broward County, Florida, Case No.

CACE19018882, granted Henry Schein’s motion to

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

Hospital District et.

The Florida court

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

On January 8, 2021, Henry

Schein filed a motion to dismiss the Amended Complaint.

An action filed by Tucson Medical Center et

previously scheduled for trial beginning on June 1, 2021 but the court has vacated

that trial date.

At this time, the

only case set for trial is the action filed by West Virginia

University Hospitals, Inc.

et al., which is currently

scheduled for a non-jury liability trial on Plaintiffs’ public nuisance claims on November 1,

Schein’s 2020 revenue of approximately $

billion from continuing operations, sales of opioids represented

than one-tenth of

Opioids represent a negligible part of our business.

We intend to defend ourselves

vigorously against these actions.

September 30, 2019

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

all others similarly situated

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

securities laws

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

Executive Officer and Chief Financial Officer, respectively)

District Court for the Eastern District of

2:19-cv-05530-FB-RLM.

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

entities who, subject to certain exclusions, purchased or otherwise acquired Covetrus common stock from February

Our financial statements are denominated in the U.S.

Dollar currency.

Fluctuations in the value of foreign currencies as compared to the U.S.

Dollar may have a significant impact on our comprehensive income.

The foreign currency translation gain (loss) during the years ended December 25, 2021, December 26, 2020 and December 28, 2019 was primarily impacted by changes in foreign currency exchange rates of the Euro, Brazilian Real, New Zealand Dollar, British Pound, Canadian Dollar, and Australian Dollar.

The foreign currency translation gain (loss) during the years ended December 25, 2021, December 26, 2020 and December 28, 2019 , was also attributable to a net investment hedge that was entered into during 2019.

See Note 11-Derivatives and Hedging Activities for further information.

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

Comprehensive income attributable to

Henry Schein, Inc.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Comprehensive income attributable to

noncontrolling interests

Comprehensive income attributable to

Redeemable noncontrolling interests

Comprehensive income

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

8, 2019 through August 12, 2019.

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

Animal Health Business with Vets First Choice in February 2019.

The complaint alleges violations of Sections

10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 and asserts that defendants’ statements in the offering

documents and after the transaction were materially false and misleading

because they purportedly overstated

Covetrus’s capabilities as to inventory management and supply-chain services, understated the costs of integrating

the Henry Schein Animal Health Business and Vets First Choice, understated Covetrus’s separation costs from

Henry Schein, and understated the impact on earnings from online competition

and alternative distribution channels

and from the loss of an allegedly large customer in North America just before the Separation and

complaint seeks unspecified monetary damages and a jury trial.

Pursuant to the provisions of the PSLRA, the court

appointed lead plaintiff and lead counsel on December 23, 2019.

Lead plaintiff filed a Consolidated Class Action

Complaint on February 21, 2020.

Lead plaintiff added Steve Paladino, our Chief Financial Officer, as a defendant

in the action.

Lead plaintiff filed an Amended Consolidated Class Action Complaint on May 21, 2020,

added a claim that Mr.

Paladino is a “control person” of Covetrus.

We intend to defend ourselves vigorously

against this action.

November 15, 2019

Frank Finazzo

filed a putative shareholder derivative action on behalf of Henry

against various present and former directors and officers of Henry Schein in

District Court for the

Eastern District of New York, Case No.

1:19-cv-6485-LDH-JO.

The named defendants in the action were Stanley

Bergman, Steven Paladino, Timothy J.

Sullivan, Barry J.

Alperin, Lawrence S.

Bacow, Gerald A.

Breslawski, Paul Brons, Shira Goodman, Joseph L.

Herring, Donald J.

Kabat, Kurt Kuehn, Philip A.

Laskawy, Anne H.

Margulies, Karyn Mashima, Norman S.

Matthews, Mark E.

Mlotek, Carol Raphael, E.

Rekow, Bradley T.

Sheares, and Louis W.

Sullivan, with Henry Schein named as a nominal defendant.

Complaint asserted claims under the federal securities laws and state law

relating to the allegations in the antitrust

actions, the In re Henry Schein, Inc.

Securities Litigation, and the City of Hollywood

securities class action

described in our prior filings with the SEC and/or above.

The complaint sought declaratory, injunctive, and

monetary relief on behalf of Henry Schein.

On January 6, 2020, one of the two law firms that filed the Finazzo

case filed another, virtually identical putative shareholder derivative action on behalf of Henry Schein

same defendants, asserting the same claims and seeking the same relief.

That case, captioned Mark Sloan v.

Bergman, et al., was also filed in the U.S.

District Court for the Eastern

District of New York, Case No.

1:20-cv-0076.

On January 24, 2020, the court consolidated the Finazzo and Sloan

cases under the new caption In

re Henry Schein, Inc.

Derivative Litigation, No.

1:19-cv-06485-LDH-JO, and appointed the

two law firms that filed

the Finazzo case as co-lead counsel for the consolidated action.

The parties agreed to a resolution of this matter

subject to various conditions, including court approval.

The settlement involves the adoption of certain procedures

but does not involve the payment of any money except a fee to the

plaintiffs’ attorneys that is immaterial.

court referred the motion to approve the settlement to a Magistrate Judge,

the parties consented to having the case

assigned to the Magistrate Judge for all purposes.

The Magistrate Judge to which the matter was ultimately

assigned held a fairness hearing and issued an order and judgment approving

the settlement.

The order and

judgment approving the settlement have become final.

On February 5, 2021, Jack Garnsey filed a putative shareholder derivative

action on behalf of Covetrus, Inc.

District Court for the Eastern District of New York, naming as defendants Benjamin Shaw, Christine T.

Komola, Steven Paladino, Betsy Atkins, Deborah G.

Ellinger, Sandra L.

Helton, Philip A.

Laskaway, Mark J.

Manoff, Edward M.

McNamara, Ravi Sachdev, David E.

Shaw, Benjamin Wolin,

and Henry Schein, Inc., with

Covetrus, Inc.

named as a nominal defendant.

The complaint alleges that the individual defendants breached

fiduciary duties under state law in connection with the same allegations

asserted in the City of Hollywood securities

class action described above and further alleges that Henry Schein aided

and abetted such breaches.

The complaint

also asserts claims for contribution under the federal securities laws against

Henry Schein and other defendants,

also arising out of the allegations in the City of Hollywood lawsuit.

The complaint seeks declaratory, injunctive,

and monetary relief.

We intend to defend ourselves vigorously against this action.

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

including, without limitation, product

liability claims, employment matters, commercial disputes, governmental

inquiries and investigations (which may

Note 19 – Discontinued Operations

Animal Health Spin-off

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

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

This was accomplished by a series of transactions among us, Vets First Choice, Covetrus, Inc.

(f/k/a HS Spinco, Inc.

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

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

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

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

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

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

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

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

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

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

In connection with the completion of the Animal Health Spin-off, we entered into a transition services agreement, which ended in December 2020, with Covetrus under which we agreed to provide certain transition services for up to twenty-four months in areas such as information technology, finance and accounting, human resources, supply chain, and real estate and facility services.

As a result of the Separation, the financial position and results of operations of the Henry Schein Animal Health Business are presented as discontinued operations and have been excluded from continuing operations and segment results for all periods presented.

The accompanying notes to the consolidated financial statements have been revised to reflect the effect of the Separation and all prior year balances have been revised accordingly to reflect continuing operations only.

The historical statements of Comprehensive Income (Loss) and Shareholders' Equity have not been revised to reflect the Separation and instead reflect the Separation as an adjustment to the balances at December 26, 2020.

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

During the years ended December 26, 2020 and December 28, 2019, we incurred $ 0.1 million and $ 23.6 million in transaction costs associated with this transaction.

All transaction costs related to the Animal Health Spin-off have been included in results from discontinued operations.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

in some cases involve our

entering into settlement arrangements or consent decrees), and other

matters arising out

of the ordinary course of our business.

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

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

to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of December 26, 2020, we had accrued our best estimate of potential losses relating to claims that were probable

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

This accrued amount, as well as

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

Our method for

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

factors, including probable recoveries from third parties.

Note 21 – Quarterly Information (Unaudited)

The following tables present certain quarterly financial data:

Quarters ended

September 26,

Restructuring costs

Operating income (loss)

Net gain on sale of equity investments

Net income (loss) from continuing operations

Amounts attributable to Henry Schein, Inc.

from continuing operations:

Net income (loss)

Earnings (loss) per share attributable to

Summarized financial information for our discontinued operations is as follows:

Cost of goods sold

Selling, general and administrative

Operating loss

Income tax benefit

Income (loss) from discontinued operations

Net loss attributable to noncontrolling interests

Net income (loss) from discontinued operations

attributable to Henry Schein, Inc.

The operating loss from discontinued operations for the year ended December 26, 2020 was primarily attributable to costs directly related to the Animal Health Spin-off.

See Note 23 – Related Party Transactions for additional information.

The net income from discontinued operations for the year ended December 26, 2020 was primarily attributable to a reduction in a liability for tax indemnification and a tax refund received during 2020 by a holding company previously part of our Animal Health legal structure and other favorable tax resolutions.

The financial information above, for the year ended December 28, 2019, represents activity of the discontinued operations during year-to-date through the Distribution Date.

The loss from discontinued operations for the year ended December 28, 2019 was primarily attributable to the inclusion of the transaction costs directly related to the Animal Health Spin-off.

HENRY SCHEIN, INC.

from continuing operations:

Quarters ended

September 28,

Restructuring costs (credits)

Operating income

Net gain on sale of equity investments

Net income from continuing operations

Amounts attributable to Henry Schein, Inc.

from continuing operations:

Earnings per share attributable to Henry Schein, Inc.

from continuing operations:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 20 – Plans of Restructuring

for details of the restructuring costs (credits) incurred during our 2020 and 2019

fiscal years.

Note 11 – Business Acquisitions Divestitures

for details of the net gain on sale of equity investments.

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.

The following table shows the net amounts expensed and paid for restructuring costs that were incurred during our 2021, 2020 and 2019 fiscal years and the remaining accrued balance of restructuring costs as of December 25, 2021, which is included in accrued expenses:

other within our consolidated balance sheets:

Balance, December 29, 2018

Payments and other adjustments

Balance, December 28, 2019

Payments and other adjustments

Balance, December 26, 2020

Payments and other adjustments

Balance, December 25, 2021

The following table shows, by reportable segment, the amounts expensed and paid for restructuring costs that were incurred during our 2021, 2020 and 2019 fiscal years and the remaining accrued balance of restructuring costs as of December 25, 2021:

Technology and

Balance, December 29, 2018

Payments and other adjustments

Balance, December 28, 2019

Payments and other adjustments

Balance, December 26, 2020

Payments and other adjustments

Balance, December 25, 2021

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 21 – Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to Henry Schein, Inc.

by the weighted-average number of common shares outstanding for the period.

Our diluted earnings per share is computed similarly to basic earnings per share, except that it reflects the effect of common shares issuable for presently unvested restricted stock and RSUs and upon exercise of stock options using the treasury stock method in periods in which they have a dilutive effect.

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

Effect of dilutive securities:

Stock options, restricted stock and restricted stock units

Note 22 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

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

29, 2018, we had $

million and $

million of non-cash net unrealized gains (losses) related to foreign

currency hedging

activities, respectively.

During the third quarter of 2018, we formed Henry Schein One, LLC

with Internet Brands through a non-cash

transaction resulting in approximately $

million of noncontrolling interest representing Internet Brands’

% minority interest and $

million of deferred additional ownership interests of Internet Brands

Henry Schein One, representing up to an additional

% ownership interests at December 26, 2020, a portion of

which is contingent upon the achievement of certain operating targets.

During the third quarter of 2020, the Internet

Brands ownership interest in Henry Schein One, LLC increased to

For the years ended December 25, 2021, December 26, 2020 and December 28, 2019, we had $ 12.7 million, $( 10.2 ) million and $( 4.9 ) million of non-cash net unrealized gains (losses) related to foreign currency hedging activities, respectively.

HENRY SCHEIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 23 – Related Party Transactions

In connection with the completion of the Animal Health Spin-off during our 2019

fiscal year, we entered into a

transition services agreement with Covetrus under which we have agreed

to provide certain transition services for

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

supply chain, and real estate and facility services

Note 2 – Discontinued Operations

for additional details).

For the years ended December 26, 2020 and December 28, 2019, we recorded approximately

million of fees for these services, respectively.

Pursuant to the transition services agreement, Covetrus

purchased certain products from us.

During the years

ended December 26, 2020 and December 28, 2019, net sales

to Covetrus under the transition services agreement were approximately

million and $

respectively.

Sales to Covetrus under the transition services

agreement ended in December 2020.

At December 26,

2020 we had $

million payable to Covetrus under this transition services agreement.

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

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

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

During 2020, 2019

and 2018, we recorded $

million and $

million, respectively in connection with costs related

to this royalty agreement.

As of December 26, 2020 and December 28, 2019, Henry Schein One, LLC

receivable balance due from Internet Brands of $

million and $

million, respectively, comprised of amounts

related to the royalty agreement and other management fees.

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

During our fiscal years ended 2020, 2019 and 2018, we recorded

net sales of $

million, respectively, to such entities.

During our fiscal years ended 2020, 2019 and 2018, we purchased

million, and $

million, respectively, from such entities.

At December 26, 2020 and

December 28, 2019, we had in the aggregate $

million and $

million, due from our equity affiliates, and

million and $

million due to our equity affiliates, respectively.

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

In connection with the completion of the Animal Health Spin-off during our 2019 fiscal year, we entered into a transition services agreement with Covetrus under which we agreed to provide certain transition services for up to twenty-four months in areas such as information technology, finance and accounting, human resources, supply chain, and real estate and facility services.

(see Note 19 – Discontinued Operations for additional details).

For the years ended December 26, 2020 and December 28, 2019, we recorded approximately $ 13.0 million and $ 17.5 million of fees for these services, respectively.

Pursuant to the transition services agreement, Covetrus purchased certain products from us.

During the years ended December 26, 2020 and December 28, 2019, net sales to Covetrus under the transition services agreement were approximately $ 75.3 million and $ 81.3 million, respectively.

Sales to Covetrus under the transition services agreement ended in December 2020.

At December 26, 2020 we had $ 0.3 million payable to Covetrus under this transition services agreement.

In connection with the formation of Henry Schein One, LLC, our joint venture with Internet Brands, which was formed on July 1, 2018, we entered into a ten-year royalty agreement with Internet Brands whereby we will pay Internet Brands approximately $ 31.0 million annually for the use of their intellectual property.

During 2021, 2020, and 2019, we recorded $ 31.0 million, $ 31.0 million, and $ 31.0 million, respectively in connection with costs related to this royalty agreement.

As of December 25, 2021 and December 26, 2020, Henry Schein One, LLC had a net receivable balance due from Internet Brands of $ 9.2 million and $ 7.7 million, respectively, comprised of amounts related to results of operations and the royalty agreement.

The components of this net receivable are recorded with prepaid and other and accrued expenses:

other within our consolidated balance sheets.

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

During our fiscal years ended 2021, 2020, and 2019, we recorded net sales of $ 66.6 million, $ 54.5 million, and $ 88.3 respectively, to such entities.

During our fiscal years ended 2021, 2020 and 2019, we purchased $ 21.8 million, $ 17.2 million, and $ 11.8 million respectively, from such entities.

At December 25, 2021 and December 26, 2020, we had in aggregate $ 44.7 million and $ 36.4 million, due from our equity affiliates, and $ 9.0 million and $ 8.6 million due to our equity affiliates, respectively.

Certain of our facilities related to our acquisitions are leased from employees and minority shareholders.

Please see Note 6 – Leases for further information.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data