What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-28 · 904 added, 577 removed, 460 unchanged (76% of the section changed)

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

expressed or implied

All forward-looking statements made by us are subject to

risks and uncertainties and are not guarantees of

future performance.

expressed or implied herein.

All forward-looking statements made by us are subject to risks and uncertainties

and are not guarantees of future

These forward-looking statements involve known and unknown

risks, uncertainties and other

factors that may cause our actual results, performance and achievements

or industry results to be materially

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

forward-looking

These statements are generally identified by the use of such

terms as “may,” “could,” “expect,”

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

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

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

to, those discussed in

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

the caption “Risk Factors” in Item 1A

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

file with the Securities and Exchange

Commission (“SEC”).

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

current and historical results

risks, uncertainties and other factors

that may cause our actual results, performance and achievements

or industry results to be materially different from

any future results, performance or achievements expressed or implied

by such forward-looking statements.

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

“plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to

make” or other comparable terms.

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

those discussed in this Annual Report

on Form 10-K, and in particular the risks discussed under the caption

“Risk Factors” in Item 1A of this report and

those that may be discussed in other documents we file with

the Securities and Exchange Commission (“SEC”).

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

and historical results

include, but are not limited to:

our dependence on third parties for

the manufacture and supply of our products;

ability to develop or acquire and maintain and protect new products (particularly

technology products) and

technologies that achieve market acceptance with acceptable margins;

challenges associated with

acquisitions, dispositions and joint ventures, including the failure

to achieve anticipated synergies/benefits, as well

as significant demands on our operations, information systems,

legal, regulatory, compliance, financial and human

resources functions in connection with acquisitions, dispositions and

the manufacture and supply of our products and

where we manufacture products, our dependence on third parties

for raw materials or purchased components;

relating to the achievement of our strategic growth objectives;

related to the recently signed Strategic

Partnership Agreement;

our ability to develop or acquire and maintain

and protect new products (particularly

technology products) and services and utilize new technologies

that achieve market acceptance with acceptable

transitional challenges associated with acquisitions, dispositions and joint ventures,

including the failure to

achieve anticipated synergies/benefits, as well as significant demands on our operations,

information systems, legal,

regulatory, compliance, financial and human resources functions in connection with acquisitions, dispositions and

joint ventures;

certain provisions in our

governing documents that may discourage third-party acquisitions of us;

changes in supplier rebates or

other purchasing incentives;

risks related to the sale of corporate brand products;

certain provisions in our governing documents that may discourage

third-party acquisitions of us;

adverse changes in supplier rebates or other purchasing incentives;

risks related to the sale of corporate brand

risks related to activist investors;

security risks associated with our

information systems and technology products and services, such as

cyberattacks or other privacy or data security

breaches (including the October 2023 incident);

effects of a highly competitive (including, without

competition from third-party online commerce sites) and consolidating

changes in the health care industry;

risks from expansion of customer purchasing power and multi-tiered

costing structures;

information systems and technology

products and services, such as cyberattacks or other privacy or data security

breaches (including the October 2023

effects of a highly competitive (including, without limitation, competition

from third-party online

commerce sites) and consolidating market;

changes in the health care

risks from expansion of customer

purchasing power and multi-tiered costing structures;

increases in shipping costs

for our products or other service issues with our third-party shippers;

global and domestic macro-economic

and political conditions, including inflation, deflation, recession, ongoing

wars, fluctuations in energy pricing and

the value of the U.S.

dollar as compared to foreign currencies, and changes

to other economic indicators,

international trade agreements, potential trade barriers and terrorism;

failure to comply with

existing and future regulatory requirements;

risks associated with the EU Medical

Device Regulation;

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

laws and regulations;

failure to comply with

laws and regulations relating to the collection, storage and processing of

sensitive personal information or standards

in electronic health records or transmissions;

changes in tax legislation;

risks related to product liability, intellectual

property and other claims;

risks associated with customs policies

or legislative import restrictions;

risks associated

with disease outbreaks, epidemics, pandemics (such as the COVID-19

pandemic), or similar wide-spread public

health concerns and other natural or man-made disasters;

for our products or other service

issues with our third-party shippers, and increases in fuel and energy costs;

in laws and policies governing

manufacturing, development and investment in territories and countries

where we do business;

general global and

domestic macro-economic and political conditions, including inflation,

deflation, recession, unemployment (and

corresponding increase in under-insured populations), consumer confidence,

sovereign debt levels, ongoing wars,

fluctuations in energy pricing and the value of the U.S.

dollar as compared to

foreign currencies, and changes to

other economic indicators, international trade agreements;

or outbreak of war, terrorism or public unrest

(including, without limitation, the war in Ukraine, the Israel-Gaza war and other

unrest and threats in the Middle

East and the possibility of a wider European or global conflict);

to laws and policies governing foreign

trade, tariffs and sanctions, or greater restrictions on imports and exports;

chain disruption;

failure to comply with existing and future regulatory requirements,

including relating to health care;

associated with the EU Medical Device Regulation;

failure to comply

with laws and regulations relating to health

care fraud or other laws and regulations;

failure to comply with laws

and regulations relating to the collection,

storage and processing of sensitive personal information or standards in electronic

health records or transmissions;

changes in tax legislation, changes in tax rates and availability of certain tax

risks related to product

liability, intellectual property and other claims;

risks associated with customs policies or legislative import

restrictions;

risks associated with disease outbreaks, epidemics, pandemics

(such as the COVID-19 pandemic), or

similar wide-spread public health concerns and other natural or

man-made disasters;

risks associated with our

global operations;

new or unanticipated litigation developments and the status

of litigation matters;

our dependence on our

senior management, employee hiring and retention, and our relationships

with customers, suppliers and

manufacturers;

litigation risks;

new or unanticipated litigation developments

and the status of litigation matters;

our dependence on our senior management, employee hiring and retention,

increases in labor costs or health care

costs, and our relationships with customers, suppliers and manufacturers;

and disruptions in financial markets.

The order in which these factors appear should not be

construed to indicate their relative importance or priority.

order in which these factors appear should not be construed to indicate their

relative importance or priority.

Index to Financial Statements

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

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page of our website (www.henryschein.com)

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

and the social media channels identified on the About Media Center page of

Recent Developments

During the years ended December 30, 2023 and December 31, 2022 we

continued to experience a decrease in the

sales of PPE and COVID-19 test kits as compared to the comparable

prior-year periods, primarily due to lower

market pricing of PPE and lower market demand for COVID-19

While the U.S.

economy has recently experienced inflationary

pressures and strengthening of the U.S.

dollar, their

impacts have not been material to our results of operations.

Though inflation impacts both our revenues and costs,

the depth and breadth of our product portfolio often allows us to offer lower-cost

national brand solutions or

corporate brand alternatives to our more price-sensitive customers who

are unwilling to absorb price increases, thus

positioning us to protect our gross profit.

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

assessment of the annual effective tax rate;

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

Cybersecurity Incident

In addition to immaterial and unrelated prior incidents at certain of

our subsidiaries, in October 2023 Henry Schein

experienced a cybersecurity incident that primarily affected the operations of our

North American and European

dental and medical distribution businesses.

Henry Schein One, our practice management software, revenue

management and patient relationship management solutions business, was

not affected, and our manufacturing

businesses were mostly unaffected.

Once we became aware of the issue, we took steps

to assess, contain and

remediate this incident.

We restored affected systems and applications, our distribution operations resumed and we

reactivated our ecommerce platform.

We also notified law enforcement and our employees, customers, suppliers

and investors, informing them of both the incident and management’s efforts to mitigate its impact on our daily

operations and data maintained on the Company’s systems.

Subsequently, on or about November 8, 2023, we

determined that the threat actor obtained personal and sensitive information

maintained on our systems belonging to

certain third parties and since that date we have notified affected and potentially affected parties

as appropriate.

The scope of personal and sensitive data impacted is still under investigation.

On November 22, 2023, we

experienced a related disruption to our ecommerce platform and related

applications, which has since been

As described in “Management’s Discussion & Analysis – 2023 Compared to 2022, the incident

adversely impacted our financial results for the fourth quarter and full year 2023.

We also expect some short-term

residual impact on our financial results in 2024.

We maintain cybersecurity insurance, subject to certain retentions and policy limitations.

With respect to the

October 2023 cybersecurity incident, we have a $60 million insurance policy, following a $5 million retention.

economy has experienced inflationary pressures and

strengthening of the U.S.

dollar, their impacts

have not been material to our results of operations.

Though inflation impacts both our revenues and costs, the depth

and breadth of our product portfolio often allows us to offer lower-cost national brand solutions

or corporate brand

alternatives to our more price-sensitive customers who are unwilling to

absorb price increases, thus positioning us

to protect our gross profit.

Segment Reporting

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

Our revised reportable segments now consist of:

(i) Global Distribution

-Added Services;

Global Specialty Products;

and (iii) Global Technology.

Global Distribution and Value-Added Services includes distribution to the global dental and medical markets of

national brand and corporate brand merchandise, as well as equipment and related

technical services.

also includes value-added services such as financial services, continuing

education services, consulting and other

This segment also markets and sells under our own corporate brand,

a portfolio of cost-effective, high-

quality consumable merchandise.

Global Specialty Products includes manufacturing, marketing and sales

implant and biomaterial products;

and endodontic, orthodontic and orthopedic

products and other health care-

related products and services.

Global Technology includes development and distribution of practice management

software, e-services, and other products, which are distributed to health

care providers.

A key element to grow closer to our customers is our One Schein initiative, which

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It also has accelerated the

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

groups, which, in addition to

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

capable of providing

specialized management information support.

believe that the trend towards cost containment has the potential

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

enhance the efficiency and

facilitation of practice management.

growth of DSOs, GPOs, HMOs, group practices, other managed care

accounts and collective buying groups, which,

in addition to their emphasis on obtaining products at competitive prices,

tend to favor distributors capable of

providing specialized management information support.

believe that the trend towards cost containment has

Index to Financial Statements

the potential to favorably affect demand for technology solutions, including software,

which can enhance the

efficiency and facilitation of practice management.

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

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that we will be able to successfully accomplish this.

also have invested in expanding our sales/marketing

infrastructure to include a focus on building relationships with decision

makers who do not reside in the office-

based practitioner setting.

are focused on building relationships with decision makers

who do not reside in the office-based practitioner setting.

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

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

Index to Financial Statements

insurance coverage.

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According to the U.S.

Census Bureau’s International Database, between 2023

and 2033, the 45 and older

Census Bureau’s International Database, between 2024 and 2034, the 45 and older

population is expected to grow by approximately 10%.

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rates of approximately 4%

between 2023 and 2033

and approximately 11% between 2023 and 2043.

between 2024 and 2034 and approximately 6% between 2024 and 2044.

According to the U.S.

Census Bureau’s International Database, in 2023

there are approximately seven million

Census Bureau’s International Database, in 2024 there are approximately seven million

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

and elder-care

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

The population

aged 65 to 84 years is projected to increase by approximately 23% during

By the year 2050, that number is projected to increase to approximately

The population aged

65 to 84 years is projected to increase by approximately 18% during

the same period.

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

care services continue to increase in the

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

continue to increase in the

United States.

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

believe that demand for our products and services will grow while

continuing to be impacted by

current and future operating, economic, and industry conditions.

The Centers for Medicare and Medicaid Services

or CMS, published “National Health Expenditure Data” indicating

that total national health care spending reached

approximately $4.5 trillion in 2022, or 17.3% of the nation’s gross domestic product, the benchmark

or CMS published “National Health Expenditure Data” indicating that

total national health care spending reached

approximately $4.9 trillion in 2023, or 17.6% of the nation’s gross domestic product, the benchmark measure

annual production of goods and services in the United States.

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impact our financial performance,

and failure to comply with such laws or regulations could have a

material adverse effect on our business.

and failure to comply with such laws or regulations could have a material adverse

effect on our business.

Business – Governmental Regulations

” for a discussion of laws, regulations and governmental activity

that may affect our results of operations and financial condition.

affect our results of operations and financial condition.

Index to Financial Statements

Results of Operations

Refer to Item 7:

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

our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results

of operations for the fiscal year 2022 compared to fiscal year 2021.

The following tables summarize the significant components of our operating

results and cash flows:

results and cash flows for each of the

three years ended December 28, 2024, December 30, 2023, and December

31, 2022 (in millions):

Operating results:

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Other expense, net

Gain on sale of equity investment

Net income attributable to Henry Schein, Inc.

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Net cash provided by (used in) financing activities

Index to Financial Statements

Plans of Restructuring and Integration Costs

On August 1, 2022, we committed to a restructuring plan focused on

funding the priorities of the BOLD+1 strategic

plan, streamlining operations and other initiatives to increase efficiency.

We revised our previous expectations of

completion and we have extended this initiative through the end of 2024.

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, both with respect to each major type of cost associated

therewith and 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 30, 2023, December 31, 2022, and December

25, 2021, we recorded

restructuring costs of $80 million, $128 million, and $8 million, respectively.

The restructuring costs for these

periods primarily related to severance and employee-related costs,

impairment of intangible assets, accelerated

amortization of right-of-use lease assets and fixed assets, other lease exit

costs, and certain business exit costs

discussed below.

During the year ended December 30, 2023, in connection with our restructuring

plan, we recorded an impairment of

an intangible asset of $12 million related to a planned disposal of a non-U.S.

The disposal is expected to

be completed in 2024.

This impairment is included in the $80 million of restructuring

charges discussed above.

During the year ended December 31, 2022, in connection with our

restructuring plan, we vacated one of the

buildings at our corporate headquarters in Melville, New York, which resulted in an accelerated amortization of a

right-of-use lease asset of $34 million.

On August 6, 2024, we committed to a new restructuring plan (the “2024

Plan”) to integrate recent acquisitions,

right-size operations and further increase efficiencies.

During the year ended December 28, 2024, we recorded

restructuring charges associated with the 2024 Plan of $73 million, which primarily

related to severance and

employee-related costs, accelerated amortization of right-of-use

lease assets and fixed assets, impairment of

intangible assets related to the disposal of a portion of a business

and other exit costs.

We expect to record

restructuring charges associated with the 2024 Plan in 2025;

however an estimate

of the amount of these charges

has not yet been determined.

During the year ended December 28, 2024, in connection with the 2024 Plan,

we recorded an impairment of

goodwill and intangible assets of $13 million related to the disposal of a portion

of a business.

This impairment is

included in the $73 million of restructuring charges discussed above and related

to the Global Specialty Products

On August 1, 2022, we committed to a restructuring plan (the “2022

Plan”) focused on funding the priorities of the

BOLD+1 strategic plan, streamlining operations and other initiatives to

increase efficiency.

The 2022 Plan has

been completed as of July 31, 2024.

During the years ended December 28, 2024, December

30, 2023, and

December 31, 2022, in connection with our 2022 Plan, we recorded restructuring

costs of $37 million, $80 million,

and $128 million, respectively.

The restructuring costs for these periods primarily related to

severance and

employee-related costs, accelerated amortization of right-of-use

lease assets and fixed assets, impairment of

intangible assets related to disposal of a U.S.

and other exit costs.

During the year ended December 30, 2023, in connection with the 2022 Plan,

we recorded an impairment of an

intangible asset of $12 million related to disposal of a U.S.

This impairment is included in the $80

million of restructuring costs discussed above and related to the Global Specialty

Products segment.

was completed during the first quarter of 2024.

During the year ended December 31, 2022, in connection with the 2022 Plan,

we vacated one of the buildings at our

corporate headquarters in Melville, New York, which resulted in an accelerated amortization of a right-of-use lease

asset of $34 million.

We also initiated the disposal of a non-profitable U.S.

recorded related costs of $49 million, which primarily consisted of

impairment of intangible assets and goodwill,

inventory impairment, and severance and employee-related costs.

These expenses are included in the $128 million

of restructuring charges discussed above.

business within the Global Specialty

Products segment and recorded related costs of $49 million, which primarily

consisted of impairment of intangible

assets and goodwill, inventory impairment, and severance and employee-related

costs, which are included in the

Global Specialty Products segment.

These costs are included in the $128 million of restructuring

charges discussed

The disposal was completed during the first quarter of 2023.

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discussed above.

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

initiative intended to mitigate stranded costs

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

and provide expense

efficiencies.

These activities were originally expected to be completed by

the end of 2020 but we extended them to

the end of 2021 in light of the changes to the business environment brought

on by the COVID-19 pandemic.

restructuring activities under this prior initiative were completed

The integration and restructuring costs related to Midway Dental

Supply are recorded in the

Global Distribution and Value-Added Services segment.

Index to Financial Statements

2024 Compared to 2023

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based on actual values and may not recalculate due to rounding.

Net sales were as follows:

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our reportable segments to align

with how the Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

Our revised reportable segments now consist of:

(i) Global Distribution

-Added Services;

Global Specialty Products;

and (iii) Global Technology.

All prior comparative segment information has been recast

to reflect our new segment structure.

Net sales by reportable segment and by major product or service type were

Increase / (Decrease)

Health care distribution

Total health care distribution

Technology and value-added services

The components of our sales growth were as follows:

Global Distribution and Value

-Added Services

Global Dental merchandise

Global Dental equipment

-added services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental

implants, gypsum, acrylics, articulators, abrasives, PPE products,

and our own corporate brand of consumable merchandise.

Includes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair and

high-tech and digital restoration equipment.

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

Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment, PPE products and vitamins.

Includes manufacturing, marketing and sales of dental implant and biomaterial products;

and endodontic, orthodontic and

orthopedic products and other health care-related products and services.

Consists of practice management software, e-services, and other products, which are distributed to health care providers.

The components of our sales growth/(decline) were as follows:

Local Currency Growth/(Decline)

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Local Internal

Health care distribution

Dental Merchandise

Dental Equipment

Total Health Care Distribution

Technology and value-added services

Consists of consumable products, dental specialty products (including implant, orthodontic and endodontic products), small

equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical

products, diagnostic tests, infection-control products, PPE products 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.

Global Distribution and Value

-Added Services

Global Dental Merchandise

Global Dental Equipment

-added services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Index to Financial Statements

Global net sales for the year ended December 28, 2024 increased 2.7%.

The components of sales growth are

presented in the table above.

The 0.4% decrease in our internally generated local currency sales was primarily

attributable to the migration to

lower priced products and the challenging economic environment in

certain markets and lower sales of PPE

products and COVID-19 test kits.

For the year ended December 28, 2024, the estimated increase in

generated local currency sales, excluding PPE products and COVID-19

test kits, was 0.3%.

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the year ended December 28, 2024 increased 1.9%.

The components of our sales increase are presented in the table

The 0.2% decrease in internally generated local currency dental sales was primarily

due to the migration to lower

priced dental merchandise products and a challenging economic environment

in certain markets, and lower sales of

PPE products.

The decrease was partially offset by sales growth in traditional equipment and parts and

the United States and sales growth in digital equipment in our international

markets, partially offset by lower sales

of digital equipment in the United States and declines in sales of

traditional equipment in certain international

The growth in traditional equipment benefited from installation

delays during the fourth quarter of 2023

after the cyber incident.

The 1.2% decrease in internally generated local currency medical sales reflects

the conversion of certain

pharmaceutical products to lower priced generics, and lower sales of PPE

COVID-19 test kits and

influenza vaccines, partially offset by strong sales of point-of-care diagnostics including

multi-assay flu/COVID

combination test kits.

The acquisition growth in medical sales was attributable to our expansion

in the Home Solutions market, including

the acquisition of Shield Healthcare during the year ended December

The acquisition growth in value-

added services within dental sales was attributable primarily to an acquisition

of a practice transitions business in

We estimate that sales of PPE products and COVID-19 test kits were approximately $622

million for the year

ended December 28, 2024 as compared to $710 million for the year ended

December 30, 2023 representing an

estimated decrease of $88 million.

The estimated $88 million net decrease in sales of PPE products

test kits represents 5.8% of Global Distribution and Value-Added Services

net sales for the year ended December

28, 2024, and was primarily due to lower glove prices and reduced demand

following the cyber incident.

estimated increase in the segment’s internally generated local currency sales, excluding PPE products and COVID-

19 test kits, was 0.3%.

Global Specialty Products

Global Specialty Products net sales for the year ended December

28, 2024 increased

The components of our

sales increase are presented in the table above.

The internally generated local currency sales were relatively flat due to implant

sales growth in certain international

markets and growth in endodontics sales in the United States and

international markets, offset by a decline in

implant sales in the United States and lower orthodontic sales.

The increase in local currency Global Specialty

Products sales was attributable to the acquisitions of TriMed during the year ended December 28, 2024,

Biotech Dental and S.I.N.

Implant System during the year ended December

Index to Financial Statements

Global Technology

Global Technology net sales for the year ended December 28, 2024 increased 4.7%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 2.4% in Global Technology sales was primarily attributable to a

continued increase in the number of cloud-based users of our practice management

software and an increase in

revenue cycle management solutions and our analytical products.

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

Increase / (Decrease)

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

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.

percentages vary between our segments.

We realize substantially higher gross margin from sales of products that

we develop and manufacture within our Global Specialty Products segment

compared to gross margin from sales of

products that we distribute within our Global Distribution and Value-Added Services segment.

Within our Global

Technology segment, higher gross margins result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

-Added Services segment, gross profit margins may vary between the

periods as a result of the changes in the mix of products sold as well as

changes in our customer mix.

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

margins due to the

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

lower volumes.

The increase in Global Distribution and Value-Added Services gross profit for the year ended December 28, 2024

compared to the prior-year-period is due to acquisitions and margin expansion providing a favorable impact

mix of higher-margin products.

The increase in Global Specialty Products gross profit reflects increased

sales volume and higher gross profit from

internally generated sales and gross profit from acquisitions.

The increase in gross margin rates was due to product

The increase in Global Technology gross profit is the result of a higher gross profit from internally generated sales

and gross profit from acquisitions.

The decrease in gross margin rates was due to increased vendor costs and

Index to Financial Statements

Operating Expenses

Operating expenses (consisting of selling, general and administrative

depreciation and amortization;

restructuring and integration costs) by segment were as follows:

Increase / (Decrease)

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Total operating expenses

Adjustments represent items excluded from segment operating income to enable comparison of financial results between periods.

These items may vary independently of business performance.

Note 4 – Segment and Geographic Data

adjustments (current year vs.

prior year) consist of (i) acquisition intangible amortization ($184 million vs.

$150 million);

restructuring costs ($110 million vs.

$80 million);

(iii) changes in contingent consideration ($45 million vs.

incident third-party advisory expenses, net of insurance proceeds ($31 million net proceeds vs.

$11 million net expenses);

impairment of capitalized assets ($12 million vs.

$27 million);

(vi) impairment of intangible assets ($0 million vs.

litigation settlements ($6 million vs.

and (viii) costs associated with shareholder advisory matters ($2 million vs.

The net increase in operating expenses is attributable to the following:

Operating Costs

acquisitions)

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Total operating expenses

The components of the net increase in total operating expenses are presented

in the table above.

The decrease in

operating costs (excluding acquisitions) during the year ended December 28,

2024 included cost savings from our

restructuring activities and reflected a gain of $19 million related to the remeasurement

to fair value of a previously

held equity investment within our Global Distribution and Value-Added Services segment.

Other Expense, Net

Other expense, net was as follows:

Interest income

Interest expense

Other expense, net

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings and increased interest rates.

Index to Financial Statements

Our effective tax rate was 24.9% for the year ended December 28, 2024, compared to 22.1%

for the prior year

The difference between our effective and federal statutory tax rates primarily relates to state

income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued

technical and administrative

guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of

large multinational businesses on a country-by-country basis.

Effective January 1, 2024, the minimum global tax

rate is 15% for various jurisdictions pursuant to the Pillar Two rules.

Future tax reform resulting from these

developments may result in changes to long-standing tax principles, which

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of December 28, 2024,

the impact of the Pillar Two

rules to our financial statements was immaterial.

Index to Financial Statements

2023 Compared to 2022

Discussion of the results of operations for the year ended December

30, 2023 as compared to December 31, 2022

was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results

Operations” in the Company’s Form 10-K for the year ended December 30, 2023, as filed with the SEC on

February 28, 2024.

During the fourth quarter of our fiscal year ended

December 28, 2024, we revised our reportable

segments to align with how the Chairman and Chief Executive Officer manages

the business, assesses performance

and allocates resources.

A discussion of the results of operations for the year ended

December 30, 2023 as

compared to December 31, 2022 for net sales and segment adjusted operating

income based on the realigned

segments is presented below.

Percentages for Net Sales;

Gross Profit;

Operating Expenses;

Expense, Net;

and Income Taxes are

based on actual values and may not recalculate due to rounding.

Net sales were as follows:

Increase / (Decrease)

Global Distribution and Value

-Added Services

Global Dental merchandise

Global Dental equipment

-added services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Includes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental

implants, gypsum, acrylics, articulators, abrasives, PPE products,

and our own corporate brand of consumable merchandise.

Includes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair and

high-tech and digital restoration equipment.

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

Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment, PPE products and vitamins.

Includes manufacturing, marketing and sales of dental implant and biomaterial products;

and endodontic, orthodontic and

orthopedic products and other health care-related products and services.

Consists of practice management software, e-services, and other products, which are distributed to health care providers.

The components of our sales growth/(decline) were as follows:

Local Currency Growth/(Decline)

Global Distribution and Value

-Added Services

Global Dental Merchandise

Global Dental Equipment

-added services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Index to Financial Statements

We report our results of operations on a 52 or 53 weeks per fiscal year basis ending on the last Saturday of

The year ended December 30, 2023, consisted of 52 weeks,

and the year ended, December 31, 2022

The year ended December 30, 2023 consisted of 52 weeks, and

the year ended December 31, 2022

consisted of 53 weeks,

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Global net sales for the year ended December 30, 2023 decreased 2.4%.

The components of our sales growth are

The components of our sales decline are

presented in the table above.

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and COVID-19 test kits, was 3.5%.

a result of the adverse impact of the cybersecurity incident during the quarter

ended December 30, 2023, our

a result of the adverse impact of the 2023 cyber incident during the quarter ended

December 30, 2023, our

internally generated local currency sales, excluding sales of PPE products

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basis were flat compared to the prior year.

In addition, we estimate that sales of PPE products and COVID-19

test kits were approximately $713 million and

$1,245 million for the years ended December 30, 2023 and December 31,

2022, respectively, representing an

estimated decrease of $532 million or 42.7%

versus the prior year, with the $532 million net decrease year-over-

year representing 4.2%

of global net sales for the year ended December 30, 2023.

Dental net sales for the year ended December 30, 2023 increased 0.9%.

The components of our sales growth are

presented in the table above.

Our decrease in internally generated local currency sales for dental

merchandise was

primarily attributable to the negative impact of the cybersecurity incident.

Our sales decrease in internally

generated local currency for dental equipment was also primarily attributable

to the impact of the cybersecurity

We estimate that sales of PPE products were approximately $338 million and $448 million for the years ended

December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease of $110 million or

24.5% versus the prior year, with the $110 million net decrease year-over-year representing 1.5% of dental net sales

for the year ended December 30, 2023.

The decrease in sales of PPE products is primarily due to lower

prices and loss of demand during the cybersecurity incident.

Our estimated internally generated local currency

sales, excluding PPE products were flat compared to the prior year.

Medical net sales for the year ended December 30, 2023 decreased 10.3%.

The components of our sales growth are

presented in the table above.

The internally generated local currency decrease in medical sales

attributable to the impact of the cybersecurity incident that occurred

during the fourth quarter of the year ended

December 30, 2023 and to lower sales of PPE products and COVID-19

test kits and other point-of-care diagnostic

We estimate that sales of PPE products and COVID-19 test kits were approximately $375 million and $797 million

for the years ended December 30, 2023 and December 31, 2022, respectively, representing an estimated decrease

$422 million or 52.9% versus the prior year, with the $422 million net decrease year-over-year representing 10.6%

of medical net sales for the year ended December 30, 2023.

The decrease in sales of these products is primarily due

to lower market prices of PPE, lower market demand of COVID-19

test kits, and loss of sales of both product

categories during the cybersecurity incident.

The estimated decrease in internally generated local currency

excluding PPE products and COVID-19 test kits was 2.2%.

Technology and value-added services

Technology and value-added services net sales for the year ended December 30, 2023 increased 11.4%.

components of our sales growth are presented in the table above.

During the year ended December 30, 2023, the

trend for sales of practice management software growth remains

strong as we continued to increase the number of

cloud-based users.

We also experienced increased demand for our revenue cycle management solutions and our

analytical products.

The increase in sales during the year ended December 30, 2023

was partially offset by the

expiration, during the year ended December 31, 2022, of a modestly profitable

government contract in one of our

value-added services businesses.

This segment of our business was largely unaffected by the cybersecurity incident

in the fourth quarter.

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

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the year ended December 30, 2023 decreased 3.8%.

The components of our sales decline are presented in the table above.

The 0.6% decrease in internally generated local currency dental sales was attributable

to a decrease in sales of

dental merchandise and dental equipment as a result of the adverse

impact of the 2023 cyber incident.

The 11.0% decrease in internally generated local currency medical sales is primarily attributable

to the impact of

the 2023 cyber incident and to lower sales of PPE products and COVID-19

test kits and other point-of-care

diagnostic products.

The acquisition growth in medical sales was attributable to our expansion

in the Home Solutions market, including

the acquisition of Shield Healthcare during the year ended December

The acquisition growth in value-

added services was attributable primarily to an acquisition of a practice

transitions business in 2023.

The increase in internally generated local currency value-added services

sales is attributable to an increase in our

dental billing solutions, partially offset by the expiration, during the year ended

December 31, 2022, of a modestly

profitable government contract in one of our value-added services businesses.

We estimate that sales of PPE products and COVID-19 test kits were approximately $710

million for the year

ended December 30, 2023

as compared to $1,238 million for the year ended December 31, 2022

representing an

estimated decrease of $528 million.

The estimated $528 million net decrease in sales of PPE products

19 test kits represents 5.0%

of Global Distribution and Value-Added Services net sales for the year ended

December 30, 2023 and was primarily due to lower market prices and loss of

demand during the 2023 cyber

Excluding PPE products and COVID-19 test kits, our internally

generated local currency sales were flat.

Global Specialty Products

Global Specialty Products net sales for the year ended December 30, 2023

increased 4.6%.

The components of

sales increase are presented in the table above.

The decrease in internally generated local currency sales was primarily

attributable to lower sales in our

orthodontics business,

partially impacted by a patent expiration and the October 2023

cyber incident and declines in

certain other health care related consumable merchandise products.

The acquisition growth in Global Specialty Products sales was attributable

to the acquisitions of Biotech Dental and

Implant system during the year ended December 30, 2023.

Index to Financial Statements

Global Technology

Global Technology net sales for the year ended December 30, 2023 increased 9.6%.

The components of our sales

growth are presented in the table above.

During the year ended December 30, 2023, the trend for sales of practice

management software growth remained strong as we continued to

increase the number of cloud-based users.

also experienced increased demand for our revenue cycle management solutions

and our analytical products.

segment of our business was not directly affected by the 2023 cyber

incident in the fourth quarter.

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

Increase / (Decrease)

Health care distribution

Technology and value-added services

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

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

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

Additionally, we

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

segment than in

our health care distribution segment.

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

software products and services, as well as certain financial services.

The software industry typically realizes higher

gross margins to recover investments in research and development.

Within our health care distribution segment, gross profit margins may vary between the periods as a result of

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

For example, sales of our corporate

brand and certain specialty products achieve gross profit margins that are higher than average

total gross profit

margins of all products.

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

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

practitioners, who normally purchase lower volumes.

Health care distribution gross profit for the year ended December 30, 2023

decreased compared to the prior-year-

period due to the decrease in sales resulting from the cybersecurity

incident and a reduction in sales of PPE

products and COVID-19 test kits, partially offset by gross profit from acquisitions

and gross margin expansion as a

result of a favorable impact of sales mix of higher-margin products.

Technology and value-added services gross profit increased as a result of a higher gross profit from internally

generated sales and gross profit from acquisitions, as well as an increase

in gross margin rates primarily due to

product mix and increases in productivity.

percentages vary between our segments.

We realize substantially higher gross margin from sales of products that

we develop and manufacture within our Global Specialty Products segment

compared to gross margin from sales of

products that we distribute within our Global Distribution and Value-Added Services segment.

Within our Global

Technology segment, higher gross margins result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

-Added Services segment, gross profit margins may vary between the

periods as a result of the changes in the mix of products sold as well as

changes in our customer mix.

sales of our corporate brand and certain specialty products achieve

gross profit margins that are higher than average

total gross profit margins of all products.

With respect to customer mix, sales to our large-group customers are

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

to the gross margin on sales

to office-based practitioners, who normally purchase lower volumes.

The decrease in Global Distribution and Value-Added Services gross profit for the year ended December 30, 2023

compared to the prior year was due to the 2023 cyber incident and a

reduction in sales of PPE products and

COVID-19 test kits, partially offset by additional gross profit from acquisitions.

The increase in Global Specialty Products gross profit is primarily attributable

to gross profit from our acquisitions

offset by lower gross profit from our orthodontics business and certain other health

care related consumable

merchandise products.

The increase in gross margin rates was due to a favorable impact of sales mix.

The increase in Global Technology gross profit reflects increased local currency revenues and additional gross

profit from acquisitions.

Index to Financial Statements

Operating Expenses

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depreciation and amortization,

restructuring and integration costs) by segment and in total were as follows:

Health care distribution

Technology and value-added services

restructuring and integration costs) by segment were as follows:

Increase / (Decrease)

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Total operating expenses

Adjustments represent items excluded from segment operating income to enable comparison of financial results between periods.

These items may vary independently of business performance.

Note 4 – Segment and Geographic Data

adjustments (current year vs.

prior year) consist of (i) acquisition intangible amortization ($150 million vs.

$126 million);

restructuring costs ($80 million vs.

$131 million);

(iii) cyber incident third-party advisory expenses ($11 million vs.

(iv) impairment of capitalized assets ($27 million vs.

and (v) impairment of intangible assets ($7 million vs.

The net increase in operating expenses is attributable to the following:

Operating Costs

Restructuring and

Integration Costs

Health care distribution

Technology and value-added services

The increase in operating costs during the year ended December 30, 2023 includes

increases in payroll and payroll

related costs, travel, convention and consulting expenses in both of our reportable

segments and increased

acquisition expenses in our healthcare distribution segment.

During the year ended December 30, 2023, our

operating expenses were favorably impacted by the recognition of

a remeasurement gain of $18 million following

an acquisition of a controlling interest of a previously held equity

investment, and were negatively impacted by

restructuring, an impairment of capitalized costs of $27 million and impairment

of intangible assets of $7 million

within our health care distribution segment.

During the year ended December 30, 2023, we also incurred $11

million of direct costs, primarily professional fees, for the remediation of

the cybersecurity incident.

restructuring and integration costs are primarily related to severance and

employee-related costs, accelerated

amortization of right-of-use lease assets and fixed assets, and other lease exit

acquisitions)

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Total operating expenses

The increase in operating costs (excluding acquisitions) during the year ended

December 30, 2023 includes

increases in payroll and payroll related costs primarily in our Global

Distribution and Value-Added Services

During the year ended December 30, 2023, our operating expenses

were favorably impacted by the

recognition of a remeasurement gain of $18 million following an acquisition of

a controlling interest of a previously

held equity investment.

Other Expense, Net

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increased borrowings and increased interest rates.

Index to Financial Statements

Our effective tax rate was 22.1% for the year ended December 30, 2023 compared to 23.5%

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technical and administrative

guidance on Pillar Two Model Rules in December 2021, which provides for a global minimum tax rate on the

earnings of large multinational businesses, on a country-by-country basis.

Effective January 1, 2024, the minimum

global tax rate is 15% for various jurisdictions pursuant to the Pillar Two framework.

Future tax reform resulting

from these developments may result in changes to long-standing tax principles,

which may adversely impact our

effective tax rate going forward or result in higher cash tax liabilities.

As we operate in jurisdictions which have

adopted Pillar 2, we are continuing to analyze the implications to effectively manage

the impact for 2024 and

guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of

large multinational businesses on a country-by-country basis.

Effective January 1, 2024, the minimum global tax

rate is 15% for various jurisdictions pursuant to the Pillar Two rules.

Future tax reform resulting from these

developments may result in changes to long-standing tax principles, which

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of December 30, 2023, the impact of the Pillar Two

rules to our financial statements was immaterial.

Index to Financial Statements

Liquidity and Capital Resources

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

We anticipate

future increases in our working capital requirements.

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

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have already invested in businesses), and finally, those that enable us to access new products and technologies.

part of our BOLD+1 Strategic Plan, including pursuing focused mergers and acquisitions,

during the year ended

December 30, 2023 we have announced acquisitions of companies specializing

in implant systems, clear aligners,

homecare medical products delivered directly to patients, and dental practice

transition services.

Net cash provided by operating activities was $848 million for the

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The net change of $348 million was

primarily attributable to lower cash net income.

During the quarter ended December 30, 2023, the cybersecurity

incident had several offsetting impacts to the operating cash flows from our working

capital, net of acquisitions,

including a decrease in operating cash flows from accounts receivable

due to delayed timing of billings and limited

collection efforts resulting from the impact of the cybersecurity incident, and an increase

in operating cash flows

resulting from reduced inventory purchases.

Net cash used in investing activities was $1,135 million for the

year ended December 30, 2023, compared to net

cash used in investing activities of $276 million for the prior year.

primarily attributable to changes in working capital accounts (primarily accounts

receivable and inventory), and

higher cash net income.

The residual impacts of the 2023 cyber incident on our working

capital during the year

ended December 28, 2024 included an increase in operating cash flows from

accounts receivable due to improved

collection levels and decreased cash flows from accounts payable and accrued

expenses resulting from previously

delayed payments.

Net cash used in investing activities was $430 million for the year

ended December 28, 2024, compared to net cash

used in investing activities of $1,135 million for the prior year.

The net change of $705 million was primarily

attributable to increased payments for equity investments and business acquisitions,

and increased purchases of

fixed assets resulting from our continued investment in our facilities and operations.

Net cash provided by financing activities was $701 million for the year

ended December 30, 2023, compared to net

cash used in financing activities of $315 million for the prior year.

attributable to decreased payments for equity investments and business

acquisitions.

Net cash used in financing activities was $510 million for the year

ended December 28, 2024, compared to net cash

provided by financing activities of $701 million for the prior year.

The net change of $1,211 million was primarily

due to increased net borrowings from debt

to finance our investments, partially offset by decreased repurchases of

common stock.

due to decreased net borrowings from debt to finance our investments,

increased acquisitions of noncontrolling

interests in subsidiaries and increased repurchases of common stock.

Index to Financial Statements

The following table summarizes selected measures of liquidity and capital

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trade accounts receivable

securitizations at December 30, 2023 and December 31, 2022, respectively.

securitization at December 28, 2024 and December 30, 2023, respectively.

Our cash and cash equivalents consist of bank balances and investments

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increased to 47.3 days as of December 28, 2024

from 41.9 days as of December 31, 2022 due to delays in billings

leading to limited collections in the quarter ended

December 30, 2023 as a result of the cybersecurity incident.

During the years ended December 30, 2023 and

December 31, 2022, we wrote off approximately $16 million and $10 million, respectively, of fully reserved

accounts receivable against our trade receivable reserve.

Our inventory turns from operations was 4.5 as of

December 30, 2023 and 4.7 as of December 31, 2022.

Our working capital accounts may be impacted by current

and future economic conditions.

from 46.2 days as of December 30, 2023.

Adjusted for the impact of the cyber incident our days sales outstanding

decreased to 45.7 days as of December 28, 2024.

During the years ended December 28, 2024 and December

2023, we wrote off approximately $12 million and $16 million, respectively, of fully reserved accounts receivable

against our trade receivable reserve.

Our inventory turns from operations increased to 5.0 as of December

from 4.5 as of December 30, 2023.

Our working capital accounts may be impacted by current and

future economic

Contractual obligations

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Note 14 – Debt

Index to Financial Statements

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 18 years, some of

Our leases have remaining terms of less than one year to approximately

17 years, some of

which may include options to extend the leases for up to 15 years.

As of December 28, 2024, our right-of-use

assets related to operating leases were $325 million and our current and non-current

operating lease liabilities were

assets related to operating leases were $293 million and our current and

non-current operating lease liabilities were

$75 million and $259 million, respectively.

2 unchanged sentences

Stock Repurchases

On February 8, 2023, our Board authorized the repurchase of up

On January 27, 2025, our Board authorized the repurchase of up

to an additional $500 million in shares of our

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share repurchases.

Subject to market conditions and other factors, we plan to continue

to accelerate our share

repurchase activity.

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.

Accounting Standards Codification Topic 480-10 is applicable

for noncontrolling interests where we are or may be required to purchase

all or a portion of the outstanding interest

in a consolidated subsidiary from the noncontrolling interest holder

under the terms of a put option contained in

contractual agreements.

As of December 30, 2023 and December 31, 2022,

our balance for redeemable

noncontrolling interests was $864 million and $576 million, respectively.

Note 19 – Redeemable

Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

As of December 28, 2024 and December 30, 2023, our balance

redeemable noncontrolling interests was $806 million and $864 million,

respectively.

Redeemable Noncontrolling Interests

for further information.

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tax benefits, including accrued

interest, of $115 million as of December 30, 2023.

interest, of $108 million and $115 million as of December 28, 2024 and December 30, 2023, respectively.

Critical Accounting Estimates

Our accounting policies are more fully described in

Note 1 – Basis of Presentation and Significant Accounting

of the consolidated financial statements.

Our accounting policies are described in

Note 1 – Basis of Presentation and Significant Accounting Policies

consolidated financial statements.

The preparation of consolidated financial statements requires us

to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses and

related disclosures of contingent assets and liabilities.

estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses and related

disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available,

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of our consolidated financial

Index to Financial Statements

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 and actual cost

for large equipment and high tech

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

salability of the inventory by reviewing on-hand quantities, historical sales,

forecasted sales and market and

economic trends.

Certain of our products, specifically PPE and COVID-19 test kits, have experienced

net realizable value, due to volatility of pricing and changes in demand

for these products.

Inventories consist primarily of finished goods, raw materials and

work-in-process and are valued at the lower of

cost or net realizable value.

Cost is determined by the weighted average method for merchandise and

for large equipment,

high tech equipment and drop-shipments.

We include product costs, labor, and related fixed

and variable overhead in the cost of inventory

that we manufacture.

In estimating carrying value of inventory, we

consider many factors including the condition and salability of the inventory

by reviewing on-hand quantities,

historical sales, forecasted sales and market and economic trends.

Business Combinations

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

Note 5 – Business Acquisitions and Divestitures

Note 5 – Business Acquisitions

for further discussion of our acquisitions.

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carrying value.

We regard our reporting units to be our operating segments:

our global dental and medical

businesses, and technology and value-added services.

Goodwill is allocated to such reporting units, for the

purposes of preparing our impairment analyses, based on a specific identification

We regard our reporting units to be our operating segments or one level below the operating

Goodwill is allocated to such reporting units, for the purposes of

preparing our impairment analyses,

based on a specific identification basis.

Application of the goodwill impairment test requires judgment, including

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year based on operating results, market conditions, and other factors.

Our third-party valuation specialists provide inputs into our determination

of the discount rate.

dependent on a number of underlying assumptions, including the risk-free rate,

tax rate, equity risk premium, debt

to equity ratio and pre-tax cost of debt.

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

The long-term growth rates are tied to

growth rates we expect to achieve beyond the years for which we have

forecasted operating results.

consider external benchmarks, and other data points which we believe are

applicable to our industry and the

composition of our global operations.

For the years ended December 30, 2023 and December 25, 2021, we believe

the fair value of each of our reporting

units sufficiently exceeds the carrying values and thus we did not record any amount

for goodwill impairment.

Based on our quantitative assessment for the year ended December 31, 2022,

we recorded a $20 million impairment

of goodwill relating to the disposal of an unprofitable business for which

estimated fair value was lower than

carrying value.

As part of our analysis for the rest of the goodwill balance, we performed

a sensitivity analysis on

the discount rate and long-term growth rate assumptions.

The sensitivities did not result in any additional

impairment charges.

During the year ended December 28, 2024, we engaged third-party valuation

specialists to determine the relative

fair value of our goodwill related to the revision of our reportable segments.

Our management reviewed and

approved this valuation.

During the fourth quarter of our fiscal year ended December 28, 2024,

we revised our segment structure to align

with how our Chairman and Chief Executive Officer manages the business, assesses

performance and allocates

Our revised reportable segments now consist of:

(i) Global Distribution

-Added Services;

Global Specialty Products;

and (iii) Global Technology.

Reporting units under the former structure were tested for

impairment, and no impairment was identified.

As a result of the realignment and the change in operating

segments, we reallocated goodwill to each of our new reporting units using

a relative fair value approach.

the impairment test under the new structure, it was determined that the

fair values of our reporting units more likely

than not exceeded their carrying values, resulting in no impairment.

For both the former and new structure

goodwill impairment tests as of September 30, 2024, the fair values of reporting

units were computed using the

methodology described above.

Index to Financial Statements

In connection with our restructuring initiatives, during the year ended

December 28, 2024, we recorded an $11

million impairment of goodwill in the Global Specialty Products segment,

relating to the disposal of a portion of a

such impairment was calculated based on the relative fair value of

For the year ended

December 31, 2022, in connection with our restructuring activities, we

recorded a $20 million impairment of

goodwill, in the Global Specialty Products segment, relating to the disposal

of an unprofitable business for which

estimated fair value was lower than carrying value.

Apart from the above impairments identified in connection with

our restructuring initiative, we did not record any

additional impairment during the years ended December 28, 2024, December

30, 2023, and December 31, 2022.

We performed our annual quantitative testing for the remaining goodwill and the fair value of each of our reporting

units sufficiently exceeded the carrying values.

Definite-Lived Intangible Assets

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impairment charges related to businesses in

our health care distribution segment, the components of which were

$7 million primarily related to customer lists

and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $12 million

charge related to the planned exit of a business.

These impairment charges were calculated as the differences

our Global Distribution and Value-Added Services segment.

It included $2 million of a trade name impairment,

calculated using the relative fair value, related to a disposal of a business,

and $1 million related to trade name

impairment due to business integration in connection with our restructuring

The remaining $1 million

impairment charges related to trade names and non-compete agreements and were

calculated as the differences

between the carrying values and the estimated fair values of the impaired

1 unchanged sentence

estimate of future cash flows.

Note 15 – Plans of Restructuring and Integration Costs

for additional

During the year ended December 30, 2023, we recorded $19 million of

impairment charges related to businesses in

our health care distribution segment, the components of which were

a $15 million charge related to the disposal of

an unprofitable business and a $34 million charge related to customer lists and relationships

attributable to

customer attrition rates being higher than expected in certain other

health care distribution businesses.

our Global Distribution and Value-Added Services segment, consisting of $7 million primarily related to customer

lists and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $12

million charge related to the planned exit of a business in connection with our restructuring

impairment charges were calculated as the differences between the carrying values and the

1 unchanged sentence

the impaired intangible assets, using a discounted estimate of future

Note 15 – Plans of

Restructuring and Integration Costs

During the year ended December 31, 2022, we recorded $49 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment, consisting of a $15 million charge related to the

disposal of an unprofitable business in connection with our restructuring

initiatives, and a $34 million charge

related to customer lists and relationships attributable to customer attrition rates

being higher than expected in

certain other Global Distribution and Value-Added Services businesses.

These impairment charges were calculated

as the differences between the carrying values and the estimated fair values of

the impaired intangible assets, using

a discounted estimate of future cash flows.

Note 16 – Plans of Restructuring and Integration Costs

for additional details.

During the year ended December 25, 2021, we recorded a $1 million

impairment charge related ratably to a

business within our health care distribution segment and a business within

our technology and value-added services

Index to Financial Statements

Redeemable Noncontrolling Interests

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The redemption amounts have been estimated

based on recent transactions, expected future earnings and cash flows

based on recent transactions and/or implied multiples of earnings

and, if such earnings and cash flows are not

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impact on our determination.

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

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

accordance with provisions contained within its 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 has a greater than 50% likelihood of being realized upon ultimate

evaluate the realizability of our deferred tax assets quarterly.

Accounting Standards Codification Topic 740 prescribes the accounting for uncertainty in income taxes recognized

in the financial statements in accordance with provisions contained within

its 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 has a greater than 50% likelihood of being

realized upon ultimate

audit settlement.

In the normal

course of business, our tax returns are subject to examination by various

taxing authorities.

Such examinations may

result in future tax and interest assessments by these taxing authorities for uncertain

tax positions taken in respect of

certain tax matters.

In the normal course of business, our tax returns are subject

to examination by various taxing

Such examinations may result in future tax and interest assessments

by these taxing authorities for

uncertain tax positions taken in respect of certain tax matters.

Note 15 – Income Taxes

for further discussion.

The Financial Accounting Standards Board Staff Q&A, Topic 740 No.

5, Accounting for Global Intangible Low-

Taxed Income (“GILTI”),

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 have elected to recognize the tax on GILTI as a period expense in the

period the tax is incurred.

Accounting Standards Update

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included under Item 8.

Index to Financial Statements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis