UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the

quarterly

 period ended

March 30, 2024

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 

OF 1934

For the transition period from ____________ to ____________

Commission File Number:

0-27078

HENRY SCHEIN, INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3136595

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

135 Duryea Road

Melville

,

New York

(Address of principal executive offices)

11747

(Zip Code)

(

631

)

843-5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

HSIC

The

Nasdaq

 Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such

reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

No 

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period

that the registrant was required to submit such files).

Yes

☒

No 

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer 

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

No

☒

As of April 29, 2024,

there were

128,050,943

 shares of the registrant’s common stock outstanding.

HENRY SCHEIN, INC.

INDEX

Page

3

4

5

6

7

8

8

9

10

11

12

13

16

18

21

22

23

25

27

27

29

29

30

31

44

44

45

45

45

46

46

47

See accompanying notes.

3

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

March 30,

December 30,

2024

2023

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

159

$

171

Accounts receivable, net of allowance for credit losses of $

84

 and $

83

 (1)

1,644

1,863

Inventories, net of reserves of $

188

 and $

192

1,686

1,815

Prepaid expenses and other

589

639

Total current assets

4,078

4,488

Property and equipment, net

500

498

Operating lease right-of-use assets

314

325

Goodwill

3,835

3,875

Other intangibles, net

915

916

Investments and other

503

471

Total assets

$

10,145

$

10,573

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

879

$

1,020

Bank credit lines

264

264

Current maturities of long-term debt

103

150

Operating lease liabilities

75

80

Accrued expenses:

Payroll and related

245

332

Taxes

143

137

Other

625

700

Total current liabilities

2,334

2,683

Long-term debt (1)

2,010

1,937

Deferred income taxes

77

54

Operating lease liabilities

266

310

Other liabilities

423

436

Total liabilities

5,110

5,420

Redeemable noncontrolling interests

798

864

Commitments and contingencies

(nil)

(nil)

Stockholders' equity:

Preferred stock, $

0.01

 par value,

1,000,000

 shares authorized,

none

 outstanding

-

-

Common stock, $

0.01

 par value,

480,000,000

 shares authorized,

128,480,909

 outstanding on March 30, 2024 and

129,247,765

 outstanding on December 30, 2023

1

1

Additional paid-in capital

-

-

Retained earnings

3,838

3,860

Accumulated other comprehensive loss

(239)

(206)

Total Henry Schein, Inc. stockholders' equity

3,600

3,655

Noncontrolling interests

637

634

Total stockholders' equity

4,237

4,289

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

10,145

$

10,573

(1)

Amounts presented include balances held by our consolidated variable interest entity (“VIE”). At March 30, 2024 and December

30, 2023, includes trade accounts receivable of $

497

 million and $

284

 million, respectively, and long-term debt of $

300

 million and

$

210

 million, respectively.

 See

 for further information.

See accompanying notes.

4

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except share and per share data)

(unaudited)

Three Months Ended

March 30,

April 1,

2024

2023

Net sales

$

3,172

$

3,060

Cost of sales

2,160

2,094

Gross profit

1,012

966

Operating expenses:

Selling, general and administrative

791

717

Depreciation and amortization

61

44

Restructuring costs

10

30

Operating income

150

175

Other income (expense):

Interest income

5

3

Interest expense

(30)

(14)

Other, net

2

(1)

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

127

163

Income taxes

(32)

(39)

Equity in earnings of affiliates, net of tax

3

4

Net income

98

128

Less: Net income attributable to noncontrolling interests

(5)

(7)

Net income attributable to Henry Schein, Inc.

$

93

$

121

Earnings per share attributable to Henry Schein, Inc.:

Basic

$

0.72

$

0.92

Diluted

$

0.72

$

0.91

Weighted-average common shares outstanding:

Basic

128,720,661

131,365,789

Diluted

129,769,580

133,039,886

See accompanying notes.

5

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions) 

(unaudited)

Three Months Ended

March 30,

April 1,

2024

2023

Net income

$

98

$

128

Other comprehensive income, net of tax:

Foreign currency translation gain (loss)

(54)

25

Unrealized gain (loss) from hedging activities

11

(3)

Other comprehensive income (loss), net of tax

(43)

22

Comprehensive income

55

150

Comprehensive income attributable to noncontrolling interests:

Net income

(5)

(7)

Foreign currency translation loss (gain)

10

(2)

Comprehensive loss (income) attributable to noncontrolling interests

5

(9)

Comprehensive income attributable to Henry Schein, Inc.

$

60

$

141

See accompanying notes.

6

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN 

STOCKHOLDERS’ EQUITY

(in millions, except share data)

(unaudited)

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

 Interests

Equity

Balance, December 30, 2023

129,247,765

$

1

$

-

$

3,860

$

(206)

$

634

$

4,289

Net income (excluding $

2

 attributable to Redeemable

noncontrolling interests)

-

-

-

93

-

3

96

Foreign currency translation loss (excluding loss of $

10

attributable to Redeemable noncontrolling interests)

-

-

-

-

(44)

-

(44)

Unrealized gain from hedging activities,

net of tax of $

4

-

-

-

-

11

-

11

Change in fair value of redeemable securities

-

-

(42)

-

-

-

(42)

Noncontrolling interests and adjustments related to

business acquisitions

-

-

1

-

-

-

1

Repurchase and retirement of common stock

(998,728)

-

(10)

(65)

-

-

(75)

Stock issued upon exercise of stock options

20,939

-

1

-

-

-

1

Stock-based compensation expense

314,759

-

8

-

-

-

8

Shares withheld for payroll taxes

(103,865)

-

(8)

-

-

-

(8)

Settlement of stock-based compensation awards

39

-

-

-

-

-

-

Transfer of charges in excess of capital

-

-

50

(50)

-

-

-

Balance, March 30, 2024

128,480,909

$

1

$

-

$

3,838

$

(239)

$

637

$

4,237

Accumulated

Common Stock

Additional

Other

Total

$0.01 Par Value

Paid-in

Retained

Comprehensive

Noncontrolling

Stockholders'

Shares

Amount

Capital

Earnings

Income / (Loss)

 Interests

Equity

Balance, December 31, 2022

131,792,817

$

1

$

-

$

3,678

$

(233)

$

649

$

4,095

Net income (excluding $

4

 attributable to Redeemable

noncontrolling interests)

-

-

-

121

-

3

124

Foreign currency translation gain (excluding gain of $

2

attributable to Redeemable noncontrolling interests)

-

-

-

-

23

-

23

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $

1

-

-

-

-

(3)

-

(3)

Change in fair value of redeemable securities

-

-

3

-

-

-

3

Initial noncontrolling interests and adjustments related to

business acquisitions

-

-

-

-

-

3

3

Repurchases and retirement of common stock

(1,223,919)

-

(13)

(87)

-

-

(100)

Stock-based compensation expense

1,016,300

-

10

-

-

-

10

Stock issued upon exercise of stock options

10,779

-

1

-

-

-

1

Shares withheld for payroll taxes

(399,194)

-

(29)

-

-

-

(29)

Transfer of charges in excess of capital

-

-

28

(28)

-

-

-

Balance, April 1, 2023

131,196,783

$

1

$

-

$

3,684

$

(213)

$

655

$

4,127

See accompanying notes.

7

HENRY SCHEIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

Three Months Ended

March 30,

April 1,

2024

2023

Cash flows from operating activities:

Net income

$

98

$

128

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

Depreciation and amortization

73

52

Non-cash restructuring charges

1

7

Stock-based compensation expense

8

10

Provision for losses on trade and other accounts receivable

5

1

Provision for deferred income taxes

2

2

Equity in earnings of affiliates

(3)

(4)

Distributions from equity affiliates

2

2

Changes in unrecognized tax benefits

2

1

Other

(6)

(1)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

190

(20)

Inventories

74

63

Other current assets

41

29

Accounts payable and accrued expenses

(290)

(243)

Net cash provided by operating activities

197

27

Cash flows from investing activities:

Purchases of property and equipment

(41)

(31)

Payments related to equity investments and business acquisitions,

net of cash acquired

(20)

(1)

Proceeds from loan to affiliate

1

2

Capitalized software costs

(9)

(9)

Other

(3)

-

Net cash used in investing activities

(72)

(39)

Cash flows from financing activities:

Net change in bank credit lines

-

132

Proceeds from issuance of long-term debt

90

31

Principal payments for long-term debt

(60)

(1)

Proceeds from issuance of stock upon exercise of stock options

1

1

Payments for repurchases and retirement of common stock

(75)

(100)

Payments for taxes related to shares withheld for employee taxes

(7)

(30)

Distributions to noncontrolling shareholders

(6)

(4)

Acquisitions of noncontrolling interests in subsidiaries

(94)

(8)

Net cash provided by (used in) financing activities

(151)

21

Effect of exchange rate changes on cash and cash equivalents

14

-

Net change in cash and cash equivalents

(12)

9

Cash and cash equivalents, beginning of period

171

117

Cash and cash equivalents, end of period

$

159

$

126

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

8

Note 1 – Basis of Presentation

Our condensed consolidated financial statements include the accounts of Henry Schein, Inc., and all of our

controlled subsidiaries (“we”, “us” and “our”). All intercompany accounts and transactions are eliminated in

consolidation. Investments in unconsolidated affiliates for which we have the ability to influence the operating or

financial decisions are accounted for under the equity method.

Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with

accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and

with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the

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

The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited

consolidated financial statements and notes to the consolidated financial statements contained in our Annual Report

on Form 10-K for the year ended December 30, 2023 and with the information contained in our other publicly-

available filings with the Securities and Exchange Commission. The condensed consolidated financial statements

reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and

financial position for the interim periods presented. All such adjustments are of a normal recurring nature. 

The preparation of financial statements in conformity with accounting principles generally accepted in the United

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

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

revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of

operations for the three months ended March 30, 2024 are not necessarily indicative of the results to be expected

for any other interim period or for the year ending December 28, 2024.

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

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

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

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

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

assumptions.

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

we consider a VIE because we are its primary beneficiary, as we have the power to direct activities that most

significantly affect its economic performance and have the obligation to absorb the majority of its losses or

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

debt. The VIE’s creditors have recourse to us for losses on these trade accounts receivable. At March 30, 2024 and

December 30, 2023, certain trade accounts receivable that can only be used to settle obligations of this VIE were

$

497

 million and $

284

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

were $

300

 million and $

210

 million, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

9

Note 2 – Significant Accounting Policies and Recently Issued Accounting Standards

Significant Accounting Policies 

There have been no material changes in our significant accounting policies during the three months ended March

30, 2024, as compared to the significant accounting policies described in Item 8 of our Annual Report on Form 10-

K for the year ended December 30, 2023.

Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update

(“ASU”) 2023-09, “

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

,” which requires public

business entities to disclose additional information in specified categories with respect to the reconciliation of the

effective tax rate to the statutory rate for federal, state and foreign income taxes. It also requires greater detail

about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a

specified threshold. In addition to new disclosures associated with the rate reconciliation, the ASU requires

information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state and foreign taxes

and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. 

The ASU also describes items that need to be disaggregated based on their nature, which is determined by reference

to the item’s fundamental or essential characteristics, such as the transaction or event that triggered the

establishment of the reconciling item and the activity with which the reconciling item is associated. The ASU

eliminates the historic requirement that entities disclose information concerning unrecognized tax benefits having a

reasonable possibility of significantly increasing or decreasing in the 12 months following the reporting date. This

ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual

financial statements that have not yet been issued or made available for issuance. This ASU should be applied on a

prospective basis; however, retrospective application is permitted. We are currently evaluating the impact that

ASU 2023 – 09 will have on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “

Segment Reporting (Topic 280): Improvements to Reportable

Segments

,” which aims to improve financial reporting by requiring disclosure of incremental segment information

on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial

analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable

segments. For example, a public entity is required to report a measure of segment profit or loss that the chief

operating decision maker uses to assess segment performance and make decisions about allocating resources. 

Topic 280 also requires other specified segment items and amounts, such as depreciation, amortization, and

depletion expense, to be disclosed under certain circumstances. The amendments in this ASU do not change or

remove those disclosure requirements and do not change how a public entity identifies its operating segments,

aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments. 

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years

beginning after December 15, 2024. Early adoption is permitted. We do not expect that the requirements of ASU

2023 – 07 will have a material impact on our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, “

Compensation - Stock Compensation (Topic 718): Scope

Application of Profits Interest and Similar Awards,

” which clarifies how to determine whether a profit interest and

similar awards should be accounted for as a share-based payment arrangement under Topic 718 or within the scope

of other guidance. The ASU provides an illustrative example with multiple fact patterns and amends the structure

of paragraph 718-10-15-3 of Topic 718 to improve its clarity and operability. The guidance in ASU 2024-01

applies to all entities that issue profits interest awards as compensation to employees or nonemployees in exchange

for goods or services. Entities can apply the amendments either retrospectively to all periods presented in the

financial statements or prospectively to profits interest awards granted or modified on or after the date of adoption. 

If prospective application is elected, an entity must disclose the nature of and reason for the change in accounting

principle that resulted from the adoption of the ASU. This ASU is effective for fiscal years beginning after

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

10

December 15, 2024, including interim periods within those fiscal years. We do not expect that the requirements of

ASU 2024 – 01 will have a material impact on our consolidated financial statements.

Note 3 – Cyber Incident

In October 2023 Henry Schein experienced a cyber 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 cycle management and patient relationship management solutions business, was not affected, and

our manufacturing businesses were mostly unaffected. On November 22, 2023, we experienced a disruption of our

ecommerce platform and related applications, which has since been remediated.

During the three months ended March 30, 2024, we continued to experience a residual impact of the cyber events

noted above relating primarily to decreased sales to episodic customers (customers that had generally registered a

less continuous level of demand pre-incident).

During the three months ended March 30, 2024, we incurred $

5

 million of expenses directly related to the cyber

incident, mostly consisting of professional fees. We maintain cyber insurance, subject to certain retentions and

policy limitations. With respect to the October 2023 cyber incident, we have a $

60

 million insurance policy,

following a $

5

 million retention.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

11

Note 4 – Net Sales from Contracts with Customers

Net sales are recognized in accordance with policies disclosed in Item 8 of our Annual Report on Form 10-K for

the year ended December 30, 2023.

Disaggregation of Net Sales

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

Three Months Ended

March 30, 2024

North America

International

Global

Net sales:

Health care distribution

Dental

$

1,103

$

811

$

1,914

Medical

1,014

27

1,041

Total health care distribution

2,117

838

2,955

Technology and value-added services

189

28

217

Total net sales

$

2,306

$

866

$

3,172

Three Months Ended

April 1, 2023

North America

International

Global

Net sales:

Health care distribution

Dental

$

1,144

$

754

$

1,898

Medical

951

20

971

Total health care distribution

2,095

774

2,869

Technology and value-added services

166

25

191

Total net sales

$

2,261

$

799

$

3,060

Contract Liabilities

At March 30, 2024, December 30, 2023, and December 31, 2022, the current and non-current contract liabilities

were $

84

 million and $

8

 million; $

89

 million and $

9

 million; and $

86

 million and $

8

 million, respectively. During

the three months ended March 30, 2024, we recognized, in net sales, $

36

 million of the amount that was previously

deferred at December 30, 2023. During the three months ended April 1, 2023, we recognized in net sales $

35

million of the amounts that were previously deferred at December 31, 2022. 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.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

12

Note 5

 –

Segment Data

We conduct our business through

two

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

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

dental businesses serve office-based dental practitioners, dental laboratories, schools, 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. Our

dental and medical groups serve practitioners in

33

 countries worldwide.

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

segment distributes 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, personal protective

equipment (“PPE”) products, vitamins, and orthopedic implants. 

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, continuing

education services for practitioners, practice technology, network and hardware services, and other services.

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

Three Months Ended

March 30,

April 1,

2024

2023

Net sales:

Health care distribution

(1)

Dental

$

1,914

$

1,898

Medical

1,041

971

Total health care distribution

2,955

2,869

Technology and value-added services

(2)

217

191

Total

$

3,172

$

3,060

(1)

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, vitamins, and orthopedic implants.

(2)

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

practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing

education services for practitioners, practice technology, network and hardware services, and other services.

Three Months Ended

March 30,

April 1,

2024

2023

Operating Income:

Health care distribution

$

126

$

145

Technology and value-added services

24

30

Total

$

150

$

175

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

13

Note 6

 –

Business Acquisitions

Our acquisition strategy is focused on investments in companies that add new customers and sales teams, increase

our geographic footprint (whether entering a new country, such as emerging markets, or building scale where we

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

2024 Acquisitions

During the quarter ended March 30, 2024, we made acquisitions within the technology and value-added services

segment. Our acquired ownership interest in these companies was

100

%. Total consideration for these acquisitions

was $

19

 million. Net assets acquired primarily consisted of $

8

 million of goodwill and $

12

 million of intangible

assets. The intangible assets acquired consisted of customer relationships and lists of $

6

 million, product

development of $

4

 million, trademarks and tradenames of $

1

 million and non-compete agreements of $

1

 million. 

Weighted average useful lives for these acquired intangible assets were

10

 years,

10

 years,

5

 years and

5

 years,

respectively.

Goodwill is a result of the expected synergies and cross-selling opportunities that these acquisitions are expected to

provide for us, as well as the expected growth potential. The majority of the acquired goodwill is deductible for tax

purposes.

The impact of these acquisitions, individually and in the aggregate, was not considered material to our condensed

consolidated financial statements.

2023 Acquisitions

Acquisition of Shield Healthcare

On October 2, 2023 we acquired a

90

% voting equity interest in Shield Healthcare, Inc. (“Shield”), a supplier of

homecare medical products delivered directly to patients in their homes, for preliminary consideration of $

366

million (including cash paid of $

307

 million, deferred consideration of $

22

 million and redeemable noncontrolling

interests of $

37

 million). Based in California, Shield expands our existing medical business by delivering a diverse

range of products, including items such as incontinence, urology, ostomy, enteral nutrition, advanced wound care

and diabetes supplies. Additionally, Shield offers continuous glucose monitoring devices directly to patients in

their homes.

The accounting for the acquisition of Shield has not been completed in several respects, including but not limited to

finalizing valuation assessments of accounts receivable, inventory, accrued liabilities and income and non-income

based taxes. To assist in the allocation of consideration, we engaged valuation specialists to determine the fair

value of intangible and tangible assets acquired and liabilities assumed. We will finalize the amounts recognized as

the information necessary to complete the analysis is obtained. During the quarter ended March 30, 2024, we

recorded immaterial measurement period adjustments, related primarily to operating leases. 

The pro forma financial information has not been presented because the impact of the Shield acquisition was

immaterial to our consolidated financial statements.

Acquisition of S.I.N. Implant System

On July 5, 2023, we acquired a

100

% voting equity interest in S.I.N. Implant System (“S.I.N.”) for consideration of

$

329

 million. Based in São Paulo, S.I.N. manufactures an extensive line of products to perform dental implant

procedures and is focused on advancing the development of value-priced dental implants. S.I.N. recently expanded

the distribution of its products into the United States and other international markets.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

14

The accounting for the acquisition of S.I.N. has not been completed in several respects, including but not limited to

finalizing valuation assessments of accounts receivable, inventory, accrued liabilities and income and non-income

based taxes. To assist in the allocation of consideration, we engaged valuation specialists to determine the fair

value of intangible and tangible assets acquired and liabilities assumed. We will finalize the amounts recognized as

the information necessary to complete the analysis is obtained. We expect to finalize these amounts as soon as

possible but no later than one year from the acquisition date. During the quarter ended March 30, 2024, we

recorded insignificant measurement period adjustments, related primarily to deferred tax adjustments.

The pro forma financial information has not been presented because the impact of the S.I.N. acquisition was

immaterial to our consolidated financial statements.

Acquisition of Biotech Dental

On April 5, 2023, we acquired a

57

% voting equity interest in Biotech Dental (“Biotech Dental”), which is a

provider of dental implants, clear aligners, individualized prosthetics and innovative digital dental software based in

France. Biotech Dental has several important solutions for dental practices and dental labs, including Nemotec, a

comprehensive, integrated suite of planning and diagnostic software using open architecture that connects disparate

medical devices to create a digital view of the patient, offering greater diagnostic accuracy and an improved patient

experience. The integration of Biotech Dental’s software with Henry Schein One’s industry-leading practice

management software solutions will help customers streamline their clinical as well as administrative workflow for

the ultimate benefit of patients.

The following table aggregates the final fair value, as of the date of acquisition, of consideration paid and net assets

acquired in the Biotech Dental acquisition, including measurement period adjustments recorded through March 30,

2024:

Preliminary

Allocation as

of July 1, 2023

Measurement

Period

Adjustments

Allocation as

of March 30,

2024

Acquisition consideration:

Cash

$

216

$

-

$

216

Fair value of contributed equity share in a controlled subsidiary

25

-

25

Redeemable noncontrolling interests

182

-

182

Total consideration

$

423

$

-

$

423

Identifiable assets acquired and liabilities assumed:

Current assets

$

78

$

(4)

$

74

Intangible assets

119

70

189

Other noncurrent assets

76

(7)

69

Current liabilities

(50)

(10)

(60)

Long-term debt

(90)

17

(73)

Deferred income taxes

(38)

(15)

(53)

Other noncurrent liabilities

(16)

(4)

(20)

Total identifiable net assets

79

47

126

Goodwill

344

(47)

297

Total net assets acquired

$

423

$

-

$

423

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

15

Goodwill is a result of expected synergies that are expected to originate from the acquisition as well as the expected

growth potential of Biotech Dental. The acquired goodwill is deductible for tax purposes. During the quarter

ended March 30, 2024 we finalized our accounting for the acquisition and recorded measurement period

adjustments related primarily to the completion of the intangibles valuation, including adjustments to intangibles,

deferred tax and certain other assets and liabilities.

The following table summarizes the identifiable intangible assets acquired as part of the acquisition of Biotech

Dental:

2023

Weighted Average Useful

Lives (in years)

Customer relationships and lists

$

47

9

Trademarks / Tradenames

18

7

Product development

124

10

Total

$

189

The pro forma financial information has not been presented because the impact of the Biotech Dental acquisition

was immaterial to our condensed consolidated financial statements.

Other 2023 Acquisitions

During the year ended December 30, 2023, in addition to those noted above, we acquired companies within the

health care distribution and technology and value-added services segments. Our acquired ownership interest ranged

between

51

% to

100

%. During the quarter ended March 30, 2024, we recorded an adjustment of $

15

 million,

within the selling, general and administrative line in our condensed consolidated statements of income, representing

a change in the fair value of contingent consideration related to a 2023 acquisition.

During the three months ended March 30, 2024 we completed accounting for certain acquisitions that occurred in

the year ended December 30, 2023. In relation to these acquisitions, we did not record material adjustments in our

condensed consolidated financial statements relating to changes in estimated values of assets acquired, liabilities

assumed and contingent consideration assets and liabilities.

The pro forma financial information for our 2023 acquisitions has not been presented because the impact of the

acquisitions was immaterial to our condensed consolidated financial statements.

Acquisition Costs

During the three months ended March 30, 2024 and April 1, 2023 we incurred $

2

 million and $

7

 million in

acquisition costs, which are included in “selling, general and administrative” within our condensed consolidated

statements of income.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

16

Note 7 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The fair value hierarchy distinguishes between

(1) market participant assumptions developed based on market data obtained from independent sources (observable

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

information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices

in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 

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

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

measurement date.

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

either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets;

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

prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by

observable market data by correlation or other means.

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

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

measure their fair values. 

Investments and notes receivable

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

Certain of our notes receivable contain variable interest rates. We believe the carrying amounts are a reasonable

estimate of fair value based on the interest rates in the applicable markets. Our investments and notes receivable

fair value is based on Level 3 inputs within the fair value hierarchy. 

Debt

The fair value of our debt (including bank credit lines, current maturities of long-term debt and long-term debt) is

based on Level 3 inputs within the fair value hierarchy, and as of March 30, 2024 and December 30, 2023 was

estimated at $

2,377

 million and $

2,351

 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. Our derivative

instruments primarily include foreign currency forward agreements, forecasted inventory purchase commitments,

foreign currency forward contracts, interest rate swaps and total return swaps.

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 are based on market rates for comparable

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

The fair value of the interest rate swap, which is classified within Level 2 of the fair value hierarchy, is determined

by comparing our contract rate to a forward market rate as of the valuation date.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

17

The fair value of total return swaps is determined by valuing the underlying exchange traded funds of the swap

using market-on-close pricing by industry providers as of the valuation date that are classified within Level 2 of the

fair value hierarchy.

Redeemable noncontrolling interests

The values for redeemable noncontrolling interests are based on recent transactions and/or implied multiples of

earnings that are classified within Level 3 of the fair value hierarchy.

 See

 for additional information.

Assets measured on a non-recurring basis at fair value include intangibles. Inputs for measuring intangibles are

classified as Level 3 within the fair value hierarchy.

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

basis classified under the appropriate level of the fair value hierarchy as of March 30, 2024 and December 30,

2023:

March 30, 2024

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

$

-

$

1

$

-

$

1

Derivative contracts undesignated

-

2

-

2

Total return swap

-

1

-

1

Total assets

$

-

$

4

$

-

$

4

Liabilities:

Derivative contracts designated as hedges

$

-

$

1

$

-

$

1

Derivative contracts undesignated

-

1

-

1

Total liabilities

$

-

$

2

$

-

$

2

Redeemable noncontrolling interests

$

-

$

-

$

798

$

798

December 30, 2023

Level 1

Level 2

Level 3

Total

Assets:

Derivative contracts designated as hedges

$

-

$

1

$

-

$

1

Derivative contracts undesignated

-

1

-

1

Total return swap

-

4

-

4

Total assets

$

-

$

6

$

-

$

6

Liabilities:

Derivative contracts designated as hedges

$

-

$

18

$

-

$

18

Derivative contracts undesignated

-

2

-

2

Total liabilities

$

-

$

20

$

-

$

20

Redeemable noncontrolling interests

$

-

$

-

$

864

$

864

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

18

Note 8 – Debt

Bank Credit Lines

Bank credit lines consisted of the following:

March 30,

December 30,

2024

2023

Revolving credit agreement

$

50

$

200

Other short-term bank credit lines

214

64

Total

$

264

$

264

Revolving Credit Agreement

On

August 20, 2021

, we entered a $

1.0

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

which was subsequently amended and restated on

July 11, 2023

 to extend the maturity date to

July 11, 2028

 and

update the interest rate provisions to reflect the current market approach for a multicurrency facility. The interest

rate on this revolving credit facility is based on Term Secured Overnight Financing Rate (“Term SOFR”) plus a

spread based on our leverage ratio at the end of each financial reporting quarter. As of March 30, 2024 the interest

rate on this revolving credit agreement was

5.32

% plus

1.10

% for a combined rate of

6.42

%. The Revolving Credit

Agreement requires, among other things, that we maintain certain maximum leverage ratios. Additionally, the

Revolving 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 March 30, 2024 and December

30, 2023, we had $

50

 million and $

200

 million in borrowings, respectively under this revolving credit facility. 

During the three months ended March 30, 2024, the average outstanding balance under the Revolving Credit

Agreement was approximately $

100

 million. As of March 30, 2024 and December 30, 2023, there were $

10

million and $

10

 million of letters of credit, respectively, provided to third parties under this Revolving Credit

Agreement.

Other Short-Term Bank Credit Lines

As of March 30, 2024 and December 30, 2023, we had various other short-term bank credit lines available, in

various currencies, with a maximum borrowing capacity of $

383

 million and $

368

 million, respectively. As of

March 30, 2024 and December 30, 2023, $

214

 million and $

64

 million, respectively, were outstanding. During the

three months ended March 30, 2024, the average outstanding balances under our various other short-term bank

credit lines was approximately $

96

 million. At March 30, 2024 and December 30, 2023, borrowings under other

short-term bank credit lines had weighted average interest rates of

6.08

% and

6.02

%, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

19

Long-term debt

Long-term debt consisted of the following:

March 30,

December 30,

2024

2023

Private placement facilities

$

1,024

$

1,074

Term loan

736

741

U.S. trade accounts receivable securitization

300

210

Various collateralized and uncollateralized loans payable with interest,

in varying installments through 2030 at interest rates

from

0.00

% to

9.42

% at March 30, 2024 and

from

0.00

% to

9.42

% at December 30, 2023

46

54

Finance lease obligations

7

8

Total

2,113

2,087

Less current maturities

(103)

(150)

Total long-term debt

$

2,010

$

1,937

Private Placement Facilities

Our private placement facilities include

four

 insurance companies, have a total facility amount of $

1.5

 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

. The facilities allow us to issue senior promissory notes to the lenders at a

fixed rate based on an agreed upon spread over applicable treasury notes at the time of issuance. The term of each

possible issuance will be selected by us and can range from

five

 to

15 years

 (with an average life no longer than

12

years

). The proceeds of any issuances under the facilities will be used for general corporate purposes, including

working capital and capital expenditures, to refinance existing indebtedness, and/or to fund potential acquisitions. 

The agreements provide, among other things, that we maintain certain maximum leverage ratios, and contain

restrictions relating to subsidiary indebtedness, liens, affiliate transactions, disposal of assets and certain changes in

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

applicable due dates.

The components of our private placement facility borrowings, which have a weighted average interest rate of

3.66

%, as of March 30, 2024 are presented in the following table:

Amount of

Date of

Borrowing

Borrowing 

Borrowing

Outstanding

Rate

Due Date

December 24, 2012

$

50

3.00

%

December 24, 2024

June 16, 2017

100

3.42

June 16, 2027

September 15, 2017

100

3.52

September 15, 2029

January 2, 2018

100

3.32

January 2, 2028

September 2, 2020

100

2.35

September 2, 2030

June 2, 2021

100

2.48

June 2, 2031

June 2, 2021

100

2.58

June 2, 2033

May 4, 2023

75

4.79

May 4, 2028

May 4, 2023

75

4.84

May 4, 2030

May 4, 2023

75

4.96

May 4, 2033

May 4, 2023

150

4.94

May 4, 2033

Less: Deferred debt issuance costs

(1)

Total

$

1,024

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

20

Term Loan

On July 11, 2023, we entered into a

three-year

 $

750

 million term loan credit agreement (the “Term Credit

Agreement”). The interest rate on this term loan is based on the Term SOFR plus a spread based on our leverage

ratio at the end of each financial reporting quarter. This term loan matures on July 11, 2026. 

We are required to make quarterly payments of $

5

 million from September 2023 through June 2024 and quarterly

payments of $

9

 million from September 2024 through June 2026, with the remaining balance due in July 2026. As

of March 30, 2024, the borrowings outstanding under this term loan were $

736

 million. At March 30, 2024, the

interest rate under the Term Credit Agreement was 

5.32

% plus 

1.47

% for a combined rate of 

6.79

%. As of

December 30, 2023, the borrowings outstanding under this term loan were $

741

 million. At December 30, 2023,

the interest rate under the Term Credit Agreement was

5.36

% plus

1.35

% for a combined rate of

6.71

%. However,

we have a hedge in place that ultimately creates an effective fixed rate of

5.91

% and

5.79

% at March 30, 2024 and

December 30, 2023, respectively. The Term Credit Agreement requires, among other things, that we maintain

certain maximum leverage ratios. Additionally, the Term 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.

U.S. Trade Accounts Receivable Securitization

We have a facility agreement based on our U.S. trade accounts receivable that is structured as an asset-backed

securitization program with pricing committed for up to

three years

. This facility agreement has a purchase limit of

$

450

 million with

two

 banks as agents, and expires on

December 15, 2025

.

As of March 30, 2024 and December 30, 2023, the borrowings outstanding under this securitization facility were

$

300

 million and $

210

 million, respectively. At March 30, 2024, the interest rate on borrowings under this facility

was based on the asset-backed commercial paper rate of

5.47

% plus

0.75

%, for a combined rate of

6.22

%. At

December 30, 2023, the interest rate on borrowings under this facility was based on the asset-backed commercial

paper rate of

5.67

% plus

0.75

%, for a combined rate of

6.42

%.

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.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

21

Note 9 – Income Taxes

For the three months ended March 30, 2024 our effective tax rate was

25.6

%, compared to

23.8

% for the prior year

period. The difference between our effective tax rate and the federal statutory tax rate primarily relates to state and

foreign income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued 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 of March 30, 2024, the impact of the

Pillar Two Rules to our financial statements was immaterial. As we operate in jurisdictions which have adopted

Pillar Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.

The total amount of unrecognized tax benefits, which are included in “other liabilities” within our condensed

consolidated balance sheets, as of March 30, 2024 and December 30, 2023, was $

113

 million and $

115

 million,

respectively, of which $

106

 million and $

107

 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 condensed consolidated statements of income.

All tax returns audited by the IRS are officially closed through 2019. The tax years subject to examination by the

IRS include years 2020 and forward. In addition, limited positions reported in the 2017 tax year are subject to IRS

examination.

The amount of tax interest expense included as a component of the provision for taxes was $

1

 million and $

1

million for the three months ended March 30, 2024 and April 1, 2023, respectively. The total amount of accrued

interest is included in “other liabilities,” and was $

17

 million as of March 30, 2024 and $

16

 million as of December

30, 2023. The amount of penalties accrued for during the periods presented were not material to our condensed

consolidated financial statements.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

22

Note 10 – Plan of Restructuring

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 three months ended March 30, 2024 and April 1, 2023, we recorded restructuring costs of $

10

 million

and $

30

 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, and other lease exit

costs.

Restructuring costs recorded for the three months ended March 30, 2024 and April 1, 2023, consisted of the

following:

Three Months Ended March 30, 2024

Health Care

Distribution

Technology and

Value-Added

Services

Total

Severance and employee-related costs

$

6

$

1

$

7

Accelerated depreciation and amortization

1

-

1

Exit and other related costs

2

-

2

Total restructuring costs

$

9

$

1

$

10

Three Months Ended April 1, 2023

Health Care

Distribution

Technology and

Value-Added

Services

Total

Severance and employee-related costs

$

17

$

3

$

20

Accelerated depreciation and amortization

7

-

7

Exit and other related costs

1

1

2

Loss on disposal of a business

1

-

1

Total restructuring costs

$

26

$

4

$

30

The following table summarizes, by reportable segment, the activity related to the liabilities associated with our

restructuring initiatives for the three months ended March 30, 2024. The remaining accrued balance of

restructuring costs as of March 30, 2024, which primarily relates to severance and employee-related costs, is

included in accrued expenses: other within our condensed consolidated balance sheets. Liabilities related to exited

leased facilities are recorded within our current and non-current operating lease liabilities within our condensed

consolidated balance sheets.

Technology and

Health Care

Value-Added

Distribution

Services

Total

Balance, December 30, 2023

$

22

$

1

$

23

Restructuring costs

9

1

10

Non-cash accelerated depreciation and amortization

(1)

-

(1)

Cash payments and other adjustments

(11)

(1)

(12)

Balance, March 30, 2024

$

19

$

1

$

20

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

23

Note 11 – Legal Proceedings

Henry Schein, Inc. has been named as a defendant in multiple opioid related lawsuits (currently less than one-

hundred and seventy-five (

175

); one or more of Henry Schein, Inc.’s subsidiaries is also named as a defendant in a

number of those cases). Generally, the lawsuits allege that the 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 its subsidiaries) reaped financial rewards by refusing or

otherwise failing to monitor appropriately and restrict the improper distribution of those drugs. These actions

consist of some that have been consolidated within the MultiDistrict Litigation (“MDL”) proceeding In Re National

Prescription Opiate Litigation (MDL No. 2804; Case No. 17-md-2804) and are currently stayed, and others which

remain pending in state courts and are proceeding independently and outside of the MDL. At this time, the

following cases are set for trial: the action filed by DCH Health Care Authority, et al. in Alabama state court, which

is currently set for a jury trial on July 8, 2024; the action filed by Mobile County Board of Health, et al. in Alabama

state court, which has been set for a jury trial on August 12, 2024; and the action filed by Florida Health Sciences

Center, Inc. (and

25

other hospitals located throughout the State of Florida) in Florida state court, which is currently

scheduled for a jury trial in September 2025. Of Henry Schein’s 2023 net sales of approximately $

12.3

 billion,

sales of opioids represented less than four-tenths of 1 percent. Opioids represent a negligible part of our

business. We intend to defend ourselves vigorously against these actions.

In August 2022, Henry Schein received a Grand Jury Subpoena from the United States Attorney’s Office for the

Western District of Virginia, seeking documents in connection with an investigation of possible violations of the

Federal Food, Drug & Cosmetic Act by Butler Animal Health Supply, LLC (“Butler”), a former subsidiary of

Henry Schein. The investigation relates to the sale of veterinary prescription drugs to certain customers. In

October 2022, Henry Schein received a second Grand Jury Subpoena from the United States Attorney’s Office for

the Western District of Virginia. The October 2022 Subpoena seeks documents relating to payments Henry Schein

received from Butler or Covetrus, Inc. (“Covetrus”). Butler was spun off into a separate company and became a

subsidiary of Covetrus in 2019 and is no longer owned by Henry Schein. We are cooperating with the

investigation.

On January 18, 2024, a putative class action was filed against the Company in the U.S. District Court for the

Eastern District of New York (“EDNY”), Case No. 24-cv-387 (the “Cruz-Bermudez Action”), based on the

October 2023 cyber incident described in

. 

On January 26, 2024, a second putative class

action was filed against the Company based on the cyber incident, also in the EDNY, Case No. 24-cv-550 (the

“Depperschmidt Action”). On February 12, 2024, the Depperschmidt Action was voluntarily dismissed without

prejudice. On February 16, 2024, an amended complaint was filed in the Cruz-Bermudez Action with additional

plaintiffs’ counsel from the Depperschmidt Action and an additional new plaintiff. 

Plaintiffs in the Cruz-Bermudez Action seek to represent a class of all individuals whose personally identifying

information and personal health information was compromised by the incident. Plaintiffs generally claim to have

been harmed by alleged actions and/or omissions by the Company in connection with the incident and that the

Company made deceptive public statements regarding privacy and data protection. Plaintiffs assert a variety of

claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. On March

22, 2024, plaintiffs voluntarily withdrew two of their five causes of action. On April 8, 2024, the court denied the

Company’s motion to dismiss the remaining claims. The case remains pending. We intend to defend ourselves

vigorously against this action.

Henry Schein, Inc. and its affiliate, North American Rescue, LLC (“NAR”), have been named as defendants in a

qui tam lawsuit brought under the federal False Claims Act (“FCA”), in an action entitled

Russ and Murphy ex rel.

United States v. North American Rescue, LLC et al.

; Case No. 21-cv-04238, filed in the United States District Court

for the Eastern District of Pennsylvania. The case was filed under seal in 2021 by two relators (Corey Russ and

Chris Murphy) who worked for one of NAR’s competitors. Relators also name C-A-T Resources, LLC (“CAT-R”)

as a defendant. CAT -R manufactures one of the products at issue in the case (the combat application tourniquet, or

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

24

“CAT”). After the Department of Justice declined to intervene, the case was unsealed, and Relators filed their first

amended complaint in November 2023. In response to motions to dismiss filed by Henry Schein, NAR and CAT-

R, Relators requested and obtained leave to file their Second Amended Complaint on April 24, 2024. Relators’

FCA claims are based on allegations that NAR and Henry Schein made false representations and certifications in

connection with, and sold and submitted false claims for payment to the federal government for, various medical

products that Relators contend violated certain “Buy American” laws (e.g., the Berry Amendment and Trade

Agreements Act of 1979) and/or were not properly sterilized as noted on the products’ packaging, and thus

misbranded. These products include the CAT, syringes, compressed gauze, tracheostomy kits, hypothermia

blankets, eye, ear, nose and throat kits, and trauma dressing. Relators allege Henry Schein controlled and

supervised NAR’s alleged misconduct for a period of time. Relators seek three times the amount of damages to be

proved at trial, statutory civil penalties, reasonable expenses, attorneys’ fees and costs, and prejudgment

interest. 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

in some cases involve our entering into settlement arrangements or consent decrees), and other matters arising out

of the ordinary course of our business. While the results of any legal proceeding cannot be predicted with certainty,

in our opinion none of these other pending matters are currently anticipated to have a material adverse effect on our

consolidated financial position, liquidity or results of operations.

As of March 30, 2024, we had accrued our best estimate of potential losses relating to claims that were probable to

result in liability and for which we were able to reasonably estimate a loss. This accrued amount, as well as related

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

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

factors, including probable recoveries from third parties.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

25

Note 12 – Stock-Based Compensation

Stock-based awards are provided to certain employees under our 2020 Stock Incentive Plan and to non-employee

directors under our 2023 Non-Employee Director Stock Incentive Plan (formerly known as the 2015 Non-

Employee Director Stock Incentive Plan) (together, the “Plans”). The Plans are administered by the Compensation

Committee of the Board of Directors (the “Compensation Committee”). Historically, equity-based awards to our

employees have been granted solely in the form of time-based and performance-based restricted stock units

(“RSUs”) with the exception of our 2021 plan year in which non-qualified stock options were issued in place of

performance-based RSUs and in 2022, when we granted time-based and performance-based RSUs, as well as non-

qualified stock options. For our 2023 plan year, we returned to granting our employees equity-based awards solely

in the form of time-based and performance-based RSUs. Our non-employee directors receive equity-based awards

solely in the form of time-based RSUs.

RSUs are stock-based awards granted to recipients with specified vesting provisions. In the case of RSUs, common

stock is delivered on or following satisfaction of vesting conditions. We issue RSUs to employees that primarily

vest (i) solely based on the recipient’s continued service over time, primarily with

four

-year cliff vesting and/or (ii)

based on achieving specified performance measurements and the recipient’s continued service over time, primarily

with

three

-year cliff vesting. RSUs granted to our non-employee directors primarily include

12

-month cliff vesting. 

For these RSUs, we recognize the cost as compensation expense on a straight-line basis.

For all RSUs, we estimate the fair value based on our closing stock price on the grant date. With respect to

performance-based RSUs, the number of shares that ultimately vest and are received by the recipient is based upon

our performance as measured against specified targets over a specified period, as determined by the Compensation

Committee. Although there is no guarantee that performance targets will be achieved, we estimate the fair value of

performance-based RSUs based on our closing stock price at time of grant.

Each of the Plans provide for certain adjustments to the performance measurement in connection with awards under

the Plans. With respect to the performance-based RSUs granted under our 2020 Stock Incentive Plan, such

performance measurement adjustments relate to significant events, including, without limitation, acquisitions,

divestitures, new business ventures, certain capital transactions (including share repurchases), differences in

budgeted average outstanding shares (other than those resulting from capital transactions referred to above),

restructuring costs, if any, amortization expense recorded for acquisition-related intangible assets (solely with

respect to performance-based RSUs granted in the 2023 and 2024 plan years), certain litigation settlements or

payments, if any, changes in accounting principles or in applicable laws or regulations, changes in income tax rates

in certain markets, foreign exchange fluctuations, the financial impact either positive or negative, of the difference

in projected earnings generated by COVID-19 test kits (solely with respect to performance-based RSUs granted in

the 2022 and 2023 plan years) and impairment charges (solely with respect to performance-based RSUs granted in

the 2023 and 2024 plan years), and unforeseen events or circumstances affecting us.

Over the performance period, the number of RSUs 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 is based on our actual performance metrics as defined under the 2020 Stock Incentive Plan.

Stock options are awards that allow the recipient to purchase shares of our common stock after vesting at a fixed

price set at the time of grant. Stock options were granted at an exercise price equal to our closing stock price on the

date of grant. Stock options issued in 2021 and 2022 vest one-third per year based on the recipient’s continued

service, subject to the terms and conditions of the 2020 Stock Incentive Plan, are fully vested

three years

 from the

grant date and have a contractual term of

ten years

 from the grant date, subject to earlier termination of term and

term acceleration upon certain events. Compensation expense for stock options is recognized using a graded

vesting method. We estimate grant date fair value of stock options using the Black-Scholes valuation model. 

During the three months ended March 30, 2024, we did

no

t grant any stock options.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

26

Our condensed consolidated statements of income reflect pre-tax share-based compensation expense of $

8

 million

and $

10

 million for the three months ended March 30, 2024 and April 1, 2023.

Total unrecognized compensation cost related to unvested awards as of March 30, 2024 was $

120

 million, which is

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

2.7

 years.

Our condensed consolidated statements of cash flows present our stock-based compensation expense as a

reconciling adjustment between net income and net cash provided by operating activities for all periods presented. 

There were no cash benefits associated with tax deductions in excess of recognized compensation for the three

months ended March 30, 2024 and April 1, 2023.

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 that most closely aligns to 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 Staff Accounting Bulletin Topic 14.

The following table summarizes the stock option activity for the three months ended March 30, 2024:

Stock Options

Weighted Average

Weighted Average

Aggregate

Exercise

Remaining Contractual

 Intrinsic

Shares

Price

Life (in years)

 Value

Outstanding at beginning of period

1,078,459

$

71.46

Granted

-

 - 

Exercised

(21,570)

62.71

Forfeited

(897)

82.62

Outstanding at end of period

1,055,992

$

71.63

7.3

$

8

Options exercisable at end of period

908,836

$

69.49

Weighted Average

Weighted Average

Aggregate

Number of

Exercise

Remaining Contractual

Intrinsic

Options

Price

Life (in years)

Value

Expected to vest

147,110

$

84.84

8.0

$

-

The following tables summarize the activity of our unvested RSUs for the three months ended March 30, 2024:

Time-Based Restricted Stock Units

Performance-Based Restricted Stock Units

Weighted

Weighted

Average

Intrinsic

Average

Intrinsic

Grant Date Fair

Value

Grant Date Fair

Value

Shares/Units

Value Per Share

Per Share

Shares/Units

Value Per Share

Per Share

Outstanding at beginning of period

1,655,393

$

70.34

208,742

$

78.02

Granted

432,350

76.56

450,333

76.81

Vested

(307,839)

62.51

(6,432)

63.01

Forfeited

(6,021)

81.48

(6,431)

83.07

Outstanding at end of period

1,773,883

$

73.19

$

75.52

646,212

$

75.68

$

75.52

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

27

Note 13 – Redeemable Noncontrolling Interests

Some minority stockholders in certain of our subsidiaries have the right, at certain times, to require us to acquire

their ownership interest in those entities at fair value. Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling interest holder under the terms of a put

option contained in contractual agreements. The components of the change in the redeemable noncontrolling

interests for the three months ended March 30, 2024 and the year ended December 30, 2023 are presented in the

following table:

March 30,

December 30,

2024

2023

Balance, beginning of period

$

864

$

576

Decrease in redeemable noncontrolling interests due to acquisitions of

noncontrolling interests in subsidiaries

(94)

(19)

Increase in redeemable noncontrolling interests due to business

acquisitions

-

326

Net income attributable to redeemable noncontrolling interests

2

6

Distributions declared, net of capital contributions

(6)

(19)

Effect of foreign currency translation gain (loss) attributable to

redeemable noncontrolling interests

(10)

5

Change in fair value of redeemable securities

42

(11)

Balance, end of period

$

798

$

864

Note 14 – Comprehensive Income

Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income and

are recorded directly to stockholders’ equity. 

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

March 30,

December 30,

2024

2023

Attributable to redeemable noncontrolling interests:

Foreign currency translation adjustment

$

(42)

$

(32)

Attributable to noncontrolling interests:

Foreign currency translation adjustment

$

(1)

$

(1)

Attributable to Henry Schein, Inc.:

Foreign currency translation adjustment

$

(232)

$

(188)

Unrealized loss from hedging activities

(2)

(13)

Pension adjustment loss

(5)

(5)

Accumulated other comprehensive loss

$

(239)

$

(206)

Total Accumulated other comprehensive loss

$

(282)

$

(239)

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

28

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

Three Months Ended

March 30,

April 1,

2024

2023

Net income

$

98

$

128

Foreign currency translation gain (loss)

(54)

25

Tax effect

-

-

Foreign currency translation gain (loss)

(54)

25

Unrealized gain (loss) from hedging activities

15

(4)

Tax effect

(4)

1

Unrealized gain (loss) from hedging activities

11

(3)

Comprehensive income

$

55

$

150

Our financial statements are denominated in U.S. Dollars. 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 three months ended March 30, 2024 and three months ended April 1, 2023 was

primarily due to changes in foreign currency exchange rates of the Euro, Brazilian Real, British Pound, Australian

Dollar, Swiss Franc and Canadian Dollar.

The hedging gain (loss) during the three months ended March 30, 2024, and April 1, 2023 was attributable to a net

investment hedge.

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

Three Months Ended

March 30,

April 1,

2024

2023

Comprehensive income attributable to

Henry Schein, Inc.

$

60

$

141

Comprehensive income attributable to

noncontrolling interests

3

3

Comprehensive income (loss) attributable to

Redeemable noncontrolling interests

(8)

6

Comprehensive income

$

55

$

150

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

29

Note 15

 –

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 unvested RSUs and upon

exercise of stock options using the treasury stock method in periods in which they have a dilutive effect.

A reconciliation of shares used in calculating earnings per basic and diluted share follows:

Three Months Ended

March 30,

April 1,

2024

2023

Basic

128,720,661

131,365,789

Effect of dilutive securities:

Stock options and restricted stock units

1,048,919

1,674,097

Diluted

129,769,580

133,039,886

The number of antidilutive securities that were excluded from the calculation of diluted weighted average common

shares outstanding are as follows:

Three Months Ended

March 30,

April 1,

2024

2023

Stock options

419,139

422,190

Restricted stock units

245,667

18,305

Total anti-dilutive securities excluded from earnings per share computation

664,806

440,495

Note 16 – Supplemental Cash Flow Information 

Cash paid for interest and income taxes was:

Three Months Ended

March 30,

April 1,

2024

2023

Interest

$

26

$

13

Income taxes

21

21

For the three months ended March 30, 2024 and April 1, 2023, we had $

15

 million and $

(4)

 million of non-cash net

unrealized gains (losses) related to hedging activities, respectively.

HENRY SCHEIN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except share and per share data)

 (unaudited

)

30

Note 17 – Related Party Transactions

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

formed on July 1, 2018, we entered into a

ten-year

 royalty agreement with Internet Brands whereby we will pay

Internet Brands approximately $

31

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

months ended March 30, 2024 and April 1, 2023, we recorded $

8

 million and $

8

 million, respectively, in

connection with costs related to this royalty agreement. As of March 30, 2024 and December 30, 2023, Henry

Schein One, LLC had a net payable balance to Internet Brands of $

3

 million and $

1

 million, respectively,

comprised of amounts related to results of operations and the royalty agreement. The components of this payable

are recorded within accrued expenses: other within our condensed consolidated balance sheets.

We have interests in entities that we account for under the equity accounting method. In our normal course of

business, during the three months ended March 30, 2024 and April 1, 2023, we recorded net sales of $

12

 million

and $

8

 million respectively, to such entities. During the three months ended March 30, 2024 and April 1, 2023, we

purchased $

3

 million and $

2

 million respectively, from such entities. At March 30, 2024 and December 30, 2023,

we had an aggregate $

31

 million and $

32

 million, respectively, due from our equity affiliates, and $

6

 million and

$

5

 million, respectively, due to our equity affiliates.

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 less than

one month

 to

17

years. As of March 30, 2024, current and non-current liabilities associated with related party operating leases were

$

5

 million and $

22

 million, respectively. At March 30, 2024 related party leases represented

6.7

% and

8.2

% of the

total current and non-current operating lease liabilities, respectively. At December 30, 2023 related party leases

represented

6.3

% and

7.4

% of the total current and non-current operating lease liabilities, respectively.

31

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

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

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

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

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

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

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

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

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

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

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

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

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

10-K. 

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; our

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

technologies that achieve market acceptance with acceptable margins; transitional challenges associated with

acquisitions, dispositions and joint ventures, including the failure to achieve anticipated synergies/benefits, 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; adverse changes in supplier rebates or

other purchasing incentives; risks related to the sale of corporate brand products; 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 limitation,

competition from third-party online commerce sites) and consolidating market; changes in the health care industry;

risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs

for our products or other service issues with our third-party shippers; general global 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; geopolitical wars; failure to comply with

existing and future regulatory requirements; risks associated with the EU Medical Device Regulation; failure to

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

laws and regulations relating to the collection, storage and processing of sensitive personal information or standards

in electronic health records or transmissions; changes in tax legislation; risks related to product liability, intellectual

property and other claims; 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; litigation

risks; 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; and disruptions in financial markets. The order in which these factors appear should not be

construed to indicate their relative importance or priority.

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

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

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

required by law.

32

Where You Can Find Important Information

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

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

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

Recent Developments

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

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

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

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

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

assumptions.

Cyber Incident

In October 2023 Henry Schein experienced a cyber 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 cycle management and patient relationship management solutions business, was not affected, and

our manufacturing businesses were mostly unaffected. On November 22, 2023, we experienced a disruption of our

ecommerce platform and related applications, which has since been remediated.

During the three months ended March 30, 2024, we continued to experience a residual impact of the cyber events

noted above relating primarily to decreased sales to episodic customers (customers that had generally registered a

less continuous level of demand pre-incident). We have a number of programs planned and underway focused on

re-establishing these customers.

We maintain cyber insurance, subject to certain retentions and policy limitations. With respect to the October 2023

cyber incident, we have a $60 million insurance policy, following a $5 million retention.

33

Executive-Level Overview

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

technology. 

We

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

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

We

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices and ambulatory surgery centers, as well

as government, institutional health care clinics and other alternate care clinics. 

We

believe that we have a strong

brand identity due to our more than 91 years of experience distributing health care products.

We are headquartered in Melville, New York, employ approximately 25,000 people (of which approximately

13,000 are based outside of the United States) and have operations or affiliates in 33 countries and territories. Our

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

strategic acquisitions.

We

have established strategically located distribution centers around the world to enable us to better serve our

customers and increase our operating efficiency. This infrastructure, together with broad product and service

offerings at competitive prices, and a strong commitment to customer service, enables us to be a single source of

supply for our customers’ needs.

While our primary go-to-market strategy is in our capacity as a distributor, we also market and sell our own

corporate brand portfolio of cost-effective, high-quality consumable merchandise products, including in vitro

diagnostic devices, manufacture certain dental specialty products in the areas of implants, orthodontics and

endodontics, manufacture drug products, and repackage/relabel prescription drugs and/or devices. 

We

have

achieved scale in these global businesses primarily through acquisitions, as manufacturers of these products

typically do not utilize a distribution channel to serve customers.

We

conduct our business through two reportable segments: (i) health care distribution and (ii) technology and

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

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

The health care distribution reportable segment, combining our global dental and medical operating segments,

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

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

orthodontic and endodontic products), diagnostic tests, infection-control products, PPE products, vitamins and

orthopedic implants. 

Our global technology and value-added services business provides software, technology and other value-added

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

systems for dental and medical practitioners. Our value-added practice solutions include practice consultancy,

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

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

practitioners.

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

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

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

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

national brand products, our corporate brand products and proprietary specialty products and solutions (including

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

including software and other value-added services.

34

Industry Overview

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

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

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

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

specialized management information support. 

We

believe that the trend towards cost containment has the potential

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

facilitation of practice management.

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

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

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

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

Industry Consolidation

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

and diverse. The industry ranges from sole practitioners working out of relatively small offices to group practices

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

combined or otherwise associated their practices.

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

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

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

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

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

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

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

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

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

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

We

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

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

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

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

customer base.

Our approach to acquisitions and joint ventures has been to expand our role as a provider of products and services

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

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

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

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

that we will be able to successfully accomplish this. 

We

also have invested in expanding our sales/marketing

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

based practitioner setting.

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

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

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

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

35

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

integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

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

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

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

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

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

According to the U.S. Census Bureau’s International Database, between 2024 and 2034, the 45 and older

population is expected to grow by approximately 11%. Between 2024 and 2044, this age group is expected to grow

by approximately 20%. This compares with expected total U.S. population growth rates of approximately 6%

between 2024 and 2034 and approximately 11% between 2024 and 2044.

According to the U.S. 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

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

aged 65 to 84 years is projected to increase by approximately 20% during the same period.

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

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

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

(“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 measure for

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

approximately $7.2 trillion by 2031, or 19.6% of the nation’s projected gross domestic product.

Government

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

promotion of pharmaceuticals and/or medical devices, and in this regard, we are subject to extensive local, state,

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

pharmaceuticals and medical devices, manufacturing activities, and as part of our specialty home medical supply

businesses that distribute and sell medical equipment and supplies directly to patients. Federal, state and certain

foreign governments have also increased enforcement activity in the health care sector, particularly in areas of fraud

and abuse, anti-bribery and anti-corruption, controlled substances handling, medical device regulations and data

privacy and security standards.

Certain of our businesses involve pharmaceuticals and/or medical devices, including in vitro diagnostic devices,

that are paid for by third parties and must operate in compliance with a variety of burdensome and complex coding,

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

commercial healthcare reimbursement programs.

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

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

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

and Education Reconciliation Act, each enacted in March 2010.

Certain of our businesses are subject to various additional federal, state, local and foreign laws and regulations,

including with respect to the sale, transportation, importation, storage, handling and disposal of hazardous or

potentially hazardous substances; “forever chemicals” such as per-and polyfluoroalkyl substances; amalgam bans;

pricing disclosures; supply chain transparency around labor practices; and safe working conditions. In addition,

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

36

pharmaceuticals, medical devices, medical supplies and/or medical treatments or services, are ongoing. CMS

recently released the 2024 durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”)

reimbursement schedule, which, effective January 1, 2024, reduced the DMEPOS reimbursement rates for non-

rural suppliers, such as us, by removing the Coronavirus Aid, Relief, and Economic Security (aka CARES) Act

relief rates in effect during the COVID-19 pandemic. This and other laws and regulations are subject to change and

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

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

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

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

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

fiscal year ended December 30, 2023, filed with the SEC on February 28, 2024.

Results of Operations

The following tables summarize the significant components of our operating results and cash flows for the three

months ended March 30, 2024 and April 1, 2023:

Three Months Ended

March 30,

April 1,

2024

2023

Operating results:

Net sales

$

3,172

$

3,060

Cost of sales

2,160

2,094

Gross profit

1,012

966

Operating expenses:

Selling, general and administrative

791

717

Depreciation and amortization

61

44

Restructuring costs

10

30

Operating income

$

150

$

175

Other expense, net

$

(23)

$

(12)

Net income

98

128

Net income attributable to Henry Schein, Inc.

93

121

Three Months Ended

March 30,

April 1,

2024

2023

Cash flows:

Net cash provided by operating activities

$

197

$

27

Net cash used in investing activities

(72)

(39)

Net cash provided by (used in) financing activities

(151)

21

37

Plan of Restructuring

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 three months ended March 30, 2024 and April 1, 2023, we recorded restructuring costs of $10 million

and $30 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, and other lease exit

costs.

38

Three Months Ended March 30, 2024 Compared to Three Months Ended April 1, 2023

Note: Percentages for Net Sales; Gross Profit; Operating Expenses; Other Expense, Net; and Income Taxes are

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

Net Sales

Net sales were as follows:

March 30,

% of

April 1,

% of

Increase

2024

Total

2023

Total

$

%

Health care distribution

(1)

Dental

$

1,914

60.3

%

$

1,898

62.0

%

$

16

0.8

%

Medical

1,041

32.9

971

31.8

70

7.3

 Total health care distribution

2,955

93.2

2,869

93.8

86

3.0

Technology and value-added services

(2)

217

6.8

191

6.2

26

13.8

Total

$

3,172

100.0

%

$

3,060

100.0

%

$

112

3.7

%

The components of our sales growth were as follows:

Total Local

Currency

Growth

Foreign

Exchange

Impact

Total Sales

Growth

Local Currency Growth

Local Internal

Growth

Acquisition

Growth

Health care distribution

(1)

Dental Merchandise

(3.7)

%

3.8

%

0.1

%

0.7

%

0.8

%

Dental Equipment

0.2

-

0.2

0.6

0.8

Total Dental

(2.9)

3.0

0.1

0.7

0.8

Medical

(0.7)

8.0

7.3

-

7.3

Total Health Care Distribution

(2.1)

4.6

2.5

0.5

3.0

Technology and value-added services

(2)

3.2

10.2

13.4

0.4

13.8

Total

(1.8)

%

5.0

%

3.2

%

0.5

%

3.7

%

(1)

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, vitamins, and orthopedic implants.

(2)

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

practice consultancy, education, revenue cycle management and financial services on a non-recourse basis, e-services, continuing

education services for practitioners, practice technology, network and hardware services, and other services.

Global Sales

Global net sales for the three months ended March 30, 2024 increased 3.7%. The components of our sales growth

are presented in the table above.

The 1.8% decrease in our internally generated local currency sales was primarily attributable to the residual impact

of the cyber incident related to decreased sales to episodic customers (customers that had generally registered a less

continuous level of demand pre-incident) and lower sales of PPE products and COVID-19 test kits. For the three

months ended March 30, 2024, the estimated decrease in internally generated local currency sales, excluding PPE

products and COVID-19 test kits, was 1.2%.

We estimate that sales of PPE products and COVID-19 test kits were approximately $181 million and $201 million

for the three months ended March 30, 2024 and April 1, 2023, respectively, representing an estimated decrease of

$20 million, or 10.0% versus the prior year, with the $20 million net decrease year-over-year representing 0.6% of

global net sales for the three months ended March 30, 2024.

39

Dental

Dental net sales for the three months ended March 30, 2024 increased 0.8%. The components of our sales growth

are presented in the table above. 

The increase in local currency sales was attributable to the acquisitions of Biotech Dental and S.I.N. during the year

ended December 30, 2023. The decrease in internally generated local currency sales for dental merchandise was

primarily attributable to the residual impact of the cyber incident. Our sales increase in internally generated local

currency for dental equipment was primarily attributable to some sales shifting into the first quarter of 2024 due to

the delay of equipment installations during the fourth quarter of 2023 resulting from the impact of the cyber

incident.

We estimate that sales of PPE products were approximately $79 million and $92 million for the three months ended

March 30, 2024 and April 1, 2023, respectively, representing an estimated decrease of $13 million, or 14.5% versus

the prior year, with the $13 million net decrease year-over-year representing 0.7% of dental net sales for the three

months ended March 30, 2024. The decrease in sales of PPE products is primarily due to lower market prices and

reduced demand following the cyber incident. The estimated decrease in internally generated local currency sales,

excluding PPE products, was 2.2%. 

Medical

Medical net sales for the three months ended March 30, 2024 increased 7.3%. The components of our sales growth

are presented in the table above. The increase in local currency sales was attributable to the acquisition of Shield

Healthcare during the year ended December 30, 2023. The internally generated local currency decrease in medical

sales is primarily attributable to the residual impact of the cyber incident as well as the conversion of certain

pharmaceutical product sales to lower priced generics, partially offset by strong sales of point-of-care diagnostics

including flu and multi-assay flu/COVID combination tests.

We estimate that sales of PPE products and COVID-19 test kits were approximately $102 million and $109 million

for the three months ended March 30, 2024 and April 1, 2023, respectively, representing an estimated decrease of

$7 million, or 6.2% versus the prior year, with the $7 million net decrease year-over-year representing 0.6% of

medical net sales for the three months ended March 30, 2024. The decrease in sales of these products is primarily

due to lower market prices of PPE products. The estimated increase in internally generated local currency sales,

excluding PPE products and COVID-19 test kits, was 0.1%.

Technology and value-added services

Technology and value-added services net sales for the three months ended March 30, 2024 increased 13.8%. The

components of our sales growth are presented in the table above. The internally generated local currency increase

in technology and value-added services sales is 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 services. We

also experienced increased demand for our revenue cycle management solutions and our analytical products.

Gross Profit

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

March 30,

Gross

April 1,

Gross

Increase

2024

Margin %

2023

Margin %

$

%

Health care distribution

$

867

29.3

%

$

837

29.2

%

$

30

3.5

%

Technology and value-added services

145

66.8

129

67.4

16

12.7

Total

$

1,012

31.9

$

966

31.6

$

46

4.7

40

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

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

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

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

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

gross margins to recover investments in research and development.

Within our health care distribution 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. 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 three months ended March 30, 2024 increased compared to the prior-

year-period due to gross profit from acquisitions and gross margin expansion as a result of a favorable impact of

sales mix of higher-margin products, partially offset by the decrease in sales resulting from the residual impact of

the cyber incident and a reduction in sales of PPE products and COVID-19 test kits.

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. The slight decrease in gross margin rates was primarily due to

amortization expense.

Operating Expenses

Operating expenses (consisting of selling, general and administrative expenses; depreciation and amortization; and

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

% of

% of

March 30,

Respective

April 1,

Respective

Increase

2024

Net Sales

2023

Net Sales

$

%

Health care distribution

$

741

25.1

%

$

692

24.1

%

$

49

7.0

%

Technology and value-added services

121

55.8

99

51.6

22

23.1

Total 

$

862

27.2

$

791

25.8

$

71

9.0

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

Operating Costs

Restructuring Costs

Acquisitions

Total

Health care distribution

$

43

$

(17)

$

23

$

49

Technology and value-added services

(6)

(3)

31

22

Total

$

37

$

(20)

$

54

$

71

The increase in operating costs during the three months ended March 30, 2024 includes increases in payroll and

payroll related costs, travel, and convention expenses in both of our reportable segments and increased acquisition

expenses in our healthcare distribution segment and an increase in accrued contingent consideration related to a

2023 acquisition in our technology and value-added services segment. During the three months ended March 30,

2024, we also incurred $5 million of expenses directly related to the cyber incident, mostly consisting of

professional fees.

41

Other Expense, Net

Other expense, net was as follows:

March 30,

April 1,

Variance

2024

2023

$

%

Interest income

$

5

$

3

$

2

127.1

%

Interest expense

(30)

(14)

(16)

(114.8)

Other, net

2

(1)

3

(363.5)

Other expense, net

$

(23)

$

(12)

$

(11)

(81.5)

Interest income increased primarily due to increased interest rates. Interest expense increased primarily due to

increased borrowings and increased interest rates.

Income Taxes

Our effective tax rate was 25.6% for the three months ended March 30, 2024 compared to 23.8% for the prior year

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

income taxes and interest expense.

The Organization of Economic Co-Operation and Development (OECD) issued 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 of March 30, 2024, the impact of the

Pillar Two Rules to our financial statements was immaterial. As we operate in jurisdictions which have adopted

Pillar Two, we are continuing to analyze the implications to effectively manage the impact for 2024 and beyond.

42

Liquidity and Capital Resources

Our principal capital requirements have included funding of acquisitions, purchases of additional noncontrolling

interests, repayments of debt principal, the funding of working capital needs, purchases of fixed assets and

repurchases of common stock. Working capital requirements generally result from increased sales, special

inventory forward buy-in opportunities and payment terms for receivables and payables. Historically, sales have

tended to be stronger during the second half of the year and special inventory forward buy-in opportunities have

been most prevalent just before the end of the year, and have caused our working capital requirements to be higher

from the end of the third quarter to the end of the first quarter of the following year.

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

placements. Please see

 for further information. Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which is susceptible to fluctuations during the

year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of

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

future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months. Funding requirements are based on

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

our funding structure to reflect any new requirements.

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

and our available funds under existing credit facilities provide us with sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Our acquisition strategy is focused on investments in companies that add new customers and sales teams, increase

our geographic footprint (whether entering a new country, such as emerging markets, or building scale where we

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

Net cash provided by operating activities was $197 million for the three months ended March 30, 2024, compared

to net cash provided by operating activities of $27 million for the prior year. The net change of $170 million was

primarily attributable to changes in working capital accounts, primarily accounts receivable and accounts payable

and accrued expenses; and lower cash net income. During the quarter ended March 30, 2024, the cyber incident

had several residual impacts to the operating cash flows from our working capital, net of acquisitions, including 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 $72 million for the three months ended March 30, 2024, compared to net

cash used in investing activities of $39 million for the prior year. The net change of $33 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 used in financing activities was $151 million for the three months ended March 30, 2024, compared to net

cash provided by financing activities of $21 million for the prior year. The net change of $172 million was

primarily due to increased net borrowings from debt to finance our investments and increased acquisitions of

noncontrolling interests in subsidiaries, partially offset by decreased repurchases of common stock.

43

The following table summarizes selected measures of liquidity and capital resources:

March 30,

December 30,

2024

2023

Cash and cash equivalents 

$

159

$

171

Working capital

 (1)

1,744

1,805

Debt:

Bank credit lines 

$

264

$

264

Current maturities of long-term debt 

103

150

Long-term debt 

2,010

1,937

Total debt 

$

2,377

$

2,351

Leases:

Current operating lease liabilities

$

75

$

80

Non-current operating lease liabilities

266

310

(1)

Includes $497 million and $284 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

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

Our cash and cash equivalents consist of bank balances and investments in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations increased to 50.4 days as of March 30, 2024 from

43.4 days as of April 1, 2023, which was primarily attributable to the impact of the cyber incident. During the three

months ended March 30, 2024, we wrote off approximately $2 million of fully reserved accounts receivable against

our trade receivable reserve. Our inventory turns from operations increased to 4.9 as of March 30, 2024 from 4.3 as

of April 1, 2023. Our working capital accounts may be impacted by current and future economic conditions.

Leases

We

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

and certain equipment. Our leases have remaining terms of less than one month to approximately 17 years, some of

which may include options to extend the leases for up to 15 years. As of March 30, 2024, our right-of-use assets

related to operating leases were $314 million and our current and non-current operating lease liabilities were $75

million and $266 million, respectively.

Stock Repurchases

On February 8, 2023, our Board of Directors authorized the repurchase of up to an additional $400 million in shares

of our common stock.

From March 3, 2003 through March 30, 2024, we repurchased $4.8 billion, or 91,393,533 shares, under our

common stock repurchase programs, with $190 million available as of March 30, 2024 for future common stock

share repurchases.

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 March 30, 2024 and April 1, 2023, our balance for redeemable noncontrolling

interests was $798 million and $864 million, respectively. Please see

 for further information.

44

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in Item

7 of our Annual Report on Form 10-K for the year ended December 30, 2023.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted or will be adopted, see

 of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk from that disclosed in Item 7A of our Annual

Report on Form 10-K for the year ended December 30, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our principal executive officer and

principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and

procedures as of the end of the period covered by this quarterly report as such term is defined in Rules 13a-15(e)

and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based

on this evaluation, our management, including our principal executive officer and principal financial officer,

concluded that our disclosure controls and procedures were effective as of March 30, 2024, to ensure that all

material information required to be disclosed by us in reports that we file or submit under the Exchange Act is

accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure and

that all such information is recorded, processed, summarized and reported within the time periods specified in the

SEC’s rules and forms, and the rules of the Nasdaq stock exchange.

Changes in Internal Control over Financial Reporting

The combination of continued acquisition integrations and systems implementation activity undertaken during the

quarter and carried over from prior quarters when considered in the aggregate, represents a material change in our

internal control over financial reporting.

During the quarter ended March 30, 2024, post-acquisition integration related activities continued for our medical

and dental businesses acquired during prior quarters. These acquisitions, the majority of which utilize separate

information and financial accounting systems, have been included in our condensed consolidated financial

statements since their respective dates of acquisition. 

In addition, we completed systems implementation activities related to a new ERP system for two of our dental

businesses in Brazil. Finally, we continued systems implementation activities in the US for two of our dental

businesses.

All continued acquisition integrations and systems implementation activity involve necessary and appropriate

change-management controls that are considered in our quarterly assessment of the design and operating

effectiveness of our internal control over financial reporting.

The deficiencies in internal control over financial reporting identified as of December 30, 2023 at the application

control level related to logical and user access management and segregation of duties have been the subject of

ongoing review and the development and implementation of specific remediation action plans, including the testing

and validation of control operating effectiveness, which is expected to be completed prior to year-end.

45

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance

that the objectives of the internal control system are met. Because of the inherent limitations of any internal control

system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company

have been detected.

PART II. OTHER INFORMATION 

ITEM 1. LEGAL PROCEEDINGS 

For a discussion of Legal Proceedings, see

 of the Notes to the Condensed Consolidated

Financial Statements included under Item 1.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Annual Report on

Form 10-K for the year ended December 30, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of equity securities by the issuer

Our share repurchase program, announced on March 3, 2003, originally allowed us to repurchase up to two million

shares pre-stock splits (eight million shares post-stock splits) of our common stock, which represented

approximately 2.3% of the shares outstanding at the commencement of the program. Subsequent additional

increases totaling $4.9 billion, authorized by our Board of Directors, to the repurchase program provide for a total

of $5.0 billion (including $400 million authorized on February 8, 2023) of shares of our common stock to be

repurchased under this program.

As of March 30, 2024, we had repurchased approximately $4.8 billion of common stock (91,393,533 shares) under

these initiatives, with $190 million available for future common stock share repurchases.

The following table summarizes repurchases of our common stock under our stock repurchase program during the

fiscal quarter ended March 30, 2024:

Total Number

Maximum Number

Total

of Shares

of Shares

Number

Average

Purchased as Part

that May Yet

of Shares

Price Paid

of Our Publicly

Be Purchased Under

Fiscal Month

Purchased (1)

Per Share

Announced Program

Our Program (2)

12/31/2023 through 2/3/2024

478,429

$

74.28

478,429

3,012,674

2/4/2024 through 3/2/2024

464,966

75.75

464,966

2,525,517

3/3/2024 through 3/30/2024

55,333

76.57

55,333

2,514,895

998,728

998,728

(1) All repurchases were executed in the open market under our existing publicly announced authorized program.

(2) The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the

closing price of our common stock at that time. This table excludes shares withheld from employees to satisfy minimum tax withholding

requirements for equity-based transactions.

46

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

During the three months ended March 30, 2024, (i)

Michael S. Ettinger

, the Company’s

Executive Vice President

and Chief Operating Officer

, and (ii)

Walter Siegel

, the Company’s

Senior Vice President and Chief Legal Officer

,

each

adopted

 a Rule10b5-1 trading arrangement which is a trading plan for the future sale of securities that is

intended to satisfy the affirmative defense of Exchange Act

Rule

10b5

-1(c), as well as the requirements of the

Company’s insider trading policy. Each plan is subject to an initial “cooling off” period during which there may be

no transactions between the adoption date and a date that is the later of 90 days or two business days following the

Company’s filing of its next quarterly report on Form 10-Q or Annual Report on form 10-K. On

March 4, 2024

,

Mr. Ettinger adopted the trading plan to sell a total of

12,240

 shares based on limit orders at a specified price, with

a term through

March 4, 2025

. On

March 7, 2024

, Mr. Siegel adopted the trading plan to sell

4,134

 shares based on

a limit order at a specified price, with a term through

March 7, 2025

.

ITEM 6. EXHIBITS

10.1

Henry Schein, Inc. Incentive Plan and Plan Summary, effective as of January 1,

2024.**+

10.2

Form of 2024 Restricted Stock Unit Agreement for time-based restricted stock

unit awards pursuant to the Henry Schein, Inc. 2020 Stock Incentive Plan (as

amended and restated effective as of May 21, 2020).**+

10.3

Form of 2024 Restricted Stock Unit Agreement for performance-based

restricted stock unit awards pursuant to the Henry Schein, Inc. 2020 Stock

Incentive Plan (as amended and restated effective as of May 21, 2020).**+

10.4

Form of 2024 Restricted Stock Unit Agreement for time-based restricted stock

unit awards pursuant to the Henry Schein, Inc. 2023 Non-Employee Director

Stock Incentive Plan (as amended and restated effective as of May 23,

2023).**+

31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

101.INS

Inline XBRL Instance Document - the instance document does not appear in the

Interactive Data File because its XBRL tags are embedded within the Inline

XBRL document+

101.SCH

Inline XBRL Taxonomy Extension Schema Document+

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document+

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document+

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document+

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document+

104

The cover page of Henry Schein, Inc.’s Quarterly Report on Form 10-Q for the

quarter ended March 30, 2024, formatted in Inline XBRL (included within

Exhibit 101 attachments).+

** Indicates management contract or compensatory plan or agreement.

+ Filed or furnished herewith.

47

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to

be signed on its behalf by the undersigned thereunto duly authorized.

Henry Schein, Inc.

(Registrant)

By: /s/ Ronald N. South

Ronald N. South

Senior Vice President and

Chief Financial Officer

(Authorized Signatory and Principal Financial

and Accounting Officer)

Dated: May 7, 2024