HSIC Henry Schein Inc - 10-K

Item 1A. Risk Factors

” for a discussion of additional burdens, risks and regulatory developments

that may

affect our results of operations and financial condition.

Proprietary Rights

We hold trademarks relating to the “Henry Schein

” name and logo, as well as certain other trademarks.

Additionally, certain of our manufacturing businesses hold patents on certain of our products.

We believe that we

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have taken necessary steps to protect our proprietary rights, but no assurance

can be given that we will be able to

successfully enforce or protect our rights in the event that they are infringed

upon by a third party.

Employees and Human Capital

At Henry Schein, we have long recognized that as a purpose-driven company, our commitment to creating shared

value drives positive societal and environmental impact while supporting long-term

business success.

Building

trusted relationships with the key stakeholders who make up our Mosaic of

Success - Team Schein Members

(TSMs), customers, suppliers, stockholders, and society, helps drive our Company’s sustained growth, amplifies

our collective strengths, and brings to life our vision of making the world healthier, together.

Overseen by the

Nominating and Governance Committee of our Board of Directors (“Board”)

with the Compensation Committee

also playing a role in environmental, social, and governance matters related

to human capital engagement and

executive compensation, some key 2025 highlights related to human capital

matters include:

Continuing to compensate employees based on role, experience, and

performance, consistent with fair

pay practices and competitive outcomes across the workforce;

Expanding our learning journey by educating TSMs on multiple components

of our culture and values,

creating an understanding of how to sustain a meaningful, inclusive, and learning

oriented culture; and

Continuing to drive a connected and caring community for our TSMs

by fostering an environment

where they can feel a sense of inclusion, belonging, and purpose.

At Henry Schein, our employees continue to be one of our greatest assets.

employ more than 25,000 people,

with approximately 48% of our workforce based in the United States and approximately

52% based outside of the

United States.

Approximately 14% of our employees are subject to collective bargaining agreements.

believe

that our relations with our employees are excellent.

TSMs are the cornerstone of our Company.

provide a connected and caring community that invests

in the

career journey of our TSMs and encourages their contribution to our

mission of making the world healthier.

Our

TSM experience strategy is centered around our Team Schein Values

under the pillars of Community, Caring, and

Career.

know our business success is built on the engagement and commitment

of our team, which is dedicated

to meeting the needs of their fellow TSMs, our customers, supplier partners, stockholders,

and society.

recognize the changes in how and where we work, and that a continued

connection to our long-standing values

is important for our team members as we evolve our culture.

Throughout 2025, we continued listening to our team

through our continuous listening program, including The Pulse Global Culture

Survey, quarterly Pulse surveys, and

TSM roundtables, to garner feedback from our TSMs on their employee experience.

believe that a great

employee experience also drives a great customer experience.

want all our TSMs to pursue their ambitions,

deliver within our value-driven culture, and enjoy a rewarding career enabled

by great people leaders.

Our recent listening efforts show that our Team Schein Values

and TSM community remain our top strengths, and

that overall TSM engagement is driven by a small set of people-centric factors,

led by how supported, well, and

connected TSMs feel, with communication and culture acting as amplifiers of

trust and inclusion.

Day-to-day

experience varies across teams, particularly during periods of change, shaping how

workload, pace, and priorities

are experienced.

The greatest opportunity lies in strengthening consistency and clarity around

direction and

expectations, so teams feel better supported as we continue to evolve.

The feedback from our listening efforts is

shared with our Executive Management Committee and Board, both of whom are

committed to addressing

identified opportunities.

Additionally, in 2025 we conducted our second Corporate Citizenship Barometer

quantify stakeholder perceptions of the Company’s environmental and social priorities, commitments, and impacts.

As part of this commitment, some highlights from 2025 included:

Community:

Provide opportunities for TSMs to have fun while contributing to an inclusive team that

respects and supports one another.

Continued our focus on creating an inclusive environment where TSMs

feel a sense of belonging;

notably, in 2025 for the fourth time, our top strength identified in The Pulse Global Culture Survey was

our Company’s inclusive culture.

To deepen our commitment to inclusion across the Company, Global

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Directors and Vice Presidents and U.S. Managers are responsible for attending educational training

focused on developing our culture.

continue to expand our learning journey, educating TSMs on

key topics that help us develop a culture of inclusion and understanding.

Completed our second year of Henry Schein Games, a global virtual platform

that drives community

and engagement and offers field-day type in-person events at various global locations

that brought

TSMs together through friendly competition by earning points for their team

by engaging in cultural-

related activities and posting photos.

Expanded the number of Connection Days throughout the globe at Henry Schein

facilities, which were

designed to boost team morale by bringing TSMs together to participate

in team building activities at

least once per quarter.

Continued focus on our Employee Resource Groups (“ERGs”), a vehicle

for all TSMs to share,

connect, learn, and develop both personally and professionally.

Each of our ERGs has a sponsor from

our Executive Management Committee and our Board.

Our Chief Executive Officer (“CEO”) engages

directly in many of our ERG programs.

Launched Functional Resource Groups (“FRGs”), a vehicle for TSMs to

learn, collaborate, and

problem-solve – bridging gaps and uniting global TSMs within similar functions

across departments,

regions, and work models.

Launched MySchein Reels and Community Explorer –pages on our internal intranet

that drive

awareness of various connection opportunities throughout the Company.

Piloted an enhanced workplace technology tool that offers functionality for collaboration by

allowing

teams to see when others are working in an office, seamless booking of spaces both at

Henry Schein

facilities and on-demand spaces, and a Company events calendar.

Certified an additional 100 TSMs through our Culture Ambassador Program,

which educates TSMs on

our culture and certifies TSMs as mentors to new hires during their first 90 days

to ensure new TSMs

understand how we live our values day to day, and how they can engage in the Team Schein Culture.

Caring:

Build a world we want to live in by supporting each other and the communities

in which we live

and work.

Continued to offer a variety of opportunities to volunteer to drive purpose and engage

in local

communities in which TSMs live and work, such as through Carry the Load, the

Care Global

Challenge, Back to School, and Holiday Cheer.

Continued to strengthen our strategic partnerships with industry associations, customers,

and suppliers

that support access to quality health care through various key programs and

initiatives (e.g., S.M.I.L.E.

Healthcare Pathway Program, Gives Kids A Smile, Cares Package Program, Global

Student Outreach

Program, and Prepare to Care).

In 2025, we shipped nearly 2,500 Henry Schein CARES packages to over 200

grant recipients.

These

packages contained donated products enabling health care heroes across

the globe to support screening,

restorative, and educational events.

Developed the Stan’s Service Award

program to honor Stanley M. Bergman’s legacy that aims to

celebrate TSMs who embody the philosophy of “doing well by doing good.” This

program awards a

limited number of cash grants to non-profit organizations globally where TSMs volunteer

their time.

Expanded our global and highly rated Steps for Suicide Prevention campaign,

which brings TSMs

together to walk for a cause and provide education, partnering with the American

Foundation for

Suicide Prevention, Suicide Awareness and Remembrance (for Veterans),

and other local

organizations.

also understand the importance of driving a culture of wellness

for our own team members through

our Mental Wellness Committee, which is supported by our CEO, Executive Management Committee,

and Board.

In 2025, we launched an “Intrinsic Motivation” campaign to help TSMs

understand what

drives them at work and how they can get more involved in initiatives that

align to that motivator to

help TSMs find work that is more meaningful, energizing, and fulfilling.

Career:

Provide opportunities for TSMs to develop personally and professionally with an emphasis on

embodying our values to achieve our collective goals with excellence

and integrity.

Launched The HELIX Network,

a leadership development program that cultivates high-performing

TSMs to represent Henry Schein with external partners.

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Implemented globally the Core Leadership Capabilities (CLCs) for all TSMs

that highlights the

leadership capabilities that all TSMs are expected to demonstrate for career

success.

The CLCs are a

common language and foundational step to developing and refining the tools,

processes, and programs

which support the evolution of a TSM’s career,

including enhancing skills and career development,

leading to enhanced career pathing and internal mobility.

Launched Career Explorer, a centralized hub for TSMs to access the tools and resources needed to

support their career journey.

The hub provides access to the Career & Leadership Opportunities page

which markets internal roles and assignments across the company to support

internal movement;

directs TSMs to the Global Talent & Development page for support in the talent, performance,

learning, and assessment space; highlights career stories from fellow TSMs

for inspiration; and details

our Core Leadership Capabilities, which provide transparency of the leadership

capabilities that all

TSMs are expected to demonstrate for career success.

Continued investment in our employees by providing both formal and

informal learning opportunities

focused on growing and enhancing knowledge, skills, and abilities through a broad

suite of professional

development training programs for current and future roles.

In 2025, we continued to add new

workshops that enabled TSMs to build the skills they need for today and for the

future.

Continued expansion of our Leadership Development programs, inclusive of

our formal mentorship

and coaching programs.

Continued roll-out of talent planning efforts designed to ensure a strong leadership

pipeline across the

organization by strategically identifying and developing talent through targeted development

opportunities and intentional succession plans.

Information derived from talent planning efforts

informs curriculum design and content to help focus on the right

capabilities and help ensure alignment

of career development efforts with the future needs of the organization.

Our Board is provided with

periodic updates regarding our talent and succession planning efforts and participates

in professional

development activities with our TSMs.

Enhanced company-wide recognitions, including our Teddy Philson Team Schein Award,

which was

redesigned in 2023 to provide more visibility and meaningful

recognition to TSMs who exemplify our

Team Schein Values,

as well as other programs including service awards which highlight TSMs who

exemplify our Team Schein Values.

In 2025, we recognized 16 award winners around the world at our

Global Directors and Vice Presidents Management Meeting.

Available Information

We make available free of charge through our website, www.henryschein.com,

our annual report on Form 10-K,

quarterly reports on Form 10-Q, current reports on Form 8-K, statements

of beneficial ownership of securities on

Forms 3, 4 and 5 and amendments to these reports and statements filed or furnished

pursuant to Section 13(a) and

Section 16 of the Securities Exchange Act of 1934 as soon as reasonably

practicable after such materials are

electronically filed with, or furnished to, the United States Securities and

Exchange Commission, or SEC.

Our

principal executive offices are located at 135 Duryea Road, Melville, New York 11747, and our telephone number

Unless the context specifically requires otherwise, the terms

the “Company,” “Henry Schein,”

“we,” “us” and “our” mean Henry Schein, Inc., a Delaware corporation,

and its consolidated subsidiaries.

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Information about our Executive Officers

The following table sets forth certain information regarding our executive

officers as of February 24, 2026:

Name

Age

Position

Stanley M. Bergman

Chairman, Chief Executive Officer, Director

Andrea Albertini

Chief Executive Officer, Global Distribution and Technology

Michael S. Ettinger

Executive Vice President and Chief Operating Officer

Mark E. Mlotek

Executive Vice President, Chief Strategic Officer

Tom Popeck

Chief Executive Officer, Henry Schein Products

Christine Sheehy

Senior Vice President, Chief Human Resources Officer

Ronald N. South

Senior Vice President, Chief Financial Officer

Stanley M. Bergman

has been our Chairman and Chief Executive Officer since 1989 and a director

since 1982.

Mr. Bergman held the position of President from 1989 to 2005.

Mr. Bergman held the position of Executive Vice

President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to 1985.

Mr. Bergman

is a South African Chartered Accountant and a Certified Public Accountant.

Mr. Bergman will retire as Chief

Executive Officer on March 1, 2026, following which Mr. Bergman will remain as Chairman of the Board.

Andrea Albertini

has been Chief Executive Officer, Global Distribution Group and Technology Group since

January 2025.

In this role, Mr. Albertini is responsible for our Global Distribution and Value-Added Services

segment and our Global Technology segment.

Mr. Albertini joined us in 2013 and has held several positions within

the organization including Chief Executive Officer, International Distribution Group, President, International

Distribution Group, President of our EMEA Dental Distribution Group,

and Vice-President of International Dental

Equipment.

Prior to joining Henry Schein, Mr. Albertini held leadership positions at Cefla Dental Group and

Castellini.

Michael S. Ettinger

has been our Executive Vice President and Chief Operating Officer since 2022.

Prior to his

current position, Mr. Ettinger served as Senior Vice President, Corporate & Legal Affairs, Chief of Staff and

Secretary from 2015 to 2022, Senior Vice President, Corporate & Legal Affairs and Secretary from 2013 to 2015,

Corporate Senior Vice President, General Counsel & Secretary from 2006 to 2013, Vice President, General

Counsel and Secretary from 2000 to 2006, Vice President and Associate General Counsel from 1998 to 2000

and

Associate General Counsel from 1994 to 1998.

Before joining us, Mr. Ettinger served as a senior associate with

Bower & Gardner and as a member of the Tax Department at Arthur Andersen.

Mark E. Mlotek

has been our Executive Vice President and Chief Strategic Officer since 2012.

Mr. Mlotek was a

director from 1995 to May 2025.

Prior to his current role, Mr. Mlotek was Senior Vice President and subsequently

Executive Vice President of the Corporate Business Development Group between 2000 and 2012.

Prior to that, Mr.

Mlotek was Vice President, General Counsel and Secretary from 1994 to 1999 and became a director in

Prior to joining us, Mr. Mlotek was a partner in the law firm of Proskauer Rose LLP, counsel to us,

specializing in mergers and acquisitions, corporate reorganizations and tax law from 1989 to 1994.

Tom

Popeck

has been our Chief Executive Officer, Henry Schein Products Group since January 2025.

In this role,

Mr. Popeck is responsible for our Global Specialty Products segment.

Since joining us in 2019, Mr. Popeck has

held several key positions including Chief Executive Officer, Healthcare Specialties Group, and President of our

Healthcare Specialties Group.

Prior to joining Henry Schein, Mr. Popeck held various sales leadership and general

management executive positions at Stryker.

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Christine Sheehy

has been our Senior Vice President, Chief Human Resources Officer since November 2024.

Sheehy joined us in 2019 and has held several key positions with increasing

responsibility, including Vice

President

of the Human Resources Business Partner function for our North America

Distribution Group, Healthcare

Specialties Group, several Global Oral Reconstruction businesses, and our

Corporate Functions.

Prior to joining

Henry Schein, Ms. Sheehy held various leadership positions at Standard Chartered

Bank and Banco Real.

Ronald N. South

has been our Senior Vice President

and Chief Financial Officer (and principal financial officer

and principal accounting officer) since 2022.

Prior to holding his current position, Mr. South was our Vice

President Corporate Finance since 2008, and Chief Accounting Officer from 2013 until 2022.

Prior to joining us in

2008 as our Vice President, Corporate Finance, Mr. South held leadership roles at Bristol-Myers Squibb and

PepsiCo, and held several roles of increasing responsibility with PricewaterhouseCoopers

LLP,

where he advised

clients located in the United States, Europe, and Latin America.

Mr. South is a Certified Public Accountant.

Other Executive Management

The following table sets forth certain information regarding other Executive

Management as of February 24, 2026:

Name

Age

Position

R. Steven Boggan

Chief Executive Officer, Global Oral Reconstruction Group, Americas

David Kochman

Senior Vice President, Chief Corporate Affairs Officer

James Mullins

Senior Vice President, Global Supply Chain

Kelly Murphy

Senior Vice President and General Counsel

Christopher Pendergast

Senior Vice President and Chief Technology Officer

R. Steven Boggan

has been our Chief Executive Officer, Global Oral Reconstruction Group since July 2025.

CEO of our Global Oral Reconstruction Group, which is part of our Global

Specialty Products segment, Mr.

Boggan leads commercial operations in the Americas, global marketing,

and R&D.

Mr. Boggan joined Henry

Schein, as the President and CEO of BioHorizons, which we acquired in

Mr. Boggan joined BioHorizons in

1995 and was promoted to President and CEO in 2000.

Prior to BioHorizons, Mr. Boggan was employed at Dow

Corning Wright and Wright Medical Technology

from 1989 until 1995.

David Kochman

has been our Senior Vice President, Chief Corporate Affairs Officer since January 2025.

Kochman joined us in 2015 and has held roles of increasing responsibility, including Vice President, Chief

Corporate Affairs Officer, and Vice

President, Corporate Affairs & Deputy Chief of Staff, Office of the CEO.

Prior

to joining Henry Schein, Mr. Kochman served as General Counsel and Corporate Development Officer for a

privately held company and was previously a Partner at the law firm Reed Smith

LLP.

James Mullins

has been our Senior Vice President of Global Supply Chain since 2018.

Mr. Mullins joined us in

1988 and has held a number of key positions with increasing responsibility, including Global Chief Customer

Service Officer.

Kelly Murphy

has been our Senior Vice President and General Counsel since 2021.

In 2025, in addition to her

global legal responsibilities, her role expanded to include leadership of

our Regulatory and Compliance functions.

Since joining us in 2011, Ms. Murphy has held several key positions of increasing responsibility within

the legal

function, most recently serving as Deputy General Counsel.

Christopher Pendergast

has been our Senior Vice President and Chief Technology Officer since 2018.

Prior to

joining us, Mr. Pendergast was employed by VSP Global from 2008 to 2018, most recently as the Chief

Technology Officer and Chief Information Officer.

Prior to VSP Global, Mr. Pendergast served in roles of

increasing responsibility at Natural Organics, Inc., from 2006 to 2008, IdeaSphere Inc./Twinlab Corporation from

2000 to 2006, IBM Corporation from 1987 to 1994 and 1998 to 2000

and Rohm and Haas from 1994 to 1998.

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ITEM 1A. Risk Factors

Our business operations could be affected by factors that are not presently known

to us or that we currently

consider not to be material to our operations, so you should not consider

the risks disclosed in this section to

necessarily represent a complete statement of all risks and uncertainties.

The Company believes that the following

risks could have a material adverse impact on our business, reputation, operating

results, financial condition and/or

the trading price of our common stock.

The order in which these factors appear does not necessarily reflect

their

relative importance or priority.

COMPANY RISKS

We are dependent upon third parties for the manufacture/supply of a significant volume of our products and

where we manufacture products, we are dependent upon third parties

for raw materials/purchased components.

We obtain a significant volume of the products we distribute from third parties, with whom we generally do not

have long-term contracts.

While there is typically more than one source of supply, some key suppliers, in the

aggregate, supply a significant portion of the products we sell.

In 2025, our top 10 Global Distribution and Value-

Added Services suppliers and our single largest supplier accounted for approximately

24% and 4%, respectively, of

our aggregate purchases.

Additionally, where we are the manufacturer of products for our speciality business (

dental implants, endodontics, and orthopedics), we are dependent upon third parties

for raw materials and

purchased components.

Although no single supplier is material, because of our dependence

upon such suppliers,

our operations are subject to the suppliers’ ability and willingness to supply

products in the quantities that we

require, and the risks include delays caused by interruption in production

based on conditions outside of our

control, including a supplier’s failure to comply with applicable government

requirements (which may result in

product recalls, product detentions, and/or cessation of sales) or an interruption

in the suppliers’ manufacturing

capabilities.

In the event of any such interruption in supply, we would need to timely identify and obtain acceptable

replacement sources.

There is no guarantee that we would be able to obtain such alternative

sources of supply on a

timely basis, if at all, and an extended interruption in supply, particularly of a high-sales volume and/or high-

margin product, could result in a significant disruption in our sales and operations,

as well as damage to our

relationships with customers and our reputation.

We may be unsuccessful in achieving our strategic growth objectives.

Our 2025 – 2027 BOLD+1 Strategic Plan is defined under “Business, Business

Strategy” above.

In particular, we

are focused on continuing to grow our Henry Schein specialty brands

and technology and value-added services

solutions both organically and inorganically, and to drive greater efficiencies.

If we are unable to effectively

implement our strategic plan, we may not achieve our desired return on our

investments through our growth

strategies.

Our business could be affected by the Strategic Partnership Agreement with KKR.

On January 29, 2025, we announced a strategic investment by

funds affiliated with KKR & Co. Inc. (“KKR”), a

leading global investment firm, and a Strategic Partnership Agreement (the “Partnership

Agreement”) with KKR.

Under the Partnership Agreement, two independent directors, Max Lin and

William K. “Dan” Daniel, joined our

Board of Directors.

On May16, 2025, we issued 3,285,151 shares of common stock

to funds affiliated with KKR

for an investment of $250 million, at approximately $76.10 per share.

Pursuant to the Partnership Agreement, KKR

also has the ability to purchase additional shares via open market purchases

up to a total equity stake of 14.9% of

the outstanding shares of common stock of the Company.

On November 4, 2025, the Company and KKR entered

into an amendment to the Partnership Agreement that increased the beneficial ownership

limit from 14.9% to19.9%

of the outstanding shares of the Company’s common stock that KKR is permitted to acquire during the

standstill

period.

The standstill provisions, including the increased ownership limit,

continue in effect for a period of six

months following the later of the expiration of the term of the Partnership Agreement

and the date on which no

KKR director appointed pursuant to the Partnership Agreement is serving on

the Company’s Board of Directors.

On December 7, 2025, pursuant to the Partnership Agreement, KKR notified

the Company of its election to

exercise the Extension Election (as defined in the Partnership Agreement) whereby

the Company’s Board of

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Directors will renominate KKR’s designees, Max Lin and William K. “Dan” Daniel, to stand for election at the

Company’s 2026 annual meeting of stockholders for a term expiring at the Company’s 2027 annual meeting of

stockholders. The Partnership Agreement may have unintended consequences,

such as uncertainty about our

management, operations, or future strategic direction, which could

result in the loss of future business opportunities

or negatively impact our ability to attract and retain qualified talent.

KKR also invests in many different types of

businesses, and has or may continue to invest in customers, suppliers,

joint venture partners, or other entities that

have relationships with the Company, or in competitors of such entities, which may create unintended conflicts

resulting in a loss of business.

Our future growth (especially for our Global Technology and Global Specialty Products segments) is dependent

upon our ability to develop or acquire and maintain and protect

new products and services and utilize new

technologies that achieve market acceptance with acceptable margins.

Our future success depends on our ability to timely develop (or obtain the right

to sell) competitive and innovative

(particularly for our Global Technology and Global Specialty Products segments) products and services and utilize

new technologies, such as artificial intelligence (“AI”) (among other emerging technologies)

and to market them

and/or utilize them quickly and cost-effectively.

Our ability to anticipate customer needs and emerging trends and

develop or acquire new products, services and technologies at competitive

prices requires significant resources,

including employees with the requisite skills, experience and expertise, particularly

in our Global Technology

segment, including dental practice management, patient engagement

and demand creation software solutions.

The

failure to successfully address these challenges could materially disrupt

our sales and operations.

We have increased and expect to continue to increase our use of AI technologies in various contexts to improve

customer and patient experiences and drive efficiencies in certain areas of our business,

including, without

limitation, making AI features available within our practice management

systems, which, among other things, helps

dentists and clinical staff detect caries.

While these innovations can present benefits to the Company, they also

create risks and challenges.

The use of AI in healthcare offerings poses certain clinical risks resulting

from

potential misdiagnosis or misinformation provided from AI applications, diminishing

critical judgment, or loss of

interpersonal care from clinicians.

These deficiencies could undermine the decisions, predictions,

or analysis AI

applications produce, as well as their adoption, subjecting us to competitive

harm, legal liability (including under

new proposed legislation regulating AI in jurisdictions such as the EU

or new applications of existing data

protection, privacy, intellectual property, and other laws), regulatory actions, and reputational harm.

In addition,

some AI scenarios, such as using AI applications to generate patient data

(including, without limitation, using AI to

capture and summarize patient interactions, and voice-activated perio charting),

present ethical, privacy, or other

social issues, risking reputational harm and/or reduced market demand

or acceptance of AI solutions.

The

safeguards we have designed to promote the ethical implementation

of AI may not be sufficient to protect us

against negative outcomes.

All of these risks are amplified by the critical nature of healthcare decisions

and the

sensitivity of health-related information, and the occurrence of any of

the above could have a material adverse

effect on our business, financial condition or operating results.

Additionally, if investments in emerging

technologies are less successful at attracting and retaining customers than

similar investments by our competitors,

or if we are otherwise unsuccessful at realizing the benefits of these

technological investments generally, this could

have a material adverse effect on our business, financial condition, or operating

results.

Additionally, widely

accessible generative AI that rapidly surpasses our organizational ability to understand

associated risks and

opportunities (including employees’ failure to comply with principles,

policies and processes governing AI usage)

could endanger our intellectual property, lead to misuse or loss of data and cause reputational harm and other fines,

penalties or losses.

Risks inherent in acquisitions, dispositions and joint ventures could

offset the anticipated benefits.

One of our business strategies has been to expand in part through acquisitions

and joint ventures and we expect to

continue to make acquisitions and enter into joint ventures in the future.

There is risk that one or more may not

succeed.

We cannot be sure, for example, that we will achieve the benefits of revenue growth that we expect from

these transactions or that we will avoid unforeseen additional costs, taxes,

or expenses.

Our ability to successfully

implement our acquisition and joint venture strategy depends upon,

among other things, the following:

the availability of suitable acquisition or joint venture candidates at

acceptable prices;

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our ability to consummate such transactions, which could potentially

be prohibited due to U.S. or

foreign antitrust regulations;

the liquidity of our investments and the availability of financing on

acceptable terms;

our ability to retain customers or product lines of the acquired businesses or

joint ventures;

our ability to retain, recruit and incentivize the management of the

companies we acquire; and

our ability to successfully integrate these companies’ operations, systems,

services, products and

personnel with our culture, management policies, legal, regulatory and compliance

policies,

information technology and cybersecurity systems and policies,

internal procedures, working capital

management, financial, operational and internal controls and strategies.

Furthermore, some of our acquisitions and future acquisitions may give

rise to an obligation to make contingent

payments or to satisfy certain repurchase obligations, which payments

could have material adverse impacts on our

financial results individually or in the aggregate.

Additionally, when we decide to sell assets or a business, we may

encounter difficulty in finding buyers or timely executing alternative exit strategies

on acceptable terms, which

could delay the accomplishment of our strategic objectives.

Dispositions may also involve continued financial

involvement in a divested business, such as through transition service agreements,

indemnities or other current or

contingent financial obligations.

Certain provisions in our governing documents and other documents to

which we are a party may discourage

third parties from seeking to acquire us that might otherwise result

in our stockholders receiving a premium

over the market price of their shares.

The provisions of our certificate of incorporation and by-laws may

make it more difficult for a third-party to

acquire us, may discourage acquisition bids and may impact the price

that certain investors might be willing to pay

in the future for shares of our common stock.

These provisions, among other things require (i) the affirmative vote

of the holders of at least 60% of the shares of common stock entitled to vote

to approve a merger, consolidation, or

a sale, lease, transfer or exchange of all or substantially all of our assets;

and (ii) the affirmative vote of the holders

of at least 66 2/3% of our common stock entitled to vote to (a)

remove a director; and (b) to amend or repeal our

by-laws, with certain limited exceptions.

In addition, certain of our employee incentive plans provide

for

accelerated vesting of equity awards upon termination without cause within

two years following a change in

control, or grant the plan committee discretion to accelerate awards

upon a change of control.

Further, certain

agreements between us and our executive officers provide for increased severance

payments and certain benefits if

those executive officers are terminated without cause by us or if they terminate

for good reason, in each case within

two years following a change in control or within ninety days prior to the

effective date of the change in control or

after the first public announcement of the pendency of the change

in control.

Adverse changes in supplier rebates or other purchasing incentives

could negatively affect our business.

The terms on which we purchase or sell products from many suppliers may

entitle us to receive a rebate or other

purchasing incentive based on the attainment of certain growth goals.

Suppliers may reduce or eliminate rebates or

incentives offered under their programs, or increase the growth goals or other conditions

we must meet to earn

rebates or incentives to levels that we cannot achieve.

Increased competition either from generic or equivalent

branded products could result in us failing to earn rebates or incentives

that are conditioned upon achievement of

growth goals.

Additionally, factors outside of our control, such as customer preferences, consolidation of suppliers

or supply issues, can have a material impact on our ability to achieve

the growth goals established by our suppliers,

which may reduce the amount of rebates or incentives we receive.

Sales of corporate brand products and products that we manufacture

entail additional risks, including the risk

that such sales could materially adversely affect our relationships with suppliers.

We offer

certain corporate brand products that are available exclusively

from us.

The sale of such corporate brand

products and the sale of products that we manufacture subject us to

potential product liability risks, mandatory or

voluntary product recalls, potential supply chain and distribution chain

disruptions and potential intellectual

property infringement risks, among other risks.

In addition, an increase in the sales of our corporate brand products

and our own manufactured products may negatively affect our sales of products

owned by our suppliers which,

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consequently, could adversely impact certain of our supplier relationships.

Our ability to locate qualified,

economically stable suppliers who satisfy our requirements, and

to acquire sufficient products in a timely and

effective manner, are critical to ensuring, among other things, that customer confidence is not diminished.

addition, we are exposed to the risk that our competitors or our large customers may

introduce their own private

label, generic, or low-cost products that compete with our products at

lower price points.

Such products could

capture significant market share or decrease market prices overall, eroding

our sales and margins.

Any failure to

develop sourcing relationships with a broad and deep supplier base

could have a material adverse effect on our

business, financial condition or operating results.

Our business could be affected by activist investors.

We actively engage in discussions with our stockholders.

In other cases, stockholders can engage in certain

divisive activist tactics, which can take many forms (including potential

proxy contests).

Some stockholder

activism has resulted in, and could in the future result in, substantial

costs, such as professional fees, and the

diversion of management’s and our Board of Directors’ attention and resources from our business and strategic

plans.

Additionally, it could cause uncertainty about our management, operations or future strategic direction,

which could result in the loss of future business opportunities or negatively

impact our ability to attract and retain

qualified talent.

Activists or other stockholders holding a large portion of our outstanding shares

could also exert

influence on actions requiring a stockholder vote, including the election of directors

and the approval of certain

extraordinary business transactions.

These risks could cause volatility in the trading price of our common

stock

based on factors other than the fundamentals of our business.

INDUSTRY RISKS

Security risks generally associated with our information systems and our

technology products and services have

in the recent past adversely affected our business and results of operations, and could

in the future materially

adversely affect our business and our results of operations if such products, services,

or systems (or third-party

systems we rely on) are interrupted, damaged by unforeseen events, are subject

to cyberattacks or fail for any

extended period of time.

We rely on information systems (“IS”) in our business to obtain, rapidly process, analyze, manage and store

customer, product, supplier and employee data to, among other things:

maintain and manage worldwide systems to facilitate the purchase and

distribution of thousands of

inventory items from numerous distribution centers;

receive, process and ship orders on a timely basis;

manage the accurate billing and collections for our customers;

process payments to suppliers;

provide products and services that maintain certain of our customers’ electronic

medical or dental

records (including protected health information of their patients); and

maintain and manage global human resources, compensation and payroll

systems.

There could be an adverse impact on our business, financial condition

or operating results if we do not maintain an

adequate information and technology infrastructure (

, hardware, networks, software, people and processes) to

effectively protect and support the current and future information requirements of the business.

In addition to

health information in our customers’ electronic medical and dental records, certain

of our IS store other sensitive

personal and financial information, such as health care and other information

related to our employees and

individuals we service, as well as other sensitive information such as

credit card information from our third-party

business partners, that is confidential, and in many cases subject to privacy

laws.

Our IS are susceptible to, among other things, natural disasters, power

losses, telecommunication failures,

cybersecurity threats and other criminal activity.

Information security risks have significantly increased

in recent

years in part because of an overall increase in cyber incidents, their increased

sophistication and the involvement of

organized crime, hackers, terrorists and foreign state agents.

The health care industry has been targeted by threat

actors seeking to undermine companies’ cybersecurity defensive

measures.

Moreover, cyberattacks have become

more difficult to detect and respond to.

They increasingly exploit AI and machine learning techniques,

such as

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generative AI-phishing, deepfake impersonations, automated vulnerability

discovery, adaptive malware and large-

scale credential-stuffing campaigns.

New subsidiaries that we acquire and non-integrated subsidiaries have

been,

and may continue to be, targets to cyberattacks as we update their defensive measures

to meet our standards.

have processes in place intended to ensure that our security measures

keep pace with new and emerging risks.

regularly review, monitor and implement multiple layers of security through technology, processes and our people.

We utilize security technologies designed to protect and maintain the integrity of our IS and data, and our defenses

are monitored and routinely tested internally and by external parties.

Despite these efforts, our facilities and

systems and those of our third-party service providers have been, and

may in the future be, vulnerable to privacy

and security incidents, cybersecurity attacks and data breaches, acts of

vandalism or theft, computer viruses and

other malicious code, misplaced or lost data, programming and/or human

errors, attacks or other acts undermining

IS of third party business partners including our customers, or other similar

events that could impact the security,

reliability and availability of our systems.

In addition, hardware, software or applications developed

internally or

procured from third parties may contain defects in design or manufacture

or other problems that could unexpectedly

compromise information security.

As a practical matter, so long as we depend on IS to operate our business, and

our business partners do the same, there can be no guaranty

that such measures will successfully stop any one

particular cybersecurity incident given the constantly evolving nature of

the threat.

We have incurred, continue to

incur, and may in the future incur substantial costs as we update our cybersecurity defense systems

and our general

computer controls to meet evolving challenges, and legislative or regulatory

action related to cybersecurity which

may increase our costs to develop or implement new technology products

and services.

A cyberattack that bypasses or compromises our, or our vendors’, IS cybersecurity and/or general

information

technology (“IT”) controls (including third-party systems we rely on)

causing an IS security breach may lead, and

has in the past led, to a disruption of our, or our vendors’, IS business systems (including third-party systems

rely on), interruption of operations (including, without limitation, receiving,

verifying and processing customer

orders, customer service, accounts payable, warehouse management and

shipping and systems tied to internal

controls over financial reporting), the loss or alteration of business,

financial and other protected information, a

negative impact on our financial performance, and to an adverse

impact on our financial accounting and reporting

controls.

A cyberattack that bypasses or compromises our IS cybersecurity

and/or general computer controls or

those of third parties with whom we engage may also lead to claims against

us by affected parties and/or

governmental agencies, and involve fines and penalties, as well as substantial

defense and settlement expenses.

Any of these impacts may alone, or collectively, have a material impact on our business.

A successful cyberattack

has, and may again in the future, disrupt our business operations, adversely

impact our financial accounting and

reporting of results of operations, divert the attention of management,

and adversely impact our results of

operations.

In addition, we develop products and provide services to our customers

that are technology-based, and a

cyberattack that bypasses the IS supporting our products or services causing

a security breach and/or perceived

security vulnerabilities in our products or services could also cause significant

loss of business and reputational

harm, and actual or perceived vulnerabilities may lead to claims against

us by our customers and/or governmental

agencies.

In addition, certain of our practice management products and services

purchased by health care

providers, such as physicians and dentists, are used to store and manage patient

medical or dental records, and when

cloud-based approaches are used, we may be responsible for hosting

those records.

These customers, and in some

cases, we are subject to laws and regulations which require that

they protect the privacy and security of those

records, and our products may be used as part of these customers’ comprehensive

data security programs, including

in connection with their efforts to comply with applicable privacy and security laws.

In addition to immaterial and unrelated incidents at certain of our subsidiaries,

in October 2023 Henry Schein

experienced a cybersecurity incident that primarily affected the operations of our

North American and European

dental and medical distribution businesses.

Henry Schein One, our practice management software, revenue

cycle

management and patient relationship management solutions business was

not affected, and our manufacturing

businesses were mostly unaffected.

Nevertheless, the October 2023 cybersecurity incident disrupted

key business

operations, adversely impacted our financial results for the fourth quarter

and full year 2023, diverted attention of

management, and caused the Company to incur significant remediation

costs.

The incident had residual impact on

our financial results in 2024.

We have spent, and plan to expend in the future, additional resources to continue to

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protect against, or to address problems caused by, business interruptions and data security breaches.

We also may

be perceived as a more vulnerable target of the cyber hackers as a result of the October

2023 incident.

The health care products distribution industry is highly competitive

(including, without limitation, competition

from third-party online commerce sites) and consolidating, and we may not

be able to compete successfully.

We compete with numerous companies, including several major manufacturers and distributors.

Some of our

competitors have greater financial and other resources than we do, which

could allow them to compete more

successfully.

Most of our products are available from several sources and our customers

tend to have relationships

with several distributors.

Competitors could obtain exclusive rights to market particular

products, which we would

then be unable to market.

Manufacturers also could increase their efforts to sell directly to end-users and

thereby

eliminate or reduce our role in distribution.

Industry consolidation among health care product distributors and

manufacturers, price competition, product unavailability, whether due to our inability to gain access to products or

to interruptions in manufacturing supply, or the emergence of new competitors, also could increase competition.

Consolidation has also increased among manufacturers of health care

products, which could have a material

adverse effect on our margins and product availability.

We could be subject to charges and financial losses in the

event we fail to satisfy minimum purchase commitments contained

in some of our contracts.

Additionally,

traditional health care supply and distribution relationships are being challenged

by online commerce solutions.

The continued advancement of online commerce by third parties and online

price transparency requires us to cost-

effectively adapt to changing technologies, to enhance existing services and to differentiate

our business (including

with additional value-added services) to address changing demands

of consumers and our customers.

The

emergence of such competition and our inability to anticipate and effectively respond to changes on

a timely basis

could have a material adverse effect on our business, financial condition or operating

results.

The health care industry is experiencing changes due to political, economic

and regulatory influences that could

materially adversely affect our business.

The health care industry is highly regulated and subject to changing

political, economic and regulatory influences.

Uncertainty surrounding possible changes to the health care environment,

including changes to regulatory

enforcement priorities, may directly or indirectly adversely affect us.

In recent years, the health care industry has

been undergoing significant changes driven by various efforts to reduce costs, including, among

other factors:

trends toward managed care; collective purchasing arrangements and

consolidation among office-based health care

practitioners; and changes in reimbursements to customers, including increased

attention to value-based payment

arrangements, as well as enforcement activities (and related

monetary recoveries) by governmental officials.

Both

our profitability and that of our customers may be materially adversely

affected by laws and regulations reducing

reimbursement rates for pharmaceuticals, medical supplies and devices,

and/or medical treatments or services,

changes to the methodology by which reimbursement levels are determined,

or regulating pricing, contracting and

discounting practices with respect to medical products and services.

It is possible that the adoption of the One Big

Beautiful Bill Act could impact eligibility for participation in Medicare

and Medicaid programs, resulting in a

change in utilization of the health care system.

In addition, a number of states are considering and enacting laws

regulations to expand their oversight of health care transactions, which

may impact the financial stability and

strategic opportunities of certain of our customers.

If we are unable to react effectively to these and other changes

in the health care industry, our business could be materially adversely affected.

The ACA greatly expanded health

insurance coverage in the United States and has been the target of legal and political

challenges since its adoption.

Any outcome of these challenges that changes the ACA could have

a significant impact on the U.S. health care

industry and the ability or willingness of individuals to engage with it.

Expansion of GPOs, DSOs, MSOs or provider networks and the

multi-tiered costing structure may place us at a

competitive disadvantage.

The health care products industry is subject to a multi-tiered costing structure, which

can vary by manufacturer

and/or product.

Under this structure, certain institutions can obtain more favorable

prices for health care products

than we are able to obtain.

The multi-tiered costing structure continues to expand as many large integrated health

care providers and others with significant purchasing power, such as GPOs, DSOs and MSOs, demand

more

favorable pricing terms.

Additionally, the formation of provider networks, GPOs, DSOs and MSOs may shift

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purchasing decisions to entities or persons with whom we do not have a historical

relationship and may threaten our

ability to compete effectively, which could in turn negatively impact our financial results.

In addition, such

organizations may establish direct relationships with manufacturers, thereby

either eliminating or reducing the

services historically provided by distributors.

Although we are seeking to obtain similar terms from manufacturers

to access lower prices demanded by GPO, DSO and MSO contracts or

other contracts, and to develop relationships

with existing and emerging provider networks, GPOs, DSOs and MSOs, we

cannot guarantee that such terms will

be obtained or contracts executed.

Increases in shipping costs or service issues with our third-party shippers

could harm our business.

Our ability to meet our customers’ expedited delivery expectations is an

integral component of our business

strategy for which our customers rely.

Shipping is a significant expense in the operation of our business.

We ship

almost all of our orders through third-party delivery services, and typically bear

the cost of shipment.

Accordingly,

any significant increase in shipping rates could have a material adverse

effect on our business, financial condition

or operating results.

While we have recently experienced increases in shipping costs,

we do not expect these

additional expenses to be material to our results now, however they could become material in a future fiscal period.

Similarly, strikes or other service interruptions by those shippers, including at transportation centers or shipping

ports, could cause our operating expenses to rise and materially adversely

affect our ability to deliver products on a

timely basis.

MACRO-ECONOMIC AND POLITICAL RISKS

Uncertain global and domestic macro-economic and political conditions

could materially adversely affect our

results of operations and financial condition.

Uncertain global and domestic macro-economic and political conditions

that affect the economy and the economic

outlook of the United States, Europe, Asia and other parts of the

world could have a material adverse effect on our

business, financial condition or operating results.

These uncertainties, include, among other things, those listed

under “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Cautionary

Note

Regarding Forward-Looking Statements.”

Additionally, changes in government, government debt and/or budget crises may lead to reductions in government

spending in certain countries, which could reduce overall health care spending

and/or lead to higher income or

corporate taxes, which could depress spending overall.

Recessionary or inflationary conditions and depressed

levels of consumer and commercial spending may also cause customers

to reduce, modify, delay,

or cancel plans to

purchase our products and may cause suppliers to reduce their output

or change their terms of sale.

We have

experienced inflationary pressures, including higher freight costs and

interest expense, and pressures resulting from

the strengthening of the dollar, which have and continue to impact our results of operations.

We generally sell

products to customers with payment terms.

If customers’ cash flow or operating and financial performance

deteriorate, or if they are unable to make scheduled payments or obtain

credit, they may not be able to, or may

delay, payment to us.

Likewise, for similar reasons suppliers may restrict credit or impose

different payment terms.

REGULATORY

AND LITIGATION RISKS

Failure to comply with existing and future regulatory requirements

could materially adversely affect our

business.

We strive to be compliant with the applicable laws, regulations and guidance described below in all material

respects, and believe we have effective compliance programs and other controls

in place to ensure substantial

compliance.

However, compliance is not guaranteed either now or in the future as certain laws, regulations

and

guidance may be subject to varying and evolving interpretations that could

affect our ability to comply, as well as

future changes, additions and enforcement approaches, including in light

of political changes.

Changes with

respect to the applicable laws, regulations and guidance described below

may require us to update or revise our

operations, services, marketing practices, and compliance programs

and controls, and may impose additional and

unforeseen costs on us, pose new or previously immaterial risks to us, or

may otherwise have a material adverse

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effect on our business.

There can be no assurance that current and future government

regulations will not adversely

affect our business, and we cannot predict new regulatory priorities, the form, content

or timing of regulatory

actions, and their impact on the health care industry and on our business

and operations.

Global efforts to contain health care costs continue to exert pressure on product pricing.

In the United States, there

has been increased scrutiny on drug pricing and concurrent efforts to control or

reduce drug costs by Congress, the

President, executive branch agencies and various states.

We may be required to report drug pricing data under

federal laws and regulations.

Several U.S. states have adopted laws, that may apply to some of

our operations, that

require drug manufacturers, including re-packagers or re-labelers, to provide

advance notice of certain price

increases and to report information relating to price increases, while

others have established prescription drug

affordability boards or multi-payer purchasing pools to reduce the cost of prescription

drugs.

At the federal level,

for example, the Inflation Reduction Act of 2022, among other things,

requires drug manufacturers that raise certain

of their drug prices faster than the rate of inflation to pay rebates to Medicare,

and over time will authorize the

federal government to negotiate directly with drug manufacturers to

lower the prices of certain brand-name drugs

covered by Medicare.

These various evolving efforts create uncertainty and may adversely affect our business.

Under the Sunshine Act, we are required to collect and report detailed

information regarding certain financial

relationships we have with covered recipients (

, physicians, dentists, teaching hospitals, other health care

practitioners) as well as physician ownership or investment interest.

We may be required to report information

under state transparency laws that address circumstances not covered

by the Sunshine Act.

We are also subject to

similar foreign transparency laws.

While we believe we have substantially compliant programs and controls

place satisfying the above laws and requirements, such compliance imposes

additional costs on us and the

requirements are sometimes unclear.

Our business is subject to additional requirements under various local, state,

federal and foreign laws and

regulations applicable to the sale and distribution of, and third-party payment

for, pharmaceuticals and medical

devices and HCT/P products.

Among the federal laws with which we must comply are the Controlled Substances

Act, the Food, Drug & Cosmetic Act, the Federal Drug Quality and Security

Act, including the Drug Supply Chain

Security Act, and Section 361 of the Public Health Services Act.

Among other things, such laws and the

regulations promulgated thereunder:

regulate the introduction, manufacture, advertising, marketing, promotion,

sampling, pricing,

reimbursement, labeling, packaging, storage, handling, returning,

recalling, reporting, distribution of,

disposal, and recordkeeping for drugs, HCT/P products and medical devices,

including unique device

identifiers;

subject us to inspection by the FDA, OSHA, and DEA and similar state

authorities;

regulate the storage, transportation and disposal of hazardous materials;

require us to advertise and promote our drugs and devices in accordance

with FDA regulations;

require us to report average sales price (ASP) to CMS for drugs or biologicals

payable under Medicare

Part B with or without a Medicaid drug rebate agreement;

require registration with the FDA and the DEA and various state agencies;

require us to design and operate a system to identify and report suspicious

orders of controlled

substances to the DEA and certain states;

require us to manage returns of products that have been recalled and subject

us to inspection of our

recall procedures and activities;

impose on us reporting requirements if a pharmaceutical, HCT/P product or

medical device causes an

adverse event, serious illness, injury or death;

require manufacturers, wholesalers, re-packagers and dispensers of prescription

drugs to identify and

trace certain prescription drugs as they are distributed;

require the licensing of prescription drug wholesalers and third-party

logistics providers; and

mandate compliance with standards for the recordkeeping, storage,

handling and documentation of

transactions involving prescription drugs and devices and associated

reporting requirements.

The FDA regulates certain computer software and digital health products intended

for use in health care settings,

including, for example, AI and machine learning-enabled medical devices

and the cybersecurity of medical devices.

Certain of our businesses involve the development and sale of

software and related products to support physician

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and dental practice management, and it is possible that the FDA or

foreign government authorities could determine

that one or more of our products is subject to regulation as a medical device,

which could subject our businesses to

substantial additional requirements, costs, potential enforcement actions

or liabilities for noncompliance with

respect to these products.

For example, some of our imaging software is regulated

as a medical device which

subjects our businesses to substantial additional requirements, costs

and potential enforcement actions or liabilities

for noncompliance with respect to these products.

Applicable federal, state, local and foreign laws and regulations also may

require us to meet various standards

relating to, among other things, licensure, registration, program eligibility, procurement, third-party reimbursement,

sales and marketing practices, product integrity and supply

tracking to product manufacturers, product labeling,

personnel, privacy and security of health or other personal information,

installation, maintenance and repair of

equipment and the importation and exportation of products.

The FDA, DEA, OCR, and state privacy regulators, as

well as CMS (including with respect to complex Medicare reimbursement

requirements applicable to our specialty

home medical supplies business) and state Medicaid agencies, have

recently increased their regulatory and

enforcement activities and, in particular, the DEA has heightened enforcement activities due to the

opioid crisis in

the United States.

The failure to comply with any of these laws or regulations, or new interpretations

of them, or the imposition of any

additional laws and regulations, could materially adversely affect our business.

The costs to us associated with

complying with the various applicable statutes and regulations, as they now

exist and as they may be modified,

could be material.

Allegations by a governmental body that we have not complied

with these laws could have a

material adverse effect on our businesses.

While we believe that we are substantially compliant with

applicable

laws and regulations, and have adequate compliance programs and controls

in place to ensure substantial

compliance, if it is determined that we have not complied with these laws,

we are potentially subject to warning

letters, substantial civil and criminal penalties, mandatory recall of product,

seizure of product and injunction,

consent decrees and suspension or limitation of payments to us, product

sale and distribution.

If we enter into

settlement agreements to resolve allegations of non-compliance, we

could be required to make settlement payments

or be subject to civil and criminal penalties, including fines and

the loss of licenses.

Non-compliance with

government requirements could also adversely affect our ability to participate in

important federal and state

government health care programs, such as Medicare and Medicaid,

and damage our reputation.

The EU Medical Device Regulation (“MDR”) may adversely affect our business.

The EU MDR significantly modified the regulatory compliance requirements

for the medical device industry as a

whole.

Among other things, as mentioned above, the EU

MDR:

strengthens the rules on placing devices on the market and reinforces

surveillance thereafter;

establishes explicit provisions on manufacturers’ responsibilities

for the follow-up of the quality,

performance and safety of devices placed on the market;

improves the traceability of medical devices throughout the supply chain to

the end-user or patient

through a unique identification number;

sets up a central database (EUDAMED) to provide patients, health care

professionals and the public

with comprehensive information on devices, importers, and distributors

registered in the EU;

strengthens rules for the assessment of certain high-risk devices, such

as implants, which may have to

undergo an additional check by experts before they are placed on the market; and

contains specific provisions in the event of interruption or discontinuation

of supply of a device.

The EU MDR imposes strict requirements for the confirmation that a

product meets the regulatory requirements,

including regarding a product’s clinical evaluation and a company’s quality systems, and for the distribution,

marketing and sale of medical devices, including post-market surveillance.

Pursuant to Regulation 2023/607 and

subject to certain conditions, medical devices that (i) obtained

a certificate under the EU Medical Device Directive

from May 25, 2017, (ii) which was still valid on May 26, 2021, and (iii)

has not been subsequently withdrawn may

continue to be placed on the market or put into service until December

31, 2027 for higher risk devices or

December 31, 2028 for medium and lower risk devices.

The modifications created by the EU MDR may have an

impact on the way we design and manufacture products and the way we

conduct our business in the EEA.

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If we fail to comply with laws and regulations relating to health care

fraud or other laws and regulations, we

could suffer penalties or be required to make significant changes to our operations,

which could materially

adversely affect our business.

Certain of our businesses are subject to federal and state (and similar

foreign) health care fraud and abuse, referral

and reimbursement laws and regulations with respect to their operations.

Some of these laws, referred to as “false

claims laws,” prohibit the submission or causing the submission of false or

fraudulent claims for reimbursement to

federal, state and other health care payers and programs.

Other laws, referred to as “anti-kickback laws,” prohibit

soliciting, offering, receiving or paying remuneration in order to induce or reward

the referral of a patient or

ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing

of, items or

services that are paid for by federal, state and other health care payers and programs.

Certain additional state and

federal laws, such as the federal Physician Self-Referral Law (“Stark Law”),

prohibit physicians and other health

care professionals from referring a patient to an entity with which

the physician (or family member) has a financial

relationship, for the furnishing of certain designated health services

(for example, durable medical equipment and

medical supplies), unless an exception applies.

The fraud and abuse laws and regulations have been subject to heightened

enforcement activity over the past few

years, often as the result of “relators” who serve as whistleblowers by filing

complaints in the name of the United

States (and if applicable, particular states) under applicable false claims

laws, and who may receive up to 30% of

total government recoveries.

Penalties under fraud and abuse laws may be severe, including treble damages

and

substantial civil penalties under the federal False Claims Act, as

well as potential loss of licenses and the ability to

participate in federal and state health care programs, criminal penalties,

or imposition of a corporate compliance

monitor, which could have a material adverse effect on our business.

Also, these measures may be interpreted or

applied by a prosecutorial, regulatory or judicial authority in a

manner that could require us to make changes in our

operations or incur substantial defense and settlement expenses.

Even unsuccessful challenges by regulatory

authorities or relators could result in reputational harm and the incurring of

substantial costs.

Most states have

adopted similar state false claims acts, and these state laws have their

own penalties which may be in addition to

federal False Claims Act penalties, and other fraud and abuse laws.

The U.S. government and industry trade associations (among others) have expressed

concerns about financial

relationships between suppliers or manufacturers on the one hand and

physicians, dentists and other health care

providers, on the other.

As a result, we regularly review and revise our marketing

practices as necessary to

facilitate compliance.

Our aspirations, goals and disclosures related to environmental, social

and governance matters and the focus on

regulators and private litigants among other things on related claims made

by companies and funds expose us to

numerous risks, including reputational, financial, legal and other risks,

that could have an adverse impact on us.

California has adopted stringent new climate disclosure requirements, as

has the EU.

We are subject to Directive (EU) 2022/2464 on corporate sustainability reporting (“CSRD”) which became

effective on January 5, 2023.

CSRD requires in-scope companies to report sustainability-related information

that is

material from both a financial risk or opportunity and an environmental

or social impact perspective, and the

assessment of materiality is inherently subjective.

Furthermore, Directive No. 2025/794 of 14 April 2025, the

“Omnibus” Directive, amended Directive 2022/2464 by introducing a

two-year postponement of the sustainability

reporting requirements for financial years beginning on or after 1

January 2025 and on or after 1

January 2026.

This “Omnibus” legislative package amending the CSRD alters the scope,

thresholds, timing and contents of

reporting obligations, which may increase our costs.

CSRD is being transposed into national law across EU

Member States, and further legislative or implementation changes may

also increase our costs.

We also are subject to certain United States and foreign laws and regulations concerning the conduct of our foreign

operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery

Act, German anti-corruption laws

and other anti-bribery laws and laws pertaining to the accuracy of our internal

books and records.

Our businesses

are generally subject to numerous other laws and regulations that

could impact our financial results, including,

without limitation, securities, antitrust, consumer protection and marketing

laws and regulations.

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In the EU, Directive No. 2019/1937 of October 23, 2019,

on the protection of persons who report breaches of

Union law,

organizes the legal protection of whistleblowers.

This Directive covers whistleblowers reporting

breaches of EU laws and regulations and protects a wide range of people,

including former employees.

All private

companies with 50 or more employees are required to create effective internal reporting

channels.

All EU Member

States have now implemented the Directive.

In the EU, both active and passive corruption in the private sector are

criminalized.

The EU Council Framework

Decision 2003/568/JHA of 22 July 2003

on combating corruption in the private sector

establishes more detailed

rules on the liability of legal persons and deterrent sanctions.

However, the liability of legal persons is regulated at

a national level.

Failure to comply with fraud and abuse laws and regulations, and other

laws and regulations, could result in

significant civil and criminal penalties and costs, including the loss of

licenses and the ability to participate in

federal and state health care programs, and could have a material adverse

effect on our business.

We may

determine to enter into settlements, make payments, agree to consent decrees

or enter into other arrangements to

resolve such matters.

Intentional or unintentional failure to comply with settlement agreements

or consent decrees

could materially adversely affect our business.

While we believe that we are substantially compliant with applicable

laws and regulations, and believe we have

adequate compliance programs and controls in place to ensure substantial

compliance, we cannot predict whether

changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response

changes in applicable law or interpretation of laws, could have a material

adverse effect on our business.

If we fail 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,

we could be required to make

significant changes to our products, or incur substantial fines, penalties, or

other liabilities.

Our businesses that involve physician and dental practice management

products, equipment and our specialty home

medical supplies businesses, and our self-funded employee benefits programs

include information technology (IT)

systems that store and process personal health, clinical, financial, and

other sensitive information of individuals.

These IT systems may be vulnerable to breakdown, wrongful intrusions, data

breaches and malicious attack, which

could require us to expend significant resources to eliminate these

problems and address related security concerns,

and could involve claims against us by private parties and/or governmental agencies.

We are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and regulations

that protect the privacy and security of personal information (including

health data), such as HIPAA, CAN-SPAM,

TCPA, Section 5 of the FTC Act, the CCPA/CPRA

and various other privacy laws that have or will soon come

into

effect.

Laws and regulations relating to privacy and data protection

are continually evolving and subject to

potentially differing interpretations, including those relating to AI.

These requirements may not be harmonized,

may be interpreted and applied in a manner that is inconsistent from one

jurisdiction to another or may conflict with

other rules or our practices.

In addition to state-specific data breach notification laws (which exist in

all U.S. states

and territories), cybersecurity laws such as the federal Cyber Incident

Reporting for Critical Infrastructure Act of

2022, proposed Federal Acquisition Regulations and amendments to SEC

reporting requirements may require us to

provide notifications about cybersecurity incidents in limited timeframes and

before investigations are complete.

Our businesses’ failure to comply with these laws and regulations could expose

us to breach of contract claims,

substantial fines, penalties and other liabilities and expenses, costs

for remediation and harm to our reputation.

Evolving laws and regulations in this area could restrict the ability

of our customers to obtain, use or disseminate

patient information, or could require us to incur significant additional

costs to re-design our products to reflect these

legal requirements, which could have a material adverse effect on our operations.

In addition, the European Parliament and the Council of the EU adopted

the GDPR that has been effective since

May 25, 2018, which increased privacy rights for Data Subjects in

the European Economic Area (EEA), including

individuals who are our customers, suppliers and employees.

The GDPR extended the scope of responsibilities for

data controllers and data processors, and generally imposes increased

requirements and potential penalties on

companies, such as us, that are either established in the EU and process personal

data of Data Subjects (regardless

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the Data Subject location), or that are not established in the EU but

that offer goods or services to Data Subjects in

the EU or monitor their behavior in the EU. Noncompliance can result

in penalties of up to the greater of EUR 20

million, or 4% of global company revenues (sanction that may be public),

and Data Subjects may seek damages.

Member states may individually impose additional requirements and penalties

regarding certain limited matters (for

which the GDPR left some room of flexibility), such as employee personal data.

With respect to the personal data

it protects, the GDPR requires, among other things, controller accountability, consents from Data Subjects or

another acceptable legal basis to process the personal data, notification

within 72 hours of a personal data breach

where required, data integrity and security, and fairness and transparency regarding the storage, use or other

processing of the personal data.

The GDPR also provides rights to Data Subjects relating notably

to information,

access, rectification, erasure of the personal data and the right to object to

the processing.

Despite Brexit, the UK

also has data protection laws equivalent to the GDPR and has implemented

further data protection related

legislation.

Switzerland enacted FADP.

Data protection authorities located in different EU Member States may

interpret GDPR differently, or requirements of national laws may vary between the EU Member States, UK and

Switzerland, or guidance on GDPR and related laws and compliance practices

may be often updated or otherwise

revised.

Any of these events will increase the complexity and costs of

processing personal data in the European

Economic Area, UK or Switzerland or concerning individuals located

in these jurisdictions.

Effective November 1, 2021, China’s PIPL imposes specific rules for processing personal information and specifies

that the law shall also apply to personal information activities carried

out outside China but for the purpose of

providing products or services to PRC citizens.

Any non-compliance with these laws and regulations may

subject

us to fines, orders to rectify or terminate any actions that are deemed

illegal by regulatory authorities, other

penalties, reputational damage, or legal proceedings against us, which

may affect our business, financial condition

or results of operations.

The PIPL carries maximum penalties of CNY50 million or

5% of the annual revenue of

entities that process personal data.

Data protection laws in other countries, such as Brazil, are

also quickly

evolving, with many countries having updated, or are in the process

of updating, their laws to bring them more in

line with the model created by GDPR.

In the United States, the CCPA, effective January 1, 2020, establishes a privacy framework for covered businesses

such as ours by, among other things, creating an expanded definition of personal information, establishing new data

privacy rights for California residents and creating a new and potentially

severe statutory damages framework for

violations of the CCPA, as well as potentially severe statutory damages and a private right of action against

businesses that suffer a data security breach due to their violation of a duty to

implement reasonable security

procedures and practices.

This private right of action may increase the likelihood of, and risks associated

with, data

breach litigation.

In addition, California voters adopted the CPRA (effective January 1, 2023)

which enhances and

strengthens regulatory requirements and individual protections that currently

exist under the CCPA.

Effective as of

January 1, 2026, the CCPA/CPRA regulatory framework includes expanded requirements.

Other states have

enacted or are considering enacting similar privacy laws, which may subject

us to additional requirements and

restrictions that could have an impact on our business.

As of January 1, 2026, comprehensive privacy laws are now

in effect in 20 states, further complicating our privacy compliance obligations through

the introduction of

increasingly disparate requirements across the various U.S. jurisdictions

in which we operate.

Additionally, certain

states have enacted specific health data privacy laws and other states

are considering similar legislation.

Congress

is considering legislation that may preempt some or all of such U.S. state

privacy laws, but which may also provide

a more expansive private right of action for privacy claims than exists under

current state laws.

The evolving complexity of privacy and data security legislation in

the U.S. and other jurisdictions globally may

complicate our compliance efforts and further increase our risk of regulatory enforcement,

penalties and litigation.

While we believe we have substantially compliant programs and controls

in place to comply with privacy laws

domestically and internationally, our compliance with data privacy and cybersecurity laws is likely to impose

additional costs on us, and we cannot predict whether the interpretations

of the requirements, or changes in our

practices in response to new requirements/interpretations, could have

a material adverse effect on our business.

Our products and services utilize new technologies, such as AI.

The regulatory landscape for AI is changing

rapidly, with both domestic and international activity.

While there is currently no comprehensive federal legislation

in the U.S. concerning the use, development or deployment of AI, regulators

pursue AI-related enforcement actions

under existing federal consumer protection laws and have issued related

guidance.

Further, state privacy, consumer

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protection and AI-specific laws are proliferating and may be applicable to our

business.

Other countries are also

applying their data and consumer protection laws to AI, particularly

generative AI, and are considering and

implementing specific legal frameworks with respect to AI.

Regulation (EU) 2024/1689 on harmonized rules on

artificial intelligence (the EU AI Act), for example, establishes a comprehensive

regulatory framework for AI that

became law in August 2024 with implementation phased through

into 2027.

As with the GDPR, it has extra-

territorial effect.

Any failure or perceived failure by us to comply with such requirements

could have an adverse

impact on our business.

Anticipated further evolution of regulations and legislation

on this topic may substantially

increase the penalties to which we could be subject in the event of any

non-compliance.

Compliance with these

laws is challenging, constantly evolving and time consuming and federal

regulators, state attorneys general and

plaintiff’s attorneys have been and will likely continue to be active in this space.

We may incur substantial expense

in complying with legal obligations to be imposed by new regulations

and we may be required to make significant

changes to our solutions and expanding business operations, all of which

may adversely affect our operations.

We also sell products and services that health care providers, such as physicians and dentists, use to store and

manage patient medical or dental records.

These customers and we are subject to laws, regulations and

industry

standards, such as HIPAA and the Payment Card Industry (PCI) Data Security Standards, which require the

protection of the privacy and security of those records.

Our products or services may be used as part of these

customers’ comprehensive data security programs, including in connection

with their efforts to comply with

applicable data privacy and security laws and contractual requirements.

Perceived or actual security vulnerabilities

in our products or services, or the perceived or actual failure by us

or our customers who use our products or

services to comply with applicable legal or contractual data privacy and

security requirements, may not only cause

us significant reputational harm, but may also lead to claims against us by our

customers and/or governmental

agencies and involve substantial fines, penalties and other liabilities and

expenses and costs for remediation.

Additionally, under the GDPR (and equivalent laws) and U.S. state privacy laws, health data belong to the category

of “sensitive data” and benefit from specific protection.

Processing of such data is generally prohibited, except for

specific exceptions.

Certain of our businesses involve the manufacture and sale of electronic

health record (EHR) systems and other

products linked to government supported incentive programs, where

the EHR systems must be certified as having

certain capabilities designated in evolving standards, such as those adopted

by CMS and ONC.

In order to maintain

certification of our EHR products, we must satisfy the changing governmental

standards.

If any other EHR systems

do not meet these standards, yet have been relied upon by health care providers

to receive federal incentive

payments, we may be exposed to risk, such as under federal health care

fraud and abuse laws, including the False

Claims Act.

Additionally, effective September 1, 2023, the HHS-OIG issued a final rule implementing civil money

penalties for information blocking as established by the Cures Act.

OIG incorporated regulations published by

ONC as the basis for enforcing information blocking penalties.

Each information blocking violation carries a $1

million penalty.

While we believe we are substantially in compliance with such certifications

and with applicable

fraud and abuse laws and regulations and that we have adequate compliance

programs and controls in place to

ensure substantial compliance, we cannot predict whether changes in

applicable law, or interpretation of laws, or

resulting changes in our compliance programs and controls, could have a

material adverse effect on our business.

Moreover, in order to satisfy our customers and comply with evolving legal requirements, our products

may need to

incorporate increasingly complex functionality, such as reporting and information blocking.

Although we believe

we are positioned to accomplish this, the effort may involve increased costs, and

our failure to implement product

modifications, or otherwise satisfy applicable standards, could have a

material adverse effect on our business.

Additionally, as electronic medical devices are increasingly connected to each other and to other technology, the

ability of these connected systems to safely and effectively exchange and use exchanged

information becomes

increasingly important.

As a medical device manufacturer, we must manage risks including those associated with

an electronic interface that is incorporated into a medical device.

Tax legislation could materially adversely affect our financial results and tax liabilities.

We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as

foreign jurisdictions.

From time to time, various legislative initiatives may be proposed

that could materially

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adversely affect our tax positions.

There can be no assurance that our effective tax rate will not be

materially

adversely affected by legislation resulting from these initiatives.

In addition, tax laws and regulations are extremely

complex and subject to varying interpretations.

Although we believe that our historical tax positions are sound and

consistent with applicable laws, regulations and existing precedent,

there can be no assurance that our tax positions

will not be challenged by relevant tax authorities or that we would be

successful in any such challenge.

We face inherent risk of exposure to product liability, intellectual property infringement and other claims in the

event that the use of the products we sell results in injury.

Our business involves a risk of product liability, intellectual property infringement and other claims in the ordinary

course of business, and from time to time we are named as a defendant

in cases as a result of our distribution of

products.

Additionally, we own and own interests in companies that manufacture certain dental and medical

products.

As a result, we could be subject to the potential risk of product liability, intellectual property

infringement or other claims relating to the manufacture and distribution

of products by those entities.

In addition,

as our corporate brand business continues to grow, purchasers of such products may increasingly seek recourse

directly from us, rather than the ultimate product manufacturer, for product-related claims.

Another potential risk

we face in the distribution of our products is liability resulting from counterfeit

or tainted products infiltrating the

supply chain.

In addition, some of the products that we transport and sell are

considered hazardous materials.

The

improper handling of such materials or accidents involving the transportation

of such materials could subject us to

liability or at least legal action that could harm our reputation.

Customs policies or legislative import restrictions could hinder the Company’s ability to import goods necessary

to our operations on a timely basis and result in government enforcement

actions and/or sanctions.

Government-imposed import policies and legislation regulating the

import of goods and prohibiting the use of

forced labor or human trafficking could result in delays or the inability to import

goods in a timely manner that are

necessary to our operations, and such policies or legislation could also

result in financial penalties, other sanctions,

government enforcement actions and reputational harm.

Certain of our suppliers have had their ability to service

certain markets restricted or negatively impacted because of allegations

of forced labor in their supply chain.

While

the Company has policies against and seeks to avoid the import of goods

that are manufactured in whole or in part

by forced labor or through human trafficking, as a result of legislative and governmental

policy initiatives, we may

be subject to increasing potential delays, added costs, supply chain disruption

and other restrictions.

GENERAL RISKS

Our business operations, results of operations, cash flows, financial condition

and liquidity may be negatively

impacted by the effects of disease outbreaks, epidemics, pandemics, or similar wide-spread public

health

concerns and other natural or man-made disasters, such as terrorism, civil

unrest, fire and extreme weather

Our business operations, results of operations, cash flows, financial condition

and liquidity may be negatively

impacted by the effects of disease outbreaks, epidemics, pandemics, similar wide-spread

public health concerns and

other natural or man-made disasters, such as terrorism, civil unrest, fire

and extreme weather (“disasters”).

For

example, as a global health care solutions company, the COVID-19 pandemic and the governmental responses

had a material adverse effect on our business, financial condition, operating results

and cash flows.

The impacts

and potential impacts from the COVID-19 pandemic included, and could include

as a result of other disasters,

adverse impacts such as significant volatility in supply, demand and selling prices, interrupted operations of

industries that use or manufacture the products we distribute for personal

protective equipment (PPE), test kits and

related products, reduction in peoples’ ability and willingness to be in

public, impact of adapted business practices,

volatility in the financial markets, and unavailability or impairment

of our manufacturing, distribution, or other

facilities, or firmwide systems such as our IS.

Our global operations are subject to inherent risks that could materially

adversely affect our business.

Our global operations are subject to risks that could materially adversely affect our business,

including, among

other things:

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difficulties and costs relating to staffing and managing foreign operations;

difficulties and delays inherent in sourcing products, establishing channels of distribution

and contract

manufacturing in foreign markets;

fluctuations in the value of foreign currencies;

uncertainties relating to trade agreements and international trade relationships;

longer payment cycles and difficulty of collecting receivables in foreign jurisdictions;

repatriation of cash from our foreign operations to the United States;

regulatory requirements, including, without limitation, anti-bribery, anti-corruption and laws pertaining

to the accuracy of our internal books and records;

litigation risks;

unexpected difficulties in importing or exporting our products and import/export

tariffs, quotas,

sanctions or penalties;

limitations on our ability under local laws to protect our intellectual

property;

unexpected regulatory, legal, economic and political changes in foreign markets;

changes in tax regulations that influence purchases of capital equipment;

civil disturbances, geopolitical turmoil, including terrorism, war or political

or military coups; and

risks associated with climate change, including physical risks such as

impacts from extreme weather

events and other potential physical consequences, regulatory and technological

requirements, market

developments, stakeholder expectations and reputational risk.

Our future success is substantially dependent upon our senior

management, and our revenues and profitability

depend on our relationships with capable personnel, as well as

customers, suppliers and manufacturers of the

products that we distribute.

On July 15, 2025, the Company announced that Mr. Bergman will retire as the Company’s CEO on December 31,

2025 (which date was extended to March 1, 2026), and that Mr. Bergman will continue to serve as Chairman of the

Board of Directors of the Company following his retirement.

On January 12, 2026, the Company announced the

appointment of Frederick M. Lowery as its next CEO, effective March 2, 2026, at

which time he will join the

Company’s Board of Directors.

Our future success is substantially dependent upon the efforts and abilities of

members of our senior management.

Competition for senior management is intense, burnout and turn-over rates

are increasing workplace concerns,

transitions among senior level officers can present challenges as well as opportunities,

and we may not be

successful in attracting and retaining key personnel, or transitioning to

new personnel following departures.

Additionally, our future revenues and profitability depend on our ability to maintain satisfactory relationships with

qualified personnel, as well as customers, suppliers and manufacturers.

If we fail to maintain our existing

relationships with such persons or fail to acquire relationships with such key

persons in the future, our business may

be materially adversely affected.

Disruptions in the financial markets may materially adversely

affect the availability and cost of credit to us.

Our ability to make scheduled payments or refinance our obligations with

respect to indebtedness will depend on

our operating and financial performance, which in turn is subject to prevailing

economic conditions and financial,

business and other factors beyond our control.

Disruptions in the financial markets may materially adversely affect

the availability and cost of credit to us.

ITEM 7.

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 this Annual Report

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

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

those that may be discussed in other documents we file with

the Securities and Exchange Commission (“SEC”).

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

current and historical results

include, but are not limited to: our dependence on third parties for

the manufacture and supply of our products and

where we manufacture products, our dependence on third parties

for raw materials or purchased components; risks

relating to the achievement of our strategic growth objectives, including

anticipated results of restructuring and

value creation initiatives; risks related to the Strategic Partnership Agreement

with KKR Hawaii Aggregator L.P.

entered into in January 2025; transitions in senior company leadership;

our ability to develop or acquire and

maintain and protect new products (particularly technology and specialty

products) and services and utilize new

technologies that achieve market acceptance with acceptable margins; transitional

challenges associated with

acquisitions 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;

risks related to activist investors;

security risks associated with our information systems and technology

products and services, such as cyberattacks

or other privacy or data security breaches (including the October 2023 incident);

effects of a highly competitive

(including, without limitation, competition from third-party online commerce sites)

and consolidating market;

political, economic and regulatory influences on 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, and increases in fuel and energy costs; changes

in laws and policies governing

manufacturing, development and investment in territories and countries

where we do business; general global and

domestic macro-economic and political conditions, including inflation,

deflation, recession, unemployment (and

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

sovereign debt levels, fluctuations in

energy pricing and the value of the U.S. dollar as compared to foreign currencies

and changes to other economic

indicators; failure to comply with existing and future regulatory

requirements, including relating to health care;

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, changes in tax rates and availability

of certain tax deductions; 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; the threat or outbreak of war (including, without

limitation, geopolitical wars), terrorism

or public unrest (including, without limitation, the war in Ukraine, the Israel-Gaza

war and other unrest and threats

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

changes to laws and policies

governing foreign trade, tariffs and sanctions or greater restrictions on imports and

exports, including changes to

international trade agreements and the current imposition of (and the

potential for additional) tariffs by the U.S. on

numerous countries and retaliatory tariffs; supply chain disruption; litigation

risks; new or unanticipated litigation

developments and the status of litigation matters; our dependence on

our senior management (including, without

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limitation, the transition to a new Chief Executive Officer), employee hiring and retention,

increases in labor costs

or health care costs, and our relationships with customers, suppliers and

manufacturers; and disruptions in financial

markets.

The order in which these factors appear should not be construed

to indicate their relative importance or

priority.

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.

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

Chief Executive Officer

On January 12, 2026, we announced the appointment of Frederick

M. Lowery as our new CEO, effective March 2,

2026, at which time Mr. Lowery will join our Board of Directors.

Mr. Lowery succeeds Stanley M. Bergman, who

will remain as our CEO through March 1, 2026, at which time Mr. Bergman will retire as CEO, but will remain as

Chairman of the Board.

Cyber Incident

As previously reported, 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.

During the years ended December 28, 2024 and December 30, 2023, we had

a sales decrease in our dental and

medical distribution businesses, which we believe was primarily a

result of lower sales to episodic customers

following the cyber incident.

With respect to the October 2023 cyber incident, we had a $60 million insurance policy, following a $5 million

retention.

During the years ended December 27, 2025, December 28, 2024

and December 30, 2023, we incurred $0

million, $9 million and $11 million, respectively, of direct expenses related to the cyber incident, mostly consisting

of professional fees.

During the years ended December 27, 2025 and December

28, 2024, we received insurance

proceeds of $20 million and $40 million, respectively, representing insurance recovery of losses related to the cyber

incident.

The expenses and insurance recoveries related to the cyber incident

are included in the selling, general

and administrative line in our consolidated statements of income.

Tariffs and Related Economic Conditions

The U.S. has adopted new and increased tariffs on imports from countries, which

tariffs remain subject to

frequently evolving exemptions and modifications, as well as to court

challenges, including a recent invalidation in

the Supreme Court of many of the tariffs.

Some countries have imposed retaliatory tariffs and other restrictions on

imports from the U.S.

These developments, and anticipated future developments,

have created a volatile

environment for global trade, and new trade policies with individual countries.

It is unclear whether, or the extent

to which, the current tariffs on trade with numerous countries will remain in place,

or change, the exceptions that

may apply, and their timing.

The tariffs did not have a material impact on our results of operations during fiscal

year 2025, although sales of

U.S. dental equipment were temporarily impacted by market uncertainty

related to tariffs in the second half of the

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quarter ended June 28, 2025.

It is unclear whether, or the extent to which, the current tariffs on trade with

numerous countries will remain in place, or change, the exceptions that

may apply, and their timing.

One Big Beautiful Bill Act

In the United States, the OBBBA, signed into law on July 4, 2025, includes

a number of provisions that are

expected to result in reductions in the number of Medicaid enrollees, which

will reduce utilization of services and

covered products generally.

There are also several provisions that will reduce federal funding to state

Medicaid

programs.

The OBBBA, in combination with tariffs, will likely have an adverse impact on

utilization, Medicaid

payment and cost of production (if foreign components are used).

The OBBBA also includes changes to corporate tax rates, limitations

on certain deductions and modifications to

international tax provisions.

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Executive-Level Overview

Henry Schein, Inc. is a solutions company for health care professionals powered

by a network of people and

technology.

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.

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, home health providers, and

other alternate care clinics.

believe

that we have a strong brand identity due to our more than 94 years of experience

distributing health care products.

are headquartered in Melville, New York, employ more than 25,000 people (of which approximately 13,000 are

based outside of the United States) and have operations or affiliates in 34 countries and

territories.

Our broad

global footprint has evolved over time through our organic growth as well as through

contribution from strategic

acquisitions.

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.

As a distributor, we market and sell branded products as well as our own corporate brand portfolio of

cost-effective,

high-quality consumable merchandise products.

also manufacture, source and sell a range of company-owned

manufactured products, primarily implants, biomaterial products, endodontics, handpiece

and small equipment,

hand instrument and repair, restoratives, orthodontics, wound care, orthopedics and dental lab products.

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.

Our reportable segments consist of: (i) Global Distribution and Value-Added Services; (ii) Global Specialty

Products; and (iii) Global Technology.

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

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

technical services.

This segment

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

services, consulting and other

services.

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

a portfolio of cost-effective, high-

quality consumable merchandise.

Global Specialty Products includes manufacturing, marketing

and sales of dental

implant and biomaterial products; and endodontic, orthodontic and orthopedic

products and other health care-

related products and services.

Global Technology includes development and distribution of practice management

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

care providers.

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

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, 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.

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

accounts and collective buying groups, which,

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

tend to favor distributors capable of

providing specialized management information support.

believe that the trend towards cost containment has

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

can enhance the

efficiency and facilitation of practice management.

Table of Contents

Index to Financial Statements

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.

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.

are focused on building relationships with decision makers

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

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

candidates for joint venture or

acquisition and intend to continue to seek opportunities to expand our

role as a provider of products and services to

the health care industry.

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

any such

opportunity or consummate any such transaction, if pursued.

If additional transactions are entered into or

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

can be no assurance that the

integration efforts associated with any such transaction would be successful.

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

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 2025 and 2035, the 45 and older

population is expected to grow by approximately 10%.

Between 2025 and 2045, this age group is expected to grow

by approximately 17%.

This compares with expected total U.S. population growth rates of

approximately 4%

between 2025 and 2035 and approximately 6% between 2025 and 2045.

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Index to Financial Statements

According to the U.S. Census Bureau’s International Database, in 2025 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 increase to approximately

17 million.

The population aged

65 to 84 years is projected to increase by approximately 15% during

the same period.

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

continue to increase in the

United States.

believe that demand for our products and services will grow while

continuing to be impacted by

current and future operating, economic and industry conditions.

The Centers for Medicare and Medicaid Services,

or CMS, published “National Health Expenditure Data” indicating that

total national health care spending reached

approximately $5.3 trillion in 2024, or 18.0% 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 $8.6 trillion by 2033, or 20.3% of the nation’s projected gross domestic product.

believe similar demographic changes are also occurring in other

markets we serve outside the U.S.

Government

Our businesses are generally subject to numerous laws and regulations that could

impact our financial performance,

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

material adverse effect on our business.

See “

Item

1. Business – Governmental Regulations

” for a discussion of laws, regulations and governmental activity

that may

affect our results of operations and financial condition.

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Index to Financial Statements

Results of Operations

Refer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in

our 2024 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results

of operations for the fiscal year 2024 compared to fiscal year 2023.

The following tables summarize the significant components of our operating

results and cash flows for each of the

three years ended December 27, 2025, December 28, 2024, and December

30, 2023 (in millions):

Years

Ended

December 27,

December 28,

December 30,

Operating results:

Net sales

Cost of sales

Gross profit

Operating expenses:

Selling, general and administrative

Depreciation and amortization

Restructuring and related costs

Operating income

Other expense, net

Income taxes

Net income

Net income attributable to Henry Schein, Inc.

Years

Ended

December 27,

December 28,

December 30,

Cash flows:

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

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Index to Financial Statements

Plans of Restructuring and Related Costs

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

Plan”) to integrate our acquisitions, right-size

operations and further increase efficiencies.

We currently expect this plan to be completed at the end of 2027.

During the years ended December 27, 2025 and December 28, 2024, we recorded

restructuring and related charges

associated with the 2024 Plan of $105 million and $73 million, respectively.

The restructuring and related costs for

these periods primarily related to severance and employee-related costs, accelerated

amortization of right-of-use

assets and fixed assets, and other exit costs.

We expect to record restructuring and related charges associated with

the 2024 Plan through the end of 2027; however, an estimate of the amount of these charges for 2026 through 2027

has not yet been determined.

During the year ended December 27, 2025, in connection with the 2024 Plan,

we recorded a loss of $1 million and

$12 million related to the disposal of businesses in the Global Distribution

and Value

-Added Services and Global

Specialty Product segments, respectively, and a net gain related to disposal of a business in the Global Technology

segment.

These amounts are included in the $105 million of restructuring and

related charges discussed above.

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

we recorded an impairment of

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

of a business in the Global

Specialty Products segment.

This impairment is included in the $73 million of restructuring and

related charges

discussed above.

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

Plan”) focused on funding the priorities of the

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

increase efficiency.

The 2022 Plan was

completed as of July 31, 2024.

During the years ended December 28, 2024 and December 30, 2023, in

connection

with our 2022 Plan, we recorded restructuring and related costs of $37 million

and $80 million, respectively, which

primarily related to severance and employee-related costs, accelerated amortization

of right-of-use assets and fixed

assets, and other exit costs.

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

we recorded an impairment of an

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

the Global Specialty Products segment.

This

impairment is included in the $80 million of restructuring and related costs discussed

above.

The disposal was

completed during the first quarter of 2024.

Table of Contents

Index to Financial Statements

2025 Compared to 2024

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.

Our reportable segments are determined based on how our Chairman

and Chief Executive Officer manages the

business, assesses performance and allocates resources.

We have three reportable segments: (i) Global Distribution

and Value

-Added Services; (ii) Global Specialty Products; and (iii) Global

Technology.

Net Sales

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

as follows:

Increase / (Decrease)

Total

Total

Global Distribution and Value

-Added Services

Global Dental Merchandise

Global Dental Equipment

Global Value

-Added Services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Eliminations

Total

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

acrylics, articulators, abrasives, PPE products and our own corporate brand of consumable merchandise.

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

services and high-tech and digital restoration equipment.

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

Includes branded and generic pharmaceuticals, home solutions products, vaccines, surgical products, diagnostic tests, infection-

control products, X-ray products, equipment, PPE products, and vitamins.

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

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

Consists of the development and distribution of practice management software, e-services and other technology-enabled products

for health care providers.

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

Constant Currency

Growth/(Decline)

Total Constant

Currency Growth

Foreign

Exchange

Impact

Total Sales

Growth

Local Internal

Growth/(Decline)

Acquisition

Growth

Global Distribution and Value

-Added Services

Global Dental Merchandise

Global Dental Equipment

Global Value

-Added Services

Global Dental

Global Medical

Total Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Total

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Index to Financial Statements

Global Sales

Global net sales for the year ended December 27, 2025 increased 4.0%,

attributable to internal growth of 2.6%,

acquisition growth of 0.9%, and an increase in foreign exchange of 0.5%.

The components of our sales increase are

presented in the table above.

Global Distribution and Value-Added Services Sales

Global Distribution and Value-Added Services net sales for the year ended December 27, 2025 increased 3.5%.

The components of our sales increase are presented in the table

above.

The 1.6% increase in internally generated local currency dental sales was

primarily due to sales growth in U.S

dental merchandise and international dental merchandise,

as well as growth in traditional dental equipment in the

U.S. and growth in traditional and digital dental equipment in international

markets.

The 3.1% increase in internally generated local currency medical sales was

attributable to growth of our Home

Solutions business,

dialysis products and pharmaceuticals.

The 2.0% decrease in internally generated local currency value-added services

sales was attributable primarily to

lower sales in our practice transitions business, partially offset by sales growth from our international

businesses.

Global Specialty Products

Global Specialty Products net sales for the year ended December 27, 2025

increased 6.7%.

The components of our

sales increase are presented in the table above.

The 3.3% increase in internally generated local currency sales was attributable

to growth in our implant and

biomaterial businesses, and orthopedics, partially offset by a decline in orthodontic

sales.

Global Technology

Global Technology net sales for the year ended December 27, 2025 increased 7.1%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 6.7% in Global Technology sales was primarily attributable to

the adoption of our core practice management solutions, particularly

our cloud-based platforms, as well as an

increase in revenue cycle management solutions.

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Index to Financial Statements

Gross Profit

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

Gross

Gross

Increase

Margin %

Margin %

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Corporate

Total

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.

Gross margin

percentages vary between our segments.

We realize substantially higher gross margin from products we develop

and manufacture within our Global Specialty Products segment compared

to products distributed within our Global

Distribution and Value-Added Services segment.

Within our Global Technology segment, higher gross margins

result from us being both the developer and seller of software products

and services.

Within our Global Distribution and Value

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

periods as a result of the changes in product mix and customer mix.

With respect to customer mix, sales to our

large-group customers are typically completed at lower gross margins as a result of

higher sales volumes, while

sales to office-based practitioners generally carry higher gross margins due to lower volumes.

The increase in Global Distribution and Value-Added Services gross profit for the year ended December 27, 2025

compared to the prior-year-period is due primarily to increased internally generated sales volume as described

above.

The decrease in gross margin rates was attributable primarily to the impact

of targeted promotional

programs and product mix.

The increase in Global Specialty Products gross profit primarily reflects

increased internally generated sales

volume and gross profit from acquisitions.

The decrease in gross margin rates was due to product mix and pricing.

The increase in Global Technology gross profit is the result primarily of higher internally generated sales.

The

increase in gross margin rates was due to product mix.

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Index to Financial Statements

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

restructuring and related costs) by segment were as follows:

Respective

Respective

Increase / (Decrease)

Sales

Sales

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Corporate

Adjustments

Total operating expenses

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

These items may vary independently of business performance.

Please see

Note 4 – Segment and Geographic Data

These

adjustments (current year vs. prior year) consist of (i) acquisition intangible amortization ($179 million vs. $184 million), (ii)

restructuring and related costs ($105 million vs. $110 million), (iii) change in contingent consideration ($(2) million vs. $45

million), (iv) litigation settlements ($5 million vs. $6 million), (v) cyber incident-insurance proceeds, net of

third-party advisory

expenses ($(20) million net proceeds vs. $(31) million net proceeds), (vi) impairment of intangible assets ($16 million vs. $0

million), (vii) impairment of capitalized assets ($0 million vs. $12 million), and (viii) costs associated with shareholder advisory

matters and select value creation consulting costs ($36 million vs. $2 million).

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

Operating Costs

(excluding

acquisitions)

Acquisitions

Adjustments

Total

Global Distribution and Value

-Added Services

Global Specialty Products

Global Technology

Corporate

Adjustments

Total operating expenses

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

in the table above.

The increase in

operating costs (excluding acquisitions) during the year ended December 27,

2025 was attributable to an increase in

Corporate investments in technology supporting the launch of our Global E-Commerce

Platform

(www.henryschein.com), depreciation expense,

the impact of certain compensation related costs and timing of

certain non-income tax credits during the year ended December 28, 2024,

partially offset by cost savings from our

restructuring activities, certain changes in estimates and other operating

cost efficiencies.

In addition, during the

year ended December 27, 2025,

our operating costs were impacted by recognition of a benefit related

to the

remeasurement to fair value of previously held equity investments of $29

million within our Global Specialty

Products segment and $9 million within our Global Distribution and Value-Added Services segment.

During the

year ended December 28, 2024,

our operating costs were impacted by recognition of a remeasurement gain

related

to the remeasurement to fair value of a previously held equity investments of $18

million within our Global

Distribution and Value-Added Services segment.

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Index to Financial Statements

Other Expense, Net

Other expense, net was as follows:

Variance

Interest income

Interest expense

Other, net

Other expense, net

Interest income increased primarily due to increased interest rates.

Interest expense increased primarily due to

increased borrowings.

Income Taxes

Our effective tax rate was 23.7% for the year ended December 27, 2025, compared to 24.9%

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, as well as the tax treatment associated with

the acquisition of a controlling

interest of a previously held non-controlling equity investment.

On July 4, 2025, President Trump signed the reconciliation tax bill, commonly known as the “One Big Beautiful

Bill Act” (OBBBA), into law.

Corporate provisions in the OBBBA include immediate expensing of domestic

research and experimental expenditures, limitations on certain deductions,

and modifications to international tax

provisions.

The changes resulting from the OBBBA did not have a significant impact

to the total tax provision.

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

technical and administrative

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

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

Effective January 1, 2024, the minimum global tax

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

Future tax reform resulting from these

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

may adversely impact our effective tax

rate going forward or result in higher cash tax liabilities.

As of December 27, 2025, the impact of the Pillar Two

rules to our financial statements was immaterial.

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Index to Financial Statements

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

Note 14 – Debt

for further information.

Our ability to generate sufficient cash flows from

operations is dependent on the continued demand of our customers

for our products and services, and access to

products and services from our suppliers.

Our business requires a substantial investment in working capital, which

is susceptible to fluctuations during the

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

Inventory purchase activity is a function of

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

We 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.

Our acquisition strategy is focused on investments in companies, including

high growth high margin businesses

aligned with our BOLD+1 strategy, 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.

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

and our available funds under existing credit facilities provide us with

sufficient liquidity to meet our currently

foreseeable short-term and long-term capital needs.

Net cash provided by operating activities was $712 million for the

year ended December 27, 2025, compared to net

cash provided by operating activities of $848 million for the prior year.

The net change of $136 million was

primarily attributable to changes in working capital accounts (primarily

accounts receivable, inventory, and

accounts payable and accrued expenses),

partially offset by an increase in operating income.

Our operating cash

flows during the year ended December 28, 2024 were positively

affected by the residual impacts of the 2023 cyber

incident and included a higher-than-normal level of cash collections.

Our cash collections normalized during the

second half of the year ended December 28, 2024.

Net cash used in investing activities was $400 million for the year ended

December 27, 2025, compared to net cash

used in investing activities of $430 million for the prior year.

The net change of $30 million was primarily

attributable to lower acquisition activity.

Net cash used in financing activities was $188 million for the year

ended December 27, 2025, compared to net cash

used in financing activities of $510 million for the prior year.

The net change of $322 million was primarily due to

increased net borrowings from debt,

proceeds received from the issuance of common stock, and a

reduction in

acquisitions of noncontrolling interests in subsidiaries, partially offset by increased

repurchases of common stock.

Table of Contents

Index to Financial Statements

The following table summarizes selected measures of liquidity and capital

resources:

December 27,

December 28,

Cash and cash equivalents

Working

capital

Debt:

Bank credit lines

Current maturities of long-term debt

Long-term debt

Total debt

Leases:

Current operating lease liabilities

Non-current operating lease liabilities

Includes $491 million and $241 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

securitization at December 27, 2025 and December 28, 2024, respectively.

Our cash and cash equivalents consist of bank balances and investments

in money market funds representing

overnight investments with a high degree of liquidity.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from operations decreased

to 44.8 days as of December 27, 2025

from 47.3 days as of December 28, 2024, which was primarily attributable

to the impact that the cyber incident had

on the cash collections during the first half of 2024.

During the years ended December 27, 2025 and December 28,

2024, we wrote off approximately $18 million and $12 million, respectively, of fully reserved accounts receivable

against our trade receivable reserve.

Our inventory turns from operations decreased to 4.8 as of December

from 5.0 as of December 28, 2024.

Our working capital accounts may be impacted by current and

future economic

conditions.

Contractual obligations

The following table summarizes our contractual obligations related

to fixed and variable rate long-term debt and

finance lease obligations, including interest (assuming a weighted

average interest rate of 4.62%), as well as

inventory purchase commitments and operating lease obligations

as of December 27, 2025:

Payments due by period

< 1 year

2 - 3 years

4 - 5 years

> 5 years

Total

Contractual obligations:

Long-term debt, including interest

Inventory purchase commitments

Operating lease obligations

Finance lease obligations, including interest

Total

For information relating to our debt please see

Note 14 – Debt

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Index to Financial Statements

Leases

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

and certain equipment.

Our leases have remaining terms of less than one year to

approximately 23 years, some of

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

As of December 27, 2025, our right-of-use

assets related to operating leases were $301 million and our current and

non-current operating lease liabilities were

$78 million and $251 million, respectively.

Please see

Note 8 – Leases

for further information.

Stock Repurchases

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

to an additional $500 million in shares of our

common stock.

On May 19, 2025, we executed an accelerated share repurchase program

to repurchase a total of $250 million of

our outstanding common stock based on volume-weighted average

prices.

In May 2025, we received 3,122,832

shares at an estimated fair value of $224 million.

In July 2025, we received an additional 368,651 shares at an

estimated fair value of $26 million, representing the final amount of shares

to be received under this accelerated

share repurchase program.

On September 8, 2025, our Board authorized the repurchase of up to

an additional $750 million in shares of our

common stock.

From March 3, 2003 through December 27, 2025, we repurchased $6.0

billion, or 107,876,628 shares, under our

common stock repurchase programs, with $780 million available

as of December 27, 2025 for future common stock

share repurchases.

Redeemable Noncontrolling Interests

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

at certain times, to require us to acquire

their ownership interest in those entities at fair value.

Accounting Standards Codification Topic 480-10 is

applicable for noncontrolling interests where we are or may be required

to purchase all or a portion of the

outstanding interest in a consolidated subsidiary from the noncontrolling

interest holder under the terms of a put

option contained in contractual agreements.

As of December 27, 2025 and December 28, 2024, our balance

for

redeemable noncontrolling interests was $895 million and $806 million,

respectively.

Please see

Note 20 –

Redeemable Noncontrolling Interests

for further information.

Table of Contents

Index to Financial Statements

Critical Accounting Estimates

Our accounting policies are described in

Note 1 – Basis of Presentation and Significant Accounting Policies

of the

consolidated financial statements.

The preparation of consolidated financial statements requires us

to make

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

and expenses and related

disclosures of contingent assets and liabilities.

We base our estimates on historical data, when available,

experience, industry and market trends, and on various other assumptions

that are believed to be reasonable under

the circumstances, the combined results of which form the basis for

making judgments about the carrying values of

assets and liabilities that are not readily apparent from other sources.

We believe that the estimates, judgments and

assumptions upon which we rely are reasonable based upon information

available to us at the time that these

estimates, judgments and assumptions are made.

However, by their nature, estimates are subject to various

assumptions and uncertainties.

Therefore, reported results may differ from estimates and any such differences may

be material to our consolidated financial statements.

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

of our Board, affect the significant estimates and judgments used in the preparation

of our consolidated financial

statements:

Inventories and Reserves

Inventories consist primarily of finished goods, raw materials and

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

cost or net realizable value.

Cost is determined by the weighted average method for merchandise

and actual cost

for large equipment, high-technology equipment and drop-shipments.

Inventory costs for manufactured products

include direct materials, labor, and an allocation of related fixed and variable overhead.

The determination of

inventory carrying values requires management to make significant

estimates and judgments.

In assessing the need

for inventory reserves and evaluating net realizable value, we consider

multiple factors, including inventory

condition, on-hand quantities, historical and forecasted sales, product

life cycles, and prevailing market and

economic conditions.

Business Combinations

The estimated fair value of acquired identifiable intangible assets (i.e., customer

relationships and lists, trademarks

and trade names, product development and non-compete agreements)

is based on critical judgments and

assumptions derived from analysis of market conditions, including discount

rates, projected revenue growth rates

(which are based on historical trends and assessment of financial projections),

estimated customer attrition and

projected cash flows.

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

and market

conditions.

Please see

Note 5 – Business Acquisitions

for further discussion of our acquisitions.

Goodwill

Goodwill is subject to impairment assessment at least once annually

as of the first day of our fourth quarter, or if an

event occurs or circumstances change that would more likely than

not reduce a reporting unit’s fair value below

carrying value.

We conduct our goodwill impairment testing at the reporting unit level.

We identify our reporting

units by assessing whether two or more components are economically

similar and therefore should be aggregated.

Our reporting units are identified as our operating segments.

Goodwill is allocated to such reporting units for the

purposes of our impairment assessment.

For the year ended December 27, 2025, our reporting structure was:

Global Distribution and Value-Added Services reportable segment, which included the following

operating segments (a) US Distribution Group; (b) Europe, Middle East,

and Africa Distribution Group;

(c) Americas Non-US Distribution Group; and (d) Asia-Pacific and Australia

Distribution Group;

Global Specialty Products reportable segment, which included the following

operating segments (a) Global

Oral Reconstruction Group; and (b) Healthcare Specialty Group; and

(iii)

Global Technology,

which is both a reportable segment and an operating segment.

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Application of the goodwill impairment test requires judgment, including

the identification of reporting units,

assignment of assets and liabilities that are considered shared services

to the reporting units, and ultimately the

determination of the fair value of each reporting unit.

The fair value of each reporting unit is calculated by

applying the discounted cash flow methodology and confirming with

a market approach.

There are inherent

uncertainties, however, related to fair value models, the inputs and our judgments in applying them to

this analysis.

The most significant inputs include estimation of detailed future cash flows based

on budget expectations, and

determination of comparable companies to develop a weighted average

cost of capital for each reporting unit.

In performing the annual goodwill impairment assessment, we prepare forward-looking

financial projections for

each reporting unit based on input from our leadership and approved operating

plans.

These projections incorporate

assumptions related to planned strategic initiatives, the continued integration

of recent acquisitions, and prevailing

macroeconomic and market conditions.

Changes in these assumptions could materially affect the estimated fair

values of the reporting units.

Our third-party valuation specialists provide inputs into our determination

of the discount rate.

The rate is

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

tax rate, equity risk premium, debt

to equity ratio and pre-tax cost of debt.

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

The long-term growth rates are tied to

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

forecasted operating results.

We also

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

applicable to our industry and the

composition of our global operations.

We performed our annual quantitative goodwill assessment, and the estimated fair value of each of our reporting

units sufficiently exceeded its respective carrying value.

As a result, no goodwill impairments were recorded

during the years ended December 27, 2025, December 28, 2024, and December

For the year ended December 28, 2024, in connection with our restructuring

initiatives, we recorded an $11 million

impairment of goodwill in the Global Specialty Products segment, relating

to the disposal of a portion of a business;

such impairment was calculated based on the relative fair value of goodwill.

Definite-Lived Intangible Assets

Annually or if we identify an impairment indicator, definite-lived intangible assets such as customer

relationships

and lists, trademarks, trade names, product development and non-compete

agreements are reviewed for impairment

indicators.

If any impairment indicators exist, quantitative testing is performed

on the asset.

The quantitative impairment model is a two-step test under which we

first calculate the recoverability of the

carrying value by comparing the undiscounted projected cash flows associated

with the asset or asset group,

including its estimated residual value, to the carrying amount.

If the cash flows associated with the asset or asset

group are less than the carrying value, we perform a fair value assessment

of the asset, or asset group.

If the

carrying amount is found to be greater than the fair value, we record an

impairment loss for the excess of book

value over the fair value.

In addition, in all cases of an impairment review, we re-evaluate the remaining useful

lives of the assets and modify them, as appropriate.

Although we believe our judgments, estimates and/or

assumptions used in estimating cash flows and determining fair value

are reasonable, making material changes to

such judgments, estimates and/or assumptions could materially affect such impairment

analyses and our financial

results.

During the year ended December 27, 2025, we recorded $16 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment.

The impairment charges included $14 million

primarily related to customer lists and relationships attributable

to lower than anticipated operating margins in these

businesses.

The remaining impairment charges of $2 million related to trade names

and non-compete agreements.

During the year ended December 28, 2024, we recorded $4 million of

impairment charges related to businesses in

our Global Distribution and Value-Added Services segment.

It included $2 million of a trade name impairment,

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

and $1 million related to trade name

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impairment due to business integration in connection with our restructuring

initiatives.

The remaining $1 million

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

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

impairment charges related to businesses in

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

lists and relationships attributable to lower than anticipated operating

margins in certain businesses, and a $12

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

initiatives.

The impairment charges for the years ended December 27, 2025, December 28, 2024,

and December 30, 2023 were

measured as the excess of the carrying values over the estimated fair values

of the related intangible assets,

determined using discounted estimates of future cash flows and the

relief-from-royalty method.

Please see

Note 16 – Plans of Restructuring and Related Costs

for additional details.

Redeemable Noncontrolling Interests

Some minority stockholders in certain of our consolidated subsidiaries have

the right, at certain times, to require us

to acquire their ownership interest in those entities at fair value.

The redemption amounts have been estimated

based on recent transactions and/or implied multiples of earnings

and, if such earnings and cash flows are not

achieved, the value of the redeemable noncontrolling interests might be impacted.

See

Note 1 – Basis of

Presentation and Significant Accounting Policies

and

Note 20 – Redeemable Noncontrolling Interests

for additional

information.

Income Tax

Determining whether a deferred tax asset will be realized requires significant

estimates and judgment to assess

whether a valuation allowance is necessary.

consider all available evidence, both positive and negative,

including estimated future taxable earnings, ongoing planning strategies,

future reversals of existing temporary

differences and historical operating results.

Additionally, changes to tax laws and statutory tax rates can have an

impact on our determination.

evaluate the realizability of our deferred tax assets quarterly.

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

in the financial statements in accordance with provisions contained within

its guidance.

This topic prescribes a

recognition threshold and a measurement attribute for the financial statement

recognition and measurement of tax

positions taken or expected to be taken in a tax return.

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

more likely than not to be sustained upon examination by the taxing authorities.

The amount recognized is

measured as the largest amount of benefit that has a greater than 50% likelihood of being realized

upon ultimate

audit settlement.

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

to examination by various taxing

authorities.

Such examinations may result in future tax and interest assessments

by these taxing authorities for

uncertain tax positions taken in respect of certain tax matters.

Please see

Note 15 – Income Taxes

for further

discussion.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted in the future, please see

Note 1 – Basis of Presentation and Significant Accounting Policies

included under Item 8.

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