Henry Schein · 10-Q · Item 2 MD&A

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities

Litigation Reform Act of 1995, we

provide the following cautionary remarks regarding important factors

that, among others, could cause future results

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

expressed or implied herein.

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

and are not guarantees of future

performance.

These forward-looking statements involve known and unknown

risks, uncertainties and other factors

that may cause our actual results, performance and achievements

or industry results to be materially different from

any future results, performance or achievements expressed or implied

by such forward-looking statements.

These

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

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

make” or other comparable terms.

Factors that

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

those discussed in the documents we

file with the Securities and Exchange Commission (SEC), including our Annual

Report on Form 10-K, and will be

contained in subsequent periodic filings we make with the SEC.

These documents identify in detail important risk

factors that could cause our actual performance to differ materially from current

expectations.

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

(including, without limitation, the transition

to our new Chief Executive Officer); 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 wars

in Ukraine and Iran, 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;

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supply chain disruption; litigation risks; new or unanticipated litigation

developments and the status of litigation

matters; our dependence on our senior management, employee hiring and

retention, increases in labor costs or

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

manufacturers; and disruptions in financial

markets.

The order in which these factors appear should not be construed

to indicate their relative importance or

priority.

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

Chairman and Chief Executive Officer

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

M. Lowery as CEO, effective March 2, 2026.

In

connection with his appointment, Mr. Lowery joined our Board of Directors.

Mr. Lowery succeeded Stanley M.

Bergman, who served as CEO through March 1, 2026 (at which time Mr. Bergman retired as CEO).

Mr. Bergman

retired as Chairman of the Board as of the end of the 2026 annual meeting of

stockholders, and the Board approved

the appointment of Mr. Bergman as Chairman Emeritus effective upon his retirement as Chairman.

The Board

appointed William K. “Dan” Daniel as Chairman following the Company’s 2026 annual meeting of stockholders.

Tariffs and Related Economic Conditions

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

the scope, applicability and legal

basis for these tariffs continue to evolve through legislative and executive

actions, exemptions and ongoing judicial

challenges.

Although the U.S. Supreme Court invalidated certain tariffs imposed

under the International

Emergency Economic Powers Act (IEEPA), the U.S. government has subsequently implemented additional tariff

measures under other statutory authorities, and further changes to U.S. trade

policy remain possible.

Some

countries have imposed, or may impose, retaliatory tariffs or 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.

T1The tariffs did not have an adverse material impact on our results of operations during

fiscal year 2025 and the six

months ended June 27, 2026, although sales of U.S. dental equipment were

temporarily impacted by market

uncertainty related to tariffs in the second half of the quarter ended June 28, 2025.

During the three and six months ended June 27, 2026 we received an

immaterial amount of refunds of certain tariffs

previously paid in the United States.

We received additional refunds after June 27, 2026, and we expect to

recognize the net impact of these refunds in our financial statements during

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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.

We

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

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

We

serve more than one million customers

worldwide including dental practitioners, laboratories, physician practices and

ambulatory surgery centers, as well

as government, institutional health care clinics, home health providers, and

other alternate care clinics.

We

believe

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

distributing health care products.

We

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

We

have established strategically located distribution centers around

the world to enable us to better serve our

customers and increase our operating efficiency.

This infrastructure, together with broad product and service

offerings at competitive prices, and a strong commitment to customer service, enables

us to be a single source of

supply for our customers’ needs.

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.

We

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.

We

have

achieved scale in these global businesses primarily through acquisitions, as

manufacturers of these products

typically do not utilize a distribution channel to serve customers.

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.

We

believe that T2the trend towards cost containment has

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

Artificial Intelligence

solutions, which can enhance the efficiency and facilitation of practice management.

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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.

We

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 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.

Aging Population and Other Market Influences

The health care products distribution industry continues to experience growth

due to the aging population,

increased health care awareness, the proliferation of medical technology

and testing, new pharmacological

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

on

insurance coverage.

In addition, the physician market continues to benefit from the

shift of procedures and

diagnostic testing from acute care settings to alternate-care sites, particularly

physicians’ offices.

According to the U.S. Census Bureau’s International Database, between 2026 and 2036, the 45 and older

population is expected to grow by approximately 10%.

Between 2026 and 2046, this age group is expected to grow

by approximately 17%.

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

approximately 4%

According to the U.S. Census Bureau’s International Database, in 2026 there are over 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 over 17 million.

The population aged 65 to 84 years is

projected to increase by approximately 12% during the same period.

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

continue to increase in the

United States.

We

believe that demand for our products and services will grow while

continuing to be impacted by

current and future operating, economic and industry conditions.

The Centers for Medicare and Medicaid Services,

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

total national health care spending reached

approximately $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 $9.0 trillion by 2034, or 20.6% of the nation’s projected gross domestic product.

We

believe similar demographic changes are also occurring in other

markets we serve outside the U.S.

Government

Certain of our businesses involve the distribution, manufacturing, importation,

exportation, marketing, sale and/or

promotion of pharmaceuticals, medical devices and/or in vitro diagnostics

and in this regard, we are subject to

extensive local, state, federal and foreign governmental laws and regulations,

including as applicable to our

wholesale distribution of pharmaceuticals, medical devices, and in vitro diagnostics;

manufacturing activities; and

as part of our specialty home medical supplies businesses that distribute and sell

medical equipment and supplies

directly to patients.

Federal, state and certain foreign governments have also increased

enforcement activity in the

health care sector, particularly in areas of fraud and abuse, anti-bribery and anti-corruption, controlled substances

handling, medical device regulations and data privacy and security standards.

Certain of our businesses involve pharmaceuticals and/or medical devices,

including orthopaedic, in vitro

diagnostic devices, software regulated as a medical device, and sales of

medical equipment and supplies directly to

patients, that are paid for by third parties and/or patients and must operate in

compliance with a variety of

burdensome and complex coding, billing and record-keeping requirements

in order to substantiate claims for

payment under federal, state and commercial/private health care reimbursement

programs.

Government and private insurance programs fund a large portion of the total cost of medical

care, and there have

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

unsuccessful, to

seek repeal of the entire United States Patient Protection and Affordable Care Act,

as amended by the Health Care

and Education Reconciliation Act, each enacted in March 2010.

Certain of our businesses are subject to various additional federal, state,

local and foreign laws and regulations,

including with respect to the sale, transportation, importation, storage, handling

and disposal of hazardous or

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

polyfluoroalkyl substances; warnings related

to potential cancer or reproductive harm linked to chemicals; amalgam bans; pricing disclosures;

supply chain

transparency around human trafficking and forced labor practices; and safe working

conditions.

In addition,

activities to control medical costs, including laws and regulations lowering

reimbursement rates for

pharmaceuticals, medical devices, medical supplies and/or medical

treatments or services, are ongoing.

Laws and

regulations are subject to change and their evolving implementation may impact

our operations and financial

performance.

Certain of our businesses also maintain contracts with governmental agencies

and are subject to certain regulatory

requirements specific to government contractors.

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 businesses.

A more detailed discussion of laws, regulations and governmental activity

is included in Management’s Discussion

and Analysis of Financial Condition and Results of Operations, contained

in our Annual Report on Form 10-K for

the fiscal year ended December 27, 2025, filed with the SEC on February

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Results of Operations

The following tables summarize the significant components of our operating

results for the three and six months

(in millions):

Three Months Ended

Six Months Ended

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.

Six Months Ended

Cash flows:

Net cash provided by operating activities

$

$

Net cash used in investing activities

Net cash provided by (used in) financing activities

Plan 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.

T3We currently expect this plan to be completed by the end of 2027.

recorded restructuring and related charges

associated with the 2024 Plan of $29 million and $23 million, respectively.

During the six months ended June 27,

Plan of $41 million and $48

million, respectively.

The restructuring and related costs for these periods primarily related

to severance and

employee-related costs, costs to exit facilities 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

through 2027 has not yet been determined.

in connection with the 2024 Plan,

we recorded a loss of $2 million related to the disposal of businesses

in the Global Specialty Products

segment.

This amount is included in the $41 million of restructuring and related charges discussed

above.

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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 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:

% of

% of

Increase

Total

Total

$

%

Global Distribution and Value

-Added Services

Global Dental Merchandise

(1)

$

%

$

%

$

%

Global Dental Equipment

(2)

Global Value

-Added Services

(3)

3

Global Dental

Global Medical

(4)

Total Global Distribution and Value

-Added Services

Global Specialty Products

(5)

Global Technology

(6)

Eliminations

(9)

n/a

Total

$

%

$

%

$

(1)

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.

(2)

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.

(3)

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

(4)

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

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

(5)

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.

(6)

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 were as follows:

Constant Currency

Growth/(Decline)

Total Constant

Currency Growth

Foreign

Exchange

Impact

Total Sales

Growth

Local Internal

Growth

Acquisition

Growth/

(Decline)

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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Global Sales

T4Global net sales for the three months ended June 27, 2026 increased 6.7%,

attributable to internal growth of 4.6%,

acquisition growth of 0.7%, and an increase in foreign exchange of 1.4%.

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 three months ended June 27, 2026 increased 6.6%.

The components of our sales increase are presented in the table

above.

The 4.9% increase in internally generated local currency dental sales was

primarily due to merchandise sales

growth in U.S. and international markets, growth in digital dental equipment

in the U.S. and traditional and digital

equipment in international markets.

The 3.9% increase in internally generated local currency medical sales was

attributable to growth of our

government and Home Solutions businesses, partially offset by lower point of care

diagnostic test products related

to respiratory illness.

Global Specialty Products Sales

Global Specialty Products net sales for the three months ended June 27, 2026

increased 8.7%.

The components of

our sales increase are presented in the table above.

The 3.2% increase in internally generated local currency sales was attributable

to growth in our implant and

biomaterial businesses.

Global Technology Sales

Global Technology net sales for the three months ended June 27, 2026 increased 8.2%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 9.1% in Global Technology sales was primarily attributable to

the increased rate of customer adoption of our core practice management solutions,

particularly our cloud-based

platforms.

Gross Profit

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

Gross

Gross

Increase / (Decrease)

Margin %

Margin %

$

%

Global Distribution and Value

-Added Services

$

%

$

%

$

%

Global Specialty Products

Global Technology

Corporate

(2)

n/a

3

n/a

(5)

n/a

Total

$

$

$

Gross margin may not be comparable to that of other distribution companies due to

differing industry practices in

the classification of distribution network costs.

Gross margin percentages also vary across our segments, reflecting

differences in business models.

The Global Specialty Products segment generates

higher gross margins, as it

primarily includes products we develop and manufacture, compared

to the Global Distribution and Value-Added

Services segment, which principally distributes third-party and corporate brand

products.

While the Global

Specialty Products segment has increasingly leveraged the Global

Distribution and Value-Added Services segment

as a sales channel, the impact on overall margins has not been material.

The Global Technology segment also

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generates higher gross margins, reflecting our role as both developer and provider 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 three months ended June 27,

2026 compared to the prior-year-period is due primarily to increased internally generated sales volume

as described

above.

T5The increase in gross margin rates was attributable primarily to favorable

business mix and early benefits

from our value creation initiatives.

The increase in Global Specialty Products gross profit primarily reflects

increased internally generated sales

volume and gross profit from acquisitions.

The increase in gross margin rates was due to product mix.

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.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

restructuring and related costs) by segment were as follows:

% of

% of

Respective

Respective

Increase

Sales

Sales

$

%

Global Distribution and Value

-Added Services

$

%

$

%

$

%

Global Specialty Products

Global Technology

8

Corporate

n/a

n/a

6

n/a

Adjustments

(1)

n/a

n/a

5

n/a

Total operating expenses

$

$

$

(1)

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

These

items may vary independently of business performance.

Adjustments:

Restructuring and related costs

$

$

Acquisition intangible amortization

Change in contingent consideration

(2)

-

Litigation settlements

-

1

Costs associated with shareholder advisory matters and select implementation related value

creation consulting costs

6

6

Total adjustments

$

$

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The net increase in operating expenses was

attributable to the following:

Operating Costs

(excluding

acquisitions)

Acquisitions

Adjustments

Total

Global Distribution and Value

-Added Services

$

$

5

$

-

$

Global Specialty Products

3

9

-

Global Technology

8

-

-

8

Corporate

6

-

-

6

-

Adjustments

-

-

5

5

Total operating expenses

$

$

$

5

$

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 three months ended

June 27, 2026 was primarily attributable to

costs associated with our sales growth and the unfavorable impact of

foreign exchange rates.

Other Expense, Net

Other expense, net was as follows:

Variance

$

%

Interest income

$

8

$

9

$

(1)

%

Interest expense

(5)

Other, net

1

(1)

2

Other expense, net

$

$

$

(4)

Interest expense increased primarily due to increased borrowings.

Income Taxes

Our effective tax rate was 24.8% for the three months ended June 27, 2026, compared

to 24.4% 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.

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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 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:

% of

% of

Increase

Total

Total

$

%

Global Distribution and Value

-Added Services

Global Dental Merchandise

(1)

$

%

$

%

$

%

Global Dental Equipment

(2)

Global Value

-Added Services

(3)

8

Global Dental

Global Medical

(4)

Total Global Distribution and Value

-Added Services

Global Specialty Products

(5)

Global Technology

(6)

Eliminations

n/a

Total

$

%

$

%

$

(1)

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.

(2)

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.

(3)

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

(4)

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

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

(5)

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.

(6)

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

Acquisition

Growth/

(Decline)

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

Table of Contents

Global Sales

Global net sales for the six months ended June 27, 2026 increased 6.5%,

attributable to internal growth of 3.6%,

acquisition growth of 0.7%, and an increase in foreign exchange of 2.2%.

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 six months ended June 27, 2026 increased 6.3%.

The components of our sales increase are presented in the table

above.

The 4.1% increase in internally generated local currency dental sales was

primarily due to merchandise sales

growth in U.S. and international markets, growth in traditional dental equipment

in the U.S. and international

markets, and value-added services sales attributable to increased sales in

our practice transitions business.

The 2.6% increase in internally generated local currency medical sales was

attributable to growth of our Home

Solutions business and dialysis products, partially offset by lower point of care diagnostic

test products related to

respiratory illness.

Global Specialty Products Sales

Global Specialty Products net sales for the six months ended June 27, 2026

increased 8.4%.

The components of

our sales increase are presented in the table above.

The 2.2% increase in internally generated local currency sales was attributable

to growth in our value implant and

biomaterial businesses.

Global Technology Sales

Global Technology net sales for the six months ended June 27, 2026 increased 7.6%.

The components of sales

growth are presented in the table above.

The internally generated local currency increase of 8.0% in Global Technology sales was primarily attributable to

the increased rate of customer adoption of our core practice management solutions,

particularly our cloud-based

platforms.

Table of Contents

Gross Profit

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

Gross

Gross

Increase / (Decrease)

Margin %

Margin %

$

%

Global Distribution and Value

-Added Services

$

%

$

%

$

%

Global Specialty Products

Global Technology

Corporate

(3)

n/a

6

n/a

(9)

n/a

Total

$

$

$

Gross margin may not be comparable to that of other distribution companies due to

differing industry practices in

the classification of distribution network costs.

Gross margin percentages also vary across our segments, reflecting

differences in business models.

The Global Specialty Products segment generates

higher gross margins, as it

primarily includes products we develop and manufacture, compared

to the Global Distribution and Value-Added

Services segment, which principally distributes third-party and corporate brand

products.

While the Global

Specialty Products segment has increasingly leveraged the Global

Distribution and Value-Added Services segment

as a sales channel, the impact on overall margins has not been material.

The Global Technology segment also

generates higher gross margins, reflecting our role as both developer and provider 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 six months ended June 27, 2026

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

above.

The increase in gross margin rates was attributable primarily to favorable

business mix.

The increase in Global Specialty Products gross profit primarily reflects

increased internally generated sales

volume and gross profit from acquisitions.

The increase in gross margin rates was due to product mix.

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.

Operating Expenses

Operating expenses (consisting of selling, general and administrative

expenses; depreciation and amortization; and

restructuring and related costs) by segment were as follows:

% of

% of

Respective

Respective

Increase

Sales

Sales

$

%

Global Distribution and Value

-Added Services

$

%

$

%

$

%

Global Specialty Products

Global Technology

Corporate

n/a

n/a

1

n/a

Adjustments

(1)

n/a

n/a

n/a

Total operating expenses

$

$

$

(1)

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

These

items may vary independently of business performance.

Table of Contents

Adjustments:

Restructuring and related costs

$

$

Acquisition intangible amortization

Cyber incident-insurance proceeds, net of third-party advisory expenses

-

Change in contingent consideration

(1)

(2)

Litigation settlements

-

1

Impairment of intangible assets

-

1

Costs associated with shareholder advisory matters and select implementation related value

creation consulting costs

Total adjustments

$

$

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

9

-

Global Technology

-

-

Corporate

1

-

-

1

-

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 six months ended

June 27, 2026 was primarily attributable to

costs associated with our sales growth and the unfavorable impact of

foreign exchange rates.

During the six months

ended June 27, 2026, our operating costs were favorably impacted by the

remeasurement to the fair value of a

previously held equity investment of $11 million within our Global Specialty Products segment.

Other Expense, Net

Other expense, net was as follows:

Variance

$

%

Interest income

$

$

$

-

%

Interest expense

(9)

Other, net

1

(2)

3

Other expense, net

$

$

$

(6)

Interest expense increased primarily due to increased borrowings.

Income Taxes

Our effective tax rate was 25.2% for the six months ended June 27, 2026, compared to 24.7%

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.

Table of Contents

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 7 – 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.

T6We 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 $145 million for the

six months ended June 27, 2026, compared to

net cash provided by operating activities of $157 million for the

prior year.

The net change of $12 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.

Net cash used in investing activities was $128 million for the

six months ended June 27, 2026, compared to net

cash used in investing activities of $197 million for the prior year.

The net change of $69 million was primarily

attributable to lower acquisition activity.

Net cash used in financing activities was $48 million for the six

months ended June 27, 2026, compared to net cash

provided by financing activities of $145 million for the prior year period.

In May 2025, funds affiliated with KKR

invested $250 million in Henry Schein through the purchase of 3,285,152

shares of common stock.

Shortly

thereafter, we initiated a $250 million accelerated share repurchase program to offset the resulting dilution.

As a

result, during the six months ended June 27, 2026 we had lower proceeds

from the issuance of common stock and

lower share repurchases compared to the prior year period.

Other factors contributing to the net change of $193

million in financing activities primarily include lower net borrowings as well

as lower payments for acquisitions of

noncontrolling interests and contingent consideration.

Table of Contents

The following table summarizes selected measures of liquidity and capital

resources:

Cash and cash equivalents

$

$

Working

capital

(1)

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

(1)

Includes $526 million and $491 million of certain accounts receivable which serve as security for U.S. trade accounts receivable

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

During the six months ended June 27, 2026, we wrote off approximately $7

million

of fully reserved accounts receivable against our trade receivable reserve.

Our inventory turns from operations

Our working capital accounts may be impacted

by current and future economic conditions.

Leases

We

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

facilities, vehicles

and certain equipment.

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

22 years, some of

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

As of June 27, 2026, our right-of-use assets

related to operating leases were $322 million and our current and non-current

operating lease liabilities were $76

million and $275 million, respectively.

Stock Repurchases

On January 27, 2025, our Board of Directors 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.

shares at an estimated fair value of $224

million.

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 of Directors authorized the repurchase of

up to an additional $750 million in

shares of our common stock.

under our

common stock repurchase programs, with $455 million available

as of June 27, 2026 for future share repurchases.

Table of Contents

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.

for

redeemable noncontrolling interests was $906 million and $895 million,

respectively.

Please see

Redeemable Noncontrolling Interests

for further information.

Critical Accounting Estimates

There have been no material changes in our critical accounting estimates

from those disclosed in Item 7 of our

Annual Report on Form 10-K for the year ended December 27, 2025.

Accounting Standards Update

For a discussion of accounting standards updates that have been adopted

or will be adopted, see

Note 2 - Significant

Accounting Policies, Accounting Pronouncements Recently Adopted and Recently Issued Accounting

Pronouncements

of the Notes to the Condensed Consolidated Financial Statements

included under Item 1.