{"url_path":"/sec/hsic/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-24","source_url":"https://www.sec.gov/Archives/edgar/data/1000228/0001000228-26-000013-index.html","accession_number":"0001000228-26-000013","cik":"0001000228","ticker":"HSIC","issuer_name":"HENRY SCHEIN INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1000228/0001000228-26-000013-index.html","primary_entity_key":"0001000228","primary_entity_name":"HENRY SCHEIN INC"},"word_count":8830,"has_tables":false,"body_markdown":"ITEM 7.\n\nManagement’s Discussion and Analysis of Financial Condition and Results of\n\nOperations\n\nCautionary Note Regarding Forward-Looking Statements\n\nIn accordance with the “Safe Harbor” provisions of the Private Securities\n\nLitigation Reform Act of 1995, we\n\nprovide the following cautionary remarks regarding important factors\n\nthat, among others, could cause future results\n\nto differ materially from the forward-looking statements, expectations and assumptions\n\nexpressed or implied herein.\n\nAll forward-looking statements made by us are subject to risks and uncertainties\n\nand are not guarantees of future\n\nperformance.\n\nThese forward-looking statements involve known and unknown\n\nrisks, uncertainties and other factors\n\nthat may cause our actual results, performance and achievements\n\nor industry results to be materially different from\n\nany future results, performance or achievements expressed or implied\n\nby such forward-looking statements.\n\nThese\n\nstatements are generally identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,”\n\n“plan,” “estimate,” “forecast,” “project,” “anticipate,” “to be,” “to\n\nmake” or other comparable terms.\n\nFactors that\n\ncould cause or contribute to such differences include, but are not limited to,\n\nthose discussed in this Annual Report\n\non Form 10-K, and in particular the risks discussed under the caption\n\n“Risk Factors” in Item 1A of this report and\n\nthose that may be discussed in other documents we file with\n\nthe Securities and Exchange Commission (“SEC”).\n\nRisk factors and uncertainties that could cause actual results to differ materially from\n\ncurrent and historical results\n\ninclude, but are not limited to: our dependence on third parties for\n\nthe manufacture and supply of our products and\n\nwhere we manufacture products, our dependence on third parties\n\nfor raw materials or purchased components; risks\n\nrelating to the achievement of our strategic growth objectives, including\n\nanticipated results of restructuring and\n\nvalue creation initiatives; risks related to the Strategic Partnership Agreement\n\nwith KKR Hawaii Aggregator L.P.\n\nentered into in January 2025; transitions in senior company leadership;\n\nour ability to develop or acquire and\n\nmaintain and protect new products (particularly technology and specialty\n\nproducts) and services and utilize new\n\ntechnologies that achieve market acceptance with acceptable margins; transitional\n\nchallenges associated with\n\nacquisitions and joint ventures, including the failure to achieve anticipated\n\nsynergies/benefits, as well as significant\n\ndemands on our operations, information systems, legal, regulatory, compliance, financial and human resources\n\nfunctions in connection with acquisitions, dispositions and joint ventures; certain\n\nprovisions in our governing\n\ndocuments that may discourage third-party acquisitions of us; adverse changes\n\nin supplier rebates or other\n\npurchasing incentives; risks related to the sale of corporate brand products;\n\nrisks related to activist investors;\n\nsecurity risks associated with our information systems and technology\n\nproducts and services, such as cyberattacks\n\nor other privacy or data security breaches (including the October 2023 incident);\n\neffects of a highly competitive\n\n(including, without limitation, competition from third-party online commerce sites)\n\nand consolidating market;\n\npolitical, economic and regulatory influences on the health care\n\nindustry; risks from expansion of customer\n\npurchasing power and multi-tiered costing structures; increases in shipping costs\n\nfor our products or other service\n\nissues with our third-party shippers, and increases in fuel and energy costs; changes\n\nin laws and policies governing\n\nmanufacturing, development and investment in territories and countries\n\nwhere we do business; general global and\n\ndomestic macro-economic and political conditions, including inflation,\n\ndeflation, recession, unemployment (and\n\ncorresponding increase in under-insured populations), consumer confidence,\n\nsovereign debt levels, fluctuations in\n\nenergy pricing and the value of the U.S. dollar as compared to foreign currencies\n\nand changes to other economic\n\nindicators; failure to comply with existing and future regulatory\n\nrequirements, including relating to health care;\n\nrisks associated with the EU Medical Device Regulation; failure to comply with\n\nlaws and regulations relating to\n\nhealth care fraud or other laws and regulations; failure to comply with\n\nlaws and regulations relating to the\n\ncollection, storage and processing of sensitive personal information or standards\n\nin electronic health records or\n\ntransmissions; changes in tax legislation, changes in tax rates and availability\n\nof certain tax deductions; risks related\n\nto product liability, intellectual property and other claims; risks associated with customs policies or legislative\n\nimport restrictions; risks associated with disease outbreaks, epidemics,\n\npandemics (such as the COVID-19\n\npandemic), or similar wide-spread public health concerns and other\n\nnatural or man-made disasters; risks associated\n\nwith our global operations; the threat or outbreak of war (including, without\n\nlimitation, geopolitical wars), terrorism\n\nor public unrest (including, without limitation, the war in Ukraine, the Israel-Gaza\n\nwar and other unrest and threats\n\nin the Middle East and the possibility of a wider European or global conflict);\n\nchanges to laws and policies\n\ngoverning foreign trade, tariffs and sanctions or greater restrictions on imports and\n\nexports, including changes to\n\ninternational trade agreements and the current imposition of (and the\n\npotential for additional) tariffs by the U.S. on\n\nnumerous countries and retaliatory tariffs; supply chain disruption; litigation\n\nrisks; new or unanticipated litigation\n\ndevelopments and the status of litigation matters; our dependence on\n\nour senior management (including, without\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n49\n\nlimitation, the transition to a new Chief Executive Officer), employee hiring and retention,\n\nincreases in labor costs\n\nor health care costs, and our relationships with customers, suppliers and\n\nmanufacturers; and disruptions in financial\n\nmarkets.\n\nThe order in which these factors appear should not be construed\n\nto indicate their relative importance or\n\npriority.\n\nWe caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control\n\nor predict.\n\nAccordingly, any forward-looking statements contained herein should not be relied upon as a prediction\n\nof actual results.\n\nWe undertake no duty and have no obligation to update forward-looking statements except as\n\nrequired by law.\n\nWhere You\n\nCan Find Important Information\n\nWe may disclose important information through one or more of the following channels: SEC filings, public\n\nconference calls and webcasts, press releases, the investor relations\n\npage of our website (www.henryschein.com)\n\nand the social media channels identified on the About Media Center page\n\nof our website.\n\nRecent Developments\n\nChief Executive Officer\n\nOn January 12, 2026, we announced the appointment of Frederick\n\nM. Lowery as our new CEO, effective March 2,\n\n2026, at which time Mr. Lowery will join our Board of Directors.\n\nMr. Lowery succeeds Stanley M. Bergman, who\n\nwill remain as our CEO through March 1, 2026, at which time Mr. Bergman will retire as CEO, but will remain as\n\nChairman of the Board.\n\nCyber Incident\n\nAs previously reported, in October 2023 Henry Schein experienced\n\na cyber incident that primarily affected the\n\noperations of our North American and European dental and medical\n\ndistribution businesses.\n\nDuring the years ended December 28, 2024 and December 30, 2023, we had\n\na sales decrease in our dental and\n\nmedical distribution businesses, which we believe was primarily a\n\nresult of lower sales to episodic customers\n\nfollowing the cyber incident.\n\nWith respect to the October 2023 cyber incident, we had a $60 million insurance policy, following a $5 million\n\nretention.\n\nDuring the years ended December 27, 2025, December 28, 2024\n\nand December 30, 2023, we incurred $0\n\nmillion, $9 million and $11 million, respectively, of direct expenses related to the cyber incident, mostly consisting\n\nof professional fees.\n\nDuring the years ended December 27, 2025 and December\n\n28, 2024, we received insurance\n\nproceeds of $20 million and $40 million, respectively, representing insurance recovery of losses related to the cyber\n\nincident.\n\nThe expenses and insurance recoveries related to the cyber incident\n\nare included in the selling, general\n\nand administrative line in our consolidated statements of income.\n\nTariffs and Related Economic Conditions\n\nThe U.S. has adopted new and increased tariffs on imports from countries, which\n\ntariffs remain subject to\n\nfrequently evolving exemptions and modifications, as well as to court\n\nchallenges, including a recent invalidation in\n\nthe Supreme Court of many of the tariffs.\n\nSome countries have imposed retaliatory tariffs and other restrictions on\n\nimports from the U.S.\n\nThese developments, and anticipated future developments,\n\nhave created a volatile\n\nenvironment for global trade, and new trade policies with individual countries.\n\nIt is unclear whether, or the extent\n\nto which, the current tariffs on trade with numerous countries will remain in place,\n\nor change, the exceptions that\n\nmay apply, and their timing.\n\nThe tariffs did not have a material impact on our results of operations during fiscal\n\nyear 2025, although sales of\n\nU.S. dental equipment were temporarily impacted by market uncertainty\n\nrelated to tariffs in the second half of the\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n50\n\nquarter ended June 28, 2025.\n\nIt is unclear whether, or the extent to which, the current tariffs on trade with\n\nnumerous countries will remain in place, or change, the exceptions that\n\nmay apply, and their timing.\n\nOne Big Beautiful Bill Act\n\nIn the United States, the OBBBA, signed into law on July 4, 2025, includes\n\na number of provisions that are\n\nexpected to result in reductions in the number of Medicaid enrollees, which\n\nwill reduce utilization of services and\n\ncovered products generally.\n\nThere are also several provisions that will reduce federal funding to state\n\nMedicaid\n\nprograms.\n\nThe OBBBA, in combination with tariffs, will likely have an adverse impact on\n\nutilization, Medicaid\n\npayment and cost of production (if foreign components are used).\n\nThe OBBBA also includes changes to corporate tax rates, limitations\n\non certain deductions and modifications to\n\ninternational tax provisions.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n51\n\nExecutive-Level Overview\n\nHenry Schein, Inc. is a solutions company for health care professionals powered\n\nby a network of people and\n\ntechnology.\n\nWe\n\nbelieve we are the world’s largest provider of health care products and services primarily to office-\n\nbased dental and medical practitioners, as well as alternate sites of care.\n\nWe\n\nserve more than one million customers\n\nworldwide including dental practitioners, laboratories, physician practices and\n\nambulatory surgery centers, as well\n\nas government, institutional health care clinics, home health providers, and\n\nother alternate care clinics.\n\nWe\n\nbelieve\n\nthat we have a strong brand identity due to our more than 94 years of experience\n\ndistributing health care products.\n\nWe\n\nare headquartered in Melville, New York, employ more than 25,000 people (of which approximately 13,000 are\n\nbased outside of the United States) and have operations or affiliates in 34 countries and\n\nterritories.\n\nOur broad\n\nglobal footprint has evolved over time through our organic growth as well as through\n\ncontribution from strategic\n\nacquisitions.\n\nWe\n\nhave established strategically located distribution centers around\n\nthe world to enable us to better serve our\n\ncustomers and increase our operating efficiency.\n\nThis infrastructure, together with broad product and service\n\nofferings at competitive prices, and a strong commitment to customer service, enables\n\nus to be a single source of\n\nsupply for our customers’ needs.\n\nAs a distributor, we market and sell branded products as well as our own corporate brand portfolio of\n\ncost-effective,\n\nhigh-quality consumable merchandise products.\n\nWe\n\nalso manufacture, source and sell a range of company-owned\n\nmanufactured products, primarily implants, biomaterial products, endodontics, handpiece\n\nand small equipment,\n\nhand instrument and repair, restoratives, orthodontics, wound care, orthopedics and dental lab products.\n\nWe\n\nhave\n\nachieved scale in these global businesses primarily through acquisitions, as\n\nmanufacturers of these products\n\ntypically do not utilize a distribution channel to serve customers.\n\nOur reportable segments consist of: (i) Global Distribution and Value-Added Services; (ii) Global Specialty\n\nProducts; and (iii) Global Technology.\n\nGlobal Distribution and Value-Added Services includes distribution to the global dental and medical markets of\n\nnational brand and corporate brand merchandise, as well as equipment and related\n\ntechnical services.\n\nThis segment\n\nalso includes value-added services such as financial services, continuing education\n\nservices, consulting and other\n\nservices.\n\nThis segment also markets and sells under our own corporate brand,\n\na portfolio of cost-effective, high-\n\nquality consumable merchandise.\n\nGlobal Specialty Products includes manufacturing, marketing\n\nand sales of dental\n\nimplant and biomaterial products; and endodontic, orthodontic and orthopedic\n\nproducts and other health care-\n\nrelated products and services.\n\nGlobal Technology includes development and distribution of practice management\n\nsoftware, e-services and other products, which are distributed to health\n\ncare providers.\n\nA key element to grow closer to our customers is our One Schein initiative, which\n\nis a unified go-to-market\n\napproach that enables practitioners to work synergistically with our supply chain, equipment\n\nsales and service and\n\nother value-added services, allowing our customers to leverage the\n\ncombined value that we offer through a single\n\nprogram.\n\nSpecifically, One Schein provides customers with streamlined access to our comprehensive offering of\n\nnational brand products, corporate brand products and proprietary specialty products\n\nand solutions (including\n\nimplant, orthodontic and endodontic products).\n\nIn addition, customers have access to a wide range of services,\n\nincluding software and other value-added services.\n\nIndustry Overview\n\nIn recent years, the health care industry has increasingly focused on cost containment.\n\nThis trend has benefited\n\ndistributors capable of providing a broad array of products and services at low\n\nprices.\n\nIt also has accelerated the\n\ngrowth of DSOs, GPOs, HMOs, group practices, other managed care\n\naccounts and collective buying groups, which,\n\nin addition to their emphasis on obtaining products at competitive prices,\n\ntend to favor distributors capable of\n\nproviding specialized management information support.\n\nWe\n\nbelieve that the trend towards cost containment has\n\nthe potential to favorably affect demand for technology solutions, including software, which\n\ncan enhance the\n\nefficiency and facilitation of practice management.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n52\n\nOur operating results in recent years have been significantly affected by strategies\n\nand transactions that we\n\nundertook to expand our business, domestically and internationally, in part to address significant changes in the\n\nhealth care industry, including consolidation of health care distribution companies, health care reform, trends\n\ntoward managed care, cuts in Medicare and collective purchasing arrangements.\n\nIndustry Consolidation\n\nThe health care products distribution industry, as it relates to office-based health care practitioners, is fragmented\n\nand diverse.\n\nThe industry ranges from sole practitioners working out of\n\nrelatively small offices to group practices\n\nor service organizations ranging in size from a few practitioners to a large number of practitioners who have\n\ncombined or otherwise associated their practices.\n\nDue in part to the inability of office-based health care practitioners to store and manage\n\nlarge quantities of supplies\n\nin their offices, the distribution of health care supplies and small equipment to office-based health\n\ncare practitioners\n\nhas been characterized by frequent, small quantity orders, and a need for rapid,\n\nreliable and substantially complete\n\norder fulfillment.\n\nThe purchasing decisions within an office-based health care practice are typically\n\nmade by the\n\npractitioner or an administrative assistant.\n\nSupplies and small equipment are generally purchased from more\n\nthan\n\none distributor, with one generally serving as the primary supplier.\n\nThe trend of consolidation extends to our customer base.\n\nHealth care practitioners are increasingly seeking to\n\npartner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician\n\nhospital organizations.\n\nIn many cases, purchasing decisions for consolidated groups are\n\nmade at a centralized or\n\nprofessional staff level; however, orders are delivered to the practitioners’ offices.\n\nOur approach to acquisitions and joint ventures has been to expand our role as\n\na provider of products and services\n\nto the health care industry.\n\nThis trend has resulted in our expansion into service areas that complement\n\nour existing\n\noperations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired\n\nbusinesses.\n\nAs industry consolidation continues, we believe that we are positioned\n\nto capitalize on this trend, as we believe we\n\nhave the ability to support increased sales through our existing infrastructure, although\n\nthere can be no assurances\n\nthat we will be able to successfully accomplish this.\n\nWe\n\nare focused on building relationships with decision makers\n\nwho do not reside in the office-based practitioner setting.\n\nAs the health care industry continues to change, we continually evaluate possible\n\ncandidates for joint venture or\n\nacquisition and intend to continue to seek opportunities to expand our\n\nrole as a provider of products and services to\n\nthe health care industry.\n\nThere can be no assurance that we will be able to successfully pursue\n\nany such\n\nopportunity or consummate any such transaction, if pursued.\n\nIf additional transactions are entered into or\n\nconsummated, we would incur merger and/or acquisition-related costs, and there\n\ncan be no assurance that the\n\nintegration efforts associated with any such transaction would be successful.\n\nAging Population and Other Market Influences\n\nThe health care products distribution industry continues to experience growth\n\ndue to the aging population,\n\nincreased health care awareness, the proliferation of medical technology\n\nand testing, new pharmacological\n\ntreatments, and expanded third-party insurance coverage, partially offset by the effects of unemployment\n\non\n\ninsurance coverage.\n\nIn addition, the physician market continues to benefit from the\n\nshift of procedures and\n\ndiagnostic testing from acute care settings to alternate-care sites, particularly\n\nphysicians’ offices.\n\nAccording to the U.S. Census Bureau’s International Database, between 2025 and 2035, the 45 and older\n\npopulation is expected to grow by approximately 10%.\n\nBetween 2025 and 2045, this age group is expected to grow\n\nby approximately 17%.\n\nThis compares with expected total U.S. population growth rates of\n\napproximately 4%\n\nbetween 2025 and 2035 and approximately 6% between 2025 and 2045.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n53\n\nAccording to the U.S. Census Bureau’s International Database, in 2025 there are approximately seven million\n\nAmericans aged 85 years or older, the segment of the population most in need of long-term care\n\nand elder-care\n\nservices.\n\nBy the year 2050, that number is projected to increase to approximately\n\n17 million.\n\nThe population aged\n\n65 to 84 years is projected to increase by approximately 15% during\n\nthe same period.\n\nAs a result of these market dynamics, annual expenditures for health care services\n\ncontinue to increase in the\n\nUnited States.\n\nWe\n\nbelieve that demand for our products and services will grow while\n\ncontinuing to be impacted by\n\ncurrent and future operating, economic and industry conditions.\n\nThe Centers for Medicare and Medicaid Services,\n\nor CMS, published “National Health Expenditure Data” indicating that\n\ntotal national health care spending reached\n\napproximately $5.3 trillion in 2024, or 18.0% of the nation’s gross domestic product, the benchmark measure\n\nfor\n\nannual production of goods and services in the United States.\n\nHealth care spending is projected to reach\n\napproximately $8.6 trillion by 2033, or 20.3% of the nation’s projected gross domestic product.\n\nWe\n\nbelieve similar demographic changes are also occurring in other\n\nmarkets we serve outside the U.S.\n\nGovernment\n\nOur businesses are generally subject to numerous laws and regulations that could\n\nimpact our financial performance,\n\nand failure to comply with such laws or regulations could have a\n\nmaterial adverse effect on our business.\n\nSee “\n\n[Item](#a2183)\n\n[1. Business – Governmental Regulations](#a2183)\n\n” for a discussion of laws, regulations and governmental activity\n\nthat may\n\naffect our results of operations and financial condition.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n54\n\nResults of Operations\n\nRefer to Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in\n\nour 2024 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results\n\nof operations for the fiscal year 2024 compared to fiscal year 2023.\n\nThe following tables summarize the significant components of our operating\n\nresults and cash flows for each of the\n\nthree years ended December 27, 2025, December 28, 2024, and December\n\n30, 2023 (in millions):\n\nYears\n\nEnded\n\nDecember 27,\n\nDecember 28,\n\nDecember 30,\n\n2025\n\n2024\n\n2023\n\nOperating results:\n\nNet sales\n\n$\n\n13,184\n\n$\n\n12,673\n\n$\n\n12,339\n\nCost of sales\n\n9,079\n\n8,657\n\n8,479\n\nGross profit\n\n4,105\n\n4,016\n\n3,860\n\nOperating expenses:\n\nSelling, general and administrative\n\n3,084\n\n3,034\n\n2,956\n\nDepreciation and amortization\n\n263\n\n251\n\n209\n\nRestructuring and related costs\n\n105\n\n110\n\n80\n\nOperating income\n\n$\n\n653\n\n$\n\n621\n\n$\n\n615\n\nOther expense, net\n\n$\n\n(120)\n\n$\n\n(108)\n\n$\n\n(73)\n\nIncome taxes\n\n(126)\n\n(128)\n\n(120)\n\nNet income\n\n419\n\n398\n\n436\n\nNet income attributable to Henry Schein, Inc.\n\n398\n\n390\n\n416\n\nYears\n\nEnded\n\nDecember 27,\n\nDecember 28,\n\nDecember 30,\n\n2025\n\n2024\n\n2023\n\nCash flows:\n\nNet cash provided by operating activities\n\n$\n\n712\n\n$\n\n848\n\n$\n\n500\n\nNet cash used in investing activities\n\n(400)\n\n(430)\n\n(1,135)\n\nNet cash provided by (used in) financing activities\n\n(188)\n\n(510)\n\n701\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n55\n\nPlans of Restructuring and Related Costs\n\nOn August 6, 2024, we committed to a restructuring plan (the “2024\n\nPlan”) to integrate our acquisitions, right-size\n\noperations and further increase efficiencies.\n\nWe currently expect this plan to be completed at the end of 2027.\n\nDuring the years ended December 27, 2025 and December 28, 2024, we recorded\n\nrestructuring and related charges\n\nassociated with the 2024 Plan of $105 million and $73 million, respectively.\n\nThe restructuring and related costs for\n\nthese periods primarily related to severance and employee-related costs, accelerated\n\namortization of right-of-use\n\nassets and fixed assets, and other exit costs.\n\nWe expect to record restructuring and related charges associated with\n\nthe 2024 Plan through the end of 2027; however, an estimate of the amount of these charges for 2026 through 2027\n\nhas not yet been determined.\n\nDuring the year ended December 27, 2025, in connection with the 2024 Plan,\n\nwe recorded a loss of $1 million and\n\n$12 million related to the disposal of businesses in the Global Distribution\n\nand Value\n\n-Added Services and Global\n\nSpecialty Product segments, respectively, and a net gain related to disposal of a business in the Global Technology\n\nsegment.\n\nThese amounts are included in the $105 million of restructuring and\n\nrelated charges discussed above.\n\nDuring the year ended December 28, 2024, in connection with the 2024 Plan,\n\nwe recorded an impairment of\n\ngoodwill and intangible assets of $13 million related to the disposal of a portion\n\nof a business in the Global\n\nSpecialty Products segment.\n\nThis impairment is included in the $73 million of restructuring and\n\nrelated charges\n\ndiscussed above.\n\nOn August 1, 2022, we committed to a restructuring plan (the “2022\n\nPlan”) focused on funding the priorities of the\n\nBOLD+1 strategic plan, streamlining operations and other initiatives to\n\nincrease efficiency.\n\nThe 2022 Plan was\n\ncompleted as of July 31, 2024.\n\nDuring the years ended December 28, 2024 and December 30, 2023, in\n\nconnection\n\nwith our 2022 Plan, we recorded restructuring and related costs of $37 million\n\nand $80 million, respectively, which\n\nprimarily related to severance and employee-related costs, accelerated amortization\n\nof right-of-use assets and fixed\n\nassets, and other exit costs.\n\nDuring the year ended December 30, 2023, in connection with the 2022 Plan,\n\nwe recorded an impairment of an\n\nintangible asset of $12 million related to disposal of a U.S. business in\n\nthe Global Specialty Products segment.\n\nThis\n\nimpairment is included in the $80 million of restructuring and related costs discussed\n\nabove.\n\nThe disposal was\n\ncompleted during the first quarter of 2024.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n56\n\n2025 Compared to 2024\n\nNote: Percentages for Net Sales; Gross Profit; Operating Expenses; Other\n\nExpense, Net; and Income Taxes are\n\nbased on actual values and may not recalculate due to rounding.\n\nOur reportable segments are determined based on how our Chairman\n\nand Chief Executive Officer manages the\n\nbusiness, assesses performance and allocates resources.\n\nWe have three reportable segments: (i) Global Distribution\n\nand Value\n\n-Added Services; (ii) Global Specialty Products; and (iii) Global\n\nTechnology.\n\nNet Sales\n\nNet sales by reportable segment and by major product or service type were\n\nas follows:\n\n% of\n\n% of\n\nIncrease / (Decrease)\n\n2025\n\nTotal\n\n2024\n\nTotal\n\n$\n\n%\n\nGlobal Distribution and Value\n\n-Added Services\n\nGlobal Dental Merchandise\n\n(1)\n\n$\n\n4,831\n\n36.6\n\n%\n\n$\n\n4,723\n\n37.3\n\n%\n\n$\n\n108\n\n2.2\n\n%\n\nGlobal Dental Equipment\n\n(2)\n\n1,799\n\n13.6\n\n1,723\n\n13.6\n\n76\n\n4.4\n\nGlobal Value\n\n-Added Services\n\n(3)\n\n238\n\n1.8\n\n233\n\n1.8\n\n5\n\n2.2\n\nGlobal Dental\n\n6,868\n\n52.0\n\n6,679\n\n52.7\n\n189\n\n2.8\n\nGlobal Medical\n\n(4)\n\n4,270\n\n32.5\n\n4,081\n\n32.2\n\n189\n\n4.6\n\nTotal Global Distribution and Value\n\n-Added Services\n\n11,138\n\n84.5\n\n10,760\n\n84.9\n\n378\n\n3.5\n\nGlobal Specialty Products\n\n(5)\n\n1,544\n\n11.7\n\n1,446\n\n11.4\n\n98\n\n6.7\n\nGlobal Technology\n\n(6)\n\n675\n\n5.1\n\n630\n\n5.0\n\n45\n\n7.1\n\nEliminations\n\n(173)\n\n(1.3)\n\n(163)\n\n(1.3)\n\n(10)\n\nn/a\n\nTotal\n\n$\n\n13,184\n\n100.0\n\n%\n\n$\n\n12,673\n\n100.0\n\n%\n\n$\n\n511\n\n4.0\n\n(1)\n\nIncludes infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, gypsum,\n\nacrylics, articulators, abrasives, PPE products and our own corporate brand of consumable merchandise.\n\n(2)\n\nIncludes dental chairs, delivery units and lights, digital dental laboratories, X-ray supplies and equipment, equipment repair\n\nservices and high-tech and digital restoration equipment.\n\n(3)\n\nConsists of financial services on a non-recourse basis, continuing education services for practitioners, consulting and other services.\n\n(4)\n\nIncludes branded and generic pharmaceuticals, home solutions products, vaccines, surgical products, diagnostic tests, infection-\n\ncontrol products, X-ray products, equipment, PPE products, and vitamins.\n\n(5)\n\nIncludes manufacturing, marketing and sales of dental implant and biomaterial products; and endodontic, orthodontic and\n\northopedic products and other health care-related products and services.\n\n(6)\n\nConsists of the development and distribution of practice management software, e-services and other technology-enabled products\n\nfor health care providers.\n\nThe components of our sales growth/(decline) were as follows:\n\nConstant Currency\n\nGrowth/(Decline)\n\nTotal Constant\n\nCurrency Growth\n\nForeign\n\nExchange\n\nImpact\n\nTotal Sales\n\nGrowth\n\nLocal Internal\n\nGrowth/(Decline)\n\nAcquisition\n\nGrowth\n\nGlobal Distribution and Value\n\n-Added Services\n\nGlobal Dental Merchandise\n\n1.4\n\n%\n\n0.2\n\n%\n\n1.6\n\n%\n\n0.6\n\n%\n\n2.2\n\n%\n\nGlobal Dental Equipment\n\n2.7\n\n0.5\n\n3.2\n\n1.2\n\n4.4\n\nGlobal Value\n\n-Added Services\n\n(2.0)\n\n4.0\n\n2.0\n\n0.2\n\n2.2\n\nGlobal Dental\n\n1.6\n\n0.4\n\n2.0\n\n0.8\n\n2.8\n\nGlobal Medical\n\n3.1\n\n1.5\n\n4.6\n\n-\n\n4.6\n\nTotal Global Distribution and Value\n\n-Added Services\n\n2.2\n\n0.8\n\n3.0\n\n0.5\n\n3.5\n\nGlobal Specialty Products\n\n3.3\n\n2.4\n\n5.7\n\n1.0\n\n6.7\n\nGlobal Technology\n\n6.7\n\n-\n\n6.7\n\n0.4\n\n7.1\n\nTotal\n\n2.6\n\n0.9\n\n3.5\n\n0.5\n\n4.0\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n57\n\nGlobal Sales\n\nGlobal net sales for the year ended December 27, 2025 increased 4.0%,\n\nattributable to internal growth of 2.6%,\n\nacquisition growth of 0.9%, and an increase in foreign exchange of 0.5%.\n\nThe components of our sales increase are\n\npresented in the table above.\n\nGlobal Distribution and Value-Added Services Sales\n\nGlobal Distribution and Value-Added Services net sales for the year ended December 27, 2025 increased 3.5%.\n\nThe components of our sales increase are presented in the table\n\nabove.\n\nThe 1.6% increase in internally generated local currency dental sales was\n\nprimarily due to sales growth in U.S\n\ndental merchandise and international dental merchandise,\n\nas well as growth in traditional dental equipment in the\n\nU.S. and growth in traditional and digital dental equipment in international\n\nmarkets.\n\nThe 3.1% increase in internally generated local currency medical sales was\n\nattributable to growth of our Home\n\nSolutions business,\n\ndialysis products and pharmaceuticals.\n\nThe 2.0% decrease in internally generated local currency value-added services\n\nsales was attributable primarily to\n\nlower sales in our practice transitions business, partially offset by sales growth from our international\n\nbusinesses.\n\nGlobal Specialty Products\n\nGlobal Specialty Products net sales for the year ended December 27, 2025\n\nincreased 6.7%.\n\nThe components of our\n\nsales increase are presented in the table above.\n\nThe 3.3% increase in internally generated local currency sales was attributable\n\nto growth in our implant and\n\nbiomaterial businesses, and orthopedics, partially offset by a decline in orthodontic\n\nsales.\n\nGlobal Technology\n\nGlobal Technology net sales for the year ended December 27, 2025 increased 7.1%.\n\nThe components of sales\n\ngrowth are presented in the table above.\n\nThe internally generated local currency increase of 6.7% in Global Technology sales was primarily attributable to\n\nthe adoption of our core practice management solutions, particularly\n\nour cloud-based platforms, as well as an\n\nincrease in revenue cycle management solutions.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n58\n\nGross Profit\n\nGross profit and gross margin percentages by segment and in total were as follows:\n\nGross\n\nGross\n\nIncrease\n\n2025\n\nMargin %\n\n2024\n\nMargin %\n\n$\n\n%\n\nGlobal Distribution and Value\n\n-Added Services\n\n$\n\n2,786\n\n25.0\n\n%\n\n$\n\n2,776\n\n25.8\n\n%\n\n$\n\n10\n\n0.4\n\n%\n\nGlobal Specialty Products\n\n847\n\n54.8\n\n802\n\n55.4\n\n45\n\n5.5\n\nGlobal Technology\n\n457\n\n67.7\n\n424\n\n67.4\n\n33\n\n7.6\n\nCorporate\n\n15\n\nn/a\n\n14\n\nn/a\n\n1\n\nn/a\n\nTotal\n\n$\n\n4,105\n\n31.1\n\n$\n\n4,016\n\n31.7\n\n$\n\n89\n\n2.2\n\nAs a result of different practices of categorizing costs associated with distribution networks\n\nthroughout our\n\nindustry, our gross margins may not necessarily be comparable to other distribution companies.\n\nGross margin\n\npercentages vary between our segments.\n\nWe realize substantially higher gross margin from products we develop\n\nand manufacture within our Global Specialty Products segment compared\n\nto products distributed within our Global\n\nDistribution and Value-Added Services segment.\n\nWithin our Global Technology segment, higher gross margins\n\nresult from us being both the developer and seller of software products\n\nand services.\n\nWithin our Global Distribution and Value\n\n-Added Services segment, gross profit margins may fluctuate between the\n\nperiods as a result of the changes in product mix and customer mix.\n\nWith respect to customer mix, sales to our\n\nlarge-group customers are typically completed at lower gross margins as a result of\n\nhigher sales volumes, while\n\nsales to office-based practitioners generally carry higher gross margins due to lower volumes.\n\nThe increase in Global Distribution and Value-Added Services gross profit for the year ended December 27, 2025\n\ncompared to the prior-year-period is due primarily to increased internally generated sales volume as described\n\nabove.\n\nThe decrease in gross margin rates was attributable primarily to the impact\n\nof targeted promotional\n\nprograms and product mix.\n\nThe increase in Global Specialty Products gross profit primarily reflects\n\nincreased internally generated sales\n\nvolume and gross profit from acquisitions.\n\nThe decrease in gross margin rates was due to product mix and pricing.\n\nThe increase in Global Technology gross profit is the result primarily of higher internally generated sales.\n\nThe\n\nincrease in gross margin rates was due to product mix.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n59\n\nOperating Expenses\n\nOperating expenses (consisting of selling, general and administrative\n\nexpenses; depreciation and amortization; and\n\nrestructuring and related costs) by segment were as follows:\n\n% of\n\n% of\n\nRespective\n\nRespective\n\nIncrease / (Decrease)\n\n2025\n\nSales\n\n2024\n\nSales\n\n$\n\n%\n\nGlobal Distribution and Value\n\n-Added Services\n\n$\n\n2,106\n\n18.9\n\n%\n\n$\n\n2,080\n\n19.3\n\n%\n\n$\n\n26\n\n1.3\n\n%\n\nGlobal Specialty Products\n\n605\n\n39.2\n\n624\n\n43.2\n\n(19)\n\n(3.1)\n\nGlobal Technology\n\n277\n\n41.0\n\n272\n\n43.2\n\n5\n\n1.5\n\nCorporate\n\n145\n\nn/a\n\n91\n\nn/a\n\n54\n\n60.8\n\n3,133\n\n23.8\n\n3,067\n\n24.2\n\n66\n\n2.1\n\nAdjustments\n\n(1)\n\n319\n\nn/a\n\n328\n\nn/a\n\n(9)\n\nn/a\n\nTotal operating expenses\n\n$\n\n3,452\n\n26.2\n\n$\n\n3,395\n\n26.8\n\n$\n\n57\n\n1.7\n\n(1)\n\nAdjustments represent items excluded from segment operating income to enable comparison of financial results between periods.\n\nThese items may vary independently of business performance.\n\nPlease see\n\n[Note 4 – Segment and Geographic Data](#a42154)\n\n.\n\nThese\n\nadjustments (current year vs. prior year) consist of (i) acquisition intangible amortization ($179 million vs. $184 million), (ii)\n\nrestructuring and related costs ($105 million vs. $110 million), (iii) change in contingent consideration ($(2) million vs. $45\n\nmillion), (iv) litigation settlements ($5 million vs. $6 million), (v) cyber incident-insurance proceeds, net of\n\nthird-party advisory\n\nexpenses ($(20) million net proceeds vs. $(31) million net proceeds), (vi) impairment of intangible assets ($16 million vs. $0\n\nmillion), (vii) impairment of capitalized assets ($0 million vs. $12 million), and (viii) costs associated with shareholder advisory\n\nmatters and select value creation consulting costs ($36 million vs. $2 million).\n\nThe net increase in operating expenses was attributable to the following:\n\nOperating Costs\n\n(excluding\n\nacquisitions)\n\nAcquisitions\n\nAdjustments\n\nTotal\n\nGlobal Distribution and Value\n\n-Added Services\n\n$\n\n3\n\n$\n\n23\n\n$\n\n-\n\n$\n\n26\n\nGlobal Specialty Products\n\n(23)\n\n4\n\n-\n\n(19)\n\nGlobal Technology\n\n5\n\n-\n\n-\n\n5\n\nCorporate\n\n54\n\n-\n\n-\n\n54\n\n39\n\n27\n\n-\n\n66\n\nAdjustments\n\n-\n\n-\n\n(9)\n\n(9)\n\nTotal operating expenses\n\n$\n\n39\n\n$\n\n27\n\n$\n\n(9)\n\n$\n\n57\n\nThe components of the net increase in total operating expenses are presented\n\nin the table above.\n\nThe increase in\n\noperating costs (excluding acquisitions) during the year ended December 27,\n\n2025 was attributable to an increase in\n\nCorporate investments in technology supporting the launch of our Global E-Commerce\n\nPlatform\n\n(www.henryschein.com), depreciation expense,\n\nthe impact of certain compensation related costs and timing of\n\ncertain non-income tax credits during the year ended December 28, 2024,\n\npartially offset by cost savings from our\n\nrestructuring activities, certain changes in estimates and other operating\n\ncost efficiencies.\n\nIn addition, during the\n\nyear ended December 27, 2025,\n\nour operating costs were impacted by recognition of a benefit related\n\nto the\n\nremeasurement to fair value of previously held equity investments of $29\n\nmillion within our Global Specialty\n\nProducts segment and $9 million within our Global Distribution and Value-Added Services segment.\n\nDuring the\n\nyear ended December 28, 2024,\n\nour operating costs were impacted by recognition of a remeasurement gain\n\nrelated\n\nto the remeasurement to fair value of a previously held equity investments of $18\n\nmillion within our Global\n\nDistribution and Value-Added Services segment.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n60\n\nOther Expense, Net\n\nOther expense, net was as follows:\n\nVariance\n\n2025\n\n2024\n\n$\n\n%\n\nInterest income\n\n$\n\n33\n\n$\n\n24\n\n$\n\n9\n\n37.1\n\n%\n\nInterest expense\n\n(150)\n\n(131)\n\n(19)\n\n(14.2)\n\nOther, net\n\n(3)\n\n(1)\n\n(2)\n\nn/a\n\nOther expense, net\n\n$\n\n(120)\n\n$\n\n(108)\n\n$\n\n(12)\n\n10.9\n\nInterest income increased primarily due to increased interest rates.\n\nInterest expense increased primarily due to\n\nincreased borrowings.\n\nIncome Taxes\n\nOur effective tax rate was 23.7% for the year ended December 27, 2025, compared to 24.9%\n\nfor the prior year\n\nperiod.\n\nThe difference between our effective and federal statutory tax rates primarily relates to state\n\nand foreign\n\nincome taxes and interest expense, as well as the tax treatment associated with\n\nthe acquisition of a controlling\n\ninterest of a previously held non-controlling equity investment.\n\nOn July 4, 2025, President Trump signed the reconciliation tax bill, commonly known as the “One Big Beautiful\n\nBill Act” (OBBBA), into law.\n\nCorporate provisions in the OBBBA include immediate expensing of domestic\n\nresearch and experimental expenditures, limitations on certain deductions,\n\nand modifications to international tax\n\nprovisions.\n\nThe changes resulting from the OBBBA did not have a significant impact\n\nto the total tax provision.\n\nThe Organization of Economic Co-Operation and Development (OECD) issued\n\ntechnical and administrative\n\nguidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of\n\nlarge multinational businesses on a country-by-country basis.\n\nEffective January 1, 2024, the minimum global tax\n\nrate is 15% for various jurisdictions pursuant to the Pillar Two rules.\n\nFuture tax reform resulting from these\n\ndevelopments may result in changes to long-standing tax principles, which\n\nmay adversely impact our effective tax\n\nrate going forward or result in higher cash tax liabilities.\n\nAs of December 27, 2025, the impact of the Pillar Two\n\nrules to our financial statements was immaterial.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n61\n\nLiquidity and Capital Resources\n\nOur principal capital requirements have included funding of acquisitions, purchases\n\nof additional noncontrolling\n\ninterests, repayments of debt principal, the funding of working capital needs,\n\npurchases of fixed assets and\n\nrepurchases of common stock.\n\nWorking capital requirements generally result from increased sales, special\n\ninventory forward buy-in opportunities and payment terms for receivables\n\nand payables.\n\nHistorically, sales have\n\ntended to be stronger during the second half of the year and special inventory\n\nforward buy-in opportunities have\n\nbeen most prevalent just before the end of the year, and have caused our working capital requirements\n\nto be higher\n\nfrom the end of the third quarter to the end of the first quarter of\n\nthe following year.\n\nWe finance our business primarily through cash generated from our operations, revolving credit facilities and debt\n\nplacements.\n\nPlease see\n\n[Note 14 – Debt](#a48838)\n\nfor further information.\n\nOur ability to generate sufficient cash flows from\n\noperations is dependent on the continued demand of our customers\n\nfor our products and services, and access to\n\nproducts and services from our suppliers.\n\nOur business requires a substantial investment in working capital, which\n\nis susceptible to fluctuations during the\n\nyear as a result of inventory purchase patterns and seasonal demands.\n\nInventory purchase activity is a function of\n\nsales activity, special inventory forward buy-in opportunities and our desired level of inventory.\n\nWe finance our business to provide adequate funding for at least 12 months.\n\nFunding requirements are based on\n\nforecasted profitability and working capital needs, which, on occasion, may\n\nchange.\n\nConsequently, we may change\n\nour funding structure to reflect any new requirements.\n\nOur acquisition strategy is focused on investments in companies, including\n\nhigh growth high margin businesses\n\naligned with our BOLD+1 strategy, that add new customers and sales teams, increase our geographic footprint\n\n(whether entering a new country, such as emerging markets, or building scale where we have already invested in\n\nbusinesses), and finally, those that enable us to access new products and technologies.\n\nWe believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,\n\nand our available funds under existing credit facilities provide us with\n\nsufficient liquidity to meet our currently\n\nforeseeable short-term and long-term capital needs.\n\nNet cash provided by operating activities was $712 million for the\n\nyear ended December 27, 2025, compared to net\n\ncash provided by operating activities of $848 million for the prior year.\n\nThe net change of $136 million was\n\nprimarily attributable to changes in working capital accounts (primarily\n\naccounts receivable, inventory, and\n\naccounts payable and accrued expenses),\n\npartially offset by an increase in operating income.\n\nOur operating cash\n\nflows during the year ended December 28, 2024 were positively\n\naffected by the residual impacts of the 2023 cyber\n\nincident and included a higher-than-normal level of cash collections.\n\nOur cash collections normalized during the\n\nsecond half of the year ended December 28, 2024.\n\nNet cash used in investing activities was $400 million for the year ended\n\nDecember 27, 2025, compared to net cash\n\nused in investing activities of $430 million for the prior year.\n\nThe net change of $30 million was primarily\n\nattributable to lower acquisition activity.\n\nNet cash used in financing activities was $188 million for the year\n\nended December 27, 2025, compared to net cash\n\nused in financing activities of $510 million for the prior year.\n\nThe net change of $322 million was primarily due to\n\nincreased net borrowings from debt,\n\nproceeds received from the issuance of common stock, and a\n\nreduction in\n\nacquisitions of noncontrolling interests in subsidiaries, partially offset by increased\n\nrepurchases of common stock.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n62\n\nThe following table summarizes selected measures of liquidity and capital\n\nresources:\n\nDecember 27,\n\nDecember 28,\n\n2025\n\n2024\n\nCash and cash equivalents\n\n$\n\n156\n\n$\n\n122\n\nWorking\n\ncapital\n\n(1)\n\n1,236\n\n1,180\n\nDebt:\n\nBank credit lines\n\n$\n\n764\n\n$\n\n650\n\nCurrent maturities of long-term debt\n\n33\n\n56\n\nLong-term debt\n\n2,310\n\n1,830\n\nTotal debt\n\n$\n\n3,107\n\n$\n\n2,536\n\nLeases:\n\nCurrent operating lease liabilities\n\n$\n\n78\n\n$\n\n75\n\nNon-current operating lease liabilities\n\n251\n\n259\n\n(1)\n\nIncludes $491 million and $241 million of certain accounts receivable which serve as security for U.S. trade accounts receivable\n\nsecuritization at December 27, 2025 and December 28, 2024, respectively.\n\nOur cash and cash equivalents consist of bank balances and investments\n\nin money market funds representing\n\novernight investments with a high degree of liquidity.\n\nAccounts receivable days sales outstanding and inventory turns\n\nOur accounts receivable days sales outstanding from operations decreased\n\nto 44.8 days as of December 27, 2025\n\nfrom 47.3 days as of December 28, 2024, which was primarily attributable\n\nto the impact that the cyber incident had\n\non the cash collections during the first half of 2024.\n\nDuring the years ended December 27, 2025 and December 28,\n\n2024, we wrote off approximately $18 million and $12 million, respectively, of fully reserved accounts receivable\n\nagainst our trade receivable reserve.\n\nOur inventory turns from operations decreased to 4.8 as of December\n\n27, 2025\n\nfrom 5.0 as of December 28, 2024.\n\nOur working capital accounts may be impacted by current and\n\nfuture economic\n\nconditions.\n\nContractual obligations\n\nThe following table summarizes our contractual obligations related\n\nto fixed and variable rate long-term debt and\n\nfinance lease obligations, including interest (assuming a weighted\n\naverage interest rate of 4.62%), as well as\n\ninventory purchase commitments and operating lease obligations\n\nas of December 27, 2025:\n\nPayments due by period\n\n< 1 year\n\n2 - 3 years\n\n4 - 5 years\n\n> 5 years\n\nTotal\n\nContractual obligations:\n\nLong-term debt, including interest\n\n$\n\n133\n\n$\n\n942\n\n$\n\n1,066\n\n$\n\n656\n\n$\n\n2,797\n\nInventory purchase commitments\n\n8\n\n1\n\n-\n\n-\n\n9\n\nOperating lease obligations\n\n91\n\n133\n\n84\n\n63\n\n371\n\nFinance lease obligations, including interest\n\n3\n\n3\n\n1\n\n-\n\n7\n\nTotal\n\n$\n\n235\n\n$\n\n1,079\n\n$\n\n1,151\n\n$\n\n719\n\n$\n\n3,184\n\nFor information relating to our debt please see\n\n[Note 14 – Debt](#a48838)\n\n.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n63\n\nLeases\n\nWe have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles\n\nand certain equipment.\n\nOur leases have remaining terms of less than one year to\n\napproximately 23 years, some of\n\nwhich may include options to extend the leases for up to 10 years.\n\nAs of December 27, 2025, our right-of-use\n\nassets related to operating leases were $301 million and our current and\n\nnon-current operating lease liabilities were\n\n$78 million and $251 million, respectively.\n\nPlease see\n\n[Note 8 – Leases](#a45248)\n\nfor further information.\n\nStock Repurchases\n\nOn January 27, 2025, our Board authorized the repurchase of up\n\nto an additional $500 million in shares of our\n\ncommon stock.\n\nOn May 19, 2025, we executed an accelerated share repurchase program\n\nto repurchase a total of $250 million of\n\nour outstanding common stock based on volume-weighted average\n\nprices.\n\nIn May 2025, we received 3,122,832\n\nshares at an estimated fair value of $224 million.\n\nIn July 2025, we received an additional 368,651 shares at an\n\nestimated fair value of $26 million, representing the final amount of shares\n\nto be received under this accelerated\n\nshare repurchase program.\n\nOn September 8, 2025, our Board authorized the repurchase of up to\n\nan additional $750 million in shares of our\n\ncommon stock.\n\nFrom March 3, 2003 through December 27, 2025, we repurchased $6.0\n\nbillion, or 107,876,628 shares, under our\n\ncommon stock repurchase programs, with $780 million available\n\nas of December 27, 2025 for future common stock\n\nshare repurchases.\n\nRedeemable Noncontrolling Interests\n\nSome minority stockholders in certain of our subsidiaries have the right,\n\nat certain times, to require us to acquire\n\ntheir ownership interest in those entities at fair value.\n\nAccounting Standards Codification Topic 480-10 is\n\napplicable for noncontrolling interests where we are or may be required\n\nto purchase all or a portion of the\n\noutstanding interest in a consolidated subsidiary from the noncontrolling\n\ninterest holder under the terms of a put\n\noption contained in contractual agreements.\n\nAs of December 27, 2025 and December 28, 2024, our balance\n\nfor\n\nredeemable noncontrolling interests was $895 million and $806 million,\n\nrespectively.\n\nPlease see\n\n[Note 20 –](#a55881)\n\n[Redeemable Noncontrolling Interests](#a55881)\n\nfor further information.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n64\n\nCritical Accounting Estimates\n\nOur accounting policies are described in\n\n[Note 1 – Basis of Presentation and Significant Accounting Policies](#a38445)\n\nof the\n\nconsolidated financial statements.\n\nThe preparation of consolidated financial statements requires us\n\nto make\n\nestimates and judgments that affect the reported amounts of assets, liabilities, revenues\n\nand expenses and related\n\ndisclosures of contingent assets and liabilities.\n\nWe base our estimates on historical data, when available,\n\nexperience, industry and market trends, and on various other assumptions\n\nthat are believed to be reasonable under\n\nthe circumstances, the combined results of which form the basis for\n\nmaking judgments about the carrying values of\n\nassets and liabilities that are not readily apparent from other sources.\n\nWe believe that the estimates, judgments and\n\nassumptions upon which we rely are reasonable based upon information\n\navailable to us at the time that these\n\nestimates, judgments and assumptions are made.\n\nHowever, by their nature, estimates are subject to various\n\nassumptions and uncertainties.\n\nTherefore, reported results may differ from estimates and any such differences may\n\nbe material to our consolidated financial statements.\n\nWe believe that the following critical accounting estimates, which have been discussed with the Audit Committee\n\nof our Board, affect the significant estimates and judgments used in the preparation\n\nof our consolidated financial\n\nstatements:\n\nInventories and Reserves\n\nInventories consist primarily of finished goods, raw materials and\n\nwork-in-process and are stated at the lower of\n\ncost or net realizable value.\n\nCost is determined by the weighted average method for merchandise\n\nand actual cost\n\nfor large equipment, high-technology equipment and drop-shipments.\n\nInventory costs for manufactured products\n\ninclude direct materials, labor, and an allocation of related fixed and variable overhead.\n\nThe determination of\n\ninventory carrying values requires management to make significant\n\nestimates and judgments.\n\nIn assessing the need\n\nfor inventory reserves and evaluating net realizable value, we consider\n\nmultiple factors, including inventory\n\ncondition, on-hand quantities, historical and forecasted sales, product\n\nlife cycles, and prevailing market and\n\neconomic conditions.\n\nBusiness Combinations\n\nThe estimated fair value of acquired identifiable intangible assets (i.e., customer\n\nrelationships and lists, trademarks\n\nand trade names, product development and non-compete agreements)\n\nis based on critical judgments and\n\nassumptions derived from analysis of market conditions, including discount\n\nrates, projected revenue growth rates\n\n(which are based on historical trends and assessment of financial projections),\n\nestimated customer attrition and\n\nprojected cash flows.\n\nThese assumptions are forward-looking and could be affected by future economic\n\nand market\n\nconditions.\n\nPlease see\n\n[Note 5 – Business Acquisitions](#a43451)\n\nfor further discussion of our acquisitions.\n\nGoodwill\n\nGoodwill is subject to impairment assessment at least once annually\n\nas of the first day of our fourth quarter, or if an\n\nevent occurs or circumstances change that would more likely than\n\nnot reduce a reporting unit’s fair value below\n\ncarrying value.\n\nWe conduct our goodwill impairment testing at the reporting unit level.\n\nWe identify our reporting\n\nunits by assessing whether two or more components are economically\n\nsimilar and therefore should be aggregated.\n\nOur reporting units are identified as our operating segments.\n\nGoodwill is allocated to such reporting units for the\n\npurposes of our impairment assessment.\n\nFor the year ended December 27, 2025, our reporting structure was:\n\n(i)\n\nGlobal Distribution and Value-Added Services reportable segment, which included the following\n\noperating segments (a) US Distribution Group; (b) Europe, Middle East,\n\nand Africa Distribution Group;\n\n(c) Americas Non-US Distribution Group; and (d) Asia-Pacific and Australia\n\nDistribution Group;\n\n(ii)\n\nGlobal Specialty Products reportable segment, which included the following\n\noperating segments (a) Global\n\nOral Reconstruction Group; and (b) Healthcare Specialty Group; and\n\n(iii)\n\nGlobal Technology,\n\nwhich is both a reportable segment and an operating segment.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n65\n\nApplication of the goodwill impairment test requires judgment, including\n\nthe identification of reporting units,\n\nassignment of assets and liabilities that are considered shared services\n\nto the reporting units, and ultimately the\n\ndetermination of the fair value of each reporting unit.\n\nThe fair value of each reporting unit is calculated by\n\napplying the discounted cash flow methodology and confirming with\n\na market approach.\n\nThere are inherent\n\nuncertainties, however, related to fair value models, the inputs and our judgments in applying them to\n\nthis analysis.\n\nThe most significant inputs include estimation of detailed future cash flows based\n\non budget expectations, and\n\ndetermination of comparable companies to develop a weighted average\n\ncost of capital for each reporting unit.\n\nIn performing the annual goodwill impairment assessment, we prepare forward-looking\n\nfinancial projections for\n\neach reporting unit based on input from our leadership and approved operating\n\nplans.\n\nThese projections incorporate\n\nassumptions related to planned strategic initiatives, the continued integration\n\nof recent acquisitions, and prevailing\n\nmacroeconomic and market conditions.\n\nChanges in these assumptions could materially affect the estimated fair\n\nvalues of the reporting units.\n\nOur third-party valuation specialists provide inputs into our determination\n\nof the discount rate.\n\nThe rate is\n\ndependent on a number of underlying assumptions, including the risk-free rate,\n\ntax rate, equity risk premium, debt\n\nto equity ratio and pre-tax cost of debt.\n\nLong-term growth rates are applied to our estimation of future cash flows.\n\nThe long-term growth rates are tied to\n\ngrowth rates we expect to achieve beyond the years for which we have\n\nforecasted operating results.\n\nWe also\n\nconsider external benchmarks, and other data points which we believe are\n\napplicable to our industry and the\n\ncomposition of our global operations.\n\nWe performed our annual quantitative goodwill assessment, and the estimated fair value of each of our reporting\n\nunits sufficiently exceeded its respective carrying value.\n\nAs a result, no goodwill impairments were recorded\n\nduring the years ended December 27, 2025, December 28, 2024, and December\n\n30, 2023.\n\nFor the year ended December 28, 2024, in connection with our restructuring\n\ninitiatives, we recorded an $11 million\n\nimpairment of goodwill in the Global Specialty Products segment, relating\n\nto the disposal of a portion of a business;\n\nsuch impairment was calculated based on the relative fair value of goodwill.\n\nDefinite-Lived Intangible Assets\n\nAnnually or if we identify an impairment indicator, definite-lived intangible assets such as customer\n\nrelationships\n\nand lists, trademarks, trade names, product development and non-compete\n\nagreements are reviewed for impairment\n\nindicators.\n\nIf any impairment indicators exist, quantitative testing is performed\n\non the asset.\n\nThe quantitative impairment model is a two-step test under which we\n\nfirst calculate the recoverability of the\n\ncarrying value by comparing the undiscounted projected cash flows associated\n\nwith the asset or asset group,\n\nincluding its estimated residual value, to the carrying amount.\n\nIf the cash flows associated with the asset or asset\n\ngroup are less than the carrying value, we perform a fair value assessment\n\nof the asset, or asset group.\n\nIf the\n\ncarrying amount is found to be greater than the fair value, we record an\n\nimpairment loss for the excess of book\n\nvalue over the fair value.\n\nIn addition, in all cases of an impairment review, we re-evaluate the remaining useful\n\nlives of the assets and modify them, as appropriate.\n\nAlthough we believe our judgments, estimates and/or\n\nassumptions used in estimating cash flows and determining fair value\n\nare reasonable, making material changes to\n\nsuch judgments, estimates and/or assumptions could materially affect such impairment\n\nanalyses and our financial\n\nresults.\n\nDuring the year ended December 27, 2025, we recorded $16 million of\n\nimpairment charges related to businesses in\n\nour Global Distribution and Value-Added Services segment.\n\nThe impairment charges included $14 million\n\nprimarily related to customer lists and relationships attributable\n\nto lower than anticipated operating margins in these\n\nbusinesses.\n\nThe remaining impairment charges of $2 million related to trade names\n\nand non-compete agreements.\n\nDuring the year ended December 28, 2024, we recorded $4 million of\n\nimpairment charges related to businesses in\n\nour Global Distribution and Value-Added Services segment.\n\nIt included $2 million of a trade name impairment,\n\ncalculated using the relative fair value, related to a disposal of a business,\n\nand $1 million related to trade name\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n66\n\nimpairment due to business integration in connection with our restructuring\n\ninitiatives.\n\nThe remaining $1 million\n\nimpairment charges related to trade names and non-compete agreements.\n\nDuring the year ended December 30, 2023, we recorded $19 million of\n\nimpairment charges related to businesses in\n\nour Global Distribution and Value-Added Services segment, consisting of $7 million primarily related to customer\n\nlists and relationships attributable to lower than anticipated operating\n\nmargins in certain businesses, and a $12\n\nmillion charge related to the planned exit of a business in connection with our restructuring\n\ninitiatives.\n\nThe impairment charges for the years ended December 27, 2025, December 28, 2024,\n\nand December 30, 2023 were\n\nmeasured as the excess of the carrying values over the estimated fair values\n\nof the related intangible assets,\n\ndetermined using discounted estimates of future cash flows and the\n\nrelief-from-royalty method.\n\nPlease see\n\n[Note 16 – Plans of Restructuring and Related Costs](#a52963)\n\nfor additional details.\n\nRedeemable Noncontrolling Interests\n\nSome minority stockholders in certain of our consolidated subsidiaries have\n\nthe right, at certain times, to require us\n\nto acquire their ownership interest in those entities at fair value.\n\nThe redemption amounts have been estimated\n\nbased on recent transactions and/or implied multiples of earnings\n\nand, if such earnings and cash flows are not\n\nachieved, the value of the redeemable noncontrolling interests might be impacted.\n\nSee\n\n[Note 1 – Basis of](#a38445)\n\n[Presentation and Significant Accounting Policies](#a38445)\n\nand\n\n[Note 20 – Redeemable Noncontrolling Interests](#a55881)\n\nfor additional\n\ninformation.\n\nIncome Tax\n\nDetermining whether a deferred tax asset will be realized requires significant\n\nestimates and judgment to assess\n\nwhether a valuation allowance is necessary.\n\nWe\n\nconsider all available evidence, both positive and negative,\n\nincluding estimated future taxable earnings, ongoing planning strategies,\n\nfuture reversals of existing temporary\n\ndifferences and historical operating results.\n\nAdditionally, changes to tax laws and statutory tax rates can have an\n\nimpact on our determination.\n\nWe\n\nevaluate the realizability of our deferred tax assets quarterly.\n\nAccounting Standards Codification Topic 740 prescribes the accounting for uncertainty in income taxes recognized\n\nin the financial statements in accordance with provisions contained within\n\nits guidance.\n\nThis topic prescribes a\n\nrecognition threshold and a measurement attribute for the financial statement\n\nrecognition and measurement of tax\n\npositions taken or expected to be taken in a tax return.\n\nFor those benefits to be recognized, a tax position must be\n\nmore likely than not to be sustained upon examination by the taxing authorities.\n\nThe amount recognized is\n\nmeasured as the largest amount of benefit that has a greater than 50% likelihood of being realized\n\nupon ultimate\n\naudit settlement.\n\nIn the normal course of business, our tax returns are subject\n\nto examination by various taxing\n\nauthorities.\n\nSuch examinations may result in future tax and interest assessments\n\nby these taxing authorities for\n\nuncertain tax positions taken in respect of certain tax matters.\n\nPlease see\n\n[Note 15 – Income Taxes](#a49832)\n\nfor further\n\ndiscussion.\n\nAccounting Standards Update\n\nFor a discussion of accounting standards updates that have been adopted\n\nor will be adopted in the future, please see\n\n[Note 1 – Basis of Presentation and Significant Accounting Policies](#a38445)\n\nincluded under Item 8.\n\n[Table of Contents](#a296)\n\n[Index to Financial Statements](#a33909)\n\n67"}