NASDAQ: HSIC

Our infrastructure, including over 5.4 million square feet of

space in 38 strategically located

distribution centers and 0.6 million square feet of space in 17 manufacturing

facilities around the world, enables us

to historically provide rapid and accurate order fulfillment, 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, which we

believe is a competitive advantage.

We conduct our business through three reportable segments:

•

Global Distribution and Value-Added Services: 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 practice services.

This segment also markets and sells under our own corporate

brand,

a portfolio of cost-effective, high-quality consumable merchandise;

•

Global Specialty Products: manufacturing, marketing and sales of dental

implant and biomaterial products;

endodontic, orthodontic and orthopedic products and other health

care-related products and services; and

•

Global Technology: development and distribution of practice management software, e-services, and other

products, which are distributed to health care providers.

Recent Developments

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent

Developments” herein for a discussion related to recent Company developments.

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Index to Financial Statements

4

Industry

The distribution and value-added services industry, as it relates to office-based health care practitioners, is

fragmented and diverse.

The industry spans a wide spectrum, from sole practitioners or small

independent offices

to mid-size and large group practices.

These larger organizations may include just a few clinicians or scale to

several hundred practices, often owned and operated by dental support organizations

(DSOs) or integrated delivery

networks (IDNs).

Due in part to the limited capacity 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, hygienist or office manager.

Supplies and small equipment are generally

purchased from more than one distributor, with one generally serving as the primary supplier.

The distribution and value-added services industry should benefit from

favorable long-term macro trends that

should help stimulate patient traffic and demand for products and services.

This includes an aging population,

increased health care awareness and the importance of preventive care,

an increasing understanding of the

connection between good oral health and overall health, improved access

to care globally, the proliferation of

medical technology and testing, new pharmacology treatments and

expanded third-party insurance coverage,

partially offset by the effects of unemployment on insurance coverage and technological

improvements, including

the advancement of software and services, prosthetic solutions and telemedicine.

In addition, the non-acute market

continues to benefit from the shift of procedures and diagnostic

testing from acute care settings to alternate-care

sites, particularly physicians’ offices and ambulatory surgery centers.

Customer consolidation will likely lead to multiple locations under

common management and the movement of

more procedures from the hospital setting to the physician or alternate

care setting, as the health care industry is

increasingly focused on efficiency and 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 Health Maintenance

Organizations (“HMOs”), management service organizations, group practices, other managed

care accounts and

collective buying groups such as Dental Service Organizations (“DSOs”) and Group Purchasing

Organizations

(“GPOs”), which, in addition to their emphasis on obtaining products

at competitive prices, tend to favor

distributors capable of providing specialized management information

support.

We believe that the trend towards

cost containment has the potential to favorably affect demand for technology solutions,

including software, which

can enhance the efficiency and facilitation of practice management.

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5

Competition

The distribution and manufacture of health care supplies and equipment is

highly competitive.

Many of the health

care products we sell are available to our customers from a number of suppliers.

In addition, our competitors could

obtain exclusive rights from manufacturers to market particular products.

Manufacturers also could seek to sell

directly to end-users and thereby eliminate or reduce our role and

that of other distributors.

In certain parts of the

dental end market, such as those related to dental specialty products, and

medical end market manufacturers already

sell directly to end customers.

In North America, we compete with other distributors, as well as several

manufacturers, of dental and medical

products, primarily on the basis of price, breadth of product line, e-commerce

capabilities, customer service and

value-added products and services.

In the dental distribution market, our primary competitors in the U.S. are

the

Patterson Dental division of Patterson Companies, Inc. and Benco Dental Supply

Company.

In addition, we

compete against a number of other distributors that operate on a national,

regional and local level.

Our primary

competitors in the U.S. medical distribution market, which accounts

for the large majority of our global medical

sales, are McKesson Corporation and Medline Industries, Inc., which are national

distributors.

We also compete

with a number of regional and local medical distributors, as well as a number

of manufacturers that sell directly to

physicians and patients in their homes.

Outside of the U.S., we believe we are the only global distributor of supplies

and equipment to dental practices, and

our competitors are primarily local and regional companies.

We compete on the basis of price and customer service

against several large competitors, including Cadence Group, Proclinic Group, DD

Group, Nuent Group, Lifco AB,

Planmeca Group, Dental Union, and Dental Bauer, as well as a large number of other dental and medical product

distributors and manufacturers.

Within Global Specialty Products, our primary global competitors include Straumann, Envista, Zimvie,

and

Dentsply Sirona for dental implants.

These companies, along with Geistlich Pharma AG and Botiss Biomaterials

GmbH, also compete with us in the biomaterials for dental tissue

regeneration market.

Within Global Technology,

we compete against numerous dental software providers, including the Eaglesoft

division of Patterson Companies, Inc., Carestream Dental LLC, Centaur Software

Development Co Pty Ltd. (d.b.a.

dental4windows, dental4web), Open Dental Software, Inc., PlanetDDS

LLC, Good Methods Global Inc. (d.b.a.

CareStack), Curve Dental, LLC., the NextGen division of Quality Systems,

Inc., eClinicalWorks and Epic Systems

Corporation.

In other software end markets, including revenue cycle management,

patient relationship

management and patient demand generation, we compete with companies

such as Vyne

Medical, Dental

Intelligence, and Weave Communications, Inc.

Many of these competitors connect to our software platforms

through our API program.

Manufacturing and Raw Materials

We manufacture certain of our specialty products (dental implants, endodontics, and orthopedics) at our 17

company manufacturing sites.

We also outsource certain manufactured products to third parties.

We purchase our

raw materials from distributors or mills.

Although no single supplier is material, raw materials may be sourced

from a single supplier or a limited number of suppliers for reasons

of quality assurance, regulatory requirements,

cost, and availability.

We believe that we have a readily available supply of raw materials and components sourced from various suppliers

for our major product lines with some redundancy to ensure product availability.

In recent periods, we have

experienced increased costs due to labor cost increases, source of supply, and tariffs, which may have had a

negative impact on our profit margins.

In most cases, through negotiations, consolidation of suppliers,

and

insourcing, we have been able to reduce the impact.

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6

Competitive Strengths

We have 94 years of experience in distributing products to health care practitioners resulting in strong awareness of

the Henry Schein

®

brand.

Our competitive strengths include:

A focus on understanding and meeting our customers’ unique needs.

Leveraging our deep expertise in the end

markets we serve, we are committed to providing customized value-driven products

and solutions to our customers

that reflect the technology-driven services best suited for their practice

needs.

We are committed to continuing to

enhance these offerings through organic investment in our portfolio and our teams, as well as

through the

acquisition of new products and services that may help us better serve

our customers.

Direct sales and marketing expertise.

Our sales and marketing efforts are designed to establish and solidify

customer relationships through coordinated and tailored engagement strategies

that connect customers where and

how they prefer.

We deliver value by emphasizing our broad product lines, including exclusive distribution

agreements, competitive prices and ease of order placement, particularly

through our e-commerce platforms.

The

key elements of our direct sales and marketing efforts are:

•

Field sales consultants.

Our field sales consultants, including equipment and specialty sales specialists,

covering major North American, European and other international

markets.

These consultants complement

our direct marketing and telesales efforts and enable us to better market, service

and support the sale of

more sophisticated products and equipment.

•

Omni-channel marketing.

We market to existing and prospective office-based health care providers

through a combination of owned, earned and paid digital channels, tradeshows,

as well as through catalogs,

flyers, direct mail and other promotional materials.

Our strategies include an emphasis on educational

content through webinars and content marketing initiatives.

We continue to leverage our marketing

technology and data insights to improve our targeting capability and the relevance of messaging

and offers.

•

Telesales.

We support our direct marketing effort with inbound and outbound telesales representatives,

who facilitate order processing, generate new sales through direct and frequent

contact with customers and

stay abreast of market developments and the hundreds of new products,

services and technologies

introduced each year to educate practice personnel.

Through automation and skilled agents, we have

strengthened our support model, enhancing the customer experience.

•

Electronic commerce solutions.

We provide our customers and sales teams with innovative and

competitive e-commerce solutions.

We continue to invest in our e-commerce platforms so customers can

find the products they need and to enable an engaging purchase experience,

supported by excellent

customer service.

Additionally, we have built enhanced account management tools that meet the needs of

customers of all sizes.

Our global e-commerce platform,

henryschein.com, focuses on accelerating the

adoption of digital commerce technologies across our Company, driving the transformation of our business

strategy and operations using digital technology, and enabling the growth of digital sales revenue.

•

Social media.

Our operating entities and employees engage our customers and

supplier partners through

various social media platforms, which are an important element of our

communications and marketing

efforts.

We continue to expand our social media presence to raise awareness about issues, engage

customers beyond a sale and deliver services and solutions to specialized

audiences.

Cost-effective purchasing

.

We believe that cost-effective purchasing is a key element to maintaining and enhancing

our position as a competitively priced provider of health care products.

We continuously evaluate our purchase

requirements and suppliers’ offerings and prices in order to obtain products at the

lowest possible cost.

In 2025,

our top 10 Global Distribution and Value-Added Services suppliers and our single largest supplier accounted for

approximately 25% and 4%, respectively, of our aggregate purchases.

Efficient distribution

.

We distribute our products from our 38 strategically located distribution centers.

We strive

to maintain optimal inventory levels in order to satisfy customer demand

for prompt delivery and complete order

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Index to Financial Statements

7

fulfillment.

These inventory levels are managed on a daily basis with

the aid of our management information

systems.

Once an order is entered, it is electronically transmitted to the distribution

center nearest the customer’s

location for order fulfillment.

Supply chain solutions.

We have implemented a fulfillment system, supported by customized inventory

management systems for individual practices, large group practices, and integrated

delivery networks.

Commitment to superior customer service

.

We maintain a strong commitment to providing superior customer

service.

We frequently monitor our customer service through customer surveys, focus groups and statistical

reports.

Our customer service policy primarily focuses on:

•

Exceptional order fulfillment.

We ship an average of approximately 150,000 cartons daily.

•

Comprehensive ordering process.

Customers may place orders 24 hours a day, 7 days a week via e-

commerce solutions, telephone, e-mail and mail.

Broad product and service offerings at competitive prices.

We offer

a broad range of products, including the Henry

Schein corporate brand, and services to our customers at competitive prices,

in the following categories:

Global Distribution and Value-Added Services

•

Consumable merchandise and equipment.

We distribute consumable products, small equipment, laboratory

products, large equipment, equipment repair services, branded and generic pharmaceuticals,

vaccines,

dental specialty products, diagnostic tests, infection-control products and vitamins.

We stock a

comprehensive selection of more than 300,000 products and Henry Schein

corporate brand cost-effective,

high-quality consumable merchandise and specialty products.

•

Home health business.

We distribute homecare medical products, including incontinence, urology, ostomy,

enteral nutrition, advanced wound, and diabetes supplies, as well as

continuous glucose monitoring devices.

These products are delivered directly to patients in their homes, providing

convenience and accessibility

while supporting patient care and adherence to treatment plans.

•

Value

-added products and services.

We offer a broad range of value-added solutions, including continuing

education programs for practitioners, consulting services, and practice

services.

Our suite of technology-

driven tools and expert advisory services helps health care professionals

enhance practice efficiency and

improve patient outcomes.

•

Repair services.

We have 127 equipment sales and service centers worldwide that provide a variety of

repair, installation and technical services for our health care customers.

Our equipment service technicians

understand the importance of having tools and equipment running smoothly

to operate offices without

interruption.

Our manufacturer-trained technicians cover major markets and deliver

personalized and local

services, providing installation and repair services for dental handpieces, dental

and medical small

equipment, table-top sterilizers and large dental equipment.

•

Financial service

s.

We offer our customers solutions in operating their practices more efficiently by

providing access to a number of financial services and products

provided by third party suppliers (including

non-recourse financing for equipment, technology and software

products, non-recourse practice financing

for leasehold improvements, business debt consolidation and commercial

real estate, non-recourse patient

financing and credit card processing) at rates that we believe are generally

lower than what our customers

would be able to secure independently.

We also provide staffing services, dental practice valuation and

brokerage services.

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8

Global Specialty Products

•

Dental implants and digital solutions.

We develop, manufacture, market and distribute a broad portfolio of

patented and evidence-based dental implants, prosthetic components,

instruments and digital workflow

solutions for implant-based tooth restorations.

With research and development and manufacturing facilities

in the United States,

Switzerland, Germany, Brazil and France, we serve customers with various global and

regional implant brands across a wide range of price segments.

Supported by our specialized sales force,

we market our products and solutions in approximately 90 countries, directly

to dental practices and

surgical specialists via our sales subsidiaries and network of international third-party

and Henry Schein

distribution partners.

•

Biomaterials.

We market and distribute a broad portfolio of biomaterials for dental tissue

regeneration.

The product portfolio primarily consists of a broad range of

privately branded allograft,

xenograft, and synthetic biomaterials.

Our dedicated biomaterial specialists support our direct implant

sales force and Henry Schein oral surgery-focused distribution channels.

•

Orthodontics.

We develop, manufacture, and distribute a comprehensive range of orthodontic products,

including brackets, braces, aligners, and accessories.

In collaboration with leading clinicians, our research

and development teams drive innovation to enhance patient care.

With manufacturing facilities in the

Unted States, Mexico, and France, we serve dental practices in over

70 countries through our specialized

sales force, international partners, and the Henry Schein distribution

network.

•

Endodontics

.

We develop, manufacture, market and distribute a complete portfolio of endodontic products

across multiple brands catering to both endodontic specialists and general

practitioners.

This includes

stainless steel and NiTi shaping files, irrigation solutions, endodontic power equipment, sealers,

and root

repair materials.

Leveraging our research and development and manufacturing facilities

in the United

States, Switzerland, and Brazil we focus on delivering meaningful

innovation to help advance endodontic

care, provide advanced training and education through a network of training

centers and digital services,

and serve our customers through multiple brands and multiple channels

addressing all segments of the

market.

By investing in dedicated endo-specific competencies and resources

to support our different sales

channels, we are successfully marketing our products and brands

in over 90 countries.

•

Orthopedics

.

We develop, manufacture and distribute innovative implants and instruments that are

designed to treat injuries, diseases and disorders of the limbs, joints

and related tissues in the upper and

lower extremities.

We also provide surgical accessories, including blades, burs, drills, a variety of pins and

wires to support orthopedic surgical procedures, and a portfolio of specialized instruments

designed to

simplify implant removal and preserve patient bone-stock during

revision arthroplasty procedures.

We

employ an extensive global network of independent sales agencies

and direct sales specialists, and we

partner closely with IDNs and GPOs.

The majority of our revenue is generated in the United States market,

with the remaining revenue coming from Canada and countries in Latin America,

Europe and Asia Pacific

region.

•

Other.

We also source or manufacture other medical and dental health care products and services that are

sold to customers, including handpiece and small equipment, rotary, hand instruments, repair services,

restoratives and preventives, as well as certain other health care-related

consumable merchandise products

and services.

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9

Global Technology

•

We sell practice management, business analytics, revenue cycle management, clinical workflow, artificial

intelligence, patient engagement and patient demand creation software

solutions to our dental

customers.

Our practice management solutions provide practitioners with

electronic medical records,

patient treatment history, analytics, billing, accounts receivable analyses and management, appointment

calendars, revenue cycle management, clinical workflow, electronic claims processing,

network and

hardware services, e-commerce and electronic marketing services,

e-Prescribe medications and prescription

solutions, sourcing third party patient payment plans, and transition

services and training and education

programs for practitioners.

We have technical representatives supporting customers using our practice

management solutions and services.

As of December 27, 2025, we had an active user base of approximately 95,000

practices and 324,000

consumers, including users of AxiUm®, Dentally®, Dentrix Ascend®,

DentalVision®, Dentrix® Dental

Systems, EXACT®, Gesden®, Jarvis Analytics®, Oasis, Officite™, OrisLine®, PBS Endo®,

Power

Practice® Px and subscriptions for Demandforce®, Sesame, and Lighthouse

360® for dental practices and

DentalPlans.com® for dental patients.

Products and Services

The following table sets forth the percentage of consolidated net sales

by principal categories of products and

services offered through our Global Distribution and Value-Added Services,

Global Specialty Products, and Global

Technology reportable segments:

December 27,

December 28,

December 30,

2025

2024

2023

Global Distribution and Value

-Added Services:

Dental merchandise

(1)

36.6

%

37.3

%

38.8

%

Dental equipment

(2)

13.6

13.6

13.5

Value

-added services

(3)

1.8

1.8

1.6

Total

Dental

52.0

52.7

53.9

Medical

(4)

32.5

32.2

31.7

Total

Global Distribution and Value

-Added Services:

84.5

84.9

85.6

Global Specialty Products

(5)

11.7

11.4

10.8

Global Technology

(6)

5.1

5.0

4.9

Eliminations

(1.3)

(1.3)

(1.3)

Total

100.0

%

100.0

%

100.0

%

(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.

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10

Business Strategy

Our mission is to provide innovative, integrated health care products and

services; and to be trusted advisors and

consultants to our customers - enabling them to deliver the best quality patient

care and enhance their practice

management efficiency and profitability.

Our BOLD+1 Strategic Plan consists of the following:

•

Build (“B”)

Complementary software, specialty, and services businesses for high growth

•

Operationalize (“O”)

One Distribution to deliver exceptional customer experience, increased

efficiency,

and growth

•

Leverage (“L”)

One Schein to broaden and deepen relationships with our customers

•

Drive (“D”)

Digital transformation for our customers and for Henry Schein

•

+1

Create value for our stakeholders

To accomplish this, we apply our competitive strengths in executing the following strategies:

•

Increase penetration of our existing customer base.

We have over one million customers worldwide and

we intend to increase sales to our existing customer base and enhance

or secure our position as their

primary supplier.

We believe our offering of a broad range of products, services and support, including

software solutions that can help drive improved workflow efficiency and patient communications

for

practices, coupled with our full-service value proposition, helps us to retain

and grow our customer base.

•

Increase the number of customers we serve.

This strategy includes increasing the productivity of our field

sales consultants and telesales team, as well as using our customer

database to focus our marketing efforts

in all of our operating segments.

In the dental business, we provide products and services to

independent

practices, mid-market groups, and large DSOs as well as community health centers

and government sites of

care.

Leveraging our broad array of assets and capabilities, we offer solutions to address these

new

markets.

In the medical business, we have expanded to serve customers

located in settings outside of the

traditional office, such as urgent care clinics, retail, occupational health and home health settings.

As

health care settings shift, we remain committed to serving these practitioners

and providing them with the

products and services they need.

•

Leverage our value-added products and services.

We continue to increase cross-selling efforts for key

product lines utilizing a consultative selling process.

We have significant cross-selling opportunities

between our dental software users and our dental customers, and opportunities

to expand our vaccine,

injectables and other pharmaceuticals sales to health care practitioners, as

well as cross-selling Electronic

Health Record (“EHR”) systems and software when we sell our core products.

Our strategy extends to

providing health systems, integrated delivery networks and other large group and

multi-site health care

organizations, including physician clinics, these same value-added products and services.

As physicians

and health systems closely align, we have increased access to opportunities

for cross-marketing and selling

our product and service portfolios.

•

Pursue strategic acquisitions and joint ventures.

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.

Markets Served

Demographic trends indicate that our markets are growing, as an

aging U.S. population is increasingly using health

care services.

According to the U.S. Census Bureau’s International Database, between 2025 and 2035, the

population of people aged 45 and older is expected to grow by approximately

10%.

Between 2025 and 2045, this

age group is expected to grow by approximately 17%.

This compares with expected total U.S. population growth

rates of approximately 4% between 2025 and 2035 and approximately 6%

between 2025 and 2045.

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11

In the dental industry, expenditures in in oral health care are predicted to rise as the 45-and-older segment of

the

population increases.

There is increasing demand for new technologies that allow

dentists to increase productivity,

and this is being driven in the U.S. by lower insurance reimbursement

rates.

At the same time, there is an expected

increase in dental insurance coverage.

In the medical market, there continues to be a migration of procedures from

acute-care settings to physicians’

offices and home health settings, a trend that we believe provides additional opportunities

for us.

There also is the

continuing use of vaccines, injectables and other pharmaceuticals in alternate-care

settings.

We believe we have

established a leading position as a vaccine supplier to the office-based physician

practitioner.

We support our dental and medical professionals through the many SKUs that we offer, as well as through

important value-added services, including practice management software,

electronic claims processing, financial

services and continuing education, all designed to help maximize a practitioner’s

efficiency.

Additionally, we seek to expand our dental full-service model and medical offerings in countries where

opportunities exist.

We do this through both direct sales and by partnering with local distribution and

manufacturing companies.

For information on revenues and long-lived assets by geographic area, see

Note 4 – Segment and Geographic Data

of “Notes to Consolidated Financial Statements.”

Seasonality and Other Factors Affecting Our Business and Quarterly Results

Our business is subject to seasonal and other quarterly fluctuations.

Sales and profitability generally have been

higher in the third and fourth quarters due to the timing of sales of seasonal

products (including influenza vaccine),

purchasing patterns of office-based health care practitioners for certain products (including

equipment and

software) and year-end promotions.

Sales and profitability may also be impacted by the timing of

certain annual

and biennial dental tradeshows where equipment promotions are offered.

In addition, some dental practices delay

equipment purchases in the U.S. until year-end due to tax incentives.

We expect our historical seasonality of sales

to continue in the foreseeable future.

Governmental Regulations

We

strive to be compliant in all material respects with the applicable

laws, regulations and guidance described

below, and believe we have effective compliance programs and other controls in place to ensure substantial

compliance.

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

guidance may be subject to varying and evolving interpretations that could

affect our ability to comply, as well as

future changes, additions and enforcement approaches, including political changes.

When we discover situations of

non-compliance we seek to remedy them and bring the affected area back into compliance.

Changes to applicable laws, regulations and guidance described below, as well as related administrative or judicial

interpretations, may require us to update or revise our operations, services,

marketing practices and compliance

programs and controls, and may impose additional and unforeseen costs

on us, pose new or previously immaterial

risks to us, or may otherwise have a material adverse effect on our business.

Government

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

exportation, marketing, sale and

promotion of pharmaceuticals and/or medical devices, and in this regard, we

are subject to extensive local, state,

federal and foreign governmental laws and regulations, including as applicable

to our wholesale distribution of

pharmaceuticals and medical devices, manufacturing activities, and as part of

our specialty home medical 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.

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12

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 (as amended,

the “ACA”).

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 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 business.

A few

noteworthy items that have come into effect recently are noted below:

●

Regulation (EU) 2023/1182 of June 14, 2023, entered into force on January 1, 2025.

This regulation lays

down specific rules relating to medicinal products for human use intended to

be placed on the market in

Northern Ireland in accordance with Article 6 of Directive 2001/83/EC.

●

Directive No. 2025/794 of April 14, 2025, known as the “Stop-the-Clock”

Directive, amended Directives

(EU) 2022/2464 (CSRD) by introducing a uniform two-year postponement of

the sustainability reporting

requirements for financial years beginning on or after January 1, 2025 and

on or after January 1, 2026.

It

also extends the deadline for transposing Directive (EU) 2024/1760 (CSDDD)

by one year (i.e. July 26,

2027) and the date of application of the transposed provisions depending

on the type of companies subject

to it (July 26, 2028, or July 26, 2029, as applicable).

●

Regulation (EU) 2025/327 of February 11, 2025 on the European Health Data Space and amending

Directive 2011/24/EU and Regulation (EU) 2024/2847 establishes the European Health Data Space

(EHDS) by providing for common rules, standards and infrastructures and a governance

framework, with a

view to facilitating access to electronic health data for the purpose of primary

use and secondary use of this

data.

This could potentially affect Henry Schein or its customers.

●

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

such tariffs remain subject

to frequently evolving exemptions and modifications,

as well as to court challenges, including a recent

invalidation in the Supreme Court of many of the tariffs.

Some countries have imposed retaliatory tariffs

and other restrictions on imports from the U.S.

These developments, and anticipated future developments,

have created a volatile environment for global trade, and new trade policies

with individual countries.

It is

unclear whether, or the extent to which, the current tariffs on trade with numerous countries will remain in

place, or change, the exceptions that may apply, and their timing.

●

In the United States, the One Big Beautiful Bill Act (“OBBBA”),

signed into law on July 4, 2025, includes

a number of provisions that are expected to result in reductions in the number of

Medicaid enrollees, as

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13

well as reductions in federal funding to state Medicaid programs, resulting

in potentially adverse impacts

on utilization of services and coverage of products.

The OBBBA also includes changes to corporate tax

rates, limitations on certain deductions and modifications to international

tax provisions.

Operating, Security and Licensure Standards

Certain of our businesses are subject to local, state and federal governmental

laws and regulations relating to the

manufacturing and/or distribution of pharmaceuticals and medical devices

and supplies.

Among the United States

federal laws applicable to us are the Controlled Substances Act, the Federal Food,

Drug, and Cosmetic Act, as

amended (“FDC Act”), Section 361 of the Public Health Service Act and Section

401 of the Consolidated

Appropriations Act of the Social Security Act, as well as laws regulating

the billing of and reimbursement from

government programs, such as Medicare and Medicaid, and from commercial payers.

We

are also subject to

comparable foreign regulations.

The FDC Act, the Controlled Substances Act, their implementing regulations,

and similar foreign laws generally

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

sampling, pricing and

reimbursement, labeling, packaging, storage, handling, returning or recalling,

reporting, and distribution of, and

record keeping for, pharmaceuticals and medical devices shipped in interstate commerce or internationally, and

states may similarly regulate such activities within the state.

Furthermore, Section 361 of the Public Health Service

Act, which provides authority to prevent the introduction, transmission

or spread of communicable diseases, serves

as the legal basis for the United States Food and Drug Administration’s (“FDA”) regulation of human cells,

tissues

and cellular and tissue-based products, also known as “HCT/P products.”

The Federal Drug Quality and Security Act of 2013 regulates pharmaceutical

supply chain requirements and pre-

empts certain state laws.

Title II of this measure, known as the Drug Supply Chain Security Act (“DSCSA”),

establishes a national electronic, interoperable system to identify and trace

certain prescription drugs as they are

distributed in the United States that went into effect on November 27, 2023.

The law’s track and trace requirements

applicable to manufacturers, wholesalers, third-party logistics providers (e.g., trading

partners), repackagers and

dispensers (e.g., pharmacies) of prescription drugs took effect in January 2015, and,

as stated, continues to be

implemented.

The DSCSA product tracing requirements replace the former FDA

drug pedigree requirements and

pre-empt certain state requirements that are inconsistent with, more stringent

than, or in addition to, the DSCSA

requirements.

Those DSCSA requirements that were scheduled to change on November

27, 2023, and include requiring trading

partners to provide, receive and maintain documentation about products and

ownership only “electronically” (and

not via paper), were subject to a one-year “stabilization period” announced by

the FDA through two guidance

documents in late August 2023.

The FDA permitted the stabilization period to accommodate an additional

year,

until November 27, 2024, to allow trading partners to implement, troubleshoot

and mature their electronic (versus

paper), interoperable systems, during which time the FDA did not intend to

take action to enforce the requirements

for the interoperable, electronic, package level product tracing.

Additionally, the FDA announced that it did not

intend to take action to enforce the portion of the FDC Act with respect

to drug product that was introduced in a

transaction into commerce by the product’s manufacturer or repackager before November 27, 2024, and for

subsequent transactions of such product through the product’s expiry.

The FDA stated this stabilization period was

intended to avoid disruption to the supply chain and ensure continued patient

access to drug products as trading

partners move towards full implementation of the DSCSA’s

enhanced drug security requirements.

The FDA again

extended the stabilization period in late 2024 as follows: (1) manufacturers and

repackagers: May 27, 2025; (2)

wholesale distributors: August 27, 2025; (3) dispensers with 26 or more pharmacists

and technicians: November 27,

2025; and (4) small dispensers: November 27, 2026.

The FDA stated that these continued exemptions apply to any

product transacted by eligible trading partners who have initiated their “systems

and processes, as described in

section 582(g)(1) of the FD&C Act,” including electronic DSCSA data connections

with immediate trading

partners by November 27, 2024.

The additional time extends to trading partners throughout the pharmaceutical

distribution supply chain who subsequently engage in a transaction including such

product.

The FDA also stated

that, for the purposes of these exemptions, eligible trading partners are those

who have initiated their systems and

processes by successfully completing data connections with their

immediate trading partners, and those trading

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14

partners who initiated processes including documentation of efforts to establish data

connections, but were not able

to fully complete these processes.

The DSCSA also establishes certain requirements for the licensing and operation

of prescription drug wholesalers

and third-party logistics providers (“3PLs”) and includes the eventual

creation of national wholesaler and 3PL

licenses in cases where states do not license such entities.

The DSCSA requires that wholesalers and 3PLs

distribute drugs in accordance with certain standards regarding the recordkeeping,

storage and handling of

prescription drugs.

The DSCSA requires wholesalers and 3PLs to report state licensure

to the FDA on an annual

basis, including the name and address of each facility, and contact information.

According to FDA guidance, states

are pre-empted from imposing any licensing requirements that are inconsistent

with, less stringent than, directly

related to, or covered by the standards established by federal law in this area.

Current state licensing requirements

concerning wholesalers will remain in effect until the FDA issues new regulations as directed

by the DSCSA.

The

FDA issued a proposed rule establishing wholesaler and 3PL national standards

for licensing and other

requirements in February 2022, but that rule has not yet been finalized.

In addition, with respect to our specialty

home medical supplies business, we are subject to certain state licensure

laws (including state pharmacy laws), and

also certain accreditation standards, including to qualify for reimbursement

from Medicare, Medicaid, and other

third-party payers.

The Food and Drug Administration Amendments Act of 2007 and

the Food and Drug Administration Safety and

Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate

regulations to implement a unique

device identification (“UDI”) system for medical devices.

The UDI rule phased in the implementation of the UDI

regulations, generally beginning with the highest-risk devices (i.e., Class

III medical devices) and ending with the

lowest-risk devices.

The UDI regulations require “labelers” to include unique device identifiers

(“UDIs”), with a

content and format prescribed by the FDA and issued under a system operated

by an FDA-accredited issuing

agency, on the labels and packages of medical devices (including, but not limited to, certain software that qualifies

as a medical device under FDA rules), and to directly mark certain devices

with UDIs.

The UDI regulations also

require labelers to submit certain information concerning UDI-labeled devices

to the FDA, much of which

information is publicly available on an FDA database, the Global Unique Device

Identification Database (GUDID).

The UDI regulations and subsequent FDA guidance regarding the UDI

requirements provide for certain exceptions,

alternatives and time extensions.

For example, the UDI regulations include a general exception

for Class I devices

exempt from the Quality System Regulation (other than record-keeping

requirements and complaint files).

Regulated labelers include entities such as device manufacturers, repackagers,

reprocessors and relabelers that

cause a device’s label to be applied or modified, with the intent that the device will be commercially distributed

without any subsequent replacement or modification of the label and include certain

of our businesses.

The FDA

also released a final rule in February 2024 to amend, effective February 2026, certain device current

good

manufacturing practice requirements in 21 CFR Part 820 (Quality System Regulation)

to align more closely with

the international consensus standard (ISO 13485) specific for device quality

management systems requirements

(QMSR) used by other countries.

As a distributor of controlled substances and List 1 and 2 chemicals, we are

required, under the Controlled

Substances Act, to obtain and renew annually registrations for our

facilities from the United States Drug

Enforcement Administration (“DEA”) permitting us to handle controlled

substances.

We

are also subject to other

statutory and regulatory requirements relating to the storage, sale, marketing,

handling, reporting, record-keeping

and distribution of such drugs and List 1 and 2 chemicals, in accordance

with the Controlled Substances Act and its

implementing regulations, and these requirements have been subject to

heightened enforcement activity in recent

times.

We

are subject to inspection by the DEA.

Certain of our businesses are also required to register for permits and/or

licenses with, and comply with operating

and security standards of, the DEA, the FDA, the United States Department of

Health and Human Services

(“HHS”), state radiation control agencies, and various state boards of pharmacy, state health departments and/or

comparable state agencies as well as comparable foreign agencies, and certain

accrediting bodies, depending on the

type of operations and location of product distribution, manufacturing or

sale.

These businesses include those that

distribute, manufacture, relabel, and/or repackage prescription pharmaceuticals

and/or medical devices and/or

HCT/P products, or own pharmacy operations, or install, maintain or repair

equipment,

including X-ray machines.

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15

In addition, Section 301 of the National Organ Transplant Act, and a number of comparable state laws, impose civil

and/or criminal penalties for the transfer of human organs, as defined in the regulations, for

valuable consideration,

while generally permitting payments for the reasonable costs incurred

in their procurement, processing, storage and

distribution.

We

are also subject to foreign government regulation of such products.

The DEA, the FDA and state

regulatory authorities have broad inspection and enforcement powers, including

the ability to suspend or limit the

distribution of products by our distribution centers, seize or order the

recall of products and impose significant

criminal, civil and administrative sanctions for violations of these laws and regulations.

Foreign regulations subject

us to similar foreign enforcement powers.

EU Regulation of Medicinal and Dental Products

European Union (“EU”) member states regulate their own health care systems,

as does EU law.

The latter regulates

certain matters, most notably medicinal products and medical devices.

Medicinal products are defined, broadly, as

substances or combinations of substances having certain functionalities and

may not include medical devices.

EU

“regulations” apply in all member states, whereas “directives” are implemented

by the individual laws of member

states.

On medicines for humans, we are regulated under Directive No. 2001/83/EC

of 6 November 2001, as amended by

Directive 2003/63/EC of 25 June 2003, EU Regulation (EC) No. 726/2004

of 31 March 2004 and others.

These

rules provide for the authorization of products, and regulate their manufacture,

importation, marketing and

distribution.

These rules implement requirements which may be implemented without

warning, as well as a

national pharmacovigilance system under which marketing authorizations

may be withdrawn, and includes

potential sanctions for breaches of the rules, and on other bases such

as harmfulness or lack of efficacy.

As

mentioned above, Directive No. 2001/83/EC was recently amended by Regulation

(EU) 2023/1182 of 14 June

2023.

This regulation lays down specific rules relating to medicinal products

for human use intended to be placed

on the market in Northern Ireland in accordance with Article 6 of Directive

2001/83/EC.

EU Regulation No. 1223/2009 of 30 November 2009

on cosmetic products

requires that cosmetic products (which

includes dental products) be safe for human health when used under normal

or reasonably foreseeable conditions of

use and comply with certain obligations which apply to manufacturers,

importers and distributors.

It includes

market surveillance, and non-compliance may result in the recall or withdrawal

of products, along with other

sanctions.

In the EU, the EU Medical Device Regulation No. 2017/745 of 5 April 2017

(“EU MDR”) covers a wide scope of

our activities, from dental material and medical devices to X-ray machines,

and certain software.

It was meant to

become applicable three years after publication (i.e., May 26, 2020).

However, on April 23, 2020, to allow

European Economic Area (“EEA”) national authorities, notified bodies,

manufacturers and other actors to focus

fully on urgent priorities related to the COVID-19 pandemic, the European Council

and Parliament adopted

Regulation 2020/561, postponing the date of application of the EU MDR by

one year (to May 26, 2021).

The EU MDR significantly modifies and intensifies the regulatory compliance

requirements for the medical device

industry as a whole.

Among other things, the EU MDR:

•

strengthens the rules on placing devices on the market and reinforces surveillance

once they are available;

•

establishes explicit provisions on manufacturers’ responsibilities

for the follow-up of the quality,

performance and safety of devices placed on the market;

•

improves the traceability of medical devices throughout the supply chain to the end-user

or patient through

a unique identification number;

•

sets up a central database to provide patients, health care professionals and the

public with comprehensive

information on products available in the EU;

•

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

implants, which may have to

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

•

identifies importers and distributors and medical device products through

registration in the EUDAMED

database, which comprises several modules that are not yet fully functional.

In order not to hinder the mandatory

use of EUDAMED by the functional delay of a single module, Regulation

No. 2024/1860 of 13 June 2024 has

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16

therefore amended Article 34 of the EU MDR to organize a gradual commissioning of the various

modules of

EUDAMED, once they have been independently audited and declared operational

by means of a Commission

notice published in the Official Journal of the European Union. In this case, the obligations

and requirements

relating to the concerned electronic modules of EUDAMED will apply six months

after the date of publication of

the notice.

These changes came into force on July 9, 2024.

Due to Commission Decision No. 2025/2371 of

26 November 2025, as from May 28, 2026, the first four EUDAMED modules

will be mandatory to use; and

•

as amended by the above-mentioned Regulation No. 2024/1860, contains

specific provisions in the event of

interruption or discontinuation of supply of a device.

In particular, the EU MDR imposes strict requirements for the confirmation that a product meets the

regulatory

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

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

Regulation 2023/607 of the European Parliament and of the Council of

March 15, 2023

amending Regulations (EU)

2017/745 and (EU) 2017/746 as regards the transitional provisions for certain medical devices and in vitro

diagnostic medical devices

has, notably, extended the EU MDR transitional periods applicable to certain medical

devices that have been assessed and/or certified under the Directive No.

93/42/EEC of 1993

concerning medical

devices

(“EU Medical Device Directive”).

Subject to certain conditions, medical devices that (i) obtained a

certificate under the EU Medical Device Directive from May 25, 2017,

(ii) which was still valid on May 26, 2021,

and (iii) has not been subsequently withdrawn may, for the moment, continue to be placed on the market or put into

service until December 31, 2027 for higher risk devices or December 31, 2028 for

medium and lower risk devices.

Nevertheless, EU MDR requirements regarding the distribution, marketing

and sale including quality systems and

post-market surveillance have to be observed by manufacturers, importers and

distributors as of the application date

(i.e., since May 26, 2021).

Other EU regulations that may apply under appropriate circumstances

include EU Regulation No. 1907/2006 of 18

December 2006

concerning the Registration, Evaluation, Authorisation and

Restriction of Chemicals

, which

requires importers to register substances or mixtures that they import

in the EU beyond certain quantities, and the

EU Regulation No. 1272/2008 of 16 December 2008

on classification, labelling and packaging of substances and

mixtures

(recently amended by Regulation No. 2024/2865 of October 23, 2024, whose

provisions come into force

on different dates), which sets various obligations with respect to the labelling and packaging

of concerned

substances and mixtures.

Furthermore, compliance with legal requirements has required and may in the future

require us to delay product

release, sale or distribution, or institute voluntary recalls of, or other corrective

action with respect to products we

sell, each of which could result in regulatory and enforcement actions, financial

losses and potential reputational

harm.

Our customers are also subject to significant federal, state, local

and foreign governmental regulations,

which may affect our interactions with customers, including the design and functionality

of our products.

Antitrust and Consumer Protection

The federal government of the United States, most U.S. states and many

foreign countries have antitrust laws that

prohibit certain types of conduct deemed to be anti-competitive, as well as consumer

protection laws that seek to

protect consumers from improper business practices.

At the U.S. federal level, the Federal Trade Commission

oversees enforcement of these types of laws, and states have similar government

agencies.

Violations of antitrust

or consumer protection laws may result in various sanctions, including criminal

and civil penalties.

Private

plaintiffs may also bring civil lawsuits against us in the United States for alleged antitrust

law violations, including

claims for treble damages.

EU law also regulates competition and provides for detailed rules protecting

consumers.

Health Care Fraud

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

foreign) health care fraud and abuse, referral

and reimbursement laws and regulations with respect to their operations.

Some of these laws, referred to as “false

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

claims for reimbursement to

federal, state and other health care payers and programs.

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

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17

soliciting, offering, receiving or paying remuneration in order to induce the referral

of a patient or ordering,

purchasing, leasing or arranging for, or recommending, ordering, purchasing or leasing of, items or services

that are

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

Certain additional state and federal laws, such

as the federal Physician Self-Referral Law, commonly known as the “Stark Law,” prohibit physicians and other

health care professionals from referring a patient to an entity with which

the physician (or family member) has a

financial relationship, for the furnishing of certain designated health services

(for example, durable medical

equipment and medical supplies), unless an exception applies. Violations of the federal Anti-Kickback Statute or

the Stark Law may be enforced as violations of the federal False Claims

Act.

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

enforcement activity over the past few

years, and significant enforcement activity has been the result of “relators” who

serve as whistleblowers by filing

complaints in the name of the United States (and if applicable, particular states)

under applicable false claims laws,

and who may receive up to 30% of total government recoveries.

Penalties under fraud and abuse laws may be

severe, including treble damages and substantial civil penalties under

the federal False Claims Act, as well as

potential loss of licenses and the ability to participate in federal and state

health care programs, criminal penalties,

or imposition of a corporate integrity agreement or corporate compliance

monitoring which could have a material

adverse effect on our business.

Also, these measures may be interpreted or applied by a prosecutorial,

regulatory or

judicial authority in a manner that could require us to make changes

in our operations or incur substantial defense

and settlement expenses.

Even unsuccessful challenges by regulatory authorities or private

relators could result in

reputational harm and the incurring of substantial costs.

Most states have adopted similar state false claims laws,

and these state laws have their own penalties, which may be in addition

to federal False Claims Act penalties, as

well as other fraud and abuse laws.

With respect to measures of this type, the United States government and industry trade associations

(among others)

have expressed concerns about financial relationships among suppliers, manufacturers

and distributors on the one

hand and physicians, dentists and other health care professionals on the other.

As a result, we regularly review and

revise our marketing practices as necessary to facilitate compliance.

We

also are subject to certain United States and foreign laws and regulations

concerning the conduct of our foreign

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

Act, German anti-corruption laws

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

books and records, which have been

the focus of increasing enforcement activity globally in recent years.

While we believe that we are substantially compliant with applicable fraud and

abuse laws and regulations, and

have adequate compliance programs and controls in place to ensure substantial

compliance, we cannot predict

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

response to changes in applicable law or interpretation of laws, or failure

to comply with applicable law, could have

a material adverse effect on our business.

Affordable Care Act (ACA) and Other Insurance Reform

The ACA increased federal oversight of private health insurance plans and

included a number of provisions

designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to

provide access to increased health coverage.

The ACA also materially expanded the number of individuals in

the

United States with health insurance.

The ACA remains subject to ongoing legal and political challenges

that

contribute to create uncertainty, and any outcomes of those challenges could have a significant impact on the

U.S.

health care industry.

The federal Physician Payments Sunshine Act or Open Payments Program

(the “Sunshine Act”) imposes annual

reporting and disclosure requirements for drug and device manufacturers and distributors

with regard to payments

or other transfers of value made to certain covered recipients (including physicians,

dentists, teaching hospitals,

physician assistants, nurse practitioners, clinical nurse specialists, certified

registered nurse anesthetists, and

certified nurse midwives), and for such manufacturers and distributors

and for group purchasing organizations, with

regard to certain ownership interests held by covered recipients in

the reporting entity.

CMS publishes information

from these reports on a publicly available website, including amounts transferred

and physician, dentist, teaching

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18

hospital, and non-physician practitioner identities.

The Sunshine Act pre-empts similar state reporting laws,

although we or our subsidiaries may be required to report under certain

state transparency laws that address

circumstances not covered by the Sunshine Act, and some of these state laws,

as well as the federal law, can be

unclear.

We

are also subject to foreign regulations requiring reporting or disclosures

to provide transparency on

certain interactions between manufacturers, suppliers, distributors and

their customers.

This includes certain

member states in the EU and other countries such as Brazil (Minas Gerais state),

Saudi Arabia and Israel.

In the United States, federal and state government actions to seek to increase health-related

price transparency may

also affect our business.

For example, CMS requires hospitals to publish online a

list of their standard charges for

all items and services, including discounted cash prices and payer-specific and de-identified negotiated

charges, in a

publicly accessible online file, and payers to disclose in-network negotiated

rates, including with device suppliers

and manufacturers, and historical out-of-network allowed amounts for all

covered items and services, including

prescription drugs.

Hospitals are also required to publish a consumer-friendly list

of standard charges for certain

“shoppable” services (i.e., services that can be scheduled by a patient in

advance) and associated ancillary services

or, alternatively, maintain an online price estimator tool.

These requirements went into effect in three stages from

2022 to 2024.

CMS may impose civil monetary penalties for noncompliance with

these price transparency

requirements.

In addition to a variety of transparency measures being enacted

at the state level, the federal No

Surprises Act (“NSA”) imposes additional price transparency requirements.

The NSA is intended to reduce the

number of “out-of-network” patients.

This will result in fewer out-of-network payments to physicians and

other

providers, which may cause financial stress to those providers who

are dependent on higher out-of-network fees.

The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”),

enacted on April 16, 2015, established

the Quality Payment Program, which modifies certain Medicare Part B payments

to “eligible clinicians,” including

physicians, dentists and other practitioners.

Under MACRA, certain eligible clinicians are required to participate

in

Medicare through the Merit-Based Incentive Payment System (“MIPS”) or Advanced

Alternative Payment Models,

through which Medicare Part B is adjusted up or down based on reported

data related to quality, promoting

interoperability, cost and improvement activities.

MIPS eligible clinicians must report performance year data by

March 31 of the following calendar year.

Payment adjustments, based on submitted data, are applied to Medicare

Part B claims during the performance year following data submission.

MACRA provides substantial financial

incentives for physicians to participate in risk contracts, and to increase physician

information technology and

reporting obligations.

MACRA continues to evolve and its implications depend on future regulatory

activity and

physician activity in the marketplace.

New state-level payment and delivery system reform

programs, including

those modeled after such federal programs, are also increasingly being rolled out

through Medicaid administrators,

as well as through the private sector, which may further alter the marketplace and impact our business.

Recently, in addition to other government efforts to control health care costs, there has been increased scrutiny on

drug pricing and concurrent efforts to control or reduce drug costs by Congress, the

President, executive branch

agencies and various states.

At the state level, several states have adopted laws that require drug manufacturers

(including relabelers and repackagers) to provide advance notice of certain

price increases and to report information

relating to those price increases, while others have taken legislative or administrative

action to establish

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

prescription drugs.

At

the federal level, section 1927 of the Social Security Act sets forth Average Sales Price (ASP) reporting

requirements for manufacturers (including repackagers and relabelers) and

requires that manufacturers provide

CMS with pricing information for their Part B-covered drugs no later than

30 days after the close of the previous

quarter.

Also at the federal level, several related bills have been introduced and regulations

proposed which, if

enacted or finalized, respectively, would impact drug pricing and related costs.

Under the Medicare Drug Price

Negotiation Program, CMS continues to negotiate prices for certain drugs with participating

manufacturers.

Also,

at the federal level, the Inflation Reduction Act of 2022, among other things,

requires drug manufacturers

(including repackagers and relabelers) that raise certain of their drug prices

faster than the rate of inflation to pay

rebates to Medicare, and over time will authorize the federal government to negotiate

directly with drug

manufacturers to lower the prices of certain brand-name drugs covered

by Medicare.

These various evolving

efforts create uncertainty and may adversely affect our business.

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19

As a result of political, economic and regulatory influences, the health care distribution

industry in the United

States is under intense scrutiny and subject to fundamental changes.

We

cannot predict what further reform

proposals, if any, will be adopted, when they may be adopted, or what impact they may have on us.

EU Directive on the pricing and reimbursement of medicinal products

EU law provides for the regulation of the pricing of medicinal products which are

implemented by EU member

states (Directive No. 89/105/EC of 21 December 1988

relating to the transparency of measures regulating the

pricing of medicinal products for human use and their inclusion in the scope of national health insurance

systems

).

Member states may, subject notably to transparency conditions and to the statement of reasons based upon

objective and verifiable criteria, regulate the price charged (or its increases) for authorized

medicines and their level

of reimbursement, or they may freeze prices, place controls on the profitability

of persons responsible for placing

medicinal products on the market, and include or exclude the medicine on

the list of products covered by national

health insurance systems.

EU law does not expressly include provisions like those of the Sunshine Act in

the United States, but a number of

EU member states (such as France in 2011, Denmark in 2014, and Italy in 2022) have enacted laws

to increase the

transparency of relationships in the health care sector.

The scope of these laws varies from one member state to

another and may, for example, include the relations between health care industry players and physicians or their

associations, students preparing for medical professions or their associations,

teachers, health establishments or

publishers of prescription and dispensing assistance software.

Regulated Software; Electronic Health Records; Privacy

The FDA has become increasingly active in addressing the regulation of

computer software and digital health

products intended for use in health care settings, including, for

example, most recently, with respect to artificial

intelligence and machine learning-enabled medical devices, and

the cybersecurity of medical devices.

Certain of

our businesses involve the development and sale of software and related

products, including to support physician

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

government authorities could determine

that one or more of our products is a medical device, which could subject us

or one or more of our businesses to

substantial additional requirements with respect to these products.

In addition, our businesses that involve physician and dental practice management

products, our specialty home

medical supplies business, and our self-insured health plans include electronic

information technology systems that

store and process personal health, clinical, financial and other sensitive information

of individuals.

These

information technology systems may be vulnerable to breakdown, wrongful

intrusions, data breaches and malicious

attack, which could require us to expend significant resources to eliminate

these problems and address related

security concerns and could involve claims against us by private parties and/or

governmental agencies.

For

example, we are directly or indirectly subject to numerous and evolving

federal, state, local and foreign laws and

regulations that protect the privacy and security of personal information,

such as the federal Health Insurance

Portability and Accountability Act of 1996, as amended, and implementing

regulations (“HIPAA”) under which

parts of our business are covered entities or business associates, the Controlling

the Assault of Non-Solicited

Pornography and Marketing Act (“CAN-SPAM”), the Telephone

Consumer Protection Act of 1991 (“TCPA”),

Section 5 of the Federal Trade Commission Act (“FTC Act”), the California Privacy Act (“CCPA”), various other

state comprehensive and health data-specific privacy laws that have or will soon come

into effect, and several

privacy bills have been proposed both at the federal and state level that may

result in additional legal requirements

that impact our business.

Laws and regulations relating to privacy and data protection are continually

evolving and

subject to potentially differing interpretations, including those relating to artificial intelligence,

the proliferation of

which may result in additional regulation.

These requirements may not be harmonized, may be interpreted and

applied in a manner that is inconsistent from one jurisdiction to another or

may conflict with other rules or our

practices.

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

in all U.S. states and territories),

cybersecurity laws such as the federal Cyber Incident Reporting for Critical

Infrastructure Act of 2022, proposed

Federal Acquisition Regulations, and amendments to SEC reporting requirements

require us to provide

notifications about material cybersecurity incidents in limited timeframes

and before investigations are complete.

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

us to breach of contract claims,

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substantial fines, penalties and other liabilities and expenses, government

investigations, litigation, costs for

remediation and harm to our reputation.

Also, evolving laws and regulations in this area could restrict the ability

of

our customers to obtain, use or disseminate patient information, or could

require us to incur significant additional

costs to re-design our products to reflect these legal requirements, which

could have a material adverse effect on

our operations.

Also, the European Parliament and the Council of the EU adopted the pan-European

General Data Protection

Regulation (“GDPR”), that has been effective since May 25, 2018, which increased

privacy rights for individuals

(“Data Subjects”), including individuals who are our customers, suppliers

and employees.

The GDPR extended the

scope of responsibilities for data controllers and data processors, and generally

imposes increased requirements and

potential penalties on companies, such as us, that are either established in

the EU and process personal data of Data

Subjects (regardless the Data Subject location), or that are not established

in the EU but that offer goods or services

to Data Subjects in the EU or monitor their behavior in the EU. Noncompliance

can result in penalties of up to the

greater of EUR 20 million, or 4% of global company revenues (sanction

that may be public), and Data Subjects

may seek damages.

Member states may individually impose additional requirements

and penalties regarding

certain limited matters (for which the GDPR left some room of flexibility),

such as employee personal data.

With

respect to the personal data it protects, the GDPR requires, among other things, controller

accountability, consents

from Data Subjects or another acceptable legal basis to process the personal

data, notification within 72 hours of a

personal data breach where required, data integrity and security, and fairness and transparency regarding the

storage, use or other processing of the personal data.

The GDPR also provides rights to Data Subjects relating

notably to information, access, rectification, erasure of the personal data and

the right to object to the processing.

Despite the UK’s exit from the EU, the UK still also has laws equivalent to the GDPR/EU data protection laws (UK

GDPR) and has implemented further data protection related legislation.

Data protection authorities located in

different EU Member States and in the UK may interpret GDPR/UK GDPR

differently, or requirements of national

laws may vary between the EU Member States and the UK, or guidance on GDPR/UK

GDPR and compliance

practices may be often updated or otherwise revised.

Any of these events will increase the complexity and costs of

processing personal data in the UK or European Economic Area or concerning

individuals located in the UK or

European Economic Area.

On August 20, 2021, China promulgated the PRC Personal Information Protection

Law (“PIPL”), which took effect

on November 1, 2021.

The PIPL imposes specific rules for processing personal information

and it also specifies

that the law shall also apply to personal information activities carried out

outside China but for the purpose of

providing products or services to PRC citizens.

Any non-compliance with these laws and regulations may subject

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

illegal by regulatory authorities, other

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

may affect our business, financial

condition or results of operations.

The PIPL carries maximum penalties of CNY50 million or 5% of

the annual

revenue of entities that process personal data.

Data protection laws in other countries outside of the United States

are also quickly evolving, with many countries having updated, or are in the

process of updating, their laws to bring

them more in line with the model created by GDPR.

In the United States, the CCPA, which increases the privacy protections afforded California residents, became

effective January 1, 2020.

The CCPA establishes a privacy framework for covered businesses such as ours by,

among other things, creating an expanded definition of personal information,

establishing new data privacy rights

for California residents and creating a new and potentially severe statutory damages

framework for violations of the

CCPA, as well as potentially severe statutory damages and a private right of action against businesses that suffer a

data security breach due to their violation of a duty to implement reasonable

security procedures and practices.

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

data breach litigation.

In

addition, in November 2020, California voters adopted the CPRA, which

became effective January 1, 2023 and

enhances and strengthens regulatory requirements and individual protections

that currently exist under the CCPA.

Other states have enacted or are considering enacting similar privacy laws, which

may subject us to additional

requirements and restrictions that could have an impact on our business.

As of January 1, 2026, broad state laws

relating to privacy, data protection, and information security are in effect in 20 states, further complicating our

privacy compliance obligations through the introduction of increasingly disparate

requirements across the various

U.S. jurisdictions in which we operate.

Additionally, Washington

state and Nevada have enacted specific health

data privacy laws, and other states are considering similar legislation.

Additional states are expected to pass their

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own versions of data privacy laws in the future.

Congress is considering legislation that may preempt some or all

of such U.S. state privacy laws, but which may also provide a more expansive

private right of action for privacy

claims than exists under current state laws.

The evolving complexity of privacy and data security legislation in the United

States and other jurisdictions

globally may complicate our compliance efforts and further increase our risk of regulatory

enforcement, penalties,

and litigation.

While we believe we have substantially compliant programs

and controls in place to comply with

the U.S. state and federal privacy laws and applicable international privacy

laws such as GDPR and PIPL, our

compliance with data privacy and cybersecurity laws is likely to impose additional

costs on us, and we cannot

predict whether the interpretations of the requirements, or changes in our practices

in response to new requirements

or interpretations of the requirements, could have a material adverse effect on our business.

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

The regulatory landscape for AI is changing

rapidly, with both domestic and international activity.

While there is currently no comprehensive federal legislation

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

pursue AI-related enforcement actions

under existing federal consumer protection laws and have issued related

guidance.

Further, state privacy, consumer

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

Other countries are also

applying their data and consumer protection laws to AI, particularly generative

AI, and are considering and

implementing specific legal frameworks with respect to AI.

Regulation (EU) 2024/1689 on harmonized rules on

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

regulatory framework for AI that

became law in August 2024 with implementation phased through into 2027.

As with the GDPR, it has extra-

territorial effect.

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

could have an adverse

impact on our business.

Anticipated further evolution of regulations and legislation on this

topic may substantially

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

non-compliance.

Compliance with these

laws is challenging, constantly evolving, and time consuming and federal regulators,

state attorneys general and

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

We

may incur substantial expense

in complying with legal obligations to be imposed by new regulations and

we may be required to make significant

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

may materially adversely affect our

operations.

We

also sell products and services that health care providers, such as physicians

and dentists, use to store and

manage patient medical or dental records.

These customers, and we, are subject to laws, regulations and industry

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

protection of the privacy and security of those records, and our products

may also be used as part of these

customers’ comprehensive data security programs, including in connection

with their efforts to comply with

applicable privacy and security laws. Perceived or actual security vulnerabilities

in our products or services, or the

perceived or actual failure by us or our customers who use our products or

services to comply with applicable legal

or contractual data privacy and security requirements, may not only cause us

significant reputational harm, but may

also lead to claims against us by our customers and/or governmental agencies

and involve substantial fines,

penalties and other liabilities and expenses and costs for remediation.

Various

federal initiatives involve the adoption and use by health care

providers of certain EHR systems and

processes.

The initiatives include, among others, programs that incentivize

physicians and dentists, through MIPS,

to use EHR technology in accordance with certain evolving requirements,

including regarding quality, promoting

interoperability, cost and improvement activities.

Qualification for the MIPS incentive payments requires the use

of EHRs that are certified as having certain capabilities designated in evolving

standards adopted by CMS and the

Office of the National Coordinator for Health Information Technology of HHS (“ONC”).

Certain of our businesses

involve the manufacture and sale of such certified EHR systems and other products

linked to government supported

incentive programs.

In order to maintain certification of our EHR products, we

must satisfy these changing

governmental standards.

If any of our EHR systems do not meet these standards, yet have been

relied upon by

health care providers to receive federal incentive payments, we may be exposed

to risk, such as under federal health

care fraud and abuse laws, including the False Claims Act.

Additionally, effective September 1, 2023, the Office of

the Inspector General (“OIG”) for HHS issued a final rule implementing

civil money penalties for information

blocking as established by the Cures Act.

OIG incorporated regulations published by ONC as the basis for

enforcing information blocking penalties.

Each information blocking violation carries up to a $1 million penalty.

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

need

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

Although we believe we are positioned to accomplish this, the effort may involve

increased costs, and our failure to

implement product modifications, or otherwise satisfy applicable standards,

could have a material adverse effect on

our business.

Other health information standards, such as regulations under HIPAA, establish standards regarding electronic

health data transmissions and transaction code set rules for specific electronic

transactions, such as transactions

involving claims submissions to third party payers.

Failure to abide by these and other electronic health data

transmission standards could expose us to breach of contract claims,

substantial fines, penalties, and other liabilities

and expenses, costs for remediation and harm to our reputation.

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

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

information becomes

increasingly important.

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

an electronic interface that is incorporated into a medical device.

There may be additional legislative or regulatory initiatives in the future impacting

health care.

E-Commerce

Electronic commerce solutions have become an integral part of traditional health

care supply and distribution

relationships.

Our distribution business is characterized by rapid technological

developments and intense

competition.

The continuing advancement of online commerce requires

us to cost-effectively adapt to changing

technologies, to enhance existing services and to develop and introduce a

variety of new services to address the

changing demands of consumers and our customers on a timely basis, particularly

in response to competitive

offerings.

Through our proprietary, technologically-based suite of products, we offer customers a variety of competitive

alternatives.

We

believe that our tradition of reliable service, our name recognition

and large customer base built

on solid customer relationships, position us well to participate in

this significant aspect of the distribution business.

We

continually explore ways and means to improve and expand our

online presence and capabilities, including in

our online commerce offerings and our use of various social media outlets.

International Transactions

United States and foreign import and export laws and regulations require us to

abide by certain standards relating to

the importation and exportation of products.

We

also are subject to certain laws and regulations concerning the

conduct of our foreign operations, including the U.S. Foreign Corrupt Practices

Act, the U.K. Bribery Act, German

anti-corruption laws and other anti-bribery laws and laws pertaining

to the accuracy of our internal books and

records, as well as other types of foreign requirements similar to those

imposed in the United States.

While we believe that we are substantially compliant with the foregoing laws

and regulations promulgated

thereunder and possess all material permits and licenses required for the conduct

of our business, there can be no

assurance that laws and regulations that impact our business or laws

and regulations as they apply to our customers’

practices will not have a material adverse effect on our business.

See “