Henry Schein Inc.
02/24/2026 | Press release | Distributed by Public on 02/24/2026 15:43
Annual Report for Fiscal Year Ending 12-27, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results ofOperations
Cautionary Note Regarding Forward-Looking Statements
In accordance with the "Safe Harbor" provisions of the Private SecuritiesLitigation Reform Act of 1995, we
provide the following cautionary remarks regarding important factorsthat, among others, could cause future results
to differ materially from the forward-looking statements, expectations and assumptionsexpressed or implied herein.
All forward-looking statements made by us are subject to risks and uncertaintiesand are not guarantees of future
performance.These forward-looking statements involve known and unknownrisks, uncertainties and other factors
that may cause our actual results, performance and achievementsor industry results to be materially different from
any future results, performance or achievements expressed or impliedby such forward-looking statements.These
statements are generally identified by the use of such terms as "may," "could," "expect," "intend," "believe,"
"plan," "estimate," "forecast," "project," "anticipate," "to be," "tomake" or other comparable terms.Factors that
could cause or contribute to such differences include, but are not limited to,those discussed in this Annual Report
on Form 10-K, and in particular the risks discussed under the caption"Risk Factors" in Item 1A of this report and
those that may be discussed in other documents we file withthe Securities and Exchange Commission ("SEC").
Risk factors and uncertainties that could cause actual results to differ materially fromcurrent and historical results
include, but are not limited to: our dependence on third parties forthe manufacture and supply of our products and
where we manufacture products, our dependence on third partiesfor raw materials or purchased components; risks
relating to the achievement of our strategic growth objectives, includinganticipated results of restructuring and
value creation initiatives; risks related to the Strategic Partnership Agreementwith KKR Hawaii Aggregator L.P.
entered into in January 2025; transitions in senior company leadership;our ability to develop or acquire and
maintain and protect new products (particularly technology and specialtyproducts) and services and utilize new
technologies that achieve market acceptance with acceptable margins; transitionalchallenges associated with
acquisitions and joint ventures, including the failure to achieve anticipatedsynergies/benefits, as well as significant
demands on our operations, information systems, legal, regulatory, compliance, financial and human resources
functions in connection with acquisitions, dispositions and joint ventures; certainprovisions in our governing
documents that may discourage third-party acquisitions of us; adverse changesin supplier rebates or other
purchasing incentives; risks related to the sale of corporate brand products;risks related to activist investors;
security risks associated with our information systems and technologyproducts and services, such as cyberattacks
or other privacy or data security breaches (including the October 2023 incident);effects of a highly competitive
(including, without limitation, competition from third-party online commerce sites)and consolidating market;
political, economic and regulatory influences on the health careindustry; risks from expansion of customer
purchasing power and multi-tiered costing structures; increases in shipping costsfor our products or other service
issues with our third-party shippers, and increases in fuel and energy costs; changesin laws and policies governing
manufacturing, development and investment in territories and countrieswhere we do business; general global and
domestic macro-economic and political conditions, including inflation,deflation, recession, unemployment (and
corresponding increase in under-insured populations), consumer confidence,sovereign debt levels, fluctuations in
energy pricing and the value of the U.S. dollar as compared to foreign currenciesand changes to other economic
indicators; failure to comply with existing and future regulatoryrequirements, including relating to health care;
risks associated with the EU Medical Device Regulation; failure to comply withlaws and regulations relating to
health care fraud or other laws and regulations; failure to comply withlaws and regulations relating to the
collection, storage and processing of sensitive personal information or standardsin electronic health records or
transmissions; changes in tax legislation, changes in tax rates and availabilityof certain tax deductions; risks related
to product liability, intellectual property and other claims; risks associated with customs policies or legislative
import restrictions; risks associated with disease outbreaks, epidemics,pandemics (such as the COVID-19
pandemic), or similar wide-spread public health concerns and othernatural or man-made disasters; risks associated
with our global operations; the threat or outbreak of war (including, withoutlimitation, geopolitical wars), terrorism
or public unrest (including, without limitation, the war in Ukraine, the Israel-Gazawar and other unrest and threats
in the Middle East and the possibility of a wider European or global conflict);changes to laws and policies
governing foreign trade, tariffs and sanctions or greater restrictions on imports andexports, including changes to
international trade agreements and the current imposition of (and thepotential for additional) tariffs by the U.S. on
numerous countries and retaliatory tariffs; supply chain disruption; litigationrisks; new or unanticipated litigation
developments and the status of litigation matters; our dependence onour senior management (including, without
Index to Financial Statements
limitation, the transition to a new Chief Executive Officer), employee hiring and retention,increases in labor costs
or health care costs, and our relationships with customers, suppliers andmanufacturers; and disruptions in financial
markets.The order in which these factors appear should not be construedto indicate their relative importance or
priority.
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control
or predict.Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction
of actual results.We undertake no duty and have no obligation to update forward-looking statements except as
required by law.
Where YouCan Find Important Information
We may disclose important information through one or more of the following channels: SEC filings, public
conference calls and webcasts, press releases, the investor relationspage of our website (www.henryschein.com)
and the social media channels identified on the About Media Center pageof our website.
Recent Developments
Chief Executive Officer
On January 12, 2026, we announced the appointment of FrederickM. Lowery as our new CEO, effective March 2,
2026, at which time Mr. Lowery will join our Board of Directors.Mr. Lowery succeeds Stanley M. Bergman, who
will remain as our CEO through March 1, 2026, at which time Mr. Bergman will retire as CEO, but will remain as
Chairman of the Board.
Cyber Incident
As previously reported, in October 2023 Henry Schein experienceda cyber incident that primarily affected the
operations of our North American and European dental and medicaldistribution businesses.
During the years ended December 28, 2024 and December 30, 2023, we hada sales decrease in our dental and
medical distribution businesses, which we believe was primarily aresult of lower sales to episodic customers
following the cyber incident.
With respect to the October 2023 cyber incident, we had a $60 million insurance policy, following a $5 million
retention.During the years ended December 27, 2025, December 28, 2024and December 30, 2023, we incurred $0
million, $9 million and $11 million, respectively, of direct expenses related to the cyber incident, mostly consisting
of professional fees.During the years ended December 27, 2025 and December28, 2024, we received insurance
proceeds of $20 million and $40 million, respectively, representing insurance recovery of losses related to the cyber
incident.The expenses and insurance recoveries related to the cyber incidentare included in the selling, general
and administrative line in our consolidated statements of income.
Tariffs and Related Economic Conditions
The U.S. has adopted new and increased tariffs on imports from countries, whichtariffs remain subject to
frequently evolving exemptions and modifications, as well as to courtchallenges, including a recent invalidation in
the Supreme Court of many of the tariffs.Some countries have imposed retaliatory tariffs and other restrictions on
imports from the U.S.These developments, and anticipated future developments,have created a volatile
environment for global trade, and new trade policies with individual countries.It is unclear whether, or the extent
to which, the current tariffs on trade with numerous countries will remain in place,or change, the exceptions that
may apply, and their timing.
The tariffs did not have a material impact on our results of operations during fiscalyear 2025, although sales of
U.S. dental equipment were temporarily impacted by market uncertaintyrelated to tariffs in the second half of the
Index to Financial Statements
quarter ended June 28, 2025.It is unclear whether, or the extent to which, the current tariffs on trade with
numerous countries will remain in place, or change, the exceptions thatmay apply, and their timing.
One Big Beautiful Bill Act
In the United States, the OBBBA, signed into law on July 4, 2025, includesa number of provisions that are
expected to result in reductions in the number of Medicaid enrollees, whichwill reduce utilization of services and
covered products generally.There are also several provisions that will reduce federal funding to stateMedicaid
programs.The OBBBA, in combination with tariffs, will likely have an adverse impact onutilization, Medicaid
payment and cost of production (if foreign components are used).
The OBBBA also includes changes to corporate tax rates, limitationson certain deductions and modifications to
international tax provisions.
Index to Financial Statements
Executive-Level Overview
Henry Schein, Inc. is a solutions company for health care professionals poweredby a network of people and
technology.
We
believe we are the world's largest provider of health care products and services primarily to office-
based dental and medical practitioners, as well as alternate sites of care.
We
serve more than one million customers
worldwide including dental practitioners, laboratories, physician practices andambulatory surgery centers, as well
as government, institutional health care clinics, home health providers, andother alternate care clinics.
We
believe
that we have a strong brand identity due to our more than 94 years of experiencedistributing health care products.
We
are headquartered in Melville, New York, employ more than 25,000 people (of which approximately 13,000 are
based outside of the United States) and have operations or affiliates in 34 countries andterritories.Our broad
global footprint has evolved over time through our organic growth as well as throughcontribution from strategic
acquisitions.
We
have established strategically located distribution centers aroundthe world to enable us to better serve our
customers and increase our operating efficiency.This infrastructure, together with broad product and service
offerings at competitive prices, and a strong commitment to customer service, enablesus to be a single source of
supply for our customers' needs.
As a distributor, we market and sell branded products as well as our own corporate brand portfolio ofcost-effective,
high-quality consumable merchandise products.
We
also manufacture, source and sell a range of company-owned
manufactured products, primarily implants, biomaterial products, endodontics, handpieceand small equipment,
hand instrument and repair, restoratives, orthodontics, wound care, orthopedics and dental lab products.
We
have
achieved scale in these global businesses primarily through acquisitions, asmanufacturers of these products
typically do not utilize a distribution channel to serve customers.
Our reportable segments consist of: (i) Global Distribution and Value-Added Services; (ii) Global Specialty
Products; and (iii) Global Technology.
Global Distribution and Value-Added Services includes distribution to the global dental and medical markets of
national brand and corporate brand merchandise, as well as equipment and relatedtechnical services.This segment
also includes value-added services such as financial services, continuing educationservices, consulting and other
services.This segment also markets and sells under our own corporate brand,a portfolio of cost-effective, high-
quality consumable merchandise.Global Specialty Products includes manufacturing, marketingand sales of dental
implant and biomaterial products; and endodontic, orthodontic and orthopedicproducts and other health care-
related products and services.Global Technology includes development and distribution of practice management
software, e-services and other products, which are distributed to healthcare providers.
A key element to grow closer to our customers is our One Schein initiative, whichis a unified go-to-market
approach that enables practitioners to work synergistically with our supply chain, equipmentsales and service and
other value-added services, allowing our customers to leverage thecombined value that we offer through a single
program.Specifically, One Schein provides customers with streamlined access to our comprehensive offering of
national brand products, corporate brand products and proprietary specialty productsand solutions (including
implant, orthodontic and endodontic products).In addition, customers have access to a wide range of services,
including software and other value-added services.
Industry Overview
In recent years, the health care industry has increasingly focused on cost containment.This trend has benefited
distributors capable of providing a broad array of products and services at lowprices.It also has accelerated the
growth of DSOs, GPOs, HMOs, group practices, other managed careaccounts and collective buying groups, which,
in addition to their emphasis on obtaining products at competitive prices,tend to favor distributors capable of
providing specialized management information support.
We
believe that the trend towards cost containment has
the potential to favorably affect demand for technology solutions, including software, whichcan enhance the
efficiency and facilitation of practice management.
Index to Financial Statements
Our operating results in recent years have been significantly affected by strategiesand transactions that we
undertook to expand our business, domestically and internationally, in part to address significant changes in the
health care industry, including consolidation of health care distribution companies, health care reform, trends
toward managed care, cuts in Medicare and collective purchasing arrangements.
Industry Consolidation
The health care products distribution industry, as it relates to office-based health care practitioners, is fragmented
and diverse.The industry ranges from sole practitioners working out ofrelatively small offices to group practices
or service organizations ranging in size from a few practitioners to a large number of practitioners who have
combined or otherwise associated their practices.
Due in part to the inability of office-based health care practitioners to store and managelarge quantities of supplies
in their offices, the distribution of health care supplies and small equipment to office-based healthcare 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 typicallymade by the
practitioner or an administrative assistant.Supplies and small equipment are generally purchased from morethan
one distributor, with one generally serving as the primary supplier.
The trend of consolidation extends to our customer base.Health care practitioners are increasingly seeking to
partner, affiliate or combine with larger entities such as hospitals, health systems, group practices or physician
hospital organizations.In many cases, purchasing decisions for consolidated groups aremade at a centralized or
professional staff level; however, orders are delivered to the practitioners' offices.
Our approach to acquisitions and joint ventures has been to expand our role asa provider of products and services
to the health care industry.This trend has resulted in our expansion into service areas that complementour existing
operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquiredbusinesses.
As industry consolidation continues, we believe that we are positionedto capitalize on this trend, as we believe we
have the ability to support increased sales through our existing infrastructure, althoughthere can be no assurances
that we will be able to successfully accomplish this.
We
are focused on building relationships with decision makers
who do not reside in the office-based practitioner setting.
As the health care industry continues to change, we continually evaluate possiblecandidates for joint venture or
acquisition and intend to continue to seek opportunities to expand ourrole as a provider of products and services to
the health care industry.There can be no assurance that we will be able to successfully pursueany such
opportunity or consummate any such transaction, if pursued.If additional transactions are entered into or
consummated, we would incur merger and/or acquisition-related costs, and therecan be no assurance that the
integration efforts associated with any such transaction would be successful.
Aging Population and Other Market Influences
The health care products distribution industry continues to experience growthdue to the aging population,
increased health care awareness, the proliferation of medical technologyand testing, new pharmacological
treatments, and expanded third-party insurance coverage, partially offset by the effects of unemploymenton
insurance coverage.In addition, the physician market continues to benefit from theshift of procedures and
diagnostic testing from acute care settings to alternate-care sites, particularlyphysicians' offices.
According to the U.S. Census Bureau's International Database, between 2025 and 2035, the 45 and older
population is expected to grow by approximately 10%.Between 2025 and 2045, this age group is expected to grow
by approximately 17%.This compares with expected total U.S. population growth rates ofapproximately 4%
between 2025 and 2035 and approximately 6% between 2025 and 2045.
Index to Financial Statements
According to the U.S. Census Bureau's International Database, in 2025 there are approximately seven million
Americans aged 85 years or older, the segment of the population most in need of long-term careand elder-care
services.By the year 2050, that number is projected to increase to approximately17 million.The population aged
65 to 84 years is projected to increase by approximately 15% duringthe same period.
As a result of these market dynamics, annual expenditures for health care servicescontinue to increase in the
United States.
We
believe that demand for our products and services will grow whilecontinuing to be impacted by
current and future operating, economic and industry conditions.The Centers for Medicare and Medicaid Services,
or CMS, published "National Health Expenditure Data" indicating thattotal national health care spending reached
approximately $5.3 trillion in 2024, or 18.0% of the nation's gross domestic product, the benchmark measurefor
annual production of goods and services in the United States.Health care spending is projected to reach
approximately $8.6 trillion by 2033, or 20.3% of the nation's projected gross domestic product.
We
believe similar demographic changes are also occurring in othermarkets we serve outside the U.S.
Government
Our businesses are generally subject to numerous laws and regulations that couldimpact our financial performance,
and failure to comply with such laws or regulations could have amaterial adverse effect on our business.See "
Item
1. Business - Governmental Regulations
" for a discussion of laws, regulations and governmental activitythat may
affect our results of operations and financial condition.
Index to Financial Statements
Results of Operations
Refer to Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in
our 2024 Annual Report on Form 10-K for management's discussion and analysis of financial condition and results
of operations for the fiscal year 2024 compared to fiscal year 2023.
The following tables summarize the significant components of our operatingresults and cash flows for each of the
three years ended December 27, 2025, December 28, 2024, and December30, 2023 (in millions):
YearsEnded
December 27,
December 28,
December 30,
2025
2024
2023
Operating results:
Net sales
$
13,184
$
12,673
$
12,339
Cost of sales
9,079
8,657
8,479
Gross profit
4,105
4,016
3,860
Operating expenses:
Selling, general and administrative
3,084
3,034
2,956
Depreciation and amortization
Restructuring and related costs
Operating income
$
$
$
Other expense, net
$
(120)
$
(108)
$
(73)
Income taxes
(126)
(128)
(120)
Net income
Net income attributable to Henry Schein, Inc.
YearsEnded
December 27,
December 28,
December 30,
2025
2024
2023
Cash flows:
Net cash provided by operating activities
$
$
$
Net cash used in investing activities
(400)
(430)
(1,135)
Net cash provided by (used in) financing activities
(188)
(510)
Index to Financial Statements
Plans of Restructuring and Related Costs
On August 6, 2024, we committed to a restructuring plan (the "2024Plan") to integrate our acquisitions, right-size
operations and further increase efficiencies.We currently expect this plan to be completed at the end of 2027.
During the years ended December 27, 2025 and December 28, 2024, we recordedrestructuring and related charges
associated with the 2024 Plan of $105 million and $73 million, respectively.The restructuring and related costs for
these periods primarily related to severance and employee-related costs, acceleratedamortization of right-of-use
assets and fixed assets, and other exit costs.We expect to record restructuring and related charges associated with
the 2024 Plan through the end of 2027; however, an estimate of the amount of these charges for 2026 through 2027
has not yet been determined.
During the year ended December 27, 2025, in connection with the 2024 Plan,we recorded a loss of $1 million and
$12 million related to the disposal of businesses in the Global Distributionand Value-Added Services and Global
Specialty Product segments, respectively, and a net gain related to disposal of a business in the Global Technology
segment.These amounts are included in the $105 million of restructuring andrelated charges discussed above.
During the year ended December 28, 2024, in connection with the 2024 Plan,we recorded an impairment of
goodwill and intangible assets of $13 million related to the disposal of a portionof a business in the Global
Specialty Products segment.This impairment is included in the $73 million of restructuring andrelated charges
discussed above.
On August 1, 2022, we committed to a restructuring plan (the "2022Plan") focused on funding the priorities of the
BOLD+1 strategic plan, streamlining operations and other initiatives toincrease efficiency.The 2022 Plan was
completed as of July 31, 2024.During the years ended December 28, 2024 and December 30, 2023, inconnection
with our 2022 Plan, we recorded restructuring and related costs of $37 millionand $80 million, respectively, which
primarily related to severance and employee-related costs, accelerated amortizationof right-of-use assets and fixed
assets, and other exit costs.
During the year ended December 30, 2023, in connection with the 2022 Plan,we recorded an impairment of an
intangible asset of $12 million related to disposal of a U.S. business inthe Global Specialty Products segment.This
impairment is included in the $80 million of restructuring and related costs discussedabove.The disposal was
completed during the first quarter of 2024.
Index to Financial Statements
2025 Compared to 2024
Note: Percentages for Net Sales; Gross Profit; Operating Expenses; OtherExpense, Net; and Income Taxes are
based on actual values and may not recalculate due to rounding.
Our reportable segments are determined based on how our Chairmanand Chief Executive Officer manages the
business, assesses performance and allocates resources.We have three reportable segments: (i) Global Distribution
and Value-Added Services; (ii) Global Specialty Products; and (iii) GlobalTechnology.
Net Sales
Net sales by reportable segment and by major product or service type wereas follows:
% of
% of
Increase / (Decrease)
2025
Total
2024
Total
$
%
Global Distribution and Value-Added Services
Global Dental Merchandise
(1)
$
4,831
36.6
%
$
4,723
37.3
%
$
2.2
%
Global Dental Equipment
(2)
1,799
13.6
1,723
13.6
4.4
Global Value-Added Services
(3)
1.8
1.8
2.2
Global Dental
6,868
52.0
6,679
52.7
2.8
Global Medical
(4)
4,270
32.5
4,081
32.2
4.6
Total Global Distribution and Value-Added Services
11,138
84.5
10,760
84.9
3.5
Global Specialty Products
(5)
1,544
11.7
1,446
11.4
6.7
Global Technology
(6)
5.1
5.0
7.1
Eliminations
(173)
(1.3)
(163)
(1.3)
(10)
n/a
Total
$
13,184
100.0
%
$
12,673
100.0
%
$
4.0
(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.
The components of our sales growth/(decline) were as follows:
Constant Currency
Growth/(Decline)
Total Constant
Currency Growth
Foreign
Exchange
Impact
Total Sales
Growth
Local Internal
Growth/(Decline)
Acquisition
Growth
Global Distribution and Value-Added Services
Global Dental Merchandise
1.4
%
0.2
%
1.6
%
0.6
%
2.2
%
Global Dental Equipment
2.7
0.5
3.2
1.2
4.4
Global Value-Added Services
(2.0)
4.0
2.0
0.2
2.2
Global Dental
1.6
0.4
2.0
0.8
2.8
Global Medical
3.1
1.5
4.6
-
4.6
Total Global Distribution and Value-Added Services
2.2
0.8
3.0
0.5
3.5
Global Specialty Products
3.3
2.4
5.7
1.0
6.7
Global Technology
6.7
-
6.7
0.4
7.1
Total
2.6
0.9
3.5
0.5
4.0
Index to Financial Statements
Global Sales
Global net sales for the year ended December 27, 2025 increased 4.0%,attributable to internal growth of 2.6%,
acquisition growth of 0.9%, and an increase in foreign exchange of 0.5%.The components of our sales increase are
presented in the table above.
Global Distribution and Value-Added Services Sales
Global Distribution and Value-Added Services net sales for the year ended December 27, 2025 increased 3.5%.
The components of our sales increase are presented in the tableabove.
The 1.6% increase in internally generated local currency dental sales wasprimarily due to sales growth in U.S
dental merchandise and international dental merchandise,as well as growth in traditional dental equipment in the
U.S. and growth in traditional and digital dental equipment in internationalmarkets.
The 3.1% increase in internally generated local currency medical sales wasattributable to growth of our Home
Solutions business,dialysis products and pharmaceuticals.
The 2.0% decrease in internally generated local currency value-added servicessales was attributable primarily to
lower sales in our practice transitions business, partially offset by sales growth from our internationalbusinesses.
Global Specialty Products
Global Specialty Products net sales for the year ended December 27, 2025increased 6.7%.The components of our
sales increase are presented in the table above.
The 3.3% increase in internally generated local currency sales was attributableto growth in our implant and
biomaterial businesses, and orthopedics, partially offset by a decline in orthodonticsales.
Global Technology
Global Technology net sales for the year ended December 27, 2025 increased 7.1%.The components of sales
growth are presented in the table above.
The internally generated local currency increase of 6.7% in Global Technology sales was primarily attributable to
the adoption of our core practice management solutions, particularlyour cloud-based platforms, as well as an
increase in revenue cycle management solutions.
Index to Financial Statements
Gross Profit
Gross profit and gross margin percentages by segment and in total were as follows:
Gross
Gross
Increase
2025
Margin %
2024
Margin %
$
%
Global Distribution and Value-Added Services
$
2,786
25.0
%
$
2,776
25.8
%
$
0.4
%
Global Specialty Products
54.8
55.4
5.5
Global Technology
67.7
67.4
7.6
Corporate
n/a
n/a
n/a
Total
$
4,105
31.1
$
4,016
31.7
$
2.2
As a result of different practices of categorizing costs associated with distribution networksthroughout our
industry, our gross margins may not necessarily be comparable to other distribution companies.Gross margin
percentages vary between our segments.We realize substantially higher gross margin from products we develop
and manufacture within our Global Specialty Products segment comparedto products distributed within our Global
Distribution and Value-Added Services segment.Within our Global Technology segment, higher gross margins
result from us being both the developer and seller of software productsand services.
Within our Global Distribution and Value-Added Services segment, gross profit margins may fluctuate between the
periods as a result of the changes in product mix and customer mix.With respect to customer mix, sales to our
large-group customers are typically completed at lower gross margins as a result ofhigher sales volumes, while
sales to office-based practitioners generally carry higher gross margins due to lower volumes.
The increase in Global Distribution and Value-Added Services gross profit for the year ended December 27, 2025
compared to the prior-year-period is due primarily to increased internally generated sales volume as described
above.The decrease in gross margin rates was attributable primarily to the impactof targeted promotional
programs and product mix.
The increase in Global Specialty Products gross profit primarily reflectsincreased internally generated sales
volume and gross profit from acquisitions.The decrease in gross margin rates was due to product mix and pricing.
The increase in Global Technology gross profit is the result primarily of higher internally generated sales.The
increase in gross margin rates was due to product mix.
Index to Financial Statements
Operating Expenses
Operating expenses (consisting of selling, general and administrativeexpenses; depreciation and amortization; and
restructuring and related costs) by segment were as follows:
% of
% of
Respective
Respective
Increase / (Decrease)
2025
Sales
2024
Sales
$
%
Global Distribution and Value-Added Services
$
2,106
18.9
%
$
2,080
19.3
%
$
1.3
%
Global Specialty Products
39.2
43.2
(19)
(3.1)
Global Technology
41.0
43.2
1.5
Corporate
n/a
n/a
60.8
3,133
23.8
3,067
24.2
2.1
Adjustments
(1)
n/a
n/a
(9)
n/a
Total operating expenses
$
3,452
26.2
$
3,395
26.8
$
1.7
(1)
Adjustments represent items excluded from segment operating income to enable comparison of financial results between periods.
These items may vary independently of business performance.Please see
Note 4 - Segment and Geographic Data
.These
adjustments (current year vs. prior year) consist of (i) acquisition intangible amortization ($179 million vs. $184 million), (ii)
restructuring and related costs ($105 million vs. $110 million), (iii) change in contingent consideration ($(2) million vs. $45
million), (iv) litigation settlements ($5 million vs. $6 million), (v) cyber incident-insurance proceeds, net ofthird-party advisory
expenses ($(20) million net proceeds vs. $(31) million net proceeds), (vi) impairment of intangible assets ($16 million vs. $0
million), (vii) impairment of capitalized assets ($0 million vs. $12 million), and (viii) costs associated with shareholder advisory
matters and select value creation consulting costs ($36 million vs. $2 million).
The net increase in operating expenses was attributable to the following:
Operating Costs
(excluding
acquisitions)
Acquisitions
Adjustments
Total
Global Distribution and Value-Added Services
$
$
$
-
$
Global Specialty Products
(23)
-
(19)
Global Technology
-
-
Corporate
-
-
-
Adjustments
-
-
(9)
(9)
Total operating expenses
$
$
$
(9)
$
The components of the net increase in total operating expenses are presentedin the table above.The increase in
operating costs (excluding acquisitions) during the year ended December 27,2025 was attributable to an increase in
Corporate investments in technology supporting the launch of our Global E-CommercePlatform
(www.henryschein.com), depreciation expense,the impact of certain compensation related costs and timing of
certain non-income tax credits during the year ended December 28, 2024,partially offset by cost savings from our
restructuring activities, certain changes in estimates and other operatingcost efficiencies.In addition, during the
year ended December 27, 2025,our operating costs were impacted by recognition of a benefit relatedto the
remeasurement to fair value of previously held equity investments of $29million within our Global Specialty
Products segment and $9 million within our Global Distribution and Value-Added Services segment.During the
year ended December 28, 2024,our operating costs were impacted by recognition of a remeasurement gainrelated
to the remeasurement to fair value of a previously held equity investments of $18million within our Global
Distribution and Value-Added Services segment.
Index to Financial Statements
Other Expense, Net
Other expense, net was as follows:
Variance
2025
2024
$
%
Interest income
$
$
$
37.1
%
Interest expense
(150)
(131)
(19)
(14.2)
Other, net
(3)
(1)
(2)
n/a
Other expense, net
$
(120)
$
(108)
$
(12)
10.9
Interest income increased primarily due to increased interest rates.Interest expense increased primarily due to
increased borrowings.
Income Taxes
Our effective tax rate was 23.7% for the year ended December 27, 2025, compared to 24.9%for the prior year
period.The difference between our effective and federal statutory tax rates primarily relates to stateand foreign
income taxes and interest expense, as well as the tax treatment associated withthe acquisition of a controlling
interest of a previously held non-controlling equity investment.
On July 4, 2025, President Trump signed the reconciliation tax bill, commonly known as the "One Big Beautiful
Bill Act" (OBBBA), into law.Corporate provisions in the OBBBA include immediate expensing of domestic
research and experimental expenditures, limitations on certain deductions,and modifications to international tax
provisions.The changes resulting from the OBBBA did not have a significant impactto the total tax provision.
The Organization of Economic Co-Operation and Development (OECD) issuedtechnical and administrative
guidance on Pillar Two rules in December 2021, which provides for a global minimum tax rate on the earnings of
large multinational businesses on a country-by-country basis.Effective January 1, 2024, the minimum global tax
rate is 15% for various jurisdictions pursuant to the Pillar Two rules.Future tax reform resulting from these
developments may result in changes to long-standing tax principles, whichmay adversely impact our effective tax
rate going forward or result in higher cash tax liabilities.As of December 27, 2025, the impact of the Pillar Two
rules to our financial statements was immaterial.
Index to Financial Statements
Liquidity and Capital Resources
Our principal capital requirements have included funding of acquisitions, purchasesof additional noncontrolling
interests, repayments of debt principal, the funding of working capital needs,purchases of fixed assets and
repurchases of common stock.Working capital requirements generally result from increased sales, special
inventory forward buy-in opportunities and payment terms for receivablesand payables.Historically, sales have
tended to be stronger during the second half of the year and special inventoryforward buy-in opportunities have
been most prevalent just before the end of the year, and have caused our working capital requirementsto be higher
from the end of the third quarter to the end of the first quarter ofthe following year.
We finance our business primarily through cash generated from our operations, revolving credit facilities and debt
placements.Please see
Note 14 - Debt
for further information.Our ability to generate sufficient cash flows from
operations is dependent on the continued demand of our customersfor our products and services, and access to
products and services from our suppliers.
Our business requires a substantial investment in working capital, whichis susceptible to fluctuations during the
year as a result of inventory purchase patterns and seasonal demands.Inventory purchase activity is a function of
sales activity, special inventory forward buy-in opportunities and our desired level of inventory.
We finance our business to provide adequate funding for at least 12 months.Funding requirements are based on
forecasted profitability and working capital needs, which, on occasion, maychange.Consequently, we may change
our funding structure to reflect any new requirements.
Our acquisition strategy is focused on investments in companies, includinghigh growth high margin businesses
aligned with our BOLD+1 strategy, that add new customers and sales teams, increase our geographic footprint
(whether entering a new country, such as emerging markets, or building scale where we have already invested in
businesses), and finally, those that enable us to access new products and technologies.
We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets,
and our available funds under existing credit facilities provide us withsufficient liquidity to meet our currently
foreseeable short-term and long-term capital needs.
Net cash provided by operating activities was $712 million for theyear ended December 27, 2025, compared to net
cash provided by operating activities of $848 million for the prior year.The net change of $136 million was
primarily attributable to changes in working capital accounts (primarilyaccounts receivable, inventory, and
accounts payable and accrued expenses),partially offset by an increase in operating income.Our operating cash
flows during the year ended December 28, 2024 were positivelyaffected by the residual impacts of the 2023 cyber
incident and included a higher-than-normal level of cash collections.Our cash collections normalized during the
second half of the year ended December 28, 2024.
Net cash used in investing activities was $400 million for the year endedDecember 27, 2025, compared to net cash
used in investing activities of $430 million for the prior year.The net change of $30 million was primarily
attributable to lower acquisition activity.
Net cash used in financing activities was $188 million for the yearended December 27, 2025, compared to net cash
used in financing activities of $510 million for the prior year.The net change of $322 million was primarily due to
increased net borrowings from debt,proceeds received from the issuance of common stock, and areduction in
acquisitions of noncontrolling interests in subsidiaries, partially offset by increasedrepurchases of common stock.
Index to Financial Statements
The following table summarizes selected measures of liquidity and capitalresources:
December 27,
December 28,
2025
2024
Cash and cash equivalents
$
$
Workingcapital
(1)
1,236
1,180
Debt:
Bank credit lines
$
$
Current maturities of long-term debt
Long-term debt
2,310
1,830
Total debt
$
3,107
$
2,536
Leases:
Current operating lease liabilities
$
$
Non-current operating lease liabilities
(1)
Includes $491 million and $241 million of certain accounts receivable which serve as security for U.S. trade accounts receivable
securitization at December 27, 2025 and December 28, 2024, respectively.
Our cash and cash equivalents consist of bank balances and investmentsin money market funds representing
overnight investments with a high degree of liquidity.
Accounts receivable days sales outstanding and inventory turns
Our accounts receivable days sales outstanding from operations decreasedto 44.8 days as of December 27, 2025
from 47.3 days as of December 28, 2024, which was primarily attributableto the impact that the cyber incident had
on the cash collections during the first half of 2024.During the years ended December 27, 2025 and December 28,
2024, we wrote off approximately $18 million and $12 million, respectively, of fully reserved accounts receivable
against our trade receivable reserve.Our inventory turns from operations decreased to 4.8 as of December27, 2025
from 5.0 as of December 28, 2024.Our working capital accounts may be impacted by current andfuture economic
conditions.
Contractual obligations
The following table summarizes our contractual obligations relatedto fixed and variable rate long-term debt and
finance lease obligations, including interest (assuming a weightedaverage interest rate of 4.62%), as well as
inventory purchase commitments and operating lease obligationsas of December 27, 2025:
Payments due by period
< 1 year
2 - 3 years
4 - 5 years
> 5 years
Total
Contractual obligations:
Long-term debt, including interest
$
$
$
1,066
$
$
2,797
Inventory purchase commitments
-
-
Operating lease obligations
Finance lease obligations, including interest
-
Total
$
$
1,079
$
1,151
$
$
3,184
For information relating to our debt please see
Note 14 - Debt
.
Index to Financial Statements
Leases
We have operating and finance leases for corporate offices, office space, distribution and other facilities, vehicles
and certain equipment.Our leases have remaining terms of less than one year toapproximately 23 years, some of
which may include options to extend the leases for up to 10 years.As of December 27, 2025, our right-of-use
assets related to operating leases were $301 million and our current andnon-current operating lease liabilities were
$78 million and $251 million, respectively.Please see
Note 8 - Leases
for further information.
Stock Repurchases
On January 27, 2025, our Board authorized the repurchase of upto an additional $500 million in shares of our
common stock.
On May 19, 2025, we executed an accelerated share repurchase programto repurchase a total of $250 million of
our outstanding common stock based on volume-weighted averageprices.In May 2025, we received 3,122,832
shares at an estimated fair value of $224 million.In July 2025, we received an additional 368,651 shares at an
estimated fair value of $26 million, representing the final amount of sharesto be received under this accelerated
share repurchase program.
On September 8, 2025, our Board authorized the repurchase of up toan additional $750 million in shares of our
common stock.
From March 3, 2003 through December 27, 2025, we repurchased $6.0billion, or 107,876,628 shares, under our
common stock repurchase programs, with $780 million availableas of December 27, 2025 for future common stock
share repurchases.
Redeemable Noncontrolling Interests
Some minority stockholders in certain of our subsidiaries have the right,at certain times, to require us to acquire
their ownership interest in those entities at fair value.Accounting Standards Codification Topic 480-10 is
applicable for noncontrolling interests where we are or may be requiredto purchase all or a portion of the
outstanding interest in a consolidated subsidiary from the noncontrollinginterest holder under the terms of a put
option contained in contractual agreements.As of December 27, 2025 and December 28, 2024, our balancefor
redeemable noncontrolling interests was $895 million and $806 million,respectively.Please see
Note 20 -
Redeemable Noncontrolling Interests
for further information.
Index to Financial Statements
Critical Accounting Estimates
Our accounting policies are described in
Note 1 - Basis of Presentation and Significant Accounting Policies
of the
consolidated financial statements.The preparation of consolidated financial statements requires usto make
estimates and judgments that affect the reported amounts of assets, liabilities, revenuesand expenses and related
disclosures of contingent assets and liabilities.We base our estimates on historical data, when available,
experience, industry and market trends, and on various other assumptionsthat are believed to be reasonable under
the circumstances, the combined results of which form the basis formaking judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources.We believe that the estimates, judgments and
assumptions upon which we rely are reasonable based upon informationavailable to us at the time that these
estimates, judgments and assumptions are made.However, by their nature, estimates are subject to various
assumptions and uncertainties.Therefore, reported results may differ from estimates and any such differences may
be material to our consolidated financial statements.
We believe that the following critical accounting estimates, which have been discussed with the Audit Committee
of our Board, affect the significant estimates and judgments used in the preparationof our consolidated financial
statements:
Inventories and Reserves
Inventories consist primarily of finished goods, raw materials andwork-in-process and are stated at the lower of
cost or net realizable value.Cost is determined by the weighted average method for merchandiseand actual cost
for large equipment, high-technology equipment and drop-shipments.Inventory costs for manufactured products
include direct materials, labor, and an allocation of related fixed and variable overhead.The determination of
inventory carrying values requires management to make significantestimates and judgments.In assessing the need
for inventory reserves and evaluating net realizable value, we considermultiple factors, including inventory
condition, on-hand quantities, historical and forecasted sales, productlife cycles, and prevailing market and
economic conditions.
Business Combinations
The estimated fair value of acquired identifiable intangible assets (i.e., customerrelationships and lists, trademarks
and trade names, product development and non-compete agreements)is based on critical judgments and
assumptions derived from analysis of market conditions, including discountrates, projected revenue growth rates
(which are based on historical trends and assessment of financial projections),estimated customer attrition and
projected cash flows.These assumptions are forward-looking and could be affected by future economicand market
conditions.Please see
Note 5 - Business Acquisitions
for further discussion of our acquisitions.
Goodwill
Goodwill is subject to impairment assessment at least once annuallyas of the first day of our fourth quarter, or if an
event occurs or circumstances change that would more likely thannot reduce a reporting unit's fair value below
carrying value.We conduct our goodwill impairment testing at the reporting unit level.We identify our reporting
units by assessing whether two or more components are economicallysimilar and therefore should be aggregated.
Our reporting units are identified as our operating segments.Goodwill is allocated to such reporting units for the
purposes of our impairment assessment.For the year ended December 27, 2025, our reporting structure was:
(i)
Global Distribution and Value-Added Services reportable segment, which included the following
operating segments (a) US Distribution Group; (b) Europe, Middle East,and Africa Distribution Group;
(c) Americas Non-US Distribution Group; and (d) Asia-Pacific and AustraliaDistribution Group;
(ii)
Global Specialty Products reportable segment, which included the followingoperating segments (a) Global
Oral Reconstruction Group; and (b) Healthcare Specialty Group; and
(iii)
Global Technology,which is both a reportable segment and an operating segment.
Index to Financial Statements
Application of the goodwill impairment test requires judgment, includingthe identification of reporting units,
assignment of assets and liabilities that are considered shared servicesto the reporting units, and ultimately the
determination of the fair value of each reporting unit.The fair value of each reporting unit is calculated by
applying the discounted cash flow methodology and confirming witha market approach.There are inherent
uncertainties, however, related to fair value models, the inputs and our judgments in applying them tothis analysis.
The most significant inputs include estimation of detailed future cash flows basedon budget expectations, and
determination of comparable companies to develop a weighted averagecost of capital for each reporting unit.
In performing the annual goodwill impairment assessment, we prepare forward-lookingfinancial projections for
each reporting unit based on input from our leadership and approved operatingplans.These projections incorporate
assumptions related to planned strategic initiatives, the continued integrationof recent acquisitions, and prevailing
macroeconomic and market conditions.Changes in these assumptions could materially affect the estimated fair
values of the reporting units.
Our third-party valuation specialists provide inputs into our determinationof the discount rate.The rate is
dependent on a number of underlying assumptions, including the risk-free rate,tax rate, equity risk premium, debt
to equity ratio and pre-tax cost of debt.
Long-term growth rates are applied to our estimation of future cash flows.The long-term growth rates are tied to
growth rates we expect to achieve beyond the years for which we haveforecasted operating results.We also
consider external benchmarks, and other data points which we believe areapplicable to our industry and the
composition of our global operations.
We performed our annual quantitative goodwill assessment, and the estimated fair value of each of our reporting
units sufficiently exceeded its respective carrying value.As a result, no goodwill impairments were recorded
during the years ended December 27, 2025, December 28, 2024, and December30, 2023.
For the year ended December 28, 2024, in connection with our restructuringinitiatives, we recorded an $11 million
impairment of goodwill in the Global Specialty Products segment, relatingto the disposal of a portion of a business;
such impairment was calculated based on the relative fair value of goodwill.
Definite-Lived Intangible Assets
Annually or if we identify an impairment indicator, definite-lived intangible assets such as customerrelationships
and lists, trademarks, trade names, product development and non-competeagreements are reviewed for impairment
indicators.If any impairment indicators exist, quantitative testing is performedon the asset.
The quantitative impairment model is a two-step test under which wefirst calculate the recoverability of the
carrying value by comparing the undiscounted projected cash flows associatedwith the asset or asset group,
including its estimated residual value, to the carrying amount.If the cash flows associated with the asset or asset
group are less than the carrying value, we perform a fair value assessmentof the asset, or asset group.If the
carrying amount is found to be greater than the fair value, we record animpairment loss for the excess of book
value over the fair value.In addition, in all cases of an impairment review, we re-evaluate the remaining useful
lives of the assets and modify them, as appropriate.Although we believe our judgments, estimates and/or
assumptions used in estimating cash flows and determining fair valueare reasonable, making material changes to
such judgments, estimates and/or assumptions could materially affect such impairmentanalyses and our financial
results.
During the year ended December 27, 2025, we recorded $16 million ofimpairment charges related to businesses in
our Global Distribution and Value-Added Services segment.The impairment charges included $14 million
primarily related to customer lists and relationships attributableto lower than anticipated operating margins in these
businesses.The remaining impairment charges of $2 million related to trade namesand non-compete agreements.
During the year ended December 28, 2024, we recorded $4 million ofimpairment charges related to businesses in
our Global Distribution and Value-Added Services segment.It included $2 million of a trade name impairment,
calculated using the relative fair value, related to a disposal of a business,and $1 million related to trade name
Index to Financial Statements
impairment due to business integration in connection with our restructuringinitiatives.The remaining $1 million
impairment charges related to trade names and non-compete agreements.
During the year ended December 30, 2023, we recorded $19 million ofimpairment charges related to businesses in
our Global Distribution and Value-Added Services segment, consisting of $7 million primarily related to customer
lists and relationships attributable to lower than anticipated operatingmargins in certain businesses, and a $12
million charge related to the planned exit of a business in connection with our restructuringinitiatives.
The impairment charges for the years ended December 27, 2025, December 28, 2024,and December 30, 2023 were
measured as the excess of the carrying values over the estimated fair valuesof the related intangible assets,
determined using discounted estimates of future cash flows and therelief-from-royalty method.
Please see
Note 16 - Plans of Restructuring and Related Costs
for additional details.
Redeemable Noncontrolling Interests
Some minority stockholders in certain of our consolidated subsidiaries havethe right, at certain times, to require us
to acquire their ownership interest in those entities at fair value.The redemption amounts have been estimated
based on recent transactions and/or implied multiples of earningsand, if such earnings and cash flows are not
achieved, the value of the redeemable noncontrolling interests might be impacted.See
Note 1 - Basis of
Presentation and Significant Accounting Policies
and
Note 20 - Redeemable Noncontrolling Interests
for additional
information.
Income Tax
Determining whether a deferred tax asset will be realized requires significantestimates and judgment to assess
whether a valuation allowance is necessary.
We
consider all available evidence, both positive and negative,
including estimated future taxable earnings, ongoing planning strategies,future reversals of existing temporary
differences and historical operating results.Additionally, changes to tax laws and statutory tax rates can have an
impact on our determination.
We
evaluate the realizability of our deferred tax assets quarterly.
Accounting Standards Codification Topic 740 prescribes the accounting for uncertainty in income taxes recognized
in the financial statements in accordance with provisions contained withinits guidance.This topic prescribes a
recognition threshold and a measurement attribute for the financial statementrecognition and measurement of tax
positions taken or expected to be taken in a tax return.For those benefits to be recognized, a tax position must be
more likely than not to be sustained upon examination by the taxing authorities.The amount recognized is
measured as the largest amount of benefit that has a greater than 50% likelihood of being realizedupon ultimate
audit settlement.In the normal course of business, our tax returns are subjectto examination by various taxing
authorities.Such examinations may result in future tax and interest assessmentsby these taxing authorities for
uncertain tax positions taken in respect of certain tax matters.Please see
Note 15 - Income Taxes
for further
discussion.
Accounting Standards Update
For a discussion of accounting standards updates that have been adoptedor will be adopted in the future, please see
Note 1 - Basis of Presentation and Significant Accounting Policies
included under Item 8.
Index to Financial Statements
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