Henry Schein Annual Report 2010

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FY2010 Annual Report · Henry Schein

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Henry Schein, Inc.

135 Duryea Road

Melville, New York 11747

U.S.A.

(631) 843-5500

www.henryschein.com

A N N U A L R E P O RT 2 010

FINANCIAL HIGHLIGHTS

NET SALES
from Continuing Operations

($ in Millions)

CAGR 11%*

OPERATING INCOME
from Continuing Operations

($ in Millions)

CAGR 15%*

EARNINGS PER DILUTED SHARE
from Continuing Operations

CAGR 16%*

OPERATING CASH FLOW
AND CAPITAL EXPENDITURES

($ in Millions)

OPERATING CASH FLOW

CAPITAL EXPENDITURES

*Five-year Compound Annual Growth Rate

NOTE:
Operating Income and Earnings Per Diluted Share from Continuing Operations attributable to Henry Schein, Inc. have been adjusted to
exclude certain one-time items. Refer to Non-GAAP Disclosures on page 12. Additionally, refer to our annual consolidated financial
statements for a complete presentation of our Consolidated Statements of Cash Flows.

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ABOUT HENRY SCHEIN

Henry Schein, Inc. (NASDAQ: HSIC), the largest provider of health care

products and services to office-based practitioners, is a Fortune 500®

company and a member of the NASDAQ 100® Index. The Company is

recognized for its excellent customer service and highly competitive prices.

Henry Schein’s five businesses – Dental, Medical, Animal Health, International

and Technology & Value-Added Services – serve more than 700,000 customers

worldwide, including dental practitioners and laboratories, physician practices

and animal health practices, as well as government and other institutions.

The Company operates through a centralized and automated distribution

network, which provides customers in more than 200 countries with a

comprehensive selection of more than 90,000 national and Henry Schein

corporate brand products in stock, as well as more than 100,000 additional

products available as special-order items. Henry Schein also provides

exclusive, innovative technology offerings for dental, medical and animal

health professionals, including value-added practice management software

and electronic health record solutions.

Headquartered in Melville, New York, Henry Schein employs more than

14,000 people and has operations or affiliates in 25 countries. The Company’s

net sales reached a record $7.5 billion in 2010. For more information, visit the

Henry Schein Web site at www.henryschein.com.

About the Cover: Global Expansion, Local Focus.
As Henry Schein continues to expand its operations around the world,
the Company never loses sight of the unique customer dynamics in the
markets it serves. By combining global resources and best practices with
deep understanding of the local environment, Henry Schein is expanding
globally while focusing on bringing value to customers locally.

HENRY SCHEIN ANNUAL REPORT

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HENRY SCHEIN AT A GLANCE

DENTAL

MEDICAL

ANIMAL HEALTH

(cid:129) Includes Henry Schein Dental
(U.S.), Henry Schein Canada and
Zahn Dental Laboratory (U.S.)

(cid:129) Serves U.S. office-based physician
practices, surgical centers and other
alternate-care sites

(cid:129) Serves U.S. animal health
practices

(cid:129) Offers approximately 40,000
products in stock and as
special-order items

(cid:129) Supplier partners: Merial;
Novartis; Bayer; Royal Canin USA;
Idexx Laboratories, Inc.;
Intervet/Schering-Plough Animal
Health; Elanco; Pfizer Inc.;
Boehringer Ingelheim; Virbac; Purina;
Abbott; Nutramax™ Laboratories;
Covidien; Sogeval; Vétoquinol;
CEVA; Jorgensen Laboratories Inc.;
Veterinary Products Laboratories;
Sound-Eklin; Kelly Foods
Corporation; Terumo Medical
Corporation; Vet-A-Mix, A Division
of Lloyd, Inc.; and PRN Pharmacal

(cid:129) Valued-added strategic solutions:
Cubex™ Inventory Management;
MyVetDirect.com Home Delivery;
practice design solutions;
Human Resources Solution
by Sequent®; Office Supply
Solutions by OfficeMax®;
Professional Development Program;
and new practice order program

(cid:129) Offers approximately 38,000
products in stock with access
to more than 109,000
traditional office, laboratory and
ambulatory surgical equipment,
diagnostic, pharmaceutical and
medical/surgical products

(cid:129) Consultative selling approach
through field, telesales and specialty
representatives, along with a
Health Care Services team
focusing on larger customers

(cid:129) Branded solutions: SurgiTeam™;
DxRx Solutions™; LabTeam;
ConnectHealth®; and PrimePlus

(cid:129) National contracts with key group
purchasing organizations (GPOs)
and affinity programs

(cid:129) Key product exclusives/semi-
exclusives: Allscripts™ Electronic
Health Records; Rx Samples
Service; Siemens Healthcare
Diagnostics Inc.; Thinklabs
Digital Stethoscopes; TxSystems®
B-LIFTx®; AFIRM®; Lupin
Ceftriaxone antibiotic; Quidel®
RapidVue® hCG test; Axis Three
3D Patient Imaging; Alma Laser;
3M™ Microchannel Skin Systems;
HealthCare Success Strategies;
AtmosAir™ Solutions; and HemaClear®

Henry Schein Marketing and Operational Excellence

Field Sales Consultants – approximately 3,100

Telesales Representatives – approximately 1,600

Direct Marketing Pieces Distributed in 2010 – approximately 30.8 million

Equipment Sales and Service Centers – 188

Distribution Centers – 63

Distribution Center Square Feet – more than 4 million

Order Fulfillment Rate – 99%

Orders Shipped Same Day – 99%

Order Accuracy – 99.9%

(cid:129) Serves U.S. and Canadian
office-based dental practices,
as well as dental laboratories

(cid:129) Offers approximately 51,000
products in stock and many
more as special-order items

(cid:129) The Special Markets team focuses
on customers at dental service
organizations, Federal accounts,
institutions, schools, community
health centers, emergency medical
services, sports teams and dental
and medical practitioners in
Puerto Rico

(cid:129) Key product exclusives/semi-
exclusives: E4D Dentist® CAD/CAM
restorative system; ARESTIN® by
OraPharma, Inc.; Ortho Organizers®
orthodontic products; Camlog™
dental implant system; Colgate®
Oral Care Products; DEXIS® digital
radiography products; i-CAT® Cone
Beam 3-D Imaging System; KaVo;
Noritake Dental Materials; Pelton &
Crane; Pentron Laboratory Products;
Gendex®; Demandforce® dental
online patient communication
system; surgical instruments from
A. Titan Instruments; Snap-on Smile®
restorative appliances; Aquoral™
from Bi-Coastal Pharmaceutical
Corp.; The Dental Button® from
m2partnership; Loyal Patient™
Rewards and Loyal Team™ Rewards
from Loyal Patients™; NatureZone®
and Brain-Pad® Mouth Guards from
Brain-Pad®; NovaBone® and
PerioGlas® from NovaBone®;
MyPerioPath®, MyPerioID® PST®
and OraRisk® HPV from OralDNA®
Labs; CAO Group products; and
VELscope® Vx from LED Dental

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INTERNATIONAL

(cid:129) Serves approximately 260,000
office-based dental, medical
and animal health practices
through operations or affiliates
in 23 countries outside of
North America:

(cid:129) Australia; Austria; Belgium;
China; the Czech Republic;
France; Germany;
Hong Kong SAR; Iceland;
Ireland; Israel; Italy; Luxembourg;
the Netherlands; New Zealand;
Portugal; Saudi Arabia;
Slovakia; Spain;
Switzerland; Turkey;
the United Arab Emirates;
and the United Kingdom

(cid:129) Schein Direct provides direct
air package delivery service to
practitioners in more than 200
countries around the world

2010 WORLDWIDE NET SALES

from Continuing Operations
$7.5 Billion

TECHNOLOGY &
VALUE-ADDED SERVICES

(cid:129) Software and value-added solutions
that support dental, medical and
animal health practitioners

(cid:129) Practice management and
electronic medical records systems
with an installed active user base of
more than 70,000 dental, medical
and animal health practices

(cid:129) Key products: DENTRIX®, Oasis,
EXACT™, and Easy Dental® for
dental practices; MicroMD® for
medical providers in primary care
and all major specialties; LabNet®
for dental laboratories; and AVImark®
from McAllister® Software Systems,
Infinity® from ImproMed™ Software
Systems, DVM Manager, and
Software of Excellence solutions
from Vet Solutions and Midshire
Veterinary Systems for animal
health practices

(cid:129) Value-added services include:
repair services through ProRepair®
and COMPLETEcare; office design
services; continuing education for
health care professionals; electronic
health claims processing (51 million
claims processed in 2010); Office
Automation Technology Solutions;
24/7 ordering capability through
the ArubA® Web-based electronic
catalog; and Financial Services such
as equipment leasing and financing,
patient financing and electronic credit
card processing

35% DENTAL

17% MEDICAL

12% ANIMAL HEALTH

33% INTERNATIONAL

3% TECHNOLOGY & VALUE-ADDED SERVICES

HENRY SCHEIN ANNUAL REPORT

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TO OUR SHAREHOLDERS

For the year, our net sales of $7.5

consecutive quarters of internal

billion represented an increase of

Dental consumable merchandise

15.1% compared with 2009. This

sales growth in local currencies,

includes 15.4% growth in local

which provides further evidence of

currencies and a decline of 0.3%

stability in our markets as well as

related to foreign currency exchange.

the effectiveness of our consultative

Income from continuing operations

approach to sales and customer

for 2010 was $325.8 million or

service. We also recorded growth

$3.49 per diluted share. Non-GAAP

in sales of Dental equipment for

income* from continuing operations

each quarter of 2010.

for 2010 was $334.0 million or

$3.58 per diluted share, representing

increases of 15.4% and 11.9%,

respectively, compared with 2009.

Through our Global Health Care

Specialties Group, we continued to

build our specialty businesses and

expand our exclusive and semi-

In 2010, we gained market share

exclusive product and service

in each of our business groups,

offerings (see sidebar article at right).

which affirms our growth strategy

Over the past several years we

and the underlying strength of our

have made excellent progress in

business. In addition, for the

deepening our presence in the global

first time in the fourth quarter of

dental specialties markets including

2010 our quarterly net sales reached

orthodontics, endodontics,

$2 billion. Quarterly net sales first

CAD/CAM and instrumentation, as

surpassed the $1 billion mark in

well as dental implants, restorations

the third quarter of 2004, and this

and alloys—products that typically

2010 was a year in which

Henry Schein continued

“helping health happen” —

expanding globally as we

focused on meeting the needs

of our customers locally. It was

a year in which we continued

to use our many global resources

and worldwide perspective, while

using our understanding of the

many local markets in which we

operate to enhance our customers’

practices. It also was a year

of solid financial performance;

ongoing diversification

doubling of quarterly sales represents

carry gross margins that are higher

and expansion to enhance our

Company’s relevance to our

customers’ practices; and

continuing commitment to our

five constituencies—our customers,

compound annual growth of 12%

than Company averages. In 2010,

since then, a timeframe that includes

we also made an investment in

the recent years of global economic

Brasseler USA, a leading distributor

challenges.

of dental specialty products.

supplier partners, investors,

At the time that this Annual Report

Team Schein Members and society.

is published, we have marked five

* Includes certain non-GAAP adjustments to provide a more comparable basis for analysis (see page 12).

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GLOBAL HEALTH CARE

SPECIALTIES GROUP

Reflecting the strong entrepreneurial

spirit that has driven Henry Schein

since it was founded, the Company

has created the Global Health Care

Specialties Group to complement its

North American and International

Groups and enhance our relevance to

customers around the world. Through

specialty businesses and expanded

exclusive and semi-exclusive product

and service offerings, the Global

Health Care Specialties Group helps

drive the success of our customers.

In the Medical business, we sold

customers such well-respected

12.5 million doses of seasonal

software brands as AVImark and

influenza vaccine in 2010, which

Infinity, as well as award-winning

was in line with our expectations.

technology support plus ancillary

We estimate that Medical internal

products and services.

sales growth was 3%, excluding

sales of products related to

the H1N1 virus and seasonal

influenza vaccines.

Through strong organic growth

and strategic acquisitions, our

International Group represented

approximately 33% of our

At the beginning of the year, we

consolidated 2010 net sales.

completed the creation of Butler

Our International Group posted

Schein Animal Health, the leading

strong internal growth in local

The Global Health Care Specialties

companion animal health distribution

currencies in our international

Group includes the Dental Specialties

Group; Exclusive Brands, including

Henry Schein’s market leading

corporate brand; and Handpiece

Repairs.

company in the United States. The

dental business, particularly in

consolidation and integration of this

international dental equipment,

business has gone very well, and

as well as solid sales growth in

we recently announced two strategic

local currencies for our international

veterinary software acquisitions

animal health business.

that further support our industry

leadership position. By adding the

products and services of McAllister

Software Systems and ImproMed

Software Systems, we have

further enhanced the vital role

of Butler Schein Animal Health

with our customers, as well as

our ability to forge even stronger

relationships with manufacturers

of veterinary pharmaceuticals,

diagnostics and pet food companies.

McAllister Software Systems serves

nearly 10,000 veterinary practices in

the United States, and ImproMed

Software Systems has approximately

4,000 users. We now offer our

In January 2011, we completed

our acquisition of Provet Holdings

Limited, the leader in the Australasia

animal health distribution market.

While we already were the leader in

the Australia and New Zealand dental

distribution market, Provet Holdings

marks our entry into the Australasian

veterinary market, and the business

continues to be run by its existing,

excellent management team. With

the addition of Provet Holdings,

Henry Schein is now the animal

health distribution market leader on

three continents (see sidebar article

on next page).

HENRY SCHEIN ANNUAL REPORT

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TO OUR SHAREHOLDERS (CONTINUED)

A GLOBAL COMMITMENT TO ANIMAL HEALTH

Through strategic mergers and acquisitions

over the past five years, Henry Schein has

become the leading provider of animal health

products and services in the United States,

across Europe and throughout Australasia,

with annual sales of approximately $2 billon.

In January 2010, the Company announced the
formation of Butler ScheinTM Animal Health, the
largest veterinary sales and distribution company

in the United States. Combining the strengths of

Butler Animal Health Supply, NLS Animal Health

and the U.S. animal health division of Henry

Schein, Butler Schein Animal Health offers U.S.

veterinary practitioners the broadest selection

We expanded our international

of U.S. Human Health, has

footprint in October 2010

brought to our Board a wealth

by entering Turkey, increasing

of health care knowledge in

the number of countries

a quickly changing medical

in which we operate to 25.

landscape.

Henry Schein acquired a 50%

non-consolidating interest in

Guney Dis Deposu, the leading

Dental distributor in Turkey and

an excellent strategic and

cultural fit with our Company.

During the year we continued

development of our

ConnectHealth and

ConnectDental initiatives,

which are more closely linking

the medical, dental and

Our Technology & Value-Added

dental laboratory markets

of products and value-added services in the

Services Group posted solid

that we serve. We also rolled

industry, and the efficiency and convenience

of ordering from one primary supplier.

Henry Schein also is the leading Pan-European

distributor of animal health products and serves

sales growth throughout 2010.

out our initiative to address

The continued excellent

the strategically important

performance of this group

endodontic dental specialty

more than 18,000 European animal health

is a clear competitive advantage

segment. And we are now

customers with operations in eight countries –

Austria, the Czech Republic, France,

Germany, Portugal, Spain, Switzerland and

for our Company, providing a

focused on the future as we

valuable platform for enhancing

complete the development of

the United Kingdom.

relationships with our

our new three-year strategic

Henry Schein began 2011 with the acquisition
of Provet® Holdings Limited, Australasia’s largest
full-service veterinary distributor and service

provider. Provet Holdings provides approximately
1,900 independent veterinary practices in

Australasia with pharmaceuticals, pet nutrition

customers and increasing

plan, determining the path

market penetration.

ahead for Henry Schein.

2010 was marked by other

important developments. In

products, consumables, instruments and

January, Bradley T. Sheares,

equipment, and training and software. Based

in Brisbane, Queensland, Provet Holdings has

approximately 375 team members, and owns

Ph.D. was appointed to our

Board of Directors. Dr. Sheares,

and operates 10 warehouses across Australia

who served as CEO of Reliant

and three in New Zealand.

The rapid growth of Henry Schein’s global animal

health presence reflects the Company’s long-

term commitment to its animal health customers

Pharmaceuticals through its

acquisition by GlaxoSmithKline,

and for 19 years was with

and a firm belief in the excellent potential

Merck, ultimately as President

of the animal health market. Along with its large

dental and physician customer base, Henry

Schein’s animal health customers now represent

a significant portion of its total customers

worldwide. Through the comprehensive array

of products and services the Company offers

animal health practitioners, it is helping them to

operate more efficient and successful practices

so they can focus on providing the best quality

care to their patients.

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Emerging from the economic

challenges of recent years, 2010

was a very solid year on which we

can confidently build for continued

success around the world. We look

forward to continuing to help our

dental, medical and animal health

customers operate more efficient

and successful practices so they

can deliver high quality care to

patients; to representing the

products of our supplier partners

in the market; to delivering our

stockholders an excellent return on

investment; to ensuring that Team

Schein remains our most important

asset in our values-based culture;

and to increasing access to care

around the world through Henry

Schein Cares, our global corporate

social responsibility program.

We are eagerly anticipating the new

opportunities that 2011 will present

and remain convinced that our best

years are yet to come. On behalf

of our Board of Directors and my

Team Schein colleagues, we thank

you for your continued support.

Sincerely,

Stanley M. Bergman
Chairman and Chief Executive Officer

NEW HEADQUARTERS FOR

HENRY SCHEIN DENTAL GERMANY,

EUROPEAN DENTAL AND

EUROPEAN SHARED SERVICES

In November 2010, Henry Schein

opened a new state-of-the-art facility

in Langen, Germany that includes

the Company’s headquarters for

Henry Schein Dental Germany,

European Dental and European

Shared Services.

The new facility reflects the continued

growth of Henry Schein in the German

dental market (Europe’s largest) as

the leading Pan-European provider

of products and services to dentists,

physicians and veterinarians. The

new headquarters also underscores

the Company’s commitment to

better serve its customers and

become an even more valuable

partner to its suppliers.

The new 5,000-square-meter facility

combines Henry Schein’s three former

sites in the region, and includes a

new Customer Service Center and

consolidated Information Technology

department. As part of the Company’s

commitment to environmental

stewardship, Henry Schein’s Langen

facility also features new low-voltage

lighting systems with built-in motion

sensors, energy-saving computer

monitors and refrigerators, and

shared printers. The building

significantly reduces the Company’s

environmental footprint, lowers CO2

emissions, and reduces energy costs.

HENRY SCHEIN ANNUAL REPORT

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HENRY SCHEIN CARES-
EXPANDING ACCESS TO CARE

Throughout 2010, Henry Schein

(cid:129) The Company established the

(cid:129) The 9th annual American Dental

continued to expand access to care

Japan Earthquake and Tsunami

Association Give Kids A Smile®

for underserved communities around

Relief Fund in response to the

program, for which Henry Schein is

the world through many activities

disaster that struck Northern Japan

the exclusive professional product

supported by Henry Schein Cares,

on March 11, 2011.

sponsor, provided 400,000

the Company’s global social

responsibility program, and

facilitated by the Henry Schein

Cares Foundation. The Company’s

work in this area has resulted in

Henry Schein being ranked first in

its industry for social responsibility

for six of the past seven years in
Fortune’s list of the World’s Most
Admired Companies.*

Activities supported by Henry Schein

Cares focus on three main areas:

advancing wellness, building

capacity in the delivery of health care

services, and assisting in emergency

preparedness and relief. By using

its core competencies—extensive

health care product offerings and

logistical distribution capabilities,

close relationships with customers

and supplier partners, and an

extensive communication network—

in creative and innovative ways,

the Company furthers the goals

of nonprofit organizations across

the United States and abroad.

(cid:129) In addition to the ongoing Henry

Schein Global Product Donation

Program, Henry Schein and its

supplier and non-governmental

organization partners shipped

more than $1 million in health

care products to help Haitian

earthquake survivors.

(cid:129) Responding to the Christchurch,

New Zealand earthquake in February

underserved children with free dental

services and educational programs.

2011 and the Lockyer Valley Flood

(cid:129) Henry Schein’s 5th annual Healthy

in Queensland, Australia in January

Lifestyles Healthy Communities™

2011, the Company established

program provided free medical and

relief funds and provided assistance

dental services to more than 5,000

through product donations and

children and their caregivers in five

customer recovery packages

cities throughout the United States.

through Henry Schein Shalfoon,

Provet and Henry Schein Halas.

(cid:129) The Company once again

partnered with the American Cancer

(cid:129) Disaster relief efforts during 2010

Society for the 5th annual Think Pink

also extended into China, Chile,

Practice Pink program to raise

Pakistan and the United States.

breast cancer awareness.

(cid:129) The Company donated equipment

(cid:129) The 13th annual Henry Schein

and oral health care supplies to the

Back to School program served

new Diospi Suyana Hospital Dental

a record 2,200 children in 15

Clinic in Peru; helped open the

cities, and the Company’s 12th

Center for Pediatric Dentistry at the

annual Holiday Cheer for Children

University of Washington School

program made the holidays

of Dentistry; and supported the

brighter for hundreds of children

Deamonte Driver Dental Project’s

and their families.

Mobile Dental Clinic to increase

access to care for children in Prince

George’s County, Maryland.

The philosophy of Henry Schein

Cares is a vision of “doing well by

doing good” – the concept of

(cid:129) The New York University College of

enlightened self-interest championed

Dentistry Henry Schein Cares Global

by Benjamin Franklin. By expanding

Student Outreach Program treated

access to care in these many ways

patients in Grenada, Nicaragua, the

through Henry Schein Cares, the

Dominican Republic, Maine, Alaska

Company firmly believes that it is

and New York.

furthering its long-term success.

*Information current as of 2010 Annual Report publication date.

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Back to School

Global Product Donation Program

www.henryschein.com/hscares

www.hscaresfoundation.org

NYU College of Dentistry Henry Schein
Cares Global Student Outreach Program

Holiday Cheer for Children

Think Pink Practice Pink

Healthy Lifestyles Healthy Communities

Haitian earthquake relief

ADA Give Kids A Smile

Diospi Suyana Hospital Dental Clinic

HENRY SCHEIN ANNUAL REPORT

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BOARD OF DIRECTORS

Seated from left to right: Barry J. Alperin,(1) (2) (3) Retired Vice Chairman, Hasbro, Inc.; Karyn Mashima,(4) Private Consultant; Former Senior Vice President, Strategy and Technology, Avaya;

Stanley M. Bergman, Chairman and Chief Executive Officer; James P. Breslawski, President and Chief Operating Officer; Donald J. Kabat,(1) (2) Retired Partner, Accenture PLC Ireland

Standing from left to right: Steven Paladino, Executive Vice President and Chief Financial Officer; Gerald A. Benjamin, Executive Vice President and Chief Administrative Officer;
Paul Brons,(4) Former Member, Board of Management, Akzo Nobel, N.V.; Louis W. Sullivan, M.D.,(3) (4) Former U.S. Secretary of Health and Human Services; Founding Dean,
Director and President Emeritus of the Morehouse School of Medicine; Mark E. Mlotek, Executive Vice President, Corporate Business Development;

Philip A. Laskawy,(1) (3) (4) Retired Chairman, Ernst & Young LLP; Norman S. Matthews,(2) (4) Former President, Federated Department Stores, Inc.;

Bradley T. Sheares, Ph.D.,(4) Former CEO, Reliant Pharmaceuticals

(1) Member Audit Committee (2) Member Compensation Committee (3) Member Nominating and Governance Committee (4) Member Strategic Advisory Committee

EXECUTIVE OFFICERS

Stanley M. Bergman
Chairman and
Chief Executive Officer

Gerald A. Benjamin
Executive Vice President and
Chief Administrative Officer

James P. Breslawski
President and
Chief Operating Officer

Leonard A. David
Senior Vice President and
Chief Compliance Officer

James Harding
Senior Vice President and
Chief Technology Officer

Stanley Komaroff
Senior Advisor

Mark E. Mlotek
Executive Vice President,
Corporate Business Development

Steven Paladino
Executive Vice President and
Chief Financial Officer

Michael Racioppi
Senior Vice President and
Chief Merchandising Officer

Lonnie Shoff
President,
Global Health Care Specialties

Michael Zack
President,
International Group

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CORPORATE INFORMATION

Henry Schein, Inc.
135 Duryea Road, Melville, New York 11747 U.S.A.
(631) 843-5500
www.henryschein.com

COMMON STOCK
Henry Schein Common Stock trades on the
NASDAQ Stock Market® under the symbol “HSIC.”

ANNUAL SHAREHOLDERS MEETING
Our Annual Meeting of Shareholders will be held on May 18,
2011 at 11:00 a.m. EDT, at the Melville Marriott Long Island,
1350 Old Walt Whitman Road, Melville, New York 11747.

FOLLOW HENRY SCHEIN ON

http://www.facebook.com/henryschein

http://twitter.com/henryschein

http://www.youtube.com/user/henryscheininc

SHAREHOLDER REPORTS AND INVESTOR INQUIRIES
For shareholder inquiries, including requests for quarterly
and annual reports, contact our Investor Relations department
via e-mail at investor@henryschein.com. Printed materials
can also be requested through the Company’s Web site.

FORM 10-K
A copy of the Company’s annual report on Form 10-K for the
fiscal year ended December 25, 2010, is available without
charge to shareholders upon request to the Company’s
Investor Relations department. The report also is available
on the Company’s Web site.

INDEPENDENT AUDITORS
BDO USA, LLP
100 Park Avenue, New York, New York 10017

LEGAL COUNSEL
Proskauer Rose, LLP
Eleven Times Square, New York, New York 10036

STOCK TRANSFER AGENT
For address changes, account cancellation, registration
changes and lost stock certificates, please contact:
Continental Stock Transfer & Trust Company
17 Battery Place, New York, New York 10004
(212) 509-4000

HENRY SCHEIN ANNUAL REPORT

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NON-GAAP DISCLOSURES

The following table sets forth, for the applicable periods, a reconciliation of operating income and income from continuing operations attributable to Henry Schein, Inc. adjusted to
reflect the effects of discontinued operations, as reported to adjusted operating income and adjusted income from continuing operations.

Operating income, as reported

Operating margin, as reported

Adjustments:

Restructuring costs (1)

Costs related to foreign tax benefit (2)

Adjusted operating income

Adjusted operating margin

December 25,
2010

Years ended

December 26,
2009

December 27,
2008

(in thousands, except per share data)

$ 521,131

$ 464,085

$ 419,286

6.9%

7.1%

6.6%

12,285

3,020

1,600

23,240

$ 533,416

$ 468,705

$ 442,526

7.1%

7.2%

6.9%

Income from continuing operations attributable to Henry Schein, Inc.:

As reported

Adjustments, net of tax:

Restructuring costs (1)

Costs related to foreign tax benefit (2)

Foreign tax benefit (3)

Adjustments related to the Lehman Brothers bankruptcy (4)

Other non-recurring income/expense, net (5)

$ 325,789

$ 308,551

$ 247,347

8,260

2,058

1,080

(20,845)

(338)

(1,028)

15,991

3,045

Adjusted income from continuing operations attributable to Henry Schein, Inc.:

$ 334,049

$ 289,478

$ 266,383

Diluted earnings from continuing operations per share attributable to Henry Schein, Inc.:

As reported

Adjusted

3.49

3.58

3.41

3.20

2.71

2.92

December 3
1995

(1,47

19,3

3.1

(10,47

9,1

(0.3

Diluted weighted-average common shares outstanding:

93,268

90,556

91,221

26,894 ......

USE OF NON-GAAP MEASURES:
The above information includes financial measures that are not calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).
The above table reconciles operating income, income from continuing operations attributable to Henry Schein, Inc. and diluted earnings from continuing operations per share attributable to
Henry Schein, Inc., our most directly comparable measure calculated and presented in accordance with GAAP, to comparable amounts as adjusted to eliminate the effect of one-time items.

We eliminated the effect of such one-time items to assist in evaluating the underlying operational performance of our business, excluding such one-time items, over the periods presented.
We believe that this presentation is appropriate and facilitates such an evaluation by us, investors and analysts. These measures should be considered supplemental to, and not a substitute
for or superior to, financial measures calculated in accordance with GAAP.

NOTES:

(1) During 2010, 2009 and 2008, we recorded restructuring costs of $12.3 million pre-tax ($8.3 million post-tax), $3.0 million pre-tax ($2.1 million post-tax) and $23.2 million pre-tax

($16.0 million post-tax), respectively. The effect that these charges had on earnings per diluted share from continuing operations attributable to Henry Schein, Inc. for the years ended
December 25, 2010 was ($0.09), December 26, 2009 was ($0.02) and December 27, 2008 was ($0.18), respectively.

(2) During 2009, we incurred professional fees of $1.6 million pre-tax ($1.1 million post-tax) related to a plan of reorganization outside the United States that will allow us to utilize

tax loss carryforwards beginning in 2010 in certain foreign tax jurisdictions. The effect that this charge had on earnings per diluted share from continuing operations attributable to
Henry Schein, Inc. for the year ended December 26, 2009 was ($0.01).

(3) During 2009, we completed a planned reorganization outside the United States that will allow us to utilize tax loss carryforwards to offset taxable income beginning in

2010 in certain foreign tax jurisdictions. As a result of this reorganization we reduced our valuation allowance by $20.8 million during the year ended December 26, 2009.
The effect that this had on earnings per diluted share from continuing operations attributable to Henry Schein, Inc. for the year ended December 26, 2009 was $0.23.

(4) During 2009 and 2008, we recorded (credits)/charges related to the Lehman Brothers bankruptcy of ($0.5) million pre-tax (($0.3) million post-tax) and

$4.5 million pre-tax ($3.0 million post-tax), respectively. The effect that this charge had on earnings per diluted share from continuing operations attributable to
Henry Schein, Inc. for the years ended December 26, 2009 and December 27, 2008 was $0.00 and ($0.03), respectively.

(5) Other non-recurring income/expense, net consists of income of $2.4 million pre-tax ($1.6 million post-tax) relating to proceeds received from litigation settlements and a charge of
$0.9 million pre-tax ($0.6 million post-tax) relating to foreign exchange. The impact of the total after-tax income of $1.0 million on our earnings per diluted share of continuing
operations attributable to Henry Schein, Inc. for the year ended December 26, 2009 was $0.01.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 25, 2010

__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

Commission file number 0-27078

HENRY SCHEIN, INC.

(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)
11-3136595
(I.R.S. Employer Identification No.)

135 Duryea Road
Melville, New York
(Address of principal executive offices)
11747
(Zip Code)

(631) 843-5500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 per share The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES: X NO: __

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES: __ NO: X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES: X NO: __

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
YES: X NO: __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

Large accelerated filer: X Accelerated filer: __ Non-accelerated filer: __ Smaller reporting company: __

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES: __ NO: X

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant, computed by reference to the

closing sales price as quoted on the NASDAQ Global Select Market on June 26, 2010 was approximately $5,099,185,000.

As of February 11, 2011, there were 91,897,104 shares of registrant’s Common Stock, par value $.01 per share, outstanding.

Portions of the Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end

of the fiscal year (December 25, 2010) are incorporated by reference in Part III hereof.

Documents Incorporated by Reference:

TABLE OF CONTENTS

PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.

PART II
ITEM 5.

ITEM 6.
ITEM 7.

ITEM 7A.
ITEM 8.
ITEM 9.

ITEM 9A.
ITEM 9B.

PART III
ITEM 10.
ITEM 11.
ITEM 12.

ITEM 13.
ITEM 14.

PART IV
ITEM 15.

Business .............................................................................................................................
Risk Factors .......................................................................................................................
Unresolved Staff Comments ..............................................................................................
Properties ...........................................................................................................................
Legal Proceedings .............................................................................................................
[Removed and Reserved] ...................................................................................................

Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities .....................................................................
Selected Financial Data .....................................................................................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................................................................................
Quantitative and Qualitative Disclosures About Market Risk ...........................................
Financial Statements and Supplementary Data ..................................................................
Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure ...............................................................................................
Controls and Procedures ....................................................................................................
Other Information ..............................................................................................................

Directors, Executive Officers and Corporate Governance .................................................
Executive Compensation ...................................................................................................
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters ..................................................................................
Certain Relationships and Related Transactions, and Director Independence ...................
Principal Accountant Fees and Services ............................................................................

Exhibits and Financial Statement Schedules .....................................................................
Signatures ..........................................................................................................................
Exhibit Index .....................................................................................................................

Page
Number

3
16
24
25
25
25

26
29

31
51
52

104
104
107

107
107

108
108
108

109
110
113

PART I

ITEM 1. Business

General

We believe we are the largest distributor of healthcare products and services primarily to office-based
healthcare practitioners. We serve more than 700,000 customers worldwide, including dental practitioners
and laboratories, physician practices and animal health clinics, as well as government and other institutions.
We believe that we have a strong brand identity due to our more than 78 years of experience distributing
healthcare products.

We are headquartered in Melville, New York, employ more than 13,500 people (of which over 6,000 are

based outside the United States) and have operations in the United States, Australia, Austria, Belgium,
Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg,
the Netherlands, New Zealand, Portugal, Slovakia, Spain, Switzerland and the United Kingdom. We also
have affiliates in Iceland, Saudi Arabia, Turkey and the United Arab Emirates.

We have established strategically located distribution centers to enable us to better serve our customers
and increase our operating efficiency. This infrastructure, together with broad product and service offerings
at competitive prices, and a strong commitment to customer service, enables us to be a single source of supply
for our customers’ needs. Our infrastructure also allows us to provide convenient ordering and rapid, accurate
and complete order fulfillment.

We conduct our business through two reportable segments: healthcare distribution and technology. These

segments offer different products and services to the same customer base. The healthcare distribution
reportable segment aggregates our dental, medical, animal health and international operating segments. This
segment consists of consumable products, small equipment, laboratory products, large dental equipment,
equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests,
infection-control products and vitamins. Our technology group provides software, technology and other
value-added services to healthcare practitioners, primarily in the United States, Canada, the United Kingdom,
Australia and New Zealand. Our value-added practice solutions include practice management software
systems for dental and medical practitioners and animal health clinics. Our technology group offerings also
include financial services on a non-recourse basis, e-services and continuing education services for
practitioners.

Industry

The healthcare products distribution industry, as it relates to office-based healthcare practitioners, is
highly fragmented and diverse. This industry, which encompasses the dental, medical and animal health
markets, was estimated to produce revenues of approximately $28 billion in 2010 in the combined North
American, European and Australian/New Zealand markets. The industry ranges from sole practitioners
working out of relatively small offices to group practices or service organizations ranging in size from a few
practitioners to a large number of practitioners who have combined or otherwise associated their practices.

Due in part to the inability of office-based healthcare practitioners to store and manage large quantities of
supplies in their offices, the distribution of healthcare 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 healthcare practice
are typically made by the practitioner or an administrative assistant. Supplies and small equipment are
generally purchased from more than one distributor, with one generally serving as the primary supplier.

The healthcare products distribution industry continues to experience growth due to the aging population,

increased healthcare awareness, the proliferation of medical technology and testing, new pharmacology
treatments and expanded third-party insurance coverage, partially offset by the affects of increased
unemployment on insurance coverage. In addition, the physician market continues to benefit from the shift of
procedures and diagnostic testing from acute care settings to alternate-care sites, particularly physicians’
offices.

We believe that consolidation within the industry will continue to result in a number of distributors,
particularly those with limited financial and marketing resources, seeking to combine with larger companies
that can provide growth opportunities. This consolidation also may continue to result in distributors seeking
to acquire companies that can enhance their current product and service offerings or provide opportunities to
serve a broader customer base.

In recent years, the healthcare industry has increasingly focused on cost containment. This trend has
benefited distributors capable of providing a broad array of products and services at low prices. It also has
accelerated the growth of HMOs, group practices, other managed care accounts and collective buying groups,
which, in addition to their emphasis on obtaining products at competitive prices, tend to favor distributors
capable of providing specialized management information support. We believe that 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.

Competition

The distribution and manufacture of healthcare supplies and equipment is highly competitive. Many of

the healthcare distribution 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 North America, we compete with other distributors, as well as several manufacturers, of dental,

medical and animal health products, primarily on the basis of price, breadth of product line, customer service
and value-added products and services. In the sale of our dental products, our primary competitors 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 sale of medical products are McKesson Corp., PSS World Medical, Inc. and
Cardinal Health, Inc., which are national distributors. In the animal health market, our primary competitors
are MWI Veterinary Supply Inc. and the Webster Veterinary division of Patterson Companies, Inc. We also
compete against a number of regional and local medical and animal health distributors, as well as a number of
manufacturers that sell directly to physicians and veterinarians. With regard to our dental practice
management software, we compete against numerous companies, including PracticeWorks, Inc. and the
Patterson Dental division of Patterson Companies, Inc. The medical practice management and electronic
medical records market is very fragmented and therefore we compete with numerous companies such as
NextGen Healthcare Information Systems, Inc., eClinicalWorks, Allscripts, LLC and athenahealth, Inc. In
the animal health practice management market, our primary competitors are IDEXX Laboratories, Inc. and
the Webster Veterinary division of Patterson Companies, Inc.

We also face significant competition internationally, where we compete on the basis of price and
customer service against several large competitors, including the GACD Group, Pluradent AG & Co.,
Planmeca Oy, Arseus NV, Billericay Dental Supply Co. Ltd., National Veterinary Services and Alcyon SA,
as well as a large number of dental, medical and animal health product distributors and manufacturers in
Australia, Austria, Belgium, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel,
Italy, Luxembourg, the Netherlands, New Zealand, Portugal, Slovakia, Spain, Switzerland, Turkey and the
United Kingdom.

Significant price reductions by our competitors could result in a similar reduction in our prices. Any of

these competitive pressures may materially adversely affect our operating results.

Competitive Strengths

We have more than 78 years of experience in distributing products to healthcare practitioners resulting in

strong awareness of the “Henry Schein” brand. Our competitive strengths include:

Direct sales and marketing expertise. Our sales and marketing efforts are designed to establish and solidify
customer relationships through personal visits by field sales representatives, frequent direct marketing and
telesales contact, emphasizing our broad product lines, including exclusive distribution agreements,
competitive prices and ease of order placement. The key elements of our direct sales and marketing efforts
are:

• Field sales consultants. We have approximately 3,100 field sales consultants, including equipment
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.

• Direct marketing. During 2010, we distributed approximately 30.8 million pieces of direct marketing
material, including catalogs, flyers, order stuffers and other promotional materials to existing and
potential office-based healthcare customers.

• Telesales. We support our direct marketing effort with approximately 1,600 inbound and outbound
telesales representatives, who facilitate order processing and generate new sales through direct and
frequent contact with customers.

Broad product and service offerings at competitive prices. We offer a broad range of products and services
to our customers, at competitive prices, in the following categories:

• Consumable supplies and equipment. We offer over 90,000 Stock Keeping Units, or SKUs, to our

customers. Of the SKUs offered, approximately 51,000 are offered to our dental customers,
approximately 38,000 to our medical customers and approximately 21,000 to our animal health
customers. We offer over 100,000 additional SKUs to our customers in the form of special order items.

• Technology and other value-added products and services. We sell practice management software

systems to our dental, medical and animal health customers. Our practice management and electronic
medical records software solutions provide practitioners with patient treatment history, billing, accounts
receivable analyses and management, appointment calendars, electronic claims processing and word
processing programs. As of December 25, 2010, we have an active user base of more than 70,000
practices, including Dentrix®, Easy Dental®, Oasis® and EXACT® for dental practices, MicroMD®
for physician practices and AVImark® and DVM Manager® for animal health clinics.

• Repair services. We have 188 equipment sales and service centers worldwide that provide a variety of
repair, installation and technical services for our healthcare customers. Our ProRepair technicians
provide installation and repair services for dental handpieces; dental, medical and animal health small
equipment; table top sterilizers; and large dental equipment.

• Financial services. We offer our customers solutions in operating their practices by providing access

to a number of financial services and products (including non-recourse financing for equipment,
technology and software products; non-recourse patient financing; collection services and credit card
processing) at rates that we believe are generally lower than what they would be able to secure
independently. We also provide dental practice valuation and brokerage services.

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. Approximately 99% of items ordered in the United States and Canada
are shipped without back ordering and are shipped on the same business day the order is received.

• Streamlined ordering process. Customers may place orders 24 hours a day, 7 days a week by mail, fax,

telephone, e-mail, Internet and by using our computerized order entry systems.

Integrated management information systems. Our information systems generally allow for centralized
management of key functions, including accounts receivable, inventory, accounts payable, payroll,
purchasing, sales and order fulfillment. These systems allow us to manage our growth, deliver superior
customer service, properly target customers, manage financial performance and monitor daily operational
statistics.

Cost-effective purchasing. We believe that cost-effective purchasing is a key element to maintaining and
enhancing our position as a competitive-pricing provider of healthcare products. We continuously evaluate
our purchase requirements and suppliers’ offerings and prices in order to obtain products at the lowest
possible cost. In 2010, our top 10 healthcare distribution suppliers and our single largest supplier accounted
for approximately 31% and 8%, respectively, of our aggregate purchases.

Efficient distribution. We distribute our products from our strategically located distribution centers. We
strive to maintain optimal inventory levels in order to satisfy customer demand for prompt delivery and
complete order 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 and a packing slip for the entire order is printed for order
fulfillment.

Products

The following table sets forth the percentage of consolidated net sales by principal categories of products

offered through our healthcare distribution and technology reportable segments:

2010

2009

2008

Healthcare Distribution

Dental:

Consumable dental products, dental laboratory products
and small equipment (1) ............................................................

Large dental equipment (2) .................................................................

Total dental

Medical products (3) ...............................................................................

Animal health products (4) .....................................................................

Total Healthcare Distribution ............................................................

Technology

Software and related products and

42.2

45.9

46.4

15.5

57.7

19.2

20.4

97.3

17.1

63.0

23.4

11.0

97.4

17.9

64.3

22.9

10.2

97.4

other value-added products (5) ..................................................

2.7

2.6

Total ...........................................................................................................

100.0

(1) Includes X-ray products, infection-control products, handpieces, preventatives, impression materials, composites, anesthetics,

teeth, dental implants, gypsum, acrylics, articulators and abrasives.

(2) Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment.

(3) Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment and vitamins.

(4) Includes branded and generic pharmaceuticals, surgical and consumable products and services and equipment.

(5) Includes software and related products and other value-added products, including financial products and continuing education.

Business Strategy

Our objective is to continue to expand as a value-added distributor of healthcare products and services to

office-based healthcare practitioners. To accomplish this, we will apply our competitive strengths in
executing the following strategies:

• Increase penetration of our existing customer base. We have over 700,000 customers worldwide and we
intend to increase sales to our existing customer base and enhance our position as their primary supplier.

• Increase the number of customers we serve. This strategy includes increasing the number and productivity

of field sales consultants, as well as using our customer database to focus our marketing efforts.

• Leverage our value-added products and services. We continue to increase cross-selling efforts for key
product lines. In the dental business, we have significant cross-selling opportunities between our dental
practice management software users and our dental distribution customers. In the medical business, we
have opportunities to expand our vaccine, injectables and other pharmaceuticals sales to medical
distribution customers, as well as cross-selling core products and practice management software with these
key products. In the animal health business, we have opportunities to cross-sell practice management
software and other products.

• Pursue strategic acquisitions and joint ventures. Our acquisition strategy includes acquiring businesses
and entering into joint ventures complementary to ours that will provide, among other things, additional
sales to be channeled through our existing distribution infrastructure, access to additional product lines and
field sales consultants and an opportunity to further expand into new geographic markets.

Markets Served

Demographic trends indicate that our markets are growing, as an aging U.S. population is increasingly

using healthcare services. Between 2010 and 2020, the 45 and older population is expected to grow by
approximately 15%. Between 2010 and 2030, this age group is expected to grow by approximately 29%.
This compares with expected total U.S. population growth rates of approximately 10% between 2010 and
2020 and approximately 20% between 2010 and 2030.

In the dental industry, there is predicted to be a rise in oral healthcare expenditures as the 45 and older
segment of the population increases. Cosmetic dentistry is another growing aspect of dental practices as new
technologies allow dentists to offer cosmetic solutions that patients seek. At the same time, there is an
expected increase in dental insurance coverage.

We support our dental 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.

There continues to be a migration of procedures from acute-care settings to physicians’ offices, 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 believe our international group is a leading European healthcare supplier servicing office-based

dental, medical and animal health practices. We are in the process of implementing SAP software across
continental Europe. Additionally, we are expanding our dental full-service model and our animal health
presence in Europe, as well as our medical offerings in countries where opportunities exist. Through our
“Schein Direct” program, we also have the capability to provide door-to-door air package delivery to
practitioners in over 200 countries around the world.

For information on revenues and long-lived assets by geographic area, see Note 15 of “Notes to

Consolidated Financial Statements,” which is incorporated herein by reference.

Seasonality and Other Factors Affecting Our Business and Quarterly Results

We experience fluctuations in quarterly earnings. As a result, we may fail to meet or exceed the

expectations of securities analysts and investors, which could cause our stock price to decline.

Our business is subject to seasonal and other quarterly fluctuations. Net sales and operating profits
generally have been higher in the third and fourth quarters due to the timing of sales of seasonal products
(including influenza vaccine, equipment and software products), purchasing patterns of office-based
healthcare practitioners and year-end promotions. Net sales and operating profits generally have been lower
in the first quarter, primarily due to increased sales in the prior two quarters. We expect our historical
seasonality of sales to continue in the foreseeable future. Quarterly results also may be adversely affected by
a variety of other factors, including:

• costs of developing new applications and services;

• costs related to acquisitions and/or integrations of technologies or businesses;

• timing and amount of sales and marketing expenditures;

• timing of pricing changes offered by our vendors;

• timing of the introduction of new products and services by our vendors;

• changes in or availability of vendor contracts or rebate programs;

• vendor rebates based upon attaining certain growth goals;

• changes in the way vendors introduce or deliver products to market;

• exclusivity requirements with certain vendors may prohibit us from distributing competitive products

manufactured by other vendors;

• loss of sales representatives;

• general economic conditions, as well as those specific to the healthcare industry and related industries;

• timing of the release of upgrades and enhancements to our technology-related products and services;

• our success in establishing or maintaining business relationships;

• restructuring costs;

• changes in accounting principles;

• unexpected difficulties in developing and manufacturing products;

• product demand and availability or recalls by manufacturers;

• exposure to product liability and other claims in the event that the use of the products we sell results in

injury; and

• increases in the cost of shipping or service issues with our third-party shippers.

Any change in one or more of these or other factors could cause our annual or quarterly operating results

to fluctuate. If our operating results do not meet market expectations, our stock price may decline.

Governmental Regulations

Certain of our businesses involve the distribution of pharmaceuticals and medical devices, and in this
regard we are subject to various local, state, federal and foreign governmental laws and regulations applicable
to the distribution of pharmaceuticals and medical devices. Among the federal laws applicable to us are the
Controlled Substances Act, the Federal Food, Drug, and Cosmetic Act, as amended, the Prescription Drug
Marketing Act of 1987, and Section 361 of the Public Health Service Act. We are also subject to comparable
foreign regulations.

The Federal Food, Drug, and Cosmetic Act generally regulates the introduction, manufacture, advertising,

labeling, packaging, storage, handling, reporting, marketing and distribution of, and record keeping for,
pharmaceuticals and medical devices shipped in interstate commerce, and states may similarly regulate such
activities within the state. Section 361 of the Public Health Service Act, which provides authority to prevent
the spread of communicable diseases, serves as the legal basis for the United States Food and Drug
Administration’s regulation of human cells, tissues, and cellular and tissue-based products, also known as
HCT/P products.

The Prescription Drug Marketing Act of 1987, or PDMA, which amended the Federal Food, Drug, and
Cosmetic Act, establishes certain requirements applicable to the wholesale distribution of prescription drugs,
including the requirement that wholesale drug distributors be licensed by each state in which they conduct
business, provide certain drug pedigree information on the distribution of prescription drugs and act in
accordance with federally established guidelines on storage, handling and record maintenance.

Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain a

registration annually from the United States Drug Enforcement Administration and are subject to other
regulatory requirements relating to the sale, marketing, handling and distribution of such drugs, in accordance
with specified rules and regulations. We are subject to inspection by the United States Drug Enforcement
Administration.

Certain of our businesses are required to register for permits and/or licenses with, and comply with
operating and security standards of, the United States Drug Enforcement Administration, the United States
Food and Drug Administration, the United States Department of Health and Human Services, and various
state boards of pharmacy, state health departments and/or comparable state agencies as well as 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 and/or
repackage prescription pharmaceuticals and/or medical devices and/or HCT/P products, or own pharmacy
operations, or install, maintain or repair equipment. 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 certain human tissue (for example human bone products) for valuable consideration, while generally
permitting payments for the reasonable costs incurred in procuring, processing, storing and distributing that
tissue. The United States Drug Enforcement Administration, the United States Food and Drug Administration
and state regulatory authorities have broad 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. Our customers are
also subject to significant federal, state, local and foreign governmental regulation.

Certain of our businesses are subject to federal and state (and similar foreign) healthcare fraud and abuse,
referral and reimbursement laws, and regulations with respect to their operations. Such laws prohibit, among
other things, the submission or causing the submission of false or fraudulent claims for reimbursement, and
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 government health care programs (known as “anti-kickback” laws). Violations of these
laws could result in civil and criminal penalties. The fraud and abuse laws and regulations have been subject

to heightened enforcement activity over the past few years, particularly through “relators,” who serve as
whistleblowers by filing complaints in the name of the United States (and if applicable, particular states)
under federal and state False Claims Act statutes, and an anti-kickback violation could be a basis for a False
Claims action. These laws and regulations are subject to frequent modification and varied interpretation, and
can have a material adverse impact on us if a violation is found. The Patient Protection and Affordable Care
Act, enacted in March 2010, known as The Health Care Reform Bill or PPACA, significantly strengthened
the federal False Claims Act, and the anti-kickback provisions, which could lead to the possibility of
increased whistleblower or relator suits.

PPACA also included other provisions to reduce fraud and abuse and Medicare expenditures and the cost
of healthcare generally, to increase federal oversight of private health insurance plans and to provide access to
health coverage for an additional 32 million people, some of which impact and further regulate some of our
businesses. In addition to the foregoing, PPACA imposed new reporting and disclosure requirements for
pharmaceutical and device manufacturers with regard to payments or other transfers of value made to certain
practitioners, including physicians and dentists, and teaching hospitals beginning in January 2012. A
provision in PPACA requiring those without insurance to pay a penalty was recently declared unconstitutional
by a Virginia federal district court, which permitted other provisions of the legislation that do not relate to
health insurance, as well as those provisions that could improve insurance coverage, to remain in effect.
PPACA in its entirety was declared unconstitutional by a Florida federal district court on January 31, 2011.
Two other federal district courts (in Michigan and Virginia) have affirmed the constitutionality of PPACA.
Appeals are pending, and the matter is expected to be determined by the Supreme Court of the United States.

Certain of our businesses also maintain contracts with governmental agencies and are subject to certain

regulatory requirements specific to government contractors.

Certain of our businesses are subject to various additional federal, state, local and foreign laws and
regulations, including with respect to the sale, transportation, storage, handling and disposal of hazardous or
potentially hazardous substances, and safe working conditions. In recent years, some states have passed or
proposed laws and regulations that are intended to protect the integrity of the medical supply channel. For
example, Florida and certain other states have implemented or are implementing drug pedigree requirements
that require that prescription drugs be distributed with records or information documenting the prior
distribution of the drug, back to the manufacturers. California has enacted a law requiring the implementation
of an electronic drug pedigree system that provides track and trace chain of custody technologies, such as
radio frequency identification, or RFID, technologies, although the effective date has been postponed until
January 1, 2015 for pharmaceutical manufacturers, and July 1, 2016 for pharmaceutical wholesalers and
repackagers. There have been increasing efforts by various levels of government to regulate the
pharmaceutical distribution system in order to prevent the introduction of counterfeit, adulterated or
misbranded pharmaceuticals into the distribution system. At the federal level, the United States Food and
Drug Administration issued final regulations pursuant to PDMA that became effective in December 2006.
The regulations impose drug pedigree and other chain of custody requirements that increase the costs and/or
burden to us of selling our products and handling product returns. In early December 2006, the federal
District Court for the Eastern District of New York issued a preliminary injunction enjoining the
implementation of some of the federal drug pedigree requirements in response to a case initiated by secondary
distributors. The court has continued to extend the injunction.

The United States Food and Drug Administration Amendments Act of 2007, which went into effect on

September 27, 2007, requires the United States Food and Drug Administration to establish standards and
identify and validate effective technologies for the purpose of securing the pharmaceutical supply chain
against counterfeit drugs. These standards include any track and trace or authentication technologies, such as
RFID and other technologies. The United States Food and Drug Administration has indicated that it is
currently drafting a proposed rule as required by the statute. The United States Food and Drug
Administration has also indicated that it is developing a proposal to require unique device identifiers for
medical devices.

Certain of our businesses involve access to personal health, medical, financial and other information of

individuals, and are accordingly directly or indirectly subject to numerous federal, state, local and foreign
laws and regulations that protect the privacy and security of such information, and require, among other
things, the implementation of various recordkeeping, operational, notice and other practices intended to
safeguard that information, limit its use to allowed purposes, and notify individuals in the event of privacy
and security breaches. As a result of the federal Health Information Technology for Economic and Clinical
Health Act (HITECH Act), which was passed in 2009, some of our businesses that were previously only
indirectly subject to federal HIPAA privacy and security rules became directly subject to such rules because
such businesses serve as “business associates” of HIPAA covered entities, such as health care providers.
Additional rules under the HITECH Act are expected to be issued in early 2011, further expanding the
privacy and security requirements applicable to some of our businesses.

In addition, United States and international 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 and anti-bribery laws and laws pertaining to the accuracy of our internal books and records.

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 regulations that impact our business or customers’ practices will not have a
material adverse impact on our business. As a result of political, economic and regulatory influences, the
healthcare 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.

See “ITEM 1A. Risk Factors” for a discussion of additional regulatory developments that may affect our

results of operations and financial condition.

Proprietary Rights

We hold trademarks relating to the “Henry Schein” name and logo, as well as certain other trademarks.
Pursuant to agreements executed in connection with our reorganization in 1994, both Henry Schein, Inc. and
Schein Pharmaceutical, Inc. (which was acquired by Watson Pharmaceuticals, Inc. in 2000), a company
previously engaged in the manufacture and distribution of multi-source pharmaceutical products, are entitled
to use the “Schein” name in connection with their respective businesses, but Schein Pharmaceutical, Inc. must
always use “Schein” in combination with the word “Pharmaceutical” and is not entitled to use the name
“Henry Schein” or to use “Schein” alone or with any other word (other than “Pharmaceutical”). We intend to
protect our trademarks to the fullest extent practicable.

Employees

As of December 25, 2010, we employed more than 13,500 full-time employees, including approximately

1,600 telesales representatives, 3,100 field sales consultants, including equipment sales specialists, 2,575
warehouse employees, 600 computer programmers and technicians, 1,250 management employees and 4,775
office, clerical and administrative employees. Approximately 305 or 2.3% of our employees were subject to
collective bargaining agreements. We believe that our relations with our employees are excellent.

Available Information

We make available free of charge through our Internet Web site, www.henryschein.com, our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements of beneficial
ownership of securities on Forms 3, 4 and 5 and amendments to these reports and statements filed or
furnished pursuant to Section 13(a) and Section 16 of the Securities Exchange Act of 1934 as soon as
reasonably practicable after such materials are electronically filed with, or furnished to, the United States
Securities and Exchange Commission, or SEC.

The above information is also available at the SEC’s Office of Investor Education and Advocacy at
United States Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-0213 or
obtainable by calling the SEC at (800) 732-0330. In addition, the SEC maintains an Internet Web site at
www.sec.gov, where the above information can be viewed.

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

telephone number is (631) 843-5500. Unless the context specifically requires otherwise, the terms the
“Company,” “Henry Schein,” “we,” “us” and “our” mean Henry Schein, Inc., a Delaware corporation, and its
consolidated subsidiaries.

Executive Officers of the Registrant

The following table sets forth certain information regarding our executive officers:

Name

Age

Position

Stanley M. Bergman .........
Gerald A. Benjamin ..........
James P. Breslawski .........
Leonard A. David .............
James Harding ..................
Stanley Komaroff .............
Mark E. Mlotek ................
Steven Paladino ...............
Michael Racioppi ............
Lonnie Shoff .....................
Michael Zack ....................

61
58
57
62
55
75
55
53
56
52
58

Chairman, Chief Executive Officer, Director
Executive Vice President, Chief Administrative Officer, Director
President, Chief Operating Officer, Director
Senior Vice President, Chief Compliance Officer
Senior Vice President, Chief Technology Officer
Senior Advisor
Executive Vice President, Corporate Business Development, Director
Executive Vice President, Chief Financial Officer, Director
Senior Vice President, Chief Merchandising Officer
President, Global Healthcare Specialties Group
President, International Group

Stanley M. Bergman has been our Chairman and Chief Executive Officer since 1989 and a director since

1982. Mr. Bergman held the position of President from 1989 to 2005. Mr. Bergman held the position of
Executive Vice President from 1985 to 1989 and Vice President of Finance and Administration from 1980 to
1985.

Gerald A. Benjamin has been our Executive Vice President and Chief Administrative Officer since 2000
and a director since 1994. Prior to holding his current position, Mr. Benjamin was Senior Vice President of
Administration and Customer Satisfaction since 1993. Mr. Benjamin was Vice President of Distribution
Operations from 1990 to 1992 and Director of Materials Management from 1988 to 1990. Before joining us
in 1988, Mr. Benjamin was employed for 13 years in various management positions at Estée Lauder, Inc.,
where his last position was Director of Materials Planning and Control.

James P. Breslawski has been our President and Chief Operating Officer since 2005 and a director since
1992. Mr. Breslawski held the position of Executive Vice President and President of U.S. Dental from 1990
to 2005, with primary responsibility for the North American Dental Group. Between 1980 and 1990, Mr.
Breslawski held various positions with us, including Chief Financial Officer, Vice President of Finance and
Administration and Controller.

Leonard A. David has been our Senior Vice President and Chief Compliance Officer since 2006. Mr.
David held the position of Vice President and Chief Compliance Officer from 2005 to 2006. Mr. David held
the position of Vice President of Human Resources and Special Counsel from 1995 to 2005. Mr. David held
the position of Vice President, General Counsel and Secretary from 1990 through 1994 and practiced
corporate and business law for eight years prior to joining us.

James Harding has been our Chief Technology Officer since 2005 and Senior Vice President since 2001.

Prior to holding his current position, Mr. Harding was Chief Information Officer since 2001, with primary
responsibility for worldwide information technology.

Stanley Komaroff has been our Senior Advisor since 2003. Prior to joining us, Mr. Komaroff was a
partner for 35 years in the law firm of Proskauer Rose LLP, counsel to us. He served as Chairman of that
firm from 1991 to 1999.

Mark E. Mlotek has been Executive Vice President of our Corporate Business Development Group since

2004 and was Senior Vice President of Corporate Business Development from 2000 to 2004. Prior to that,
Mr. Mlotek was Vice President, General Counsel and Secretary from 1994 to 1999 and became a director in
1995. Prior to joining us, Mr. Mlotek was a partner in the law firm of Proskauer Rose LLP, counsel to us,
specializing in mergers and acquisitions, corporate reorganizations and tax law from 1989 to 1994.

Steven Paladino has been our Executive Vice President and Chief Financial Officer since 2000. Prior to

holding his current position, Mr. Paladino was Senior Vice President and Chief Financial Officer from 1993
to 2000 and has been a director since 1992. From 1990 to 1992, Mr. Paladino served as Vice President and
Treasurer and from 1987 to 1990 served as Corporate Controller. Before joining us, Mr. Paladino was
employed in public accounting for seven years, most recently with the international accounting firm of BDO
USA, LLP. Mr. Paladino is a certified public accountant.

Michael Racioppi has been our Senior Vice President, Chief Merchandising Officer since 2008. Prior to

holding his current position, Mr. Racioppi was President of the Medical Division from 2000 to 2008 and
Interim President from 1999 to 2000, and Corporate Vice President from 1994 to 2008. Mr. Racioppi served
as Senior Director, Corporate Merchandising from 1992 to 1994. Before joining us in 1992, Mr. Racioppi
was employed by Ketchum Distributors, Inc. as the Vice President of Purchasing and Marketing.

Lonnie Shoff has been President of the Global Healthcare Specialties Group since September 2009.
Prior to joining us, Ms. Shoff was employed with Roche Diagnostics, where she held a series of positions of
increasing responsibility in the United States and Switzerland over the past 20 years, most recently as Senior
Vice President General Manager, Applied Science.

Michael Zack has been President of our International Group since 2006. Mr. Zack held the position of
Senior Vice President of our International Group from 1989 to 2006. Mr. Zack was employed by Polymer
Technology (a subsidiary of Bausch & Lomb) as Vice President of International Operations from 1984 to
1989 and by Gruenenthal GmbH as Manager of International Subsidiaries from 1975 to 1984.

ITEM 1A. Risk Factors

Recently enacted legislation may adversely impact us.

The Patient Protection and Affordable Care Act enacted in March 2010, generally known as The Health

Care Reform Bill, imposes new reporting and disclosure requirements for pharmaceutical and medical device
manufacturers with regard to payments or other transfers of value made to physicians and teaching hospitals
beginning in January 2012. Implementing regulations have not yet been issued, but it is possible that such
regulations, when issued, will treat us or one or more of our subsidiaries as a “manufacturer” subject to these
reporting requirements. In addition, several states require pharmaceutical and/or device companies to report
expenses relating to the marketing and promotion of products as well as gifts and payments to individual
practitioners in the states, or prohibit certain marketing related activities. Other states, such as California,
Nevada, and Massachusetts, require pharmaceutical and/or device companies to implement compliance
programs or marketing codes. Wholesale distributors are covered by the laws in certain of these states. In
others, it is possible that our activities or the activities of one or more of our subsidiaries will subject us to the
state’s reporting requirements and prohibitions.

The Patient Protection and Affordable Care Act also imposes (i) a 2.3% excise tax on domestic sales of

medical devices by manufacturers and importers beginning in 2013, which we may need to assist in
implementing and which may affect sales, and (ii) mandates pharmacy benefit manager transparency
regarding rebates, discounts and price concessions, which could affect pricing and competition.

The healthcare products distribution industry is highly competitive, and we may not be able to compete
successfully.

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

our competitors have greater financial and other resources than we do, which could allow them to compete
more successfully. Most of our products are available from several sources and our customers tend to have
relationships with several distributors. Competitors could obtain exclusive rights to market particular
products, which we would then be unable to market. Manufacturers also could increase their efforts to sell
directly to end-users and thereby eliminate or reduce our role and that of other distributors. Industry
consolidation among healthcare products distributors, price competition, the unavailability of products,
whether due to our inability to gain access to products or to interruptions in supply from manufacturers, or the
emergence of new competitors also could increase competition. In the future, we may be unable to compete
successfully and competitive pressures may reduce our revenues.

The healthcare industry is experiencing changes that could adversely affect our business.

The healthcare industry is highly regulated and subject to changing political, economic and regulatory
influences. In recent years, the healthcare industry has undergone significant change driven by various efforts
to reduce costs, including the reduction of spending budgets by government and private insurance programs,
such as Medicare, Medicaid and corporate health insurance plans; pressures relating to potential healthcare
reform; trends toward managed care; consolidation of healthcare distribution companies; consolidation of
healthcare manufacturers; collective purchasing arrangements and consolidation among office-based
healthcare practitioners; and changes in reimbursements to customers. Both our own profit margins and the
profit margins of our customers may be adversely affected by laws and regulations reducing reimbursement
rates for pharmaceuticals and/or medical treatments or services or changing the methodology by which
reimbursement levels are determined. If we are unable to react effectively to these and other changes in the
healthcare industry, our operating results could be adversely affected. In addition, the enactment of any
significant healthcare reforms could have a material adverse effect on our business.

Failure to comply with existing and future regulatory requirements could negatively affect our business.

Our business is subject to requirements under various local, state, federal and international laws and
regulations applicable to the distribution of pharmaceuticals and medical devices, and human cells, tissue, and
cellular and tissue-based products, also known as HCT/P products. Among the federal laws with which we
must comply are the Controlled Substances Act, the Federal Food, Drug, and Cosmetic Act, as amended, the
Prescription Drug Marketing Act of 1987, and Section 361 of the Public Health Services Act. Among other
things, such laws, and the regulations promulgated thereunder:

•

regulate the storage and distribution, labeling, packaging, handling, reporting, record keeping,
introduction, manufacturing and marketing of drugs, HCT/P products and medical devices;

subject us to inspection by the United States Food and Drug Administration and the United States Drug
Enforcement Administration;

regulate the storage, transportation and disposal of certain of our products that are considered hazardous
materials;

require registration with the United States Food and Drug Administration and the United States Drug
Enforcement Administration and various state agencies;

require record keeping and documentation of transactions involving drug products;

require us to design and operate a system to identify and report suspicious orders of controlled substances
to the United States Drug Enforcement Agency;

require us to manage returns of products that have been recalled and subject us to inspection of our recall
procedures and activities; and

impose reporting requirements if a pharmaceutical, HCT/P products or medical device causes serious
illness, injury or death.

Applicable federal, state and local laws and regulations also may require us to meet various standards
relating to, among other things, licensure or registration, sales and marketing practices, product integrity and
supply tracking to the manufacturer of the product, personnel, privacy and security of health or other personal
information, installation, maintenance and repair of equipment, and the importation and exportation of
products. Our business also is subject to requirements of similar and other foreign governmental laws and
regulations affecting our operations abroad. The United States Food and Drug Administration and Drug
Enforcement Administration have recently increased their regulatory and enforcement activities.

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

regulations, or the imposition of any additional laws and regulations, could negatively affect our business.
There can be no assurance that current government regulations will not adversely affect our business. The
costs to us associated with complying with the various applicable statutes and regulations, as they now exist
and as they may be modified, could be material. Allegations by a governmental body that we have not
complied with these laws could have a material adverse impact on our businesses. If it is determined that we
have not complied with these laws, we are potentially subject to penalties including warning letters, civil and
criminal penalties, mandatory recall of product, seizure of product and injunction, and suspension or
limitation of product sale and distribution. If we enter into settlement agreements to resolve allegations of
non-compliance, we could be required to make settlement payments or be subject to civil and criminal
penalties, including fines and the loss of licenses. Non-compliance with government requirements could
adversely affect our ability to participate in federal and state government healthcare programs, and damage
our reputation. Any of the foregoing could have a material adverse impact on our businesses. We believe
that the healthcare services industry will continue to be subject to extensive domestic and foreign government
regulation and that we have adequate compliance programs and controls in place to ensure substantial
compliance with the laws and regulations.

If we fail to comply with laws and regulations relating to healthcare fraud, we could suffer penalties or be
required to make significant changes to our operations.

We are subject to extensive and frequently changing federal and state laws and regulations relating to
healthcare fraud. These measures, which focus on our relationships with pharmaceutical manufacturers and
healthcare providers, have been subject to varying interpretations, as well as heightened enforcement activity,
over the past few years. Significant enforcement activity has been the result of actions brought by “relators,”
who file complaints in the name of the United States (and if applicable, particular states) under federal and
state False Claims Act statutes. Damages can be catastrophic if a violation is found. These healthcare fraud
laws and regulations, among other things, (i) prohibit persons from soliciting, offering, receiving or paying
any remuneration in order to induce the referral of a patient for treatment or to induce the ordering,
purchasing, leasing or arranging for or recommending ordering, purchasing or leasing of items or services that
are in any way paid for by government-sponsored healthcare programs and (ii) impose a number of
restrictions upon referring physicians and providers of designated health services under government
healthcare programs. While we believe that we are substantially compliant with all applicable laws, many of
the regulations applicable to us are vague or indefinite and have not been interpreted by the courts. They 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. If we fail to comply with applicable laws and regulations, we could suffer
civil and criminal penalties, including the loss of licenses or our ability to participate in federal and state
healthcare programs.

Expansion of group purchasing organizations (“GPO”) or hospital purchasing power and the multi-tiered
costing structure may place us at a competitive disadvantage.

The medical-products industry is subject to a multi-tiered costing structure, which can vary by

manufacturer and/or product. Under this structure, certain institutions can obtain more favorable prices for
medical products than we are able to obtain. The multi-tiered costing structure continues to expand as many
large integrated healthcare providers and others with significant purchasing power, such as GPOs, demand
more favorable pricing terms. This may threaten our ability to compete effectively, which would in turn
negatively impact our results of operations. Although we are seeking to obtain similar terms from
manufacturers and obtain access to lower prices demanded by GPO contracts or other contracts, we cannot
assure such terms will be obtained or contracts will be executed.

Our international operations are subject to inherent risks that could adversely affect our operating results.

International operations are subject to risks that may materially adversely affect our business, results of
operations and financial condition. The risks that our international operations are subject to include, among
other things:

• difficulties and costs relating to staffing and managing foreign operations;

• difficulties in establishing channels of distribution;

•

fluctuations in the value of foreign currencies;

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

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

regulatory requirements;

• unexpected difficulties in importing or exporting our products;

•

imposition of import/export duties, quotas, sanctions or penalties; and

• unexpected regulatory, economic and political changes in foreign markets.

We experience fluctuations in quarterly earnings. As a result, we may fail to meet or exceed the
expectations of securities analysts and investors, which could cause our stock price to decline.

Our business is subject to seasonal and other quarterly fluctuations. Net sales and operating profits
generally have been higher in the third and fourth quarters due to the timing of sales of seasonal products
(including influenza vaccine, equipment and software products), purchasing patterns of office-based
healthcare practitioners and year-end promotions. Net sales and operating profits generally have been lower
in the first quarter, primarily due to increased sales in the prior two quarters. We expect our historical
seasonality of sales to continue in the foreseeable future. Quarterly results may also be adversely affected by
a variety of other factors, including:

•

costs of developing new applications and services;

costs related to acquisitions and/or integrations of technologies or businesses;

timing and amount of sales and marketing expenditures;

timing of pricing changes offered by our vendors;

timing of the introduction of new products and services by our vendors;

changes in or availability of vendor contracts or rebate programs;

• vendor rebates based upon attaining certain growth goals;

•

changes in the way vendors introduce or deliver products to market;

exclusivity requirements with certain vendors may prohibit us from distributing competitive products
manufactured by other vendors;

•

loss of sales representatives;

• general economic conditions, as well as those specific to the healthcare industry and related industries;

•

timing of the release of upgrades and enhancements to our technology-related products and services;

• our success in establishing or maintaining business relationships;

•

restructuring costs;

changes in accounting principles;

• unexpected difficulties in developing and manufacturing products;

• product demand and availability or recalls by manufacturers;

•

exposure to product liability and other claims in the event that the use of the products we sell results in
injury; and

•

increases in the cost of shipping or service issues with our third-party shippers.

Any change in one or more of these or other factors could cause our annual or quarterly operating results

to fluctuate. If our operating results do not meet market expectations, our stock price may decline.

Because substantially all of the products that we distribute are not manufactured by us, we are dependent
upon third parties for the manufacture and supply of substantially all of our products.

We obtain substantially all of our products from third-party suppliers. Generally, we do not have long-
term contracts with our suppliers committing them to supply products to us. Therefore, suppliers may not
provide the products we need in the quantities we request. Because we generally do not control the actual
production of the products we sell, we may be subject to delays caused by interruption in production based on
conditions outside of our control. In the event that any of our third-party suppliers were to become unable or
unwilling to continue to provide the products in required volumes, we would need to identify and obtain
acceptable replacement sources on a timely basis. There is no guarantee that we would be able to obtain such
alternative sources of supply on a timely basis, if at all. An extended interruption in the supply of our
products, including the supply of our influenza vaccine and any other high sales volume product, would have
an adverse effect on our results of operations, which most likely would adversely affect the value of our
common stock.

Our expansion through acquisitions and joint ventures involves risks.

We have expanded our domestic and international markets in part through acquisitions and joint ventures,

and we expect to continue to make acquisitions and enter into joint ventures in the future. Such transactions
involve numerous risks, including possible adverse effects on our operating results or the market price of our
common stock. Some of our acquisitions and future acquisitions may also give rise to an obligation by us to
make contingent payments or to satisfy certain repurchase obligations, which payments could have an adverse
effect on our results of operations. In addition, integrating acquired businesses and joint ventures:

• may result in a loss of customers or product lines of the acquired businesses or joint ventures;

•

requires significant management attention;

• may place significant demands on our operations, information systems and financial resources and;

•

results in additional acquisition and integration expenses.

There can be no assurance that our future acquisitions or joint ventures will be successful. Our ability to

continue to successfully effect acquisitions and joint ventures will depend upon the following:

•

the availability of suitable acquisition or joint venture candidates at acceptable prices;

• our ability to consummate such transactions, which could potentially be prohibited due to U.S. or foreign

antitrust regulations;

•

the availability of financing on acceptable terms, in the case of non-stock transactions; and

the liquidity of our investments and our ability to raise capital could be affected by the financial credit
markets.

Our acquisitions may not result in the benefits and revenue growth we expect.

We are in the process of integrating companies that we acquired and including the operations, services,

products and personnel of each company within our management policies, procedures and strategies. We
cannot be sure that we will achieve the benefits of revenue growth that we expect from these acquisitions or
that we will not incur unforeseen additional costs or expenses in connection with these acquisitions. To
effectively manage our expected future growth, we must continue to successfully manage our integration of
these companies and continue to improve our operational systems, internal procedures, working capital
management, financial and operational controls. If we fail in any of these areas, our business could be
adversely affected.

We face inherent risk of exposure to product liability and other claims in the event that the use of the
products we sell results in injury.

Our business involves a risk of product liability and other claims in the ordinary course of business, and

from time to time we are named as a defendant in cases as a result of our distribution of pharmaceutical
products, medical devices, bone regeneration and other healthcare products. Additionally, we own interests in
companies that manufacture certain dental products. As a result, we are subject to the potential risk of product
liability or other claims relating to the manufacture and distribution of products by those entities. One of the
potential risks we face in the distribution of our products is liability resulting from counterfeit or tainted
products infiltrating the supply chain. In addition, some of the products that we transport and sell are
considered hazardous materials. The improper handling of such materials or accidents involving the
transportation of such materials could subject us to liability. We have various insurance policies, including
product liability insurance, covering risks and in amounts that we consider adequate. In many cases in which
we have been sued in connection with products manufactured by others, the manufacturer of the product
provides us with indemnification. There can be no assurance that the insurance coverage we maintain is
sufficient or will be available in adequate amounts or at a reasonable cost, or that indemnification agreements
will provide us with adequate protection. A successful claim brought against us in excess of available
insurance or not covered by indemnification agreements, or any claim that results in significant adverse
publicity against us, could have an adverse effect on our business.

Our technology segment depends upon continued software and e-services product development, technical
support and successful marketing.

Competition among companies supplying practice management software and/or e-services is intense and

increasing. Our future sales of practice management software and e-services will depend on, among other
factors:

•

the effectiveness of our sales and marketing programs;

• our ability to enhance our products and services; and

• our ability to provide ongoing technical support.

We cannot be sure that we will be successful in introducing and marketing new software, software
enhancements or e-services, or that such software, software enhancements and e-services will be released on
time or accepted by the market. Our software and applicable e-services products, like software products
generally, may contain undetected errors or bugs when introduced or as new versions are released. We cannot
be sure that future problems with post-release software errors or bugs will not occur. Any such defective
software may result in increased expenses related to the software and could adversely affect our relationships
with the customers using such software. We do not have any patents on our software or e-services, and rely
upon copyright, trademark and trade secret laws, as well as contractual and common law protections. We
cannot provide assurance that such legal protections will be available or enforceable to protect our software or
e-services products.

Risks generally associated with our information systems could adversely affect our results of operations.

We rely on information systems in our business to obtain, rapidly process, analyze and manage data to,

among other things:

• maintain and manage worldwide systems to facilitate the purchase and distribution of thousands of

inventory items from numerous distribution centers;

•

receive, process and ship orders on a timely basis;

• manage the accurate billing and collections for thousands of customers; and

• process payments to suppliers.

Our results of operations could be adversely affected if these systems are interrupted, damaged by

unforeseen events, or fail for any extended period of time.

Declining economic conditions could adversely affect our results of operations and financial condition.

Macro-economic uncertainties that affect the economy and the economic outlook of the United States and
other parts of the world could adversely impact our customers and vendors, which could adversely affect us.
Recessionary conditions and depressed levels of consumer and commercial spending may cause customers to
reduce, modify, delay or cancel plans to purchase our products and may cause vendors to reduce their output
or change their terms of sales. We generally sell products to customers with payment terms. If customers’
cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled
payments or obtain credit, they may not be able to pay, or may delay payment to us. Likewise, for similar
reasons vendors may restrict credit or impose different payment terms. Any inability of current and/or
potential customers to pay us for our products and/or services or any demands by vendors for different
payment terms may adversely affect our results of operations and financial condition.

Disruptions in the financial markets may adversely affect the availability and cost of credit to us.

Our ability to make scheduled payments or refinance our obligations with respect to indebtedness will

depend on our operating and financial performance, which in turn is subject to prevailing economic
conditions and financial, business and other factors beyond our control. Disruptions in the financial markets
may adversely affect the availability and cost of credit to us.

Our revenues depend on our relationships with capable sales personnel as well as customers, suppliers and
manufacturers of the products that we distribute.

Our future operating results depend on our ability to maintain satisfactory relationships with qualified

sales personnel as well as customers, suppliers and manufacturers. If we fail to maintain our existing
relationships with such persons or fail to acquire relationships with such key persons in the future, our
business may be adversely affected.

Our future success is substantially dependent upon our senior management.

Our future success is substantially dependent upon the efforts and abilities of members of our existing
senior management, particularly Stanley M. Bergman, Chairman and Chief Executive Officer, among others.
The loss of the services of Mr. Bergman could have a material adverse effect on our business. We have an
employment agreement with Mr. Bergman. We do not currently have “key man” life insurance policies on
any of our employees. Competition for senior management is intense, and we may not be successful in
attracting and retaining key personnel.

Increases in the cost of shipping or service issues with our third-party shippers could harm our business.

Shipping is a significant expense in the operation of our business. We ship almost all of our orders
through third-party delivery services, and typically bear the cost of shipment. Accordingly, any significant
increase in shipping rates could have an adverse effect on our operating results. Similarly, strikes or other
service interruptions by those shippers could cause our operating expenses to rise and adversely affect our
ability to deliver products on a timely basis.

We may not be able to respond to technological change effectively.

Traditional healthcare supply and distribution relationships are being challenged by electronic online
commerce solutions. Our distribution business is characterized by rapid technological developments and
intense competition. The continued advancement of online commerce will require us to cost-effectively adapt
to changing technologies, to enhance existing services and to develop and introduce a variety of new services
to address changing demands of consumers and our clients on a timely basis, particularly in response to
competitive offerings. Our inability to anticipate and effectively respond to changes on a timely basis could
have an adverse effect on our business.

The market price for our common stock may be highly volatile.

The market price for our common stock may be highly volatile. A variety of factors may have a

significant impact on the market price of our common stock, including:

•

the publication of earnings estimates or other research reports and speculation in the press or investment
community;

•

changes in our industry and competitors;

• our financial condition, results of operations and cash flows and prospects;

•

stock repurchases;

any future issuances of our common stock, which may include primary offerings for cash, stock splits,
issuances in connection with business acquisitions, restricted stock/units and the grant or exercise of stock
options from time to time;

• general market and economic conditions; and

•

any outbreak or escalation of hostilities in areas where we do business.

In addition, the NASDAQ Stock Market can experience extreme price and volume fluctuations that can
be unrelated or disproportionate to the operating performance of the companies listed on NASDAQ. Broad
market and industry factors may negatively affect the market price of our common stock, regardless of actual
operating performance. In the past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been instituted against companies. This type of litigation,
if instituted, could result in substantial costs and a diversion of management’s attention and resources, which
would have an adverse effect on our business.

Certain provisions in our governing documents and other documents to which we are a party may
discourage third-party offers to acquire us that might otherwise result in our stockholders receiving a
premium over the market price of their shares.

The provisions of our certificate of incorporation and by-laws may make it more difficult for a third party
to acquire us, may discourage acquisition bids and may limit the price that certain investors might be willing
to pay in the future for shares of our common stock. These provisions, among other things:

•

require the affirmative vote of the holders of at least 60% of the shares of common stock entitled to vote
to approve a merger, consolidation, or a sale, lease, transfer or exchange of all or substantially all of our
assets; and

•

require the affirmative vote of the holders of at least 66 2/3% of our common stock entitled to vote to:

•

remove a director; and

to amend or repeal our by-laws, with certain limited exceptions.

In addition, our 1994 Stock Incentive Plan, 1996 Non-Employee Director Stock Incentive Plan and 2001

Non-Employee Director Incentive Plan provide for accelerated vesting of stock options upon a change in
control, and certain agreements between us and our executive officers provide for increased severance
payments if those executive officers are terminated without cause by the Company or if they terminate for
good reason in each case, within two years after a change in control or within ninety days prior to the
effective date of the change in control or after the first public announcement of the pendency of the change in
control.

Tax legislation initiatives could adversely affect our net earnings and tax liabilities.

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

well as foreign jurisdictions. From time to time, various legislative initiatives may be proposed that could
adversely affect our tax positions. There can be no assurance that our effective tax rate will not be adversely
affected by these initiatives. In addition, tax laws and regulations are extremely complex and subject to
varying interpretations. Although we believe that our historical tax positions are sound and consistent with
applicable laws, regulations and existing precedent, there can be no assurance that our tax positions will not
be challenged by relevant tax authorities or that we would be successful in any such challenge.

Item 1B. Unresolved Staff Comments

We have no unresolved comments from the staff of the SEC that were issued 180 days or more preceding

the end of our 2010 fiscal year.

ITEM 2. Properties

We own or lease the following properties:

Property
Corporate Headquarters ...................
Corporate Headquarters ...................
Office and Distribution Center .........
Distribution Center ..........................
Distribution Center ..........................
Distribution Center ..........................
Distribution Center ..........................
Distribution Center ..........................
Distribution Center ..........................
Office and Distribution Center .........
Distribution Center ..........................
Office and Distribution Center .........
Distribution Center ..........................
Distribution Center ..........................

Location
Melville, NY
Melville, NY
West Allis, WI
Denver, PA
Indianapolis, IN
Indianapolis, IN
Grapevine, TX
Gallin, Germany
Jacksonville, FL
Niagara on the Lake, Canada
Sparks, NV
Gillingham, United Kingdom
Tours, France
Lyssach, Switzerland

Own or
Lease
Own
Lease
Lease
Lease
Own
Lease
Lease
Own
Lease
Lease
Lease
Lease
Own
Lease

Approximate
Square Footage
105,000
185,000
106,000
613,000
287,000
243,000
242,000
215,000
212,000
128,000
338,000
103,000
133,000
180,000

Lease Expiration
Date
N/A
July 2020
October 2017
February 2013
N/A
August 2013
July 2013
N/A
June 2013
September 2016
February 2013
April 2020
N/A
July 2016

The properties listed in the table above are our principal properties primarily used by our healthcare
distribution segment. In addition, we lease numerous other distribution, office, showroom, manufacturing and
sales space in locations including the United States, Australia, Austria, Belgium, Canada, China, the Czech
Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New
Zealand, Portugal, Slovakia, Spain, Switzerland, Turkey and the United Kingdom.

We believe that our properties are in good condition, are well maintained and are suitable and adequate to

carry on our business. We have additional operating capacity at certain distribution center facilities.

ITEM 3. Legal Proceedings

From time to time, we may become a party to legal proceedings, including, without limitation, product
liability claims, employment matters, commercial disputes and other matters arising out of the ordinary course
of our business. In our opinion, pending matters will not have a material adverse effect on our financial
condition or results of operations.

We have various insurance policies, including product liability insurance, covering risks in amounts that
we consider adequate. In many cases in which we have been sued in connection with products manufactured
by others, the manufacturer provides us with indemnification. There can be no assurance that the insurance
coverage we maintain is sufficient or will be available in adequate amounts or at a reasonable cost, or that
indemnification agreements will provide us with adequate protection.

As of December 25, 2010, we had accrued our best estimate of potential losses relating to product liability
and other claims that were probable to result in a liability and for which we were able to reasonably estimate a
loss. This accrued amount, as well as related expenses, was not material to our financial position, results of
operations or cash flows. Our method for determining estimated losses considers currently available facts,
presently enacted laws and regulations and other external factors, including probable recoveries from third
parties.

ITEM 4. [Removed and Reserved]

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Our common stock is traded on the NASDAQ Global Select Market tier of the NASDAQ Stock Market,
or NASDAQ, under the symbol HSIC. On October 2, 2007, our common stock became a component of the
NASDAQ-100 stock market index. The following table sets forth, for the periods indicated, the high and low
reported sales prices of our common stock as reported on NASDAQ for each quarterly period in fiscal 2010
and 2009:

Fiscal 2010:
1st Quarter ............................................................................................
2nd Quarter ..........................................................................................
3rd Quarter ...........................................................................................
4th Quarter ...........................................................................................

58.50
62.63
57.60
62.62

51.49
53.41
50.96
55.55

High

Low

Fiscal 2009:
1st Quarter ............................................................................................
2nd Quarter ..........................................................................................
3rd Quarter ...........................................................................................
4th Quarter ...........................................................................................

40.60
47.70
56.50
56.92

33.55
38.77
43.82
49.10

On February 11, 2011, there were approximately 962 holders of record of our common stock and the last

reported sales price was $67.36.

Purchases of Equity Securities by the Issuer

Our current share repurchase program, announced on June 21, 2004, originally allowed us to repurchase

up to $100.0 million of shares of our common stock, which represented approximately 3.5% of the shares
outstanding at the commencement of the program. On October 31, 2005, March 28, 2007 and November 16,
2010, our Board of Directors authorized an additional $100.0 million, for a total of $400.0 million, of shares
of our common stock to be repurchased under this program. As of December 25, 2010, we had repurchased
$300.0 million of common stock (6,639,821 shares) under this initiative, with $100.0 million available for
future common stock share repurchases.

The following table summarizes repurchases of our common stock under our stock repurchase program

during the fiscal quarter ended December 25, 2010:

Fiscal Month
09/26/10 through 10/30/10
10/31/10 through 11/27/10
11/28/10 through 12/25/10

Total
Number
of Shares
Purchased (1)
127,085
792,613
-
919,698

Average
Price Paid
Per Share
$
59.02
57.30
-

Total Number
of Shares
Purchased as Part
of Our Publicly
Announced Program
127,085
792,613
-
919,698

Maximum Number
of Shares
that May Yet
Be Purchased Under
Our Program (2)

808,847
1,732,202
1,608,752

(1) All repurchases were executed in the open market under our existing publicly announced authorized program.

(2) The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on
the closing price of our common stock at that time.

Dividend Policy

We have not declared any cash dividends on our common stock during fiscal years 2010 or 2009. We
currently do not anticipate declaring any cash dividends on our common stock in the foreseeable future. We
intend to retain earnings to finance the expansion of our business and for general corporate purposes,
including our stock repurchase program. Any declaration of dividends will be at the discretion of our Board
of Directors and will depend upon the earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to payment of dividends and other factors.

Stock Performance Graph

The graph below compares the cumulative total stockholder return on $100 invested, assuming the
reinvestment of all dividends, on December 31, 2005, the last trading day before the beginning of our 2006
fiscal year, through the end of fiscal 2010 with the cumulative total return on $100 invested for the same
period in the Dow Jones U.S. Health Care Index, the NASDAQ Stock Market (U.S. companies) Composite
Index and the NASDAQ Stock Market Composite Index.

This year, we selected the NASDAQ Stock Market Composite Index for the comparison as opposed to

only the U.S. companies of the NASDAQ Stock Market Composite Index in order to compare our stock
performance against a published index as opposed to a segment of a published index. We included both in the
graph below for comparison purposes.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

ASSUMES $100 INVESTED ON DECEMBER 31, 2005
ASSUMES DIVIDENDS REINVESTED

Henry Schein, Inc. ......................................

100.00

112.24

142.19

2005

2006

2007

2008
$

81.07

2009

2010

121.47

142.44

December 31, December 30, December 29, December 27, December 26, December 25,

Dow Jones U.S. Health
Care Index ...............................................

NASDAQ Stock Market
Composite Index ......................................

NASDAQ Stock Market
(U.S. companies) Composite Index .........

100.00

106.88

116.82

87.10

109.87

114.50

100.00

110.25

122.90

70.92

106.98

125.95

100.00

112.51

122.09

72.15

104.22

120.63

ITEM 6. Selected Financial Data

The following selected financial data, with respect to our financial position and results of operations for
each of the five fiscal years in the period ended December 25, 2010, set forth below, has been derived from,
should be read in conjunction with and is qualified in its entirety by reference to, our consolidated financial
statements and notes thereto. The selected financial data presented below should also be read in conjunction
with ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and ITEM 8, “Financial Statements and Supplementary Data.”

December 25,
2010

December 26,
2009

Years ended
December 27,
2008
(in thousands, except per share data)

December 29,
2007

December 30,
2006

Income Statement Data:
Net sales ..............................................................................
Gross profit ..........................................................................
Selling, general and administrative

expenses ...........................................................................
Restructuring costs (1) .........................................................
Operating income ................................................................
Other expense, net ...............................................................
Income from continuing operations before taxes,
equity in earnings (losses) of affiliates and
noncontrolling interests ...................................................
Income taxes ........................................................................
Equity in earnings (losses) of affiliates ................................
Income from continuing operations .....................................
Income (loss) from discontinued

operations, net of tax (2) ..................................................
Net income ..........................................................................
Less: Net income attributable to

7,526,790
2,170,876

6,538,336
1,916,820

6,380,413
1,874,295

5,889,884
1,706,092

5,021,523
1,459,330

1,637,460
12,285
521,131
(19,096)

502,035
(160,069)
10,165
352,131

-
352,131

1,449,715
3,020
464,085
(11,365)

452,720
(127,521)
5,243
330,442

2,715
333,157

1,431,769
23,240
419,286
(23,837)

395,449
(131,210)
5,037
269,276

(7,902)
261,374

1,319,153
-
386,939
(8,430)

378,509
(128,556)
(73)
249,880

(20,704)
229,176

1,155,215
-
304,115
(13,529)

290,586
(103,440)
835
187,981

(19,304)
168,677

noncontrolling interests ....................................................
Net income attributable to Henry Schein, Inc. .....................

(26,342)
325,789

(22,004)
311,153

(21,917)
239,457

(17,442)
211,734

(8,090)
160,587

Amounts attributable to Henry Schein, Inc.:
Income from continuing operations ...................................
Income (loss) from discontinued
operations, net of tax ......................................................
Net income ........................................................................

Earnings (loss) per share attributable to

Henry Schein, Inc.:

From continuing operations:

325,789

308,551

247,347

232,529

180,049

-
325,789

2,602
311,153

(7,890)
239,457

(20,795)
211,734

(19,462)
160,587

Basic ................................................................................
Diluted .............................................................................

3.62
3.49

3.47
3.41

2.78
2.71

2.63
2.55

2.05
2.00

From discontinued operations:

Basic ................................................................................
Diluted .............................................................................

-
$
-

0.03
0.03

(0.09)
(0.08)

(0.24)
(0.23)

(0.22)
(0.21)

From net income:

Basic ................................................................................
Diluted .............................................................................

3.62
3.49

3.50
3.44

2.69
2.63

2.39
2.32

1.83
1.79

Weighted-average common shares outstanding:

Basic ................................................................................
Diluted .............................................................................

90,097
93,268

88,872
90,556

89,080
91,221

88,559
91,163

87,952
89,820

December 25,
2010

December 26,
2009

Years ended
December 27,
2008
(in thousands)

December 29,
2007

December 30,
2006

Net Sales by Market Data:
Healthcare distribution (3):

Dental (4) ................................................................
Medical (5) ..............................................................
Animal health (6) ....................................................
International (7) ......................................................
Total healthcare distribution ................................
Technology (8) ............................................................
Total ....................................................................

2,678,830
1,290,428
889,303
2,468,277
7,326,838
199,952
7,526,790

2,509,921
1,217,020
240,082
2,398,105
6,365,128
173,208
6,538,336

2,567,064
1,210,875
218,093
2,221,092
6,217,124
163,289
6,380,413

2,447,841
1,340,146
200,123
1,769,881
5,757,991
131,893
5,889,884

2,122,415
1,235,125
163,871
1,401,889
4,923,300
98,223
5,021,523

December 25,
2010

December 26,
2009

As of
December 27,
2008
(in thousands)

December 29,
2007

December 30,
2006

Balance Sheet data:
Total assets .................................................................
Long-term debt ...........................................................
Redeemable noncontrolling interests ..........................
Stockholders' equity ...................................................

4,547,471
395,309
304,140
2,412,957

3,835,985
243,373
178,570
2,161,508

3,599,210
256,648
233,035
1,772,354

3,313,472
407,627
150,028
1,674,987

2,880,547
434,804
111,902
1,393,356

(1) Restructuring costs for the year ended December 25, 2010 consist primarily of severance costs, including severance pay and
benefits of $8.8 million, facility closing costs of $3.4 million and other professional and consulting costs of $0.1 million.
Restructuring costs for the year ended December 26, 2009 consist primarily of employee severance costs, including severance
pay and benefits of $1.5 million and facility closing costs of $1.5 million. Restructuring costs for the year ended December 27,
2008 consist primarily of employee severance costs, including severance pay and benefits of $18.6 million, facility closing costs
of $3.8 million and other professional and consulting costs of $0.8 million. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Plans of Restructuring” herein and the consolidated financial statements and
related notes contained in ITEM 8.

(2) On August 5, 2009, we completed the sale of a wholesaler of dental consumables for aggregate consideration of $14.2 million, of
which $13.2 million has been received as of December 26, 2009. As a result of this sale, included in operating results from
discontinued operations for 2009 is a net gain, net of tax, of $2.6 million or $0.03 per diluted share.
During the fourth quarter of 2008, included in operating results from discontinued operations, we recorded an impairment charge
of $11.2 million ($7.3 million, net of tax), or $0.08 per diluted share, related to the exit from our wholesale ultrasound business.
During 2007, we sold substantially all of the assets of our oncology pharmaceutical and specialty pharmacy businesses,
previously reported as part of our healthcare distribution reportable segment. The aggregate sales price was $14.3 million, which
was received during the third and fourth quarters of 2007. As a result of these sales, included in the operating results from
discontinued operations for 2007 is a net gain, net of tax, of approximately $0.7 million or $0.01 per diluted share. We recorded
an impairment charge to our related long-lived assets of approximately $20.6 million, net of tax, or $(0.23) per diluted share in
2007.
On April 1, 2006, we sold substantially all of the assets of our Hospital Supply Business, previously reported as part of our
healthcare distribution reportable segment. The sale price was $36.5 million, which was received during the second quarter of
2006. As a result of this sale, included in the operating results from discontinued operations for 2007 is a $0.3 million ($0.2
million after-tax) expense relating to contract contingencies. Included in operating results from discontinued operations for 2006
is a $32.3 million ($19.4 million after-tax) loss on the sale, including $3.5 million ($2.1 million after-tax) of transitional service
obligations and selling costs.

(3) Consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair
services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and
vitamins.

(4) Consists of products sold in the United States and Canadian dental markets.
(5) Consists of products sold in the United States’ medical market.
(6) Consists of products sold in the United States’ animal health market.
(7) Consists of products sold in the dental, medical and animal health markets, primarily in Europe, Australia and New Zealand.
(8) Consists of practice management software, financial services and other value-added products and services, which are distributed
primarily to healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand for the years
2007 through 2010 and the United States and Canada for the year 2006.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995,

we provide the following cautionary remarks regarding important factors that, among others, could cause
future results to differ materially from the forward-looking statements, expectations and assumptions
expressed or implied herein. All forward-looking statements made by us are subject to risks and uncertainties
and are not guarantees of future performance. These forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results, performance and
achievements or industry results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These statements are identified by
the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,”
“project,” “anticipate” or other comparable terms.

Risk factors and uncertainties that could cause actual results to differ materially from current and
historical results include, but are not limited to: recently enacted healthcare legislation; effects of a highly
competitive market; changes in the healthcare industry; changes in regulatory requirements; risks from
expansion of customer purchasing power and multi-tiered costing structures; risks associated with our
international operations; fluctuations in quarterly earnings; our dependence on third parties for the
manufacture and supply of our products; transitional challenges associated with acquisitions, including the
failure to achieve anticipated synergies; financial risks associated with acquisitions; regulatory and litigation
risks; the dependence on our continued product development, technical support and successful marketing in
the technology segment; risks from disruption to our information systems; general economic conditions;
decreased customer demand and changes in vendor credit terms; disruptions in financial markets; our
dependence upon sales personnel, manufacturers and customers; our dependence on our senior management;
possible increases in the cost of shipping our products or other service issues with our third-party shippers;
risks from rapid technological change; possible volatility of the market price of our common stock; certain
provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax
legislation. The order in which these factors appear should not be construed to indicate their relative
importance or priority.

We caution that these factors may not be exhaustive and that many of these factors are beyond our ability

to control or predict. Accordingly, any forward-looking statements contained herein should not be relied
upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-
looking statements.

Executive Level Overview

We are headquartered in Melville, New York, employ more than 13,500 people (of which over 6,000 are

We conduct our business through two reportable segments: healthcare distribution and technology. These

Our dental group serves office-based dental practitioners, schools and other institutions in the combined

United States and Canadian dental market. Our medical group serves office-based medical practitioners,
surgical centers, other alternate-care settings and other institutions throughout the United States. Our animal
health group serves animal health practices and clinics throughout the United States. Our international group
serves dental, medical and animal health practitioners in 23 countries outside of North America and is what
we believe to be a leading European healthcare supplier serving office-based practitioners.

Our technology group provides software, technology and other value-added services to healthcare
practitioners, primarily in the United States, Canada, the United Kingdom, Australia and New Zealand. Our
value-added practice solutions include practice management software systems for dental and medical
practitioners and animal health clinics. Our technology group offerings also include financial services on a
non-recourse basis, e-services and continuing education services for practitioners.

Industry Overview

Our operating results in recent years have been significantly affected by strategies and transactions that

we undertook to expand our business, domestically and internationally, in part to address significant changes
in the healthcare industry, including consolidation of healthcare distribution companies, potential healthcare
reform, trends toward managed care, cuts in Medicare and collective purchasing arrangements.

Our current and future results have been and could be impacted by the current economic environment and

uncertainty, particularly impacting overall demand for our products and services.

Industry Consolidation

Our trend with regard to acquisitions and joint ventures has been to expand our role as a provider of
products and services to the healthcare industry. This trend has resulted in expansion into service areas that
complement our existing operations and provide opportunities for us to develop synergies with, and thus
strengthen, the acquired businesses.

As industry consolidation continues, we believe that we are positioned to capitalize on this trend, as we

believe we have the ability to support increased sales through our existing infrastructure.

As the healthcare industry continues to change, we continually evaluate possible candidates for merger or

acquisition and intend to continue to seek opportunities to expand our role as a provider of products and
services to the healthcare industry. There can be no assurance that we will be able to successfully pursue any
such opportunity or consummate any such transaction, if pursued. If additional transactions are entered into
or consummated, we would incur merger and/or acquisition-related costs, and there can be no assurance that
the integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

The healthcare products distribution industry continues to experience growth due to the aging population,

The January 2000 U.S. Bureau of the Census estimated that the elderly population in the United States
will more than double by the year 2040. In 2000, four million Americans were aged 85 or older, the segment
of the population most in need of long-term care and elder-care services. By the year 2040, that number is
projected to more than triple to more than 14 million. The population aged 65 to 84 years is projected to more
than double in the same time period.

As a result of these market dynamics, annual expenditures for healthcare services continue to increase in
the United States. Given current operating, economic and industry conditions, we believe that demand for our
products and services will grow at slower rates. The Centers for Medicare and Medicaid Services, or CMS,
published “National Health Expenditure Projections 2009 – 2019” indicating that total national healthcare
spending reached approximately $2.5 trillion in 2009, or 17.3% of the nation’s gross domestic product, the
benchmark measure for annual production of goods and services in the United States. Healthcare spending is
projected to reach approximately $4.6 trillion in 2019, approximately 19.6% of the nation’s gross domestic
product.

Government

The healthcare industry is subject to extensive government regulation, licensure and operating compliance
procedures. Additionally, government and private insurance programs fund a large portion of the total cost of
medical care. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, was
the largest expansion of the Medicare program since its inception, and provided participants with voluntary
outpatient prescription drug benefits beginning in 2006. The MMA also included provisions relating to
medication management programs, generic substitution and provider reimbursement. The Patient Protection
and Affordable Care Act, enacted in March 2010, generally known as The Health Care Reform Bill or
PPACA, increased federal oversight of private health insurance plans and included a number of provisions
designed to reduce Medicare expenditures and the cost of healthcare generally, to reduce fraud and abuse, and
to provide access to health coverage for an additional 32 million people. PPACA also imposes (i) a 2.3%
excise tax on domestic sales of medical devices by manufacturers and importers beginning in 2013, and a
“fee” on branded prescription drugs and biologics beginning in 2011, which may affect sales, (ii) mandates
pharmacy benefit manager transparency regarding rebates, discounts and price concessions, which could
affect pricing and competition and (iii) reduces the amount of out-of-pocket liability for patients participating
in the Medicare outpatient drug benefit program created by the MMA. A provision in PPACA requiring those
without insurance to pay a penalty was recently declared unconstitutional by a Virginia federal district court,
which permitted other provisions of the legislation that do not relate to health insurance, as well as those
provisions that could improve insurance coverage, to remain in effect. PPACA in its entirety was declared
unconstitutional by a Florida federal district court on January 31, 2011. Two other federal district courts (in
Michigan and Virginia) have affirmed the constitutionality of PPACA. Appeals are pending, and the matter is
expected to be determined by the Supreme Court of the United States.

In addition to the foregoing, PPACA imposed new reporting and disclosure requirements for

pharmaceutical and device manufacturers with regard to payments or other transfers of value made to certain
practitioners, including physicians and dentists, and teaching hospitals beginning in January 2012.
Implementing regulations have not yet been issued, but it is possible that such regulations, when issued, will
treat us or one or more of our subsidiaries as a “manufacturer” subject to these reporting requirements. In
addition, several states require pharmaceutical and/or device companies to report expenses relating to the
marketing and promotion of products as well as gifts and payments to individual practitioners in the states, or
prohibit certain marketing related activities. Other states, such as California, Nevada, Massachusetts and
Connecticut, require pharmaceutical and/or device companies to implement compliance programs or
marketing codes. Wholesale distributors are covered by the laws in certain of these states. In others, it is
possible that our activities, including on behalf of manufacturers, or the activities of one or more of our
subsidiaries will subject us to the state’s reporting requirements and prohibitions.

Regulations adopted under the federal Prescription Drug Marketing Act, effective December 2006,

require the identification and documentation of transactions involving the receipt and distribution of
prescription drugs, that is, drug pedigree information. In early December 2006, the federal District Court for
the Eastern District of New York issued a preliminary injunction enjoining the implementation of some of the
federal drug pedigree requirements in response to a case initiated by secondary distributors. On December
31, 2009, the U.S. District Court granted a motion to extend the time for either party to re-open the matter
(which had been administratively closed in light of potential legislative action by Congress), and the Court in
effect extended the injunction through June 30, 2011. Other states and government agencies are currently
considering similar laws and regulations. We continue to work with our suppliers to help minimize the risks
associated with counterfeit products in the supply chain and potential litigation.

There have been increasing efforts by various levels of government, including state departments of health,
state boards of pharmacy and comparable agencies, to regulate the pharmaceutical distribution system in order
to prevent the introduction of counterfeit, adulterated or mislabeled pharmaceuticals into the distribution
system. An increasing number of states, including Florida, have already adopted laws and regulations,
including drug pedigree tracking requirements, that are intended to protect the integrity of the pharmaceutical
distribution system. California has enacted a statute that, beginning in 2015, will require manufacturers to

identify each package of a prescription pharmaceutical with a standard, machine-readable numerical
identifier, and will require manufacturers and distributors to participate in an electronic track-and-trace
system and provide or receive an electronic pedigree for each transaction in the drug distribution chain. Other
states have passed or are reviewing the same type of requirements. Bills have been introduced in Congress
that would impose similar requirements at the federal level.

The Combat Methamphetamine Enhancement Act of 2009, signed by President Obama in October 2010,

prohibits distributors from selling listed chemical products, used to manufacture methamphetamine and
amphetamine illegally, to individuals not currently registered with the Drug Enforcement Administration
(DEA) or not on the United States Attorney General’s published list of self-certified entities. The Secure and
Responsible Drug Disposal Act of 2010, also signed by President Obama in October 2010, is intended to
allow individuals to more easily and safely dispose of controlled substances while reducing the chance of
diversion, by facilitating the return of unused portions of controlled substances to designated entities
including long term care facilities and law enforcement agencies. The law does not authorize the DEA to
mandate that entities establish a drug disposal program.

There may be additional legislative initiatives in the future impacting healthcare.

E-Commerce

Traditional healthcare supply and distribution relationships are being challenged by electronic online
commerce solutions. Our distribution business is characterized by rapid technological developments and
intense competition. The advancement of online commerce will require 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 growing aspect of
the distribution business. We continue to explore ways and means to improve and expand our Internet
presence and capabilities.

Results of Operations

The following tables summarize the significant components of our operating results and cash flows for
each of the three years ended December 25, 2010, December 26, 2009 and December 27, 2008 (in thousands):

Years ended

December 25,

December 26,

December 27,

2010

2009

2008

Operating Results:

Net sales .......................................................................................................

7,526,790

6,538,336

6,380,413

Cost of sales .................................................................................................

Gross profit ..............................................................................................

Operating expenses:

Selling, general and administrative .........................................................

Restructuring costs ...................................................................................

5,355,914

2,170,876

1,637,460

12,285

4,621,516

1,916,820

1,449,715

3,020

4,506,118

1,874,295

1,431,769

23,240

Operating income ...............................................................................

521,131

464,085

419,286

Other expense, net .........................................................................................

(19,096)

(11,365)

(23,837)

Income from continuing operations ...............................................................

352,131

330,442

269,276

Income from continuing operations attributable

to Henry Schein, Inc. ................................................................................

325,789

308,551

247,347

Years ended

December 25,

December 26,

December 27,

2010

2009

2008

Cash Flows:

Net cash provided by operating activities .....................................................

388,874

396,890

384,782

Net cash used in investing activities .............................................................

Net cash used in financing activities .............................................................

(428,404)

(283,256)

(97,448)

(197,675)

(168,010)

(87,970)

Plans of Restructuring

On November 5, 2008, we announced certain actions to reduce operating costs. These actions included

the elimination of approximately 430 positions from our operations and the closing of several smaller
facilities. Also, during the first quarter of 2010, we completed an additional restructuring in order to further
reduce operating expenses. This restructuring included headcount reductions of 184 positions, as well as the
closing of a number of smaller locations.

During the years ended December 25, 2010, December 26, 2009 and December 27, 2008, we recorded

restructuring costs of approximately $12.3 million (approximately $8.3 million after taxes), $3.0 million
(approximately $2.1 million after taxes) and $23.2 million (approximately $16.0 million after taxes),
respectively. These costs primarily consisted of employee severance pay and benefits, facility closing costs,
representing primarily lease termination and asset write-off costs, and outside professional and consulting fees
directly related to the restructuring plans. The costs associated with these restructurings are included in a
separate line item, “Restructuring costs,” within our consolidated statements of income.

2010 Compared to 2009

Net Sales

Net sales for 2010 and 2009 were as follows (in thousands):

Healthcare distribution (1):
Dental (2) ........................................
Medical (3) .....................................
Animal health (4) ............................
International (5) ...............................
Total healthcare distribution ........
Technology (6) ......................................
Total .............................................

2010

2,678,830
1,290,428
889,303
2,468,277
7,326,838
199,952
7,526,790

% of
Total

35.6 %
17.1
11.8
32.8
97.3
2.7
100.0 %

2009

2,509,921
1,217,020
240,082
2,398,105
6,365,128
173,208
6,538,336

% of
Total

38.4 %
18.6
3.7
36.7
97.4
2.6
100.0 %

Increase

168,909
73,408
649,221
70,172
961,710
26,744
988,454

6.7 %
6.0
270.4
2.9
15.1
15.4
15.1

(1) Consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair
services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and
vitamins.

(2) Consists of products sold in the United States and Canadian dental markets.

(3) Consists of products sold in the United States’ medical market.

(4) Consists of products sold in the United States’ animal health market.

(5) Consists of products sold in the dental, medical and animal health markets, primarily in Europe, Australia and New Zealand.

(6) Consists of practice management software and other value-added products and services, which are distributed primarily to

healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand.

The $988.5 million, or 15.1%, increase in net sales for the year ended December 25, 2010 includes an

increase of 15.4% local currency growth (3.1% internally generated revenue and 12.3% growth from
acquisitions) offset by a decrease of 0.3% related to foreign currency exchange.

The $168.9 million, or 6.7%, increase in dental net sales for the year ended December 25, 2010 includes a

increase of 5.7% in local currencies (2.2% increase in internally generated revenue and 3.5% growth from
acquisitions) and an increase of 1.0% related to foreign currency exchange. The 5.7% increase in local
currency sales was due to increases in dental equipment sales and service revenues of 2.5% (2.3% increase in
internally generated revenue and 0.2% growth from acquisitions) and dental consumable merchandise sales
growth of 6.7% (2.2% increase in internally generated revenue and 4.5% growth from acquisitions).

The $73.4 million, or 6.0%, increase in medical net sales for the year ended December 25, 2010 includes

an increase in internally generated revenue of 2.3% and acquisition growth of 3.7%.

The $649.2 million, or 270.4%, increase in animal health net sales for the year ended December 25, 2010

includes acquisition growth of 269.8%, due to the acquisition of a majority interest in Butler Animal Health
Supply, LLC as of December 31, 2009, as well as internally generated revenue of 0.6%.

The $70.1 million, or 2.9%, increase in international net sales for the year ended December 25, 2010
includes sales growth of 4.9% in local currencies (4.2% internally generated growth and 0.7% growth from
acquisitions) offset by a decrease of 2.0% related to foreign currency exchange.

The $26.7 million, or 15.4%, increase in technology net sales for the year ended December 25, 2010
includes an increase of 14.8% in local currency growth (10.4% internally generated growth and 4.4% growth
from acquisitions) and an increase of 0.6% related to foreign currency exchange.

Gross Profit

Gross profit and gross margins for 2010 and 2009 by segment and in total were as follows (in thousands):

2010

Gross
Margin %

2009

Gross
Margin %

Increase

Healthcare distribution ................
Technology ..................................
Total ...................................

2,033,860
137,016
2,170,876

27.8 %
68.5
28.8

1,792,516
124,304
1,916,820

28.2 %
71.8
29.3

241,344
12,712
254,056

13.5 %
10.2
13.3

Gross profit increased $254.1 million, or 13.3%, for the year ended December 25, 2010 compared to the
prior year period. As a result of different practices of categorizing costs associated with distribution networks
throughout our industry, our gross margins may not necessarily be comparable to other distribution
companies. Additionally, we realize substantially higher gross margin percentages in our technology segment
than in our healthcare distribution segment. These higher gross margins result from being both the developer
and seller of software products and services, as well as certain financial services. For a number of reasons, the
software industry typically realizes higher gross margins to recover investments in research and development.

Healthcare distribution gross profit increased $241.3 million, or 13.5%, for the year ended December 25,

2010 compared to the prior year period. Healthcare distribution gross profit margin decreased to 27.8% for
the year ended December 25, 2010 from 28.2% for the comparable prior year period due to changes in
product sales mix.

Technology gross profit increased $12.7 million, or 10.2%, for the year ended December 25, 2010
compared to the prior year period. Technology gross profit margin decreased to 68.5% for the year ended
December 25, 2010 from 71.8% for the comparable prior year period, primarily due to changes in the product
sales mix.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in total for 2010 and 2009 were as follows

(in thousands):

2010

Healthcare distribution ..............
Technology ...............................
Total .................................

1,566,915
70,545
1,637,460

% of
Respective
Net Sales

21.4 %
35.3
21.8

2009

1,387,581
62,134
1,449,715

% of
Respective
Net Sales

21.8 %
35.9
22.2

Increase

179,334
8,411
187,745

12.9 %
13.5
13.0

Selling, general and administrative expenses increased by $187.7 million, or 13.0%, for the year ended

December 25, 2010 compared to the prior year period. As a percentage of net sales, selling, general and
administrative expenses decreased to 21.8% from 22.2% from the comparable year period.

As a component of total selling, general and administrative expenses, selling expenses increased $117.7
million, or 12.2%, for the year ended December 25, 2010 from the prior year period. As a percentage of net
sales, selling expenses decreased to 14.3% from 14.7% for the comparable prior year period.

As a component of total selling, general and administrative expenses, general and administrative expenses

increased $70.0 million, or 14.4%, for the year ended December 25, 2010 from the prior year period. As a
percentage of net sales, general and administrative expenses decreased to 7.4% from 7.5% for the comparable
prior year period.

Other Expense, Net

Other expense, net for the years ended 2010 and 2009 was as follows (in thousands):

2010

2009

Increase / (Decrease)
%

Interest income .................................................
Interest expense ................................................
Other, net .........................................................
Other expense, net ....................................

14,098
(33,641)
447
(19,096)

9,979
(23,370)
2,026
(11,365)

4,119
(10,271)
(1,579)
(7,731)

41.3 %
(43.9)
(77.9)
(68.0)

Other expense, net increased $7.7 million to $19.1 million for the year ended December 25, 2010 from
the comparable prior year period. Interest expense increased $10.3 million primarily due to debt associated
with the acquisition of a majority interest in Butler Animal Health Supply, LLC, partially offset by reduced
interest expense from the redemption of all of our Convertible Notes on September 3, 2010 and from
repayment of our $130.0 million senior notes on June 30, 2009. Interest income increased $4.1 million as a
result of increased late fee income, partially offset by lower interest income on our invested funds. Other, net
decreased by $1.6 million due primarily to net proceeds received from litigation settlements in the third
quarter of 2009, partially offset by the impact of foreign currency exchange.

Income Taxes

For the year ended December 25, 2010, our effective tax rate from continuing operations was 31.9%

compared to 28.2% for the prior year period. The difference resulted primarily from the reduction of a
valuation allowance in 2009 as explained below. Without the effect of the reduction of the valuation
allowance described below, our effective tax rate from continuing operations for the year ended December 26,
2009 would have been 32.8%. The net reduction in our 2010 effective tax rate results from additional tax
planning initiatives, settlements of tax audits, a reduction of valuation allowances and higher income from
lower taxing countries. The difference between our effective tax rate and the federal statutory tax rate for
both periods related primarily to foreign and state income taxes.

During the third quarter of 2009, we substantially completed a plan of reorganization outside the United
States that allowed us to utilize tax loss carryforwards to offset taxable income beginning in 2010 in certain
foreign tax jurisdictions. As a result, we determined that it is more likely than not that a portion of deferred
tax assets previously fully reserved will be realized. Therefore, the 2009 provision for income taxes includes
a $20.9 million reduction of the valuation allowance which is based on an estimate of future taxable income
available to be offset by the tax loss carryforwards.

Loss from Discontinued Operations

During the year ended December 26, 2009, we recognized aggregate gains of $2.6 million, net of tax,
related to discontinued operations (see Note 9 in the accompanying annual consolidated financial statements
for further discussion).

Net Income

Net income increased $19.0 million, or 5.7%, for the year ended December 25, 2010 compared to the

prior year period. The increase in net income is primarily due to increased net sales.

2009 Compared to 2008

Net Sales

Net sales for 2009 and 2008 were as follows (in thousands):

2009

2,509,921
1,217,020
240,082
2,398,105
6,365,128
173,208
6,538,336

% of
Total

38.4 %
18.6
3.7
36.7
97.4
2.6
100.0 %

2008

% of
Total

Increase / (Decrease)

2,567,064
1,210,875
218,093
2,221,092
6,217,124
163,289
6,380,413

40.2 %
19.0
3.4
34.8
97.4
2.6
100.0 %

(57,143)
6,145
21,989
177,013
148,004
9,919
157,923

(2.2) %
0.5
10.1
8.0
2.4
6.1
2.5

(2) Consists of products sold in the United States and Canadian dental markets.

(3) Consists of products sold in the United States’ medical market.

(4) Consists of products sold in the United States’ animal health market.

(5) Consists of products sold in the dental, medical and animal health markets, primarily in Europe, Australia and New Zealand.

(6) Consists of practice management software and other value-added products and services, which are distributed primarily to

healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand.

The $157.9 million, or 2.5%, increase in net sales for the year ended December 26, 2009 includes an

increase of 5.7% local currency growth (0.9% internally generated revenue and 4.8% growth from
acquisitions) offset by a decrease of 3.2% related to foreign currency exchange. Excluding sales of influenza
vaccines, sales increased 6.6%. Sales of influenza vaccines declined in 2009 compared to 2008 due to
manufacturers’ supply shortage.

The $57.1 million, or 2.2%, decrease in dental net sales for the year ended December 26, 2009 includes a

decrease of 1.6% in local currencies (4.0% decline in internally generated revenue offset by 2.4% growth
from acquisitions) and a decrease of 0.6% related to foreign currency exchange. The 1.6% decline in local
currency sales was due to a decline in dental equipment sales and service revenues of 10.6% (11.3% decline
in internally generated revenue reduced by 0.7% growth from acquisitions) offset by dental consumable
merchandise sales growth of 1.9% (1.2% decrease in internally generated revenue reduced by 3.1% growth
from acquisitions).

The $6.1 million, or 0.5%, increase in medical net sales for the year ended December 26, 2009 includes a
decline in internally generated revenue of 0.9% and acquisition growth of 1.4%. Excluding sales of influenza
vaccines, which declined in 2009, medical sales increased 5.0%.

The $22.0 million, or 10.1%, increase in animal net sales for the year ended December 26, 2009 was all

internally generated.

The $177.0 million, or 8.0%, increase in international net sales for the year ended December 26, 2009
includes sales growth of 16.4% in local currencies (6.2% internally generated growth and 10.2% growth from
acquisitions) offset by a decrease of 8.4% related to foreign currency exchange.

The $9.9 million, or 6.1%, increase in technology net sales for the year ended December 26, 2009
includes an increase of 8.3% in local currency growth (6.7% internally generated growth and 1.6% growth
from acquisitions) offset by a decrease of 2.2% related to foreign currency exchange. During the year, we
experienced continued growth in electronic services as well as sales of technology products in our
international markets.

Gross Profit

Gross profit and gross margins for 2009 and 2008 by segment and in total were as follows (in thousands):

2009

Gross
Margin %

2008

Gross
Margin %

Increase

Healthcare distribution ................
Technology ..................................
Total ...................................

1,792,516
124,304
1,916,820

28.2 %
71.8
29.3

1,753,655
120,640
1,874,295

28.2 %
73.9
29.4

38,861
3,664
42,525

2.2 %
3.0
2.3

Gross profit increased $42.5 million, or 2.3%, for the year ended December 26, 2009 compared to the
prior year period. As a result of different practices of categorizing costs associated with distribution networks
throughout our industry, our gross margins may not necessarily be comparable to other distribution
companies. Additionally, we realize substantially higher gross margin percentages in our technology segment
than in our healthcare distribution segment. These higher gross margins result from being both the developer
and seller of software products, as well as certain financial services. For a number of reasons, the software
industry typically realizes higher gross margins to recover investments in research and development.

Healthcare distribution gross profit increased $38.9 million, or 2.2%, for the year ended December 26,

2009 compared to the prior year period. Healthcare distribution gross profit margin remained constant at
28.2% for the year ended December 26, 2009 compared with the comparable prior year period.

Technology gross profit increased $3.7 million, or 3.0%, for the year ended December 26, 2009 compared
to the prior year period. Technology gross profit margin decreased to 71.8% for the year ended December 26,
2009 from 73.9% for the comparable prior year period, primarily due to changes in the product sales mix.

Selling, General and Administrative

Selling, general and administrative expenses by segment and in total for 2009 and 2008 were as follows

(in thousands):

2009

Healthcare distribution ..............
Technology ...............................
Total .................................

1,387,581
62,134
1,449,715

% of
Respective
Net Sales

21.8 %
35.9
22.2

2008

1,368,108
63,661
1,431,769

% of
Respective
Net Sales

22.0 %
39.0
22.4

Increase / (Decrease)
%

19,473
(1,527)
17,946

1.4 %
(2.4)
1.3

Selling, general and administrative expenses increased by $17.9 million, or 1.3%, for the year ended
December 26, 2009 compared to the prior year period. This increase results from $10.5 million in expense
reductions and a $28.4 million net increase from the effects of foreign exchange offset by the additional
selling, general and administrative costs from operations acquired. As a percentage of net sales, selling,
general and administrative expenses decreased to 22.2% from 22.4% from the comparable year period.

As a component of total selling, general and administrative expenses, selling expenses decreased $9.7
million, or 1.0%, for the year ended December 26, 2009 from the prior year period. As a percentage of net
sales, selling expenses decreased to 14.7% from 15.2% for the comparable prior year period.

As a component of total selling, general and administrative expenses, general and administrative expenses

increased $27.6 million, or 6.0%, for the year ended December 26, 2009 from the prior year period. As a
percentage of net sales, general and administrative expenses increased to 7.5% from 7.2% for the comparable
prior year period.

Other Expense, Net

Other expense, net for the years ended 2009 and 2008 was as follows (in thousands):

2009

2008

Increase / (Decrease)
%

9,979
(23,370)
2,026
(11,365)

16,355
(34,605)
(5,587)
(23,837)

(6,376)
11,235
7,613
12,472

(39.0) %
32.5
136.3
52.3

Other expense, net decreased $12.5 million to $11.4 million for the year ended December 26, 2009 from

the comparable prior year period. The decrease was primarily the result of decreased interest expense of
$11.2 million due to repayment of our $130.0 million senior notes on June 30, 2009, as well as lower interest
rates on our floating debt, partially offset by a decrease in interest income of $6.4 million resulting from lower
interest rates on our invested funds. In addition, Other, net increased by $7.6 million due primarily to net
proceeds received from litigation settlements in the third quarter of 2009 and non-recurring charges incurred
during the third quarter of 2008 relating to the bankruptcy of Lehman Brothers Holdings, Inc.

Income Taxes

For the year ended December 26, 2009, our effective tax rate from continuing operations was 28.2%

compared to 33.2% for the prior year period. The difference is primarily related to a reduction in the
valuation allowance on certain foreign deferred tax assets, as well as additional tax planning initiatives,
settlements of tax audits and higher income from lower taxing countries. Absent the effects of the reversal of
a portion of the valuation allowance on certain foreign deferred tax assets in 2009, our effective tax rate for
the year ended December 26, 2009 would have been 32.8%. The remaining difference in our effective tax
rate between 2009 and 2008 is due to foreign and state income taxes.

Loss from Discontinued Operations

During the years ended December 26, 2009 and December 27, 2008, respectively, we recognized

aggregate gains and (losses) of $2.6 million and $(7.9) million, net of tax, respectively, related to
discontinued operations (see Note 7 in the accompanying annual consolidated financial statements for further
discussion).

Net Income

Net income increased $71.8 million, or 27.5%, for the year ended December 26, 2009 compared to the

prior year period. The increase in net income is primarily due to the factors noted above.

Liquidity and Capital Resources

Our principal capital requirements include funding of acquisitions, repayments of debt principal, the
funding of working capital needs, purchases of securities and fixed assets and repurchases of common stock.
Working capital requirements generally result from increased sales, special inventory forward buy-in
opportunities and payment terms for receivables and payables. Historically, sales have tended to be stronger
during the third and fourth quarters and special inventory forward buy-in opportunities have been most
prevalent just before the end of the year, causing our working capital requirements to have been higher from
the end of the third quarter to the end of the first quarter of the following year.

We finance our business primarily through cash generated from our operations, revolving credit facilities

and debt placements. Our ability to generate sufficient cash flows from operations is dependent on the
continued demand of our customers for our products and services, and access to products and services from
our suppliers.

Our business requires a substantial investment in working capital, which is susceptible to fluctuations
during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity
is a function of sales activity, special inventory forward buy-in opportunities and our desired level of
inventory. We anticipate future increases in our working capital requirements.

We finance our business to provide adequate funding for at least 12 months. Funding requirements are
based on forecasted profitability and working capital needs, which, on occasion, may change. Consequently,
we may change our funding structure to reflect any new requirements.

We believe that our cash and cash equivalents, our ability to access private debt markets and public equity
markets, and our available funds under existing credit facilities provide us with sufficient liquidity to meet our
currently foreseeable short-term and long-term capital needs. We have no off-balance sheet arrangements.

Net cash provided by operating activities was $388.9 million for the year ended December 25, 2010

compared to $396.9 million for the comparable prior year period. The net change of $8.0 million was
primarily attributable to unfavorable working capital changes, offset by net income improvements.

Net cash used in investing activities was $428.4 million for the year ended December 25, 2010 compared
to $97.4 million for the comparable prior year period. The net change of $331.0 million was primarily due to
increased payments for business acquisitions.

Net cash used in financing activities was $283.3 million for the year ended December 25, 2010 compared
to $197.7 million for the comparable prior year period. The net change of $85.6 million was primarily due to
increased acquisitions of noncontrolling interests in certain subsidiaries, net repayments of long-term debt and
increased repurchases of our common stock, partially offset by an increase in proceeds from stock option
exercises.

We expect to invest approximately $55 million to $60 million during 2011 in capital projects to

modernize and expand our facilities and computer systems and to integrate certain operations into our existing
structure.

The following table summarizes selected measures of liquidity and capital resources (in thousands):

Cash and cash equivalents ..........................................................................
Available-for-sale securities - long-term ....................................................
Working capital ..........................................................................................

150,348
13,367
1,001,215

471,154
18,848
1,127,279

December 25,
2010

December 26,
2009

Debt:
Bank credit lines ....................................................................................
Current maturities of long-term debt .....................................................
Long-term debt ......................................................................................
Total debt .........................................................................................

41,508
4,487
395,309
441,304

932
23,560
243,373
267,865

Our cash and cash equivalents consist of bank balances and investments in money market funds

representing overnight investments with a high degree of liquidity.

Available-for-sale securities

As of December 25, 2010, we have approximately $15.1 million ($13.4 million net of temporary
impairments) invested in auction-rate securities (“ARS”). ARS are publicly issued securities that represent
long-term investments, typically 10-30 years, in which interest rates had reset periodically (typically every 7,
28 or 35 days) through a “dutch auction” process. Approximately $13.1 million ($11.4 million net of
temporary impairments) of our ARS are backed by student loans that are backed by the federal government
and the remaining $2.0 million are invested in closed-end municipal bond funds. Our ARS portfolio is
comprised of investments that are rated AAA by major independent rating agencies. Since the middle of
February 2008, these auctions have failed to settle due to an excess number of sellers compared to buyers.
The failure of these auctions has resulted in our inability to liquidate our ARS in the near term. We are
currently not aware of any defaults or financial conditions that would negatively affect the issuers’ ability to
continue to pay interest and principal on our ARS. We continue to earn and receive interest at contractually
agreed upon rates. We believe that the current lack of liquidity related to our ARS investments will have no
impact on our ability to fund our ongoing operations and growth opportunities. As of December 25, 2010, we
have classified ARS holdings as long-term, available-for-sale and they are included in the Investments and
other line within our consolidated balance sheets.

Accounts receivable days sales outstanding and inventory turns

Our accounts receivable days sales outstanding from continuing operations remained constant at 40.4
days as of December 25, 2010 when compared to the prior year. During the years ended December 25, 2010
and December 26, 2009, we wrote off approximately $6.7 million and $6.1 million, respectively, of fully
reserved accounts receivable against our trade receivable reserve. Our inventory turns from continuing
operations increased to 6.5 for the year ended December 25, 2010 from 6.2 for the year ended December 26,
2009. Our working capital accounts may be impacted by current and future economic conditions.

Contractual obligations

The following table summarizes our contractual obligations related to fixed and variable rate long-term

debt, including interest (assuming an average long-term rate of interest of 4.9%), as well as operating and
capital lease obligations, capital expenditure obligations and inventory purchase commitments as of
December 25, 2010:

Payments due by period (in thousands)

< 1 year

2 - 3 years

4 - 5 years

> 5 years

Total

Contractual obligations:

Long-term debt, including interest ..........................

23,129

46,987

58,388

385,409

513,913

Inventory purchase commitments ............................

127,518

131,907

Operating lease obligations .....................................

Capital lease obligations, including interest ............

60,100

1,959

79,156

2,062

44,100

32,333

507

124,091

35,423

427,616

207,012

4,528

Total ........................................................................

212,706

260,112

135,328

544,923

1,153,069

Inventory purchase commitments include obligations to purchase certain pharmaceutical products from a

manufacturer through 2013, which require us to pay a price based on the prevailing market price or formula
price in each respective year. The amounts included in the above table related to these purchase commitments
were determined using current market conditions. We also have obligations to purchase certain
pharmaceutical products from another manufacturer. Actual amounts may differ.

Redemption of convertible debt

On September 3, 2010, we paid approximately $240 million in cash and issued 732,422 shares of our
common stock in connection with the redemption of our $240.0 million of Convertible Notes, which were
issued in 2004.

The Convertible Notes were senior unsecured obligations bearing a fixed annual interest rate of 3.0% and
were due to mature on August 15, 2034. The Convertible Notes were convertible into our common stock at a
conversion ratio of 21.58 shares per one thousand dollars of principal amount of notes, which is equivalent to
a conversion price of $46.34 per share, under the following circumstances:

•

if the price of our common stock was above 130% of the conversion price measured over a
specified number of trading days;

• during the five-business-day period following any 10-consecutive-trading-day period in which the
average of the trading prices for the Convertible Notes for that 10-trading-day period was less
than 98% of the average conversion value for the Convertible Notes during that period;

•

if the Convertible Notes have been called for redemption; or

• upon the occurrence of a fundamental change or specified corporate transactions, as defined in

the Convertible Note agreement.

Debt

On September 5, 2008, we entered into a $400.0 million revolving credit facility with a $100.0 million

expansion feature. The $400.0 million credit line expires in September 2013. In addition to the amounts
outstanding under our shelf facilities, as discussed below, we have outstanding borrowings of approximately
$30.0 million under our $400.0 million credit facility. As of December 25, 2010, there were $9.8 million of
letters of credit provided to third parties.

On August 10, 2010, we entered into a $400.0 million private placement facilities with two insurance
companies. These shelf facilities are available through August 2013 on an uncommitted basis. The facilities
allow us to issue senior promissory notes to the lenders at a fixed rate based on an agreed upon spread over
applicable treasury notes at the time of issuance. The term of each possible issuance will be selected by us
and can range from five to 15 years (with an average life no longer than 12 years). The proceeds of any
issuances under the facilities will be used for general corporate purposes, including working capital and
capital expenditures, to refinance existing indebtedness and/or to fund potential acquisitions. As of December
25, 2010, we have an outstanding balance under the facilities of $100.0 million at a fixed rate of 3.79%,
which is due on September 2, 2020.

Acquisitions and acquisition commitment

On October 14, 2010, we announced an agreement to acquire 100% of the outstanding shares of Provet

Holdings Limited (ASX: PVT), Australia's largest distributor of veterinary products with sales in its 2010
fiscal year of approximately $278 million, for approximately $91 million, in a cash-for-stock exchange. This
transaction closed after year end.

Effective December 31, 2009, Butler Animal Health Supply, LLC, or BAHS, a majority-owned

subsidiary whose financial information is consolidated with ours, incurred approximately $320.0 million of
debt (of which $37.5 million was provided by Henry Schein, Inc.) in connection with our acquisition of a
majority interest in BAHS. The remaining outstanding balance of $279.1 million is reflected in our
consolidated balance sheet as of December 25, 2010.

The debt incurred as part of the acquisition of BAHS is repayable in 23 quarterly installments of $0.8

million through September 30, 2015, and a final installment of $301.6 million on December 31, 2015.
Interest on the BAHS debt is charged at LIBOR plus a margin of 3.5% with a LIBOR floor of 2% for a
current effective rate of 5.5% as of December 25, 2010. The debt agreement contains provisions which, under
certain circumstances, require BAHS to make prepayments of the loan commitment based on excess cash
flows of BAHS as defined in the debt agreement. The debt agreement also contains provisions that require
BAHS to hedge risks related to potential rising interest rates. As a result, BAHS entered into a series of
interest rate caps with a notional amount of $160.0 million, protecting against LIBOR interest rates rising
above 3.0% through March 30, 2012.

Stock repurchases

From June 21, 2004 through December 25, 2010, we repurchased $300.0 million, or 6,639,821 shares,
under our common stock repurchase programs. On November 16, 2010, our Board of Directors authorized an
additional $100.0 million for additional repurchases of our common stock, all of which is available as of
December 25, 2010 for future common stock share repurchases.

Redeemable noncontrolling interests

Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to

acquire their ownership interest in those entities. Such redemption prices are equal to fair value based on
third-party valuations. ASC Topic 480-10 is applicable for noncontrolling interests where we are or may be
required to purchase all or a portion of the outstanding interest in a consolidated subsidiary from the
noncontrolling interest holder under the terms of a put option contained in contractual agreements. The
components of the change in the Redeemable noncontrolling interests for the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 are presented in the following table:

Balance, beginning of period ................................................................
Net increase (decrease) in redeemable noncontrolling interests
due to business acquisitions or redemptions ....................................
Net income attributable to redeemable noncontrolling interests ...........
Dividends declared ...............................................................................
Effect of foreign currency translation attributable to
redeemable noncontrolling interests ................................................
Change in fair value of redeemable securities .......................................
Balance, end of period ..........................................................................

December 25,
2010

December 26,
2009

December 27,
2008

178,570

233,035

150,028

62,314
26,054
(12,360)

(71,951)
21,975
(5,973)

14,994
21,929
(2,994)

(2,281)
51,843
304,140

2,065
(581)
178,570

(2,060)
51,138
233,035

Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are

adjusted at each reporting period with a corresponding adjustment to Additional paid-in capital. Future
reductions in the carrying amounts are subject to a “floor” amount that is equal to the fair value of the
redeemable noncontrolling interests at the time they were originally recorded. The recorded value of the
redeemable noncontrolling interests cannot go below the floor level. These adjustments do not impact the
calculation of earnings per share.

Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase

price cash consideration if certain financial targets are met. For acquisitions completed prior to 2009, we
accrue liabilities that may arise from these transactions when we believe that the outcome of the contingency
is determinable beyond a reasonable doubt. For 2009 and future acquisitions, as required by ASC Topic 805,
“Business Combinations,” we have and will accrue liabilities for the estimated fair value of additional
purchase price adjustments at the time of the acquisition. Any adjustments to these accrual amounts will be
recorded in our consolidated statement of income.

Unrecognized tax benefits

As more fully disclosed in Note 12 of “Notes to Consolidated Financial Statements,” we adopted ASC

Topic 740, “Income Taxes,” effective December 31, 2006. We cannot reasonably estimate the timing of
future cash flows related to the unrecognized tax benefits, including accrued interest, of $26.9 million as of
December 25, 2010.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. We base our estimates on historical data, when available, experience, industry and
market trends, and on various other assumptions that are believed to be reasonable under the circumstances,
the combined results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. However, by their nature, estimates are subject to
various assumptions and uncertainties. Reported results are therefore sensitive to any changes in our
assumptions, judgments and estimates, including the possibility of obtaining materially different results if
different assumptions were to be applied.

We believe that the following critical accounting policies, which have been discussed with our audit
committee, affect the significant estimates and judgments used in the preparation of our financial statements:

Revenue Recognition

We generate revenue from the sale of dental, medical and animal health consumable products, as well as
equipment, software products and services and other sources. Provisions for discounts, rebates to customers,
customer returns and other contra-revenue adjustments are recorded based upon historical data and estimates
and are provided for in the period in which the related sales are recognized.

Revenue derived from the sale of consumable products is recognized when products are shipped to
customers. Such sales typically entail high-volume, low-dollar orders shipped using third-party common
carriers. We believe that the shipment date is the most appropriate point in time indicating the completion of
the earnings process because we have no post-shipment obligations, the product price is fixed and
determinable, collection of the resulting receivable is reasonably assured and product returns are reasonably
estimable.

Revenue derived from the sale of equipment is recognized when products are delivered to customers.

Such sales typically entail scheduled deliveries of large equipment primarily by equipment service
technicians. Some equipment sales require minimal installation, which is typically completed at the time of
delivery.

Revenue derived from the sale of software products is recognized when products are shipped to

customers. Such software is generally installed by customers and does not require extensive training due to
the nature of its design. Revenue derived from post-contract customer support for software, including annual
support and/or training, is recognized over the period in which the services are provided.

Revenue derived from the sale of products consisting of multiple elements (i.e., hardware, software,
installation, training and technical support) is allocated to the various elements based upon vendor-specific
objective evidence of fair value or deferred until such time as vendor-specific objective evidence of fair value
is obtained.

Revenue derived from other sources including freight charges, equipment repairs and financial services, is

recognized when the related product revenue is recognized or when the services are provided.

Accounts Receivable and Reserves

The carrying amount of accounts receivable reflects a reserve representing our best estimate of the
amounts that will not be collected. In addition to reviewing delinquent accounts receivable, we consider
many factors in estimating our reserve, including historical data, experience, customer types, credit
worthiness and economic trends. From time to time, we may adjust our assumptions for anticipated changes
in any of these or other factors expected to affect collectibility. Although we believe our judgments, estimates
and/or assumptions related to accounts receivable and reserves are reasonable, making material changes to
such judgments, estimates and/or assumptions could materially affect our financial results.

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method for merchandise or actual cost for large equipment and high tech
equipment. In accordance with our policy for inventory valuation, we consider many factors including the
condition and salability of the inventory, historical sales, forecasted sales and market and economic trends.

From time to time, we may adjust our assumptions for anticipated changes in any of these or other factors

expected to affect salability. Although we believe our judgments, estimates and/or assumptions related to
inventory and reserves are reasonable, making material changes to such judgments, estimates and/or
assumptions could materially affect our financial results.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets (primarily trademarks) are not amortized, but are
subject to impairment analysis at least once annually. Such impairment analyses for goodwill require the
comparison of the fair value to the carrying value of reporting units. Measuring fair value of a reporting unit
is generally based on valuation techniques using multiples of sales or earnings. Although we believe our
judgments, estimates and/or assumptions used in determining fair value are reasonable, making material
changes to such judgments, estimates and/or assumptions could materially affect such impairment analyses
and our financial results.

We regard our reporting units to be our operating segments (dental, medical, animal health and

international) and technology. Goodwill was allocated to such reporting units, for the purposes of preparing
our impairment analyses, based on a specific identification basis. Our impairment analysis for indefinite-
lived intangibles consists of a review of historical, current and forecasted sales and gross profit levels, as well
as a review of any factors that may indicate potential impairment. We assess the potential impairment of
goodwill and other indefinite-lived intangible assets annually (at the end of our third quarter) and on an
interim basis whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. For certain indefinite-lived intangible assets, a present value technique, such as estimates of
future cash flows, is utilized. There were no events or circumstances from the date of that assessment through
December 25, 2010 that impacted our analysis. Some factors we consider important, which could trigger an
interim impairment review, include:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of acquired assets or the strategy for our overall business

(e.g., decision to divest a business); or

• significant negative industry or economic trends.

If we determine through the impairment review process that goodwill or other indefinite-lived intangible

assets are impaired, we will record an impairment charge in our consolidated statement of income.

For the year ended December 25, 2010, the results of our goodwill impairment testing did not result in

any impairments.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized over the period they are
earned. The factors we consider in estimating supplier rebate accruals include forecasted inventory purchases
and sales in conjunction with supplier rebate contract terms which generally provide for increasing rebates
based on either increased purchase or sales volume. Although we believe our judgments, estimates and/or
assumptions related to supplier rebates are reasonable, making material changes to such judgments, estimates
and/or assumptions could materially affect our financial results.

Long-Lived Assets

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment

whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable through the estimated undiscounted future cash flows derived from such assets.

Definite-lived intangible assets primarily consist of non-compete agreements, trademarks, trade names,

customer lists, customer relationships and intellectual property. For long-lived assets used in operations,
impairment losses are only recorded if the asset’s carrying amount is not recoverable through its
undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the
difference between the carrying amount and the estimated fair value. When an impairment exists, the related
assets are written down to fair value. Although we believe our judgments, estimates and/or assumptions used
in estimating cash flows and determining fair value are reasonable, making material changes to such
judgments, estimates and/or assumptions could materially affect such impairment analyses and our financial
results.

Stock-Based Compensation

We measure stock-based compensation at the grant date, based on the estimated fair value of the award.
Prior to March 2009, awards principally included a combination of at-the-money stock options and restricted
stock (including restricted stock units). In March 2009 and March 2010, equity-based awards were granted
solely in the form of restricted stock and restricted stock units, with the exception of stock options for certain
pre-existing contractual obligations.

We estimate the fair value of stock options using the Black-Scholes valuation model which requires us to

make assumptions about the expected life of options, stock price volatility, risk-free interest rates and
dividend yields.

We issue restricted stock that vests based on the recipient’s continued service over time (four-year cliff
vesting) and restricted stock that vests based on our achieving specified performance measurements (three-
year cliff vesting).

With respect to time-based restricted stock, we estimate the fair value on the date of grant based on our

closing stock price. With respect to performance-based restricted stock, the number of shares that ultimately
vest and are received by the recipient is based upon our performance as measured against specified targets
over a three-year period as determined by the Compensation Committee of the Board of Directors. Though
there is no guarantee that performance targets will be achieved, we estimate the fair value of performance-
based restricted stock, based on our closing stock price at time of grant. Adjustments to the performance-
based restricted stock targets are provided for significant events such as acquisitions, divestitures, new
business ventures and share repurchases. Over the performance period, the number of shares of common
stock that will ultimately vest and be issued and the related compensation expense is adjusted upward or
downward based upon our estimation of achieving such performance targets. The ultimate number of shares
delivered to recipients and the related compensation cost recognized as an expense will be based on our actual
performance metrics as defined.

Although we believe our judgments, estimates and/or assumptions related to stock-based compensation
are reasonable, making material changes to such judgments, estimates and/or assumptions could materially
affect our financial results.

Recently Issued Accounting Standards

Accounting pronouncements adopted by us and recently issued accounting pronouncements not yet

adopted by us are included in “Note 1 – Significant Accounting Policies” to the consolidated financial
statements in Part II, Item 8 of this Form 10-K.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, which include changes in interest rates, as well as changes in foreign
currency exchange rates as measured against the U.S. dollar and each other, and changes to the credit markets.
We attempt to minimize these risks by using an interest rate cap agreement and foreign currency forward
contracts and through maintaining counter-party credit limits. These hedging activities provide only limited
protection against interest rate and currency exchange and credit risks. Factors that could influence the
effectiveness of our programs include volatility of the interest rate and currency markets and availability of
hedging instruments and liquidity of the credit markets. All interest rate cap and foreign currency forward
contracts that we enter into are components of hedging programs and are entered into for the sole purpose of
hedging an existing or anticipated interest rate or currency exposure. We do not enter into such contracts for
speculative purposes. We manage our credit risks by diversifying our investments, maintaining a strong
balance sheet and having multiple sources of capital.

Interest Rate Hedges

In connection with the debt incurred as part of the acquisition of Butler Animal Health Supply, LLC
(“BAHS”), BAHS incurred $320.0 million of debt. Interest on the debt is charged at LIBOR plus a margin of
3.5% with a LIBOR floor of 2%. The debt agreement contains a provision that required BAHS to hedge risks
related to potential rising interest rates. As a result, BAHS has entered into series of interest rate caps, with a
notional amount of $160.0 million, protecting against LIBOR interest rates rising above 3% through March
12, 2012.

As of December 25, 2010, the fair value of our interest rate cap agreements recorded in other current and

non-current assets in our consolidated balance sheet was $14 thousand, which represented the amount that
would be received upon unwinding the interest rate cap agreements based on market conditions at that time.
Changes in the fair value of these interest rate cap agreements are reflected as an adjustment to current and
non-current assets or liabilities with an offsetting adjustment to Accumulated other comprehensive income
since the hedge is deemed fully effective.

Foreign Currency Agreements

The value of certain foreign currencies as compared to the U.S. dollar may affect our financial results.

Fluctuations in exchange rates may positively or negatively affect our revenues, gross margins, operating
expenses and retained earnings, all of which are expressed in U.S. dollars. Where we deem it prudent, we
engage in hedging programs using primarily foreign currency forward contracts aimed at limiting the impact
of foreign currency exchange rate fluctuations on earnings. We purchase short-term (i.e., 12 months or less)
foreign currency forward contracts to protect against currency exchange risks associated with intercompany
loans due from our international subsidiaries and the payment of merchandise purchases to foreign suppliers.
We do not hedge the translation of foreign currency profits into U.S. dollars, as we regard this as an
accounting exposure, not an economic exposure.

As of December 25, 2010, the fair value of our foreign currency exchange agreements, which expire
through May 26, 2011, recorded in other current liabilities was $1.6 million, as determined by quoted market
prices. A hypothetical 5% change in the value of the U.S. dollar would change the fair value of our foreign
currency exchange agreements by $2.3 million.

Short-Term Investments

We limit our credit risk with respect to our cash equivalents, available-for-sale securities, short-term
investments and derivative instruments, by monitoring the credit worthiness of the financial institutions who
are the counter-parties to such financial instruments. As a risk management policy, we limit the amount of
credit exposure by diversifying and utilizing numerous investment grade counter-parties.

ITEM 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS
HENRY SCHEIN, INC.

Report of Independent Registered Public Accounting Firm ................................................................

Consolidated Financial Statements:

Balance Sheets as of December 25, 2010 and December 26, 2009 ...............................................

Statements of Income for the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 .......................................................................

Statements of Changes in Stockholders’ Equity for the years ended
December 25, 2010, December 26, 2009 and December 27, 2008 ......................................

Statements of Cash Flows for the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 .......................................................................

Notes to Consolidated Financial Statements .................................................................................

Page

Report of Independent Registered Public Accounting Firm ................................................................

111

Schedule II - Valuation and Qualifying Accounts for the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 ........................................................................

112

All other schedules are omitted because the required information is either inapplicable or is included in the
consolidated financial statements or the notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Henry Schein, Inc.
Melville, New York

We have audited the accompanying consolidated balance sheets of Henry Schein, Inc. as of December 25,

2010 and December 26, 2009 and the related consolidated statements of income, changes in stockholders’
equity and cash flows for each of the three years in the period ended December 25, 2010. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Henry Schein, Inc. at December 25, 2010 and December 26, 2009, and the
results of its operations and its cash flows for each of the three years in the period ended December 25, 2010,
in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Henry Schein, Inc.'s internal control over financial reporting as of December 25, 2010,
based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 22, 2011
expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

New York, New York
February 22, 2011

HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

December 25,
2010

December 26,
2009

ASSETS
Current assets:
Cash and cash equivalents ............................................................................................................
Accounts receivable, net of reserves of $56,267 and $51,724 .....................................................
Inventories, net .............................................................................................................................
Deferred income taxes ..................................................................................................................
Prepaid expenses and other ..........................................................................................................
Total current assets ...............................................................................................................
Property and equipment, net .............................................................................................................
Goodwill ...........................................................................................................................................
Other intangibles, net .......................................................................................................................
Investments and other .......................................................................................................................
Total assets ...........................................................................................................................

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..........................................................................................................................
Bank credit lines ...........................................................................................................................
Current maturities of long-term debt ............................................................................................
Accrued expenses:
Payroll and related ....................................................................................................................
Taxes .........................................................................................................................................
Other .........................................................................................................................................
Total current liabilities .........................................................................................................
Long-term debt .................................................................................................................................
Deferred income taxes ......................................................................................................................
Other liabilities .................................................................................................................................
Total liabilities ......................................................................................................................

Redeemable noncontrolling interests ................................................................................................
Commitments and contingencies

Stockholders' equity:

Preferred stock, $.01 par value, 1,000,000 shares authorized,

none outstanding

Common stock, $.01 par value, 240,000,000 shares authorized,

91,939,477 outstanding on December 25, 2010 and

150,348
885,784
870,206
48,951
214,013
2,169,302
252,573
1,424,794
405,468
295,334
4,547,471

471,154
725,397
775,199
48,001
183,782
2,203,533
259,576
986,395
204,445
182,036
3,835,985

590,029
41,508
4,487

521,079
932
23,560

172,746
91,581
267,736
1,168,087
395,309
190,225
76,753
1,830,374

304,140

155,298
86,034
289,351
1,076,254
243,373
100,976
75,304
1,495,907

178,570

90,630,889 outstanding on December 26, 2009 .......................................................................

Additional paid-in capital ..............................................................................................................
Retained earnings ..........................................................................................................................
Accumulated other comprehensive income ..................................................................................
Total Henry Schein, Inc. stockholders' equity ...............................................................................

Noncontrolling interests ................................................................................................................

919

601,014
1,779,178
30,514
2,411,625

1,332

906

603,772
1,492,607
64,194
2,161,479

Total stockholders' equity .....................................................................................................
Total liabilities, redeemable noncontrolling interests and stockholders' equity ....................

2,412,957
4,547,471

2,161,508
3,835,985

See accompanying notes.

HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

Net sales ..........................................................................................
Cost of sales ....................................................................................
Gross profit ................................................................................
Operating expenses:
Selling, general and administrative ............................................
Restructuring costs .....................................................................
Operating income ..................................................................
Other income (expense):
Interest income ...........................................................................
Interest expense ..........................................................................
Other, net ...................................................................................
Income from continuing operations before taxes,
equity in earnings of affiliates and noncontrolling
interests ............................................................................
Income taxes ...................................................................................
Equity in earnings of affiliates ........................................................
Income from continuing operations .................................................
Income (loss) from discontinued operations, net of tax .............
Net income ......................................................................................
Less: Net income attributable to noncontrolling interests ..........
Net income attributable to Henry Schein, Inc. ................................

Amounts attributable to Henry Schein, Inc.:
Income from continuing operations ...............................................
Income (loss) from discontinued operations, net of tax ................
Net income ....................................................................................

Earnings (loss) per share attributable to Henry Schein, Inc.:

From continuing operations:
Basic ..........................................................................................
Diluted .......................................................................................

From discontinued operations:
Basic ..........................................................................................
Diluted .......................................................................................

From net income:
Basic ..........................................................................................
Diluted .......................................................................................

Weighted-average common shares outstanding:
Basic ..........................................................................................
Diluted .......................................................................................

December 25,
2010

7,526,790
5,355,914
2,170,876

Years ended
December 26,
2009

6,538,336
4,621,516
1,916,820

December 27,
2008

6,380,413
4,506,118
1,874,295

1,637,460
12,285
521,131

14,098
(33,641)
447

1,449,715
3,020
464,085

9,979
(23,370)
2,026

1,431,769
23,240
419,286

16,355
(34,605)
(5,587)

502,035
(160,069)
10,165
352,131
-
352,131
(26,342)
325,789

452,720
(127,521)
5,243
330,442
2,715
333,157
(22,004)
311,153

395,449
(131,210)
5,037
269,276
(7,902)
261,374
(21,917)
239,457

325,789
-
325,789

308,551
2,602
311,153

247,347
(7,890)
239,457

$
$

3.62
3.49

$
$

3.47
3.41

$
$

2.78
2.71

$
$

-
-

$
$

0.03
0.03

$
$

(0.09)
(0.08)

$
$

3.62
3.49

$
$

3.50
3.44

$
$

2.69
2.63

90,097
93,268

88,872
90,556

89,080
91,221

See accompanying notes.

HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share and per share data)

Common Stock
$.01 Par Value

Shares
89,603,660

Amount
$
896

Additional
Paid-in Capital
$

579,125

Accumulated
Other
Comprehensive
Income

Retained
Earnings

Noncontrolling
Interests

Total
Stockholders'
Equity

994,424

100,268

274

1,674,987

239,457

(12)

239,445

Balance, December 29, 2007 ....................................................................

Net income (loss) (excluding $21,929 attributable to Redeemable

noncontrolling interests) ....................................................................

Foreign currency translation loss (excluding $2,060 attributable to

Redeemable noncontrolling interests) ................................................

Unrealized gain from foreign currency hedging activities,

net of tax of $2,526 ............................................................................
Unrealized investment loss, net of tax benefit of $821 .............................
Pension adjustment loss, net of tax benefit of $443 .................................
Total comprehensive income .............................................................

-
-
-

Change in fair value of redeemable securities ..........................................
Stock issued to 401(k) plan ......................................................................
Repurchase and retirement of common stock ...........................................
Stock issued upon exercise of stock options,
including tax benefit of $6,977 .........................................................
Stock-based compensation expense ..........................................................

-
79,723
(1,621,710)

991,259
298,917

Balance, December 27, 2008 ....................................................................

89,351,849

Net income (excluding $21,975 attributable to Redeemable

noncontrolling interests) ....................................................................

Foreign currency translation gain (excluding $2,065 attributable to

Redeemable noncontrolling interests) ................................................

Unrealized gain from foreign currency hedging activities,

net of tax benefit of $3,228 ................................................................
Unrealized investment loss, net of tax benefit of $105 .............................
Pension adjustment loss, net of tax benefit of $1,086 ..............................
Total comprehensive income .............................................................

Purchase of noncontrolling interest ..........................................................
Change in fair value of redeemable securities ..........................................
Stock issued to 401(k) plan ......................................................................
Stock issued upon exercise of stock options,
including tax benefit of $2,642 .........................................................
Stock-based compensation expense ..........................................................
Shares withheld for payroll taxes .............................................................
Liability for cash settlement stock option awards .....................................

-
-
-

-
-
100,778

445,916
802,068
(69,722)
-

-
-
-

-
1
(16)

10
3

894

-
-
-

-
-
1

4
8
(1)
-

-
-
-

(51,138)
4,661
(30,345)

32,616
25,104

560,023

-
-
-

-
581
5,300

14,508
25,916
(2,149)
(407)

-
-
-

-
-
(52,427)

-
-

(75,666)

6,929
(1,201)
(609)

-
-
-

-
-

1,181,454

29,721

311,153

-
-
-

-
-
-
-

46,364

(8,238)
(120)
(3,533)

-
-
-

-
-
-
-

Balance, December 26, 2009 ....................................................................

90,630,889

906

603,772

1,492,607

64,194

Net income (excluding $26,054 attributable to Redeemable

noncontrolling interests) ....................................................................

Foreign currency translation loss (excluding $2,281 attributable to

Redeemable noncontrolling interests) ................................................

Unrealized loss from foreign currency hedging activities,

net of tax benefit of $255 ...................................................................
Unrealized investment gain, net of tax of $215 ........................................
Pension adjustment loss, net of tax benefit of $1,710 ..............................
Total comprehensive income .............................................................

Dividends paid .........................................................................................
Reclassification of noncontrolling interests no longer

subject to redemption .........................................................................

Initial noncontrollling interests and adjustments related to

business acquisitions ..........................................................................
Change in fair value of redeemable securities ..........................................
Stock issued upon conversion of convertible senior notes .......................
Stock issued to 401(k) plan ......................................................................
Repurchase and retirement of common stock ...........................................
Stock issued upon exercise of stock options,
including tax benefit of $8,304 .........................................................
Stock-based compensation expense ..........................................................
Shares withheld for payroll taxes .............................................................
Liability for cash settlement stock option awards .....................................

-
-
-

-
-
732,422
107,662
(1,005,869)

1,248,643
285,742
(60,012)
-

-
-
-

-
-
7
1
(10)

12
3
-
-

-
-
-

(22,077)
(51,843)
12,129
5,720
(18,507)

46,729
29,907
(4,260)
(556)

325,789

-
-
-

-
-
-
-
(39,218)

-
-
-
-

(28,303)

(885)
145
(4,637)

-
-
-
-
-

-
-
-
-

-
-
-

-
-

262

-
-
-

(262)
-
-

-
-
-
-

288

-
-
-

(501)

1,516

-
-
-
-
-

-
-
-
-

(75,666)

6,929
(1,201)
(609)
168,898

(51,138)
4,662
(82,788)

32,626
25,107

1,772,354

311,182

46,364

(8,238)
(120)
(3,533)
345,655

(262)
581
5,301

14,512
25,924
(2,150)
(407)

2,161,508

326,077

(28,303)

(885)
145
(4,637)
292,397

(501)

1,516

(22,077)
(51,843)
12,136
5,721
(57,735)

46,741
29,910
(4,260)
(556)

Balance, December 25, 2010 ....................................................................

91,939,477

919

601,014

1,779,178

30,514

1,332

2,412,957

See accompanying notes.

HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

352,131

333,157

261,374

Cash flows from operating activities:
Net income ............................................................................................
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of discontinued operation, net of tax .........................
Impairment from write-down of long-lived assets of
discontinued operation ................................................................
Depreciation and amortization ........................................................
Amortization of bond discount .......................................................
Stock-based compensation expense ................................................
Provision for losses on trade and other accounts receivable ...........
Benefit from deferred income taxes ................................................
Stock issued to 401(k) plan ............................................................
Undistributed earnings of affiliates .................................................
Other ...............................................................................................
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................................................
Inventories ......................................................................................
Other current assets ........................................................................
Accounts payable and accrued expenses ........................................
Net cash provided by operating activities ...................................................

Cash flows from investing activities:
Purchases of fixed assets .......................................................................
Payments for equity investments and business
acquisitions, net of cash acquired ........................................................
Cash received from business divestiture ................................................
Purchases of available-for-sale securities ..............................................
Proceeds from sales of available-for-sale securities ..............................
Proceeds from maturities of available-for-sale securities ......................
Net proceeds from foreign exchange forward contract
settlements ...........................................................................................
Other ......................................................................................................
Net cash used in investing activities ...........................................................

Cash flows from financing activities:
Proceeds from (repayments of) bank borrowings ..................................
Proceeds from issuance of long-term debt .............................................
Principal payments for long-term debt ..................................................
Proceeds from issuance of stock upon exercise of stock options ...........
Payments for repurchases of common stock ..........................................
Excess tax benefits related to stock-based compensation ......................
Distributions to noncontrolling shareholders ........................................
Acquisitions of noncontrolling interests in subsidiaries ........................
Other ......................................................................................................
Net cash used in financing activities ...........................................................

-
101,214
4,007
29,910
5,564
(6,051)
5,721
(10,165)
3,702

(76,129)
(21,307)
(26,640)
26,917
388,874

(39,000)

(399,575)
-
(26,984)
6,000
26,984

-
4,171
(428,404)

40,500
110,000
(266,051)
38,437
(57,735)
11,292
(12,531)
(146,811)
(357)
(283,256)

(2,382)

-
81,493
5,990
25,924
4,747
(26,214)
5,301
(5,243)
2,373

20,445
(19,242)
375
(29,834)
396,890

(51,627)

(56,648)
12,716
-
9,955
-

275
(12,119)
(97,448)

(4,481)
-
(154,329)
11,870
-
4,680
(2,604)
(52,453)
(358)
(197,675)

Net change in cash and cash equivalents ....................................................
Effect of exchange rate changes on cash and cash equivalents ...................
Cash and cash equivalents, beginning of year ............................................
Cash and cash equivalents, end of year ......................................................

(322,786)
1,980
471,154
150,348

101,767
(183)
369,570
471,154

See accompanying notes.

8,484
78,127
5,649
25,429
6,255
(5,958)
4,662
(5,037)
150

(26,834)
(68,360)
11,261
89,580
384,782

(50,870)

(128,470)
-
(35,925)
5,722
-

41,336
197
(168,010)

(7,197)
-
(33,721)
25,649
(82,788)
11,041
(2,150)
-
1,196
(87,970)

128,802
(6,822)
247,590
369,570

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

Note 1 – Significant Accounting Policies

Nature of Operations

We distribute healthcare products and services primarily to office-based healthcare practitioners in

the combined North American and European markets, with operations in the United States, Australia,
Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland,
Israel, Italy, Luxembourg, the Netherlands, New Zealand, Portugal, Slovakia, Spain, Switzerland and the
United Kingdom. We also have affiliates in Iceland, Saudi Arabia, Turkey and the United Arab Emirates.

Principles of Consolidation

Our consolidated financial statements include the accounts of Henry Schein, Inc. and all of our
controlled subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Investments in unconsolidated affiliates, which are greater than or equal to 20% and less than or equal to
50% owned or investments in unconsolidated affiliates of less than 20% in which we have the ability to
influence the operating or financial decisions, are accounted for under the equity method. See Note 6 for
accounting treatment of Redeemable noncontrolling interests. Certain prior period amounts have been
reclassified to conform to the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted

in the United States requires us to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Fiscal Year

We report our results of operations and cash flows on a 52-53 week basis ending on the last Saturday

of December. The years ended December 25, 2010, December 26, 2009 and December 27, 2008
consisted of 52 weeks.

Revenue Recognition

We generate revenue from the sale of dental, medical and animal health consumable products, as well

as equipment, software products and services and other sources. Provisions for discounts, rebates to
customers, customer returns and other contra-revenue adjustments are recorded based upon historical data
and estimates and are provided for in the period in which the related sales are recognized.

Revenue derived from the sale of consumable products is recognized when products are shipped to
customers. Such sales typically entail high-volume, low-dollar orders shipped using third-party common
carriers. We believe that the shipment date is the most appropriate point in time indicating the completion
of the earnings process because we have no post-shipment obligations, the product price is fixed and
determinable, collection of the resulting receivable is reasonably assured and product returns are
reasonably estimable.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

Revenue derived from the sale of equipment is recognized when products are delivered to customers.

Revenue derived from the sale of software products is recognized when products are shipped to
customers. Such software is generally installed by customers and does not require extensive training due
to the nature of its design. Revenue derived from post-contract customer support for software, including
annual support and/or training, is recognized over the period in which the services are provided.

Revenue derived from other sources including freight charges, equipment repairs and financial

services, is recognized when the related product revenue is recognized or when the services are provided.

Cash and Cash Equivalents

We consider all highly liquid short-term investments with an original maturity of three months or less

to be cash equivalents. Outstanding checks in excess of funds on deposit of $44.7 million and $48.3
million, primarily related to payments for inventory, were classified as accounts payable as of December
25, 2010 and December 26, 2009.

Available-for-sale Securities

As of December 25, 2010, we have approximately $15.1 million invested in auction-rate securities
(“ARS”). ARS are publicly issued securities that represent long-term investments, typically 10-30 years,
in which interest rates had reset periodically (typically every 7, 28 or 35 days) through a “dutch auction”
process. Approximately $13.1 million of our ARS are backed by student loans that are backed by the
federal government and the remaining $2.0 million are invested in closed-end municipal bond funds.

We determine cost of investments in available-for-sale securities on a specific identification basis. As

of December 25, 2010 and December 26, 2009, unrealized losses, which are recorded in Accumulated
other comprehensive income within the equity section of our consolidated balance sheets, on our available-
for-sale securities totaled $1.7 million and $2.2 million, respectively. Gross realized gains and losses were
immaterial in all periods presented.

Accounts Receivable and Reserves

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects our best

estimate of the amounts that will not be collected. The reserve for accounts receivable is comprised of
allowance for doubtful accounts and sales returns. In addition to reviewing delinquent accounts
receivable, we consider many factors in estimating our reserve, including historical data, experience,
customer types, credit worthiness and economic trends. From time to time, we adjust our assumptions for
anticipated changes in any of these or other factors expected to affect collectibility.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

Inventories and Reserves

Inventories consist primarily of finished goods and are valued at the lower of cost or market. Cost is

determined by the first-in, first-out method for merchandise or actual cost for large equipment and high
tech equipment. In accordance with our policy for inventory valuation, we consider many factors
including the condition and salability of the inventory, historical sales, forecasted sales and market and
economic trends. From time to time, we adjust our assumptions for anticipated changes in any of these or
other factors expected to affect the value of inventory.

Direct Shipping and Handling Costs

Freight and other direct shipping costs are included in cost of sales. Direct handling costs, which
represent primarily direct compensation costs of employees who pick, pack and otherwise prepare, if
necessary, merchandise for shipment to our customers are reflected in selling, general and administrative
expenses. Direct shipping and handling costs from continuing operations were $57.0 million, $46.6
million and $49.6 million for the years ended December 25, 2010, December 26, 2009 and December 27,
2008.

Advertising and Promotional Costs

We generally expense advertising and promotional costs as incurred. Total advertising and

promotional expenses from continuing operations were $12.7 million, $12.4 million and $18.4 million for
the years ended December 25, 2010, December 26, 2009 and December 27, 2008. Additionally,
advertising and promotional costs incurred in connection with direct marketing, including product catalogs
and printed material, are deferred and amortized on a straight-line basis over the period which is benefited,
generally not exceeding one year. As of December 25, 2010 and December 26, 2009, we had $3.5 million
and $3.4 million of deferred direct marketing expenses included in other current assets.

Supplier Rebates

Supplier rebates are included as a reduction of cost of sales and are recognized over the period they are

earned. The factors we consider in estimating supplier rebate accruals include forecasted inventory
purchases and sales, in conjunction with supplier rebate contract terms, which generally provide for
increasing rebates based on either increased purchase or sales volume.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation or amortization.

Amortization of leasehold improvements is computed using the straight-line method over the lesser of the
useful life of the assets or the lease term. Depreciation is computed primarily under the straight-line
method (see Note 2, Property and Equipment, Net for estimated useful lives).

Capitalized software costs consist of costs to purchase and develop software. Costs incurred during
the application development stage for software bought and further customized by outside suppliers for our
use and software developed by a supplier for our proprietary use are capitalized. Costs incurred for our
own personnel who are directly associated with software development are capitalized.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

Income Taxes

We account for income taxes under an asset and liability approach that requires the recognition of
deferred income tax assets and liabilities for the expected future tax consequences of events that have been
recognized in our financial statements or tax returns. In estimating future tax consequences, we generally
consider all expected future events other than enactments of changes in tax laws or rates. The effect on
deferred income tax assets and liabilities of a change in tax rates will be recognized as income or expense
in the period that includes the enactment date. We file a consolidated U.S. federal income tax return with
our 80% or greater owned U.S. subsidiaries.

Foreign Currency Translation and Transactions

The financial position and results of operations of our foreign subsidiaries are determined using local

currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the
exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of
exchange prevailing during the year. Translation adjustments arising from the use of differing exchange
rates from period to period are included in Accumulated other comprehensive income in stockholders’
equity. Gains and losses resulting from foreign currency transactions are included in earnings.

Risk Management and Derivative Financial Instruments

We use derivative instruments to minimize our exposure to fluctuations in interest rates and foreign

currency exchange rates. Our objective is to manage the impact that interest rate and foreign currency
exchange rate fluctuations could have on recognized asset and liability fair values, earnings and cash
flows. Our risk management policy requires that derivative contracts used as hedges be effective at
reducing the risks associated with the exposure being hedged and be designated as a hedge at the inception
of the contract. We do not enter into derivative instruments for speculative purposes. Our derivative
instruments primarily include interest rate caps related to our long-term floating rate debt and foreign
currency forward agreements related to certain intercompany loans and certain forecasted inventory
purchase commitments with foreign suppliers.

Our interest rate cap agreements are designated as cash flow hedges. At each balance sheet date, the
interest rate caps are recorded at estimated fair value. Changes in the fair value of the cap are expected to
be highly effective in offsetting the unpredictability in expected future cash flows on floating rate
indebtedness attributable to fluctuations in interest rates. Unrealized gains and losses on the outstanding
balances of the interest rate caps are recorded as a component of Accumulated other comprehensive
income. Gains and losses realized at the time of our quarterly interest payments due to the expiration of
applicable portions of the interest rate caps are reclassified to Interest expense.

Our foreign currency forward agreements related to forecasted inventory purchase commitments are

designated as cash flow hedges. Our foreign currency forward agreements related to foreign currency
balance sheet exposure provide economic hedges but are not designated as hedges for accounting
purposes.

For agreements not designated as hedges, changes in the value of the derivative, along with the
transaction gain or loss on the hedged item, are recorded in earnings. For cash flow hedges, the effective
portion of the changes in the fair value of the derivative, along with any gain or loss on the hedged item, is
recorded as a component of Accumulated other comprehensive income in stockholders’ equity and
subsequently reclassified into earnings in the period(s) during which the hedged transaction affects
earnings.

We classify the cash flows related to our hedging activities in the same category on our consolidated

statements of cash flows as the cash flows related to the hedged item.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

Acquisitions

The net assets of businesses purchased are recorded at their fair value at the acquisition date and our

consolidated financial statements include their results of operations from that date. Any excess of
acquisition consideration over the fair value of identifiable net assets acquired is recorded as goodwill.
Some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash
consideration if certain financial targets are met. For acquisitions completed prior to 2009, we accrue
liabilities that may arise from these transactions when we believe that the outcome of the contingency is
determinable beyond a reasonable doubt. Starting in our 2009 fiscal year, as required by ASC Topic 805,
“Business Combinations,” we have accrued liabilities for the estimated fair value of additional purchase
price adjustments at the time of the acquisition. Any adjustments to these accrual amounts will be
recorded in our consolidated statement of income. For the year ended December 25, 2010, there were no
material adjustments recorded in our consolidated statement of income relating to changes in estimated
contingent purchase price liabilities.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets (primarily trademarks) are not amortized, but are

subject to impairment analysis at least once annually. Such impairment analyses for goodwill require a
comparison of the fair value to the carrying value of reporting units. Measuring fair value of a reporting
unit is generally based on valuation techniques using multiples of sales or earnings. We regard our
reporting units to be our operating segments (dental, medical, animal health and international) and
technology. Goodwill was allocated to such reporting units, for the purposes of preparing our impairment
analyses, based on a specific identification basis. Our impairment analysis for indefinite-lived intangibles
consists of a review of historical, current and forecasted sales and gross profit levels, as well as a review of
any factors that may indicate potential impairment. We assess the potential impairment of goodwill and
other indefinite-lived intangible assets annually (at the end of our third quarter) and on an interim basis
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For
certain indefinite-lived intangible assets, a present value technique, such as estimates of future cash flows,
is utilized. There were no events or circumstances from the date of that assessment through December 25,
2010 that impacted our analysis.

Some factors we consider important that could trigger an interim impairment review include:

• significant underperformance relative to expected historical or projected future operating results;

•

significant changes in the manner of our use of acquired assets or the strategy for our overall
business (e.g., decision to divest a business); or

• significant negative industry or economic trends.

If we determine through the impairment review process that goodwill or other indefinite-lived

intangible assets are impaired, we record an impairment charge in our consolidated statements of income.

For the year ended December 25, 2010, the results of our goodwill impairment testing did not result in

any impairments.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

Long-Lived Assets

Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for
impairment whenever events or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable through the estimated undiscounted future cash flows derived from such assets.

Definite-lived intangible assets primarily consist of non-compete agreements, trademarks, trade names,

Cost of Sales

The primary components of cost of sales include the cost of the product (net of purchase discounts,
supplier chargebacks and rebates) and inbound and outbound freight charges. Costs related to purchasing,
receiving, inspections, warehousing, internal inventory transfers and other costs of our distribution
network are included in selling, general and administrative expenses along with other operating costs.

As a result of different practices of categorizing costs associated with distribution networks throughout
our industry, our gross margins may not necessarily be comparable to other distribution companies. Total
distribution network costs from continuing operations were $54.2 million, $54.6 million and $56.4 million
for the years ended December 25, 2010, December 26, 2009 and December 27, 2008.

Comprehensive Income

Comprehensive income includes certain gains and losses that, under accounting principles generally
accepted in the United States, are excluded from net income as such amounts are recorded directly as an
adjustment to stockholders’ equity. Our comprehensive income is primarily comprised of net income,
foreign currency translation adjustments, unrealized gains (losses) on hedging and investment activity and
pension adjustments.

Accounting Pronouncements Adopted

During February 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2010-09, “Subsequent Events (Topic 855)”. The amended guidance in ASU
2010-09 states that an entity that is an SEC filer is required to evaluate subsequent events through the date
that the financial statements are issued, but is not required to disclose the date through which subsequent
events have been evaluated. The adoption of the provisions of this amendment did not have a material
impact on our consolidated financial statements.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

During January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures

(Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 includes new
disclosure requirements related to fair value measurements, including transfers in and out of Levels 1 and
2 and information about purchases, sales, issuances and settlements for Level 3 fair value measurements.
This update also clarifies existing disclosure requirements relating to levels of disaggregation and
disclosures of inputs and valuation techniques. The new disclosures are required in interim and annual
reporting periods beginning after December 15, 2009, except the disclosures relating to Level 3 activity are
effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal
years. Effective December 27, 2009, we have adopted the provisions relating to Level 1 and Level 2
disclosures and such provisions did not have a material impact on our consolidated financial statements.
We do not expect the provisions relating to Level 3 disclosures to have a material impact on our
consolidated financial statements.

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted
Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification
(“the Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted
accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative. The Codification also
includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification. Following the Codification, the FASB will
not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates which will serve to update the Codification,
provide background information about the guidance and provide the basis for conclusions on the changes
to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and
presented. The Codification was effective for our third quarter 2009 financial statements and the principal
impact on our financial statements is limited to disclosures as all future references to authoritative
accounting literature will be referenced in accordance with the Codification.

In May 2009, the FASB issued guidance within Topic 855-10 relating to subsequent events. This
guidance establishes principles and requirements for subsequent events. This guidance defines the period
after the balance sheet date during which events or transactions that may occur would be required to be
disclosed in a company’s financial statements. Public entities are required to evaluate subsequent events
through the date that financial statements are issued. This guidance also provides guidelines in evaluating
whether or not events or transactions occurring after the balance sheet date should be recognized in the
financial statements. This guidance requires disclosure of the date through which subsequent events have
been evaluated.

In April 2009, the FASB issued guidance within ASC Topic 825-10 concerning interim disclosures

about fair value instruments. This guidance requires that disclosures about the fair value of a company’s
financial instruments be made whenever summarized financial information for interim reporting periods is
made. The provisions of this guidance are effective for interim reporting periods ending after June 15,
2009. The adoption of this guidance did not have a material impact on our consolidated financial
statements.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

In April 2009, the FASB issued, within ASC 820, additional guidance for estimating fair value in
accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly
decreased. The provisions of this additional guidance are effective for interim and annual reporting
periods ending after June 15, 2009. The adoption of this additional guidance did not have a material
impact on our consolidated financial statements.

In April 2009, the FASB amended previous guidance and issued additional guidance within ASC 320
relating to the disclosure requirements for other-than-temporary impairments for debt and equity securities.
This guidance addresses the determination as to when an investment is considered impaired, whether that
impairment is other than temporary, and the measurement of an impairment loss. The provisions of this
guidance are effective for interim and annual reporting periods ending after June 15, 2009. The adoption
of this guidance did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued guidance within ASC Topic 805, “Business Combinations.” ASC
Topic 805 amends the initial recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business combination. This guidance is
effective for assets or liabilities arising from contingencies in business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The adoption of this guidance did not have a material impact on our consolidated
financial statements.

Effective December 28, 2008, we have adopted the provisions of ASC Topic 480-10. ASC Topic 480-
10 is applicable for noncontrolling interests where we are or may be required to purchase (for a price equal
to fair value based on third-party valuations) all or a portion of the outstanding interest in a consolidated
subsidiary from the noncontrolling interest holder under the terms of put options contained in contractual
agreements. As a result of the adoption of the provisions of ASC Topic 480-10, we have recorded the
maximum redemption amount which approximates fair value of the noncontrolling interests subject to put
options as redeemable noncontrolling interests ($304.1 million, $178.6 million and $233.0 million at
December 25, 2010, December 26, 2009 and December 27, 2008, respectively) and reduced Additional
paid-in capital and Noncontrolling interests within the Stockholders’ equity section of our consolidated
balance sheets. The change in carrying value of the noncontrolling interests subject to put options at
December 25, 2010 compared to December 26, 2009 was primarily due to purchases of additional interests
in consolidated subsidiaries and income attributable to noncontrolling interests. Changes in the estimated
redemption amounts of the noncontrolling interests subject to put options are adjusted at each reporting
period with a corresponding adjustment to Additional paid-in capital. These adjustments do not impact the
calculation of earnings per share.

In June 2008, the FASB issued guidance within ASC Topic 815-40, “Contracts in Entity’s Own
Equity.” This guidance provides that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating
the instrument’s contingent exercise and the instruments settlement provisions. ASC Topic 815-40
clarifies the impact of foreign currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. This guidance is effective for fiscal years beginning after
December 15, 2008. The implementation of this guidance did not have a material impact on our
consolidated financial statements.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

In March 2008, the FASB issued guidance within ASC Topic 815, “Derivatives and Hedging.” ASC
Topic 815 requires disclosures of the fair values of derivative instruments and their gains and losses in a
tabular format. ASC Topic 815 also requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative
instruments and disclosures about credit-risk-related contingent features in derivative agreements. This
guidance is effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The adoption of this guidance did not have a material impact on our consolidated
financial statements.

In February 2008, the FASB issued guidance within ASC Topic 820, “Fair Value Measurements and

Disclosures.” This guidance within ASC Topic 820 delayed the effective date of certain provisions of
ASC Topic 820 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years
beginning after November 15, 2008. In October 2008, the FASB issued further guidance under ASC
Topic 820 specifically related to financial assets within the scope of accounting pronouncements that
require or permit fair value measurements in accordance with ASC Topic 820. This guidance clarifies the
application of ASC Topic 820 in determining the fair values of assets or liabilities in a market that is not
active. ASC Topic 820 was effective upon issuance, including prior periods for which financial statements
have not been issued. The adoption of this guidance did not have an impact on our consolidated financial
statements.

In January 2008, the FASB issued guidance within ASC Topic 260, “Earnings Per Share.” ASC Topic

260 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and should be included in the
two-class method of computing earnings per share. ASC Topic 260 is effective for fiscal years beginning
after December 15, 2008. The adoption of ASC Topic 260 did not have a material impact on our
consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2010, the FASB issued ASU 2010-29, which contains updated accounting guidance to

clarify the acquisition date that should be used for reporting pro forma financial information when
comparative financial statements are issued. This update requires that a company should disclose revenue
and earnings of the combined entity as though the business combination(s) that occurred during the current
year had occurred as of the beginning of the comparable prior annual reporting period only. This update
also requires disclosure of the nature and amount of material, nonrecurring pro forma adjustments. The
provisions of this update, which are to be applied prospectively, are effective for business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2010, with early adoption permitted. The impact of this update on our consolidated
financial statements will depend on the size and nature of future business combinations.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 1 – Significant Accounting Policies – (Continued)

During October 2009, the FASB issued ASU 2009-13 which amended guidance contained within ASC
Topic 605-25 related to revenue recognition for multiple-element arrangements. The amendments in this
update establish a selling price hierarchy for determining the selling price of a deliverable. These
amendments also will replace the term fair value in the revenue allocation guidance with selling price to
clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a
marketplace participant. The guidance in this update will require that a vendor determine its best estimate
of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on
a standalone basis. The amendments in this update will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The
provisions are not expected to have a material impact on our consolidated financial statements.

Note 2 – Property and Equipment, Net

Property and equipment consisted of the following:

Land .....................................................................................................
Buildings and permanent improvements ..............................................
Leasehold improvements .....................................................................
Machinery and warehouse equipment ..................................................
Furniture, fixtures and other ................................................................
Computer equipment and software ......................................................

Less accumulated depreciation and amortization ................................
Property and equipment, net ...........................................................

December 25,
2010

December 26,
2009

13,151
98,501
58,228
60,927
72,406
209,095
512,308
(259,735)
252,573

12,644
97,983
60,392
73,003
73,069
239,543
556,634
(297,058)
259,576

The decrease in gross property and equipment during the year ended December 25, 2010 is primarily

attributable to the write-off of fully depreciated property and equipment.

Depreciation is computed primarily under the straight-line method over the following estimated useful

lives:

Buildings and permanent improvements ...........
Machinery and warehouse equipment ..............
Furniture, fixtures and other .............................
Computer equipment and software ...................

Years
40
5-10
3-10
3-10

The net carrying value of equipment held under capital leases amounted to approximately $3.2 million

and $5.5 million as of December 25, 2010 and December 26, 2009. Property and equipment related
depreciation expense, from continuing operations, for the years ended December 25, 2010, December 26,
2009 and December 27, 2008 was $49.1 million, $46.4 million and $45.1 million.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 3 – Goodwill and Other Intangibles, Net

The changes in the carrying amount of goodwill for the years ended December 25, 2010 and December

26, 2009 were as follows:

Balance as of December 27, 2008 ....................................
Adjustments to goodwill:
Acquisitions .................................................................
Discontinued operation impairment ............................
Foreign currency translation ........................................
Balance as of December 26, 2009 ....................................
Adjustments to goodwill:
Acquisitions .................................................................
Foreign currency translation ........................................
Balance as of December 25, 2010 ....................................

Other intangible assets consisted of the following:

Healthcare
Distribution

Technology

Total

856,623

66,329

922,952

40,817
(444)
15,674
912,670

4,383
-
3,013
73,725

45,200
(444)
18,687
986,395

445,089
(10,934)
1,346,825

5,530
(1,286)
77,969

450,619
(12,220)
1,424,794

December 25, 2010

Accumulated

December 26, 2009

Accumulated

Cost

Amortization

Net

Cost

Amortization

Net

Non-compete agreements ...................................

44,309

(6,089)

38,220

27,800

(6,460)

21,340

Trademarks / trade names - definite lived ...........

Trademarks / trade names - indefinite lived ........

Customer relationships and lists .........................

Other ...................................................................

40,346

25,059

384,365

42,309

(13,666)

(98,906)

(12,259)

26,680

25,059

285,459

30,050

18,892

26,720

192,004

36,728

(11,026)

(69,235)

(10,978)

7,866

26,720

122,769

25,750

Total .............................................................

536,388

(130,920)

405,468

302,144

(97,699)

204,445

Non-compete agreements represent amounts paid primarily to key employees and prior owners of
acquired businesses, as well as certain sales persons, in exchange for placing restrictions on their ability to
pose a competitive risk to us. Such amounts are amortized, on a straight-line basis over the respective non-
compete period, which generally commences upon termination of employment or separation from us. The
weighted-average non-compete period for agreements currently being amortized was approximately six
years as of December 25, 2010.

Trademarks, trade names, customer lists and customer relationships were established through business

acquisitions. Definite-lived trademarks and trade names are amortized on a straight-line basis over a
weighted-average period of approximately six years as of December 25, 2010. Customer relationships and
customer lists are definite-lived intangible assets that are amortized on a straight-line basis over a
weighted-average period of approximately 11 years as of December 25, 2010. The increase in customer
relationships and customer lists during the year ended December 25, 2010 is primarily attributable to the
acquisition of BAHS.

Amortization expense, attributable to continuing operations, related to definite-lived intangible assets

for the years ended December 25, 2010, December 26, 2009 and December 27, 2008 was $47.2 million,
$30.6 million and $27.9 million. The annual amortization expense expected for the years 2011 through
2015 is $50.2 million, $48.3 million, $41.2 million, $35.0 million and $32.3 million.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 4 – Investments and Other

Investments and other consisted of the following:

December 25,
2010

December 26,
2009

Investment in unconsolidated affiliates (1) ....................................................
Non-current deferred foreign, state and local income taxes ...........................
Notes receivable (2) .......................................................................................
Auction rate securities, net of temporary impairment ....................................
Distribution rights and exclusivity agreements, net of amortization ..............
Security deposits ............................................................................................
Debt issuance costs, net of amortization ........................................................
Other long-term assets ...................................................................................
Total ...........................................................................................................

198,613
30,894
17,098
13,367
4,978
3,435
9,015
17,934
295,334

86,117
33,201
23,437
18,848
5,311
3,197
1,931
9,994
182,036

(1) Increase in investment in unconsolidated affiliates during the year ended December 25, 2010 is primarily due to the purchase

of new equity interests.

(2) Long-term notes receivable carry interest rates ranging from 1.52% to 12.0% and are due in varying installments through 2020.

Amortization of other long-term assets, from continuing operations, for the years ended December 25,

2010, December 26, 2009 and December 27, 2008 was $4.9 million, $4.5 million and $4.5 million.

Note 5 – Debt

Bank Credit Lines

On September 5, 2008, we entered into a $400 million revolving credit facility with a $100 million
expansion feature. The $400 million credit line expires in September 2013. This credit line replaced our
then existing $300 million revolving credit line, which would have expired in May 2010. The interest rate
is based on USD LIBOR plus a spread based on our leverage ratio at the end of each financial reporting
quarter. The agreement provides, among other things, that we maintain certain interest coverage and
maximum leverage ratios, and contains restrictions relating to subsidiary indebtedness, liens, employee
and shareholder loans, disposal of businesses and certain changes in ownership. In addition to the amounts
outstanding under our shelf facilities, discussed below, we have outstanding borrowings of approximately
$30.0 million under our $400 million credit facility. As of December 25, 2010, there were $9.8 million of
letters of credit provided to third parties.

As of December 25, 2010, we had various other short-term bank credit lines available, of which
approximately $11.5 million was outstanding. As of December 25, 2010, borrowings under our credit
lines had a weighted average interest rate of 2.58% and were collateralized by assets with an aggregate net
carrying value of $245.6 million.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 5 – Debt – (Continued)

On August 10, 2010, we entered into a $400 million private placement shelf facilities with two
insurance companies. These shelf facilities are available through August 2013 on an uncommitted basis.
The facilities allow us to issue senior promissory notes to the lenders at a fixed rate based on an agreed
upon spread over applicable treasury notes at the time of issuance. The term of each possible issuance will
be selected by us and can range from five to 15 years (with an average life no longer than 12 years). The
proceeds of any issuances under the facilities will be used for general corporate purposes, including
working capital and capital expenditures, to refinance existing indebtedness and/or to fund potential
acquisitions. The agreement provides, among other things, that we maintain certain maximum leverage
ratios, and contains restrictions relating to subsidiary indebtedness, liens, employee and shareholder loans,
disposal of businesses and certain changes in ownership. As of December 25, 2010, we have an
outstanding balance under the facilities of $100.0 million at a fixed rate of 3.79%, which is due on
September 2, 2020.

The debt incurred as part of the acquisition of Butler Animal Health Supply, LLC (“BAHS”) is

repayable in 23 quarterly installments of $0.8 million through September 30, 2015, and a final installment
of $301.6 million on December 31, 2015. Interest on the BAHS debt is charged at LIBOR plus a margin
of 3.5% with a LIBOR floor of 2% for a current effective rate of 5.5% as of December 25, 2010. The
agreement provides, among other things, that we maintain certain interest coverage and maximum leverage
ratios, and contains restrictions relating to subsidiary indebtedness, capital expenditures, liens, employee
and shareholder loans, disposal of businesses and certain changes in ownership. In addition, the debt
agreement contains provisions which, under certain circumstances, require BAHS to make prepayments
based on excess cash flows of BAHS as defined in the debt agreement. The debt agreement also contains
provisions that require BAHS to hedge risks related to potential rising interest rates. As a result, BAHS
entered into a series of interest rate caps, with a notional amount of $160.0 million, protecting against
LIBOR interest rates rising above 3.0% through March 30, 2012.

Long-term debt

Long-term debt consisted of the following:

Private placement debt .......................................................................................
Senior notes .......................................................................................................
Convertible debt (net of discount of $4.0 million) .............................................
Notes payable to banks (net of a discount of $1.3 million) at an
interest rate of 5.5% (1) ................................................................................
Various collateralized and uncollateralized loans payable with interest,
in varying installments through 2015 at interest rates ranging
from 3.3% to 8.25% .....................................................................................
Capital lease obligations (see Note 17) .............................................................
Total ..................................................................................................................
Less current maturities .......................................................................................
Total long-term debt ....................................................................................

December 25,
2010

December 26,
2009

100,000
-
-

$
-
20,453
235,993

279,055

16,522
4,219
399,796
(4,487)
395,309

4,836
5,632
266,933
(23,560)
243,373

(1) Increase in notes payable balance at December 25, 2010 is primarily attributable to the debt incurred as part of the acquisition

of BAHS.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 5 – Debt – (Continued)

The Convertible Notes were senior unsecured obligations bearing a fixed annual interest rate of 3.0%

and were due to mature on August 15, 2034. The Convertible Notes were convertible into our common
stock at a conversion ratio of 21.58 shares per one thousand dollars of principal amount of notes, which is
equivalent to a conversion price of $46.34 per share, under the following circumstances:

•

if the price of our common stock was above 130% of the conversion price measured over a
specified number of trading days;

• during the five-business-day period following any 10-consecutive-trading-day period in which
the average of the trading prices for the Convertible Notes for that 10-trading-day period was
less than 98% of the average conversion value for the Convertible Notes during that period;

•

if the Convertible Notes have been called for redemption; or

• upon the occurrence of a fundamental change or specified corporate transactions, as defined in

the Convertible Note agreement.

On September 3, 2010, we paid approximately $240 million in cash and issued 732 shares of our
common stock in connection with the redemption of our $240.0 million of Convertible Notes, which were
issued in 2004.

As of December 25, 2010, the aggregate amounts of long-term debt, including capital leases, maturing

in each of the next five years and thereafter are as follows:

2011 .............................................................................................
2012 .............................................................................................
2013 .............................................................................................
2014 .............................................................................................
2015 .............................................................................................
Thereafter .....................................................................................

4,487
5,533
3,322
15,298
4,899
366,257

Total ........................................................................................

399,796

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 6 – Redeemable Noncontrolling Interests

Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us

to acquire their ownership interest in those entities. Such redemption prices are equal to fair value based
on third-party valuations. ASC Topic 480-10 is applicable for noncontrolling interests where we are or
may be required to purchase all or a portion of the outstanding interest in a consolidated subsidiary from
the noncontrolling interest holder under the terms of a put option contained in contractual agreements. The
components of the change in the Redeemable noncontrolling interests for the years ended December 25,
2010, December 26, 2009 and December 27, 2008 are presented in the following table:

December 25,
2010

December 26,
2009

December 27,
2008

178,570

233,035

150,028

62,314
26,054
(12,360)

(71,951)
21,975
(5,973)

14,994
21,929
(2,994)

(2,281)
51,843
304,140

2,065
(581)
178,570

(2,060)
51,138
233,035

Changes in the estimated redemption amounts of the noncontrolling interests subject to put options are

Some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash

consideration if certain financial targets are met. For acquisitions completed prior to 2009, we accrue
liabilities that may arise from these transactions when we believe that the outcome of the contingency is
determinable beyond a reasonable doubt. Starting in our 2009 fiscal year, as required by ASC Topic 805,
“Business Combinations,” we have accrued liabilities for the estimated fair value of additional purchase
price adjustments at the time of the acquisition. Any adjustments to these accrual amounts will be
recorded in our consolidated statement of income. For the year ended December 25, 2010, there were no
material adjustments recorded in our consolidated statement of income relating to changes in estimated
contingent purchase price liabilities.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 7 – Comprehensive Income

Comprehensive income includes certain gains and losses that, under GAAP, are excluded from net

income as such amounts are recorded directly as an adjustment to stockholders’ equity. Our
comprehensive income is primarily comprised of net income, foreign currency translation adjustments,
unrealized gains (losses) on hedging and investment activity and pension adjustments.

The following table summarizes our Accumulated other comprehensive income, net of applicable

taxes as of:

Attributable to Redeemable noncontrolling interests:
Foreign currency translation adjustment ............................

(864)

1,417

(648)

December 25,
2010

December 26,
2009

December 27,
2008

Attributable to Henry Schein, Inc.:
Foreign currency translation adjustment .................................
Unrealized gain (loss) from foreign currency
hedging activities ...............................................................
Unrealized investment loss .....................................................
Pension adjustment loss ..........................................................
Accumulated other comprehensive income .......................

41,138

69,441

23,077

(1,060)
(1,176)
(8,388)
30,514

(175)
(1,321)
(3,751)
64,194

8,063
(1,201)
(218)
29,721

Total Accumulated other comprehensive income ...................

29,650

65,611

29,073

The following table summarizes other comprehensive income attributable to our Redeemable

noncontrolling interests, net of applicable taxes for the years ended:

December 25,
2010

December 26,
2009

December 27,
2008

Foreign currency translation adjustment .....................................

(2,281)

2,065

(2,060)

The following table summarizes our total comprehensive income, net of applicable taxes for the years

ended:

December 25,
2010

December 26,
2009

December 27,
2008

Comprehensive income attributable to
Henry Schein, Inc. .........................................................
Comprehensive income (loss) attributable to
noncontrolling interests .................................................
Comprehensive income attributable to Redeemable
noncontrolling interests .................................................
Comprehensive income ........................................................

292,109

345,626

168,910

288

(12)

23,773
316,170

24,040
369,695

19,869
188,767

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 8 – Fair Value Measurements

ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”) establishes a
framework for measuring fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. ASC Topic 820 applies under other previously issued accounting
pronouncements that require or permit fair value measurements but does not require any new fair value
measurements.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820
establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed
based on market data obtained from independent sources (observable inputs) and (2) an entity’s own
assumptions about market participant assumptions developed based on the best information available in
the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted

quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are
described as follows:

• Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities that are

accessible at the measurement date.

• Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that
are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs
that are derived principally from or corroborated by observable market data by correlation or other
means.

• Level 3— Inputs that are unobservable for the asset or liability.

The following section describes the valuation methodologies that we used to measure different

financial instruments at fair value.

Cash equivalents and trade receivables

Due to the short-term maturity of such investments, the carrying amounts are a reasonable estimate of

fair value.

Long-term investments and notes receivable

There are no quoted market prices available for investments in unconsolidated affiliates and long-term

notes receivable; however, we believe the carrying amounts are a reasonable estimate of fair value.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 8 – Fair Value Measurements – (Continued)

Auction-rate securities

As of December 25, 2010, we have approximately $15.1 million ($13.4 million net of temporary
impairments) invested in auction-rate securities (“ARS”), which are included as part of Investments and
other within our consolidated balance sheets. ARS are publicly issued securities that represent long-term
investments, typically 10-30 years, in which interest rates had reset periodically (typically every 7, 28 or
35 days) through a “dutch auction” process. Approximately $13.1 million ($11.4 million net of temporary
impairments) of our ARS are backed by student loans that are backed by the federal government and the
remaining $2.0 million are invested in closed-end municipal bond funds. Our ARS portfolio is comprised
of investments that are rated AAA by major independent rating agencies. Since the middle of February
2008, ARS auctions have failed to settle due to an excess number of sellers compared to buyers. The
failure of these auctions has resulted in our inability to liquidate our ARS in the near term. We are
currently not aware of any defaults or financial conditions that would negatively affect the issuers’ ability
to continue to pay interest and principal on our ARS. We continue to earn and receive interest at
contractually agreed upon rates.

During 2010, we received approximately $0.4 million and $5.6 million of redemptions, at par, for our

closed-end municipal bond funds and our student loan portfolios, respectively.

As of December 25, 2010, we have continued to classify our closed-end municipal bond funds, as well

as our student loan portfolios, as Level 3 within the fair value hierarchy due to the lack of observable
inputs and the absence of significant refinancing activity.

Based upon the information currently available and the use of a discounted cash flow model in
accordance with applicable authoritative guidance, our previously recorded cumulative temporary
impairment at December 26, 2009 of $2.2 million related to our closed-end municipal bond funds and our
student loan portfolios was decreased to $1.7 million during the year ended December 25, 2010. The
decrease in the temporary impairment was due to the level of redemptions and changes in interest rates
during the year. The temporary impairment has been recorded as part of Accumulated other
comprehensive income within the equity section of our consolidated balance sheet.

Money market fund

As of December 25, 2010, we had approximately $0.2 million, $0 net of reserves, invested in the
Reserve Primary Fund. This money market fund included in its holdings commercial paper of Lehman
Brothers. As a result of the Chapter 11 bankruptcy of Lehman Brothers Holdings, Inc., the net asset value
of the fund decreased below $1.00. During the year ended December 25, 2010, we received approximately
$1.8 million of distributions from the Reserve Primary Fund. We do not expect to receive any additional
redemptions from the Reserve Primary Fund. As of December 25, 2010, the value of our holdings in this
fund are classified as Level 3 within the fair value hierarchy, due to the lack of observable inputs and the
absence of trading activity.

Accounts payable and accrued expenses

Financial liabilities with carrying values approximating fair value include accounts payable and other

accrued liabilities. The carrying value of these financial instruments approximates fair value due to their
short maturities.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 8 – Fair Value Measurements – (Continued)

Debt

The fair value of our debt is estimated based on quoted market prices for our traded debt and on
market prices of similar issues for our private debt. The fair value of our debt as of December 25, 2010
and December 26, 2009 was estimated at $441.3 million and $307.5 million.

Derivative contracts

Derivative contracts are valued using quoted market prices and significant other observable and
unobservable inputs. We use derivative instruments to minimize our exposure to fluctuations in interest
rates and foreign currency exchange rates. Our derivative instruments primarily include interest rate caps
related to our long-term floating rate debt and foreign currency forward agreements related to
intercompany loans and certain forecasted inventory purchase commitments with suppliers.

The fair values for the majority of our foreign currency and interest rate derivative contracts are

obtained by comparing our contract rate to a published forward price of the underlying market rates, which
is based on market rates for comparable transactions and are classified within Level 2 of the fair value
hierarchy.

Redeemable noncontrolling interests

Some minority shareholders 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 based on third-party valuations. The
noncontrolling interests subject to put options are adjusted to their estimated redemption amounts each
reporting period with a corresponding adjustment to Additional paid-in capital. Future reductions in the
carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable
noncontrolling interests at the time they were originally recorded. The recorded value of the redeemable
noncontrolling interests cannot go below the floor level. These adjustments will not impact the calculation
of earnings per share. The details of the changes in Redeemable noncontrolling interests are shown in
Note 6.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 8 – Fair Value Measurements – (Continued)

The following table presents our assets and liabilities that are measured and recognized at fair value on
a recurring basis classified under the appropriate level of the fair value hierarchy as of December 25, 2010
and December 26, 2009:

December 25, 2010

Level 1

Level 2

Level 3

Total

Assets:
Available-for-sale securities ........................
Money market fund ......................................
Derivative contracts .....................................
Total assets ...........................................

-
$
-
-
$
-

-
$
-
1,213
1,213

13,367
-
-
13,367

13,367
-
1,213
14,580

Liabilities:
Derivative contracts .....................................
Total liabilities ......................................

$
-
$
-

$
$

2,771
2,771

$
-
$
-

$
$

2,771
2,771

Redeemable noncontrolling interests ..................

$
-

304,140

December 26, 2009

Level 1

Level 2

Level 3

Total

-
$
-
-
$
-

-
$
-
6,177
6,177

18,848
1,746
-
20,594

18,848
1,746
6,177
26,771

Liabilities:
Derivative contracts .....................................
Total liabilities ......................................

$
-
$
-

$
$

5,234
5,234

$
-
$
-

$
$

5,234
5,234

Redeemable noncontrolling interests ..................

$
-

178,570

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 8 – Fair Value Measurements – (Continued)

As of December 25, 2010, we have estimated the value of our closed-end municipal bond fund ARS

portfolio and our student loan backed ARS portfolio based upon a discounted cash flow model. The
assumptions used in our valuation model include estimates for interest rates, timing and amount of cash
flows and expected holding periods for the ARS portfolio. As a result of these analyses, our previously
recorded cumulative temporary impairment at December 26, 2009 of $2.2 million was decreased by $0.5
million to $1.7 million during the year ended December 25, 2010.

We estimated the value of our holdings within the Reserve Primary Fund based upon the net asset

value of the fund as of September 16, 2008, subsequent to the declaration of bankruptcy by Lehman
Brothers Holdings, Inc. During the year ended December 25, 2010, we received approximately $1.8
million of distributions from The Reserve Primary Fund, leaving a remaining balance of approximately
$0.2 million, $0 net of reserves, as of December 25, 2010.

The following table presents a reconciliation of our assets and liabilities measured at fair value on a

recurring basis using unobservable inputs (Level 3):

Balance, December 29, 2007 ..............................................................................................
Transfers to Level 3 ............................................................................................................
Change in redeemable noncontrolling interests ..................................................................
Losses:
Reported in earnings - Reserve Primary Fund increase ...................................................
Reported in accumulated other comprehensive income ...................................................
Balance, December 27, 2008 ..............................................................................................
Change in redeemable noncontrolling interests ..................................................................
Redemptions at par .............................................................................................................
Gains and (losses):
Reported in earnings - Reserve Primary Fund reduction .................................................
Reported in accumulated other comprehensive income ...................................................
Balance, December 26, 2009 ..............................................................................................
Change in redeemable noncontrolling interests ..................................................................
Redemptions at par .............................................................................................................
Gains:
Reported in earnings - Reserve Primary Fund reduction .................................................
Reported in accumulated other comprehensive income ...................................................
Balance, December 25, 2010 ..............................................................................................

Level 3 (1)

150,028
36,318
83,007

(750)
(2,022)
266,581
(54,465)
(13,227)

500
(225)
199,164
125,728
(7,781)

36
360
317,507

(1) Level 3 amounts consist of closed-end municipal bond funds, student loan backed auction-rate securities, money market fund
and redeemable noncontrolling interests. See Note 6 for the components of the changes in Redeemable noncontrolling
interests.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 9 – Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions

Acquisitions

The operating results of all acquisitions are reflected in our financial statements from their respective

acquisition dates.

Effective December 31, 2009, we acquired a majority interest in Butler Animal Health Holding
Company, LLC (“Butler Holding”), the holding company of BAHS, a distributor of companion animal
health supplies to veterinarians. BAHS further complements our domestic and international animal health
operations and accordingly has been included in our Animal health operating segment, which is reported as
part of Healthcare distribution. We contributed certain assets and liabilities with a net book value of
approximately $86.0 million related to our United States animal health business to BAHS and paid
approximately $42.0 million in cash to acquire 50.1% of the equity interests in Butler Holding indirectly
through W.A. Butler Company, a holding company that is partially owned by Oak Hill Capital Partners
(“OHCP”). As part of a recapitalization at closing, BAHS combined with our animal health business to
form Butler Schein Animal Health (“BSAH”), while incurring approximately $127.0 million in
incremental debt used primarily to finance Butler Holding stock redemptions. As a result, BSAH had
$320.0 million of debt at closing, $37.5 million of which was provided by Henry Schein, Inc. and is
eliminated in the accompanying consolidated financial statements. Total consideration for the acquisition
of BAHS, including $96.1 million of value for noncontrolling interests, was $351.1 million and was
allocated as follows:

Net assets of BAHS at fair value:
Current assets ......................................................................................................................................

164,789

Intangible assets:
Trade name (useful life 3 years) ......................................................................................................
Customer relationships (useful life 12 years) ...................................................................................
Non-compete agreements (useful life 2 years) .................................................................................
Goodwill .............................................................................................................................................
Other assets .........................................................................................................................................
Current liabilities ................................................................................................................................
Bank indebtedness ..............................................................................................................................
Deferred income tax liabilities ............................................................................................................
Net book value of our assets and liabilities contributed .....................................................................
Total allocation of consideration ...................................................................................................

10,000
140,000
2,600
270,714
14,138
(62,770)
(200,100)
(74,271)
86,048
351,148

The goodwill recognized is primarily attributable to expected synergies and the assembled workforce

of BAHS. The goodwill is not expected to be tax deductible for income tax purposes. As a result of our
contributed business being under the control of Henry Schein before and after the transaction, the assets
and liabilities of this business remain at their original historical accounting basis in the accompanying
consolidated financial statements.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 9 – Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions –
(Continued)

The debt incurred as part of the acquisition of BAHS is repayable in 23 quarterly installments of $0.8

million through September 30, 2015, and a final installment of $301.6 million on December 31, 2015.
Interest on the BAHS debt is charged at LIBOR plus a margin of 3.5% with a LIBOR floor of 2% for a
current effective rate of 5.5% as of December 25, 2010. The debt agreement contains provisions which,
under certain circumstances, require BAHS to make prepayments based on excess cash flows of BAHS as
defined in the debt agreement. The debt agreement also contains provisions that require BAHS to hedge
risks related to potential rising interest rates. As a result, BAHS entered into a series of interest rate caps,
with a notional amount of $160.0 million, protecting against LIBOR interest rates rising above 3.0%
through March 30, 2012.

In connection with the acquisition of a majority interest in BAHS, we entered into (i) a Put Rights
Agreement with OHCP and Butler Holding (the “Oak Hill Put Rights Agreement”), and (ii) a Put Rights
Agreement with Burns Veterinary Supply, Inc. (“Burns”) and Butler Holding (the “Burns Put Rights
Agreement” and together with the Oak Hill Put Rights Agreement, the “Put Rights Agreements”), which
provide each of OHCP and Burns with certain rights to require us to purchase their respective direct and
indirect ownership interests in Butler Holding at fair value based on third-party valuations (“Put Rights”).
Our maximum annual payment to OHCP under the Oak Hill Put Rights Agreement will not exceed $125.0
million for the first year during which OHCP can exercise its rights, $137.5 million for the second year and
$150.0 million for the third year and for each year thereafter. Pursuant to the Burns Put Rights Agreement,
Burns can exercise its Put Rights from and after December 31, 2014, at which time Burns will be permitted
to sell to us up to 20% of its closing date ownership interest in Butler Holding each year. If OHCP still
holds ownership interests in Butler Holding at the time the Burns Put Rights begin, then the put amounts
payable by us to OHCP and Burns in any year will not exceed $150.0 million in the aggregate. As a result
of the Put Right Agreements, the noncontrolling interest in BAHS has been reflected as part of
Redeemable noncontrolling interests in the accompanying consolidated balance sheet.

In addition to the BAHS acquisition, we completed certain other acquisitions during the year ended
December 25, 2010, which were immaterial to our financial statements individually and in the aggregate
and resulted in the recording of approximately $162.9 million of initial goodwill through preliminary
purchase price allocations.

We completed certain acquisitions during the year ended December 26, 2009, which were immaterial

to our financial statements individually and in the aggregate.

On December 23, 2008, we acquired DNA Anthos Impianti (DNA), Medka and Noviko. DNA is a

distributor of the Anthos brand of dental equipment in Italy. DNA also sells dental consumable
merchandise and provides technical services. Medka, headquartered in Berlin, is a full-service provider of
medical consumables, equipment and technical services primarily to physicians. Noviko, headquartered in
Brno, is a distributor of veterinary supplies in the Czech Republic.

The aggregate initial purchase price for the acquisitions of DNA, Medka and Noviko was

approximately $52.9 million. The aggregate 2008 sales for these three companies were approximately
$165.0 million. As of December 27, 2008, we recorded initial goodwill of approximately $34.8 million
related to these acquisitions.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 9 – Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions –
(Continued)

In addition to these acquisitions, we completed other acquisitions during the year ended December 27,

2008 which resulted in the recording of approximately $28.9 million of initial goodwill through
preliminary purchase price allocations. These other acquisitions were immaterial to our financial
statements individually and in the aggregate.

Discontinued Operations and Divestitures

On August 5, 2009, we completed the sale of a wholesaler of dental consumables for aggregate
consideration of $14.2 million. Prior results for this business have been presented as discontinued
operations in the accompanying consolidated statements of income. The total pretax income from
discontinued operations for the year ended December 26, 2009 was $6.5 million ($2.6 million after taxes)
consisting of a $6.0 million ($2.4 million after taxes) gain on the sale and $0.5 million ($0.2 million after
taxes) income from operations. The total pretax loss from discontinued operations for this business for the
year ended December 27, 2008 was $0.1 million (nil after taxes).

Net sales generated by our wholesaler of dental consumables were $8.0 million and $14.5 million for

the years ended December 26, 2009 and December 27, 2008, respectively.

During November 2008, we reached a decision to exit the wholesale ultrasound business and dispose

of such operations during the fourth quarter of 2008. This business was a component of our healthcare
distribution business.

In connection with this decision, we assessed our long-lived assets for impairment, which resulted in
the recording of an impairment charge of approximately $11.2 million (approximately $7.3 million after-
tax) for the write-down of all long-lived assets, including goodwill of $6.7 million. The total pretax loss
from discontinued operations for this business for the year ended December 27, 2008 was $12.1 million
($7.9 million after taxes).

Net sales generated by this business were $12.7 million for the year ended December 27, 2008.

We have classified the operating results of these businesses as discontinued operations in the

accompanying consolidated statements of income for all periods presented.

Loan and Investment Agreement

On December 12, 2008, we converted $10.4 million of loan receivables and related accrued interest
into an equity interest of 15.33% in D4D Technologies, LLC (“D4D”). Due to the conversion, we now
account for our equity interest in D4D under the equity method of accounting prospectively from the date
of conversion.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 9 – Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions –
(Continued)

In addition, under our previous agreement, if certain product specification and performance milestones

occurred, we were required to pay additional amounts (as equity contributions) to certain of D4D’s
members equal to $16.0 million. On August 3, 2009, we entered into an amendment whereby we paid
certain of D4D’s members approximately $8.0 million and agreed to make two contingent payments of up
to $4.0 million each based on D4D meeting certain financial performance criteria in 2009, 2010 and 2011.
A total of $2.6 million of these amounts have been earned and will be paid in two equal payments upon
receipt of audited financials for fiscal 2010 and 2011. A contingent payment with respect to fiscal 2010
and 2011 of up to an additional $2.7 million per year may be earned based on D4D’s financial
performance. The August 3, 2009 payment of approximately $8.0 million is included in Investments and
other in our consolidated financial statements and is being amortized over a period of 15 years. Amounts
due under the amended agreement are being accounted for as increases in the carrying value of our
investment in D4D when paid or at such earlier time as the payment is determined to be probable. Any
underlying allocations to intangible assets will be determined at that time.

Note 10 – Plans of Restructuring

On November 5, 2008, we announced certain actions to reduce operating costs. These actions
included the elimination of approximately 430 positions from our operations and the closing of several
smaller facilities.

For the years ended December 26, 2009 and December 27, 2008, we incurred restructuring costs of

approximately $3.0 million (approximately $2.1 million after taxes) and $23.2 million (approximately
$16.0 million after taxes), respectively, consisting of employee severance pay and benefits, facility closing
costs, representing primarily lease termination and asset write-off costs, and outside professional and
consulting fees directly related to the restructuring plan.

During the first quarter of 2010, we completed an additional restructuring in order to further reduce

operating expenses. This restructuring included headcount reductions of 184 positions, as well as the
closing of a number of smaller locations.

For the year ended December 25, 2010, we recorded restructuring costs of approximately $12.3
million (approximately $8.3 million after taxes) consisting of employee severance pay and benefits,
facility closing costs, representing primarily lease termination and asset write-off costs, and outside
professional and consulting fees directly related to the restructuring plan.

The costs associated with these restructurings are included in a separate line item, “Restructuring

costs” within our consolidated statements of income.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 10 – Plans of Restructuring – (Continued)

The following table shows the amounts expensed and paid for restructuring costs that were incurred
during 2010 and 2009 and the remaining accrued balance of restructuring costs as of December 25, 2010
and December 26, 2009, which is included in Accrued expenses: Other and Other liabilities within our
consolidated balance sheet:

Balance at
December 27,
2008

14,330
3,688

Provision
1,532
$
1,452

Payments
and Other
Adjustments

Balance at
December 26,
2009

13,697
3,110

2,165
2,030

Provision
8,800
$
3,355

Payments
and Other
Adjustments

Balance at
December 25,
2010

8,978
3,034

1,987
2,351

519
18,537

36
3,020

453
17,260

102
4,297

130
12,285

227
12,239

5
4,343

Severance costs (1) ................
Facility closing costs (2) .......
Other professional and
consulting costs ...................
Total .................................

(1) Represents salaries and related benefits for employees separated from the Company.

(2) Represents costs associated with the closing of certain smaller facilities (primarily lease termination costs) and

property and equipment write-offs.

The following table shows, by reportable segment, the restructuring costs incurred during 2010 and
2009 and the remaining accrued balance of restructuring costs as of December 25, 2010 and December 26,
2009:

Balance at
December 27,
2008

Healthcare distribution ..........
Technology ............................
Total .................................

18,457
80
18,537

Provision
3,020
$
-
3,020

Payments
and Other
Adjustments

Balance at
December 26,
2009

17,252
8
17,260

Provision
12,063
$
222
12,285

4,225
72
4,297

Payments
and Other
Adjustments

Balance at
December 25,
2010

11,945
294
12,239

4,343
-
4,343

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 11 – Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to Henry Schein, Inc. by the
weighted-average number of common shares outstanding for the period. Our diluted earnings per share is
computed similarly to basic earnings per share, except that it reflects the effect of common shares issuable
upon vesting of restricted stock and upon exercise of stock options using the treasury stock method in
periods in which they have a dilutive effect.

On September 3, 2010, we redeemed all of our 3% convertible contingent notes originally due in 2034

(the “Convertible Notes”) for approximately $240 million in cash and issued 732 shares of our common
stock. The effect of assumed conversion of our Convertible Notes, as it relates to the impact on diluted
earnings per share, was included through September 3, 2010.

For the years ended December 25, 2010 and December 27, 2008, diluted earnings per share includes
the effect of common shares issuable upon conversion of our convertible debt. During these periods, the
debt was convertible at a premium as a result of the conditions of the debt. As a result, the amount in
excess of the principal is presumed to be settled in common shares and is reflected in our calculation of
diluted earnings per share. For the year ended December 26, 2009, our convertible debt was not
convertible at a premium and thus the impact of an assumed conversion was not applicable.

A reconciliation of shares used in calculating basic and diluted earnings per share follows:

Basic ...................................................................................
Effect of dilutive securities:
Stock options, restricted stock and restricted units ..........
Effect of assumed conversion of convertible debt ..............
Diluted ...........................................................................

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

90,097

88,872

89,080

2,271
900
93,268

1,684
-
90,556

1,515
626
91,221

Weighted-average options to purchase 991, 2,738 and 910 shares of common stock at prices ranging
from $59.89 to $62.05, $47.31 to $62.05 and $53.43 to $62.05 per share that were outstanding during the
years ended December 25, 2010, December 26, 2009 and December 27, 2008, respectively, were excluded
from each respective year’s computation of diluted earnings per share. In each of these years, such
options’ exercise prices exceeded the average market price of our common stock, thereby causing the
effect of such options to be anti-dilutive.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 12 – Income Taxes

Income from continuing operations before taxes, equity in earnings of affiliates and noncontrolling

interests was as follows:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Domestic ................................................................................
Foreign ...................................................................................
Total ..................................................................................

343,502
158,533
502,035

308,238
144,482
452,720

300,227
95,222
395,449

The provisions for income taxes attributable to continuing operations were as follows:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Current income tax expense:
U.S. Federal ..................................................................
State and local ...............................................................
Foreign ..........................................................................
Total current ............................................................

108,540
22,227
35,353
166,120

101,092
16,649
35,965
153,706

94,215
14,310
22,741
131,266

Deferred income tax expense (benefit):
U.S. Federal ..................................................................
State and local ...............................................................
Foreign ..........................................................................
Total deferred ..........................................................
Total provision .....................................................

(9,096)
(1,299)
4,344
(6,051)
160,069

(5,059)
(722)
(20,404)
(26,185)
127,521

499
72
(627)
(56)
131,210

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 12 – Income Taxes – (Continued)

The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were

as follows:

Current deferred income tax assets:
Inventory, premium coupon redemptions and accounts receivable
valuation allowances ..............................................................................
Uniform capitalization adjustments to inventories ......................................
Other current assets .....................................................................................
Current deferred income tax asset (1) .........................................................

Non-current deferred income tax asset (liability):
Property and equipment ..............................................................................
Stock-based compensation ..........................................................................
Other non-current liabilities ........................................................................
Net operating losses of domestic subsidiaries .............................................
Net operating losses of foreign subsidiaries ................................................
Total non-current deferred tax liability ..................................................
Valuation allowance for non-current deferred tax assets (2) .................
Net non-current deferred tax liability (1) ...................................................
Net deferred income tax liability ......................................................................

Years Ended

December 25,
2010

December 26,
2009

18,047
8,131
19,244
45,422

18,734
9,690
6,742
35,166

(13,131)
38,663
(215,162)
8,300
49,107
(132,223)
(27,108)
(159,331)
(113,909)

(14,658)
35,312
(120,737)
9,411
58,980
(31,692)
(36,083)
(67,775)
(32,609)

(1)

(2)

Certain deferred tax amounts do not have a right of offset and are therefore reflected on a gross basis in current assets and
non-current liabilities in our consolidated balance sheets.

Primarily relates to operating losses of acquired foreign subsidiaries, the benefits of which are uncertain. Any future
reductions of such valuation allowances will be reflected as a reduction of income tax expense in accordance with the
provisions of ASC Topic 805, “Business Combinations.”

All net deferred income tax assets are realizable as we have sufficient taxable income in prior years
and anticipate sufficient taxable income in future years to realize the tax benefit for deductible temporary
differences.

As of December 25, 2010, we have federal net operating loss carryforwards of $21.7 million relating
to our domestic subsidiaries. Of such losses, $16.2 million can be utilized against future federal income
through 2026, and $5.5 million can be utilized against future federal income through 2027. We have state
net operating loss carryforwards of $7.0 million relating to our domestic subsidiaries, which can be utilized
against future state income through 2029. Foreign net operating loss carryforwards totaled $178.0 million
as of December 25, 2010. Of such losses, $0.8 million can be utilized against future foreign income
through 2012, $1.5 million can be utilized against future foreign income through 2013, $2.4 million can be
utilized against future foreign income through 2014, $3.2 million can be utilized against future foreign
income through 2015, $1.5 million can be utilized against future foreign income through 2016, $1.1
million can be utilized against future foreign income through 2017 and $167.5 million has an indefinite
life.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 12 – Income Taxes – (Continued)

The tax provisions attributable to continuing operations differ from the amount computed using the

federal statutory income tax rate as follows:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Income tax provision at federal statutory rate .............................
State income tax provision, net of federal income tax effect ......
Foreign income tax benefit .........................................................
Valuation allowance ....................................................................
Interest expense related to loans .................................................
Other ...........................................................................................
Total income tax provision ....................................................

175,713
13,224
(17,109)
(7,085)
(9,714)
5,040
160,069

158,452
10,078
(16,743)
(19,467)
(7,014)
2,215
127,521

138,407
9,426
(11,902)
3,090
(7,254)
(557)
131,210

For the year ended December 25, 2010, our effective tax rate from continuing operations was 31.9%

compared to 28.2% for the prior year period. The difference resulted primarily from the reduction of a
valuation allowance in 2009 as explained below. Without the effect of the reduction of the valuation
allowance described below, our effective tax rate from continuing operations for the year ended December
26, 2009 would have been 32.8%. The net reduction in our 2010 effective tax rate results from additional
tax planning initiatives, settlements of tax audits, a reduction of valuation allowances and higher income
from lower taxing countries. The difference between our effective tax rate and the federal statutory tax
rate for both periods related primarily to foreign and state income taxes.

During the third quarter of 2009, we substantially completed a plan of reorganization outside the
United States that allowed us to utilize tax loss carryforwards to offset taxable income beginning in 2010
in certain foreign tax jurisdictions. As a result, we determined that it is more likely than not that a portion
of deferred tax assets previously fully reserved will be realized. Therefore, the 2009 provision for income
taxes includes a $20.9 million reduction of the valuation allowance which is based on an estimate of future
taxable income available to be offset by the tax loss carryforwards.

Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign
subsidiaries, which have been, and will continue to be reinvested. These earnings could become subject to
additional tax if they were remitted as dividends, if foreign earnings were loaned to us or a U.S. affiliate,
or if we should sell our stock in the foreign subsidiaries. It is not practicable to determine the amount of
additional tax, if any, that might be payable on the foreign earnings. As of December 25, 2010, the
cumulative amount of reinvested earnings was approximately $344.0 million.

ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in the financial
statements in accordance with other provisions contained within this guidance. This topic prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more likely than not to be sustained upon examination by the taxing authorities. The
amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being
realized upon ultimate audit settlement.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 12 – Income Taxes – (Continued)

The total amount of unrecognized tax benefits as of December 25, 2010 was approximately $26.9
million, all of which would affect the effective tax rate if recognized. It is expected that the amount of
unrecognized tax benefits will change in the next 12 months; however, we do not expect the change to
have a material impact on our consolidated financial statements.

The total amounts of interest and penalties were approximately $5.1 million and $0, respectively, as of

December 25, 2010. It is expected that the amount of interest will change in the next twelve months.
However, we do not expect the change to have a material impact on our consolidated financial statements.

The tax years subject to examination by major tax jurisdictions include the years 2006 and forward by

the U.S. Internal Revenue Service, the years 1997 and forward for certain states and the years 2003 and
forward for certain foreign jurisdictions.

The following table provides a reconciliation of unrecognized tax benefits excluding the effects of

deferred taxes:

December 25,
2010

December 26,
2009

17,000
2,500
5,100
(700)
(2,100)
-
21,800

11,800
1,600
6,700
(100)
(2,000)
(1,000)
17,000

Balance, beginning of period ........................................................................
Additions based on current year tax positions ..............................................
Additions based on prior year tax positions ..................................................
Reductions based on prior year tax positions ...............................................
Reductions resulting from settlements with taxing authorities ......................
Reductions resulting from lapse in statutes of limitations ............................
Balance, end of period ..................................................................................

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 13 – Concentrations of Risk

Certain financial instruments potentially subject us to concentrations of credit risk. These financial
instruments consist primarily of cash equivalents, available-for-sale securities, trade receivables, long-term
investments, notes receivable and derivative instruments. In all cases, our maximum exposure to loss from
credit risk equals the gross fair value of the financial instruments. We continuously assess the need for
reserves for such losses, which have been within our expectations. We do not require collateral or other
security to support financial instruments subject to credit risk, except for long-term notes receivable.

We limit our credit risk with respect to our cash equivalents, available-for-sale securities, short-term
and long-term investments and derivative instruments, by monitoring the credit worthiness of the financial
institutions who are the counter-parties to such financial instruments. As a risk management policy, we
limit the amount of credit exposure by diversifying and utilizing numerous investment grade counter-
parties.

With respect to our trade receivables, our credit risk is somewhat limited due to a relatively large
customer base and its dispersion across different types of healthcare professionals and geographic areas.
No single customer accounted for more than 0.9% of our net sales in 2010. With respect to our sources of
supply, our top 10 healthcare distribution suppliers and our single largest supplier accounted for
approximately 31% and 8%, respectively, of our aggregate purchases in 2010.

Our long-term notes receivable represent strategic financing arrangements with certain industry
affiliates and amounts owed to us from sales of certain businesses. Generally, these notes are secured by
certain assets of the counter-party; however, in most cases our security is subordinate to other commercial
financial institutions. While we have exposure to credit loss in the event of non-performance by these
counter-parties, we conduct ongoing assessments of their financial and operational performance.

Note 14 – Derivatives and Hedging Activities

We are exposed to market risks, which include changes in interest rates, as well as changes in foreign

currency exchange rates as measured against the U.S. dollar and each other, and changes to the credit
markets. We attempt to minimize these risks by primarily using interest rate cap agreements, foreign
currency forward contracts and by maintaining counter-party credit limits. These hedging activities
provide only limited protection against interest rate, currency exchange and credit risks. Factors that could
influence the effectiveness of our hedging programs include interest rate volatility, currency markets and
availability of hedging instruments and liquidity of the credit markets. All interest rate cap and foreign
currency forward and interest rate cap contracts (see Note 5 for discussion of interest rate cap related to
BAHS) that we enter into are components of hedging programs and are entered into for the sole purpose of
hedging an existing or anticipated interest rate and currency exposure. We do not enter into such contracts
for speculative purposes and we manage our credit risks by diversifying our investments, maintaining a
strong balance sheet and having multiple sources of capital.

Fluctuations in the value of certain foreign currencies as compared to the U.S. dollar may positively or

negatively affect our revenues, gross margins, operating expenses and retained earnings, all of which are
expressed in U.S. dollars. Where we deem it prudent, we engage in hedging programs using primarily
foreign currency forward and interest rate caps contracts aimed at limiting the impact of foreign currency
exchange rate and interest rate fluctuations on earnings. We purchase short-term (i.e., 12 months or less)
foreign currency forward contracts to protect against currency exchange risks associated with
intercompany loans due from our international subsidiaries and the payment of merchandise purchases to
our foreign suppliers. We purchase interest rate caps to protect against interest rate risk on variable rate
debt payable to third parties. We do not hedge the translation of foreign currency profits into U.S. dollars,
as we regard this as an accounting exposure, not an economic exposure.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 14 – Derivatives and Hedging Activities – (Continued)

The following table presents the fair value of our derivative instruments:

Derivatives designated as
hedging instruments under
ASC Topic 815-10:
Interest rate contracts
Foreign exchange contracts

Total

Derivatives not designated as
hedging instruments under
ASC Topic 815-10:
Foreign exchange contracts

Total derivatives

Derivatives designated as
hedging instruments under
ASC Topic 815-10:
Interest rate contracts
Foreign exchange contracts

Total

Derivatives not designated as
hedging instruments under
ASC Topic 815-10:
Foreign exchange contracts

Total derivatives

Asset Derivatives
December 25, 2010

Liability Derivatives
December 25, 2010

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Prepaid expenses and other
Prepaid expenses and other

14
509

Accrued expenses other
Accrued expenses other

$
-
1,178

523

1,178

Prepaid expenses and other

690

Accrued expenses other

1,593

1,213

2,771

Asset Derivatives
December 26, 2009

Liability Derivatives
December 26, 2009

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Prepaid expenses and other
Prepaid expenses and other

453
427

Accrued expenses other
Accrued expenses other

$
-
3,428

880

3,428

Prepaid expenses and other

5,297

Accrued expenses other

1,806

6,177

5,234

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 14 – Derivatives and Hedging Activities – (Continued)

Cash Flow Hedges

Our cash flow hedges consist of foreign exchange contracts and interest rate caps. The amounts
recorded in Accumulated other comprehensive income (“AOCI”) primarily represent the change in spot
rates at the time of the initial hedge compared to the spot rate when marked to market. The loss
recognized in AOCI (effective portion) for the years ended December 25, 2010 and December 26, 2009
was $0.5 million and $0.1 million, respectively.

The activity recorded within our consolidated statements of income relating to cash flow hedges
include amounts reclassified from AOCI (effective portion) and forward points (ineffective portion). The
following table presents the effect of our cash flow hedges:

Location of Loss
Reclassified from AOCI
into Income (Effective
Portion)

Other, net

Cost of sales

Loss Reclassified from AOCI
into Income (Effective
Portion)

Year Ended
December 25,

2010

Location where Forward
Points are Recognized in
Income on Derivative
(Ineffective Portion)

Amount of Forward Points
Recognized in Income on
Derivative (Ineffective
Portion)

Year Ended
December 25,

2010

(593)

Interest expense

(185)

(2,440)

Gain (Loss) Reclassified from
AOCI into Income (Effective
Portion)

Year Ended
December 26,

2009

Location where Forward
Points are Recognized in
Income on Derivative
(Ineffective Portion)

Amount of Forward Points
Recognized in Income on
Derivative (Ineffective
Portion)

Year Ended
December 26,

2009

(1,081)

Interest income

4,886

Other, net

Location of Gain (Loss)
Reclassified from AOCI
into Income (Effective
Portion)

Other, net

Cost of sales

Economic Hedges

We are also a party to contracts that serve as economic hedges that we have not designated as hedges
for accounting purposes, which consist of foreign exchange contracts. Gains (losses) associated with these
foreign exchange contracts are recorded in Other, net within our consolidated statements of income and
totaled $1.4 million and $(4.3) million for the years ended December 25, 2010 and December 26, 2009,
respectively. Forward points related to these foreign exchange contracts, which are recorded in Interest
expense within our consolidated statements of income, totaled $0.5 and $0.2 million for the years ended
December 25, 2010 and December 26, 2009, respectively.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 15 – Segment and Geographic Data

We conduct our business through two reportable segments: healthcare distribution and technology.

These segments offer different products and services to the same customer base. The healthcare
distribution reportable segment aggregates our dental, medical, animal health and international operating
segments. This segment consists of consumable products, small equipment, laboratory products, large
equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products,
diagnostic tests, infection-control products and vitamins.

Our dental group serves office-based dental practitioners, schools and other institutions in the
combined United States and Canadian dental market. Our medical group serves office-based medical
practitioners, surgical centers, other alternate-care settings and other institutions throughout the United
States. Our animal health group serves animal health practices and clinics throughout the United States.
Our international group serves dental, medical and animal health practitioners in 23 countries outside of
North America.

Our technology group provides software, technology and other value-added services to healthcare
practitioners, primarily in the United States, Canada, the United Kingdom, Australia and New Zealand.
Our value-added practice solutions include practice management software systems for dental and medical
practitioners and animal health clinics. Our technology group offerings also include financial services on a
non-recourse basis, e-services and continuing education services for practitioners.

The following tables present information about our business segments:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Net Sales:
Healthcare distribution (1):
Dental (2) ....................................................................
Medical (3) .................................................................
Animal health (4) ........................................................
International (5) ..........................................................
Total healthcare distribution ..................................
Technology (6) ................................................................
Total ...........................................................................

2,678,830
1,290,428
889,303
2,468,277
7,326,838
199,952
7,526,790

2,509,921
1,217,020
240,082
2,398,105
6,365,128
173,208
6,538,336

2,567,064
1,210,875
218,093
2,221,092
6,217,124
163,289
6,380,413

(1) Consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment
repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control
products and vitamins.

(2) Consists of products sold in the United States and Canadian dental markets.

(3) Consists of products sold in the United States’ medical market.

(4) Consists of products sold in the United States’ animal health market.

(5) Consists of products sold in dental, medical and animal health markets, primarily in Europe, Australia and New Zealand.

(6) Consists of practice management software and other value-added products and services, which are distributed primarily to

healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 15 – Segment and Geographic Data – (Continued)

Years ended
December 25, December 26, December 27,
2009

2010

2008

Operating Income:
Healthcare distribution ..............................................................
Technology ................................................................................
Total ......................................................................................

Income from continuing operations before taxes, equity in
earnings of affiliates and noncontrolling interests :
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Depreciation and Amortization:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Income Tax Expense Attributable to Continuing Operations:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Interest Income:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Interest Expense:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Purchases of Fixed Assets:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

Total Assets:
Healthcare distribution ...............................................................
Technology ................................................................................
Total ......................................................................................

454,660
66,471
521,131

437,971
64,064
502,035

401,915
62,170
464,085

392,431
60,289
452,720

362,307
56,979
419,286

337,617
57,832
395,449

95,267
5,947
101,214

75,290
6,203
81,493

99,000
28,521
127,521

9,929
50
9,979

23,362
8
23,370

49,282
2,345
51,627

132,785
27,284
160,069

14,088
10
14,098

33,627
14
33,641

37,158
1,842
39,000

71,731
6,396
78,127

103,344
27,866
131,210

15,982
373
16,355

34,583
22
34,605

49,336
1,534
50,870

As of
December 25, December 26, December 27,
2009

2010

2008

4,405,389
142,082
4,547,471

3,703,315
132,670
3,835,985

3,457,391
141,819
3,599,210

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 15 – Segment and Geographic Data – (Continued)

The following table sets forth our net sales by principal categories of products offered through our

healthcare distribution and technology reportable segments:

December 25,
2010

Years Ended
December 26,
2009

December 27,
2008

Healthcare Distribution

Dental:
Consumable dental products, dental laboratory

products and small equipment (1) .........................
Large dental equipment (2) ............................................
Total dental ..............................................................

3,180,366
1,167,934
4,348,300

2,994,714
1,118,500
4,113,214

2,963,657
1,142,948
4,106,605

Medical products (3) .........................................................
Animal health products (4) ................................................

1,441,396
1,537,142

Total Healthcare distribution ........................................

7,326,838

1,530,704
721,210

6,365,128

1,458,629
651,890

6,217,124

Technology

Software and related products and

other value-added products (5) .................................

199,952

173,208

163,289

Total

................................................................................

7,526,790

6,538,336

6,380,413

(1) Includes X-ray products, infection-control products, handpieces, preventatives, impression materials, composites, anesthetics,

teeth, dental implants, gypsum, acrylics, articulators and abrasives.

(2) Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment.

(3) Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray

products, equipment and vitamins.

(4) Includes branded and generic pharmaceuticals, surgical and consumable products and services and equipment.

(5) Includes software and related products and other value-added products, including financial products and continuing

education.

The following table presents information about our operations by geographic area as of and for the
three years ended December 25, 2010. Net sales by geographic area are based on the respective locations
of our subsidiaries. No country, except for the United States and Germany, generated net sales greater
than 10% of consolidated net sales. There were no material amounts of sales or transfers among
geographic areas and there were no material amounts of export sales.

2010

2009

2008

United States ...................
Germany ..........................
Other ................................
Consolidated total .......

Net Sales
4,777,172
689,159
2,060,459
7,526,790

Long-Lived
Assets
1,248,837
187,112
646,886
2,082,835

Net Sales
3,902,353
699,309
1,936,674
6,538,336

Long-Lived
Assets
590,917
182,590
676,909
1,450,416

Net Sales
3,897,520
671,341
1,811,552
6,380,413

Long-Lived
Assets
588,308
184,729
611,843
1,384,880

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 16 – Employee Benefit Plans

Stock-based Compensation

Our accompanying consolidated statements of income reflect pre-tax share-based compensation
expense, recorded in accordance with the provisions of ASC Topic 718, “Stock Compensation,” of $29.9
million ($20.4 million after-tax), $25.9 million ($17.5 million after-tax) and $25.4 million ($17.0 million
after-tax) for the years ended December 25, 2010, December 26, 2009 and December 27, 2008.

Our accompanying consolidated statements of cash flows present our stock-based compensation
expense as an adjustment to reconcile net income to net cash provided by operating activities for all
periods presented. In the accompanying consolidated statements of cash flows, we presented $11.3
million, $4.7 million and $11.0 million of benefits associated with tax deductions in excess of recognized
compensation as a cash inflow from financing activities for the years ended December 25, 2010, December
26, 2009 and December 27, 2008.

Stock-based compensation represents the cost related to stock-based awards granted to employees and
non-employee directors. We measure stock-based compensation at the grant date, based on the estimated
fair value of the award, and recognize the cost (net of estimated forfeitures) as compensation expense on a
straight-line basis over the requisite service period. Our stock-based compensation expense is reflected in
selling, general and administrative expenses in our consolidated statements of income.

Stock-based awards are provided to certain employees and non-employee directors under the terms of

our 1994 Stock Incentive Plan, as amended, and our 1996 Non-Employee Director Stock Incentive Plan, as
amended (together, the “Plans”). The Plans are administered by the Compensation Committee of the
Board of Directors. Prior to March 2009, awards under the Plans principally include a combination of at-
the-money stock options and restricted stock (including restricted stock units). In March 2009 and March
2010, equity-based awards were granted solely in the form of restricted stock and restricted stock units,
with the exception of stock options for certain pre-existing contractual obligations. As of December 25,
2010, there were 27,077 shares authorized and 5,730 shares available to be granted under the 1994 Stock
Incentive Plan and 800 shares authorized and 147 shares available to be granted under the 1996 Non-
Employee Director Stock Incentive Plan.

Stock options are awards that allow the recipient to purchase shares of our common stock at a fixed
price. Stock options are granted at an exercise price equal to our closing stock price on the date of grant.
These awards, which generally vest 25% per year based on the recipient’s continued service subject to the
terms and conditions of the Plans, are fully vested four years from the grant date and have a contractual
term of ten years from the grant date. Additionally, recipients may not sell any shares that they acquire
through exercising their stock options until the third anniversary of the date of grant of such options. We
estimate the fair value of stock options using the Black-Scholes valuation model.

Grants of restricted stock are common stock awards granted to recipients with specified vesting

provisions. We issue restricted stock that vests solely based on the recipient’s continued service over time
(four-year cliff vesting) and restricted stock that vests based on our achieving specified performance
measurements and the recipient’s continued service over time (three-year cliff vesting).

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 16 – Employee Benefit Plans – (Continued)

With respect to time-based restricted stock, we estimate the fair value on the date of grant based on our

The Plans provide for adjustments to the performance-based restricted stock targets for significant

events such as acquisitions, divestitures, new business ventures and share repurchases. Over the
performance period, the number of shares of common stock that will ultimately vest and be issued and the
related compensation expense is adjusted upward or downward based upon our estimation of achieving
such performance targets. The ultimate number of shares delivered to recipients and the related
compensation cost recognized as an expense will be based on our actual performance metrics as defined
under the Plans.

Restricted stock units are unit awards that we grant to certain employees that entitle the recipient to

shares of common stock upon vesting. We grant restricted stock units with the same time-based and
performance-based vesting that we use for restricted stock. The fair value of restricted stock units is
determined on the date of grant, based on our closing stock price.

We record deferred income tax assets for awards that result in deductions on our income tax returns
based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which
we will receive a deduction. Differences between the deferred income tax assets recognized for financial
reporting purposes and the actual tax deduction reported on our income tax return are recorded in
additional paid-in capital (if the tax deduction exceeds the deferred income tax asset) or in earnings (if the
deferred income tax asset exceeds the tax deduction and no additional paid-in capital exists from previous
awards).

Stock-based compensation grants for the years ended December 25, 2010 and December 26, 2009
primarily consisted of restricted stock and restricted stock unit grants. Stock-based compensation grants
for the year ended December 27, 2008 consisted of stock options, restricted stock and restricted stock unit
grants. Certain options granted require us to settle the option in the form of a cash payment. As of
December 25, 2010, we have recorded a liability of $0.6 million relating to fair value measurement of
these options. The weighted-average grant date fair value of stock-based awards granted before forfeitures
was $55.59, $34.35 and $18.44 per share during the years ended December 25, 2010, December 26, 2009
and December 27, 2008.

Total unrecognized compensation cost related to non-vested awards as of December 25, 2010 was

$56.2 million, which is expected to be recognized over a weighted-average period of approximately 2.0
years.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 16 – Employee Benefit Plans – (Continued)

A summary of the stock option activity under the Plans is presented below:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Weighted
Average
Exercise Price

6,295
10
(1,249)
(44)
5,012

40.66
56.03
30.84
50.12
43.05

6,792
42
(446)
(93)
6,295

39.85
38.33
26.62
48.83
40.66

6,829
1,125
(991)
(171)
6,792

34.67
59.78
25.87
45.29
39.85

4,252

40.58

4,835

36.31

5,141

35.11

Outstanding at beginning
of year ....................................
Granted .......................................
Exercised ....................................
Forfeited .....................................
Outstanding at end of year ..........

Options exercisable at end
of year ....................................

The following weighted-average assumptions were used in determining the fair values of stock options

using the Black-Scholes valuation model:

Expected dividend yield ...........................................................................
Expected stock price volatility ..................................................................
Risk-free interest rate ................................................................................
Expected life of options (years) ................................................................

2010
0%
20%
2.37%
4.5

2009
0%
28%
1.88%
4.5

2008
0%
20%
2.75%
4.5

We have not declared cash dividends on our stock in the past and we do not anticipate declaring cash

dividends in the foreseeable future. The expected stock price volatility is based on the evaluation of
implied volatilities from traded call options on our stock and from call options embedded in our
convertible debt, historical volatility of our stock and other factors. The risk-free interest rate is based on
the U.S. Treasury yield curve in effect on the date of grant in conjunction with considering the expected
life of options. The expected life of options represents the approximate period of time that granted options
are expected to be outstanding and is based on historical data, including, among other things, option
exercises, forfeitures and cancellations. Estimates of fair value are not intended to predict actual future
events or the value ultimately realized by recipients of stock options, and subsequent events are not
indicative of the reasonableness of the original estimates of fair value made by us.

The following table represents the intrinsic values of:

December 25,
2010

95,777
91,741

As of
December 26,
2009

84,880
82,476

December 27,
2008

24,928
24,928

Stock options outstanding ...................................................
Stock options exercisable ....................................................

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 16 – Employee Benefit Plans – (Continued)

The total cash received as a result of stock option exercises for the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 was approximately $38.4 million, $11.9 million and $25.6
million. In connection with these exercises, the tax benefits that we realized for the years ended December
25, 2010, December 26, 2009 and December 27, 2008 were $8.3 million, $2.6 million and $7.0 million.
We settle employee stock option exercises with newly issued common shares.

The total intrinsic value of restricted stock (including RSUs) that vested was $12.3 million, $8.7
million and $1.4 million during the years ended December 25, 2010, December 26, 2009 and December
27, 2008. The following table summarizes the status of our non-vested restricted shares/units for the year
ended December 25, 2010:

Time-Based Restricted Stock/Units

Shares/Units

Weighted Average
Grant Date Fair Value
$
25,662
13,881
(4,125)
(614)
34,804

598
246
(87)
(14)
743

Aggregate Intrinsic
Value

46,190

Performance-Based Restricted Stock/Units

Shares/Units

1,010
478
(129)
(12)
1,347

Weighted Average
Grant Date Fair Value
22,271
$
26,942
(6,622)
(508)
42,083

Aggregate Intrinsic
Value

83,748

Outstanding at beginning of period .............
Granted ........................................................
Vested .........................................................
Forfeited ......................................................
Outstanding at end of period .......................

401(k) Plans

We offer qualified 401(k) plans to substantially all our domestic full-time employees. As determined

by our Board of Directors, matching contributions to these plans generally do not exceed 100% of the
participants’ contributions up to 7% of their base compensation, subject to applicable legal limits.
Matching contributions include both cash and our common stock. Forfeitures attributable to participants
whose employment terminates prior to becoming fully vested are used to reduce our matching
contributions.

Assets of the 401(k) and other defined contribution plans are held in self-directed accounts enabling
participants to choose from various investment fund options. Matching contributions and administrative
expenses related to these plans charged to operations during the years ended December 25, 2010,
December 26, 2009 and December 27, 2008 amounted to $22.2 million, $18.9 million and $17.3 million.

Supplemental Executive Retirement Plan

We offer an unfunded, non-qualified supplemental executive retirement plan to eligible employees.
This plan generally covers officers and certain highly-compensated employees after they have reached the
maximum IRS allowed pre-tax 401(k) contribution limit. Our contributions to this plan are equal to the

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 16 – Employee Benefit Plans – (Continued)

401(k) employee-elected contribution percentage applied to base compensation for the portion of the year
in which such employees are not eligible to make pre-tax contributions to the 401(k) plan. The amounts
charged (credited) to operations during the years ended December 25, 2010, December 26, 2009 and
December 27, 2008 amounted to $0.6 million, $1.9 million and $(1.6) million. The reduction in expense
during the year ended December 27, 2008 was due to a decrease in the market value of the plan’s
investments during the period.

Note 17 – Commitments and Contingencies

Operating Leases

We lease facilities and equipment under non-cancelable operating leases expiring through 2025. We

expect that in the normal course of business, leases will be renewed or replaced by other leases.

Future minimum annual rental payments under our non-cancelable operating leases as of December

25, 2010 were:

60,100
48,162
30,994
18,608
13,725
35,423

Total minimum operating lease payments ...............................

207,012

Total rental expense attributable to continuing operations for the years ended December 25, 2010,

December 26, 2009 and December 27, 2008 was $62.6 million, $56.1 million and $59.0 million.

Capital Leases

We lease certain equipment under capital leases. Future minimum annual lease payments under our
capital leases together with the present value of the minimum capital lease payments as of December 25,
2010 were:

1,959
1,537
525
496
11
-
4,528
(309)
4,219

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 17 – Commitments and Contingencies – (Continued)

Purchase Commitments

In our healthcare distribution business, we sometimes enter into long-term purchase commitments to

ensure the availability of products for distribution. Future minimum annual payments for inventory
purchase commitments as of December 25, 2010 were:

127,518
110,165
21,742
22,712
21,388
124,091

427,616

We have obligations to purchase certain pharmaceutical products from a manufacturer through 2013,
which require us to pay a price based on the prevailing market price or a formula price in each respective
year. The amounts included in the above table related to these purchase commitments were determined
using current market conditions. We also have obligations to purchase certain pharmaceutical products
from another manufacturer. Actual amounts may differ.

Litigation

From time to time, we may become a party to legal proceedings, including, without limitation, product

liability claims, employment matters, commercial disputes and other matters arising out of the ordinary
course of our business. In our opinion, pending matters will not have a material adverse effect on our
financial condition or results of operations.

We have various insurance policies, including product liability insurance, covering risks in amounts

that we consider adequate. In many cases in which we have been sued in connection with products
manufactured by others, the manufacturer provides us with indemnification. There can be no assurance
that the insurance coverage we maintain is sufficient or will be available in adequate amounts or at a
reasonable cost, or that indemnification agreements will provide us with adequate protection.

As of December 25, 2010, we had accrued our best estimate of potential losses relating to product

liability and other claims that were probable to result in a liability and for which we were able to
reasonably estimate a loss. This accrued amount, as well as related expenses, was not material to our
financial position, results of operations or cash flows. Our method for determining estimated losses
considers currently available facts, presently enacted laws and regulations and other external factors,
including probable recoveries from third parties.

Employment, Consulting and Non-Compete Agreements

We have definite-lived employment, consulting and non-compete agreements expiring through 2015
that have varying base aggregate annual payments of approximately $13.4 million in 2011, which decrease
periodically to approximately $0.3 million in 2015. We also have a lifetime consulting agreement that
provides for current compensation of $0.4 million per year, increasing $25 every fifth year with the next
increase in 2012. In addition, some agreements have provisions for additional incentives and
compensation.

100

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 18 – Quarterly Information (Unaudited)

The following presents certain quarterly financial data:

Net sales .....................................................
Gross profit ................................................
Operating income .......................................
Net income .................................................

Amounts attributable to
Henry Schein, Inc.:
Net income .................................................

Earnings per share attributable to
Henry Schein, Inc.:

From net income:
Basic ......................................................
Diluted ...................................................

Net sales .....................................................
Gross profit ................................................
Operating income .......................................
Income from continuing operations ............
Net income .................................................

Amounts attributable to
Henry Schein, Inc.:
Income from continuing operations ............
Income from discontinued operations,
net of tax ................................................
Net income .................................................

Earnings per share attributable to
Henry Schein, Inc.:

From continuing operations
per share:
Basic ......................................................
Diluted ...................................................
From net income:
Basic ......................................................
Diluted ...................................................

Quarters ended

March 27,

June 26,

2010
1,760,310
513,033
103,759
67,252

2010
1,849,401
545,644
138,006
93,163

September 25,
2010
1,893,511
537,456
137,368
94,490

December 25,
2010
2,023,568
574,743
141,998
97,226

60,900

84,001

87,893

92,995

0.68
0.66

0.93
0.90

0.97
0.94

1.03
1.00

Quarters ended

March 28,
2009 (1)

June 27,
2009 (1)

September 26,
2009 (1)

1,485,388
438,363
90,588
59,183
59,300

1,607,434
475,918
121,970
80,200
80,425

1,659,433
476,267
113,885
98,375
100,748

December 26,
2009
1,786,081
526,272
137,642
92,684
92,684

54,774

73,324

94,045

86,408

77
54,851

149
73,473

2,376
96,421

-
86,408

0.62
0.61

0.83
0.81

1.06
1.03

0.97
0.94

0.62
0.61

0.83
0.81

1.09
1.05

0.97
0.94

(1) On August 5, 2009, we completed the sale of a wholesaler of dental consumables for aggregate consideration of $14.2

million, of which $13.2 million has been received as of December 26, 2009. As a result of this sale, included in operating
results from discontinued operations for 2009 is a net gain, net of tax, of $2.6 million or $0.03 per diluted share.

101

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 18 – Quarterly Information (Unaudited) – (Continued)

We experience fluctuations in quarterly earnings. As a result, we may fail to meet or exceed the

expectations of securities analysts and investors, which could cause our stock price to decline.

Our business has been subject to seasonal and other quarterly fluctuations. Net sales and operating
profits generally have been higher in the third and fourth quarters due to the timing of sales of software,
equipment and seasonal products (including influenza vaccine, equipment and software products),
purchasing patterns of office-based healthcare practitioners and year-end promotions. Net sales and
operating profits generally have been lower in the first quarter, primarily due to increased sales in the prior
two quarters. Quarterly results may also be adversely affected by a variety of other factors, including:

• costs of developing new applications and services;

• costs related to acquisitions and/or integrations of technologies or businesses;

• the timing and amount of sales and marketing expenditures;

• timing of pricing changes offered by our vendors;

• timing of the introduction of new products and services by our vendors;

• changes in or availability of vendor contracts or rebate programs;

• vendor rebates based upon attaining certain growth goals;

• changes in the way vendors introduce or deliver products to market;

• exclusivity requirements with certain vendors may prohibit us from distributing competitive products

manufactured by other vendors;

• loss of sales representatives;

• general economic conditions, as well as those specific to the healthcare industry and related

industries;

• the timing of the release of upgrades and enhancements to our technology-related products and

services;

• our success in establishing or maintaining business relationships;

• restructuring costs;

• changes in accounting principles;

• unexpected difficulties in developing and manufacturing products;

• product demand and availability or recalls by manufacturers;

• exposure to product liability and other claims in the event that the use of the products we sell results in

injury; and

• increases in the cost of shipping or service issues with our third-party shippers.

Any change in one or more of these or other factors could cause our annual or quarterly operating
results to fluctuate. If our operating results do not meet or exceed market expectations, our stock price
may decline.

102

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except per share data)

Note 19 – Supplemental Cash Flow Information

Cash paid for interest and income taxes was:

December 25,
2010

Years ended
December 26,
2009

December 27,
2008

Interest ..........................................................................
Income taxes .................................................................

25,531
145,758

22,202
170,024

30,249
109,103

There was approximately $286.3 million, $3.7 million and $0.8 million of debt assumed as a part of

the acquisitions for the years ended December 25, 2010, December 26, 2009 and December 27, 2008,
respectively. Debt assumed in the year ended December 25, 2010 primarily relates to the acquisition of
Butler Animal Health Supply, LLC. On September 3, 2010, we paid approximately $240 million in cash
and issued 732 shares of our common stock in connection with the redemption of our $240.0 million
Convertible Notes, which were issued in 2004. During the years ended December 25, 2010, December 26,
2009 and December 27, 2008, we had $(1.1) million, $(11.5) million and $9.5 million of non-cash net
unrealized gains (losses) related to foreign currency hedging activities. During the year ended December
26, 2009, we exchanged a loan receivable from D4D in the amount of $7.6 million for equity securities in
D4D.

103

ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure

None.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our principal executive
officer and principal financial officer, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this annual report as such term
is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Based on this evaluation, our management, including our principal
executive officer and principal financial officer, concluded that our disclosure controls and procedures
were effective as of December 25, 2010 to ensure that all material information required to be disclosed by
us in reports that we file or submit under the Exchange Act is accumulated and communicated to them as
appropriate to allow timely decisions regarding required disclosure and that all such information is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms.

Changes in Internal Control over Financial Reporting

The combination of continued acquisition activity, ongoing acquisition integrations and systems
implementations undertaken during the quarter and carried over from prior quarters, when considered in
the aggregate, represents a material change in our internal control over financial reporting.

During the quarter ended December 25, 2010, post-acquisition and integration related activities
continued for the North American Animal Health, Dental and Medical businesses acquired during 2010
representing aggregate annual revenues of approximately $756.0 million. These acquisitions, the
majority of which utilize separate information and financial accounting systems, have been included in
our consolidated financial statements. In addition, for our Dental business in the United States, post-
implementation related activities continued for the new sales compensation system which supports
accounting for annual sales commissions of approximately $131.0 million.

All acquisitions, acquisition integrations and systems implementations involved necessary and
appropriate change-management controls that are considered in our annual assessment of the design and
operating effectiveness of our internal control over financial reporting.

104

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over

financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system is
designed to provide reasonable assurance to our management and Board of Directors regarding the
preparation and fair presentation of published financial statements. Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting based on
the framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or the COSO Framework. Based on our evaluation under the
COSO Framework, our management concluded that our internal control over financial reporting was
effective at a reasonable assurance level as of December 25, 2010.

The effectiveness of our internal control over financial reporting as of December 25, 2010 has been
independently audited by BDO USA, LLP, an independent registered public accounting firm, and their
attestation is included herein.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the internal control system are met. Because of the inherent
limitations of any internal control system, no evaluation of controls can provide absolute assurance that
all control issues, if any, within a company have been detected.

105

Report of Independent Registered Public Accounting Firm

Board of Directors
Henry Schein, Inc.
Melville, New York

We have audited Henry Schein, Inc.’s internal control over financial reporting as of December 25,

2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Henry Schein, Inc.’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Item 9A, “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, Henry Schein, Inc. maintained, in all material respects, effective internal control over

financial reporting as of December 25, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Henry Schein, Inc. as of December 25, 2010 and
December 26, 2009, and the related consolidated statements of income, changes in stockholders’ equity,
and cash flows for each of the three years in the period ended December 25, 2010 and our report dated
February 22, 2011 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

New York, New York
February 22, 2011

106

ITEM 9B. Other Information.

None.

ITEM 10. Directors, Executive Officers and Corporate Governance

PART III

Information required by this item regarding our directors and executive officers and our corporate

governance is hereby incorporated by reference to the Section entitled “Election of Directors”, with
respect to directors, and the first paragraph of the Section entitled “Corporate Governance - Board of
Directors Meetings and Committees - Audit Committee”, with respect to corporate governance, in each
case in our definitive 2011 Proxy Statement to be filed pursuant to Regulation 14A and to the Section
entitled “Executive Officers of the Registrant” in Part I of this report, with respect to executive officers.

There have been no changes to the procedures by which stockholders may recommend nominees to
our Board of Directors since our last disclosure of such procedures, which appeared in our definitive 2010
Proxy Statement filed pursuant to Regulation 14A on March 31, 2010.

Information required by this item concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 is hereby incorporated by reference to the Section entitled “Section 16(a)
Beneficial Ownership Reporting Compliance” in our definitive 2011 Proxy Statement.

We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial
Officer and Vice President of Corporate Finance. We make available free of charge through our Internet
Web site, www.henryschein.com, under the “About Henry Schein—Corporate Governance” caption, our
Code of Ethics. We intend to disclose on our Web site any amendment to, or waiver of, a provision of the
Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer or Vice President of
Corporate Finance.

ITEM 11. Executive Compensation

The information required by this item is hereby incorporated by reference to the Section entitled
“Compensation Discussion and Analysis”, “Compensation Committee Report” (which information shall
be deemed furnished in this Annual Report on Form 10-K), “Executive and Director Compensation” and
“Compensation Committee Interlocks and Insider Participation” in our definitive 2011 Proxy Statement
to be filed pursuant to Regulation 14A.

107

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

We maintain several stock incentive plans for the benefit of certain officers, directors and employees.

Certain plans are subject to stockholder approval, while other plans have been authorized solely by the
Board of Directors. Descriptions of these plans appear in the notes to our consolidated financial
statements. The following table summarizes information relating to these plans as of December 25, 2010:

Number of Common
Shares to be Issued Upon
Exercise of Outstanding
Options and Rights

Weighted-Average
Exercise Price of
Outstanding Options

Number of Common
Shares Available for
Future Issuances

Plans Approved by
Stockholders ......................
Plans Not Approved by
Stockholders ......................
Total ..................................

4,961,763

50,000
5,011,763

$43.28

20.41
$43.05

5,877,277

The other information required by this item is hereby incorporated by reference to the Section entitled

“Security Ownership of Certain Beneficial Owners and Management” in our definitive 2011 Proxy
Statement to be filed pursuant to Regulation 14A.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is hereby incorporated by reference to the Section entitled
“Certain Relationships and Related Transactions” and “Corporate Governance – Board of Directors
Meetings and Committees – Independent Directors” in our definitive 2011 Proxy Statement to be filed
pursuant to Regulation 14A.

ITEM 14. Principal Accountant Fees and Services

The information required by this item is hereby incorporated by reference to the Section entitled
“Independent Registered Public Accounting Firm Fees and Pre-Approval Policies and Procedures” in our
definitive 2011 Proxy Statement to be filed pursuant to Regulation 14A.

108

ITEM 15. Exhibits and Financial Statement Schedules

PART IV

1. Financial Statements:

Our Consolidated Financial Statements filed as a part of this report are listed on the index on
page 52.

2. Financial Statement Schedules:

Schedule II
No other schedules are required.

3. Exhibits:

The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the
Exhibit List immediately preceding the exhibits.

109

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Henry Schein, Inc.

By: /s/ STANLEY M. BERGMAN
Stanley M. Bergman
Chairman and Chief Executive Officer
February 22, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.

Signature

Capacity

/s/ STANLEY M. BERGMAN
Stanley M. Bergman

Chairman, Chief Executive Officer
and Director (principal executive officer)

/s/ STEVEN PALADINO
Steven Paladino

/s/ JAMES P. BRESLAWSKI
James P. Breslawski

/s/ GERALD A. BENJAMIN
Gerald A. Benjamin

/s/ MARK E. MLOTEK
Mark E. Mlotek

/s/ BARRY J. ALPERIN
Barry J. Alperin

/s/ PAUL BRONS
Paul Brons

/s/ DONALD J. KABAT
Donald J. Kabat

/s/ PHILIP A. LASKAWY
Philip A. Laskawy

/s/ KARYN MASHIMA
Karyn Mashima

/s/ NORMAN S. MATTHEWS
Norman S. Matthews

/s/ BRADLEY T. SHEARES, PH. D.
Bradley T. Sheares, Ph. D.

/s/ LOUIS W. SULLIVAN, MD
Louis W. Sullivan, MD

Executive Vice President, Chief Financial
Officer and Director (principal financial and
accounting officer)

Director

110

Date

February 22, 2011

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Henry Schein, Inc.
Melville, New York

The audits referred to in our report dated February 22, 2011 relating to the consolidated financial
statements of Henry Schein, Inc. which is contained in Item 15 of this Form 10-K, included the audits of
the financial statement schedule listed in the accompanying index. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based upon our audits.

In our opinion such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

/s/ BDO USA, LLP

New York, New York
February 22, 2011

111

Schedule II
Valuation and Qualifying Accounts

Additions

Description

Year ended December 25, 2010:
Allowance for doubtful accounts,
sales returns and other ...................

Year ended December 26, 2009:
Allowance for doubtful accounts,
sales returns and other ...................

Year ended December 27, 2008:
Allowance for doubtful accounts,
sales returns and other ...................

Balance at
beginning of
period

Charged to
statement of
income (1)

Charged to
other

accounts (2) Deductions (3)

Balance at
end of
period

51,724

5,564

5,700

(6,721)

56,267

42,855

4,747

10,269

(6,147)

51,724

41,315

6,255

1,959

(6,674)

42,855

(1) Represents amounts charged to bad debt expense.

(2) Amounts charged to net sales primarily relate to increases in allowances for sales returns.

(3) Deductions primarily consist of fully reserved accounts receivable that have been written off.

112

Exhibits

3.1 Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to

our Annual Report on Form 10-K for the fiscal year ended December 30, 2006.)

3.2 Amendment dated November 12, 1997 to Amended and Restated Certificate of Incorporation.

(Incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year
ended December 30, 2006.)

3.3 Amendment dated June 16, 1998 to Amended and Restated Certificate of Incorporation.

(Incorporated by reference to Exhibit 3.3 to our Registration Statement on Form S-3, Reg. No.
333-59793.)

3.4 Amendment dated May 25, 2005 to Amended and Restated Certificate of Incorporation.

(Incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 25, 2005.)

3.5 Amended and Restated By-Laws. (Incorporated by reference to Exhibit 3.2 to our Registration

Statement on Form S-1, Reg. No. 33-96528.)

3.6 Amendments to Amended and Restated By-Laws adopted July 15, 1997. (Incorporated by

reference to Exhibit 3.3 to our Registration Statement on Form S-4, Reg. No. 33-36081.)

4.1 Master Note Facility, dated as of August 9, 2010, by and among us, New York Life Investment

Management LLC and each New York Life affiliate which becomes party thereto. (Incorporated
by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on August 10, 2010.)

4.2 Private Shelf Agreement, dated as of August 9, 2010, by and among the Company, Prudential

Investment Management, Inc. and each Prudential affiliate which becomes party thereto.
(Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on August 10,
2010.)

10.1 Henry Schein, Inc. 1994 Stock Incentive Plan, as amended and restated effective as of March 27,

2007. (Incorporated by reference to our definitive 2007 Proxy Statement on Schedule 14A filed
on April 10, 2007.)**

10.2 Amendment No. One to the Henry Schein, Inc. 1994 Stock Incentive Plan, effective as of January

1, 2005. (Incorporated by reference to Exhibit 10.2 to our Annual Report on Form 10-K for the
fiscal year ended December 27, 2008.)**

10.3 Amendment No. Two to the Henry Schein, Inc. 1994 Stock Incentive Plan, effective as of May
28, 2009. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the fiscal quarter ended June 27, 2009.)**

10.4 Amendment Number Three to the Henry Schein, Inc. 1994 Stock Incentive Plan, effective as of
May 28, 2009. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q
for the fiscal quarter ended March 27, 2010.)**

113

Exhibits

10.5 Form of Restricted Stock Agreement for time-based restricted stock awards pursuant to the Henry
Schein, Inc. 1994 Stock Incentive Plan (as amended and restated effective as of March 27, 2007).
(Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the fiscal
quarter ended March 27, 2010.)**

10.6 Form of Restricted Stock Agreement for performance-based restricted stock awards pursuant to

the Henry Schein, Inc. 1994 Stock Incentive Plan (as amended and restated effective as of March
27, 2007). (Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for
the fiscal quarter ended March 27, 2010.)**

10.7 Form of Restricted Stock Unit Agreement for time-based restricted stock awards pursuant to the
Henry Schein, Inc. 1994 Stock Incentive Plan (as amended and restated effective as of March 27,
2007). (Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the
fiscal quarter ended March 27, 2010.)**

10.8 Form of Restricted Stock Unit Agreement for performance-based restricted stock awards pursuant

to the Henry Schein, Inc. 1994 Stock Incentive Plan (as amended and restated effective as of
March 27, 2007). (Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-
Q for the fiscal quarter ended March 27, 2010.)**

10.9 Form of Restricted Stock Unit Agreement for time-based restricted stock awards pursuant to the
Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive Plan (as amended and restated
effective as of April 1, 2003, and as further amended effective as of April 1, 2004 and January 1,
2005). (Incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the
fiscal quarter ended March 27, 2010.)**

10.10 Henry Schein, Inc. Supplemental Executive Retirement Plan, amended and restated effective as
of January 1, 2008. (Incorporated by reference to Exhibit 10.3 to our Annual Report on Form 10-
K for the fiscal year ended December 27, 2008.)**

10.11 Amendment No. One to the Henry Schein, Inc. Supplemental Executive Retirement Plan,

effective as of January 1, 2008. (Incorporated by reference to Exhibit 10.3 to our Quarterly
Report on Form 10-Q for the fiscal quarter ended June 27, 2009.)**

10.12 Amendment Number Two to the Henry Schein, Inc. Supplemental Executive Retirement Plan,

effective as of January 1, 2008.** +

10.13 Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive Plan, as amended by

Amendment No. One, effective as of May 25, 2004. (Incorporated by reference to our definitive
2004 Proxy Statement on Schedule 14A filed on April 27, 2004.)**

10.14 Amendment No. Two to the Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive
Plan, effective as of January 1, 2005. (Incorporated by reference to Exhibit 10.5 to our Annual
Report on Form 10-K for the fiscal year ended December 27, 2008.)**

10.15 Amendment Number Three to the Henry Schein, Inc. 1996 Non-Employee Director Stock

Incentive Plan, effective as of May 10, 2010. (Incorporated by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 2010.)**

114

Exhibits

10.16 2001 Henry Schein, Inc. Section 162(m) Cash Bonus Plan effective as of June 6, 2001.

(Incorporated by reference to our definitive 2001 Proxy Statement on Schedule 14A, filed on
April 30, 2001.)**

10.17 Amendment No. One to 2001 Henry Schein, Inc. Section 162(m) Cash Bonus Plan, effective as

of May 24, 2005. (Incorporated by reference to our definitive 2005 Proxy Statement on Schedule
14A, filed on April 22, 2005.)**

10.18 Amendment No. Two to 2001 Henry Schein, Inc. Section 162(m) Cash Bonus Plan, effective as
of January 1, 2007. (Incorporated by reference to Exhibit 10.8 to our Annual Report on Form 10-
K for the fiscal year ended December 27, 2008.)**

10.19 Amendment No. Three to Henry Schein, Inc. Section 162(m) Cash Bonus Plan effective as of

December 31, 2009. (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on
Form 10-Q for the fiscal quarter ended June 27, 2009.)**

10.20 Henry Schein, Inc. 2001 Non-Employee Director Incentive Plan. (Incorporated by reference to

Exhibit 10.14 to our Annual Report on Form 10-K for the fiscal year ended December 28,
2002.)**

10.21 Henry Schein, Inc. 2004 Employee Stock Purchase Plan, effective as of May 25, 2004.

(Incorporated by reference to our definitive 2004 Proxy Statement on Schedule 14A, filed on
April 27, 2004.)**

10.22 Henry Schein, Inc. Non-Employee Director Deferred Compensation Plan, amended and restated
effective as of January 1, 2005. (Incorporated by reference to Exhibit 10.11 to our Annual Report
on Form 10-K for the fiscal year ended December 27, 2008.)**

10.23 Henry Schein, Inc. Deferred Compensation Plan effective as of January 1, 2011.**+

10.24 Henry Schein Management Team Performance Incentive Plan and Plan Summary, effective as of
January 1, 2010. (Incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-
Q for the fiscal quarter ended March 27, 2010.)**

10.25 Amended and Restated Employment Agreement dated as of December 31, 2008 between us and

Stanley M. Bergman. (Incorporated by reference to Exhibit 10.13 to our Annual Report on
Form 10-K for the fiscal year ended December 27, 2008.)**

10.26 Amended and Restated Letter Agreement effective as of December 11, 2008 between us and

Stanley Komaroff. (Incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-
K for the fiscal year ended December 27, 2008.)**

10.27 Amended and Restated Change in Control Agreements dated December 12, 2008 between us and

Gerald Benjamin, James Breslawski, Leonard David, Stanley Komaroff, Mark Mlotek, Steven
Paladino, Michael Racioppi and Michael Zack, respectively. (Incorporated by reference to
Exhibit 10.15 to our Annual Report on Form 10-K for the fiscal year ended December 27,
2008.)**

115

Exhibits

10.28 Credit Agreement among us, the several lenders parties thereto, JPMorgan Chase Bank, N.A., as
administrative agent and HSBC Bank USA, N.A., The Bank of New York Mellon, and UniCredit
Markets and Investment Banking, acting through Bayerische Hypo- und Vereinsbank AG, New
York Branch, as co-syndication agents, dated as of September 5, 2008. (Incorporated by reference
to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended September 27,
2008.)

10.29 Amendment dated November 29, 2009 to the Credit Agreement among us, the several lenders

parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and HSBC Bank USA,
N.A., The Bank of New York Mellon, and UniCredit Markets and Investment Banking, acting
through Bayerische Hypo- und Vereinsbank AG, New York Branch, as co-syndication agents,
dated as of September 5, 2008. (Incorporated by reference to Exhibit 10.21 to our Annual Report
on Form 10-K for the fiscal year ended December 26, 2009.)

10.30 Second Amendment dated August 9, 2010 to the Credit Agreement among us, the several lenders

10.31 Third Amendment dated October 29, 2010 to the Credit Agreement among us, the several lenders

10.32 Credit Agreement among Butler Animal Health Supply, LLC, the several lenders parties thereto,

and JPMorgan Chase Bank, N.A., as administrative agent, dated as of December 31, 2009. +

10.33 First Amendment dated December 21, 2010 to the Credit Agreement among Butler Animal

Health Supply, LLC, the several lenders parties thereto, and JPMorgan Chase Bank, N.A., as
administrative agent, dated as of December 31, 2009. *+

10.34 Distribution Agreement entered into as of December 2, 2004, by and between us and ID

Biomedical Corporation. (Incorporated by reference to Exhibit 10.31 to our Annual Report on
form 10-K for the year ended December 25, 2004.)*

10.35 Amendment dated October 2, 2006 to Distribution Agreement, dated as of December 2, 2004, by

and between us and ID Biomedical Corporation. (Incorporated by reference to Exhibit 10.20 to
our Annual Report on Form 10-K for the fiscal year ended December 27, 2008.)*

10.36 Second Amendment dated October 5, 2006 to Distribution Agreement, dated as of December 2,
2004, by and between us and ID Biomedical Corporation. (Incorporated by reference to Exhibit
10.21 to our Annual Report on Form 10-K for the fiscal year ended December 27, 2008.)

10.37 Amendment dated December 20, 2007 to Distribution Agreement, dated as of December 2, 2004,
by and between us and ID Biomedical Corporation. (Incorporated by reference to Exhibit 10.22 to
our Annual Report on Form 10-K for the fiscal year ended December 27, 2008.)

116

Exhibits

10.38 Amendment dated October 15, 2008 to Distribution Agreement, dated as of December 2, 2004,
by and between us and ID Biomedical Corporation. (Incorporated by reference to Exhibit 10.23
to our Annual Report on Form 10-K for the fiscal year ended December 27, 2008.)*

10.39 Amendment dated February 9, 2010 to Distribution Agreement, dated as of December 2, 2004, by

and between us and ID Biomedical Corporation.* (Incorporated by reference to Exhibit 10.27 to
our Annual Report on Form 10-K for the fiscal year ended December 26, 2009.)

10.40 Omnibus Agreement, dated November 29, 2009, by and among Henry Schein, Inc., National

Logistics Services, LLC, Winslow Acquisition Company, Butler Animal Health Holding
Company LLC, Butler Animal Health Supply, LLC, Oak Hill Capital Partners II, L.P., Oak Hill
Capital Management Partners II, L.P., W.A. Butler Company, Burns Veterinary Supply, Inc. and
certain other persons party thereto. (Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K filed on November 30, 2009.)

10.41 Amendment No. 1 to Omnibus Agreement, dated December 31, 209, by and between Henry

Schein, Inc. and Butler Animal Health Holding Company LLC. (Incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K filed on January 4, 2010.)

10.42 Put Rights Agreement, dated December 31, 2009, by and among Henry Schein, Inc., Oak Hill

Capital Partners II, L.P., Oak Hill Capital Management Partners II, L.P. and Butler Animal
Health Holding Company LLC. (Incorporated by reference to Exhibit 10.2 to our Current Report
on Form 8-K filed on January 4, 2010.)

10.43 First Amendment dated December 1, 2010 to Put Rights Agreement among Henry Schein, Inc.,

Oak Hill Capital Partners II, L.P., Oak Hill Capital Management Partners II, L.P. and Butler
Animal Health Holding Company LLC.+

10.44 Put Rights Agreement, dated December 31, 2009, by and among Henry Schein, Inc., Burns

Veterinary Supply, Inc. and Butler Animal Health Holding Company LLC. (Incorporated by
reference to Exhibit 10.3 to our Current Report on Form 8-K filed on January 4, 2010.)

10.45 First Amendment dated December 1, 2010 to Put Rights Agreement among Henry Schein, Inc.,

Burns Veterinary Supply, Inc. and Butler Animal Health Holding Company LLC.+

21.1 List of our Subsidiaries.+

23.1 Consent of BDO USA, LLP.+

31.1 Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of

2002.+

31.2 Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of

2002.+

32.1 Certification of our Chief Executive Officer and Chief Financial Officer pursuant to Section 906

of the Sarbanes-Oxley Act of 2002.+

_________
+ Filed herewith.
* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the

publicly filed document and have been furnished separately to the Securities and Exchange
Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

** Indicates management contract or compensatory plan or agreement.

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Henry Schein, Inc.

135 Duryea Road

Melville, New York 11747

U.S.A.

(631) 843-5500

www.henryschein.com

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