Good morning ladies and gentlemen, and welcome to the HenrySchein Third Quarter 2007 Conference Call. At this time all participants are ina listen-only mode. Later we will conduct a question-and-answer session, andinstructions will follow at that time. (Operator Instructions) As a reminderladies and gentlemen, this call is being recorded. I would now like to introduce your host for today's call,Susan Vassallo, Henry Schein's Vice President of Corporate Communications.Please go ahead Susan.

Thank you, operator, and my thanks to each of you forjoining us to discuss Henry Schein's third quarter results. If you have notreceived a copy of our earnings news release issued earlier this morning,please call 631-843-5937 and a copy will be faxed to you immediately, or ofcourse you can obtain a copy on our website at www.henryschein.com. With us this morning are Stanley Bergman, Chairman and ChiefExecutive Officer of Henry Schein, Steven Paladino, Executive Vice Presidentand Chief Financial Officer, and Neal Goldner, Vice President of InvestorRelations. Before we begin, I would like to point out that certaincomments made during this call will include information that isforward-looking. As you know, risks and uncertainties involved in the Company'sbusiness may affect the matters referred to in forward-looking statements. As aresult, the Company's performance may differ from those expressed in orindicated by such forward-looking statements. Also these forward lookingstatements are qualified in their entirety by the cautionary statementscontained in Henry Schein Securities and Exchange Commission filings. Thecontent of this conference call contains time-sensitive information that isaccurate only as of the date of this live broadcast, November 1, 2007. HenrySchein undertakes no obligation to revise or update any forward-lookingstatements to reflect events or circumstances after the date of this call. I ask that during the Q&A portion of today's call, youplease limit yourself to a single question before returning into the queue.This will provide as many listeners as possible the opportunity to ask aquestion within the one hour we have allotted for this call. I would now like to turn the call over to Mr. StanleyBergman.

Thank you, Susan, and good morning everyone. And of course,thank you for joining us this morning. We are very pleased with our thirdquarter financial results, which once again, reflects strong double-digit salesgrowth and market share gains in each of our four major business units. Our Dental Group continued its trend of mid-teens growth,while our Medical, International and Technology Groups, each posted sales gainswell in excess of 20% for the quarter, worldwide internal sales growth was 13%for the quarter. So, the strength of the business throughout our variousbusiness units remains very, very strong. We remain very, very excited aboutthe future. We feel that our strategies are good. And we feel that our team isexecuting well. In a moment, I'll review some of the highlights of thequarter with you; give you a glimpse of some of the thoughts for the future.But before I do that, let me ask Steve Paladino, our Chief Financial Officer,to provide you with an overview of our quarterly financial performance. Steven?

Okay. Thank you, Stanley.Let me begin by saying that I too am pleased to report very strong financialperformance for the third quarter. Let me begin by pointing out that all of ourcurrent and prior year financial information has been restated to reflect theoncology pharmaceutical and specialty pharmacy businesses has discontinuedoperations, and excludes those businesses from the detail of the incomestatement. We recorded an additional loss on discontinued operationsfor the quarter of $1.1 million or $0.01 per diluted share and this relatesprimarily to the completion of the sale of the oncology pharmaceutical businesswhich was completed during the third quarter. During the fourth quarter, we expect to complete the sale ofour specialty pharmacy business that we discussed on last quarter's call. Sofor purposes of comparability, I will discuss our results from continuingoperations without discontinued businesses in both, the current and priorperiods. Our net sales for the quarter ended September 29, 2007, were$1.5 billion, reflecting 20.8% growth over the third quarter of 2006 or 18.3%growth in local currencies, 13% of this growth was internally generated, while5.3% was acquisition growth, primarily due to the acquisitions of Dunlop's, aleading U.K. animal health products supplier, as well as our acquisitions ofDarby Medical and Darby Dental Laboratory and certain Becker-Parkin businesses.You can find the details of our sales growth in exhibit A of our earnings news release. Our operating margin from continuing operations for thethird quarter for 2007, was 6.4%, 140 basis points higher than the operatingmargins from continuing operations in the third quarter of 2006. This was theresult of continued leveraging of our higher sales volumes across ourestablished infrastructure, as well as higher influenza vaccine sales versusthe prior year's third quarter. However, it is important to note that our operating margin,excluding flu vaccine sales, also improved by approximately 100 basis points.Our effective tax rate from continuing…

Thank you, Steven. I would like to review some highlightsfrom each of our four business groups with you this morning. Let's start with Dental Group. Well, we are delighted toreport continued strong performance during the quarter with mid-teen salesgrowth over the prior year. Our Dental Group continues to be successful inbuilding momentum, delivering profitable growth and expanding our presence inthe market place as we successfully execute our long-term strategy. We did gainfurther market share in the consumable merchandise side of the business duringthe quarter, and are particularly pleased with our internal growth rate of 6%in local currencies. We are also pleased with continued strength in our Dentalequipment sales and service revenues with very, very good internal growth ofover 24% in local currencies. Clearly, we are gaining market share in the equipmentbusiness, which I believe is directly attributable to the execution of ourstrategies that we've been talking about for several years, and with thecontribution coming on the growth side from both, basic equipment and some ofthe newer high tech product lines. We saw good growth in both sectors. We continue to be most optimistic about the long-termpotential of digital imaging, including specifically the new Cone Beamtechnology products, as well as of course lasers. We also look forward toentering the exciting Dental CAD/CAM market later this year in the United States,when we expect to begin to ship the E4D product. With E4D, we expect to distribute a highly competitiveproduct offering with unique features and important user benefits. We believethe market is eagerly awaiting the roll out of E4D as evidenced by dentistinterest at the Henry Schein booth at the ATA Trade Show, as well as recentvisits to the D4D training center by opinion leaders in the CAD/CAM field. Whenwe begin shipping E4D, our primary goal of course, is to ensure that theinitial…

(Operator Instructions) Your first question comes from theline of Steven Postal with Lehman Brothers.

Thanks a lot, and good morning. I had a clarificationquestion and then a follow up. Steve, can you elaborate on the net impact ofthe two tax items and how on a net basis, that impacted you?

Sure. The two tax items, again, first there was a change inthe tax rates in Germany,and that caused us to have a one-time benefit of approximately $3 millionincluded in our effective tax rate. But there was also some tax restructuringthat occurred during the quarter, and there was an additional tax expense for asimilar amount, about $3 million that happened during the third quarter. So,the overall effective tax rate really isn't impacted, because they offset eachother by those two factors. But I just talk about both of them, since I think alot of people are aware of what's going on in Germany in the tax rates.

And then a question on flu vaccine, what droves the decisionto decrease the guidance to 15 million doses? I mean, it's my understandingthat it sounds to me like you maybe still have some product on back order, andyou are selling it right now. What’s the change relative to when we last heardfrom you?

Well, we decided a little while ago, that given the amountof supply that is available in the market, that in order to mitigate risk inorder to have very high confidence that will sell all of our products. Wedecided to reduce commitments for product. And we feel very comfortable thatthe commitments that we now have 15.5 million doses for 2007, given that we'vealready sold about 12.5 million of those doses. We feel very confident thatwe'll be able to sell the remainder in the next few or several weeks, and thatwas just really a decision to mitigate risk.

And Steve, that must speak to the flexibility that youapparently have in these contracts with suppliers.

Well, I'd rather not for competitive reasons go into thecontracts and which manufacturers we did this with. I think it's important forinvestors to know what our commitments are now and our confidence level inachieving that.

Okay. Thanks a lot.

(Operator Instructions) Your next question comes from theline of John Kreger with William Blair & Company. John Kreger - WilliamBlair & Company: Hi, a quick question for Steve. Can you talk a bit about thedeclining gross profit margin compared to a year ago? I'm guessing that wasdriven by a mix, but if you elaborate, that will be helpful.

Yes, you are exactly right that the gross margins diddecline a little bit; I think it was 20 some odd basis points on theyear-over-year-year basis. But let me tell you what it's not related to. It isnot any pricing pressures. It is not related to any unusual things in themarket. It is solely related to mix within our products. So, there's nothingthat we are concerned about in the gross margins, and obviously, we had verystrong leverage on our infrastructure expenses, and we improved our operatingexpenses as a percent of settles by over 160 basis points, getting that marginimprovement overall. But again, there's really nothing going on from a pricingperspective that we were concerned about. In fact, prices remain very stable,very constant. John Kreger - WilliamBlair & Company: And in general terms, could you talk about what categoriesin your portfolio tend to be lower margin versus higher margin. For example,the step up in the vet business, would that have been a driver down on grossprofit?

Yeah, the vet business does have a little bit lower grossmargins. Now obviously, if you look at our business units, technology clearlyhas the highest gross margins. Next comes dental, and medical and vet, includinginternational are lower margins. But we look at the business really with theshared infrastructure, and we feel good about growing the operating marginsbecause of the leverage we can have on the business. John Kreger - WilliamBlair & Company: Thanks very much.

(Operator Instructions) Your next question is a follow-upquestion from Steven Postal with Lehman Brothers & Company.

Thank you; I got back quickly. Maybe just a couple offollow-up questions. The company is growing substantially over the yearsthroughout the world in various different businesses. I guess the big picturequestion, could you just, Stanley, maybe just talk about how you've managedthat growth as the company is growing and how you plan on continue to managethat growth as you go into different areas?

Yes, Steve. Obviously, it's a very good question by the way.Obviously growth is managed through management, and I think we have investedsignificantly in management over the last 15 years and continue to invest inthat area. The way we are organized is that Jim Breslawskiheads up our -- who is our present Company Vice President heads up brilliantfocuses on our North American businesses. And in the North American businessarea, we have very good management that has been developed over the years inthe dental arena and in the medical arena, and most recently through anacquisition of NLS on the veterinary side. We've also focused very well on growingour management capability up in Utahwith respect to our Practice Solutions business. So, I would say that ourgrowth is significantly driven, and the results from the performance issignificantly driven in North America by the unified management that Jimmybrings to the North American business and then the various highways he has forthe specific business units. On the International side, the growth hasbeen driven by, of course, Michael Zack, similar capacity to Jimmy but on theInternational side as seasoned Henry Schein executive just like Jimmy. Jimmyhas been with the company for 27 years, and Michael has been with -- this ishis 18th year with the company. AndMichael has two managers reporting to him, Norbert Orth for Central Europe andBob Minowitz for Western Europe and the Middle East, and Australia and New Zealand. Norbert and Bob Minowitz are also bothvery seasoned executives. We have country managers underneath them that arevery, very good too. But we refer to internally as the third circle, and thatrelates to our business development, business which is headed up by Mark Mlotek. And Mark underneath him has a group about 10 or so peoplethat focus on business development matters when there will be acquisitions…

Alright. Thanks. That's very helpful. What's your senseregarding any impact on dental services spending from the slowing economy, andI'm typically referring to implants and the lab business.

The implant business I think is, of course, it could beslightly impacted I suppose by the any potential slowing of the economy.However, it's creating far greater acceptance globally than any, I think,economic issue would mitigate any real, you know, moderate economy. I mean, ifthere were real, real depression or something like that, who knows where it'sgoing to go? But if it would slight tapering the economy, the momentum in theimplant arena would overcome that. On the lab side, there are many puts and takes there. Ithink it would be hard to give you a composite number because of a lot of newtechnology entering into that filed. And overall, we still think it’s a goodbusiness for us. Overall, by the way, our implant business is doing very, verywell for us, a good acquisition for us.

And just a final question, Steve, it looked like theminority interest allocation there went up substantially; can you just talkabout that?

Yeah. It was actually linked to the labs question. Minorityinterest is up because of significantly increased profits, both in the Camlogimplant business, where we own a majority interest of 51%, as well as increasedprofitability in our Australian business where we also own a majority interestof 51%.

Interesting. Alright, thanks again.

Okay.

Your next question comes from the line of Jennifer Hillswith Goldman Sachs & Company Jennifer Hills - Goldman Sachs & Company: Good morning. Can you please provide additional color intothe supply and demand dynamics in the flu markets, and more specifically,demand from physicians, customers, has that decreased significantly, or arethey buying more of it direct? And then more color on pricing environment;we've seen that some of your competitors are offering to accept returns. Isthat a risk? Is there exposure? Is Henry Schein planning to do somethingsimilar? And then finally, why a more conservative outlook for flu in 2008?

Okay. We saw a very strong sales to our oppositioncustomers. We did very little business to date with other than physicians. Wedo, do a couple of governmental bids and we did sell to some other thirdparties, but the bulk of our sales, that we've sold to date have been for thephysician market. We're still seeing, as of less in this week, continued goodsales growth. So, we think it was overall a good season. We are hopeful that someof the activities at the CDC is going to be introducing some of their publicawareness campaigns, which I think are coming out this week or next week andcontinuing. We'll keep demand strong. With respect to returns, our policy has been that we sell fluvaccine on non-return basis to our customers. We have not seen that as anysignificant factor in achieving our sales goals. So, I don't see that changingat all for us. I think your last part of the question was related to the nextyear. We feel very good about selling 12 million to 15 million doses somewhatto this year. Our primary supply will be Glaxo Smith Kline. We feel very goodabout that relationship. I really just think it's a risk/reward situation forus to go and buy product. It's not to say that we can't sell more but want tofeel very comfortable in the 20 years of selling flu vaccine. We have never hada situation of not being able to sell our committed volumes. So, its reallyjust a risk/reward and nothing more than that. Jennifer Hills - Goldman Sachs & Company: Perhaps a follow-up question on 2008 guidance. The organicgrowth trends have been extremely strong this year. How are you thinking aboutthose trends moving into 2008?

Well, I would say that, very generally speaking, we don'tsee major deviations from internal sales growth. There are a couple of itemsthat are baked into our guidance; number one, when we look at Dental equipmentsales growth, as I think most people realize Dental equipment sales growth hasbenefited recently from new exclusivities that we have been doing well on,those new exclusivities annualize after this quarter. So, we'll see a littlebit of impact related to that, but that's all baked into our guidance. We hopethat we'll see really international sales growth. If you look at the last fourquarters, it has been accelerating, but I think right now, the level that it’sat, is a comfortable level given the market conditions in Europe.So we don’t really see except those kind of minor exceptions, any majordeviations in internal sales growth. Let me add one other thing. Obviously, we expect to have onthe equipment side, E4D sales in 2008, and that should also benefit equipmentsales growth in 2008. Jennifer Hills - Goldman Sachs & Company: Okay. That's all I had. Thank you.

Okay.

(Operator Instructions) Your next question is a follow-upquestion from John Kreger with William Blair & Company. John Kreger - WilliamBlair & Company: Thanks very much. Steve, since you were mentioning E4D, canyou talk a little bit more about your expectations? I'm guessing there is apretty long sales cycle for a new product like this.

Yeah, I would say that, that's true, that it is a longersale cycle than some other products, but we also have a list of customers whohave expressed interest in buying the product. So, the first thing that we'llbe doing is, going back to that list and speaking to those customers andallowing them to, since they have expressed interest first, allowing them tobuy first. We feel good about E4D coming out. We feel like the product willperform well. We feel like our relationships with our customers will allow usto sell into the market, but we also want to make sure that as we beginselling, that the customer training, support and service levels are impeccableon the products. So we want to make sure that there is a very positive customerbuzz on the product, and the only way you get that is by the training andsupport. So we want to make sure that we don’t go too quickly, initially. John Kreger - WilliamBlair & Company: Great, thanks. And then a separate question. If you look atyou international business now, what's the rough mix between dental medical andvet?

Now, its moving more towards medical and vet with theDunlops acquisition. Prior to Dunlops, it was probably 90% dental, and thebalance medical and vet very highly weighted towards to vet. Now, with Dunlops,it's probably in the 70% something range, you know, on the go forward basisdental, and again Dunlops is all veterinary business. John Kreger - WilliamBlair & Company: Okay. Thanks. And then a final question. It's abouteconomics moving and the impact on your dental business here in the US.That impact to the last time we saw this earlier in the decade, if I recallconsumable growth slowed a bit, but your equipment business really took off andperhaps partly due to some tax incentives. As you think about some signs ofeconomics pulling now, would you expect a similar pattern or more stabletrends?

Well, right now, as you've seen our results, our dentalequipment sales have been very strong. We do believe that there is a little bitof sensitivity in the market, for very high priced products -- high pricedequipments that are newer products in the market. We believe that there's alittle sensitivity there. But, again, right now, looking at the third quarter results,we haven't seen anything related to economic conditions that would tell us thatthe markets are slowing. As Stanleytalked about implants a minute or two ago, we had very strong sales growth inour implant business, over 30% growth in implants in the third quarter. Ourprosthetic business also had very good growth in the third quarter. So, rightnow, we are not seeing any thing based on the economic conditions.

It still seems to be a greater demand for dental servicesand the natural capacity. And therefore, in order to bring them into balance,there is an investment in equipment that leads to increased productivity in theout list. So we see that in most of the rest in world. John Kreger - WilliamBlair & Company: Thanks very much.

The next question comes from the lines of David Veal withMorgan Stanley & Co. One moment. David, your line is open.

Operator, maybe we can go to the next question and comeback.

David, your line is open.

I'm here, can you hear me?

Yes, we can.

Yes.

Okay. Sorry. Maybe there is some cost synergies to beachieved from the new teleconferencing vendor. So, when we think about thestock price, with some of the flu vaccine varies behind is still like the stockrates maybe, permanently above the conversion price in the convert. Can youjust talk to, how you might think about refinancing that or how the outlooklooks like there?

Sure. You know the convert is in the money. It has a slightdiluted impact in our current earnings per share. I believe that the firstmaturity comes in 2010, where there is a put or call. Right now, I think, myguess would be that at that time, the convert would be refinanced, eitherbecause it's being put by shareholders or because of us calling it. And it'sprobably because it's, I think, it would be our most expensive debt becauseit's effectively having in our equity with the coupon rate. So that's probablyour most expensive debt that's on the balance sheet today. So my guess is thatit will be refinanced in the future.

That's basically in your guidance for '08?

Yeah. And that's correct. It is in our guidance for '08.

Okay. Sounds great. Thank you.

Welcome.

(Operator Instructions) Your next question comes from theline of Jeff Johnson with Robert Baird & Company. Jeff Johnson - RobertBaird & Company: Stanley, Steve, good morning. How are you?

Good. How are you doing, Jeff? Jeff Johnson - RobertBaird & Company: Good. Thank you. One question I guess here on flu. Lookslike pricing is obviously holding in fairly well here. If I do the math just onyour revenue and number of doses, looks like over $10 per dose at this point.But next year, if I do the math on your guidance it looks like it maybe flowingthrough the bottomline at about a penny, a little north of a penny per millionshares. We'd previously have been thinking about a penny and a half per milliondoses, I am sorry. Has there been a change in international terms for next yearas you reduced your allocation? Is there just slightly more pricing, moreconservative pricing assumptions in your guidance for next year, or were wejust, kind of, wrong in how we used to run that through your P&L?

Well, again we -- there has been no change in our contracts.The only things will be, there will be a little bit of a mixed difference, webelieve next year between manufacturers. So it is a little bit over a penny permillion doses as you could see from our guidance. We are not really -- maybethat's, I think, it's realistic. No one knows what pricing is going to be nextyear. So I think we have built into our guidance a conservative estimate onwhat we think we can achieve in profitability. There is really nothing changedthat's going on there. So I guess some of the estimates that are out there werea little bit up. Jeff Johnson - RobertBaird & Company: Fair enough. And just a follow-up on that. The straightmath, we’re doing the very simplistic math on your Q3 of revenue for flu versusnumber of doses over $10 is kind of what you recognized, at least in Q3 on apricing standpoint?

Yes, that’s correct. But also be aware that our salesincludes excise tax. Excise tax is about $7.50 per vial, so that’s inclusive ofexcise tax. Jeff Johnson - RobertBaird & Company: Fair enough. And last question, just to make sureexpectations, I guess they're realistic going into Q4 and then as we get into2008, and as we look at your dental equipment business, comps now over the lastfour quarters or at least growth in dental equipment organically has been northof 20%. I would assume it's still fair to expect double-digit dental equipmentorganic growth over the next few quarters, that it won't fall off anythingbeyond that, as you still have the E4D coming out, as you talked about, andbase business is very healthy there.

Well, the base business is very healthy. Remember, we dohave the annualization that happens in Q4 of both, the Biolase and ICAPproducts or ISI products. We would still expect strong growth, but we’re notgiving guidance by that level of detail, and we still expect to gain marketshare in the equipment segment, and we still expect to introduce E4D. And eventhough those exclusives are annualized, and they should provide good growth ona year-over-year basis. Jeff Johnson - RobertBaird & Company: Fair enough. Let me just ask it a little differently Steve. Ifwe exclude those exclusives over the last few quarters, dental equipmentorganics still around that double-digit range at least?

Again for competitive reasons, I'd rather not give thatlevel of detail, if you don’t mind. Jeff Johnson - RobertBaird & Company: Fair enough. I appreciate it, guys. Thanks.

Okay.

Your final question comes from the line of Robert Willoughbywith the Banc of America & Company. Robert Willoughby -Banc of America & Company: Hi. Did you comment on the move up in inventoriesreceivables and payables? Is that a flu phenomena or is there something elsebehind that?

Well, it's the combination of the increased sales growth onthe receivables side, yes. It's directly impacted by flu vaccine sales, becausethe bulk of what we sold in Q3 was in the September timeframe, and a verylittle of that has been collected at quarter-end. The flu really does not havean impact on inventory because we turned it around very quickly. So, there wassome inventory on hand at the end of Q3, but it's not a big driver. If you lookat our metrics for the quarter, we were more efficient on both, receivables,with improving DSOs by over half a day and improving inventory turns by overhalf the time. So, it's really just because of increased sales volume, both onthe organic growth and the acquisition growth. Robert Willoughby -Banc of America & Company: Okay. So do we see the bulk likely to come in this quarter? Doyou pay down the payables, or how should we think about that?

Are you just talking specifically about influenza vaccine? Robert Willoughby -Banc of America & Company: Yeah, I guess if that is the bulk of the receivables boost.

Yeah, but that's normal payment times for flu vaccines, andthe normal payment to manufacturers. And yes, we did offer some extended termsfor some flu vaccine customers, but that should be substantially collected bythe year end, and maybe some that trickles into the first quarter. But again, Ireally would focus you more on not the absolute dollars but on the DSOs and inventoryreturns, because that's really, I think the better metric. Robert Willoughby -Banc of America & Company: And Steve, just the accounts payables line item fourthquarter, that should trend higher, or that should trend lower?

No. If it trends higher in Q4, there is typically thepotential for us to do some forward buy-ins at the end of the year. So to theextent if that occurs, that inventory would not be paid for until January. Iwould expect it to trend a little bit higher. Robert Willoughby -Banc of America & Company: Okay. Thank you.

At this time, there's no further questions. Presenters, doyou any closing remarks?

Okay, thank you for participating in today's call. As Iassume, you can tell from Steven and my words and our tone, we are very, veryoptimistic about the overall prospects of the company, and we thank you foryour interest. If there are any question, please feel free to give Steve a callat the Henry Schein number, which is 631-843-5915. Neal Goldner, our VP ofInvestor Relations, his extension is 2820, and Susan Vassallo, who heads up communications,her extension is 5562. So, we will be back again next quarter, but I think itsin four month's time, right, because there's an extra month for the year end.

I think it’s a little bit later. Yes, that’s right.

220 days. Thank you very much.

Thank you for participating in today's conference. You maydisconnect at this time.