Good morning, ladies and gentlemen, and welcome to the Henry Schein Fourth Quarter Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today’s call, Carolynne Borders, Henry Schein’s Vice President of Investor Relations. Please go ahead, Carolynne.

Thank you, Natalya, and my thanks to each of you for joining us to discuss Henry Schein’s results for the fourth quarter of 2014. With me this morning are Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein; and Steven Paladino, Executive Vice President and Chief Financial Officer. Before we begin, I would like to state that certain comments made during this call will include information that is forward-looking. As you know, risks and uncertainties involved in the company’s business may affect the matters referred to in forward-looking statements. As a result, the company’s performance may differ from those expressed in or indicated by such forward-looking statements. These forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein’s filings with the Securities and Exchange Commission. In addition, all comments about the markets we serve, including growth rates and market share, are based upon the company’s internal analysis and estimates. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 11, 2015. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. [Operator Instructions]. With that said, I would like to turn the call over to Stanley Bergman.

Good morning everyone. Thank you, Carol. And thank you for joining us. We closed our 2014 year with strong fourth quarter financial results that once again included market share gains in each of our business groups. The global markets we serve remain generally healthy highlighted by of course continued strong patient traffic in North America. And we are particularly pleased with the solid internal sales growth in local currencies in our international businesses too. We achieved adjusted EPS growth for the year of 10% and are firming our guidance range for 2015 diluted EPS. I’m also pleased to mention that in 2014, for the first time, the Henry Schein exceeded the $10 billion sales mark on an annual basis. In a moment I’ll provide some additional commentary on our performance along with a review of some of our key accomplishments during 2014. Needless to say, we completed our three-year strategic plan for the period 2012 to ‘14 and did very well from our point of view on of course planning and executing on that plan. We feel that our business units are in good shape, we have a great management team in each of our business units. And at the corporate level, and are well positioned for a good 2015 and beyond. So, before I give you further comments and highlights on the company per-say, Steven will review our quarterly financial results. Steven?

Okay. Thank you, Stan, and good morning to all. I’m also pleased to report strong results for the fourth quarter of 2014 as well as the full year. If you look at our Q4 results, our net sales for the quarter ended December 27, 2014 were $2.7 billion reflecting a 7% increase compared with the fourth quarter of 2013. This consisted of 9.9% growth in local currencies and 2.9% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.9% and acquisition growth contributed an additional 5%. You could see additional details of our sales growth in Exhibit A of our earnings news release that was issued this morning. Our operating margin for the fourth quarter was 7.5% and expanded by 11 basis points compared with the fourth quarter of last year. And, even if you exclude the impact of acquisitions completed during the past 12 months, our margin also expanded by 6 basis points compared with last year’s fourth quarter. Our effective tax rate for the quarter was 29.7% and this compares with 29.8% in the fourth quarter of 2013. The slightly lower tax rate is due to implementation of our ongoing tax plan strategies as well as high earnings in countries with lower corporate income tax rates. Going forward for 2015, we believe our effective tax rate will continue at a similar rate and be in the 30% range. Our net income attributable to Henry Schein for the fourth quarter of 2014 was $133 million or $1.56 per diluted share. This represents growth of 7% and 9.1%, respectively, compared with the fourth quarter of 2013. I think it’s important to note that foreign currency exchange had a negative impact of approximately $0.04 on the current quarter’s EPS for the quarter. So, $0.04 negative impact is…

Thank you very much, Steven. So, let’s begin a discussion on our four business groups with Dental. In North America, internal consumable merchandise sales growth in local currencies remained strong at nearly 5%. Equipment sales and service revenue as Steven noted, declined in North America, due to the issues surrounding the timing of tax incentives in 2014 that Steve mentioned. We of course had a lot of purchases in the fourth quarter of 2013 that were driven by the large amount of accelerated depreciation that was available to customers. And of course, advising customers on December 19 that was now available for a window of 10 days or so, was just not practical to have, and had no real impact. Our International Dental growth was solid for both consumable merchandise and for the equipment side, with internal growth bolstered by strategic acquisitions made earlier in the year, especially on the Dental equipment side. In early January, we announced that during the year’s second quarter, we will be expanding our Dental equipment product offering in North America by adding the tag-line of A-dec equipment. Our commitment to our dental customers has always been to provide the widest possible selection of products equipment and value added services to create customized solutions that meet our customer’s needs. Products from A-dec along with those from our other valued equipment supplier partners, firm this commitment by providing greater access to the broadest range of Dental equipment from industry leaders. Let me just confirm that, we will only be adding A-dec line around the middle of the second quarter. We also recently announced the Acquisition of ADS Florida, which is one of the largest Dental Practice Transition and Brokerage Company serving the State of Florida. Although this transaction represents only a few million dollars in revenue,…

Natalya, we’d like to start taking questions please.

[Operator Instructions]. Your first question comes from the line of Bob Jones with Goldman Sachs.

Great, thanks for the questions. I guess if there was a soft spot in the quarter, you guys called out dental equipment, and I understand you believe that a lot of that was from Section 179 and the timing there. Any sense you could give us on what you would have expected to see in equipment had it not been for that change in timing? And then, maybe more helpful even than that, could you maybe just talk about what you are seeing in your equipment backlog as we move into year 2015?

Sure, Bob. On the first part of your question, I don’t know if I want to give a specific number because it’s really difficult to quantify what customers would have bought because of tax incentives that ultimately didn’t buy. But we certainly believe we would have had good growth, if I peel the onion on the equipment categories in North America, I think it’s important to note that our CAD/CAM sales growth was strong, traditional equipment was down a little bit but not as much as the overall category. And really I think people, on some of the discretionary digital solutions that’s really where we saw people hold back. In my opinion a lot of that really is timing that people would have accelerated their purchases in Q4. They will ultimately buy some time in 2015 not necessarily in Q1 but sometime in 2015. Right now the tax incentives, the way that U.S. government did it, they reinstated them December 19, but the re-expired on January 1, 2015. So, no one knows whether they’ll reinstate them again and at what time. But right now they are the tax incentives are only at the $25,000 level. The second part of your question really, again, I gave color on the components, I’m not sure there is a lot more to add there other than, again, we feel like with the addition of additional equipment lines, including A-dec, we feel like we’re going to have a good equipment year in 2015. And I think most people realize that the consumables sales growth which was strong just under 5% really is a better indicator of how the market is doing than this one quarter of equipment sales.

That’s very helpful, Steve. I guess just switching gears to medical, I believe the guidance that you are reaffirming today was actually given prior to the Cardinal announcement, so as we think about the ramp of the expected synergies and savings from that arrangement, which I know -- I think is expected to close in 2Q, anything you can add just as part of how we should think about how additive that deal could be in your 2015?

Yes. So, we did say at the time of the announcement it was slightly accretive. That’s somewhere, couple of pennies or so of accretion for 2015. Remember that’s net of all integration costs and one-time costs. So we’re not expecting to complete the integration until Q2. So, really in Q1 there is really mostly expenses and not a lot of benefit. So, it is slightly accretive but we do expect increased accretion. And really we’re being very conservative on the potential for procurement and buying at better prices because we really don’t know the impact of that yet, so that could be an additional upside on certain products. Obviously we would think that Cardinal Health buys at better prices than we could do on our own, especially on the pharma side. So, hopefully that will be benefit. But it’s too early really to quantify what that benefit will be.

Okay, got it. Thanks so much.

Your next question is from the line of Glen Santangelo with Credit Suisse.

Hi guys, thanks for taking the question. Steve, I just wanted to follow-up on the medical segment. I mean, you obviously reported some decent organic growth in there, but could you maybe talk about the Cardinal revenues that you booked? You booked them on an agency basis. How should we think about that transition and when you’ll book them as regular revenues? And were there any incremental revenues that augmented that internal number or did that fall at acquisition, how do I think about all that?

Okay, yes, Glen, good question. So, because right now, Cardinal is continuing to service customers they are taking orders, they are shipping, they’re billing, they’re collecting, they’re really doing all of the functions until integration. U.S. GAAP doesn’t allow us to record that revenue gross with all of the expenses. So we get a fee based on sales from Cardinal which is designed to represent the estimated profitability of those sales that they’re collecting on our behalf. And that number is what we included in the acquisition growth. So, the organic growth does not include any impact from the Cardinal agency fee that we are receiving, once integrated, so sometime during Q2 is the plan. We’ll shift over to having those sales fulfilled through our distribution network and we’ll be taking the orders and doing all of the traditional distribution work. And at that time we’ll record the gross revenues again which should be north of $300 million on a full-year basis going forward.

All right, that’s helpful. Stan, maybe if I can just follow-up with you on what you are seeing on the M&A landscape, essentially, there was a pretty interesting animal health deal announced in the sector with one of your, obviously, closest competitors being acquired here recently. Your closest dental competitor has made inroads across the pond on the animal health side as well. And so, are you starting to see any changes in the competitive landscape as some of these other companies maybe start to look more globally from a competitive perspective, any rise in prices or anything we should be aware of?

No, I don’t think our competitors changes in ownership or expansion of broad or impact much. Our pipeline on acquisitions is as full as ever, which we could close all the deals in the pipeline, it’s not a matter of capital it’s a matter of capacity because integrations are something that goes along with every acquisition. So we don’t have an issue finding acquisitions, I think we will have no issue in putting the capital to work that we’ve outlined. I think something like, certainly between 45% and 50% of our cash flow will go into acquisitions. We will continue with our formula of accretive acquisitions. And in fact, I think we’re on a better position today to make acquisitions than ever before. Our track record is outstanding for keeping management where we make commitments upfront. Our suppliers are generally supportive of us because they’ve seen us enter markets and not disrupt markets. But in fact add to the distribution capability and the value added services in the market which generally gets better after we enter from the competitive landscape point of view. So, I don’t think there is any issue from that point of view. We have no problem in keeping the pipeline full. We will expand our geographic presence in our dental and our animal health business. We will probably do that in medical again, at some point but we want to get the Cardinal integration behind us. That’s a big opportunity, we have the right to sell the Cardinal products abroad and we will do that. And I think you’ll see us adding much more in the value added service area, continues to be important to us across the board, all countries. And of course the specialty area, there is lots and lots of opportunity. Meanwhile we’ve become an important player in the specialty only products we’re always an important player in selling general products equipment consumables to specialists. But it was the specialty products, the implants, and the bone regeneration, the wires and brackets and related products and the endodontic type specific products we are doing well growing that throughout the world inorganically and of course organically. So, I don’t think we have any issue in continuing to expand and I don’t think we’ll be paying a penny more than we used to pay. We have a very good reputation in this area and very good integrating businesses once we acquire them.

Okay, thanks for the details.

Next question is from the line of John Kreger with William Blair.

Hi, thanks very much. Stan, towards the end of your remarks, you listed off some of the newer countries that you’ve entered in recent years. Can you just expand a little bit upon how that portfolio, of countries are doing? Are they generating higher levels of growth than your more mature markets? How does the profitability in that portfolio compare to your more mature markets? And should we expect more of these types of entries as we move through ‘15?

Yes. First of all that’s a very good question, John. It’s something that’s very important for us. It’s clear that Asia and the developing world are growing at a much faster rate than the developed world and certainly faster than Europe. So, and that there is a big market, there is at least a third of the world’s dental business that’s available in these developing world markets/Asia. And of course Japan is not a developing, or Korea is not a developing world country. So, we continue to expect to increase our presence. Having said that at the moment it’s relatively small, and the entry into Japanese market for example is not a consolidated entry acquisition nor is the one in Brazil, nor is the one in South Africa. We are doing well in all of these businesses, but they’re not material. China, we are not material, we are growing but it’s not profitable, the others are all profitable. And Thailand is profitable although there was an issue for a couple of quarters because of the coup. But I think it’s quite balanced today. We think we’re going to have is from an economic point of view things are looking better. So, overall, I think these markets are all markets that are growing faster on even if you take into account some of the losses in China where it was, have a team much bigger than we need much more sophisticated team and outstanding team actually. We believe we have the best professional team in China or anyone really in our space. So, overall I think you’ll see that from a profitability point of view it’s pretty good. We’re particularly pleased by the way with Brazil, where our growth is really fantastic and South Africa too. And so, I would say that these are opportunities that are doing very well for us, except for China which is growing nicely on the top line but at this stage still requiring quite a bit of an investment.

Great, thank you. Then, similar question on your dental chain business how is that going versus dental overall? And should we view that as being additive to margins over time or maybe a little bit below the average?

Yes. First of all, our corporate accounts business not only in this country in the U.S. but throughout the world is growing. And it’s gaining a greater market share of our total business, number one. Number two, it’s not dilutive to our general gross profit because there is, this is incremental business. We don’t need to put new catalogues. We have a different compensation structure for our team. It’s quite complex because of the very large accounts, we don’t really pay commission. It’s a customer service type bonus. But in for the mid-mark and for the middle market customers we do have compensation but it is modified. So, overall its profitable business. These customers are working with us to advance the purchases with specific manufacturers that are interested in this sector and supporting us. So, overall this is not dilutive to our gross margin - operating margin sorry, thank you Steven. But I wouldn’t want to go beyond that for competitive reasons. But this is good business for us. And we have a real good market share.

Great, thanks very much.

Your next question is from the line of Jeff Johnson with Robert Baird.

Thank you, good morning guys. I wanted to start maybe on the A-dec news from a few weeks ago. Steve or Stanley, how do we think about that as far as the incremental impact this year? We’ve talked in a couple of our notes about some low-hanging fruit we believe you will be able to capitalize on in the near term here once that contract goes live. But the basic equipment market growth as a whole market probably doesn’t change a whole lot. So, do you lose a little bit somewhere else or do you take share this year because of A-dec? How should we just think about the pie versus your part of that pie this year with A-dec in there?

Yes, it’s a very good question. The goal here obviously is try to expand the market a bit, which I think we can because we have customers that have older units of A-dec chairs that like to replace them. And they don’t replace them necessarily with another brand, so that’s a good place to start. But our goal is not to be disruptive in the marketplace because we are in the sort of long-rule. There are certain customers that the A-dec line naturally fits in with. And there are customers that are happy with the products we’ve been offering. Our goal is to expand the A-dec business together with ours. But at the same time not in any way distract from our loyal suppliers over the years. So, we will go carefully, I think A-dec is aware of this. And we hope to add to the marketplace in general, the A-dec chairs are slightly more expensive than chairs that we have been offering today. Overall, we think we have an outstanding offering A-dec adds to that. But we also believe that the offering we have from our existing suppliers is a good one, it’s been an outstanding one. It allows us to become a very significant player in the equipment business. In fact, we believe we’re the largest provider of equipment in the world, general equipment. So we just have to be careful not to disrupt the market and make sure that we’re additive. And I think that over time we will do well for A-dec as well as for our existing suppliers and more importantly for our customers and our sales team.

Great, that’s helpful. Thank you, Stanley. And then, Steve, just as my follow-up, the A-dec is maybe slightly, the A-dec deal may be slightly accretive this year or additive this year, Cardinal obviously. But what I haven’t heard is how much currency since you last provided guidance, maybe how much do you think currency is going to take from the year relative to the last time you provided guidance or the first time you provided guidance back last quarter, and even on a year-over-year basis if you can kind of give us the total impact you’d expect from currencies?

Sure, Jeff. So when we issued guidance and I’ll just focus on the dollar to the Euro because that’s our major currency although, now there was a little bit of impact on some of the other currencies too. But Euro to the dollar was a $1.24 when we issued guidance. Right now as of yesterday or today, it’s probably $1.13. So, assuming that the $1.13 stays for the entire year which I’m not sure is it good or bad assumption but we have to start with an assumption. That would have anywhere versus our previous guidance, anywhere between $0.08 to $0.10 EPS impact. And that’s why on the conference call we said while we’re still comfortable with our range, we’re really at this point saying the lower end of the range. Yes, there are a few offsets Cardinal is a little bit of an offset. Actually fuel prices are a little bit of an offset to it also but not significant. And again, we don’t know which way fuel prices are going to go over the next 8 or 9 months. But I think we still feel like achieving our full year guidance is very doable. And obviously if the dollar continues to strengthen, we’ll look to see if we can continue to achieve the guidance by doing some other activities or not. But again it’s so hard to predict and I really don’t want to predict but I think the full year impact will be, because I think it’s too difficult and there are too many variables.

Understood. Thanks, guys.

Jeff, I think Steven’s view is quite correct. It’s much too early in the year to change guidance. And we have to remember that on the one side our earnings don’t translate any U.S. dollars and European earnings as before. On the other hand, we’re hopeful that because of a low Euro, we will see a stimulation of the economies in Europe. That will happen right away, but I think my sense is having spent some time in Europe now, in the last couple of weeks, last month or so that we will seize some recovery in some of the markets in Europe from an export point of view which then in the end, trickles into some of our business. So, I think and at the same time, if Euro stays low, our imports or products go down in price, not only in terms of products from Europe but also from Asia. So, it’s much too early and I think Steven is correct to signal lower end but there is so many variables that can move in a positive direction as well. So, but it’s much too early to go much further than that.

Understood, thank you.

Your final question is from the line of John Block with Stifel.

Great, thanks. Good morning. I’ve got one dental and one vet. Maybe I will start with vet. The North American vet internal number was certainly solid, but it was a slight step down from the 3Q levels and we are hearing through the market, overall market remains pretty strong. So was that North American number hit a little bit as you terminated the IDEXX deal before year-end? And then, can you also comment on your experience in the early days trying to convert IDEXX accounts to either Abaxis or Heska? And then I’ve got a follow-up on dental. Thanks.

So, I don’t know exactly the impact. I’m sure Steve would be happy to get back to you on IDEXX on our fourth quarter 2014 versus ‘13. But clearly it was distraction as it was to others in the marketplace. I don’t know whether this quarter is indicative of the trends or not, but I will tell you that our animal health business is solid. We will do well in the diagnostic field I’m quite convinced about that. We’ve had this type of issues so many times in our history. And we’ve always come out in the end quite strong, to welcome wake-up call because I think you will see us investing much heavier in our software businesses. And so we will move towards despite bidirectional integration that improves the quality of our systems. The use of the system shall we say. And I think overall in the end, Henry Schein will be a better investment for our shareholders from this point of view. So, I will say that also then I think you’ve seen this from others who have reported traffic into the animal health space is okay. It’s a great market we’re seeing lots of capital coming into this market. And we remain very bullish we’ve invested heavily from a management point of view in Europe and Australia and New Zealand. Our CEO of animal health business in the U.S. retired, he’s still a consultant to the company. We’ve replaced Kevin with an outstanding new president, who’s presiding over an outstanding team. So, we remain extremely excited about the third leg to Henry Schein that we added really about four or five years ago in a material way. It’s a great investment. And you’ll see us making more investments not only on expanding our distribution but in value-added services and in advancing unique products in this area. A great market and I think we should have, it’s hard to give you precise numbers but we should have a very good 2015 in the animal health space.

Okay. And then the dental is two parts. Stanley, the first one is for you. About a year ago, I think it was around then, you laid out what looked like some aggressive goals to move from sort of one out of every three new North American CAD/CAM users to one out of every two. How are you tracking against that now nine or 12 months later? And then, Steven, to an earlier question, I just want to make sure I’m thinking about this correctly. If I estimate about a $40 million shortfall in North American dental equipment because of the 179 delay, we should view that largely as a pickup from 4Q ‘14 to 4Q ‘15 as those accounts await the reimplementation of 179, rather than trickling in throughout 2015? Thanks, guys, for your time.

Yes. So, it’s hard to give you in one quarter whether we are at 50% or a third of the new systems. What I can tell you is that we’re continuing to do well in CAD/CAM in the U.S., in Canada, in other markets where we have E4D, and in the markets where we have CEREC, we’re doing well. And our global category or CAD/CAM the hardware, the entry devices, the materials is doing well and is growing. We have a team in place it’s been in place for four years now. And really are doing very, very well. So, I think this category is probably the -- at least from the big categories, the fastest growing category. I believe that overall we’re doing quite well. But in fact we’re gaining market-share globally. But to give you precise number of new units sold in the fourth quarter versus what our competitors sold, or competitors with similar influence, it’s very hard to tell. We’ll track that in a much longer period of time.

Yes, I’ll pick up on the second part of your question, John. But I’ll add to Stanley’s first part. Q4 I think when you look at how much market share we grew on CAD/CAM, because of the reduced sales were tax incentives, I don’t know if it’s really indicative. But while saying that, we still had something in the high-teens sales growth in CAD/CAM in North America. So we still had very strong growth, probably it would have been a lot stronger if the tax incentives were available. But they just weren’t. With respect to the second part of your question, if nothing changes from where we are, we’ll kind of have a normal year I believe for equipment because we did not get pull-forward in 2014, in Q4 2014 from 2015. And if nothing changes, the tax incentives aren’t increased, we probably won’t get much pull-forward in at the end of 2015 pulling forward from 2016. So it would be kind of a normal year, which would be good I think. We’re still hopeful and I think there is, still possibilities that the tax incentives could be reinstated at some point. But right now we have to go with whatever the tax logos that exist. And it’s only for the first $25,000 of capital expenditures, which is a relatively small amount. As you know CAD/CAM is over $100,000, a lot of other equipment is expensive. So without that tax incentive, it doesn’t give people the incentive to buy now and they’ll still buy but they’ll buy in due course rather than trying to accelerate it. So, hopefully that answers your question.

It does. Thanks for your time guys.

Okay.

So, thank you all for your interest. The questions actually were as usual very good. If you have additional questions, please feel free to call Steven Paladino or Carolynne Borders at 631-843-5500 and the operator would put you through. And so, as we finish off the reporting for 2014 and go into 2015, we are extremely excited as a company. There is so much going on and we just have an outstanding team. Our brand is doing well in the marketplace and we’re excited to be implementing our strategies for the, in connection with 2015 - 2017 Strat Plan, I think it’s well thought out. The team is galvanized behind it. And we’re excited going forward. Thank you for calling in. And I guess we speak to you in six days’ time. Thank you.