Good morning, ladies and gentlemen, and welcome to the Henry Schein third 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. 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, Bettina, and thanks to each of you for joining us to discuss Henry Schein's results for the third quarter of 2016. With me on the call today 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 materially 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 on the company's internal analysis and estimates. The contents of this conference call contain time-sensitive information that is accurate only as of the date of the live broadcast, November 2, 2016. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. I ask that during the Q&A portion of today's call, you limit yourself to a single question and a follow-up before returning to the queue. This will provide the opportunity for as many listeners as possible to ask a question within the one hour we have allotted. With that said, I would like to turn the call over to Stanley Bergman.

Thank you, Carolynne. Good morning, everyone, and thank you for joining us. We are pleased to report record financial results for the third quarter. We believe we gained market share in each of our business groups, as the company continues to be well served by our diversified portfolio and an expanding global customer base. Today, we are affirming guidance for 2016 GAAP diluted EPS growth of 7% to 8% or 10% to 11% on an adjusted non-GPA (sic) [non-GAAP] basis. We are also pleased to introduce guidance for 2017 diluted EPS that represents growth of 17% to 19% on a GAAP basis or growth on a 9% to 11% basis on an adjusted non-GPA (sic) [non-GAAP] basis. Both compared with respective midpoints of 2016 guidance. In a moment, I'll provide some additional commentary on our recent business performance and accomplishments. But to set the tone, we remain very pleased with the state of the company, with our continued market share growth throughout the world, and believe we are operating in very good markets. So, Steven, please provide your financial report.

Okay. Thank you, Stan, and good morning to all. As we begin, I'd like to point out that our 2016 third quarter results include restructuring costs of $5.4 million pre-tax or $0.05 per diluted share. Our Q3 2015 results include restructuring costs of $8.4 million pre-tax or $0.08 per diluted share. Also, our prior year third quarter results include a one-time income tax benefit net of controlling interest of $3.8 million or $0.05 per diluted share related to a favorable tax ruling. I will be discussing our results as reported on a GAAP basis and also on an adjusted non-GAAP basis, which excludes the restructuring costs and the prior year tax benefit, as we believe the adjusted non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enabling comparison of financial results between prior periods where certain items may vary independent of business performance and allow for greater transparency with respect to the key metrics used by management in operating our business. These adjusted non-GAAP financial measures are presented solely for informational and comparative purposes, and should not be regarded as a replacement for corresponding GAAP measures. You can see in Exhibit B of this morning's earnings release a reconciliation of GAAP to non-GAAP results. So first, turning to our sales results, our net sales for the quarter ended September 24, 2016, were $2.9 billion, reflecting a 6.7% increase compared with the prior year's third quarter and this consists of 7.7% growth in constant currency and a 1% decline related to foreign currency exchange. In local currencies, our internally generated sales increased 6.0%, and acquisition growth contributed an additional 1.7%. When further normalizing our results for switches between agency sales and direct sales, that internal sales growth in local currencies for Q3 was 5.6%.…

Thank you, Steven. Let me begin my review of our four business groups with the Dental group. Our North American dental consumable merchandise growth in quarter three was relatively consistent with the quarter two growth. Sales of dental specialty products did well in the third quarter with particular strength in the implant sales worldwide. While the dental consumable merchandise market continued to reflect somewhat slower than historic growth, it appears to be stable. Though not back to levels we saw a couple of quarters ago, we believe that the soft U.S. dental market is more temporary as September sales growth accelerated, although October was somewhat soft. We believe that October sales growth was negatively impacted by the weather in certain areas of the country. I would note that we have demonstrated our ability to deliver profitable EPS growth even during soft market conditions. North American dental equipment internal sales growth in local currencies is 13.3% during the quarter, while, shall I say, sales of high-tech equipment with strong CAD/CAM and Zahn customer automated prosthetic product sales experienced double-digit year-over-year internal growth in local currencies. Note that equipment growth benefited to some extent from an acceleration of sales growth associated in part with the promotion in the quarter. Favorable dental equipment purchases are typically a leading indicator of dental practitioner sentiment. We do believe that the third quarter equipment sales in North America, coupled with the potential benefit from the Section 179 tax incentive, indicate that current market slowness may not prevail over the long term. That said, we are still closely monitoring industry data points as they become available in order to gauge the growth of the dental end market in North America. We would like to see additional future market data to draw any firm conclusion on sales trends.…

And your first question comes from the line of Ross Muken with Evercore ISI.

Hi. This is Elizabeth Anderson in for Ross. I was wondering if you could talk a little bit more about the North American dental market, particularly the consumables in the quarter, and then also what you're seeing in terms of competitive levels for different segments like large groups or smaller ones. Thank you.

So thank you for that question. We believe the U.S. dental market continues to be quite stable. In our view, the soft U.S. dental consumable market is more temporary, in our view again, as September sales growth accelerated. Now, just to be clear, we're talking about hundreds of basis points, even less than that, swings. So it is hard to measure this impact on a month-to-month basis. September was strong, October was soft. We believe the October sales growth was negatively impacted by weather in certain areas in the country. When I say soft, I mean relatively soft in terms of basis points. Small numbers of basis points. It is still, in our view, too early to conclude whether the market will experience a more significant rebound. But it's really important to note that our U.S. dental equipment and our specialty product sales were strong during the quarter. By the way, our Canadian business is also strong. So that impacts the North American performance as well. We believe that the U.S. dental equipment positive trends are positive market indicators. So, overall, the U.S. dental market is solid, probably flat from a unit point of view. Very hard to tell. There are some units that are up in the specialty areas, and there's also some price compression because of, perhaps, competitiveness with one or two product categories. But, overall, the market is solid, and very hard to make concrete long-term decisions on trends based on one week's performance over another. But we believe dentists would not be investing in their practices if they didn't feel good about the practices. By the way, we do continue to feel very good about our global Animal Health business, our U.S. Medical business, our international Dental business. And overall, we do feel very confident that we are gaining market share across all of our portfolios throughout the world. So it's a long answer to a short question.

Perfect. That was very helpful. And then, just in terms of the competitive environment you're seeing in Dental in terms of large group or smaller spaces, do you have any additional comments on that area? Any changes you've been seeing?

Well, the dental market has always been a very competitive market. We have been competing strongly with our major competitors and the smaller competitors for decades. I'm not sure the competition has increased substantially. At the end of the day, we believe we have a very strong proposition to offer to our large customers, our midsized customers and our smaller customers. The proposition we offer is based on a margin generation value that enables us to fund the Value-Added Services, which we believe are unique in the market, in particular, our software that we offer, interoperability of that software with various devices, our e-commerce platform. These are all unique. So, given that array of value-added offering and coupled with the prices that perhaps are being offered from time to time by competitors, we believe we have a very good offering and, more important, do not feel we are in any more of a competitive disadvantage or advantage to the historical trends. Having said that, we do believe that our value-added service offering continues to improve and, therefore, increases the positive gap between us and our competition.

Perfect. Thank you.

And your next question comes from the line of Jeff Johnson with Robert Baird. Jeff D. Johnson - Robert W. Baird & Co., Inc. (Broker): Thank you. Good morning, guys. How are you?

Very good. How are you doing? Jeff D. Johnson - Robert W. Baird & Co., Inc. (Broker): I'm doing well. Thank you. So, Steve, I want to start with you, and then Stanley, I want to come back to a bigger picture question for you as well. But, Steve, just I would assume you guys can cut your data in certain ways. So just on your October comments, I'd be interested to hear kind of what you were seeing in the North American dental consumables market, maybe outside the Southeast where I'm assuming your weather comments are focused, And then I'm just trying to understand what you pulled forward into 3Q. I get it on the promotion side, on the equipment side for the North American dental, but it feels like to me, you may be talking about some other areas as well. So just want to clarify that.

Yeah, on the favorable timing, I'll deal with the first that's easy. There are three factors. One is the North American dental equipment sales, 13% growth in the current quarter, but some of that did pull forward from Q4. The second is favorable timing on influenza vaccine sales. I think, as most people know, we can't control sales between Q3 and Q4. And we just had stronger versus last year – we had stronger sales growth in the current quarter versus last year's third quarter. And the last is, it's some timing of some expenses. And again, all three of those, we wanted to point out that while it was still a strong quarter, were some favorable timing things that helped Q3 and will reverse in Q4. On your second question, Jeff, I think you know that starting in June, the market saw and we were unfortunately the first to talk about it on our conference call, the U.S. dental market showed softness. We saw that softness really continue June, July and August at different rates, but not materially different rates. September was a very strong month for us. We were beginning to believe – during September, and I'm talking about consumable merchandise in the U.S. dental market, specifically, we were beginning to believe that it was really just related to the summer and vacations for practices or patients, but it was very strong. And then, October was not as strong. It was still a bit better than what we saw earlier. But, geographically, you had the hurricane impact that negatively impacted things. You had the ADA trade show that was in a different quarter than last year that negatively impacted. So we still believe that October is potentially an indicator of positive signs, but as Stanley said, we don't…

Thank you, Jeff. Good question. I think we have to, of course, add to the Value-Added Services proposition of Henry Schein. We have many business units that are offering different componentry to the dental market whether it's products, specialty products, whether it is value-added services, software, e-commerce, different kinds of services from an education point of view, from a practitioner's point of view, from the relationship with schools. We need to go out into the marketplace much more with a one-stop proposition to our customers, including leveraging our businesses outside of dental, namely medical and to some extent veterinary, because they also are dealing with some of the schools and some of the institutions. So, what we need to be doing is going out far more with a one-stop value-added service proposition. We are well positioned. I don't believe anyone has the array of services that we have and particularly on a global basis. We need to globalize more of our value-added services, be it in the digital prosthetic field or in the software field. And interoperability will be key. So these are the various areas that we will focus on. Your last sentence about additional competition coming into our markets with large accounts, I think that's what you implied. I don't think anything has changed there. There's been a lot of competition in that space. There will always be competition in that space. More of the business will go into the very large accounts, but more will go into the mid-sized accounts. And I believe that in our strategic vision for the future, we will focus on separate value-added service propositions for different sectors of the market, the very large, the mid markets and the small. And these will be global propositions because it's the same trend that we're seeing around the world. And our value-added service offerings will be globalized. Yes, they will be customized for specific market needs, but the strategic thinking behind these offerings and the services that we will develop or expand the services that we will develop will be utilizing global resources and global solutions, with some customization for the local needs. So we are very excited about the opportunities we have to further advance our value-added service propositions for specific sectors based on the size of customer and adding to that the various value-added service solutions from a specialty point of view as well.

Bettina, we'll take the next...

Okay. And your next question comes from the line of Michael Cherny with UBS.

Good morning, guys, and thanks for all the details so far. So I want to ask a different type of competition question. I know this has been the theme, but it seems like the theme across healthcare. I know you guys have been very much focusing on the value-added services you provide, the strong partnerships. Have you seen a trend of people working or are you trying to use price specifically? It seems like it's coming up in other different healthcare subsectors where that's in the dental market or even animal health and medical where people are trying to use price specifically as the weapon trying to come in and take share.

Well, of course, price has always played a role – a key role. You've got to be competitive. Price has been an issue in our markets for the 36 years that I've been in the business. So, yes, price is important. But you have to balance price with value-added services. It costs money to develop value-added services. It costs money to field a sales force, although both the value-added services and the field force need to be more efficient. We need to have more sales per head and we need to have more sales per dollar invested in value-added services. So the combination of investment in the value-added services and price is what drives competition and the bottom line. We obviously have to sharpen that as we have done every single year for decades. We have to sharpen at the end of the day the price we charge for the value-added service and the products. Competition has always been there. So I'm not sure if there's anything new in the market other than we have to just continue with what we've done for decades, which is to provide a better proposition to our customers. I'm confident that we are well positioned to do that as we bring together our various offerings into a unified offering for our customer base.

Thanks. The fact that nothing's really different I think is the key focal point, so I appreciate the color.

When I say nothing's different, nothing's different in the market in terms of competition. The dental market, the medical and animal health markets have been fiercely competitive markets for decades, and I don't expect that to change.

Can I just add one thing, please? Mike, you made reference in your question to other areas of healthcare where there is, my understanding because it's not an area we participate in, but I assume you're referring to pharma wholesaling and over the last couple of weeks or so, there's been a lot of input on very competitive situations. I just want to make sure everyone realizes that's not our market. Sometimes we get painted with a broad brush that we're both in healthcare distribution, but whatever is going on there, and I don't pretend to understand it as well, that is really not what we're seeing in our market. Yes, you have to be competitive, but we still don't believe that you have participants who are doing irrational pricing in order to gain market share. So it's just a different world in our segment of medical and animal health.

Steve, that's very helpful clarification. Thank you.

And your next question comes from the line of Brandon Couillard with Jefferies.

Thanks. Just a quick question for Steve. The inventory levels are down again quarter over quarter sequentially, which is counter to sort of the historical trend in the business. Was that largely tied to Dental, and should we expect that to bounce back in the fourth quarter?

Yeah, well, inventory levels were down. The inventory turns were also relatively consistent year-over-year. And when you look at our inventory levels, there's less inventory carried for equipment, because much of equipment is custom ordered. So we do have certain equipment that, for standard packages, that we'll sell immediately to customers. But many times, customers are not ordering out of inventory. So it's directly related to more the consumable sides. I would say that the better measurement is looking at inventory turns, and that's been consistent. And our goal, quite frankly, is to improve turns over the next year or two. There're still opportunities in the market, from time to time, to do small forward buy-ins. So we take advantage of that where it's financially smart to do so. Typically, we're not buying forward any significant period of time. We're dealing with four to six weeks. So it's very short-term buys. But if the market allows us to get a little bit of advantage doing that, then we'll take advantage of it.

That's it. Thanks.

Your next question comes from the line of David Larsen with Leerink.

Hey, congratulations on a good quarter. Can you talk a bit about the growth rate in North American medical? I think it was 7% in the quarter. What was that ex agency, and how did that compare to the previous quarters? Was that a slight deceleration?

Okay. So there was no agency impact that was material in the current quarter. So it's the same number with or without agency because there was no impact. So, yes, you're correct that it was slightly lower than a comparable number, which I think was high-single digits – high-single maybe to 10% in the prior quarter. But I don't think there's anything there. It's still very strong sales growth. We're still growing significantly faster than the market and taking market share. And you have to be careful just specifically looking at that closely one quarter to a next, because there are ebbs and flows in winning business that don't perfectly go straight line in every quarter, but we're still very pleased with that 7% growth.

Yeah, it looks good. So there's no noticeable impact from, like say, the Affordable Care Act or perhaps some lives coming off of these exchanges, nothing like that? It'll probably pop back up next quarter?

Well -

I think these exchanges are not really impacting us directly per se. The number of Americans who now have access to a primary care physician has gone up over the last year or two or three. More people realize that through the Affordable Act, they can access a primary care physician. They understand more and more the value of a primary care physician visit. So that has gone up. We have cautioned, though, on prior calls, that double-digit growth in this market is not realistic. Can't do that forever. So the kind of growth we're experiencing now, a little bit up, little bit down, is where we can continue to grow for a while into the future. Mid-single digits to a little bit higher single digits is, I think, what you can expect. But beyond that, we may have quarters from time to time with a very high rate, but I don't think that is sustainable, and we certainly haven't built our models and our budgets around that.

Okay, great. Thanks and congrats on a good quarter.

Thank you.

We have time for one final question.

Okay, and your final question comes from the line of John Kreger with William Blair. John C. Kreger - William Blair & Co. LLC: Hi. Thanks very much. Steve, can you just clarify – you had strong U.S. dental equipment growth, but you did say some of that was driven by promotions? I think I heard you say you expect it to be strong in the fourth quarter too, but just wanted to make sure, can we expect that number to be a positive number year-over-year in Q4?

Yeah, so, it's not unusual for us to have promotions from time to time. It's part of what we continually do. We had a very successful promotion for equipment sales that ended at the end of Q3, which is also typical. We typically time our promotions to end at the end of a quarter. It's probably more successful than we expected it to be, which is a good thing, I guess. And I guess, John, the thing that we believe will be positive for us is this whole Section 179, where practices can deduct up to $500,000 of CapEx. And we believe that'll drive additional equipment sales growth in Q4, and we've been saying that all year. But quite frankly, it's really hard to estimate with precision how much of that will occur, but I do think that we'll see benefit there and I do think that there'll be a little bit of impact because we did pull forward equipment sales, but we still expect to have a good Q4 in equipment. But the wildcard is how much of the 179 will actually come to help us in Q4. John C. Kreger - William Blair & Co. LLC: Great, that's helpful. So the other question, if you just think about your U.S. business in total, are you seeing any signs that some of the softness that you saw pop up in June in Dental is rolling into Animal Health or Medical?

Yeah, it doesn't seem like that. It doesn't seem like that at all, which is also another factor why we believe that this U.S. phenomenon may be more temporary. Temporary may not be measured in a month or two. It may be measured in a longer time period. But when you look at Medical and you look at Animal Health, we're really not seeing a similar thing occurring in the U.S. So I think that's a positive indicator, but we're being cautious. While we do expect a little bit of improvement in the U.S. dental market in our guidance, we're not being very aggressive there until we actually see it occur because we can't predict exactly when that temporary piece will rebound. And again, we're still expecting it to rebound, but we have to actually see it happen. John C. Kreger - William Blair & Co. LLC: Great, thanks so much.

John, just to add to Steven's comment, I think it is reasonable to expect mid percentage growth – single-digit growth in our Animal Health and our Medical businesses. Yes, we've had quarters where that number has been higher. I'm talking about an internal growth adjusting for agency switches in the Animal Health space, but I think mid-single percentage growth is reasonable in Animal Health and Medical. Again, we've had higher, but we have to build our models based on that. Some growth in Dental and that I think is the way we need to project the future rather than build it based on – build our future based on some of the spikes we've had on the higher side from time to time. Again, we are very comfortable with our businesses. We expect to grow market share across the board in each of our businesses in the major sections of consumables, equipment, value-added services in the case of Animal Health in both the pharmaceutical side and the consumables side, the disposable side, diagnostics. And so I think we're well positioned in the entire company to continue to grow market share across the board. We have a great management team. We're adding to the management team in a couple of areas where we have, where we feel that there's greater opportunity to grow into newer areas or areas that may be of the newer parts of the economy from our point of view and are very, very excited about the company. The morale is good and overall I think we're well positioned to develop our 2018-2019-2020 strategic plan. We have a clear understanding of what's going to be in there. It's a question of fine-tuning. And we're very, very excited about the future.

So with that in mind, everyone, thank you for calling in and we look forward to being on the phone with you, I think, in this time it's 120 days, right? Because it's in February. So if you have any questions, please feel free to call Carolynne Borders at...

631-390-8105.

Or Steve Paladino with the 5915 as the last four digits. Thank you very much. Have a great balance of the year and look forward to speaking to you in 2017.

And this does conclude today's conference call. You may now all disconnect.