Good day, ladies and gentlemen. And welcome to Henry Schein's Second 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, Andrea, and thanks to each of you for joining us to discuss Henry Schein's results for the second quarter of 2017. 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 upon 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, August 8, 2017. 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, you limit yourself to a single question and a follow-up before returning to the queue, allowing as many listeners as possible to ask a question within the one hour we have allotted for this call. 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. I'd like to start today's call by making a few high-level comments. We are pleased with the overall sales results of the second quarter of 2017 in each of our global Dental, Animal Health and Medical businesses. We delivered solid earnings per share growth as we continue to implement our strategy of growing the business organically and through acquisitions. We strongly believe that our strategic framework is built on a commitment to help our customers operate more efficient and successful practices and has worked well for us for many, many years. As a result, many of our products, technologies and solutions have leading positions in our market. And our corporate focus remains on delivering consistent earnings growth over the long term while investing in our business for the future that will continue to be driven by healthcare innovation. So, we are particularly pleased with our strong second quarter of 2017. We look forward to providing you with additional color on the quarter and of course responding to any questions that the investor community may have. So in a moment, I'll provide some additional commentary on our recent business performance and accomplishments. But first, Steve will review our financial results. Steve?

Okay. Thank you, Stanley, and good morning to all. As we begin, I'd like to point out certain items impacting our second quarter results. Our Q2 2017 results include a litigation settlement expense of approximately $5.3 million pre-tax or $0.04 per diluted share. And our Q2 2016 results include restructuring cost of $20.4 million pre-tax or $0.18 per diluted share. I will be discussing our results as reported on a GAAP basis and also on a non-GAAP basis which excludes the litigation settlement in the current quarter as well as the prior year restructuring costs. We believe that the non-GAAP financial measures provide investors with useful information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for GAAP measures. You can look at Exhibit B in this morning's earning release for a complete reconciliation of our GAAP and non-GAAP disclosures, as well as the reconciliations being provided on our Investor Relations sections of our website. Okay. If we look to our results for the quarter, net sales for the quarter ended July 1, 2017 were $3.1 billion, reflecting a 6.5% increase compared with the second quarter of 2016. This consisted of 7.7% growth in local currencies and a 1.2% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.4% and acquisition growth was an additional 3.3%. Again, details of our sales growth are contained in Exhibit A of our earnings news release issued this morning. Operating margin for the second quarter of 2017 was 6.9%…

Thank you, Steven. It was indeed an honor to be recognized by Chief Executive magazine, and I, of course, share this award with all of our Team Schein Members across the globe. So before we go through highlights for each of the business units, I'd like to note that we believe we gained market share during the second quarter in each of our global Dental, Animal Health and Medical businesses. This has been the case for quite a while. We are confident that our strategies, the way we execute our strategies, position us well to continue to gain market share in each of our three verticals across the globe. Let me begin my review of our four business groups with Dental. In North America, Dental consumable merchandise internal sales growth in local currencies was 0.8%. Going forward, this year we believe the North American consumable market for Dental will continue to grow at a slightly higher rate than inflation, with little unit growth, and I believe we've said this for a while. In line with the broader macroeconomic trends, we believe the domestic market should realize unit growth improvements over time. We're also quite sure about that. Regarding the North American dental equipment, we're quite pleased with the robust 14.8% internal sales growth in local currencies as dentists continue to invest capital in their practices in order to improve productivity and profitability. As Steven noted, the strong growth in the second quarter was partially impacted by the easier prior year comparable. However, we did generate 14.8% internal sales growth in dental equipment. And we believe that the dental equipment market remains quite strong in North America and, by the way, for that matter, in most markets around the world. Our steadfast commitment is to offer our global Dental customers a…

Your first question comes from the line of Robert Jones with Goldman Sachs. Nathan Rich - Goldman Sachs & Co. LLC: Thanks. This is Nathan Rich on for Bob this morning. Maybe starting on the North American dental market, can you just provide some more detail on what you believe drove the slower consumables growth in the quarter, especially given the comparison year-over-year I think was a little bit easier? And I think the past several quarters the company's view has been that the North American dental end markets are stable. Just wondering if anything has changed with regards to that outlook?

Sure. So, let me start with the macro. We believe that the North American, for that matter, the U.S. dental market, is quite stable. We believe that from a consumable point of view, the market is growing at the lower end of single digits, but is nevertheless growing at approximately the inflation rate. There's not an increase really in units. There are parts of the market that are growing perhaps better, including implants. And so I would not read anything into – I think there's been a lot of comments into our consumer growth in the U.S. market, North American market, this quarter. There's timing issues. And, again, we're talking about basis points here, moving one way or the other. Timing, we did lose one of our larger customers, by no means our largest customer. There is some movement towards lower-price products. I think we see this in the economy in general. Some private brand, controlled brands. That movement not really impacting in a huge way our profit per unit of product sold. But overall, we believe that the market is quite stable from a consumable point of view in the United States and North America for that matter, including Canada. Let me just hasten to add that we believe the equipment market is more robust. And this relates primarily to practitioners investing in technology, whether it's in digital imaging, digital CAD/CAM, and our sales organization being well-positioned to help our customers adapt their practices to the digitalization of dentistry. So we are quite optimistic about our North American business from a sales point of view and also from a profitability point of view.

Yeah, I'd just like to add a couple of specifics to what Stanley's comments were. Stanley talked about the loss of one of our special market customers as well as timing issues including one less selling day this quarter than Canada because of the Easter holidays. We talked about that last quarter where we had one more selling day. Those two items in total negatively impacted our North American consumable sales growth by at least 1 percentage point. I also think it's important to note that when we look at the progression during the quarter, sales growth strengthened during the quarter. And without getting into specifics for July, July was a very solid consumable sales growth in North America. So I don't think we think there's any market changes that are important to note. I think we believe that there's a little bit of ebbs and flows and calendar issues that are contributing to it, but we still feel like the market is pretty consistent. Nathan Rich - Goldman Sachs & Co. LLC: Okay. That makes a lot of sense. And then, Steve, just on your guidance for North America Dental equipment, I appreciate the guidance on 3Q. Do you have any early expectations for growth in the fourth quarter as you guys ramp up the distribution of the Sirona line? And how should we think about any potential impact on the consumable side of the business? As I believe the agreement allows you to sell certain bundles and CEREC Blocs and that type of stuff as well.

Well, I think we're very optimistic with the addition of the full Sirona equipment line. But I think to be fair, it does take some time to build a pipeline. So while we would expect it to have incremental sales in Q4, I think really you have to look to 2018 to really give us a little bit of time to ramp up. We're not giving specific guidance on that, but we would hope to have an overall very good equipment quarter in Q4, in part because of that. But also we think the equipment market, as Stanley just said, has a lot of life in it. Nathan Rich - Goldman Sachs & Co. LLC: Okay. Thanks for the questions.

Okay.

Your next question comes from the line of Jeff Johnson of Robert Baird. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good morning, guys. Stanley, congratulations on the CEO Award. Well deserved. Maybe I could follow up with one question here just on the consumable side. Steve, you gave some good color on the DSO changes and the selling day issues. Wondering how much maybe your specialty business versus your general consumables business, if you could give any color on that in North America this quarter? And also obviously some disruptions going on at one of your larger competitors. Just wondering if that is helping at all, or if we should think of that as an incremental tailwind in the quarter at all? Thank you.

Thank you, Jeff. So I believe that overall the specialties are helping, of course, not only in the sale of the specialty products, whether it's the implants, the wires, the brackets, the endo files, but generally this is pulling along business in the consumable area and in particular on the equipment side. And on the equipment side, we are doing quite well in selling equipment to specialists and, in fact, GPs that may do specialty work. I think this has been very, very helpful. I don't think the specialty businesses are material enough yet to impact the overall consumable growth rate in the United States in a material way. But over time, I think you can expect that the specialists will impact our business in a positive way because of our ability to serve all of the specialty needs, not only in the consumables, pharmaceutical, equipment, but I might add in the software area, too. I think as it relates to what's happening in the marketplace, we have seen disruption in the marketplace over the years come and go. This is a highly competitive market. We fight for every dollar of sales. I don't think that is going to change in any material way. We have an outstanding sales force. We add to that sales force every year. We recruit both from our competition and also internal rookies we hire and we develop them over time. This is not only for the sales organization, but for sales management. And I think our sales force will continue to do well using tools we have, whether it's the practice solutions, the e-commerce, those kinds of educational and analytical tools that we offer them. So I don't think any particular disruption, contrary to what's I think many are writing about, is impacting our business in a significant way. There's no freezing of the markets. There is no massive movement of sales people from one distributor to Henry Schein. We continue to be going in the same direction that we've had over the years and we continue to add incremental sales people in a moderate way specifically to throw vacancies in markets that we believe were underpenetrated. So, I think, we're heading in the direction we've always headed in, which is to gain more market share through ensuring that we offer the best solutions to our customers, train our sales people, and execute well through our infrastructure.

Yeah. I would just add, because you're also asking about specialties and the biggest component of specialties for us is dental implants, and we had a really good quarter in dental implants on a global basis. Our organic sales growth was about 7%, and it was higher in North America. So, we feel like we're taking market share in the implant market as well as other specialties. But again, it doesn't move the needle all that much on a global basis because it's still relatively small compared to the core dental business. Jeff D. Johnson - Robert W. Baird & Co., Inc.: All right, Steve. That's helpful. And maybe just one follow up on the balance sheet. So, inventory levels did come down. I know turn stayed about the same, but inventory levels did come down $50 million or $60 million relative to the last couple quarters. With the end markets maybe being a touch soft, maybe in North America might be the way to phrase it, where are you at with inventory levels? Do you feel like you're at kind of a sustainable level? Are there more cuts that need to be done? Do you need to expand inventory ahead your changed relationship in September? Just kind of help us out on the balance sheet side a little bit.

Sure. Well, we will need to build inventory going into September 1 for Sirona because you need to be able to do installs and quickly service your customers. So, of course, that – whenever you add a line, that's natural. But I think as we look out, there is an internal goal to get more efficient with inventory turns. We do believe there's still room for us to continue to improve inventory turns. And so longer term, we would feel that there's opportunity to take some cash out of the inventory by improving those turns. It's still a specific goal that we have internally. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you.

Okay.

Your next question comes from the line of Jon Block with Stifel. Jonathan Block - Stifel, Nicolaus & Co., Inc.: Great. Thanks, guys, and good morning. Stanley, maybe just to push you on some of your earlier comments, just sort of looking long term in dental, I think, you mentioned sort of the domestic consumable unit growth would improve over time. And if you could just help us out with what changes incrementally from sort of a macro standpoint from the current landscape to drive that improvement? And then a follow-up, Steve, just while I've got you, maybe if you can outline for us the FX EPS tailwind today relative to when you provided 2017 guidance back in November? Thanks, guys.

Thanks, Jon. From a macro point of view, there is more and more literature that is being published by the very credible scientific institutions, major dental schools, medicals showing the direct correlation between good oral care and good healthcare. I think, this has been understood more and more by insurance carriers, I think by IDNs, I'm not sure yet by government officials across the board, but many in Congress are understanding this. And so, we are seeing more and more programs emerge, where medical practices are adding a dental component, dental practices are connecting with medical providers, so that pediatricians are understanding the importance of good oral care. So, we remain very optimistic. We do know that where patients or the public is exposed to good oral care, the general quality of life increases and the cost of healthcare goes down, whether it's in the obstetrics area, the pulmonary area, the diabetes area. And these are all areas that are being pushed by healthcare policy people as a way to reduce healthcare cost. Wellness and prevention above all the driving of ways to impact NCDs, non-communicable diseases, is the best way to control healthcare costs. People understand this, and dentistry is right in the middle of these NCDs. And so, we remain very, very optimistic about where dentistry is heading. We think there's a bigger role for oral care, yes. The drilling and filling will be going down, but there are many, many other areas of opportunity in dentistry, and we're very, very excited about the future of dentistry. I think, it is very hard and inappropriate, I think, to measure dental consumables on a quarterly basis based on small movements in basis points. I think in the long run, we will do okay. And I think for the time being, we will see the lower part of single-digit organic growth in dentistry, but we are headed, I think, for better times. And I think, as healthcare policy people get their needs understood, it will be good for dentistry.

So, on the second part of your question, Jon, so when we originally gave guidance before the year started, we did say that we would – we were expecting foreign exchange to be consistent with levels at that point. We've seen some headwinds in Q1, foreign exchange negatively impacted our EPS by $0.02. This current quarter it negatively impacted our EPS by $0.01. So, year-to-date, we have $0.03. We probably have things stay where they are, one or two more pennies that will negatively impact us for the second half of the year. So, it's a little bit of a headwind, but it's not that significant. But we're still comfortable with our full year guidance despite that. And again, it assumes no major changes from where we are at this point. I think that there is – personally, I think that the dollar could strengthen a little bit more, but we'll see if that happens or not.

Your next question comes from the line of Sarah James with Piper Jaffray. Austin T. Quackenbush - Piper Jaffray & Co.: Good morning. This is Austin on for Sarah. Thank you for taking the questions. I'll start off with we have seen some slower volume growth within the hospitals this quarter including in their outpatient centers where Schein tends to focus. But this didn't seem to affect you guys. This quarter, it sounds like you've picked up some market share. But – so, what have you been hearing from the medical business customers, and how do you see growth in the medical business going forward?

So, Austin, good question also. On the medical side, the vast majority of our growth other than a little bit of inflation, and there isn't much because there is I think some deflation in the medical world as larger customers understand the quality of products being offered and are trading in many instances to private brand, controlled brand, rather than more expensive brand. So, I would say in terms of inflation it's probably slightly deflationary, but that doesn't really impact our profit because per unit we still make about the same, if not, more on some of the private brand type products. Now, as for units. In general in the space, it's hard to tell. But what is clearly happening is that the large group practices are growing, IDNs are buying practices, although I think for the last quarter or so, we've been told or our statistics show a slight slowing down of the number of practices being bought by IDNs. But in any event whether the IDN business is growing significantly or just marginally in the ultimate care space, our growth is coming primarily from market share growth in that we are landing some large customers. It is a little bit lumpy as to when these customers come on board because it may take as long as a year to bring a customer on board. Our pipeline of new customers is pretty good. We are well known now in the IDN and large group practice marketplace as a reliable provider for running very good data and valued-added services. So we remain quite optimistic about our medical business. But I think one cannot expect double-digit growth every quarter and I'd be surprised if it goes below the mid-single digits. But we're in that cusp of double-digit growth area for medical, I think for a while. Very optimistic about the business. Just like in dental, animal health, we have very good management on the medical side. They're doing good job. But I don't think our business is at all correlated to what happens in the hospital arena. Let me hasten to add that the second quarter flu diagnostics, the diagnostic products were probably much lower than the previous year. So if those visits to practitioners related to flu and flu-like symptoms had remained constant, our growth would have even been higher. Austin T. Quackenbush - Piper Jaffray & Co.: Great. Thanks. And then on the gross margin side, results were slightly below our expectation. So, can you provide more color on what caused gross margin pressure this quarter and did business mix play a factor?

Yes. Business mix did play a factor. It was part of the factor. But we also saw a little bit of gross margin contraction in our European Dental markets, as well as some of our Animal Health businesses in certain markets. So, it's a combination of those things. But again, if you look at mix and those other things, I think while we focus on gross margin, we focus also on the operating margin and we back out all of those adjustments that I went through in the prepared remarks. We still got 12 basis points of operating margin expansion. A little bit lower than what we would like, but we're working on trying to improve that also. Austin T. Quackenbush - Piper Jaffray & Co.: Perfect. Thank you.

Okay.

Your next question comes from the line of Michael Cherny from UBS.

Good morning, guys. I hate to keep going back to this, but on the Dental market, I think it was around this time last year when you started to see some market-related weakness across the board. As you think about the experience from the last year relative to consumables and your expectations, what type of leading indicators do you think you can start to identify to better understand some of the moving pieces here or are there really none and it's just a matter of the market essentially sorting itself out?

So, Michael, appreciate all the questions in this area, but we are talking about swings of basis points. It's really, really hard to give you precise information. Again, in the second quarter last year, we were taken by surprise because the beginning of the quarter was good and then it tapered off. I don't think we're experiencing any of that kind of volatility, although I think, as Steven mentioned, parts of the second quarter were a little bit weaker than say, July. But we have to be very careful because we don't know what August and September will be looking like. But we are talking about basis points here in swings. Overall, the market, as we said, is approximately stable in units, then you have some inflation. But as the large group practices grow, and particularly the midmarket practices grow, and that's the fastest-growing part. They're also, I would say, a little bit more discrete buyers. They will compare products. They will have people that will look at the products to ensure that they're getting the best deal for a specific kind of product. Our salespeople today are far more knowledgeable on quality differences between one manufacturer and another, private brand, control brand. So I think you could have a little bit of shopping that could suppress the numbers a bit. But overall it doesn't impact our profit. In fact, in some areas it increases the profits. So I don't think there's any conclusions you can draw from our performance this quarter compared to last year. There are also some timing issues. And Steven mentioned Canada and Easter. If you talk to some of our medical people, they will tell you the timing of the national sales meeting had an impact. But we are talking about small amounts of movement between one quarter and another. And I think at some point, it doesn't prove to be that valuable in pursuing this. And there's a lot being written about it. But the Dental markets in our view are still quite solid in the United States, in North America, generally throughout the world. We remain optimistic and we're investing in this part of the business and seeing lots and lots of upside on the software side, on the equipment side and, in particular in our business, gaining market share across the board in all of the areas that we service.

Thanks. And then just one more really quick question. Henry Schein has been investing for years in an e-commerce platform. Can you give us any sense of how much of the business roughly, if you can, go through some level of e-commerce channel within Henry Schein?

Yeah. Steven will give you the exact number. But of course, it's growing. And in particular here as we move from smaller practitioners to the midsized practices or very large practices, there is a movement, a migration, to e-commerce. This is not only Dental, this is in Medical, it's in Animal Health. We just launched a new website, a very exciting website. It's been turned on for all of our business units now over the last three months. It's a project that's been worked on for two or three years. And I'd like to take this opportunity to congratulate the teams that worked on that, of course software development team, but also the users, the business people, because it went in flawlessly from a customer point of view. There's so much going on in the e-commerce section. It's very, very exciting. Interoperability is all over the place in our field. The direct connection between our website, what our customers are doing, study clubs, digital imaging, digital prosthetics, all connected, practice management activity. Lots and lots of stuff going on. And this is very, very exciting as we move the business towards a digital platform. And we believe that our unique systems will stand us in good stead, whether it's from competition within the industry, where, of course, it is very fierce, to competition that may emerge from other industries coming into our area, we built a pretty good moat and are continuing to advance our business through digitalization and e-commerce. But, Steven, you might have specific information.

Sure. Yeah. So let me give you a little bit of data on a global basis. So, electronic sales on a worldwide global basis, runs at just under 50% of our sales. However, it's important to note that on the equipment side, very little equipment sales are bought through the internet. There normally is demonstrations, there's normally in-person meetings and things like that. So for the consumable side, it's significantly higher than that just under 50%. And it varies by market and varies by business unit. But it is a very high percentage of our consumable sales that are being received over the internet or in some form of electronic means.

Let me hasten to add as well that Henry Schein's leading telesales operation is very, very effective. And I believe that there's nothing in our markets or scale of the capabilities as we have, not only in Dental, but across the board. So, anything else? I think Carolynne was indicating we can ask one more question, operator.

And your final question comes from the line of Erin Wright of Credit Suisse. Erin Wilson Wright - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks for taking my last question. How is access to new products this year in Animal Health, like Zoetis' product, new generic products and others, contributed to top-line growth? And how much of the growth was attributable to in-market demand versus the new products? And as you head into the second half of the year, how do you anticipate, or do you anticipate, any meaningful changes to your vendor contracts with a more consolidated vendor base? Thanks.

Yeah, so that's a good question also on the Animal Health pharma side. I can't answer specifically on Zoetis. If you call Carolynne or Steven, they can talk to you about specific products. Because Zoetis puts a large part of their business through us, but they keep a few products that they sell direct. In fact, our relationship with Zoetis is very good. They have advanced the amount of business that they're putting through us in a very nice way. I would say our relationships with our large pharma suppliers in general is very good on the Animal Health side. I myself have met recently with CEOs of a number of these companies. There's one underlying shift that occurred with one supplier that had really only two major distributors last year and had a drop, previously had three, went to two, and now it's back to three. So that's moving some odd sales between the different distributors. You take that out and overall we have a healthy market and we continue to gain market share. There's been a lot that's been written about pressure on margins. And there's always been pressure on margins. I've been in this business for over 30 years. I can't remember a year when there wasn't pressure on margins. Our job is to ensure that we provide value to our suppliers. A couple of them have gone through significant transitions as they've merged. They've been very inwardly focused. I believe that they understand what needs to be done in order to motivate our sales force. And I expect that we will continue to do well with all the major pharmaceutical players in the Animal Health space, as they understand what they need to do to grow their market share with us. And generally very happy with our Animal Health business in the United States. And then quickly say, in Australia, New Zealand and in Europe, as we move towards a global Animal Health distribution business, I believe the only distributor that's really global. And we're focused on adding new markets. We entered the Brazilian market and been well-received, granted only in one particular region, two regions actually. And we'll expand in Brazil and hopefully in Asia as well in the not-too-distant future. So I think our relationship with our major suppliers are good. Some were a little bit inwardly focused. And I believe that they understand what needs to be done in order to motivate our sales force. So I'm generally very optimistic on our Animal Health business.

So, I think, Carolynne, that's it. Very excited about our future. We're sun-setting our 2015, 2016 and 2017 strategic plan. I think largely having met our major goals, of course, wish we had done better in some areas and surprised how well we did in others. The 2018, 2019 and 2020 strategic plan is coming together nicely. Of course, no one can predict the future 100%, but I think we are putting good plans together to continue to expand our business globally through organic growth, focusing on inorganic growth. There's lots and lots of opportunities but we can't avail ourselves of all opportunities because we simply don't have the human capital to integrate everything that looks logical. So, we are focused on capital deployment. I think Steven indicated to me this morning again that he remains optimistic about buying stock back. The pipeline of acquisitions is full. We will manage our working capital quite well, so we will not have to add too much to that even as business increases. But you can't manage that every day. You can manage it every day but you can't get progress every day. But overall I would say that we're happy with the organization and with the progress we are making. And so, we look forward to providing increased shareholder value over the years to come. Thank you for your interest. Of course Carolynne Borders is ready to take calls later.

631-390-8105.

And Steven at the same number, except 5915. I called that number before although now I send you more emails. So, thank you all and appreciate your interest.

Thank you for your participation. This concludes today's call. You may now disconnect.