Good morning, ladies and gentlemen, and welcome to Henry Schein’s Quarter Four Financial Results Conference Call. At this time, all participants are in 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 will now introduce your host for today's call, Carolynne Borders, Henry Schein's Vice President of Investor Relations. Please go ahead, Carolynne.

Thank you, operator, and my thanks to each of you for joining us to discuss Henry Schein's results for the 2015 fourth quarter and full year. With me on the call 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 10, 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 for this call. With that said, I would like to turn the call over to Stanley Bergman.

Good morning and thank you, Carolynne, and thank you all for joining us. We are delighted to report that sales growth during the fourth quarter was particularly strong and we believe we gained market share on an overall basis during the quarter, both here in North America and of course internationally. As we successfully continued our long-standing strategy of organic growth complemented by strategic acquisitions, we are especially pleased with our worldwide internal growth in local currencies for the quarter of 6.5%, which we’re very pleased represents the highest quarterly growth rate in eight years. Adjusted diluted EPS for the quarter was $1.67. This caps off a successful 2015 performance with worldwide local internal sales growth of 5% and adjusted EPS growth for the full year of nearly 10%. And that is of course despite the continued negative impact from the strength of the U.S. dollar. And looking into this year into 2016, today we are pleased to affirm our guidance for adjusted diluted EPS that represents growth of 10% to 12% compared to 2015 adjusted EPS. There is just no question that our almost 19,000 Team Schein members around the world are working together as a team to execute on our 2015, '16 and '17 strategic plan. The morale on the company’s great and that’s the reason why we have these solid results. So thank you to the team, thanks to our Board, thanks to our customers and our suppliers. In a moment I’ll provide some additional commentary on our recent performance and business accomplishments. But first, Steven, will review our financial results for the quarter and for the year.

Okay. Thank you, Stan, and good morning to all. I am also very pleased to report solid results for the fourth quarter of 2015. As we begin, I’d like to point out that the 2015 fourth quarter results include restructuring costs of $12.4 million pre-tax or $0.11 per diluted share. We expect to continue to record restructuring costs through the first half of 2016. I will be discussing our results as reported and also on a non-GAAP basis, which would be excluding those restructuring costs, as we believe the latter is useful for comparative purposes. Also, Exhibit B to this morning’s earnings news release reconciles GAAP and non-GAAP income and EPS from continuing operations. So turning to our Q4 results, the net sales for the quarter ended December 26, 2015 were $2.9 billion reflecting a 5.5% increase compared with the fourth quarter of 2014. This consisted of 10.3% growth in local currencies and a 4.8% decline related to foreign currency exchange. As a reminder, about 35% of our worldwide sales are based on currencies other than U.S. dollar and we do not hedge against this translation exposure. In local currencies or constant currencies, our internally generated sales increased 6.5%, which as Stan just mentioned was the highest in eight years and acquisition growth was an additional 3.8%. I’d also like to comment that based on our experience and what we’re seeing in the end markets thus far in 2016, the overall dentals, medical and animal health markets that we serve continue to reflect stable to an improving environment. You could also note the details of our sales growth that are contained in Exhibit E of today’s news release. The operating margin for the fourth quarter of 2015 was 7.0%. That’s a contraction of 47 basis points compared to last year.…

Thank you, Steven. Let me begin my review of our four business groups for both the quarter and the year, starting with the dental group. I’m pleased to report that fourth quarter internal dental sales growth in local currencies in North America internationally and for the group as a whole were all at multiyear highs. In North America, consumable merchandize internal growth in local currencies of 6.1% was particularly strong highlighted by market share gains and higher sales throughout special market customers. Equipment sales and service internal growth in local currencies of 11.5% also was in our view excellent and reflected strength in sales of traditional equipment. International consumable merchandize internal sales in local currencies grew by 4%. International equipment sales and service internal sales growth in local currencies was a solid 7%. So let me point out that our global dental sales growth in local currencies for the full year was 5%, as we continue to gain market share globally. This growth was well balanced between our North American and international businesses. A notable acquisition in our dental group during 2015 was our 90% ownership in Dental Trey of Italy, which I discussed during last quarter’s call. Dental Trey had sales for the 12 months ended June 30 of 2015 of approximately $49 million and complements our existing business in Italy with a solid product offering and longstanding customer relationship. Of course, they are particularly strong in the KOL and education area – the key opinion leader area and education of dentists. I’m very excited that we recently signed an agreement to acquire a majority interest in Dental Cremer, a distributor of dental supplies and equipment in Brazil. This investment will build upon our existing business in Brazil, which we established in 2014. Brazil’s dental market is fueled by…

Thank you. [Operator Instructions]. Your first question comes from Jeff Johnson from Robert Baird.

Thank you, guys. Good morning. Can you hear me okay?

Yes, we can. Perfect.

Great. Stanley, a lot of information there. I just want to focus in on maybe the dental equipment business if I could with my two questions. First off, you talked about some basic equipment strength in the quarter. I was wondering if you could maybe give a little more color on what you’re seeing in a couple of areas; I’d point to DSOs, maybe the pace of business you’re seeing there versus private practice? And maybe if you could talk about any benefits you might be seeing from one of your new basic equipment relationships? Is that opening up new business, is that just replacing other branded sales you might have been making? And then just on the technology side of equipment, any commentary there as you pointed more to basic equipment than I think you did technology? Thank you.

Well, that’s a lot of questions you’re asking and probably the key question for our equipment business today. So, yes, our traditional business has done very well. But let me hasten to point out that in January 2015 we did announce taking on the A-dec line, which we actually brought in around May. We did, I think, do well on the A-dec line. I believe we did live up to the expectations or perhaps even exceeded what was expected from us by A-dec. But let me hasten to say that we did well with our traditional suppliers that have supported us for decades. And in that context, overall, we did well with the traditional equipment. Obviously, adding the A-dec line puts stress on our organization from equipment organization and our field sales consultants from a learning point of view and from a service point of view, learning how to service the equipment and fine-tuning our design capabilities. All of that was well absorbed while maintaining the relationship with our branded manufacturers that have supported us for all these years. So I would say overall, the manufacturers are pleased and our sales organization is pleased. And now I am of course dealing with the United States and Canada. On the digital side and the high-tech side, I believe we made pretty good progress as well. We currently believe we’re selling more than one of three new units in the CAD/CAM space, which is our number one global strategy to advance digitalized prosthetics. We are seeing strong growth in sales of our digital impression solutions with our 3M, 3Shape and PlanScan offerings. Of course, I think you know Henry Schein is committed to open architecture to the extent suppliers provide us with the product. Henry Schein offers multiple brands of digital impression…

Yes, I’ll just give you one or two quick points for color as you were asking. So when you look at CAD/CAM, we’re continuing to see good growth there, it was a little bit less overall than the 11.5% in North America. But the dynamic that we’re seeing is really very strong growth on scanner only. We’re still seeing full unit sales in addition to that, but there’s been a little bit of a change in the market over the last year or two where customers are beginning to look at scan only to start with and then hopefully in the future they’ll add the milling machines. So that’s been a nice opportunity for us. And the only other point I want to just to add is, A-dec has helped the traditional equipment growth obviously. But the good news is that and Stanley said this I believe is that we haven’t seen it cannibalize other equipment lines. So we really do think that we’re penetrating new customers with the A-dec product lines for the most part. And that’s also good news. That’s not just swapping out other equipment lines.

Your next question comes from Robert Jones from Goldman Sachs.

Good morning. This is Nathan Rich on for Bob this morning. Steve, a couple of questions on guidance. First, I definitely appreciate the detail you gave on Q1 but just wanted to confirm something you said. Did you say that you expect sales trend to remain kind of relatively consistent into Q1 at this point, at least on an internal basis? And so any color you can provide on that, maybe how sales trended kind of coming out of the fourth quarter?

Sure. Absolutely, we believe that sales trends in end markets are showing consistent growth, they’re very stable to growing depending on the specific market. But generally the markets are cooperating. We did see in January that continue, so we did see good organic sales growth in the month of January. So we believe that will continue and we’re hopeful that as the year progresses, maybe there could be a little bit more end market improvement. But right now that’s not baked into our guidance.

Your next question comes from John Kreger from William Blair.

Hi. Thanks very much. Maybe just following up on that same theme, if you kind of think about the various global markets that you touch, are you seeing any that stand out as particularly getting better from your perspective or getting worst against setting market share gains aside?

So I was just going to say that, no, I don’t think – the general answer is I don’t think that there are markets that are showing deterioration at all. It’s hard to measure on a month-to-month basis, John, as you know but sometimes there’s just little anomalies in growth from month-to-month. But the sense is that the markets generally are very consistent and not showing any pullback at all. Stan, I don’t know if you want to --

I think the markets are stable. Generally, there could be – one particular market may have a particular advantage from time-to-time because of the tax situation, et cetera. But we think the dental, animal health markets are pretty stable, so I can’t point to anything particular. And of course, the medical market have huge challenges but we are uniquely positioned I think to deal with these huge changes and particularly consolidation, creation of IDNs, insurance companies buying practices, merging into hospitals, et cetera. And I don’t think the market is improving per se but it’s working well for our kind of services.

Your next question comes from Jon Block from Stifel.

Great. Thanks. Good morning. Maybe two quick ones. The first one, if you guys can just update us on the size of the dental specialty business. Is that now close to a $700 million or $650 million business that’s growing maybe 100 or 200 basis points above underlying consumables? I’m just trying to reconcile. Obviously, you’re consumable number demo was big and just trying to sort of reconcile your number versus that of your competitors and what we’re seeing coming out of some of the manufacturers?

Right. Let me just give you a context and while I’m doing that, Steven can think through the specific numbers. But there are two really component parts to this market. The first is, specialty products per se that are only used by specialists and used by those GPs that are doing specialty procedures. When I’m talking about are oral surgery products, implants, bone regeneration and few have the same product; in the endodontic space, the endo-specific files or related kinds of products and in the orthodontic space, the wires specifically and the brackets and to some end of course the liners, which we don’t really sell. But then in addition to that there are products that specialists purchase such as equipment and consumables and gloves and all surgeons buy pharmaceutical products, et cetera, that we’ve always sold as part of our general core business. And I would say that business always tends to do a little bit better with expensive equipment, like the 3D x-ray, et cetera, because specialists especially need those properties products and second they tend to make more money, so they can afford more specialty products. When we talk about our specialty business, we are referring to not that product – the general products which are part of our core business and nor are we referring to the software in particular that’s part of our software business, but we’re referring to the specialty products like implants, bone regeneration, wires and brackets and files, et cetera in the endo space. And in that space, it’s hard for us to measure how the market is growing because no one compares what we – there’s no like information. With that said, I don’t know if we actually have disclosed the basket in every [indiscernible] but go ahead.

So, Jon, you’re correct. In dollars, it’s over $600 million for 2015, the specialties group. And remember, a fair amount of that revenue is outside the U.S., so you have currency negatively impacting that if you’re coming year-over-year. Where we’re really seeing accelerated growth within the specialties group is primarily on dental implants both domestically in the U.S. as well as outside of the U.S. We are growing faster than the core consumable sales growth, so that’s again part of the strategy and that is continuing.

Your next question comes from Lisa Gill from JPMorgan.

Hi. Thanks. Good morning. It’s actually Mike Minchak in for Lisa. So just a couple quick questions. So, first, as it relates to the medical segment, obviously really strong growth trends there again, especially given a weaker flu season. You talked about a focus on large new practices, just wondering if you can talk about how much opportunity continues to remain there and whether your guidance assumes a continuation of that strong double-digit internal growth trend?

Well, I’ll leave it up to Steven to answer what’s in the guidance. But we have a decent share of the medical space in the physician and ASC arena. We believe we are number two but we believe we’re growing faster than anyone else. But our market share is relatively small still. So we expect to have good growth and believe we have the right products at this time. We are certainly being called in practically for every single business – there’s a lot of business out there. Everybody is reconfiguring how they want – every provider how they want to service their physicians, their ASCs. We’re in there, we’re bidding, we have a great sales organization and we have terrific GPO and other types of contracts and supplier relationships. And the infrastructure we have is really, really good. So, we have a good product. We have a decent market share, number two, we believe but we believe there’s still a huge market share to go that will be split up over the major competitors of today going forward into the years to come. So, we’re very bullish. But exactly what’s in our guidance, I’ll haul you off to Steven.

So, Mike, we’re still expecting a strong growth to continue in the medical group. We do have some visibility in that we know what bids are out in the market, we know what bids we’ve been awarded. We can estimate the on boarding of customers. Even when you win a bid though it’s important to note that you don’t immediately start shipping all of that new business to customers. So it may take three to six months to ramp up, but it does have some visibility in being able to look at growth rates. I would say, yes, our expectations are continued strong growth. I would say somewhere in the high single to low double digits is what we’re expecting. And we think again based on the visibility, that’s very achievable.

Your next question comes from Michael Cherny from Evercore ISI.

Good morning, guys, and thank you for all the color so far. Steve, in the past you’ve been able to break down for us a little bit of the underlying margin progression and I know there’s a lot of moving pieces regarding mix, the new product lines and obviously FX. Is there any way to get a sense from you on an underlying perspective what margin expansion was on a year-over-year basis?

Sure. We did give some detail to that, so if you look at on a full year basis, we were a bit ahead of our goal. I think we have always said – or for this year we were saying somewhere in the 20 to 30 basis points for the full year. And again, excluding restructuring costs, we expanded by 34 basis points for the full year. And again, that’s at the high end or slightly over the high end. So it’s really a combination of things. It’s a combination of a conservative effort to drive towards higher margin sales, it’s partly the restructuring activities kicking in, it’s partly new acquisitions. So there’s a lot of moving parts in it, but all of that is things that we expect that we can continue. So we still feel comfortable at operating margin expansion going into 2016. It’s still an important goal that again we feel that we can achieve going forward.

Can we take the next question?

Your next question comes from Kevin Ellich from Piper Jaffray.

Good morning. Just a quick question on the animal health business. Steve, thanks for the detail on the scil acquisition and how it’s performing. Just wondering how the sales are going for scil compared to the diagnostic manufacturers. Are your sales people more incentivized to push one product over the other? And I guess do you have any updated thoughts on potentially expanding your livestock business as well? Thanks.

So maybe I’ll take the first part and Stanley can talk a little bit about large animal. So, scil really is much stronger outside the U.S. than in the U.S. But the goal is to expand it in both markets. And it’s not just the scil diagnostics that we’re looking to promote to customers. The scil team also gives us the ability to install, to repair equipment. So it really enables all of the diagnostic and equipment lines not just the specific scil line. So it really should be beneficial to all of our equipment lines going forward. I’ll turn it over to Stanley on the production to animal, but as you know in North America we are predominately companion, maybe a few percentage of our revenues are production. But outside of North America, we do have a significant portion of our revenues that are companion and production. So maybe I’ll turn it over to Stanley for some more color there.

Yes, thank you, Steven. And just on the scil side, scil really mirrors what we’re doing on the dental side, medical side where we have great sales organizations for equipment, service installations, design organizations and most importantly interoperability, the ability to connect our practice management solutions to equipment with the goal to have the equipment really be open architecture. And so – or should I sort of say the middle way of being open architecture. So, we have capabilities of connecting software to various devices and scil in our various businesses in dental and medical provides that capability. And we’re very pleased with that team, really are pleased. And now you ask about large animal. Nothing’s never but we don’t think distributing branded pharmaceuticals in mass on a logistics basis for large animals is really the best use of our capital. It’s not too different to us years ago exiting the specialty pharma space where there’s huge amounts of sales available that are relatively large margin. It’s better for the drug wholesalers to do that than for us. So, in the large animal space, we will continue to look for market opportunities. Some countries present an opportunity. For example, in the dairy industry we’re quite active in Ireland and parts of Europe and in particular New Zealand, but as an opportunity the equine area which is not really – I suppose it would be large animals but is not really production animals is an area we’re very interested in and believe we can bring value. And then there are markets like Australia and New Zealand and pieces of Europe where we believe that through our logistics, we add value that others don’t add. And then it will be unique products for the large animals, for example, Kruuse has, scil has, veterinary instruments, our orthopedic business provide. So, we will be more selective to find areas that we could bring value and at great high margin opportunity rather than shipping off masses amount of low margin branded pharmaceuticals.

Sylvia, I believe we have time for one more question.

Your final question comes from Steven Valiquette from UBS.

Thanks for taking my question. Good morning, Stan and Steve. Congrats on these pretty strong results. Good to see the market reacting pretty favorably. My quick question really just has to do with the North American dental equipment in the fourth quarter, I would say pretty strong but there still just seems to be some investor confusion or a mix of views. So whether or not the timing of the renewal of that 179 tax reduction helps overall dental industry equipment sales or not? And also I think whether for you guys or for the industry just thinking ahead for 2016, the upcoming 4Q '16 given that the start of being renewed [ph] I think for a couple of years, how do we think about that, the year-over-year comp for North American dental equipment 4Q '16 versus 4Q '15 just in terms of whether it’s a normalized comparison, just any thoughts on that as well? Thanks.

Steve can provide more specific color but Section 179 has virtually no impact this year. Our year end was just before Christmas I believe, because that’s the way our calendar works. We had about three days or four days or three and a half business days to use the 179 and our sales organization has given up on being able to really cultivate relationships based – for corporate specific equipment and using 179. And you need a really complete plug and play, so for example CAD/CAM couldn’t work, big traditional equipment couldn’t work, maybe a few x-rays could work here and there. But it had very little impact for 2015. Assuming that Congress keeps it in place this year, I think it will be a very good opportunity for the end of 2016. Steven, any more information?

Yes, I think you summarized it well. It’s hard to believe that in the short time that we had in 2015 that it really had any impact to us. It certainly wasn’t negative. It could have been a very slight benefit but we don’t really think it has much impact. But we do think and we are hopeful that for 2016, it will be a benefit in Q4. This provision actually has been made permanent. So unless Congress decides to repeal it during 2016, it should be available in fourth quarter 2016 and ongoing and the benefit is $500,000 of equipment that qualifies small businesses can be expensed in the year that they buy it. So, again, we think it could be a nice benefit for Q4 of '16.

Okay. So thank you all for your interest. Good questions there. We remain quite bullish on Henry Schein. The morale in the company’s good. We feel strongly about our strategic plans for '15, '16 and '17; are executing on that both from an internal growth point of view and new products point of view, a reallocation of resources including the optimization and external sales through acquisitions. And overall, as I mentioned early on, the company is excellent. So we’ll be back in, I guess, 60 days with a report on the first quarter. Thank you very much.