Good morning, ladies and gentlemen. And welcome to the Henry Schein Fourth Quarter and Full Year 2017 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, Shama, and thanks to each of you for joining us to discuss Henry Schein's results for the 2017 fourth quarter and full year. 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 the 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 end market growth rates and market share are based upon the company's internal analysis and estimate. The contents of this conference call contain time-sensitive information that is accurate only as of the date of the live broadcast, February 20, 2018. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Please limit yourself to a single question and a follow up during Q&A to allow as many listeners as possible to ask a question within the one hour that we have allotted for the call. With that said, I would like to turn the call over to Stanley Bergman.

Good morning and thank you, Carolynne. Thank you everyone for joining us. Now let me start with a review of our financial results at a high level. We closed out 2017 with a strong fourth quarter that demonstrates the advantage of our Henry Schein high-touch, value-added solutions business model. Our customers rely on our team of trusted advisors for the clinical, supply chain, technology and business solutions that practitioners and their office personnel need to operate their practices efficiently day in and day out. We satisfy practice needs through technology as well as our consultative high touch selling approach. So our customers can focus on patient care. It is really important to understand that we are in fact providing a high-touch relationship with our customers that have sustained our growth for well over a quarter century, since we added the field component to our sales and marketing programs. Before I begin to go into further information on the quarter and on the company I'd like to note that in recognition of our team members following recent US Tax Cuts and Jobs Act, Henry Schein plans to distribute up to $1,000 one-time cash bonus to certain designated staff members in the US with one full year of service as of January 1, 2018. We are pleased to be able to give back to certain Team Schein members in the US with the special bonus in recognition of the hard work and commitment to excellence. This incremental investment in our team is a reflection of the motivation spirit and value that our broader team across the globe delivers to our customers every single day. Steven, of course will provide more details on the financial impact of this bonus. So our competitive position in the marketplace builds upon four key elements. Mainly education,…

Okay. Thank you, Stanley, and good morning to all. As we begin I'd like to point out that I'll be reviewing our results on GAAP basis, a reported GAAP basis and also a non-GAAP basis. Each reporting period has items that affect non-GAAP results and they are as follows. For Q4 2017 our non-GAAP results exclude a one-time tax charge of $143 million, or $0.92 per diluted share. And this is related to an estimate of the transitional tax on deemed repatriated foreign earnings, as well as the revaluation of deferred income taxes, both that have associated with US tax reform legislation. In addition, we have a loss of $17.6 million pretax, or $0.11 per diluted share and that loss is associated with the previously announced divesture of our equity ownership in E4D Technologies. On a full year 2017 non-GAAP basis results exclude the same items as well as the litigation settlement expense of $5.3 million pretax or $0.02 per diluted share in the second quarter. For last year, our Q4, 2016 non-GAAP results exclude restructuring cost of $16.1 million pretax, or $0.08 per diluted share, and on a full year basis our non-GAAP results exclude restructuring cost of $45.9 million pretax or $0.21 per diluted share. We believe that these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business; they enable the 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 of the business. These non-GAAP financial measures are presented solely for information and comparative purposes and should not be regarded as replacement for the corresponding GAAP measures and you could see a detailed reconciliation of these items in Exhibit B…

Thank you, Steven. Before we move on, allow me to comment in more detail on the February 12 press release from the US Federal Trade Commission alleging that Henry Schein and other distributors violated US anti-trust law by conspiring to refuse to provide discounts to and otherwise serve buying group representing dental practitioners. We believe these allegations are totally merit less and we intent to defend ourselves vigorously. I'll also note that the complaint seeks injunctive release and does not seek monetary damages. We do not anticipate this matter will have a material, adverse effect on our financial conditions or results of operations. I want to reemphasis that despite what are provocative allegations are content in the complaint; the case is about whether we conspired with other parties not to sell to dental buying groups. Based on the FTC's original definition of these buying groups, let me point out that we do business with more than 100 of these organizations. Even under a narrower definition recently advanced by the FTC, we have done business and continue to do business with very, very groups that we are now accused of refusing to do business with. This is not logical. Henry Schein has a long history of serving customers with integrity and honest. We have earned our reputation for doing business the right way. This is exactly why we have been named the Fortune's list of World's Most Admired Companies for 17 consecutive years from the first time we appeared on the Fortune 500 list, and why we have been named at Ethisphere's List of the World's Most Ethical Companies annually now since 2012. So we are really quite upset about this and really believe that this whole complaint is merit less. Now I'll share a few financial highlights from 2017 as…

[Operator Instructions] Your first question comes from Kevin Ellich of Craig-Hallum.

Good morning. Thanks for taking the question. I guess starting off with the dental, Stan, could you give us a little bit more color on the strong equipment growth you are seeing in the US? I mean inventory on the balance sheet continues to build and maybe if you can provide a little color there. Then the follow up is in animal health. Just wondering how the Merritt that acquisition that you guys announced last year is coming along. How the integration is going? Thank you.

So let me start with the end. The Merritt acquisition is totally integrated. We delivered on our expectations perhaps even a little bit better. On the equipment, we believe we are well positioned to help practitioners take advantage of the new technology that is available to them to increase the efficiency of their practice and position them to provide better clinical care. This is not only in the US but it's abroad. Of course, we are delighted to have become a full line distributor of the Dentsply Sirona product offering but our expansion in equipment sales and related services is related -- not only to Dentsply Sirona but to a number of other manufactures that I mentioned in the call. We are very well positioned to continue to grow well in this part of the dental market. And dentists are investing in their practices wanting to add the latest technology which is also indicative of the optimism that dentists had in dentistry. And again, let me emphasize, this is in the US but Canada and abroad likewise dental laboratories are also investing in their labs and are heavily investing in digital technology.

On part of your question, let me just first add that 18% sales growth included both strong growths in traditional equipment, traditional equipment was double digits and high tech equipment was also double digit a bit higher than the traditional. So it's really across the board strong sales growth in all aspects of dental equipment in North America. Related to our inventory, yes, we did have to bring in inventory in order to meet demand and expected demand for Dentsply Sirona products, it's typical for us to have showroom inventory as well as being able to fill the orders as quickly as the customers needs or want. But I will say that both on working capital we do have a goal of improving inventory turns. I'd like to see somewhere close to half a turn improvement over the next year or so. So we do think that there is opportunity to become more efficient on inventory management going forward also.

Your next question comes from Jeff Johnson of Baird.

Thank you. Good morning, guys. So Steve or Stanley I guess either one. Just wondering the last couple of quarters you've been trending towards -- at least towards that 3% number on a dental consumable North American basis, if we exclude some of the noise, just wondering if you think that's a reasonable number to be thinking for 2018. I know you don't guide by line items but that's kind of where that number has been. So any reason we shouldn't think that number can repeat again this year. And then we've heard that flu maybe having a little impact on cancellation early this year. Just are you hearing any feedback from your customers about dental trends being impacted at all by the heavy flu season we've been seeing?

So, Jeff, on the market, the market is relatively stable. Maybe it's growing a percent - potentially little bit more than that. There is a bit more optimism now than perhaps a year ago. So it's definitely leaning in the positive area. And we continue to gain market share, we hear this from our manufacturers, the data that is available showing us that we continue to gain market share. Whether we grow 2% or 3% or 4%, it's sort of in that range. And let me just emphasize that equipment is very strong. We expected to remain strong because dentists are investing in their practices. As it relates to flu, yes, I think the statistics are out there that flu is having impact on the population. I think it's the highest percentage of the population to be effected by the flu virus in many years. So I think it will impact visits to dentists in specific parts of the country. But I don't think that will have a significant impact on Henry Schein's ability to deliver results we are focused on and we anticipate.

Okay, great. Maybe as a follow up just on the FTC case. I am sure you can't say much or won't say much but I think you had 14 days to respond to the complaints included in that filing. And if you didn't then they were deemed to be admitted to. From your comments, Stanley, I am assuming you are going to respond to each of those complaints. But, Steve, I guess I am wondering also if there is anything embedded in guidance from a cost standpoint either from a compliant standpoint and an independent monitor standpoint or legal expense standpoint how should we be thinking about the expenses embedded in 2018 guidance from this issue? Thanks.

So, Jeff, Steven will response to the financial aspect. But Henry Schein, I think is the very first time we ever commented on litigation. But we feel this case is so outrageous and this is the one fundamental point. We've done business with dental buying groups for many years. Henry Schein, in fact was the company that conceived the notion of dealing with special markets and groups of customers. We continue to do business with very large buying groups, mid-sized buying groups, and we are now accused of refusing to do business with these people who actually have been doing business with for 20 plus years. So we absolutely deny these allegations. We don't know what others have done or what potentially others have done but we have not done anything wrong in our view and this case is without merit from our point of view. As you know Henry Schein is the company where we have prided ourselves with ethical behavior, adherence to the laws, integrity, and honesty and how can we do something that -- how can we agree to do something that we are already doing. It just doesn't make sense. The FTC is accusing us of doing something that we are actually doing. So it's beside logic this whole thing and we vehemently, vehemently refute these allegations. And this is the first time I think in the 22 years as a public company, we've actually commented on litigation because this is so outrageous.

Yes. So the only thing I would add on that is that the complaint if you take the time to read the complaint has some, what I would call, provocative comments. But don't be swayed and I am glad that you asked the question, Jeff, for the benefit of everyone, don't be swayed by provocative statements. Go back to the basics which Stanley just mentioned which is how could we be accused of conspiring not to sell to certain buying groups when we are selling and we have been selling and we've always sells to the same buying group. So, again be careful not to be swayed by again provocative statements in the complaint. As far as financial impact, again, there is no monetary damages or fines that the complaints are seeking. It's only injunctive relief; we do have an estimate built into our guidance for some legal cost and other cost in order to deal with the matter. Hopefully we have estimated that well although as you can probably guess it's hard to estimate that with perfection. But we do believe that we have it adequately covered in the guidance.

Your next question comes from Glen Santangelo of Deutsche Bank.

Yes, thanks for taking my question. Stan, I apologize in advance for hitting this FTC issue one more time. But I think it's such a big deal for investors. You seemed to make the case that you were selling to the certain classic customers all along and hence the complaint is merit less, but if you look at the complaint they actually say that the companies were conspiring to refuse to provide discount. So it kind of sound likes in the complaint that the company may have been treating this one sort of customer class a little bit differently from a discounting perspective. And I guess what investors are nervous about if that's true, will you have to adjust your business practices in way that kind of make you slightly less profitable on a go forward basis. So you may not be able to comment but I figure I would throw out there.

So we deny these allegations. We have been a company that is worked with GPOs whether it's in the dental space, the medical and animal health space for a long time. I don't think, can't imagine any scenario where we have to now start adjusting our pricing policy because of the FTC complaint. We have been servicing this customers, we were the company that conceived the notion of special markets 22 years ago where we went out to service large group practices, we now have a mid market group that is focused on mid market practices. And have supported small practices involved in buying group for a long time. So this whole thing doesn't make sense from Henry Schein point of view. And I don't believe this would impact our margin is possible. I don't think, other factors could impact our margin and as Steven has noted on many occasions we are working to increase our efficiency to advance sales higher margin product et cetera. But I don't think this particular set of circumstances will impact our margins.

Okay. I appreciate that. Maybe just one follow-up for Steven on the guidance. Steven, if you look at the raise, it looks like you raised about $0.18 at the mid point and you also absorbed the incremental $0.02 a cost in the employee comp expense. And so if you think about that as an equivalent of $0.20 raise, some are concerned that if you look at the tax differentials that that would have been a little bit bigger than $0.20 would have implied a little big than the $0.20 raise. A little bit surprising giving how strong the organic sales trends seemed to be and the momentum seems to be heading in the right directions. So any sort of comments as sort of reconciles those two points so we know how to think about that?

Sure. Well, first of all, our guidance increase was only related to the tax impact net of the $0.02 comp that we talked about. We did not change guidance for any other aspects of the business. And if you look at -- and you could the math yourself, but if you look at an estimate of somewhere between 3% and 4% lower tax rate for the company, and if you use something even to mid point of that range, I think you will quickly get to the guidance that we gave. Remember, this is a very complex tax law. We are still feeling our way around it. So the goal is to be a little bit conservative on our guidance on it because of many moving parts including what percentage of our income is within the US versus in other tax jurisdiction. And but again the guidance was only changed because of that. I'd also remind you that if you remember in Q1 of this year, we had 2017 we had an outsized tax benefit for long-term compensation that was because the stock prices is one of the variables that determines our investing date, what the actual tax deduction will be and because over the three year period that ended in Q1 of 2017, the stock price performance was very strong. We are not expecting that same benefit in 2018. So that's what built into our tax guidance also. But again if you just do the math as I outlined, I think you will come very close to what we did in guidance.

Your next question comes from Robert Jones of Goldman Sachs.

Hi, great, thanks for the questions. I just go back to the US dental equipment, 18% internal growth. I know, Stanley, you mentioned that it was a combination of legacy equipment that you had access to and then also obviously Sirona portfolio that's new. Is there any more perspective you can share there for us? I think it's important for investors to try to parse out just how much of that big ramp in growth was attributable to your access to the Sirona portfolio specifically?

Yes. We are not giving guidance on the breakdown we never had between the manufactures that we --to generate sales from. So I think and Steven had some clarifying points here. We've never done that. So I think it's best to ask the manufacturers directly.

Yes. No, I don't want to give specific supplier guidance. But we did say that traditional equipment was very strong also at double digits within that 18%. And I'll just comment that the Dentsply Sirona was not a significant impact our traditional equipment. It was more A-dec and other lines that we have. And Dentsply Sirona really impacts more for us, the high tech equipment at least in this most recent quarter. So, again, it was really broad based our equipment sales growth. So we are very pleased with that.

That's helpful. And I guess just go back to the FTC complaint. I know, Stanley, clearly we understand your view on the matter. But I was more curious just if you guys could talk to what the range of outcomes is possible from this? Is there anything you can share with us as far as what types of resolutions on what timeline we might expect? I don't think there is another official trial date until October, so just wondering what kind of guide post or types of outcome we should think about related to this.

Bob, if you pull the complaint because it is public information. You can see what the complaint is asking for relief, so there are details in that. And rather than me going by memory, I refer you to the complaint directly. But, again, it's all injunctive relief. There are no financial damages but take a look at the detail complaint because that's all we know at this point.

Your next question comes from Jon Block of Stifel.

Thanks, guys. Good morning. Two questions. Let me ask first within -- hopefully I'll have time for follow up. So just to shift gears, international dental consumable results, I believe downed 2.6%. That was the first negative quarter that I have seen since 1Q, 2015, you guys navigated internationally very well during some of the macro weakness but anything to call out there or do you expect to bounce back in the coming quarters and then I just got a quick follow up. Thanks.

Well, the weakness internationally, really was a not new event although maybe is more pronounced this quarter. We did talk about in certain European countries specifically Germany with some weakness in that market last quarter. That's continuing. I think we do believe that European market is still a very good market. We are very focused on improving our value add component. We are very advanced in the US and some other market. And we are not just quite advanced at this time in Germany and a couple of other markets. But there is a strong focus on that. So I think I can't say in the next quarter necessarily, but if you think out medium term, I think that you will see more improvement in our international dental revenues.

Just and again without putting a new metric after this, you are going to have track every quarter, just simply this is too much to track for investors. But in Germany, there were five I think less business days this quarter because of the way the holidays fell. And there is a challenge in the consumable market in Italy. We don't think it's going to be the challenge for that long. And there were some weakness in France on consumables but we don't see any of these things as long term trend.

Okay, great, thank you. And quick follow-up. Steven, you called it a potential I believe restructuring that you alluded to later in 2018. And frequent restructuring certainly are not common for Henry Schein. I think you last took one in 2016. So at a high level any details you can provide, what division would this be specific to? What do you guys tweaking? Because again I think restructurings prior work maybe every four or five years and now you can called out one possibly in 2018 after one in 2016. Thanks for your time guys.

Sure, Jon. It's hard -- we are just looking at what the opportunities are. And the reason why I mentioned it is because we do think there are further opportunities to improve profitability, to take some cost out of the system. But at this point, it's really part of the analysis. We haven't completed the analysis. So I don't have specifics. I can't tell you exactly where it might be or what the potential benefit would be. But I do raise it because I think that there is a reasonably good likelihood that when we finish the analysis; we'll have opportunities to improve profitability through restructuring activities. You are right it's not something that we do all time. But we think there is opportunity here and why not take advantage of it at this time.

And also just more color we don't expect this to have any material impact -- certainly no material impact on the front end of the house in terms of sales force reductions or anything like that. But we've been investing in software and systems and we think we can increase our efficiency on those areas and also integrate some of our acquisitions that we made in the past into our core system. So it's that kind of work and we are -- we've been working on this for a while for past six months. And now we finally concluded working towards concluding what specific plans to implement.

So I guess also the short follow up is we'll give a further update next quarter as we have those plans more fully developed.

Your final question comes from Brandon Couillard of Jefferies.

Thanks for squeezing me in. Good morning. Couple of housekeeping. Steven, was there any outsized flu impact to the medical revs in the fourth quarter? And then could you just confirm in terms of the 2018 guidance what it embeds for currency tailwind on EPS as well as your margin expansion expectations for the year? Thanks.

Sure. Flu vaccine sales were little bit stronger in Q4 versus Q3 but it wasn't a material impact on our overall sales growth. We do expect to sell a similar number of doses somewhere in the 6 million -7 million dose range in 2018 that's embedded in our guidance. And foreign exchange, we are really not expecting any major movement in foreign exchange from current levels. Obviously, our guidance can absorb it on the downside or have upside, small movement because the range is wide enough to absorb that. But a bit of material change in foreign exchange rate we would call it out in 2018 should have happened.

Thank you. Now Stan will conclude with his remarks.

Thank you, everyone for calling in. Thank you for the questions as I think you can tell from Steven and my tone, we remain most optimistic about the company. And we are very excited as we unfold our 2018, 2020 strategic plan. We feel very good with our high-touch value added proposition of serving customers with wide array of value-added services and delivered through our field consultants and supported by telesales and what we believe to be world class electronic ordering and other ways of doing business with Henry Schein. And are very, very enthusiastic about the future. So thanks for your interest. Again, if you have questions you can call Steve at 5915; it is the last four digits for Henry Schein number and Carolynne --

631-3908-105

So thank you very much and we will be back in I believe 60 days right or 90 days. Just under 90 days. Thank you.

This concludes today's conference call. You may now disconnect.