UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File Number: 0-27078

HENRY SCHEIN, INC.

Delaware		11-3136595
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes þ		No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o		No þ

     As of May 2, 2006, there were 88,314,954 shares of the registrant’s common stock outstanding.

 

 

HENRY SCHEIN, INC.
INDEX

				Page
PART I. FINANCIAL INFORMATION
ITEM 1.		Consolidated Financial Statements:
		Balance Sheets as of April 1, 2006 and December 31, 2005			3
		Statements of Income for the three months ended April 1, 2006 and March 26, 2005			4
		Statements of Cash Flows for the three months ended April 1, 2006 and March 26, 2005			5
		Notes to Consolidated Financial Statements			6
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk			25
ITEM 4.		Controls and Procedures			25
PART II. OTHER INFORMATION
ITEM 1.		Legal Proceedings			26
ITEM 6.		Exhibits			27
		Signature			27
EX-10.1: PERFORMANCE INCENTIVE PLAN
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

PART I. FINANCIAL INFORMATION

		April 1,				December 31,
		2006				2005
		(unaudited)				(Adjusted — Note 3)
ASSETS
Current assets:
Cash and cash equivalents		$	159,890			$	254,498
Available-for-sale securities			80,175				80,195
Accounts receivable, net of reserves of $39,494 and $52,308			546,414				582,617
Inventories			511,949				505,542
Deferred income taxes			30,108				35,505
Prepaid expenses and other			164,970				126,052
Total current assets			1,493,506				1,584,409
Property and equipment, net			194,258				190,746
Goodwill			682,482				626,869
Other intangibles, net			133,936				123,204
Investments and other			62,762				57,892
Total assets		$	2,566,944			$	2,583,120
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	340,651			$	371,392
Bank credit lines			3,380				2,093
Current maturities of long-term debt			30,717				33,013
Accrued expenses:
Payroll and related			83,318				96,113
Taxes			44,532				65,070
Other			146,477				156,433
Total current liabilities			649,075				724,114
Long-term debt			488,214				489,520
Deferred income taxes			60,374				54,432
Other liabilities			56,146				53,547
Minority interest			14,258				12,353
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding			—				—
Common stock, $.01 par value, 240,000,000 shares authorized, 88,256,957 outstanding on April 1, 2006 and 87,092,238 outstanding on December 31, 2005			883				871
Additional paid-in capital			587,107				559,266
Retained earnings			684,217				667,958
Accumulated other comprehensive income			26,670				21,059
Total stockholders’ equity			1,298,877				1,249,154
Total liabilities and stockholders’ equity		$	2,566,944			$	2,583,120

See accompanying notes.

HENRY SCHEIN, INC.

		Three Months Ended
		April 1,				March 26,
		2006				2005
						(Adjusted — Note 3)
Net sales		$	1,161,781			$	1,062,997
Cost of sales			824,179				761,603
Gross profit			337,602				301,394
Operating expenses:
Selling, general and administrative			276,684				248,132
Operating income			60,918				53,262
Other income (expense):
Interest income			4,556				1,299
Interest expense			(7,394	)			(6,226	)
Other, net			221				(113	)
Income from continuing operations before taxes, minority interest and equity in earnings of affiliates			58,301				48,222
Income taxes			(21,222	)			(17,861	)
Minority interest in net income of subsidiaries			(1,560	)			(45	)
Equity in earnings of affiliates			108				187
Income from continuing operations			35,627				30,503
Discontinued operations:
Income (loss) from operations of discontinued components			(32,279	)			560
Income tax benefit (expense)			12,911				(190	)
Income (loss) on discontinued operations			(19,368	)			370
Net income		$	16,259			$	30,873
Earnings from continuing operations per share:
Basic		$	0.41			$	0.35
Diluted		$	0.40			$	0.35
Earnings (loss) from discontinued operations per share:
Basic		$	(0.22	)		$	0.01
Diluted		$	(0.22	)		$	0.00
Earnings per share:
Basic		$	0.19			$	0.36
Diluted		$	0.18			$	0.35
Weighted-average common shares outstanding:
Basic			87,310				86,679
Diluted			89,242				88,221

See accompanying notes.

HENRY SCHEIN, INC.

		Three Months Ended
		April 1,				March 26,
		2006				2005
						(Adjusted Note — 3)
Cash flows from operating activities:
Net income		$	16,259			$	30,873
Adjustments to reconcile net income to net cash used in operating activities:
Loss on sale of discontinued operation, net of tax			19,363				—
Depreciation and amortization			14,352				13,237
Stock-based compensation expense			3,857				3,740
Provision for (recovery of) losses on trade and other accounts receivable			118				(208	)
Deferred income taxes			4,978				1,638
Undistributed earnings of affiliates			(108	)			(187	)
Minority interest in net income of subsidiaries			1,560				45
Other			(1,113	)			1,089
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			4,599				14,434
Inventories			(12,481	)			8,610
Other current assets			3,143				29,908
Accounts payable and accrued expenses			(92,527	)			(121,356	)
Net cash used in operating activities			(38,000	)			(18,177	)
Cash flows from investing activities:
Purchases of fixed assets			(11,168	)			(8,138	)
Payments for business acquisitions, net of cash acquired			(72,712	)			(39,046	)
Purchases of available-for-sale securities			(60,875	)			—
Proceeds from sales of available-for-sale securities			60,895				—
Net payments for foreign exchange forward contract settlements			(1,161	)			(4,478	)
Other			191				(2,302	)
Net cash used in investing activities			(84,830	)			(53,964	)
Cash flows from financing activities:
Net proceeds from bank borrowings			1,223				183
Principal payments for long-term debt			(2,645	)			(696	)
Proceeds from issuance of stock upon exercise of stock options			17,108				10,944
Payments for repurchases of common stock			—				(16,310	)
Excess tax benefits related to stock-based compensation			6,925				2,882
Other			(186	)			(401	)
Net cash provided by (used in) financing activities			22,425				(3,398	)
Net change in cash and cash equivalents			(100,405	)			(75,539	)
Effect of exchange rate changes on cash and cash equivalents			5,797				3,659
Cash and cash equivalents, beginning of period			254,498				186,621
Cash and cash equivalents, end of period		$	159,890			$	114,741

See accompanying notes.

HENRY SCHEIN, INC.

Note 1. Basis of Presentation

     Our consolidated financial statements include our accounts, as well as those of our wholly-owned and majority-owned subsidiaries. Certain prior period amounts have been reclassified to conform to the current period presentation.

     Our accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by U.S. GAAP for complete financial statements.

     The consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2005.

     The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three months ended April 1, 2006 are not necessarily indicative of the results to be expected of any other interim period or for the year ending December 30, 2006.

Note 2. Segment Data

     We conduct our business through two reportable segments: healthcare distribution and technology. These segments offer different products and services to the same customer base. The healthcare distribution reportable segment aggregates our dental, medical (including veterinary) and international operating segments. Products distributed include consumable products, small equipment, laboratory products, large equipment, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

     Our dental group serves office-based dental practices, schools and other institutions in the combined United States and Canadian dental market. Our medical group serves office-based physician practices, surgical centers, other alternate-care settings, veterinarian clinics and other institutions throughout the United States. Our international group serves 17 countries outside of North America and is what we believe to be a leading European healthcare supplier serving office-based practices.

     Our technology group provides software, technology and other value-added services to healthcare providers, primarily in the United States and Canada. Our value-added practice solutions include practice-management software systems for dental and medical practices and veterinary clinics. Our technology group offerings also include financial services and continuing education services for practitioners.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 2. Segment Data (Continued)

     The following tables present information about our business segments:

		Three Months Ended
		April 1,				March 26,
		2006				2005 (1)
Net Sales:
Healthcare distribution (2):
Dental (3)		$	482,036			$	436,522
Medical (4)			334,631				313,370
International (5)			322,306				292,098
Total healthcare distribution			1,138,973				1,041,990
Technology (6)			22,808				21,007
Total		$	1,161,781			$	1,062,997

		Three Months Ended
		April 1,				March 26,
		2006				2005 (1) (2)
Operating Income:
Healthcare distribution		$	52,162			$	45,083
Technology			8,756				8,179
Total		$	60,918			$	53,262

     We estimate the fair value of restricted stock that vests based on the passage of time on the date of grant, based on our closing stock price. With respect to performance-based restricted stock, the number of shares that ultimately vest and are received by the recipient depends on our earnings per share performance measured against specified targets over a three-year period. The fair value of performance-based restricted stock is determined on the date of grant, based on our closing stock price, and assumes that performance targets will be achieved. Over the performance period, the number of shares of common stock that will ultimately vest and be issued is adjusted upward or downward based upon the probability of achievement of such performance targets. The ultimate number of shares delivered to recipients and the related compensation cost recognized as expense will be based on a comparison of the final performance metrics to the specified targets.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 3. Stock-Based Compensation (Continued)

     Restricted stock units (“RSUs”) are unit awards we grant to certain non-U.S. employees that entitle the recipient to shares of common stock upon vesting after four years for time-based awards or three years for performance-based awards. The fair value of RSUs is determined on the date of grant, based on our closing stock price.

     We record deferred tax assets for awards that result in deductions on our income tax returns, based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which we will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on our income tax return are recorded in additional paid-in capital (if the tax deduction exceeds the deferred tax asset) or in earnings (if the deferred tax asset exceeds the tax deduction and no additional paid-in capital exists from previous awards).

     The majority of stock-based compensation expense for the three months ended April 1, 2006 and March 26, 2005 was generated through stock options. The weighted-average grant date fair value of stock-based awards granted during the three months ended April 1, 2006 and March 26, 2005 was $24.2 million and $20.8 million. For the three months ended April 1, 2006, the fair value of stock-based awards issued was evenly divided between stock options and restricted stock (including RSUs).

     Total unrecognized compensation cost related to non-vested awards as of April 1, 2006 was $54.6 million, which is expected to be recognized over a weighted-average period of approximately 3 years. There were no significant capitalized stock-based compensation costs as of April 1, 2006.

     The following table summarizes stock option activity under the Plans during the three months ended April 1, 2006:

						Weighted
						Average Exercise
		Shares				Price
Outstanding at beginning of period			8,882,557			$	26.37
Granted			799,565				47.31
Exercised			(909,187	)			18.82
Forfeited			(53,645	)			20.86
Outstanding at end of period			8,719,290				29.11
Options exercisable at end of period			5,599,562				23.07

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 3. Stock-Based Compensation (Continued)

     The shares under option at April 1, 2006, were in the following exercise price ranges:

														Options Outstanding
																		Weighted Average
																		Remaining				Weighted				Aggregate
														Number				Contractual Life				Average Exercise				Intrinsic
Range of Exercise Prices														Outstanding				in Years				Price				Value
$			5.91			to				$	9.87				416,423				2.8			$	7.11			$	16,969,083
			10.75			to					15.03				635,647				3.9				13.27				21,985,516
			16.10			to					22.80				2,760,861				5.6				19.65				77,874,331
			22.98			to					47.31				4,906,359				8.6				38.35				46,659,706
															8,719,290				7.0				29.11			$	163,488,636

														Options Exercisable
																		Weighted Average
																		Remaining				Weighted				Aggregate
														Number				Contractual Life				Average Exercise				Intrinsic
Range of Exercise Prices														Exercisable				in Years				Price				Value
$			5.91			to				$	9.87				416,423				2.8			$	7.11			$	16,969,083
			10.75			to					15.03				635,647				3.9				13.27				21,985,516
			16.10			to					22.80				2,760,429				5.6				19.65				77,862,934
			22.98			to					47.31				1,787,063				8.1				35.55				22,003,453
															5,599,562				6.0				23.07			$	138,820,986

     The following weighted-average assumptions were used in determining the fair values of stock options using the Black-Scholes valuation model:

		2006				2005
Expected dividend yield			0	%			0	%
Expected stock price volatility			25	%			30	%
Risk-free interest rate			4.8	%			4.0	%
Expected life of options (years)			5				5

     We have not declared cash dividends on our stock in the past and we do not anticipate declaring cash dividends in the foreseeable future. The expected stock price volatility is based on implied volatilities from traded options on our stock, historical volatility of our stock, and other factors. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant in conjunction with considering the expected life of options. The expected life of options is based on historical data on option exercises and represents the period of time that granted options are expected to be outstanding. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by recipients of stock options, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 3. Stock-Based Compensation (Continued)

     The total intrinsic value of stock options exercised during the three months ended April 1, 2006 and March 26, 2005 was $25.5 million and $12.5 million. The total cash received as a result of stock option exercises for the three months ended April 1, 2006 and March 26, 2005 was approximately $17.1 million and $10.9 million. In connection with these exercises, the tax benefits realized by us for the three months ended April 1, 2006 and March 26, 2005 were $9.4 million and $4.7 million. We settle employee stock option exercises with newly issued common shares.

     The total intrinsic value of restricted stock (including RSUs) that vested during the three months ended April 1, 2006 and March 26, 2005 was $55 and $27. The following table summarizes the status of our non-vested restricted shares for the three months ended April 1, 2006:

		Time-Based Restricted Stock
						Weighted Average
		Shares				Grant Date Fair Value
Outstanding at beginning of period			17,478			$	424,766
Granted			104,269				4,932,961
Vested			(1,189	)			(29,583	)
Forfeited			—				—
Outstanding at end of period			120,558			$	5,328,144
		Performance-Based Restricted Stock
						Weighted Average
		Shares				Grant Date Fair Value
Outstanding at beginning of period			—			$	—
Granted			151,263				7,156,512
Vested			—				—
Forfeited			—				—
Outstanding at end of period			151,263			$	7,156,512

Note 4. Business Acquisitions and Divestiture

Acquisitions

     On March 31, 2006, we completed the acquisition of NLS Animal Health (“NLS”), a privately held, full-service veterinary distribution business with annual revenues of approximately $110.0 million. We recorded $49.0 million of goodwill related to this acquisition through a preliminary purchase price allocation. Although the assets and liabilities of NLS are included in the accompanying financial statements, the operating results of NLS will be reflected in our financial statements beginning with the three months ending July 1, 2006.

     In addition to the NLS acquisition, we completed one other acquisition during the three months ended April 1, 2006. Both acquisitions were immaterial to our financial statements individually and in the aggregate.

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 4. Business Acquisitions and Divestiture (Continued)

Divestiture

     On April 1, 2006, we sold substantially all of the assets of our Hospital Supply Business, previously reported as part of our healthcare distribution reportable segment. The sale price was $36.5 million, $34.5 million of which was received on April 3, 2006 with the balance due on June 30, 2006. As a result of this sale, included in the operating results from discontinued operations for the three months ended April 1, 2006 is a $32.3 million ($19.4 million after-tax) loss on the sale, including $3.5 million ($2.1 million after-tax) of transitional service obligations and selling costs.

     Net sales generated by our Hospital Supply Business were $37.9 million and $38.4 million for the three month periods ended April 1, 2006 and March 26, 2005. We have classified the operating results of the Hospital Supply Business as a discontinued operation in the accompanying consolidated statements of income for all periods presented. The carrying amounts of the major classes of the Hospital Supply Business assets held-for-sale as of December 31, 2005 included accounts receivable, net of reserves, of approximately $43.9 million and inventories, net of reserves, of approximately $16.2 million.

     As part of the sale agreement, we are obligated to make payments to the buyer, up to a maximum of $13.0 million, contingent upon the buyer’s collection of specified accounts receivable within one year and the maintenance of a specified level of aggregate sales of the Hospital Supply Business during the two-year post-closing period. Any future payments made in connection with these contingencies will be presented as part of the results from discontinued operations.

Note 5. Earnings Per Share

     Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Our diluted earnings per share is computed similarly to basic earnings per share, except it reflects the effect of common shares issuable upon vesting of restricted stock and upon exercise of stock options using the treasury stock method in periods in which they have a dilutive effect.

     For the three months ended April 1, 2006, diluted earnings per share does not include the effect of common shares issuable upon conversion of our convertible debt because the principal is required to be settled in cash. If at any time, the debt is convertible at a premium as a result of the conditions of the debt, the amount in excess of the principal would be presumed settled in common shares and thereby reflected in our calculation of diluted earnings per share.

     A reconciliation of shares used in calculating earnings per basic and diluted share follows:

		Three Months Ended
		April 1,				March 26,
		2006				2005
Basic			87,309,609				86,679,090
Effect of assumed exercise of employee stock options			1,847,918				1,541,737
Effect of assumed vesting of restricted stock			84,102				—
Diluted			89,241,629				88,220,827

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except share and per share data)
(unaudited)

Note 5. Earnings Per Share (Continued)

     Weighted-average options to purchase 263,593 shares of common stock at an exercise price of $47.31 per share and 311,111 shares of common stock at exercise prices ranging from $38.50 to $39.43 per share that were outstanding during the three months ended April 1, 2006 and March 26, 2005 were excluded from the computation of diluted earnings per share. In each of these periods, such options’ exercise prices exceeded the average market price of our common stock, thereby causing the effect of such options to be anti-dilutive.

Note 6. Comprehensive Income

     Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income, as these amounts are recorded directly as adjustments to stockholders’ equity. Our comprehensive income primarily includes net income, foreign currency translation adjustments and unrealized gains and losses on hedging activities. Comprehensive income totaled $21.9 million and $20.7 million for the three months ended April 1, 2006 and March 26, 2005.

Note 7. Supplemental Cash Flow Information

     Cash paid for interest and income taxes was:

		Three Months Ended
		April 1,				March 26,
		2006				2005
Interest		$	12,629			$	11,786
Income taxes			25,428				3,067

     During the three months ended April 1, 2006 and March 26, 2005, we had a $4.0 million non-cash net unrealized loss and an $18.5 million non-cash net unrealized gain related to hedging activities. Further, in connection with our sale of our Hospital Supply Business, as previously discussed, we received $34.5 million of the $36.5 million sale proceeds on April 3, 2006 with the balance due on June 30, 2006.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

     In accordance with the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors which, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. All forward-looking statements made by us are subject to risks and uncertainties and are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are identified by the use of such terms as “may,” “could,” “expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,” “project,” “anticipate” or other comparable terms.

     Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: competitive factors; changes in the healthcare industry; changes in government regulations that affect us; financial risks associated with our international operations; fluctuations in quarterly earnings; our dependence on third parties for the manufacture and supply of our products; transitional challenges associated with acquisitions; regulatory and litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence upon sales personnel and key customers; our dependence on our senior management; possible increases in the cost of shipping our products or other service trouble with our third-party shippers; risks from rapid technological change; risks from potential increases in variable interest rates; financial risks associated with acquisitions; possible volatility of the market price of our common stock; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation that affect us. The order in which these factors appear should not be construed to indicate their relative importance or priority.

     We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.

Recent Developments

     On March 31, 2006, we completed the acquisition of NLS Animal Health, a privately held, full-service veterinary distribution business with annual revenues of approximately $110.0 million. Refer to Note 4 in the accompanying financial statements for further discussion.

     On April 1, 2006, we sold substantially all of the assets of our Hospital Supply Business, previously reported as part of our healthcare distribution reportable segment. Refer to Note 4 in the accompanying financial statements for further discussion.

Executive-Level Overview

     We believe we are the largest distributor of healthcare products and services primarily to office-based healthcare practitioners in the combined North American and European markets. We serve more than

500,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary clinics, as well as government and other institutions. We believe that we have a strong brand identity due to our 74 years of experience distributing healthcare products.

     We are headquartered in Melville, New York, employ nearly 11,000 people and have operations in the United States, Canada, the United Kingdom, the Netherlands, Belgium, Germany, France, Austria, Portugal, Spain, the Czech Republic, Luxembourg, Italy, Ireland, Switzerland, Israel, Australia and New Zealand. We also have an affiliate in Iceland.

     We have established strategically located distribution centers to enable us to better serve our customers and increase our operating efficiency. This infrastructure, together with broad product and service offerings at competitive prices, and a strong commitment to customer service, enables us to be a single source of supply for our customers’ needs. Our infrastructure also allows us to provide convenient ordering and rapid, accurate and complete order fulfillment.

     We conduct our business through two reportable segments: healthcare distribution and technology. These segments offer different products and services to the same customer base. The healthcare distribution reportable segment aggregates our dental, medical (including veterinary) and international operating segments. Products distributed include consumable products, small equipment, laboratory products, large equipment, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

     Our dental group serves office-based dental practices, schools and other institutions in the combined United States and Canadian dental market. Our medical group serves office-based physician practices, surgical centers, other alternate-care settings, veterinarian clinics and other institutions throughout the United States. Our international group serves 17 countries outside of North America and is what we believe to be a leading European healthcare supplier serving office-based practices.

     Our technology group provides software, technology and other value-added services to healthcare providers, primarily in the United States and Canada. Our value-added practice solutions include practice-management software systems for dental and medical practices and veterinary clinics. Our technology group offerings also include financial services and continuing education services for practitioners.

Industry Overview

     In recent years, the healthcare industry has increasingly focused on cost containment. This trend has benefited distributors capable of providing a broad array of products and services at low prices. It also has accelerated the growth of HMOs, group practices, other managed care accounts and collective buying groups, which, in addition to their emphasis on obtaining products at competitive prices, tend to favor distributors capable of providing specialized management information support. We believe that the trend towards cost containment has the potential to favorably affect demand for technology solutions, including software, which can enhance the efficiency and facilitation of practice management.

     Our operating results in recent years have been significantly affected by strategies and transactions we undertook to expand our business, domestically and internationally, in part to address significant changes in the healthcare industry, including consolidation of healthcare distribution companies, potential healthcare reform, trends toward managed care, cuts in Medicare and collective purchasing arrangements.

Industry Consolidation

     The healthcare products distribution industry, as it relates to office-based healthcare practitioners, is highly fragmented and diverse. This industry, which encompasses the dental, medical and veterinary markets, was estimated to produce revenues of approximately $21 billion in 2005 in the combined North

American and Western and Central European markets. The industry ranges from sole practitioners working out of relatively small offices to group practices or service organizations ranging in size from a few practitioners to a large number of practitioners who have combined or otherwise associated their practices.

     Due in part to the inability of office-based healthcare practitioners to store and manage large quantities of supplies in their offices, the distribution of healthcare supplies and small equipment to office-based healthcare practitioners has been characterized by frequent, small-quantity orders, and a need for rapid, reliable and substantially complete order fulfillment. The purchasing decisions within an office-based healthcare practice are typically made by the practitioner or an administrative assistant, and supplies and small equipment are generally purchased from more than one distributor, with one generally serving as the primary supplier.

     We believe that consolidation within the industry will continue to result in a number of distributors, particularly those with limited financial and marketing resources, seeking to combine with larger companies that can provide growth opportunities. This consolidation also may continue to result in distributors seeking to acquire companies that can enhance their current product and service offerings or provide opportunities to serve a broader customer base.

     Our trend with regard to acquisitions has been to expand our role as a provider of products and services to the healthcare industry. This trend has resulted in expansion into service areas that complement our existing operations and provide opportunities for us to develop synergies with, and thus strengthen, the acquired businesses.

     As industry consolidation continues, we believe that we are positioned to capitalize on this trend, as we believe we have the ability to support increased sales through our existing infrastructure. In the U.S. dental market, we estimate that there are currently more than 300 smaller distributors holding approximately 35% of the market. In the U.S. medical market, we estimate that more than 500 smaller distributors hold approximately 50% of the market, and in the European dental market, we estimate that more than 200 competitors hold approximately 80% of the market.

     As the healthcare industry continues to change, we continually evaluate possible candidates for merger or acquisition and intend to continue to seek opportunities to expand our role as a provider of products and services to the healthcare industry. There can be no assurance that we will be able to successfully pursue any such opportunity or consummate any such transaction, if pursued. If additional transactions are entered into or consummated, we would incur additional merger and acquisition-related costs, and there can be no assurance that the integration efforts associated with any such transaction would be successful.

Aging Population and Other Market Influences

     The healthcare products distribution industry continues to experience growth due to the aging population, increased healthcare awareness, the proliferation of medical technology and testing, new pharmacology treatments and expanded third-party insurance coverage. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing shifting from hospitals to alternate-care sites, particularly physicians’ offices. As the cosmetic surgery and elective procedure markets continue to grow, physicians are increasingly performing more of these procedures in their offices. The elder-care market continues to benefit from the increasing growth rate of the population of elderly Americans.

     The January 2000 U.S. Bureau of the Census estimates that the elderly population in the United States will more than double by the year 2040. In 2000, four million Americans were aged 85 or older, the segment of the population most in need of long-term care and elder-care services. By the year 2040, that

number is projected to more than triple to more than 14 million. The population aged 65 to 84 years is projected to more than double in the same time period.

     As a result of these market dynamics, the annual expenditures for healthcare services continue to increase in the United States. The Centers for Medicare and Medicaid Services (CMS) published “National Health Care Expenditures Projections: 2005 – 2015” indicating that total national healthcare spending reached $1.9 trillion in 2004, or 16.0% of the nation’s gross domestic product. Healthcare spending is projected to reach $4.0 trillion in 2015, an estimated 20.0% of the nation’s gross domestic product, the benchmark measure for annual production of goods and services in the United States.

Results of Operations

     The following table summarizes the significant components of our operating results from continuing operations and cash flows for the three months ended April 1, 2006 and March 26, 2005 (in thousands):

		Three Months Ended
		April 1,				March 26,
		2006				2005 (1)
Operating Results:
Net sales		$	1,161,781			$	1,062,997
Cost of sales			824,179				761,603
Gross profit			337,602				301,394
Operating expenses:
Selling, general and administrative (2)			276,684				248,132
Operating income		$	60,918			$	53,262
Other expense, net		$	(2,617	)		$	(5,040	)
Income from continuing operations			35,627				30,503
Cash Flows:
Net cash used in operating activities (2)		$	(38,000	)		$	(18,177	)
Net cash used in investing activities			(84,830	)			(53,964	)
Net cash provided by (used in) financing activities (2)			22,425				(3,398	)

Three Months Ended April 1, 2006 Compared to Three Months Ended March 26, 2005

Net Sales

     Net sales from continuing operations for the three months ended April 1, 2006 and March 26, 2005 were as follows (in thousands):

		April 1,				% of				March 26,				% of
		2006				Total				2005 (1)				Total
Healthcare distribution (2):
Dental (3)		$	482,036				41.5	%		$	436,522				41.1	%
Medical (4)			334,631				28.8				313,370				29.4
International (5)			322,306				27.7				292,098				27.5
Total healthcare distribution			1,138,973				98.0				1,041,990				98.0
Technology (6)			22,808				2.0				21,007				2.0
Total		$	1,161,781				100.0	%		$	1,062,997				100.0	%

     The $98.8 million, or 9.3%, increase in net sales for the three months ended April 1, 2006, includes increases of 11.7% local currency growth (8.3% internally generated primarily due to volume growth and 3.4% from acquisitions), offset by a 2.4% decline related to foreign currency exchange.

     The $45.5 million, or 10.4%, increase in dental net sales for the three months ended April 1, 2006, includes increases of 9.8% local currency growth (9.1% internally generated and 0.7% from acquisitions) and 0.6% related to foreign currency exchange. The 9.8% local currency growth was due to dental consumable merchandise sales growth of 9.9% (9.3% internal growth and 0.6% acquisition growth) and dental equipment sales and service growth of 9.1% (8.4% internal growth and 0.7% acquisition growth). Internally generated dental net sales growth was primarily due to increased volume.

     The $21.3 million, or 6.8%, increase in medical net sales for the three months ended April 1, 2006, includes internal growth of 4.9% primarily due to volume growth and acquisition growth of 1.9%.

     The $30.2 million, or 10.3%, increase in international net sales for the three months ended April 1, 2006, includes increases of 20.3% in local currencies (9.5% from acquisitions and 10.8% internally generated primarily due to volume growth), offset by a 10.0% decline related to foreign currency exchange.

     The $1.8 million, or 8.6%, increase in technology net sales for the three months ended April 1, 2006, includes increases of 8.3% in local currency growth and 0.3% due to foreign currency exchange. The increase was primarily due to increased electronic and financial services sales.

Gross Profit

     Gross profit and gross margins from continuing operations by segment and in total for the three months ended April 1, 2006 and March 26, 2005 were as follows (in thousands):

		April 1,				Gross				March 26,				Gross
		2006				Margin %				2005 (1)				Margin %
Healthcare distribution		$	320,115				28.1	%		$	285,267				27.4	%
Technology			17,487				76.7				16,127				76.8
Total		$	337,602				29.1			$	301,394				28.4

     For the three months ended April 1, 2006, gross profit increased $36.2 million, or 12.0%, from the comparable prior year period. As a result of different practices of categorizing costs associated with distribution networks throughout our industry, our gross margins may not necessarily be comparable to other distribution companies. Additionally, we realize substantially higher gross margin percentages in our technology segment than in our healthcare distribution segment. These higher gross margins result from being both the developer and seller of software products combined with the nature of the software industry, in which developers realize higher gross margins to recover investments in research and development.

     Healthcare distribution gross profit increased $34.8 million, or 12.2%, for the three months ended April 1, 2006 from the comparable prior year period. Healthcare distribution gross profit margin increased to 28.1% for the three months ended April 1, 2006 from 27.4% for the comparable prior year period which reflects improved margin management.

     Technology gross profit increased $1.4 million, or 8.4%, for the three months ended April 1, 2006 from the comparable prior year period. Technology gross profit margin decreased slightly to 76.7% for the three months ended April 1, 2006 from 76.8% for the comparable prior year period.

Selling, General and Administrative

     Selling, general and administrative expenses from continuing operations by segment and in total for the three months ended April 1, 2006 and March 26, 2005 were as follows (in thousands):

						% of								% of
		April 1,				Respective				March 26,				Respective
		2006				Net Sales				2005 (1) (2)				Net Sales
Healthcare distribution		$	267,953				23.5	%		$	240,184				23.1	%
Technology			8,731				38.3				7,948				37.8
Total		$	276,684				23.8			$	248,132				23.3

     Selling, general and administrative expenses increased $28.6 million, or 11.5%, to $276.7 million for the three months ended April 1, 2006 from the comparable prior year period. As a percentage of net sales, selling, general and administrative expenses increased to 23.8% from 23.3% for the comparable prior year period. The increase of 0.5% was primarily due to payroll and expenses related to recent acquisitions.

     As a component of selling, general and administrative expenses, selling expenses increased $23.4 million, or 14.8%, to $182.0 million for the three months ended April 1, 2006 from the comparable prior year period. As a percentage of net sales, selling expenses increased to 15.7% from 14.9% for the comparable prior year period. The increase was primarily due to payroll and expenses related to recent acquisitions.

     As a component of selling, general and administrative expenses, general and administrative expenses increased $5.2 million, or 5.8%, to $94.7 million for the three months ended April 1, 2006 from the comparable prior year period. As a percentage of net sales, general and administrative expenses decreased to 8.1% from 8.4% for the comparable prior year period. The decrease was primarily due to leveraging our infrastructure with increased sales volume.

Other Expense, Net

     Other expense, net from continuing operations for the three months ended April 1, 2006 and March 26, 2005 were as follows (in thousands):

		April 1,				March 26,
		2006				2005 (1)
Interest income		$	4,556			$	1,299
Interest expense			(7,394	)			(6,226	)
Other, net			221				(113	)
Other expense, net		$	(2,617	)		$	(5,040	)

     Other expense, net decreased $2.4 million for the three months ended April 1, 2006 from the comparable prior year period, primarily due to increases in interest income resulting from higher cash and security balances at higher interest rates, partially offset by increased interest expense due to rising interest rates.

Income Taxes

     For the three months ended April 1, 2006, our effective tax rate from continuing operations decreased to 36.4% from 37.0% for the comparable prior year period. The difference between our effective tax rates and the federal statutory rates for both periods related primarily to foreign and state income taxes.

Liquidity and Capital Resources

     Our principal capital requirements include the funding of working capital needs, acquisitions, capital expenditures and repurchases of common stock. Working capital requirements generally result from increased sales, special inventory forward buy-in opportunities, and payment terms for receivables and payables. Because sales tend to be stronger during the third and fourth quarters and special inventory forward buy-in opportunities are most prevalent just before the end of the year, our working capital requirements have generally been higher from the end of the third quarter to the end of the first quarter of the following year.

     We finance our business primarily through cash generated from our operations, revolving credit facilities, private placement debt and stock issuances. Our ability to generate sufficient cash flows from operations is dependent on the continued demand of our customers for, and supply by our vendors of, our products and services. Given current operating, economic and industry conditions, we believe that demand for our products and services will remain consistent in the foreseeable future. We do not expect the loss of cash flows from discontinued operations to have a material impact on our future liquidity or capital resources.

     Net cash flow used in operating activities was $38.0 million for the three months ended April 1, 2006, compared to $18.2 million for the comparable prior year period. This net change of $19.8 million was due primarily to timing changes in inventory and other current assets, partially offset by changes in accounts payable and accrued expenses, all before the effects of foreign exchange.

     Net cash used in investing activities was $84.8 million for the three months ended April 1, 2006, compared to $54.0 million for the comparable prior year period. The net change of $30.8 million was primarily due to acquisitions. We expect to invest up to approximately $55.0 million during the

remainder of the fiscal year in capital projects to modernize and expand our facilities and computer systems infrastructure and to integrate subsidiary operations into our core infrastructure.

     Net cash provided by financing activities was $22.4 million for the three months ended April 1, 2006, compared to $3.4 million used in financing activities for the comparable prior year period. The net change of $25.8 million was primarily due to no repurchases of common stock during the three months ended April 1, 2006 and increased proceeds from the exercise of stock options.

     The following table summarizes selected measures of liquidity and capital resources (in thousands):

		April 1,				December 31,
		2006				2005
Cash and cash equivalents		$	159,890			$	254,498
Available-for-sale securities			80,175				80,195
Working capital			844,431				860,295
Debt:
Bank credit lines		$	3,380			$	2,093
Current maturities of long-term debt			30,717				33,013
Long-term debt			488,214				489,520
Total debt		$	522,311			$	524,626

     Our cash and cash equivalents consist of bank balances and investments in money market funds representing overnight investments with a high degree of liquidity. Our available-for-sale securities consist of short-term tax-efficient auction rate securities, which also have a high degree of liquidity.

     Our business requires a substantial investment in working capital, which is susceptible to large variations during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity is a function of sales activity, special inventory forward buy-in opportunities and our desired level of inventory.

     Our accounts receivable days sales outstanding from continuing operations improved to 42.6 days for the three months ended April 1, 2006 from 43.4 days for the comparable prior year period. Our inventory turnover from continuing operations for the three months ended April 1, 2006 increased to 6.6 turns from 6.4 turns for the comparable prior year period. We anticipate future increases in the value of our working capital as a result of continued sales growth.

     In 2004, we completed an issuance of $240.0 million of convertible debt. These notes are senior unsecured obligations bearing a fixed annual interest rate of 3.0% and are due to mature on August 15, 2034. Interest on the notes is payable on February 15 and August 15 of each year, which commenced on February 15, 2005. The notes are convertible into our common stock at a conversion ratio of 21.58 shares per one thousand dollars of principal amount of notes, which is the equivalent conversion price of $46.34 per share, under the following circumstances:

	•		if the last price of our common stock is above 130% of the conversion price measured over a specified number of trading days;
	•		during the five business-day period following any 10 consecutive trading-day period in which the average of the trading prices for the notes for that 10 trading-day period was less than 98% of the average conversion value for the notes during that period;
	•		if the notes have been called for redemption; or

•

upon the occurrence of a fundamental change or specified corporate transactions, as defined in the note agreement.

     Upon conversion, we are required to satisfy our conversion obligation with respect to the principal amount of the notes to be converted, in cash, with any remaining amount to be satisfied in shares of our common stock. We currently have sufficient availability of funds through our $300.0 million revolving credit facility (discussed below) along with cash on hand to fully satisfy the cash portion of our conversion obligation. We also will pay contingent interest during any six-month interest period beginning August 20, 2010 if the average trading price of the notes is above specified levels. We may redeem some or all of the notes on or after August 20, 2010. The note holders may require us to purchase all or a portion of the notes on August 15, 2010, 2014, 2019, 2024 and 2029 or, subject to specified exceptions, upon a change of control event.

     Our $130.0 million senior notes come due on June 30, 2009 and bear interest at a fixed rate of 6.94% per annum. Beginning September 25, 2006, principal payments totaling $20.0 million are due annually on our $100.0 million senior notes which bear interest at a fixed rate of 6.66% per annum. Interest on both notes is payable semi-annually.

     In 2003, we entered into agreements relating to our $230.0 million senior notes to exchange their fixed interest rates for variable interest rates. For the three months ended April 1, 2006, the weighted-average variable interest rate was 7.5%. This weighted-average variable interest rate comprises LIBOR plus a spread and resets on the interest due dates for such senior notes.

     On May 24, 2005, we entered into a $300.0 million revolving credit facility with a $100.0 million expansion feature. This facility, which expires in May 2010, replaced our previous revolving credit facility of $200.0 million, which was scheduled to expire in May 2006. As of April 1, 2006, there were $8.2 million of letters of credit provided to third parties and no borrowings outstanding under this revolving credit facility.

     On June 21, 2004, we announced that our Board of Directors had authorized a common stock repurchase program. This program previously allowed us to repurchase up to $100.0 million in shares of our common stock, which represented approximately 3.5% of shares outstanding on the announcement date. On October 31, 2005, our board authorized an additional $100.0 million of shares in our common stock to be repurchased under this program. As of April 1, 2006, we had repurchased $88.5 million or 2,518,110 shares under this initiative, with $111.5 million remaining.

     Some minority shareholders in certain of our subsidiaries have the right at certain times to require us to acquire their ownership interest in those entities at a price that approximates fair value pursuant to a formula price as defined in the agreements. Additionally, some prior owners of such acquired subsidiaries are eligible to receive additional purchase price cash consideration if certain profitability targets are met. We accrue liabilities that may arise from these transactions when we believe the outcome of the contingency is determinable beyond a reasonable doubt.

     We finance our business to provide adequate funding for at least 12 months. Funding requirements are based on forecasted profitability and working capital needs, which, on occasion, may change. Consequently, we may change our funding structure to reflect any new requirements.

     We believe that our cash and cash equivalents, our ability to access private debt markets and public equity markets, and our available funds under existing credit facilities provide us with sufficient liquidity to meet our currently foreseeable short-term and long-term capital needs.

     E-Commerce

     Traditional healthcare supply and distribution relationships are being challenged by electronic online commerce solutions. Our distribution business is characterized by rapid technological developments and intense competition. The advancement of online commerce will require us to cost-effectively adapt to changing technologies, to enhance existing services and to develop and introduce a variety of new services to address the changing demands of consumers and our customers on a timely basis, particularly in response to competitive offerings.

     Through our proprietary, technologically-based suite of products, we offer customers a variety of competitive alternatives. We believe that our tradition of reliable service, our name recognition and large customer base built on solid customer relationships position us well to participate in this growing aspect of the distribution business. We continue to explore ways and means to improve and expand our Internet presence and capabilities.

Critical Accounting Policies and Estimates

     There have been no material changes in our critical accounting policies and estimates from those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in our exposure to market risk from that disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2005.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of April 1, 2006 to ensure that all material information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure and that all such information is recorded, processed, summarized and reported as specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

     There have been no changes in our internal control over financial reporting that occurred during the quarter ended April 1, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

     A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Our business involves a risk of product liability claims and other claims in the ordinary course of business, and from time to time we are named as a defendant in cases as a result of our distribution of pharmaceutical and other healthcare products. As a business practice, we generally obtain product indemnification from our suppliers.

     We have various insurance policies, including product liability insurance, covering risks in amounts that we consider adequate. In many cases in which we have been sued in connection with products manufactured by others, the manufacturer provides us with indemnification. There can be no assurance that the insurance coverage we maintain is sufficient or will be available in adequate amounts or at a reasonable cost, or that indemnification agreements will provide us with adequate protection. In our opinion, all pending matters, including those described below, are covered by insurance or will not otherwise have a material adverse effect on our financial condition or results of operations.

     As of April 1, 2006, we had accrued our best estimate of potential losses relating to product liability and other claims that were probable to result in a liability and for which we were able to reasonably estimate a loss. This accrued amount, as well as related expenses, was not material to our financial position, results of operations or cash flows. Our method for determining estimated losses considers currently available facts, presently enacted laws and regulations and other external factors, including probable recoveries from third parties.

Product Liability Claims

     As of April 1, 2006, we were a defendant in approximately 40 product liability cases. We have obtained defense and indemnification commitments from the manufacturer in many of these cases. The manufacturer has withheld indemnification commitments in some of these cases pending product identification. In our opinion, these cases are covered by insurance or will not otherwise have a material adverse effect on our financial condition or results of operations.

ITEM 6. EXHIBITS

     Exhibits.

     10.1 Henry Schein’s Management Team 2006 Performance Incentive Plan Summary

     31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

     32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Henry Schein, Inc.
		(Registrant)
		By: /s/ Steven Paladino
		Steven Paladino
		Executive Vice President and
		Chief Financial Officer
		(Authorized Signatory and Principal Financial
		and Accounting Officer)

Dated: May 9, 2006

Exhibit 10.1

Management Team

2006

Performance Incentive Plan Summary

1. Introduction

Congratulations on being designated a participant in the Performance Incentive Plan (“PIP,” or the “Plan”), Henry Schein’s incentive-based cash compensation program for its management team. Plan participants include the entire management team of directors and vice presidents. The Plan has been designed to bind all participants together in a concerted effort to drive our business toward achieving common objectives that benefit the Company as a whole, the management team and each participant. The Plan is specifically designed to:

	•		Provide each participating management team member (“Participant”) with an annual cash bonus opportunity;
	•		Foster achievement of specific corporate, business unit and individual performance goals (“Goals”);
	•		Recognize and reward Participants for individual and group team achievements;

The PIP cash bonus award, in conjunction with a Participant’s base compensation, is intended to provide Participants with competitive total annual cash compensation for comparable positions at companies in our industry and at other organizations of our size.

This program was reviewed and approved by the Compensation Committee of the Board of Directors.

The Compensation Committee or the Chief Executive Officer (the “CEO”) (solely with respect to Participants other than executive officers) has the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the PIP and to construe and interpret the terms and provisions of the PIP and any award issued under the PIP.

Any decision, interpretation or other action made or taken in good faith by or at the direction of the Compensation Committee or the CEO (solely with respect to Participants other than executive officers) will be final, binding and conclusive on Henry Schein and all Participants and their respective heirs, executors, administrators, successors and assigns.

The Compensation Committee may, in its sole discretion, delegate any of its responsibilities under the PIP with respect to the implementation of the Plan (including administrative tasks).

2. Eligibility

The CEO annually determines eligibility for participation in the Plan. Participation is intended to be ongoing. However, changes in assignments may result in a Participant’s being ineligible to participate in the Plan. Team Schein Members will be notified at the beginning of each year regarding their eligibility to participate in the Plan.

3. PIP Awards

PIP awards are based on:

	•		The Company’s annual profitability, specifically measured against earnings per share (“EPS”), net income or other predetermined profitability Goals;
	•		The participant’s business unit or functional area’s level of achievement in financial and other performance goals.
	•		The participant’s achievement of his or her individual goals.

4. Individual Performance Goals

A Participant’s individual performance Goals are classified into three categories:

	•		Company financial performance
	•		Functional area financial performance
	•		MBO performance

The Company Financial Performance Goals are based on annual earnings per share (EPS) achievement. The Functional Financial Performance Goal and the MBO Performance Goal evaluation and analysis are conducted annually, unless otherwise specified. The PIP award payouts corresponding to levels of achievement of Company Financial Performance Goals are set forth on Exhibit A. The PIP award payouts for meeting or exceeding Functional Area Financial Goals and each Participant’s individualized MBO Performance Goals are set forth on Exhibits B and C, respectively.

The CEO or the Compensation Committee, as applicable, and the person to whom the Participant reports (“Manager”) will determine the Participant’s Goals at the start of each year. There will be an ongoing review of these goals. Any changes during the year must be approved by the Manager and, if appropriate, by the CEO. Each Participant and his or her Manager are encouraged to have performance evaluations during the year to monitor progress and, if necessary, to modify Goals (with the approval of the CEO, if appropriate) for the balance of the year.

The following table illustrates performance Goals for different types of management positions:

Performance Goals Based on
Position and Role
		Range of Performance Goal Categories
		Functional				Company
		Financial				Financial
Management Segment		Performance				Performance				MBO Performance
Corporate			10% - 40	%			15% - 40	%			30% - 50	%
Management Participants
(e.g. Finance, Supply Chain TSM’s,
etc)
Major Business			55% - 65	%			15% - 35	%			10% - 25	%
Unit Participants
(e.g. Dental Group, Medical Group,
Veterinary Group TSM’s, etc.)
Supporting Corporate Function			10% - 20	%			15% - 35	%			40% - 60	%
Participants (e.g. Legal Department,
Human Resources Department TSM’s, etc.)

5. Company Financial Performance Goals

The Company net income goal will be set for the entire Management Team based on the annually set EPS target. The internally developed EPS base Goal is determined by the Compensation Committee with input from the Executive Management team. The Compensation Committee will make adjustments to the 2006 EPS goal for acquisitions based on information provided to them by the Executive Management team. Changes to the goal will be provided to the participants.

See Exhibit A for PIP award payouts for achieving Company Financial Performance Goals.

6. Functional Area Financial Performance Goals

For Participants managing areas that impact a P&L, these Goals are based on the business unit’s financial performance measured against annual financial budgets, in the following areas:

	•		Group/ Divisional gross profit goals.
	•		Group/Divisional contribution dollars.
	•		Group/Divisional Pre-Tax income after “service charges.”
	•		Group/Divisional net income Goals.
	•		Pre-Tax Income of operating subsidiaries — sales, gross profit and operating income Goals.

For Participants with infrastructure or supporting responsibilities, these Goals are based on expense performance relative to the budget and other quantitative goals versus the budget.

See Exhibit B for PIP award payouts for achieving levels of the Functional Area Financial Goals.

7. MBO Performance Goals

Specific, measurable MBO Performance Goals will be developed for each Participant. These MBO Performance Goals should drive toward and support five enterprise-wide initiatives: Profitability; Process Excellence; Customer Satisfaction, Strategic Planning, and Organizational Development. To drive performance and to focus management energy, it is recommended that the number of MBO’s be limited to five to nine critical objectives.

§		Profitability - e.g., reduce expenses as a percent of sales; increase gross profit percentage and gross profit dollars; increase business unit sales; reduce inventory.
§		Process Excellence - e.g., implement a new policy; reduce errors to customers; reduce DSO’s; increase inventory turns.
§		Customer Satisfaction - e.g., increase frequency of salesperson to customer contacts; implement project to develop computer screens to aid in positive customer interactions; support internal customer by completing all recruits within a reasonable predetermined time period; develop customer feedback program, such as surveys and focus groups.
§		Strategic Planning - e.g., develop strategic plan based on individual responsibilities; benchmark Participant’s unit against similar companies’ functions.
§		Organizational Development - e.g. personal business development, succession planning, diversity goals, staff development, recruitment goals.

See Exhibit C for PIP award payouts for achieving and exceeding MBO Performance Goals.

8. Acquisitions, New Business Ventures and Other Adjustments

Functional Financial and MBO goals will be adjusted for acquisitions and new business ventures that were not initially considered when developing the original Company target. The Compensation Committee will adjust the Company Financial Performance Goal for unbudgeted acquisitions by an amount equal to a reasonable estimate of the expected accretion or dilution. In the event the Compensation Committee adjusts the Company Financial Performance Goal for unbudgeted acquisitions in accordance with the preceding sentence, the PIP award payouts set forth on Exhibit A will correspond to the levels of achievement of the adjusted Company Financial Goal.

Adjustments may also be made to the Company Financial Performance Goals in the discretion of the Compensation Committee for items resulting from, for example, unforeseeable events or other facts and circumstances beyond the control of the Company. Notwithstanding anything to the contrary, all items of gain, loss or expense as presented to the Compensation Committee for, or during, the applicable fiscal year, that are related to the following items will not be considered in the calculation of Company Financial Performance Goals:

(i) (a) the disposal of a business or discontinued operations; (b) capital transactions undertaken by the Company during the fiscal year; or (c) the Company’s repurchase of any class of its securities during the fiscal year; or

(ii) changes in accounting principles or to changes in applicable law or regulations.

9. Plan Awards

During the first fiscal quarter of each year, individual performance for the previous year is evaluated relative to Goals. PIP awards are determined for each performance category, as applicable. A Participant’s total Plan award will equal the sum of the awards earned in each category for the previous year’s performance.

Notwithstanding anything herein to the contrary, the Compensation Committee or the CEO (solely with respect to Participants other than executive officers) may, at any time, provide that all or a portion of a PIP award is payable: (i) upon the attainment of any goal (including the Goals), as determined by the Compensation Committee or the CEO, as applicable; or (ii) regardless of whether the applicable goals are attained, as determined by the Compensation Committee or the CEO (solely with respect to Participants other than executive officers) in their sole discretion.

In order to receive any PIP award, Participants must be actively employed on March 15 of the year the Plan award is to be paid out. A prorated Plan award may be available, at the discretion of the CEO, if a Participant in the Plan dies, becomes permanently disabled, retires at the normal retirement age during the Plan year, or in other special circumstances.

PIP awards, less applicable withholdings, will generally be made by the end of the first fiscal quarter of each year.

This Plan is not intended to, nor does it constitute, a contract or guarantee of continued employment. The Company reserves the right to change or terminate the Plan at any time without notice.

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Stanley M. Bergman, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Henry Schein, Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 9, 2006		/s/ Stanley M. Bergman
		Stanley M. Bergman
		Chairman and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Steven Paladino, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Henry Schein, Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 9, 2006		/s/ Steven Paladino
		Steven Paladino
		Executive Vice President and
		Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Henry Schein, Inc. (the “Company”) for the period ending April 1, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stanley M. Bergman, the Chairman and Chief Executive Officer of the Company, and I, Steven Paladino, Executive Vice President and Chief Financial Officer of the Company, do hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Stanley M. Bergman
Dated May 9, 2006		Stanley M. Bergman
		Chairman and Chief Executive Officer
Dated May 9, 2006		/s/ Steven Paladino
		Steven Paladino
		Executive Vice President and
		Chief Financial Officer

This certification accompanies each Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.