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 that, 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 regulatory requirements that affect us; 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, including the failure to achieve anticipated synergies; financial risks 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; 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, any forward-looking statements contained herein should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.

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 550,000 customers worldwide, including dental practitioners and laboratories, physician practices and animal health clinics, as well as government and other institutions. We believe that we have a strong brand identity due to our more than 75 years of experience distributing healthcare products.

We are headquartered in Melville, New York, employ more than 12,000 people (of which over 5,000 are based outside the United States) and have operations in the United States, Australia, Austria, Belgium, Canada, the Czech Republic, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, Switzerland and the United Kingdom. We also have affiliates in Iceland, Israel and the United Arab Emirates.

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 animal health) and international operating segments. This segment consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

Our dental group serves office-based dental practitioners, schools and other institutions in the combined United States and Canadian dental market. Our medical group serves office-based medical practitioners, surgical centers, other alternate-care settings, animal health clinics and other institutions throughout the United States. Our international group serves 18 countries outside of North America and is what we believe to be a leading European healthcare supplier serving office-based practitioners.

Our technology group provides software, technology and other value-added services to healthcare practitioners, primarily in the United States, Canada, the United Kingdom, Australia and New Zealand. Our value-added practice solutions include practice-management software systems for dental and medical practitioners and animal health clinics. Our technology group offerings also include financial services, e-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 that 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 animal health markets, was estimated to produce revenues of approximately $25.5 billion in 2007 in the combined North American and 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. 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 27% of the market. In the U.S. medical market, we estimate that more than 500 smaller distributors hold approximately 38% of the market, and in the European dental market, we estimate that more than 200 smaller distributors 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 merger and/or 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 from acute care settings 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 estimated 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, annual expenditures for healthcare services continue to increase in the United States. Given current operating, economic and industry conditions, we believe that demand for our products and services will remain relatively consistent with recent trends for the foreseeable future. The Centers for Medicare and Medicaid Services, or CMS, published "National Health Expenditure Projections 2007 - 2017" indicating that total national healthcare spending reached $2.1 trillion in 2006, or 16.0% of the nation's gross domestic product, the benchmark measure for annual production of goods and services in the United States. Healthcare spending is projected to reach $4.3 trillion in 2017, approximately 19.5% of the nation's gross domestic product.

Government Influences

The healthcare industry is subject to extensive government regulation, licensure and operating compliance procedures. National healthcare reform has been the subject of a number of legislative initiatives by Congress. Additionally, government and private insurance programs fund a large portion of the total cost of medical care. The Balanced Budget Act passed by Congress in 1997 significantly reduced reimbursement rates for nursing homes and home healthcare providers, affecting spending levels and the overall financial viability of these institutions.

The Medicare Prescription Drug, Improvement, and Modernization Act or the Medicare Act, is the largest expansion of the Medicare program since its inception, and provides participants with voluntary prescription drug benefits through an interim drug discount card. The Medicare Act also includes provisions relating to medication management programs, generic substitution and provider reimbursement.

There have been increasing efforts by various levels of government, including state departments of health, state boards of pharmacy and comparable agencies, to regulate the pharmaceutical distribution system in order to prevent the introduction of counterfeit, adulterated or mislabeled pharmaceuticals into the distribution system. An increasing number of states, including Florida, have already adopted laws and regulations, including drug pedigree tracking requirements, that are intended to protect the integrity of the pharmaceutical distribution system. Regulations adopted under the federal Prescription Drug Marketing Act, effective December, 2006, require the identification and documentation of transactions involving the receipt and distribution of prescription drugs, that is, drug pedigree information. Other states and government agencies are currently considering similar laws and regulations. We continue to work with our suppliers to help minimize the risks associated with counterfeit products in the supply chain and potential litigation.

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.

Expense Reduction Initiative

On November 5, 2008, we announced certain expense reduction actions to reduce costs in light of the current economic environment. The actions will include the elimination of approximately 300 positions from our operations around the world, or approximately 2.5% of our workforce, and the closing of several smaller facilities. These actions will result in a one-time pretax charge of approximately $22 million to $25 million, which we expect to record in the fourth quarter of 2008.

Results of Operations

The following table summarizes the significant components of our operating results from continuing operations for the three and nine months ended September 27, 2008 and September 29, 2007, and cash flows for the nine months ended September 27, 2008 and September 29, 2007 (in thousands):

                                                     Three Months Ended                        Nine Months Ended
                                             September 27,      September 29,         September 27,      September 29,
                                                 2008               2007                  2008               2007
Operating results:
Net sales                                   $     1,650,771    $     1,505,575       $     4,821,367    $     4,202,720
Cost of sales                                     1,172,190          1,076,245             3,403,138          2,968,567
Gross profit                                        478,581            429,330             1,418,229          1,234,153
Operating expenses:
Selling, general and administrative                 363,303            332,630             1,104,367            972,880
Operating income                            $       115,278    $        96,700       $       313,862    $       261,273

Other expense, net                          $        (8,464 )  $         2,079       $       (16,288 )  $        (1,273 )
Income from continuing operations                    68,425             60,668               186,232            158,521

Cash flows:
Net cash provided by operating activities                                            $       188,564    $       149,925
Net cash used in investing activities                                                         85,605            160,028
Net cash used in financing activities                                                         57,050             34,852

Three Months Ended September 27, 2008 Compared to Three Months Ended September 29, 2007

Net Sales



Net sales from continuing operations for the three months ended September 27,
2008 and September 29, 2007 were as follows (in thousands):



                                 September 27,     % of      September 29,     % of
                                     2008          Total         2007          Total
Healthcare distribution (1):
Dental (2)                      $       644,871    39.0 %   $       616,972    41.0 %
Medical (3)                             426,853    25.9             444,990    29.6
International (4)                       538,033    32.6             411,772    27.3
Total healthcare distribution         1,609,757    97.5           1,473,734    97.9
Technology (5)                           41,014     2.5              31,841     2.1
Total                           $     1,650,771   100.0 %   $     1,505,575   100.0 %

(1) Consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins.

(2) Consists of products sold in the United States and Canada.

(3) Consists of products and equipment sold in the United States' medical and animal health markets.

(4) Consists of products sold in the dental, medical and animal health markets, primarily in Europe.

(5) Consists of practice management software and other value-added products and services, which are distributed primarily to healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand in 2008 and the United States and Canada in 2007.

The $145.2 million, or 9.6%, increase in net sales for the three months ended September 27, 2008 includes increases of 8.0% local currency growth (2.2% internally generated and 5.8% from acquisitions) and 1.6% related to foreign currency exchange.

The $27.9 million, or 4.5%, increase in dental net sales for the three months ended September 27, 2008 includes increases of 4.4% local currency growth (all internally generated) and 0.1% related to foreign currency exchange. The 4.4% local currency growth was due to dental consumable merchandise sales growth of 4.8% (all internally generated) and dental equipment sales and service growth of 3.4% (all internally generated).

The $18.1 million, or 4.1%, decrease in medical net sales for the three months ended September 27, 2008 includes a decline in internal growth of 4.2% and acquisition growth of 0.1%. This decrease was due to a reduction of sales of certain lower-margin pharmaceutical products. Excluding sales of these products, internal medical net sales growth was approximately 3.4% or approximately 2.0% excluding sales of influenza vaccine.

The $126.2 million, or 30.7%, increase in international net sales for the three months ended September 27, 2008 includes increases of 24.7% in local currencies (5.2% internally generated and 19.5% from acquisitions), and 6.0% related to foreign currency exchange.

The $9.2 million, or 28.8%, increase in technology net sales for the three months ended September 27, 2008 includes an increase in internal growth of 11.3% and acquisition growth of 17.5%. The increase in net sales growth was primarily driven by last year's acquisition of Software of Excellence and by growth in our electronic and financial services businesses.

Gross Profit



Gross profit and gross margin percentages from continuing operations by segment
and in total for the three months ended September 27, 2008 and September 29,
2007 were as follows (in thousands):



                           September 27,      Gross      September 29,      Gross
                               2008         Margin %         2007         Margin %

Healthcare distribution   $       448,232      27.8 %   $       405,536      27.5 %
Technology                         30,349      74.0              23,794      74.7
Total                     $       478,581      29.0     $       429,330      28.5

For the three months ended September 27, 2008, gross profit increased $49.3 million, or 11.5%, 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 typically realize higher gross margins to recover investments in research and development.

Healthcare distribution gross profit increased $42.7 million, or 10.5%, for the three months ended September 27, 2008 from the comparable prior year period. Healthcare distribution gross profit margin increased to 27.8% for the three months ended September 27, 2008 from 27.5% for the comparable prior year period primarily due to changes in the product sales mix.

Technology gross profit increased $6.6 million, or 27.5%, for the three months ended September 27, 2008 from the comparable prior year period. Technology gross profit margin decreased to 74.0% for the three months ended September 27, 2008 from 74.7% for the comparable prior year period primarily due to changes in the product sales mix.

Selling, General and Administrative



Selling, general and administrative expenses from continuing operations by
segment and in total for the three months ended September 27, 2008 and September
29, 2007 were as follows (in thousands):



                                               % of                            % of
                           September 27,    Respective     September 29,    Respective
                               2008          Net Sales         2007          Net Sales

Healthcare distribution   $       347,481       21.6 %    $       320,164       21.7 %
Technology                         15,822       38.6               12,466       39.2
Total                     $       363,303       22.0      $       332,630       22.1

Selling, general and administrative expenses increased $30.7 million, or 9.2%, to $363.3 million for the three months ended September 27, 2008 from the comparable prior year period. As a percentage of net sales, selling, general and administrative expenses decreased to 22.0% from 22.1% for the comparable prior year period.

As a component of selling, general and administrative expenses, selling expenses increased $19.2 million, or 8.5%, to $244.2 million for the three months ended September 27, 2008 from the comparable prior year period. As a percentage of net sales, selling expenses decreased to 14.8% from 15.0% for the comparable prior year period.

As a component of selling, general and administrative expenses, general and administrative expenses increased $11.5 million, or 10.7%, to $119.1 million for the three months ended September 27, 2008 from the comparable prior year period. As a percentage of net sales, general and administrative expenses increased to 7.2% from 7.1% for the comparable prior year period.

Other Expense, Net



Other expense, net, from continuing operations for the three months ended
September 27, 2008 and September 29, 2007 were as follows (in thousands):



                      September 27,       September 29,
                          2008                2007

Interest income      $         4,260     $         4,378
Interest expense              (7,933 )            (6,216 )
Other, net                    (4,791 )             3,917
Other expense, net   $        (8,464 )   $         2,079

Other expense, net, increased $10.5 million for the three months ended September 27, 2008 from the comparable prior year period. Approximately $3.7 million of the increase was due to a reserve for losses associated with open foreign exchange contracts for hedging intercompany loans with Lehman Brothers Special Financing, Inc., whose parent, Lehman Brothers Holdings, Inc. filed for Chapter 11 bankruptcy on September 15, 2008. An additional $0.8 million was attributable to a reserve for losses in our investment in the Reserve Primary Fund, a money market fund that decreased its net asset value from $1.00 to $0.97 due to investments in Lehman Brothers debt. The prior period's results also reflect a gain recorded from the divestiture of certain non-core businesses related to the acquisition of a dental supply company in the third quarter of 2007.

Income Taxes

For the three months ended September 27, 2008, our effective tax rate from continuing operations was 32.5% compared to 34.1% for the prior year period. The difference between our effective tax rates and the federal statutory tax rates for both periods primarily relates to state and foreign income taxes.

Nine Months Ended September 27, 2008 Compared to Nine Months Ended September 29, 2007

Net Sales



Net sales from continuing operations for the nine months ended September 27,
2008 and September 29, 2007 were as follows (in thousands):



                                 September 27,     % of      September 29,     % of
                                     2008          Total         2007          Total
. . .