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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

-----------------
FORM 10-Q
-----------------

(Mark One)

X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the period ended September 26, 1998

__ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission File Number: 0-27078

HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)

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

135 DURYEA ROAD
MELVILLE, NEW YORK 11747
(Address of principal executive offices)

TELEPHONE NUMBER (516) 843-5500
(Registrant's telephone number, including area code)

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 X No

As of November 5, 1998, there were 39,789,516 shares of the
Registrant's Common Stock outstanding.

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HENRY SCHEIN, INC.

INDEX

PART I. FINANCIAL INFORMATION Page No.
--------

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets
September 26, 1998 and December 27, 1997.................................................... 3

Consolidated Statements of Operations
Three and nine months ended September 26, 1998 and September 27, 1997 ...................... 4

Consolidated Statements of Cash Flows
Nine months ended September 26, 1998 and September 27, 1997 .............................. 5

Notes to Consolidated Financial Statements .................................................... 6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ................................................................. 10

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES......................................................................... 16

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................................. 16

SIGNATURE .................................................................................... 17

PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

September 26, December 27,
1998 1997
------------ ------------
(restated)

ASSETS
Current assets:
Cash and cash equivalents.......................... $ 16,076 $ 11,813
Accounts receivable, less reserves of $17,255
and $14,922, respectively........................ 353,772 284,727
Inventories ....................................... 264,781 228,005
Deferred income taxes.............................. 16,545 13,323
Other ............................................. 42,803 41,128
---------- ----------
Total current assets......................... 693,977 578,996
Property and equipment, net of accumulated
depreciation and amortization of $66,560 and
$63,307, respectively.............................. 68,487 63,155
Goodwill and other intangibles, net of accumulated
amortization of $16,173 and $10,911, respectively.. 145,252 130,847
Investments and other ............................... 42,684 30,948
---------- ----------
$950,400 $803,946
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $183,160 $137,992
Bank credit lines................................. 21,408 32,173
Accruals:

Salaries and related expenses..................... 29,835 25,021
Merger and integration costs...................... 13,652 17,056
Other............................................. 46,257 42,194
Current maturities of long-term debt................ 6,260 9,470
---------- ----------
Total current liabilities................... 300,572 263,906
Long-term debt...................................... 182,014 107,042
Other liabilities .................................. 8,834 6,550
---------- ----------
Total liabilities .......................... 491,420 377,498
---------- ----------
Minority interest................................... 1,784 2,225
---------- ----------
Stockholders' equity:
Common stock, $.01 par value, authorized
60,000,000; issued 39,757,374 and 38,120,572,
respectively ................................... 398 381
Additional paid-in capital ....................... 347,542 328,644
Retained earnings ................................ 113,817 99,588
Treasury stock, at cost (62,479 shares) .......... (1,156) (1,156)
Accumulated other comprehensive income ........... (1,780) (1,609)
Deferred compensation............................. (1,625) (1,625)
---------- ----------
Total stockholders' equity ................. 457,196 424,223
---------- ----------
$950,400 $803,946
========== ==========

See accompanying notes to consolidated financial statements.

HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

Three Months Ended Nine Months Ended
------------------------------ -------------------------------
September 26, September 27, September 26, September 27,
1998 1997 1998 1997
----------------- ------------ ------------ -----------
(restated) (restated)

Net sales...................................... $492,634 $439,309 $1,418,968 $1,240,430
Cost of sales.................................. 338,935 310,431 978,979 871,810
--------- ------- ------------ -----------
Gross profit........................... 153,699 128,878 439,989 368,620
Operating expenses:
Selling, general and administrative........ 128,631 113,747 377,272 328,420
Merger and integration costs .............. 20,240 17,718 32,640 22,071
--------- --------- --------- ------------
Operating income (loss) ............... 4,828 (2,587) 30,077 18,129
Other income (expense):
Interest income ........................... 1,638 2,328 4,826 5,361
Interest expense .......................... (2,606) (2,034) (8,556) (5,079)
Other - net ............................... 289 16 850 483
--------- --------- --------- ------------
Income (loss) before taxes on
income, minority interest and
equity in earnings of affiliates... 4,149 (2,277) 27,197 18,894
Taxes on income ............................... 2,572 6,228 12,483 16,343
Minority interest in net income (losses) of
subsidiaries ............................. 86 (311) (57) (437)
Equity in earnings of affiliates ............. 815 558 1,470 888
--------- --------- --------- ------------
Net income (loss) .................... $ 2,306 $(7,636) $16,241 $3,876
========= ======== ======= ======

Net income (loss) per common share:

Basic ..................................... $ 0.06 $ (0.20) $ 0.41 $ 0.10
========= ======== ======== =======
Diluted.................................... $ 0.06 $ (0.20) $ 0.39 $ 0.10
========= ======== ======== =======
Pro Forma:

Historical net income (loss)............... $ 2,306 $(7,636) $ 16,241 $ 3,876
Pro Forma adjustment (provision for
taxes on previously untaxed earnings
(loss) of an acquisition)................ (2,240) 385 (2,579) 597
--------- -------- -------- -------
Pro Forma net income (loss).................... $ 66 $ (7,251) $ 13,662 $ 4,473
========= ======== ======== =======
Pro Forma net income (loss) per common share:
Basic...................................... $ 0.00 $ (0.19) $ 0.34 $ 0.12
========= ======== ======== =======
Diluted.................................... $ 0.00 $ (0.19) $ 0.33 $ 0.11
========= ======== ======== =======
Weighted average shares outstanding:
Basic...................................... 39,787 37,560 39,729 37,493
========= ======== ======== =======
Diluted.................................... 41,828 37,560 41,588 39,393
========= ======== ======== =======

See accompanying notes to consolidated financial statements.

HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Nine Months Ended
-----------------------------------
September 26, September 27,
1998 1997
------ -----
(RESTATED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 16,241 $ 3,876
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization................................... 13,953 11,797
Provision for losses on accounts receivable ................... 1,813 3,837
Provision (benefit) for deferred income taxes .................. (1,901) 368
Undistributed earnings of affiliates............................ (1,470) (888)
Stock issued to ESOP trust ..................................... 1,311 1,111
Provision (benefit) for merger and integration costs............ (3,404) 5,753
Minority interest in net losses of subsidiaries ................ (57) (437)
Other .......................................................... 49 132
Changes in assets and liabilities:
Increase in accounts receivable................................. (59,443) (51,551)
Increase in inventories ........................................ (27,775) (4,273)
Decrease (increase) in other current assets .................... 5,961 (2,727)
Increase in accounts payable and accruals ...................... 54,172 9,045
---------- ----------
Net cash used in operating activities................................... (550) (23,957)
---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................................... (28,094) (16,814)
Business acquisitions, net of cash acquired......................... (11,549) (45,847)
Other .............................................................. (11,831) (8,126)
---------- ----------
Net cash used in investing activities .................................. (51,474) (70,787)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ........................... 129,493 14,314
Principal payments on long-term debt ............................... (19,812) (10,967)
Proceeds from issuance of stock upon exercise of options ........... 7,308 2,421
Proceeds from borrowings from banks ............................... 104,836 65,342
Principal payments on borrowings from banks ....................... (163,406) (2,663)
Purchase of treasury stock ........................................ -- (619)
Dividends paid by acquired company ................................. (2,011) (1,483)
Other .............................................................. (121) (387)
---------- ----------
Net cash provided by financing activities ............................. 56,287 65,958
---------- ----------
Net increase (decrease) in cash and cash equivalents .................. 4,263 (28,786)
Cash and cash equivalents, beginning of period ........................ 11,813 45,818
---------- ----------
Cash and cash equivalents, end of period ............................. $ 16,076 $ 17,032
========== ==========

See accompanying notes to consolidated financial statements.

HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)

NOTE 1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Henry Schein,
Inc. and its wholly-owned and majority-owned subsidiaries (collectively, the
"Company").

In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the information set
forth therein. These consolidated financial statements are condensed and
therefore do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. The
financial statements include adjustments to give effect to the acquisitions of
Sullivan Dental Products, Inc. ("Sullivan"), effective November 12, 1997 and H.
Meer Dental Supply Co. ("Meer"), effective August 14, 1998, which were accounted
for under the pooling of interests method. The consolidated financial statements
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K and 10-K/A for the year ended December 27, 1997. The Company follows the
same accounting policies in preparation of interim reports. The results of
operations for the nine months ended September 26, 1998 are not necessarily
indicative of the results to be expected for the fiscal year ending December 26,
1998 or any other period.

NOTE 2. BUSINESS ACQUISITIONS

During the nine months ended September 26,1998, the Company completed five
acquisitions. The 1998 completed acquisitions included two dental supply
companies, the most significant of which was Meer, a leading full-service dental
distributor serving over 40,000 dentists, dental laboratories and institutions
throughout the United States, with 1997 annual net sales of over $180,000 and,
combined with the other dental company, totaled approximately $212,000 in
aggregate net sales for 1997. The completed acquisitions also included two
medical supply companies with aggregate net sales for 1997 of approximately
$37,000, and one international dental distribution business with 1997 net sales
of approximately $16,000. Of the five completed acquisitions, four were
accounted for under the pooling of interests method, and the remaining
acquisition of a 50.1% interest was accounted for under the purchase method of
accounting. The financial statements have been restated to give retroactive
effect to the Meer transaction as the remaining three pooling transactions were
not material and have been included in the consolidated financial statements
from the beginning of the quarter in which the acquisitions occurred. Results of
operations of the business acquisition accounted for under the purchase method
of accounting have been included in the consolidated financial statements
commencing with the acquisition date.

The Company issued 2,973,680 shares, 347,063 shares and 121,000 shares of its
Common Stock, with an aggregate value of approximately $151,100, in connection
with three of the pooling transactions. Additionally, in connection with one of
the dental supply company acquisitions, the Company issued shares of a
subsidiary, with rights equivalent to those of the Company's Common stock, which
are exchangeable into 603,500 shares of the Company's Common Stock, at each
shareholders' option, and had an aggregate value of approximately $24,000.

HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in thousands, except share data)
(unaudited)

NOTE 2. BUSINESS ACQUISITIONS (CONTINUED)

The total cash purchase price for the acquisition accounted for under the
purchase method of accounting was approximately $6,800. The excess of the
acquisition costs over the fair value of identifiable net assets acquired
will be amortized on a straight-line basis over 30 years.

In connection with the 1998 and 1997 acquisitions accounted for under the
pooling of interests method, the Company incurred certain merger and
integration costs during the three and nine months ended September 26, 1998
and September 27, 1997, of approximately $20,240 and $32,640, and $17,718 and
$22,071, respectively. These costs consist primarily of compensation,
investment banking, legal, accounting and advisory fees, impairment of
goodwill arising from acquired businesses integrated into the Company's
dental business, as well as other integration costs associated with these
mergers. Net of taxes, for the three and nine months ended September 26,
1998 and September 27, 1997, merger and integration costs were approximately
$0.38 and $0.59 per share, and $0.44 and $0.55 per share, respectively, on a
diluted basis.

The summarized unaudited pro forma results of operations set forth below for
the nine months ended September 26, 1998 and September 27, 1997 assume the
acquisitions, completed in 1997 and the first nine months of 1998, which
were either non-material pooling transactions included in the consolidated
financial statements from the beginning of the quarter in which the
acquisitions occurred, or were accounted for under the purchase method of
accounting, occurred as of the beginning of each of these periods.

Nine Months Ended
---------------------------------------
September 26, September 27,
1998 1997
------ ------

Net sales ...................................................... $1,447,679 $1,348,882
Net income (1).................................................... $ 15,829 $ 3,742
Net income per common share:
Basic ........................................................ $ 0.40 $ 0.10
Diluted ...................................................... $ 0.38 $ 0.09
Pro forma net income, reflecting adjustment for income taxes
on previously untaxed earnings of Meer ...................... $ 13,250 $ 4,339
Pro forma net income per common share:
Basic ........................................................ $ 0.33 $ 0.12
Diluted ...................................................... $ 0.32 $ 0.11

- --------------
(1) Includes merger and integration costs of approximately $32,640 and
$22,071, and related tax benefits of $7,835 and $624, for the nine months
ended September 26, 1998 and September 27, 1997, respectively.

HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in thousands, except share data)
(unaudited)

NOTE 2. BUSINESS ACQUISITIONS (CONTINUED)

Pro forma adjusted net income per common share, including acquisitions, may
not be indicative of actual results, primarily because pro forma earnings
include historical results of operations of acquired entities and do not
reflect any cost savings or potential sales erosion that may result from the
Company's integration efforts.

Net sales and net income (loss) of the Company and Meer were $395,485 and
$(6,679), and $43,824 and $(572), respectively, for the three months ended
September 27, 1997, and $1,107,968 and $5,368, and $132,462 and $(895),
respectively, for the nine months ended September 27, 1997. The Meer net losses
for the three and nine months ended September 27, 1997 include pro forma
adjustments of $385 and $597, respectively, to reflect assumed income tax
benefits arising from Meer's conversion from an S Corp. to a C Corporation. For
the period ended August 14, 1998, the effective date of the Meer acquisition,
Meer's net sales and pro forma net income was approximately $118,073 and $1,646,
respectively. The pro forma adjustment was for taxes on previously untaxed
earnings of Meer as an S Corp. through August 14, 1998.

NOTE 3. SENIOR NOTES

On September 25, 1998 the Company completed a private placement transaction
under which it issued $100,000 in senior notes, the proceeds of which were used
to pay down amounts owed under its revolving credit facility. Principal payments
totaling $20,000 are due annually starting September 25, 2006. The notes bear
interest at a rate of 6.66% per annum. Interest is payable semi-annually.

NOTE 4. COMPREHENSIVE INCOME

The Company adopted SFAS No. 130 Reporting Comprehensive Income, which
requires that all components of comprehensive income and total comprehensive
income be reported on one of the following: a statement of income and
comprehensive income, a statement of comprehensive income or a statement of
stockholders' equity. Comprehensive income is comprised of net income and
all changes to stockholders' equity, except those due to investments by
owners (changes in paid-in capital) and distributions to owners (dividends).
For interim reporting purposes, SFAS 130 requires disclosure of total
comprehensive income.

HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in thousands, except share data)
(unaudited)

NOTE 4. COMPREHENSIVE INCOME (CONTINUED)

Total comprehensive income for the three and nine months ended September 26,
1998 and September 27, 1997 is as follows:

Three Months Ended
-------------------------------------

September 26, September 27,
1998 1997
------------- -------------
Net income (loss).......................................... $2,306 $ (7,636)
========== ========
Pro forma net income (loss), reflecting the
Meer tax adjustment.................................... $ 66 $ (7,251)
Foreign currency translation adjustments................... (97) (471)
--------- ---------
Pro forma comprehensive income (loss)...................... $ (31) $ (7,722)
========= =========

Nine Months Ended
-------------------------------------

September 26, September 27,
1998 1997
------------- -------------
Net income.................................................. $16,241 $3,876
======= ======
Pro forma net income, reflecting the
Meer tax adjustment..................................... $13,662 $4,473
Foreign currency translation adjustments.................... (171) (1,537)
------- ------
Pro forma comprehensive income.............................. $13,491 $2,936
======= ======

NOTE 5. EARNINGS PER SHARE

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

Three Months Ended
-------------------------------------

Three Months Nine Months
Ended Ended
------------- -------------
September 26, 1998
Basic*................................................. 39,787 39,729
Effect of assumed conversion of
employee stock options............................. 2,041 1,859
---------- ---------
Diluted................................................ 41,828 41,588
========= ========
September 27, 1997
Basic.................................................. 37,560 37,493
Effect of assumed conversion of
employee stock options............................. -- 1,900
--------- -------
Diluted................................................ 37,560 39,393
========= =======

* Includes shares which are exchangeable into 603,500
shares of the Company's Common Stock (see Note 2).

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

RECENT DEVELOPMENTS

During the nine months ended September 26,1998, the Company completed five
acquisitions. The 1998 completed acquisitions included two dental
supply companies, the most significant of which was Meer, a leading
full-service dental distributor serving over 40,000 dentists, dental
laboratories and institutions throughout the United States, with 1997 annual
net sales of over $180.0 million and, combined with the other
dental company totaled approximately $212.0 million in aggregate net sales
for 1997. The completed acquisitions also included two medical supply
companies with aggregate net sales for 1997 of approximately $37.0 million,
and one international dental distribution business with 1997 net sales of
approximately $16.0 million. Of the five completed acquisitions, four were
accounted for under the pooling of interests method, and the remaining
acquisition of a 50.1% interest was accounted for under the purchase
method of accounting. The financial statements have been restated to give
retroactive effect to the Meer transaction as the remaining three pooling
transactions were not material and have been included in the consolidated
financial statements from the beginning of the quarter in which the
acquisitions occurred. Results of operations of the business acquisition
accounted for under the purchase method of accounting have been included in
the consolidated financial statements commencing with the acquisition date.

The Company issued 2,973,680 shares, 347,063 shares and 121,000 shares of
its Common Stock, with an aggregate value of approximately $151.1 million,
in connection with three of the pooling transactions, the most significant
of which was Meer, which closed on August 14, 1998. Additionally, in
connection with one of the dental supply company acquisitions, the Company
issued shares of a subsidiary, with rights equivalent to those of the
Company's Common stock, which are exchangeable into 603,500 shares of the
Company's Common Stock, at each shareholders' option, and had an aggregate
value of approximately $24.0 million. The total cash purchase price for the
acquisition accounted for under the purchase method of accounting was
approximately $6.8 million. The excess of the acquisition costs over the
fair value of identifiable net assets acquired will be amortized on a
straight-line basis over 30 years.

In connection with the 1998 and 1997 acquisitions accounted for under the
pooling of interests method, the Company incurred certain merger and
integration costs during the three and nine months ended September 26, 1998
and September 27, 1997, of approximately $20.2 million and $32.6 million,
and $17.7 million and $22.1 million, respectively. These costs consist
primarily of compensation, investment banking, legal, accounting and
advisory fees, impairment of goodwill arising from acquired businesses
integrated into the company's dental business, as well as other integration
costs associated with these mergers. Net of taxes, for the three and nine
months ended September 26, 1998 and September 27, 1997, merger and
integration costs were approximately $0.38 and $0.59 per share, and $0.44
and $0.55 per share, respectively, on a diluted basis.

Excluding the merger and integration costs, net of taxes, pro forma net
income and pro forma net income per diluted common share would have been $38.5
million and $0.92, and $25.9 million and $0.66, respectively for the nine
months ended September 26, 1998 and September 27, 1997, and $15.8 million
and $0.38, and $10.2 million and $0.26, respectively for the three months
ended September 26, 1998 and September 27, 1997.

On August 7, 1998, the Company completed the sale of Marus Dental
International ("Marus"), the Company's dental equipment manufacturing
operation. Marus had 1997 net sales of approximately $25.0 million. The
operations of Marus were not material to the Company.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 26, 1998 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 27, 1997

Net sales increased $53.3 million, or 12.1%, to $492.6 million for the three
months ended September 26, 1998 from $439.3 million for the three months ended
September 27, 1997. Of the $53.3 million increase, approximately $22.9 million
represented a 18.4% increase in the Company's medical business, $13.6 million
represented a 5.4% increase in its dental business, $12.3 million represented a
28.0% increase in its international business, $2.6 million represented a 33.5%
increase in its technology and value-added product business, and $1.9 million
represented a 18.0% increase in its veterinary business. The increase in medical
net sales is primarily attributable to sales to hospitals, acquisitions, and the
benefits of a new telesales structure, partially offset by a decline in sales to
the Company's largest renal dialysis customer, Renal Treatment Centers, Inc.,
("RTC"). The increase in dental net sales was primarily the result of the
continuing favorable impact of the Company's integrated sales and marketing
approach (which coordinates the efforts of its field sales consultants with its
direct marketing and telesales personnel), acquisitions and continued success of
the Company's targeted marketing programs, offset in part by a reduction in
dental equipment sales resulting from the Company's disposal of its equipment
manufacturing subsidiary, Marus in August 1998, and estimated sales erosion on
the Meer acquisition. In the international market the increase in net sales was
primarily due to increased account penetration in France and the United Kingdom,
and an acquisition in Australia. Favorable exchange rate translation adjustments
increased net sales in the international market by approximately $1.4 million.
Had net sales for the international market been translated at the same exchange
rates in effect during the third quarter of 1997, the increase in international
net sales would have been 3.2% less. The increase in technology and value-added
product net sales was primarily due to increased practice management software
sales. In the veterinary market, the increase in net sales was primarily due to
increased account penetration with core accounts and veterinary groups.
Excluding net sales of Marus and RTC, in both periods as well as the estimated
sales erosion on the Meer acquisition, net sales would have increased by 18.8%
in 1998 over 1997.

Gross profit increased by $24.8 million, or 19.2%, to $153.7 million for the
three months ended September 26, 1998, from $128.9 million for the three
months ended September 27, 1997. Gross profit margin increased by 1.9% to
31.2% from 29.3% last year, with improvements primarily in technology and
value-added product margins and to a lesser extent, medical, veterinary, and
dental margins.

Selling, general and administrative expenses increased by $14.9 million, or
13.1%, to $128.6 million for the three months ended September 26, 1998 from
$113.7 million for the three months ended September 27, 1997. Selling and
shipping expenses increased by $11.0 million, or 14.5%, to $87.1 million for
the three months ended September 28, 1998 from $76.1 million for the three
months ended September 27, 1997. As a percentage of net sales, selling and
shipping expenses increased 0.4% to 17.7% for the three months ended
September 26, 1998 from 17.3% for the three months ended September 27, 1997.
The increase was primarily due to higher selling and shipping expenses
attributable to increases in

payroll, freight and other costs as a result of opening new warehouse
facilities, and increased spending on promotional programs and advertising
expenditures. General and administrative expenses increased $3.9 million, or
10.4%, to $41.5 million for the three months ended September 26, 1998 from $37.6
million for the three months ended September 27, 1997 primarily as a result of
acquisitions. As a percentage of net sales, general and administrative expenses
decreased 0.2% to 8.4% for the three months ended September 26, 1998 from 8.6%
for the three months ended September 27, 1997.

Other income (expense) - net decreased by $1.0 million, to $(0.7) million
for the three months ended September 26, 1998, compared to $0.3 million for
the three months ended September 27, 1997 due to an increase in interest
expense resulting from an increase in average borrowings and lower imputed
interest income on long-term accounts receivable balances.

Equity in earnings of affiliates increased $0.2 million to $0.8 million for
the three months ended September 26, 1998 from $0.6 million for the three
months ended September 27, 1997. This increase was primarily due to
increased sales volume and improved margins for the products sold by an
unconsolidated 50%-owned affiliate.

For the three months ended September 26, 1998 the Company's effective tax rate
was 62.0%. Excluding merger and integration costs, the majority of which are not
deductible for income tax purposes, and including a pro forma tax adjustment for
Meer on previously untaxed earnings as an S Corp, and the establishment of a net
deferred tax asset arising from Meer's conversion from an S Corp. to a C
Corporation, the Company's effective tax rate would have been 38.2%. For the
three months ended September 27, 1997, the Company's effective tax rate was
273.5%. Excluding merger and integration costs and including a pro forma
adjustment for assumed tax benefits arising from the previously untaxed loss of
Meer, the Company's effective tax rate for the three months ended September 27,
1997 would have been 39.8%. The difference between the Company's effective tax
rate, excluding merger and integration costs and the Meer tax adjustment, and
the Federal statutory rate relates primarily to state income taxes.

Nine Months Ended September 26, 1998 compared to
Nine Months Ended September 27, 1997

Net sales increased $178.6 million, or 14.4%, to $1,419.0 million for the nine
months ended September 26, 1998 from $1,240.4 million for the nine months ended
September 27, 1997. Of the $178.6 million increase, approximately $80.6 million
represented a 11.0% increase in the Company's dental business, $54.6 million
represented a 16.7% increase in its medical business, $34.8 million represented
a 27.3% increase in its international business, $5.9 million represented a 19.5%
increase in its veterinary business and $2.7 million represented a 9.9% increase
in its technology and value-added product business. The increase in dental net
sales was primarily the result of the continuing favorable impact of the
Company's integrated sales and marketing approach (which coordinates the efforts
of its field sales consultants with its direct marketing and telesales
personnel), continued success of the Company's targeted marketing programs and
acquisitions, offset in part by a reduction in dental equipment sales resulting
from the Company's disposal of its equipment manufacturing subsidiary, Marus in
August 1998, and estimated sales erosion on the Meer acquisition. The increase
in medical net sales was primarily attributable to sales to hospitals,
acquisitions and the benefits of a new telesales structure, partially offset by
a decline in sales to renal dialysis centers. In the first quarter of 1998 the
Company's largest renal dialysis customer, RTC, was acquired by Total Renal
Care, Inc., which currently is not a customer of the Company. In March of this
year, RTC stopped purchasing Epogen from the Company, but continues to purchase
other products. During fiscal year 1997, the Company's sales of Epogen to RTC
amounted to $38.7 million. In the international market the

increase in net sales was due to acquisitions, primarily in Germany, the United
Kingdom and Australia, and increased account penetration in France, the United
Kingdom and Spain. Unfavorable exchange rate translation adjustments reduced the
increase in net sales for the international market by approximately $1.4
million. Had net sales for the international market been translated at the same
exchange rates in effect during the first nine months of 1997, international net
sales would have increased by an additional 1.0%. In the veterinary market, the
increase in net sales was primarily due to increased account penetration with
core accounts and veterinary groups. The increase in technology and value-added
product sales was primarily due to increased practice management software sales.
Excluding net sales of Marus and RTC in both periods, as well as the estimated
sales erosion on the Meer acquisition, net sales would have grown by 18.6% in
1998 over 1997.

Gross profit increased by $71.4 million, or 19.4%, to $440.0 million for the
nine months ended September 26, 1998, from $368.6 million for the nine
months ended September 27, 1997. Gross profit margin increased by 1.3% to
31.0% from 29.7% last year, with improvements primarily in technology and
value-added product margins and to a lesser extent, medical, veterinary and
dental margins.

Selling, general and administrative expenses increased by $48.9 million, or
14.9%, to $377.3 million for the nine months ended September 26, 1998 from
$328.4 million for the nine months ended September 27, 1997. Selling and
shipping expenses increased by $34.2 million, or 15.5%, to $254.4 million for
the nine months ended September 26, 1998 from $220.2 million for the nine months
ended September 27, 1997. As a percentage of net sales, selling and shipping
expenses increased 0.1% to 17.9% for the nine months ended September 26, 1998
from 17.8% for the nine months ended September 27, 1997. The increase was
primarily due to higher selling and shipping expenses attributable to
increases in payroll, freight and other costs as a result of opening new
warehouse facilities, and increased spending on promotional programs and
advertising expenditures. General and administrative expenses increased $14.7
million, or 13.6%, to $122.9 million for the nine months ended September 26,
1998 from $108.2 million for the nine months ended September 27, 1997, primarily
as a result of acquisitions. As a percentage of net sales, general and
administrative expenses remained unchanged at 8.7%.

Other income (expense) - net decreased by $3.7 million, to $(2.9) million
for the nine months ended September 26, 1998, compared to $0.8 million for
the nine months ended September 27, 1997 due to an increase in interest
expense resulting from an increase in average borrowings and lower imputed
interest income on long-term accounts receivable balances.

Equity in earnings of affiliates increased $0.6 million to $1.5 million for
the nine months ended September 26, 1998 from $0.9 million for the nine
months ended September 27, 1997. This increase was primarily due to
increased sales volume and improved margins for the products sold by an
unconsolidated 50%-owned affiliate.

For the nine months ended September 26, 1998 the Company's effective tax rate
was 45.9%. Excluding merger and integration costs, the majority of which are not
deductible for income tax purposes, and including a pro forma tax adjustment for
Meer on previously untaxed earnings as an S Corp, and the establishment of a net
deferred tax asset arising from Meer's conversion from an S Corp. to a C
Corporation, the Company's effective tax rate would have been 38.3%. For the
nine months ended September 27, 1997, the Company's effective tax rate was
86.5%. Excluding merger and integration costs and including a pro forma
adjustment for assumed tax benefits arising from the previously untaxed loss of
Meer, the Company's effective tax rate for the three months ended September 27,
1997 would have been 40.0%. The difference between the Company's effective tax
rate, excluding merger and integration costs and the Meer tax adjustment, and
the Federal statutory rate relates

primarily to state income taxes.

YEAR 2000

Management has initiated a company-wide program to prepare the Company's
computer systems, applications and software products for the year 2000, as
well as to assess the readiness for the year 2000 of critical vendors and other
third parties upon which the Company relies to operate its business. The year
2000 issue arises from the widespread use of computer programs that rely on
two-digit date codes to perform computations or decision-making functions. The
Company anticipates completing all of its system critical upgrades and
enhancements and testing before the end of the third quarter of 1999. The
Company expects to incur internal payroll costs as well as consulting costs and
other expenses related to infrastructure, facility enhancements and software
upgrades necessary to prepare for the Company's systems for the year 2000.
Management estimates that the cost of this program will be between $2.0 million
and $3.0 million, with approximately $1.5 million representing incremental costs
to the Company.

There can be no assurance that the computer systems of other companies upon
which the Company's systems or software products rely upon will be timely
converted, or that such failure to convert by another company would not have a
material adverse effect on the Company's business or systems and results of
operations.

The statements contained in this Year 2000 readiness disclosure are subject to
certain protection under the Year 2000 Information and Readiness Disclosure Act.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal capital requirements have been to fund (a) working
capital needs resulting from increased sales, extended payment terms on
various products, special inventory forward buy-in opportunities, and to
fund initial start-up inventory requirements for new distribution centers,
(b) acquisitions and (c) capital expenditures. Since sales have been
strongest during the fourth quarter and special inventory forward buy-in
opportunities are most prevalent just before the end of the year, the
Company's working capital requirements have been generally higher from the
end of the third quarter to the end of the first quarter of the following
year. The Company has financed its business primarily through revolving
credit facilities, senior notes and stock issuances.

Net cash used by operating activities for the nine months ended September 26,
1998 of $0.6 million resulted primarily from net income of $16.2 million,
adjusted for non-cash changes of $10.3 million, offset by an increase in
operating items of working capital of $27.1 million. The increase in working
capital was primarily due to a $59.4 million increase in accounts receivable,
and a $27.8 million increase in inventory, offset by a $6.0 million decrease in
other current assets, and an increase in accounts payable and other accrued
expenses of $54.2 million. The Company anticipates future increases in working
capital as a result of its continued sales growth.

Net cash used in investing activities for the nine months ended September
26, 1998 of $51.5 million resulted primarily from cash outlays for capital
expenditures of $28.1 million, acquisitions of $11.6 million and increases
in loans to unconsolidated affiliates, purchases of intangibles and other
long-term asset acquisitions totaling $11.8 million. The increased amount of
capital expenditures over the comparable prior year period was due to
expenditures for additional operating facilities, as well as the development
of new computer systems. The Company expects that it will invest in excess
of $30.0 million during the year ending December 26, 1998, including
approximately $10.0 million to $12.0 million relating to the consolidation
and integration of facilities and systems as a result of recent
acquisitions. Thereafter, the Company expects to invest in excess of $20.0
million per year

in capital projects to modernize and expand its facilities and infrastructure
systems and integrate operations.

Net cash provided by financing activities for the nine months ended September
26, 1998 of $56.3 million resulted primarily from borrowings under a new $100.0
million privately placed Senior Notes, offset primarily by repayments on the
Company's revolving credit facility and other long-term debt.

In addition, with respect to certain acquisitions and joint ventures,
holders of minority interest in the acquired entities or ventures have the
right at certain times to require the Company to acquire their interest at
either fair market value or a formula price based on earnings of the entity.

The Company's cash and cash equivalents as of September 26, 1998 of $16.1
million consist of bank balances and money market funds. These investments
have staggered maturity dates, none greater than three months, and have a
high degree of liquidity.

The Company has a $150.0 million revolving credit facility which has a
termination date of August 15, 2002. Borrowings under the credit facility
were $36.3 million at September 26, 1998. The Company also has two
uncommitted bank lines totaling $30.0 million under which $28.0 million has
been borrowed at September 26, 1998. Certain of the Company's subsidiaries
have revolving credit facilities that total approximately $35.3 million
under which $21.4 million has been borrowed at September 26, 1998.

On September 25, 1998 the Company completed a private placement transaction
under which it issued $100.0 million in Senior Notes, the proceeds of which were
used to pay down amounts owed under its revolving credit facility. Principal
payments totaling $20.0 million are due annually starting September 25, 2006.
The notes bear interest at a rate of 6.66% per annum. Interest is payable
semi-annually.

The Company believes that its cash and cash equivalents, its anticipated
cash flow from operations, its ability to access private and public debt and
equity markets, and the availability of funds under its existing credit
agreements will provide it with liquidity sufficient to meet its short and
long-term capital needs.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information in this Form
10-Q contains information that is forward looking, such as the Company's
opportunities to increase sales through, among other things, acquisitions;
its exposure to fluctuations in foreign currencies; its anticipated
liquidity and capital requirements; competitive product and pricing
pressures and the ability to gain or maintain share of sales in global
markets as a result of actions by competitors; and the results of legal
proceedings. The matters referred to in forward looking statements could be
affected by the risks and uncertainties involved in the Company's business.
These risks and uncertainties include, but are not limited to, the effect of
economic and market conditions, the impact of the consolidation of health
care practitioners, the impact of health care reform, opportunities for
acquisitions and the Company's ability to effectively integrate acquired
companies, the acceptance and quality of software products, acceptance and
ability to manage operations in foreign markets, the ability to maintain
favorable supplier arrangements and relationships, possible disruptions in
the Company's computer systems or

telephone systems, the Company's ability and its customers' and suppliers'
ability to replace, modify or upgrade computer programs in ways that adequately
address the Year 2000 issue (see "Year 2000"), possible increases in shipping
rates or interruptions in shipping service, the level and volatility of interest
rates and currency values, economic and political conditions in international
markets, including civil unrest, government changes and restrictions on the
ability to transfer capital across borders, the impact of current or pending
legislation, regulation and changes in accounting standards and taxation
requirements, environmental laws in domestic and foreign jurisdictions, as well
as certain other risks described in this Form 10-Q. Subsequent written and oral
forward looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements in
this paragraph and elsewhere described in this Form 10-Q.

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES

(c) On August 14, 1998 the Company issued an aggregate of 2,973,680 shares
of its Common Stock in connection with its acquisition of Meer (see
Note 2 to the consolidated financial statements included in this
quarterly report) and 121,000 shares of its Common Stock in connection
with another acquisition, without registration under the Securities Act
of 1933 in reliance upon the exemption provided in Section 4(c) and
Rule 144 promulgated thereunder.

Additionally, in connection with an earlier acquisition, a subsidiary
of the Company issued 558,000 Class A non-voting exchangeable preferred
shares. These shares are exchangeable by their holders into an
equivalent number of the Company's Common Stock. Subsequently 101,087
shares of the Class A non-voting shares were exchanged for 101,087
shares of the Company's Common Stock. The remaining 456,913 shares of
Class A non-voting exchangeable preferred shares have been treated as
if exchanged into 456,913 shares of the Company's Common Stock, since
they cannot be disposed of in any other manner than exchange into the
Company's Common Stock.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

10.109 Agreement and Plan of Merger, dated as of August 3, 1998,
among the Company, HSI Acquisition Corp., H. Meer Dental Supply
Co., and Edward Meer individually and as Trustee of the Edward
M. Meer Revocable Living Trust dated November 17, 1972, Brian D.
Meer, individually and as Trustee of the Brian D. Meer Revocable
Living Trust dated May 10, 1989, as amended, Robert D. Meer,
individually and as Trustee of the Robert D. Meer Revocable
Living Trust dated August 20, 1991, Jeffrey A. Meer,
individually and as Trustee of the Jeffrey A. Meer Revocable
Living Trust dated August 20, 1984, as amended, Norma
Handelsman, individually and as Trustee of the Norma Handelsman
Revocable Living Trust dated December 18, 1993, Herbert B.
Handelsman, individually and as Trustee of the Herbert B.
Handelsman Revocable Living Trust dated December 18, 1993, Tedd
Handelsman, individually and as Trustee of the Tedd Handelsman
Revocable Living Trust dated June 5, 1997, Amy Molnar and Jon
Eric Handelsman (collectively, the "H. Meer Dental Supply Co.
Stockholders").

10.110 Amendment No. 1 dated as of August 14, 1998 to the Agreement and
Plan of Merger, dated as of August 3, 1998, among the Company,
HSI Acquisition Corp., H. Meer Dental Supply Co., and the H.
Meer Dental Supply Co. Stockholders.

10.111 Note Purchase Agreement dated as of July 15, 1998 (The "Note
Purchase Agreement") among the Company, New York Life Insurance
Company, New York Life Insurance and Annuity Corporation,
Jackson National Life Insurance Company, Teachers Insurance and
Annuity Association and the Equitable Life Assurance Society of
the United States, providing for the purchase of an aggregate of
$100,000,000 of the Company's 6.66% Senior Notes due July 15,
2010.

10.112 Form of Corporate Guaranty executed by certain subsidiaries of
the Company pursuant to the Note Purchase Agreement.

27.1 Financial Data Schedule

(b) Reports on Form 8-K.
None.

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
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

Dated: November 10, 1998