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Henry Schein at a Glance

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Henry Schein Reports Record Fourth Quarter And Full Year 2018 Financial Results
- Q4 GAAP net income per diluted share of $0.87 versus prior-year GAAP net loss per share of $0.06
- Q4 non-GAAP diluted EPS of $1.12 versus prior-year non-GAAP diluted EPS of $0.97
- Introduces 2019 non-GAAP diluted EPS guidance from continuing operations, reflecting 7% to 9% growth over 2018 non-GAAP diluted EPS from continuing operations
- Provides unaudited financial information for the years 2016, 2017 and 2018, and for each quarter of 2018 on a continuing operations basis

MELVILLE, N.Y., Feb. 20, 2019 /PRNewswire/ -- Henry Schein, Inc. (Nasdaq: HSIC), the world's largest provider of health care solutions to office-based dental and medical practitioners, today reported record fourth quarter financial results.

Net sales for the quarter ended December 29, 2018 were $3.4 billion, an increase of 1.7% compared with the fourth quarter of 2017. This consisted of 3.3% growth in local currencies and a 1.6% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.1% and acquisition growth was 1.2% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the fourth quarter of 2018 was $133.0 million, or $0.87 per diluted share, compared with a prior-year net loss of $8.5 million, or $0.06 per share. Non-GAAP net income for the fourth quarter of 2018 was $171.6 million, or $1.12 per diluted share, compared with non-GAAP net income of $152.1 million, or $0.97 per diluted share, for the fourth quarter of 2017. Non-GAAP results for the fourth quarter of 2018 and 2017 exclude certain items noted in Exhibit B, which provides a reconciliation of GAAP net income and diluted EPS to non-GAAP net income and diluted EPS.

"This has been a historic year at Henry Schein as we further positioned the company to advance our 2018 to 2020 strategic plan. This included the creation of our Henry Schein One dental technology business, the spin-off of our animal health business into Covetrus (Nasdaq: CVET) and restructuring efforts, which together are strategically positioning Henry Schein for continued success," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "We thank our Team Schein Members across the globe for their significant contributions to these important efforts."

Mr. Bergman continued, "As we begin 2019, we are most excited about the future of Henry Schein. We believe the long-term business opportunities remain attractive in the global markets for Dental and Medical offices as well as alternate sites of care. We offer the broadest range of solutions in the markets we serve, including medical and dental supply chain and specialty solutions, as well as dental technology through Henry Schein One. Looking ahead, we are confident that we are well-positioned to deliver continued revenue and profitability growth for Henry Schein's Dental and Medical businesses with long-term organic sales growth goals of one to two percentage points above underlying market growth rates, supplemented by strategic acquisitions."

Dental sales of $1.7 billion decreased 0.2%, consisting of 1.8% growth in local currencies and a 2.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 1.5% and acquisition growth was 0.3%. The 1.5% internal growth in local currencies included 0.6% growth in North America and 2.8% growth internationally.

"Fourth quarter dental consumables internal sales growth in North America of 2.5% in local currencies was impacted by a soft end market, most notably in November and December. We believe we continue to gain market share in the North America dental consumable merchandise market. Dental equipment sales declined by 3.5% in local currencies as we faced a tough prior-year comparison when adjusted internal growth in local currencies exceeded 19%," commented Mr. Bergman. "Internationally, internal sales growth in local currencies increased 3.4% for dental consumables and increased 1.3% for dental equipment."

Animal Health sales of $877.6 million decreased 1.4%, consisting of 0.7% growth in local currencies and a 2.1% decline related to foreign currency exchange. In local currencies, internally generated sales decreased 0.6% and acquisition growth was 1.3%. The decline of 0.6% internal sales in local currencies included a decline of 1.9% in North America and 0.8% growth internationally. On a normalized basis, adjusting for manufacturer switches between direct and agency sales, internal sales growth in local currencies in North America was 2.1%.

"The completed spin-off of our Animal Health business into a new publicly traded company, Covetrus, has created a significant global technology-enabled provider of products and services for the companion animal health market. Going forward, we believe these customers will benefit from a unique platform of enhanced insight, multi-channel client engagement and integrated services," commented Mr. Bergman.

Medical sales of $684.8 million increased 7.5% on an as-reported basis and also for internally generated sales in local currencies. Acquisition growth of 0.1% was offset by a decline of 0.1% in foreign currency exchange.

"We were pleased with robust growth in our Medical sales for the quarter. The North America Medical market continues to experience a rapid evolution as health care providers pursue the best ways to deliver services at lower costs and with better outcomes," remarked Mr. Bergman. "Henry Schein is benefiting from the shift in care from high-cost acute settings to lower-cost sub-acute care sites, such as the physician offices, urgent care sites and ambulatory care centers that we serve. Our track record in serving large group networks with supply chain, education, technology and support services continues to be a solid competitive advantage."

Technology and Value-Added Services sales of $139.1 million increased 21.4%, consisting of 22.1% growth in local currencies and a 0.7% decline related to foreign currency exchange. In local currencies, internally generated sales increased 0.5% and acquisition growth was 21.6%.

"Growth in Technology and Value-Added Services was primarily driven by the formation of Henry Schein One. North America internal sales growth in local currencies was flat, reflecting lower sales from technology support and financing services revenue associated with the decline in dental equipment sales. As we look ahead to 2019, we believe our Henry Schein One dental software solutions will drive growth for this business group as practices leverage tools to enhance practice efficiency and patient communication. International Technology and Value-Added Services internal sales increased 2.8% in local currencies," said Mr. Bergman.

Stock Repurchase Plan
The Company repurchased approximately 997,000 shares of its common stock during the fourth quarter at an average price of $86.14 per share, or approximately $86 million. The impact of the repurchase of shares on fourth quarter 2018 diluted EPS was immaterial. On December 13, 2018, Henry Schein announced that its Board of Directors authorized the repurchase of up to $400 million of shares of the Company's common stock. At fiscal year-end, Henry Schein had approximately $400 million authorized and available for future stock repurchases.

Full Year 2018 Results
Net sales for the full year ended December 29, 2018 were $13.2 billion, an increase of 5.9% compared with 2017. This consisted of 5.2% growth in local currencies and an increase of 0.7% related to foreign currency exchange. In local currencies, internally generated sales increased 3.4% and acquisition growth was 1.8% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for 2018 was $535.9 million, or $3.49 per diluted share, an increase of 31.9% and 35.8%, respectively, compared with 2017. On a non-GAAP basis, net income attributable to Henry Schein, Inc. for 2018 was $635.3 million, or $4.13 per diluted share, an increase of 11.4% and 14.7%, respectively, compared with 2017 on a non-GAAP basis. Non-GAAP results for 2018 and 2017 exclude certain items noted in Exhibit B, which provides a reconciliation of GAAP net income and diluted EPS to non-GAAP net income and diluted EPS.

Restructuring Program
Henry Schein previously disclosed a comprehensive restructuring initiative designed to increase profitability by improving business efficiencies, reducing redundancies and maximizing the Company's infrastructure.

The Company recorded a pretax restructuring charge in the fourth quarter of 2018 of $35.4 million, or $0.17 per diluted share. The charge for the full year was $62.9 million on a pretax basis, or $0.31 per diluted share. These charges primarily include severance pay, facility closing costs, and outside professional and consulting fees directly related to the restructuring. Henry Schein is extending the restructuring initiative into the first half of 2019 as it identifies further cost saving opportunities.

2019 EPS Guidance
Henry Schein today introduced 2019 financial guidance. At this time the Company is not providing GAAP guidance as it is unable to provide an accurate estimate of costs related to restructuring and the Animal Health spin-off on full-year 2019 financial results. Guidance is as follows:

  • 2019 non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc. is expected to be $3.38 to $3.46, reflecting growth of 7% to 9% compared with 2018 non-GAAP diluted EPS from continuing operations of $3.17. The Company's Animal Health business was spun off to shareholders as of February 7, 2019, and that business will be classified as a discontinued operation for all current and prior periods presented.
  • Guidance for 2019 non-GAAP diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any. Guidance also assumes foreign exchange rates that are generally consistent with current levels.

The Company has provided guidance for 2019 diluted EPS on a non-GAAP basis as noted above. A reconciliation to the Company's projected 2019 diluted EPS prepared on a GAAP basis is not provided because the Company is unable to provide such reconciliation for an estimate of restructuring and Animal Health spin-off related costs without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact, and the periods in which the non-GAAP adjustments may be recognized.

The Company's 2019 diluted EPS prepared on a GAAP basis will include the impact of such items as restructuring charges, spin-off expenses, any litigation settlement expenses, and the tax effect of all such items. Management does not believe these items are representative of the Company's underlying business performance. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

To facilitate comparisons against past results, Henry Schein is providing unaudited financial information in Exhibit C for the years 2016, 2017 and 2018, and in Exhibit D for each quarter of 2018 that provide unaudited preliminary estimates of our results of operations (GAAP and non-GAAP) on a continuing operations basis for the periods presented.

Fourth Quarter and Full Year 2018 Conference Call Webcast
The Company will hold a conference call to discuss fourth quarter and full year 2018 financial results today, beginning at 10:00 a.m. Eastern time. Individual investors are invited to listen to the conference call through Henry Schein's website at www.henryschein.com. In addition, a replay will be available beginning shortly after the call has ended.

About Henry Schein, Inc.
Henry Schein, Inc. (Nasdaq: HSIC) is a solutions company for health care professionals powered by a network of people and technology. With more than 18,000 Team Schein Members worldwide, the Company's network of trusted advisors provides more than 1 million customers globally with more than 300 valued solutions that improve operational success and clinical outcomes. Our Business, Clinical, Technology, and Supply Chain solutions help office-based dental and medical practitioners work more efficiently so they can provide quality care more effectively. These solutions also support dental laboratoriesgovernment and institutional health care clinics, as well as other alternate care sites. 

Henry Schein operates through a centralized and automated distribution network, with a selection of more than 120,000 branded products and Henry Schein private-brand products in stock, as well as more than 180,000 additional products available as special-order items.

A Fortune 500® Company and a member of the S&P 500® and the Nasdaq 100® indexes, Henry Schein is headquartered in Melville, N.Y., and has operations or affiliates in 31 countries. The Company's sales from continuing operations reached $9.4 billion in 2018, and have grown at a compound annual rate of approximately 13% since Henry Schein became a public company in 1995.

For more information, visit Henry Schein at www.henryschein.comFacebook.com/HenrySchein and @HenrySchein on Twitter.

Cautionary Note Regarding Forward-Looking Statements and Use of Non-GAAP Financial Information

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.  A full discussion of our operations and financial condition, including factors that may affect our business and future prospects, is contained in documents we have filed with the United States Securities and Exchange Commission, or SEC, and will be contained in all subsequent periodic filings we make with the SEC. These documents identify in detail important risk factors that could cause our actual performance to differ materially from current expectations.

Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: effects of a highly competitive and consolidating market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic conditions; risks associated with currency fluctuations; risks associated with political and economic uncertainty; disruptions in financial markets; volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions, dispositions and joint ventures, including the failure to achieve anticipated synergies/benefits; financial and tax risks associated with acquisitions, dispositions and joint ventures; litigation risks; new or unanticipated litigation developments; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence on third parties for certain technologically advanced components; increased competition by third party online commerce sites; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation. 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.

Included within the press release are non-GAAP financial measures that supplement the Company's Consolidated Statements of Income prepared under generally accepted accounting principles (GAAP).  These non-GAAP financial measures adjust the Company's actual results prepared under GAAP to exclude certain items.  In the schedules attached to this press release, the non-GAAP measures have been reconciled to and should be considered together with the Consolidated Statements of Income. Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.

(TABLES TO FOLLOW)

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)




Three Months Ended


Years Ended



December 29,


December 30,


December 29,


December 30,



2018


2017


2018


2017



(unaudited)


(unaudited)




















Net sales


$

3,375,202


$

3,318,054


$

13,201,995


$

12,461,543

Cost of sales



2,465,342



2,417,098



9,606,911



9,062,440

Gross profit



909,860



900,956



3,595,084



3,399,103

Operating expenses:













Selling, general and administrative



674,738



659,765



2,701,876



2,534,409

Litigation settlements



-



-



38,488



5,325

Transaction costs related to Animal Health spin-off



20,086



-



38,756



-

Restructuring costs



35,401



-



62,912



-

Operating income



179,635



241,191



753,052



859,369

Other income (expense):













Interest income



5,807



4,349



21,236



17,553

Interest expense



(22,320)



(16,598)



(78,786)



(53,654)

Other, net



648



(909)



(154)



(420)

Income before taxes and equity in earnings













of affiliates



163,770



228,033



695,348



822,848

Income taxes



(31,408)



(206,230)



(155,492)



(362,506)

Equity in earnings of affiliates



6,648



4,343



22,270



16,587

Loss on sale of equity investment



-



(17,636)



-



(17,636)

Net income



139,010



8,510



562,126



459,293

Less: Net income attributable to noncontrolling interests



(6,037)



(17,045)



(26,245)



(52,994)

Net income (loss) attributable to Henry Schein, Inc.


$

132,973


$

(8,535)


$

535,881


$

406,299














Earnings (loss) per share attributable to Henry Schein, Inc.:


























Basic


$

0.88


$

(0.06)


$

3.51


$

2.59

Diluted


$

0.87


$

(0.06)


$

3.49


$

2.57














Weighted-average common shares outstanding:













Basic



151,757



155,104



152,656



156,787

Diluted



152,991



155,104



153,707



158,208


Note: Certain prior period amounts have been reclassified to conform to the current period presentation.

 

 

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)




December 29,


December 30,



2018


2017

ASSETS







Current assets:







Cash and cash equivalents


$

80,209


$

174,658

Accounts receivable, net of reserves of $60,533 and $53,832



1,603,711



1,522,807

Inventories, net



1,970,742



1,933,803

Prepaid expenses and other



520,558



454,752

Total current assets



4,175,220



4,086,020

Property and equipment, net



382,398



375,001

Goodwill



2,820,295



2,301,331

Other intangibles, net



584,244



669,641

Investments and other



538,370



432,002

Total assets


$

8,500,527


$

7,863,995








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Accounts payable


$

1,227,209


$

1,153,012

Bank credit lines



951,458



741,653

Current maturities of long-term debt



8,955



16,659

Accrued expenses:







Payroll and related



279,764



272,998

Taxes



172,165



188,873

Other



579,276



455,780

Total current liabilities



3,218,827



2,828,975

Long-term debt



1,003,873



907,756

Deferred income taxes



31,570



50,431

Other liabilities



392,313



420,285

Total liabilities



4,646,583



4,207,447








Redeemable noncontrolling interests



312,156



832,138

Commitments and contingencies














Stockholders' equity:







Preferred stock, $.01 par value, 1,000,000 shares authorized,







   none outstanding



-



-

Common stock, $.01 par value, 480,000,000 shares authorized,







   151,401,668 outstanding on December 29, 2018 and 240,000,000 shares







   authorized, 153,690,146 outstanding on December 30, 2017



1,514



1,537

Retained earnings



3,208,589



2,940,029

Accumulated other comprehensive loss



(248,771)



(130,067)

Total Henry Schein, Inc. stockholders' equity



2,961,332



2,811,499

Noncontrolling interests



580,456



12,911

Total stockholders' equity



3,541,788



2,824,410

Total liabilities, redeemable noncontrolling interests and stockholders' equity


$

8,500,527


$

7,863,995


Note: Certain prior period amounts have been reclassified to conform to the current period presentation

 

 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)




Three Months Ended


Years Ended



December 29,


December 30,


December 29,


December 30,



2018


2017


2018


2017



(unaudited)


(unaudited)




















Cash flows from operating activities:













Net income


$

139,010


$

8,510


$

562,126


$

459,293

Adjustments to reconcile net income to net cash













provided by operating activities:













Depreciation and amortization



52,471



51,794



207,560



193,072

Loss on sale of equity investment



-



17,636



-



17,636

Stock-based compensation expense



2,005



10,307



36,240



42,294

Provision for losses on trade and other













accounts receivable



7,235



2,389



15,105



9,370

Provision for (benefit from) deferred income taxes



(34,931)



(8,115)



(41,213)



485

Equity in earnings of affiliates



(6,648)



(4,343)



(22,270)



(16,587)

Distributions from equity affiliates



5,777



6,331



21,311



23,157

Changes in unrecognized tax benefits



(3,503)



4,335



(650)



(2,318)

Provision for (benefit from) transition tax



(10,000)



140,000



(10,000)



140,000

Other



(1,397)



4,890



(807)



10,921

Changes in operating assets and liabilities,













  net of acquisitions:













Accounts receivable



8,080



66,311



(147,499)



(160,266)

Inventories



(49,484)



(202,395)



(84,784)



(175,059)

Other current assets



(10,285)



(14,926)



(92,059)



(85,759)

Accounts payable and accrued expenses



195,622



155,290



241,646



89,276

Net cash provided by operating activities



293,952



238,014



684,706



545,515














Cash flows from investing activities:













Purchases of fixed assets



(28,811)



(26,186)



(90,637)



(81,501)

Payments related to equity investments and business













acquisitions, net of cash acquired



(14,245)



(29,887)



(61,570)



(288,673)

Proceeds from sale of equity investment



1,000



34,048



1,000



34,048

Repayments from (borrowings for) loan to affiliate



(1,500)



1,500



(25,700)



6,700

Other



(3,041)



(956)



(16,047)



(12,850)

Net cash used in investing activities



(46,597)



(21,481)



(192,954)



(342,276)














Cash flows from financing activities:













Proceeds from (repayments of) bank borrowings



(193,357)



109,391



210,741



302,941

Proceeds from issuance of long-term debt



-



-



115,000



200,440

Debt issuance costs



(106)



(219)



(501)



(1,990)

Principal payments for long-term debt



(421)



(519)



(28,042)



(60,050)

Proceeds from issuance of stock upon exercise













of stock options



-



325



3,076



5,266

Payments for repurchases of common stock



(85,894)



(224,995)



(200,000)



(450,000)

Payments for taxes related to shares withheld for













employee taxes



(120)



(111)



(18,023)



(44,832)

Distributions to noncontrolling stockholders



(1,748)



(5,213)



(17,515)



(29,134)

Acquisitions of noncontrolling interests in subsidiaries



(3,614)



(7,278)



(668,512)



(35,192)

Net cash used in financing activities



(285,260)



(128,619)



(603,776)



(112,551)














Effect of exchange rate changes on cash and













cash equivalents



(1,626)



6,865



17,575



21,589

Net change in cash and cash equivalents



(39,531)



94,779



(94,449)



112,277

Cash and cash equivalents, beginning of period



119,740



79,879



174,658



62,381

Cash and cash equivalents, end of period


$

80,209


$

174,658


$

80,209


$

174,658














Note: Certain prior period amounts have been reclassified to conform to the current period presentation.

 

 

Exhibit A - QTD Sales


Henry Schein, Inc.

2018 Fourth Quarter

Sales Summary

(in thousands)

(unaudited)


Q4 2018 over Q4 2017


Global

Q4 2018


Q4 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















Dental

$

1,673,733


$

1,676,758


-0.2%


-2.0%


1.8%


0.3%


1.5%

















Animal Health


877,608



889,785


-1.4%


-2.1%


0.7%


1.3%


-0.6%

















Medical


684,799



636,920


7.5%


-0.1%


7.6%


0.1%


7.5%

















Total Health Care Distribution


3,236,140



3,203,463


1.0%


-1.6%


2.6%


0.5%


2.1%

















Technology and value-added services


139,062



114,591


21.4%


-0.7%


22.1%


21.6%


0.5%

















Total Global

$

3,375,202


$

3,318,054


1.7%


-1.6%


3.3%


1.2%


2.1%

















North America

Q4 2018


Q4 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















Dental

$

1,036,056


$

1,030,559


0.5%


-0.4%


0.9%


0.3%


0.6%

















Animal Health


440,043



448,675


-1.9%


0.0%


-1.9%


0.0%


-1.9%

















Medical


665,752



617,697


7.8%


0.0%


7.8%


0.1%


7.7%

















Total Health Care Distribution


2,141,851



2,096,931


2.1%


-0.2%


2.3%


0.1%


2.2%

















Technology and value-added services


118,827



94,165


26.2%


-0.1%


26.3%


26.3%


0.0%

















Total North America

$

2,260,678


$

2,191,096


3.2%


-0.1%


3.3%


1.2%


2.1%

















International

Q4 2018


Q4 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















Dental

$

637,677


$

646,199


-1.3%


-4.5%


3.2%


0.4%


2.8%

















Animal Health


437,565



441,110


-0.8%


-4.2%


3.4%


2.6%


0.8%

















Medical


19,047



19,223


-0.9%


-3.0%


2.1%


0.0%


2.1%

















Total Health Care Distribution


1,094,289



1,106,532


-1.1%


-4.3%


3.2%


1.2%


2.0%

















Technology and value-added services


20,235



20,426


-0.9%


-3.7%


2.8%


0.0%


2.8%

















Total International

$

1,114,524


$

1,126,958


-1.1%


-4.3%


3.2%


1.2%


2.0%

 

 

Exhibit A - YTD Sales


Henry Schein, Inc.

Full Year 2018

Sales Summary

(in thousands)

(unaudited)


Full Year 2018 over Full Year 2017


Global

Full Year 2018


Full Year 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local Internal
Growth

















Dental

$

6,348,945


$

6,048,813


5.0%


0.8%


4.2%


1.2%


3.0%

















Animal Health


3,682,639



3,476,635


5.9%


1.3%


4.6%


2.5%


2.1%

















Medical


2,661,166



2,497,994


6.5%


0.1%


6.4%


0.1%


6.3%

















Total Health Care Distribution


12,692,750



12,023,442


5.6%


0.8%


4.8%


1.4%


3.4%

















Technology and value-added services


509,245



438,101


16.2%


0.4%


15.8%


12.3%


3.5%

















Total Global

$

13,201,995


$

12,461,543


5.9%


0.7%


5.2%


1.8%


3.4%

















North America

Full Year 2018


Full Year 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local Internal
Growth

















Dental

$

3,867,118


$

3,700,364


4.5%


0.0%


4.5%


1.2%


3.3%

















Animal Health


1,865,316



1,792,896


4.0%


0.0%


4.0%


2.7%


1.3%

















Medical


2,581,696



2,423,893


6.5%


0.0%


6.5%


0.1%


6.4%

















Total Health Care Distribution


8,314,130



7,917,153


5.0%


0.0%


5.0%


1.2%


3.8%

















Technology and value-added services


426,653



363,391


17.4%


0.0%


17.4%


14.6%


2.8%

















Total North America

$

8,740,783


$

8,280,544


5.6%


0.1%


5.5%


1.8%


3.7%

















International

Full Year 2018


Full Year 2017


Total Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local Internal
Growth

















Dental

$

2,481,827


$

2,348,449


5.7%


1.9%


3.8%


1.2%


2.6%

















Animal Health


1,817,323



1,683,739


7.9%


2.6%


5.3%


2.4%


2.9%

















Medical


79,470



74,101


7.2%


4.9%


2.3%


0.0%


2.3%

















Total Health Care Distribution


4,378,620



4,106,289


6.6%


2.2%


4.4%


1.7%


2.7%

















Technology and value-added services


82,592



74,710


10.6%


2.8%


7.8%


0.7%


7.1%

















Total International

$

4,461,212


$

4,180,999


6.7%


2.3%


4.4%


1.6%


2.8%

 

 

Exhibit B

Henry Schein, Inc.

2018 Fourth Quarter and Full Year 2018

Reconciliation of GAAP results of net income (loss) attributable to Henry Schein, Inc. to

non-GAAP results of net income attributable to Henry Schein, Inc.

(in thousands, except per share data)

(unaudited)




Fourth Quarter



Full Year



2018



2017


% Growth



2018



2017


% Growth

















Net Income (loss) attributable to Henry Schein, Inc.

$

132,973


$

(8,535)


1,658.0%


$

535,881


$

406,299


31.9%

Diluted earnings (loss) attributable to Henry Schein, Inc.

$

0.87


$

(0.06)


1,550.0%


$

3.49


$

2.57


35.8%

Non-GAAP Adjustments
















Restructuring costs - Pre-tax (1)

$

35,401


$





$

62,912


$




Income tax benefit for restructuring costs (1)


(8,850)








(15,728)






Litigation settlements - Pre-Tax (2)










38,488



5,325



Income tax benefit for litigation settlements (2)










(9,622)



(2,130)



Transaction costs related to Animal Health spin-off (3)


20,086








38,756






Income tax benefit for Animal Health transaction costs (3)


(502)








(1,823)






One time tax on reorganization related to HS One (4)










3,914






Transition tax on repatriated foreign earnings (5)





140,000





(10,000)



140,000



Loss on sale of equity investment (6)





17,636








17,636



Deferred tax adjustment (7)





2,952








2,952



International legal entity reorganization (8)


(10,649)








(10,649)






One-time tax charge related to the Animal Health spin-off (9)


3,135








3,135






Total non-GAAP adjustments to Net Income

$

38,621


$

160,588




$

99,383


$

163,783



Non-GAAP adjustments to diluted EPS

$

0.25


$

1.03




$

0.65


$

1.03



















Non-GAAP Net Income attributable to Henry Schein, Inc.

$

171,594


$

152,053


12.9%


$

635,264


$

570,082


11.4%

Non-GAAP diluted EPS attributable to Henry Schein, Inc.

$

1.12


$

0.97


15.5%


$

4.13


$

3.60


14.7%


Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.  Earnings per share numbers may not sum due to rounding.



(1)

Represents Q4 2018 restructuring costs of $35,401, net of $8,850 tax benefit, resulting in an after-tax effect of $26,551 and full year 2018 restructuring costs of $62,912, net of $15,728 tax benefit, resulting in an after-tax effect of $47,184.

(2)

Represents a Q3 2018 pre-tax charge of $38,488 related to a litigation settlement, net of a tax benefit of $9,622, resulting in a net after-tax charge of $28,866 and a Q1 2017 pre-tax charge of $5,325 related to a litigation settlement, net of a tax benefit of $2,130, resulting in a net after-tax charge of $3,195.

(3)

Represents Q4 2018 transaction costs associated with the spin-off of our Animal Health business of $20,086, net of $502 tax benefit, resulting in an after-tax effect of $19,584. For the full year 2018, such transaction costs are $38,756, net of $1,823 tax benefit, resulting in an after-tax effect of $36,933.

(4)

Represents a Q3 2018 one-time-charge of $3,914 to income tax expense as a result of a reorganization of legal entities related to forming Henry Schein One.

(5)

Represents a Q3 2018 net credit of $10,000 related to a change in the estimate of the transition tax on deemed repatriated foreign earnings and a Q4 2017 charge of $140,000 related to the original estimate of the transition tax on deemed repatriated foreign earnings.

(6)

Represents a Q4 2017 loss on divestiture of an equity ownership in E4D.  There was no tax benefit recognized related to this loss.

(7)

Represents Q4 2017 one-time charge of $2,952 to income tax expense for the revaluation of deferred taxes associated with U.S. tax reform legislation.

(8)

Represents a $10,649 effect on income resulting from an income tax credit of $13,852, net of noncontrolling interest of $3,203, in Q4 2018 originating from a legal entity reorganization outside the United States.

(9)

Represents a Q4 2018 one-time charge of $3,135 to income tax expense as a result of a reorganization of legal entities completed in preparation for the Animal Health spin-off.

 

 

Exhibit C


Henry Schein, Inc. (Continuing Operations)

Consolidated Statement of Income (Unaudited)




Year ended








Currency: $000


December 29,
2018


December 30,
2017


December 31,
2016

Net sales

$

9,417,602

$

8,883,438

$

8,218,886

Cost of sales


(6,506,857)


(6,136,776)


(5,612,979)

Gross profit


2,910,745


2,746,662


2,605,907

Operating expenses:







Selling, general and administrative


(2,217,272)


(2,071,575)


(1,975,444)

Litigation settlement costs


(38,488)


(5,325)


-

Restructuring costs


(54,367)


-


(38,622)

Operating income


600,618


669,762


591,841

Other income (expense):







Interest Income


15,489


12,438


8,360

Interest Expense


(76,016)


(51,067)


(29,936)

Other, net


(3,259)


(1,339)


2,871

Income before taxes


536,832


629,794


573,136

Income taxes


(107,431)


(308,974)


(169,311)

Equity in earnings of affiliates


21,036


(2,344)


17,110

Net income


450,437


318,476


420,935

Net income attributable to noncontrolling interest


(19,723)


(25,304)


(19,651)

Net Income Attributable to Continuing Operations -- GAAP

$

430,714

$

293,172

$

401,284








Shares outstanding (000s)


153,707


158,208


163,724








EPS Attributable to Continuing Operations -- GAAP

$

2.80

$

1.85

$

2.45








Non-GAAP adjustments attributable to Continuing Operations:







Restructuring costs (net of $13.6 million tax and $9.7 million tax for
FY18 and FY16, respectively)


40,775




28,967

Litigation settlements (net of $9.6 million tax and $2.1 million tax for
FY18 and FY17, respectively)


28,866


3,195



One-time tax for Henry Schein One legal entity reorganization


3,914





Change in estimate of transition tax on repatriated foreign earnings


(10,000)


140,000



Loss on sale of equity investment




17,636



Deferred tax adjustment resulting from Tax Act




2,952



Tax credit (net of noncontrolling interest) from international legal entity
reorganization


(10,649)





One-time tax for Animal Health legal entity reorganization


3,135












Net Income Attributable to Continuing Operations -- Non-GAAP

$

486,755

$

456,955

$

430,251








EPS Attributable to Continuing Operations -- Non-GAAP

$

3.17

$

2.89

$

2.63

 

 

Exhibit D


Henry Schein, Inc. (Continuing Operations)

Consolidated Statement of Income (Unaudited)



Quarter ended


Year ended








Currency: $000

March 31,
2018

June 30,
2018

September 29,
2018

December 29,
2018


December 29,
2018

Net sales

$

2,273,451

$

2,316,031

$

2,355,564

$

2,472,556


$

9,417,602

Cost of sales


(1,554,320)


(1,597,704)


(1,633,206)


(1,721,627)



(6,506,857)

Gross profit


719,131


718,327


722,358


750,929



2,910,745

Operating expenses:












Selling, general and administrative


(554,213)


(552,723)


(552,051)


(558,285)



(2,217,272)

Litigation settlement costs


-


-


(38,488)


-



(38,488)

Restructuring costs


(2,675)


(8,497)


(8,551)


(34,644)



(54,367)

Operating income


162,243


157,107


123,268


158,000



600,618

Other income (expense):












Interest Income


3,453


3,725


3,928


4,383



15,489

Interest Expense


(16,904)


(17,235)


(20,430)


(21,447)



(76,016)

Other, net


(751)


(434)


(589)


(1,485)



(3,259)

Income before taxes


148,041


143,163


106,177


139,451



536,832

Income taxes


(36,142)


(33,880)


(16,634)


(20,775)



(107,431)

Equity in earnings of affiliates


2,819


5,312


6,698


6,207



21,036

Net income


114,718


114,595


96,241


124,883



450,437

Net income attributable to noncontrolling
interest


(3,183)


(3,955)


(5,477)


(7,108)



(19,723)

Net Income Attributable to Continuing
Operations -- GAAP

$

111,535

$

110,640

$

90,764

$

117,775


$

430,714













Shares outstanding (000s)


154,130


154,189


153,614


152,991



153,707













EPS Attributable to Continuing
Operations -- GAAP

$

0.72

$

0.72

$

0.59

$

0.77


$

2.80













Non-GAAP adjustments attributable to
Continuing Operations: