UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report(Date of earliest event reported) March 2, 2004
HENRY SCHEIN, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-27078 11-3136595
(Commission File Number) (IRS Employer Identification No.)
135 Duryea Road
Melville, New York
(Address of Principal Executive Offices)
11747
(Zip Code)
(631) 843-5500
(Registrant's Telephone Number, Including Area Code)
Item 7. Financial Statements, ProForma Financial Information and Exhibits.
(c) Exhibits
99.1 Press Release issued by Henry Schein, Inc. on March 2, 2004
reporting the financial results for the fourth quarter ended
December 27, 2003 and fiscal year ended December 27, 2003.
Item 12. Results of Operations and Financial Condition.
On March 2, 2004, Henry Schein, Inc. issued a press release reporting the
financial results for the fourth quarter ended December 27, 2003 and fiscal year
ended December 27, 2003. The full text of the press release is attached hereto
as Exhibit 99.1 and is incorporated herein by reference.
The information provided in this Form 8-K, including Exhibit 99.1
attached hereto, is being furnished and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liabilities of that section, nor
shall such information be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Henry Schein, Inc.
(Registrant)
By: /s/ Steven Paladino
------------------------------------
Steven Paladino
Executive Vice President,
Chief Financial Officer and Director
(principal financial officer and
accounting officer)
Dated: March 3, 2004
HENRY SCHEIN
NEWS RELEASE
Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747
FOR: Henry Schein, Inc.
CONTACT: Steven Paladino
Executive Vice President and
Chief Financial Officer
steve.paladino@henryschein.com
(631) 843-5500
Susan Vassallo
Manager, Investor and
Public Relations
susan.vassallo@henryschein.com
FOR IMMEDIATE RELEASE (631) 843-5562
HENRY SCHEIN REPORTS FOURTH QUARTER DILUTED EPS
OF $0.79, UP 18% ON A COMPARABLE BASIS
Net sales increase 27% to $946.9 million;
internal sales growth of 18% in local currencies
MELVILLE, N.Y. - March 2, 2004 - Henry Schein, Inc. (Nasdaq NM: HSIC), the
largest provider of healthcare products and services to office-based
practitioners in the combined North American and European markets, today
reported financial results for the quarter and year ended December 27, 2003.
Net sales for the fourth quarter of 2003 were a record $946.9 million, an
increase of 26.7% from the fourth quarter of 2002. In local currencies, net
sales increased 22.9% including 18.0% internal growth.
Dental sales increased 16.8%, or 15.6% in local currencies (11.6% internal
growth). In local currencies, Dental consumable merchandise sales increased
12.7% (7.4% internal growth) and Dental equipment sales were up 23.8%, all
internally generated.
Medical sales increased 34.7% (29.8% internal growth), International sales
improved 38.3% or 18.0% in local currencies (10.0% internal growth), and
Technology and Value-Added Services sales grew 4.0%.
Net income for the fourth quarter of 2003 was $35.5 million or $0.79 per
diluted share. Both net income and diluted EPS were up approximately 15%, or
approximately 18% on a comparable basis. (See Exhibit B for details.)
"Excellent growth in sales and earnings during the fourth quarter concludes
a year of outstanding financial performance, marking the 14th consecutive
quarter of net income and EPS growth in the high teens to 20% range on a
comparable basis," said Stanley M. Bergman, Chairman, Chief Executive Officer
and President of Henry Schein. "I am extremely pleased to report market share
gains in our Dental, Medical and International Business Groups, with internal
sales growth at a multiple of estimated market growth rates. This internal
growth was complemented by our strategic acquisitions of Damer & Cartwright
Pharmaceutical and American Medical Services, both completed in the fourth
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quarter of 2003, which provide us entree into the high-growth specialty and
oncology pharmaceutical distribution markets. Also, our strategic acquisitions
of Colonial Surgical and Hager Dental, completed in mid-year 2003, expand our
market share in the important glove product category and strengthen our European
operations specifically in the German equipment full service sector,
respectively," continued Mr. Bergman.
Operating margin for the fourth quarter reflects a change in product sales
mix in our Technology and Value Added Services group and the injectable
pharmaceutical component of our Medical group, as well as strategic investments
in expanding our European technology and infrastructure. "Our increasing
presence in the injectable pharmaceutical marketplace expands our product
offerings and brings additional benefits in sales of companion products"
commented Mr. Bergman, "while the European investments will facilitate the
continued success of our International strategy."
For the full year 2003, net sales were $3.35 billion, an increase of 18.7%
from 2002. In local currencies, net sales increased 15.4% including 13.0%
internal growth. Highlighting the full year sales growth were local currency
internal sales growth of 8% for our Dental Group (including 5% growth in
merchandise and 17% growth in equipment sales and service revenue) and 21%
internal growth for our Medical Group. "Sales at our Dental and Medical Groups
were bolstered by a growing number of field sales consultants, a continued
commitment to education and sales training, and our investments in technology.
Medical Group sales were further impacted by our growing presence in the
injectable pharmaceutical distribution marketplace," said Mr. Bergman.
For the year, International local currency internal sales growth of 7% was
highlighted by particular strength in France, Spain, and Austria. "Including
completed and announced acquisitions, our International Group is becoming
increasingly important to our company as our global presence continues to
expand. We continue to expect a mid-year closing for the acquisition of the
demedis/EDH Group, which we announced in early January." Mr. Bergman added.
Net income from continuing operations for the full year 2003 was $139.5
million, up 18.3% (19.5% on a comparable basis) compared with 2002. Diluted EPS
for 2003 was $3.10, up 17.9% (19.3% on a comparable basis) over the prior year.
"This past year also marked a strengthening of our board of directors with
the appointments of Dr. Margaret Hamburg and Dr. Louis Sullivan, both leaders in
the healthcare field. We look forward to benefiting from their valuable insight
and contributions," Mr. Bergman concluded.
The Company reported that under a repurchase program of up to two million
shares of common stock announced on March 12, 2003, during the fourth quarter
51,500 shares were repurchased at an average price of $67.85 per share. The
impact of this share repurchase on fourth quarter diluted EPS was not
significant. Through the close of the fourth quarter, the Company has
repurchased 1,335,000 shares under this initiative.
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2004 EPS Guidance
Henry Schein confirmed 2004 financial guidance as previously announced on
January 8, 2004. Assuming the acquisition of the demedis/EDH Group closes by the
end of the second quarter of 2004, Henry Schein expects full-year 2004 earnings
per diluted share of $3.57 to $3.63. This represents growth of 15% to 17%
compared with 2003 results. The Company noted that this 2004 EPS guidance is for
current operations and the acquisition of the demedis/EDH Group, and does not
include the impact of other potential future acquisitions.
Fourth Quarter Conference Call Webcast
The Company will hold a conference call to discuss fourth quarter financial
results today, beginning at 10 a.m. Eastern Time. Individual investors are
invited to listen to the conference call over the Internet through Henry
Schein's Web site at www.henryschein.com. In addition, a replay will be
available beginning shortly after the call has ended.
About Henry Schein
Henry Schein, Inc. is the largest distributor of healthcare products and
services to office-based practitioners in the combined North American and
European markets. Recognized for its excellent customer service and low prices,
the Company's four business groups--Dental, Medical, International and
Technology--serve more than 425,000 customers worldwide, including dental
practices and laboratories, physician practices and veterinary clinics, as well
as government and other institutions. The Company's sales reached a record $3.4
billion in 2003.
The Company operates through a centralized and automated distribution
network, which provides customers in more than 125 countries with a
comprehensive selection of over 90,000 national and Henry Schein private-brand
products.
Henry Schein also offers a wide range of innovative value-added practice
solutions, including such leading practice management software systems as
DENTRIX(R) and Easy Dental(R) for dental practices, and AVImark(R) for
veterinary clinics, which are installed in over 50,000 practices; and ArubA(R),
Henry Schein's electronic catalog and ordering system.
Headquartered in Melville, N.Y., Henry Schein employs nearly 8,000 people
in 16 countries. For more information, visit the Henry Schein Web site at
www.henryschein.com.
Certain information contained herein includes information that is
forward-looking. The matters referred to in forward-looking statements may be
affected by the risks and uncertainties involved in the Company's business.
These forward-looking statements are qualified in their entirety by the
cautionary statements contained in the Company's Securities and Exchange
Commission filings.
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(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Years Ended
--------------------------- ---------------------------
December 27, December 28, December 27, December 28,
2003 2002 2003 2002
------------ ------------ ------------ ------------
(unaudited) (unaudited)
Net sales .......................................... $ 946,924 $ 747,403 $ 3,353,805 $ 2,825,001
Cost of sales ...................................... 693,176 539,757 2,426,611 2,030,097
----------- ----------- ----------- -----------
Gross profit ................................ 253,748 207,646 927,194 794,904
Operating expenses:
Selling, general and administrative ............ 194,664 157,849 693,475 598,635
Merger, integration and restructuring costs .... -- (734) -- (734)
----------- ----------- ----------- -----------
Operating income ............................ 59,084 50,531 233,719 197,003
Other income (expense) (1):
Interest income ................................ 2,236 2,990 8,746 10,446
Interest expense ............................... (4,171) (3,978) (18,311) (17,960)
Other, net ..................................... 367 (77) 1,622 940
----------- ----------- ----------- -----------
Income before taxes, minority interest,
equity in earnings of affiliates and loss
on sale of discontinued operation ......... 57,516 49,466 225,776 190,429
Taxes on income from continuing operations ......... (21,396) (17,982) (84,378) (70,510)
Minority interest in net income of subsidiaries .... (833) (753) (2,807) (2,591)
Equity in earnings of affiliates ................... 255 232 931 659
----------- ----------- ----------- -----------
Net income from continuing operations .............. 35,542 30,963 139,522 117,987
Loss on sale of discontinued operation,
net of tax ...................................... -- -- (2,012) --
----------- ----------- ----------- -----------
Net income ......................................... $ 35,542 $ 30,963 $ 137,510 $ 117,987
=========== =========== =========== ===========
Net income from continuing operations per
common share:
Basic .......................................... $ 0.81 $ 0.70 $ 3.19 $ 2.71
=========== =========== =========== ===========
Diluted ........................................ $ 0.79 $ 0.69 $ 3.10 $ 2.63
=========== =========== =========== ===========
Loss on sale of discontinued operation, net
of tax per common share:
Basic .......................................... $ -- $ -- $ (0.04) $ --
=========== =========== =========== ===========
Diluted ........................................ $ -- $ -- $ (0.04) $ --
=========== =========== =========== ===========
Net income per common share:
Basic .......................................... $ 0.81 $ 0.70 $ 3.15 $ 2.71
=========== =========== =========== ===========
Diluted ........................................ $ 0.79 $ 0.69 $ 3.06 $ 2.63
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic .......................................... 43,717 43,956 43,709 43,489
=========== =========== =========== ===========
Diluted ........................................ 45,045 45,101 44,988 44,872
=========== =========== =========== ===========
(1) Reflects elimination of intercompany interest income and interest expense
for the three months and twelve months ended December 27, 2003 that was not
eliminated in our press release issued March 2, 2004. This elimination had
no effect on any other item on the consolidated statements of income
including net income or earnings per share.
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 27, December 28,
2003 2002
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 157,351 $ 200,651
Marketable securities ........................................ 3,012 31,209
Accounts receivable, net of reserves of $43,203 and $36,200 .. 467,085 368,263
Inventories, net ............................................. 385,846 323,080
Deferred income taxes ........................................ 30,559 29,919
Prepaid expenses and other ................................... 112,631 74,407
----------- -----------
Total current assets ................................. 1,156,484 1,027,529
Property and equipment, net ...................................... 154,205 142,532
Goodwill ......................................................... 398,888 302,687
Other intangibles, net ........................................... 37,551 7,661
Investments and other ............................................ 72,242 77,643
----------- -----------
Total assets ......................................... $ 1,819,370 $ 1,558,052
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 278,163 $ 243,166
Bank credit lines ............................................ 6,059 4,790
Current maturities of long-term debt ......................... 3,253 2,662
Accruals:
Payroll and related expenses .............................. 68,214 53,954
Taxes ..................................................... 45,969 32,196
Other expenses ............................................ 117,530 86,562
----------- -----------
Total current liabilities ............................ 519,188 423,330
Long-term debt ................................................... 247,100 242,561
Other liabilities ................................................ 37,432 24,196
Minority interest ................................................ 11,532 6,748
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 authorized,
none outstanding .......................................... -- --
Common stock, $.01 par value, 120,000,000 authorized,
43,761,973 and 44,041,591 outstanding .................... 438 440
Additional paid-in capital .................................... 445,118 436,554
Retained earnings ............................................. 533,654 430,389
Treasury stock, at cost, 0 and 62,479 shares .................. -- (1,156)
Accumulated other comprehensive income (loss) ................. 24,999 (4,794)
Deferred compensation ......................................... (91) (216)
----------- -----------
Total stockholders' equity ........................... 1,004,118 861,217
----------- -----------
Total liabilities and stockholders' equity ........... $ 1,819,370 $ 1,558,052
=========== ===========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Years Ended
--------------------------- ---------------------------
December 27, December 28, December 27, December 28,
2003 2002 2002 2003
------------ ------------ ------------ ------------
(unaudited) (unaudited)
Cash flows from operating activities of continuing
operations:
Net income ..................................................... $ 35,542 $ 30,963 $ 137,510 $ 117,987
Loss on sale of discontinued operation, net of tax ....... -- -- 2,012 --
--------- --------- --------- ---------
Net income from continuing operations .......................... 35,542 30,963 139,522 117,987
Adjustments to reconcile net income to net cash
provided by operating activities of continuing operations:
Depreciation and amortization .................................. 10,887 8,186 36,843 28,272
Provision for losses and allowances on trade receivables ....... 2,174 3,848 6,548 8,962
Stock issued to ESOP trust ..................................... -- -- 2,300 1,340
Provision for deferred income taxes ............................ (1,438) 2,373 5,524 226
Undistributed earnings of affiliates ........................... (255) (232) (931) (659)
Minority interest in net income of subsidiaries ................ 833 753 2,807 2,591
Other .......................................................... 2,107 176 2,005 145
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable ...................................... 46,130 46,244 (69,543) (6,714)
Inventories, net ......................................... (1,325) (4,939) (28,781) (23,075)
Other current assets ..................................... (21,850) (9,783) (16,957) (18,445)
Accounts payable and accruals ............................ 37,947 (8,570) 49,506 24,039
--------- --------- --------- ---------
Net cash provided by operating activities
of continuing operations ....................................... 110,752 69,019 128,843 134,669
--------- --------- --------- ---------
Cash flows from investing activities:
Purchases of capital expenditures .............................. (9,933) (11,283) (38,978) (47,543)
Payments for business acquisitions, net of cash acquired ....... (50,383) (1,337) (118,180) (36,224)
Purchases of marketable securities ............................. (528) (4,918) (39,667) (55,211)
Proceeds from sales of marketable securities ................... 20,515 -- 40,619 --
Proceeds from maturities of marketable securities .............. 900 -- 39,030 --
Other, including discontinued operation ........................ (275) (733) (946) (3,780)
--------- --------- --------- ---------
Net cash used in investing activities .............................. (39,704) (18,271) (118,122) (142,758)
--------- --------- --------- ---------
Cash flows from financing activities:
Principal payments on long-term debt ........................... (1,481) (553) (8,667) (14,941)
Proceeds from issuance of stock upon exercise
of stock options ............................................ 3,970 1,369 22,348 34,122
Net (payments on) proceeds from bank borrowings ................ (862) (1,349) (180) 394
Payments for repurchases of common stock ....................... (4,027) -- (61,754) --
Other .......................................................... (4) 1,865 (122) (892)
--------- --------- --------- ---------
Net cash (used in) provided by financing activities ................ (2,404) 1,332 (48,375) 18,683
--------- --------- --------- ---------
Net change in cash and cash equivalents ............................ 68,644 52,080 (37,654) 10,594
Effect of exchange rate changes on cash and cash
equivalents ..................................................... (4,150) (728) (5,646) (3,310)
Cash and cash equivalents, beginning of period ..................... 92,857 149,299 200,651 193,367
--------- --------- --------- ---------
Cash and cash equivalents, end of period ........................... $ 157,351 $ 200,651 $ 157,351 $ 200,651
========= ========= ========= =========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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Exhibit A
HENRY SCHEIN, INC.
2003 Fourth Quarter and Full Year
Details of "Comparable Basis" Growth Comparison
Net Sales by Category
(in thousands)
(unaudited)
Fourth Quarter % Full Year %
2003 2002 Growth 2003 2002 Growth
Net Sales As Reported
- ----------------------------------------------------------------------------------------------------------------
Dental $ 379,494 $ 324,991 16.8% $1,364,812 $1,227,273 11.2%
Medical 380,175 282,322 34.7% 1,338,084 1,093,956 22.3%
International 167,447 121,043 38.3% 576,628 437,046 31.9%
Technology 19,808 19,047 4.0% 74,281 66,726 11.3%
--------- --------- ---------- ----------
Total $ 946,924 $ 747,403 26.7% $3,353,805 $2,825,001 18.7%
- ----------------------------------------------------------------------------------------------------------------
Add: Technology Sales Methodology (1)
Dental -- -- -- $ 1,449
Medical -- -- -- --
International -- -- -- --
Technology -- -- -- 2,031
----------
Total -- -- -- 3,480
Net Sales Comparable Basis
- ----------------------------------------------------------------------------------------------------------------
Dental $ 379,494 $ 324,991 16.8% $1,364,812 $1,228,722 11.1%
Medical 380,175 282,322 34.7% 1,338,084 1,093,956 22.3%
International 167,447 121,043 38.3% 576,628 437,046 31.9%
Technology 19,808 19,047 4.0% 74,281 68,757 8.0%
--------- --------- ---------- ----------
Total $ 946,924 $ 747,403 26.7% $3,353,805 $2,828,481 18.6%
- ----------------------------------------------------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative, MarketOne, effective
at the beginning of the third quarter of 2002, certain technology and
equipment products are being sold directly to end-user customers rather
than through resellers. This had no impact on net income since the increase
in net sales was directly offset by an increase in commission expense.
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Exhibit B
HENRY SCHEIN, INC.
2003 Fourth Quarter and Full Year
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
Fourth Quarter % Full Year %
2003 2002 Growth 2003 2002 Growth
As Reported
- ------------------------------------------------------------------------------------------------------------------------
Net Sales $ 946,924 $ 747,403 26.7% $3,353,805 $2,825,001 18.7%
Operating Income 59,084 50,531 16.9% 233,719 197,003 18.6%
Margin 6.2% 6.8% -52 bp 7.0% 7.0% 0 bp
Net Income from Continuing Operations $ 35,542 $ 30,963 14.8% $ 139,522 $ 117,987 18.3%
Diluted EPS from Continuing Operations 0.79 0.69 14.5% 3.10 2.63 17.9%
Net Income 35,542 30,963 14.8% 137,510 117,987 16.5%
Diluted EPS 0.79 0.69 14.5% 3.06 2.63 16.3%
- ------------------------------------------------------------------------------------------------------------------------
Add: Technology Sales Methodology (1)
Net Sales -- -- -- $ 3,480
Operating Income -- -- -- --
Net Income from Continuing Operations -- -- -- --
Diluted EPS from Continuing Operations -- -- -- --
Net Income -- -- -- --
Diluted EPS -- -- -- --
Subtract: Gains on Real Estate Transactions (2)
Net Sales -- -- -- --
Operating Income -- -- -- --
Net Income from Continuing Operations -- -- $ (454) $ (890)
Diluted EPS from Continuing Operations -- -- (0.01) (0.02)
Net Income -- -- (454) (890)
Diluted EPS -- -- (0.01) (0.02)
Subtract: Restructuring Accrual Reversal (3)
Net Sales -- -- -- --
Operating Income -- $ (734) -- $ (734)
Net Income from Continuing Operations -- (734) -- (734)
Diluted EPS from Continuing Operations -- (0.02) -- (0.02)
Net Income -- (734) -- (734)
Diluted EPS -- (0.02) -- (0.02)
Comparable Basis
- ------------------------------------------------------------------------------------------------------------------------
Net Sales $ 946,924 $ 747,403 26.7% $3,353,805 $2,828,481 18.6%
Operating Income 59,084 49,797 18.6% 233,719 196,269 19.1%
Margin 6.2% 6.7% -42 bp 7.0% 6.9% 3 bp
Net Income from Continuing Operations $ 35,542 $ 30,229 17.6% $ 139,068 $ 116,363 19.5%
Diluted EPS from Continuing Operations 0.79 0.67 17.9% 3.09 2.59 19.3%
Net Income 35,542 30,229 17.6% 137,056 116,363 17.8%
Diluted EPS 0.79 0.67 17.9% 3.05 2.59 17.8%
- ------------------------------------------------------------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative, MarketOne, effective
at the beginning of the third quarter of 2002, certain technology and
equipment products are being sold directly to end-user customers rather
than through resellers. This had no impact on net income since the increase
in net sales was directly offset by an increase in commission expense.
(2) In the third quarter of 2002, there was a $1.4 million pre-tax ($890
thousand after-tax) gain primarily related to the settlement of a real
estate transaction. In the first quarter of 2003, there was a $726 thousand
pre-tax ($454 thousand after-tax) gain also related to a real estate
transaction. Both gains were included in the "Other, net" line on the
income statements.
(3) In the fourth quarter of 2002, we recorded a net credit related to a
reversal of previously accrued merger, integration and restructuring costs.
###