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): July 27, 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 12. Results of Operations and Financial Condition.
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.
On July 27, 2004, Henry Schein, Inc. issued a press release reporting the
financial results for the second quarter ended June 26, 2004 and the six months
ended June 26, 2004. The full text of the press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
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 and accounting
officer)
Dated: July 27, 2004
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press Release issued by Henry Schein, Inc. on July 27, 2004
reporting the financial results for the second quarter ended
June 26, 2004 and the six months ended June 26, 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
steven.paladino@henryschein.com
(631) 843-5500
Susan Vassallo
Director, Investor and
Public Relations
susan.vassallo@henryschein.com
FOR IMMEDIATE RELEASE (631) 843-5562
HENRY SCHEIN REPORTS RECORD SECOND QUARTER
DILUTED EPS OF $0.86, UP 16%
Net sales increase 22% to a Q2 record of $945.7 million
MELVILLE, N.Y. - July 27, 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 ended June 26, 2004.
Net sales for the second quarter of 2004 were a record $945.7 million, an
increase of 21.8% from the second quarter of 2003 (See Exhibit A for details of
sales growth). This increase includes 20.3% local currency growth (12.4%
internally generated and 7.9% from acquisitions net of a divestiture) and 1.5%
related to foreign currency exchange. Record second quarter net income was $38.7
million, an increase of 17.9% compared with the second quarter of 2003. Earnings
per diluted share of $0.86 represents an increase of 16.2% compared with the
second quarter of 2003.
"Growth in net sales during the second quarter was outstanding, and
reflects meaningful market-share gains in our Dental, Medical and International
business groups through strong internal growth complemented by strategic
acquisitions," said Stanley M. Bergman, Chairman, Chief Executive Officer and
President of Henry Schein.
Dental sales increased by 17.1% including 16.9% growth in local currencies
(13.2% internally generated and 3.7% from acquisitions) and 0.2% related to
foreign currency exchange. In local currencies, Dental consumable merchandise
sales increased 16.9% (13.1% internal growth) and Dental equipment sales and
service revenues were up 16.8% (13.2% internal growth).
"Our Dental Group's impressive internal growth rate was two to three times
our estimate for market growth and was enhanced by the successful introductions
of the Colgate and Pentron product lines," explained Mr. Bergman.
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Medical sales increased 24.0% (14.3% internal growth and 9.7% acquisition
growth), Technology and Value-Added Services sales grew 9.7% (6.0% internal
growth and 3.7% acquisition growth) and International sales improved 30.2%
including 22.2% in local currencies (7.2% internally generated and 15.0% from
acquisitions net of a divestiture) and 8.0% due to foreign currency exchange.
"Second quarter sales by our Medical Group continued to reflect total and
internal growth significantly above market growth rates. Technology and
Value-Added Services sales gains were highlighted by strong performance at our
electronic services business, including dental claims processing. International
Group internal sales gains in local currencies solidly exceeded our estimate for
market growth, with particular strength in France, Spain and the United Kingdom.
A highlight of the quarter was completing the acquisition of the demedis
full-service businesses in Germany and the Benelux countries, and the KRUGG
direct-marketing dental and veterinary business in Italy. We look forward to
further international success, particularly in Europe, as we continue to execute
our full-service dental strategy across the continent, " Mr. Bergman added.
"We are excited about our recent entry into the large, fast growing and
highly profitable market for dental implants through Camlog GmbH. This
excellent, new product line is consistent with our goal to bring our customers
an increasing number of value-added products and services," noted Mr. Bergman.
Second quarter operating margin decline reflects a continuation of the
change in product sales mix experienced during the first quarter. This change in
sales mix was primarily in the injectable pharmaceutical component of the
Company's Medical Group as well as, to a lesser extent, within the Technology
and Value-Added Services Group.
Cash flow from operations for the second quarter of 2004 was $81.0 million,
compared with $55.1 million for the second quarter of 2003.
Stock Repurchase Plan
The Company reported that under a repurchase program of up to two million
shares of common stock announced in March 2003, 406,600 shares were repurchased
during the second quarter of 2004 at an average price of $68.72 per share and,
to date, the entire two million shares have been repurchased at an average price
of $53.87. The impact of this share repurchase on second quarter diluted EPS was
not meaningful. On June 21, 2004 the Company reported that, in addition to the
previously announced share repurchase program, its Board of Directors has
authorized the repurchase of up to $100 million worth of shares of the Company's
common stock.
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2004 EPS Guidance
Henry Schein reaffirmed previous financial guidance for 2004. The Company
expects full-year 2004 earnings per diluted share of $3.55 to $3.61. This
represents growth of 15% to 17% compared with 2003 results from continuing
operations. The Company noted that this 2004 EPS guidance is for current
operations including completed acquisitions, and does not include the impact of
potential future acquisitions.
Second Quarter Conference Call Webcast
The Company will hold a conference call to discuss second 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, a Fortune 500(R) company, is recognized for its excellent
customer service and highly competitive prices. The Company's four business
groups - Dental, Medical, International and Technology - serve more than 450,000
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 more than 9,000
people and has operations in 18 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)
(unaudited)
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net sales ......................................... $ 945,690 $ 776,166 $ 1,832,321 $ 1,514,163
Cost of sales ..................................... 693,975 555,637 1,349,779 1,092,217
----------- ----------- ----------- -----------
Gross profit ............................... 251,715 220,529 482,542 421,946
Operating expenses:
Selling, general and administrative ........... 188,130 164,499 372,657 323,711
----------- ----------- ----------- -----------
Operating income ........................... 63,585 56,030 109,885 98,235
Other income (expense):
Interest income ............................... 2,451 1,921 4,667 4,313
Interest expense .............................. (3,114) (4,595) (6,116) (9,328)
Other, net .................................... 180 242 331 927
----------- ----------- ----------- -----------
Income before taxes, minority interest
and equity in earnings of affiliates ..... 63,102 53,598 108,767 94,147
Taxes on income ................................... (23,412) (20,207) (40,444) (35,413)
Minority interest in net income of subsidiaries ... (1,254) (874) (1,779) (1,611)
Equity in earnings of affiliates .................. 300 338 585 498
----------- ----------- ----------- -----------
Net income ........................................ $ 38,736 $ 32,855 $ 67,129 $ 57,621
=========== =========== =========== ===========
Earnings per common share:
Basic ......................................... $ 0.88 $ 0.76 $ 1.53 $ 1.32
=========== =========== =========== ===========
Diluted ....................................... $ 0.86 $ 0.74 $ 1.49 $ 1.29
=========== =========== =========== ===========
Weighted-average common shares outstanding:
Basic ......................................... 43,914 43,500 43,850 43,754
=========== =========== =========== ===========
Diluted ....................................... 45,040 44,549 45,073 44,780
=========== =========== =========== ===========
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 26, December 27,
2004 2003
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 106,337 $ 157,351
Accounts receivable, net of reserves of $45,970 and $43,203 .... 518,808 467,085
Inventories .................................................... 444,979 385,846
Deferred income taxes .......................................... 30,108 30,559
Prepaid expenses and other ..................................... 146,442 115,643
----------- -----------
Total current assets ................................... 1,246,674 1,156,484
Property and equipment, net ........................................ 158,036 154,205
Goodwill ........................................................... 570,420 398,888
Other intangibles, net ............................................. 99,861 37,551
Investments and other .............................................. 125,282 72,242
----------- -----------
Total assets ........................................... $ 2,200,273 $ 1,819,370
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $ 287,714 $ 278,163
Bank credit lines .............................................. 85,033 6,059
Current maturities of long-term debt ........................... 3,114 3,253
Accrued expenses:
Payroll and related ......................................... 89,633 68,214
Taxes ....................................................... 58,565 45,969
Other ....................................................... 125,077 117,530
----------- -----------
Total current liabilities .............................. 649,136 519,188
Long-term debt ..................................................... 420,877 247,100
Deferred income taxes .............................................. 54,627 32,938
Other liabilities .................................................. 13,816 4,494
Minority interest .................................................. 13,263 11,532
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,
43,737,962 and 43,761,973 outstanding ...................... 437 438
Additional paid-in capital ...................................... 453,383 445,118
Retained earnings ............................................... 575,123 533,654
Accumulated other comprehensive income .......................... 20,125 24,999
Deferred compensation ........................................... (514) (91)
----------- -----------
Total stockholders' equity ............................. 1,048,554 1,004,118
----------- -----------
Total liabilities and stockholders' equity ............. $ 2,200,273 $ 1,819,370
=========== ===========
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)
(unaudited)
Three Months Ended Six Months Ended
------------------------ ------------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Cash flows from operating activities:
Net income ............................................... $ 38,736 $ 32,855 $ 67,129 $ 57,621
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ..................... 10,342 8,571 19,984 17,115
Provision for losses and allowances
on trade receivables ........................... 744 1,660 1,153 3,820
Provision for deferred income taxes ............... 2,831 1,825 3,396 3,893
Undistributed earnings of affiliates .............. (300) (338) (585) (498)
Minority interest in net income of subsidiaries ... 1,254 874 1,779 1,611
Other ............................................. (56) (161) 88 (246)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable ......................... (8,118) (20,416) (14,933) (33,578)
Inventories ................................. 1,959 13,305 (21,150) 4,481
Other current assets ........................ (8,600) 1,690 9,738 12,527
Accounts payable and accrued expenses ....... 42,253 15,251 (5,856) (25,715)
--------- --------- --------- ---------
Net cash provided by operating activities .................... 81,045 55,116 60,743 41,031
--------- --------- --------- ---------
Cash flows from investing activities:
Purchases of capital expenditures ........................ (8,135) (7,813) (13,789) (21,321)
Payments for business acquisitions,
net of cash acquired ................................... (88,441) (64,473) (135,807) (66,754)
Payments related to pending business
acquisitions ............................................ (13,375) -- (56,441) --
Purchases of marketable securities ....................... -- (17,094) -- (21,195)
Proceeds from sales of marketable securities ............. -- -- 14,472 --
Proceeds from maturities of marketable securities ........ -- 2,100 -- 28,530
Other .................................................... 840 3,348 (5,417) 1,861
--------- --------- --------- ---------
Net cash used in investing activities ........................ (109,111) (83,932) (196,982) (78,879)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from bank borrowings ............................ 180,000 -- 180,000 --
Repayment of debt assumed in business
acquisitions ............................................ (113,779) -- (113,779) --
Principal payments on long-term debt ..................... (1,448) (4,700) (1,710) (4,954)
Proceeds from issuance of stock upon exercise
of stock options ........................................ 5,195 6,729 17,878 11,329
Net proceeds from (payments on) short-term
bank borrowings ......................................... 26,278 735 50,695 (46,152)
Payments for repurchases of common stock ................. (34,910) (39,669) (45,964) (940)
Other .................................................... (160) (158) (506) (93)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities .......... 61,176 (37,063) 86,614 (40,810)
--------- --------- --------- ---------
Net change in cash and cash equivalents ...................... 33,110 (65,879) (49,625) (78,658)
Effect of exchange rate changes on cash and cash
equivalents ............................................... 141 45 (1,389) (832)
Cash and cash equivalents, beginning of period ............... 73,086 186,995 157,351 200,651
--------- --------- --------- ---------
Cash and cash equivalents, end of period ..................... $ 106,337 $ 121,161 $ 106,337 $ 121,161
========= ========= ========= =========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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Exhibit A
Henry Schein, Inc.
2004 Second Quarter and Year to Date
Sales Growth Rate Summary
(unaudited)
Q2 2004 over Q2 2003
--------------------
Consolidated Dental Medical International Technology
------------ ------------ ------------ ------------ ------------
Internal 12.4% 13.2% 14.3% 7.2% 6.0%
Acquisitions 9.0% 3.7% 9.7% 20.4% 3.7%
Divestiture -1.1% -- -- -5.4% --
------------ ------------ ------------ ------------ ------------
Local Currency Sales Growth 20.3% 16.9% 24.0% 22.2% 9.7%
Foreign Currency Exchange 1.5% 0.2% -- 8.0% --
------------ ------------ ------------ ------------ ------------
Total Sales Growth 21.8% 17.1% 24.0% 30.2% 9.7%
============ ============ ============ ============ ============
YTD Q2 2004 over YTD Q2 2003
----------------------------
Consolidated Dental Medical International Technology
------------ ------------ ------------ ------------ ------------
Internal 11.0% 10.7% 13.3% 7.3% 7.3%
Acquisitions 8.5% 4.4% 10.0% 16.0% 3.7%
Divestiture -1.1% -- -- -5.9% --
------------ ------------ ------------ ------------ ------------
Local Currency Sales Growth 18.4% 15.1% 23.3% 17.4% 11.0%
Foreign Currency Exchange 2.6% 0.5% -- 13.1% --
------------ ------------ ------------ ------------ ------------
Total Sales Growth 21.0% 15.6% 23.3% 30.5% 11.0%
============ ============ ============ ============ ============
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Exhibit B
HENRY SCHEIN, INC.
2004 Second Quarter and Year to Date
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
Second Quarter % Year to Date %
2004 2003 Growth 2004 2003 Growth
As Reported
- -------------------------------------------------------------------------------------------
Net Income $ 38,736 $ 32,855 17.9% $ 67,129 $ 57,621 16.5%
Diluted EPS 0.86 0.74 16.2% 1.49 1.29 15.5%
- -------------------------------------------------------------------------------------------
Subtract: Gain on Real Estate Transaction (1)
Net Income -- -- -- $ (454)
Diluted EPS -- -- -- (0.01)
Comparable Basis
- -------------------------------------------------------------------------------------------
Net Income $ 38,736 $ 32,855 17.9% $ 67,129 $ 57,167 17.4%
Diluted EPS 0.86 0.74 16.2% 1.49 1.28 16.4%
- -------------------------------------------------------------------------------------------
(1) In the first quarter of 2003, there was a $726 thousand pre-tax gain ($454
thousand after-tax) related to a real estate transaction. This gain was
included in the "Other, net" line on the consolidated income statement.
Use of Non-GAAP Measures
The above 'Comparable Basis' net income and diluted earnings per share are
financial measures that are not calculated and presented in accordance with
accounting principles generally accepted in the United States ("GAAP"). The
above table reconciles net income and diluted earnings per share, the Company's
most directly comparable financial measures calculated and presented in
accordance with GAAP, to 'Comparable Basis' net income and diluted earnings per
share as adjusted to eliminate the effect of a real estate transaction gain
which is not part of our ongoing healthcare distribution and technology
operations.
Management eliminates the effect of such items to assist in evaluating the
underlying operational performance of the Company's business segments over the
periods presented. Management believes that this presentation is appropriate and
facilitates such an evaluation by management, investors and analysts. In
addition, management uses these measures for budgeting and planning purposes.
These measures should be considered supplemental to, and not a substitute for or
superior to, financial measures calculated in accordance with GAAP.
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