UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 26, 2005
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HENRY SCHEIN, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27078 11-3136595
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(State or other jurisdiction (Commission File IRS Employer
of incorporation) Number) (Identification No.)
135 DURYEA ROAD, MELVILLE, NEW YORK 11747
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (631) 843-5500
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 26, 2005, Henry Schein, Inc. issued a press release reporting
the financial results for the three and six months ended June 25, 2005. The full
text of the press release is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
Item 9.01. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibit 99.1 - Press Release dated July 26, 2005.
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 hereunto duly authorized.
HENRY SCHEIN, INC.
By: /s/ Steven Paladino
------------------------------------
Steven Paladino
Executive Vice President,
Chief Financial Officer and Director
(principal financial and accounting
officer)
Date: July 26, 2005
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release dated July 26, 2005.
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, Corporate Communications
susan.vassallo@henryschein.com
FOR IMMEDIATE RELEASE (631) 843-5562
HENRY SCHEIN REPORTS SECOND QUARTER RESULTS
Net sales increase 21% to $1.14 billion
MELVILLE, N.Y. - July 26, 2005 - 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 25, 2005.
Net sales for the second quarter of 2005 were $1.14 billion, an
increase of 20.7% from the second quarter of 2004 (See Exhibit A for details of
sales growth). This increase includes 19.1% local currency growth (3.4%
internally generated and 15.7% from acquisitions) and 1.6% related to foreign
currency exchange. Second quarter net income was $40.0 million, an increase of
3.2% compared with the second quarter of 2004. Earnings per diluted share of
$0.45 represents an increase of 4.7% compared with the prior-year quarter.
"Our financial results reflect second quarter records for sales, net
income and earnings per share," said Stanley M. Bergman, Chairman and Chief
Executive Officer of Henry Schein. "During the quarter we also made
significant progress toward effectively integrating acquired businesses into
Henry Schein, including Ash Temple in Canada and the Demedis businesses in
Germany, Austria and the Benelux countries."
Net income and earnings per share growth for the second quarter reflect
the impact of certain one-time items including integration costs of recent
acquisitions, seasonality changes, and expenses associated with relocation to a
new corporate headquarters in Melville, New York, as discussed in the Company's
first quarter earnings release.
For the quarter, Dental sales increased 18.8%, including 18.2% growth
in local currencies (10.1% internally generated and 8.1% from acquisitions) and
0.6% related to foreign currency exchange. Of the 18.2% local currency growth,
Dental consumable merchandise sales increased 15.5% (8.1% internal growth, 7.4%
acquisition growth) and Dental equipment sales and service revenues were up
28.9% (17.6% internal growth, 11.3% acquisition growth). Sales of the Colgate
products introduced in May 2004 accounted for about 1.1% of the Dental
consumable merchandise internal growth in local currencies.
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"We are pleased to report double-digit sales growth in our Dental
Group, which we have achieved consistently for the past eight quarters. We
continue to gain market share due to the investments we have made in field sales
force training, strategic acquisitions and innovations such as our Privileges
customer loyalty program in combination with our industry leading Dental
practice management software and clinical applications, all supported by our
initiatives in e-commerce and information technology," explained Mr. Bergman.
"Earlier this month we held our annual national Dental sales meeting,
which is the largest such gathering in the industry and serves as an important
showcase for our vendor partners while providing training and motivation for our
field sales consultants," he added. "This year's record attendance included
approximately 1,250 Team Schein Members and more than 135 vendors attracting, we
believe, the largest number of dental vendors to a company sponsored event in
the industry."
Medical sales declined 2.9% during the second quarter (internal sales
down 3.9%, offset by acquisition growth of 1.0%), reflecting the continued
impact of shedding lower margin and nominally profitable pharmaceutical and
veterinary sales.
"Medical Group sales during the second quarter reflect the further
implementation of strategic decisions made in the preceding quarter in support
of the Company's operating margin expansion goals," commented Mr. Bergman. "Our
core physician and alternate care business however, improved by 8.3% without the
impact of lower margin pharmaceutical products, of which 6.5% was internal
growth."
"In June, our Medical Group held its annual national sales meeting with
more than 800 attendees. This was our largest Medical conference ever," he
added. "We continue to strengthen the value-added partnership dynamic between
our Medical field sales consultants and their physician customers, similar to
the success we have had in our Dental Group."
International sales increased 71.2%, including 64.0% growth in local
currencies (2.4% internally generated and 61.6% from acquisitions) and 7.2% due
to foreign currency exchange. "International Group internal sales growth in
local currencies improved compared with the first quarter of 2005 as the
government reimbursement issues in Germany have begun to ease. Total
International Group sales growth was once again significantly bolstered by the
acquisition of the Demedis full-service businesses in Germany, Austria and the
Benelux countries, and the KRUGG dental business in Italy," Mr. Bergman
commented.
"Also contributing to second quarter International growth was the
acquisition of Halas Dental and Shalfoon Bros., which strengthened our position
in the Australia and New Zealand dental products markets, and we are now the
leading dental distributor in those markets. We continue to be very excited
about our prospects in the International arena as well as in North America," he
added.
Technology and Value-Added Services sales grew 9.5%, including 9.2%
growth in local currencies and 0.3% related to foreign currency exchange.
"Growth in Technology and Value-Added Services revenues was fueled by
particularly strong performance in the electronic services business,"
Mr. Bergman explained.
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Stock Repurchase Plan
In June 2004, the Company announced a share repurchase program of up to
$100 million worth of common stock, under which 121,800 shares were repurchased
during the second quarter at an average price of $38.58 per share. The impact
of the repurchase of shares under this program on second quarter diluted EPS was
immaterial. To date under this program, 1,736,110 shares have been repurchased
at an average price of $32.98 per share.
2005 EPS Guidance
On June 15, 2005, Chiron Corporation (Nasdaq NM: CHIR) revised its
production estimates for Fluvirin(R) influenza virus vaccine for the 2005-2006
influenza season, and now estimates it will produce between 18 million and 26
million doses. Henry Schein remains cautiously optimistic about Chiron's
ability to re-enter the U.S. market for influenza vaccine in time for the 2005
season. However, at this time there is continued uncertainty about the number of
doses of influenza vaccine that Chiron will produce, how many will be available
in the United States and the amount Henry Schein will receive, if any, for 2005.
In addition, although end user pricing for influenza vaccine is expected to
increase this year, there remains uncertainty regarding specific pricing, and
Henry Schein has not yet announced influenza vaccine pricing to its customers
for 2005. Since we do not have reasonable certainty with respect to these
matters, we are not providing specific guidance at this time should Chiron
re-enter the influenza vaccine market in 2005.
However, Henry Schein affirms that it expects 2005 diluted EPS in the
range of $1.73 to $1.77 if Chiron is unable to re-enter the influenza vaccine
market this year. This represents mid-teens percentage diluted EPS growth over
2004, excluding the $0.10 one-time charge in 2004 related to the Fluvirin
contract. This guidance assumes no significant increase in sales of influenza
vaccine products from other manufacturers over 2004 levels. This guidance does
not include the impact of expensing of stock options (per Financial Accounting
Standards No. 123(R)), which has been delayed until 2006. The Company notes
that all 2005 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.
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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 475,000
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 $4.1 billion in 2004. The Company operates
through a centralized and automated distribution network, which provides
customers in more than 125 countries with a comprehensive selection of over
160,000 national and Henry Schein private-brand products.
Henry Schein also offers a wide range of innovative value-added
practice solutions for healthcare professionals, such as ArubA(R), the Company's
electronic catalog and ordering system. Our leading practice-management software
solutions have been installed in more than 50,000 practices -- DENTRIX(R) and
Easy Dental(R) for dental practices, and AVImark(R) for veterinary clinics.
Headquartered in Melville, N.Y., Henry Schein employs nearly 11,000
people and has operations in 19 countries. For more information, visit the
Henry Schein Web site at www.henryschein.com.
In accordance with the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company provides the following
cautionary remarks regarding important factors which, 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 the
Company's 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 the Company's operations and financial
condition, including factors that may affect its business and future prospects,
is contained in documents the Company has filed with the SEC and will be
contained in all subsequent periodic filings made with the SEC. These documents
identify in detail important risk factors that could cause the Company's 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: competitive factors; changes in the healthcare industry; changes in
government regulations that affect the Company; financial risks associated with
the Company's international operations; fluctuations in quarterly earnings;
transitional challenges associated with acquisitions; regulatory and litigation
risks; the dependence on the Company's continued product development, technical
support and successful marketing in the technology segment; the Company's
dependence upon sales personnel and key customers; the Company's dependence on
its senior management; the Company's dependence on third parties for the
manufacture and supply of its products; possible increases in the cost of
shipping the Company's products or other service trouble with the Company's
third-party shippers; risks from rapid technological change; and risks from
potential increases in variable interest rates.
The order in which these factors appear should not be construed to
indicate their relative importance or priority. The Company cautions that these
factors may not be exhaustive and that many of these factors are beyond the
Company's ability to control or predict. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results. The
Company undertakes no duty and has no obligation to update forward-looking
statements.
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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 25, June 26, June 25, June 26,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Net sales ............................................ $ 1,141,620 $ 945,690 $ 2,243,030 $ 1,832,321
Cost of sales ........................................ 817,208 693,975 1,612,431 1,349,779
----------- ----------- ----------- -----------
Gross profit .................................. 324,412 251,715 630,599 482,542
Operating expenses:
Selling, general and administrative .............. 253,948 188,130 502,930 372,657
----------- ----------- ----------- -----------
Operating income .............................. 70,464 63,585 127,669 109,885
Other income (expense):
Interest income .................................. 1,980 2,451 4,008 4,667
Interest expense ................................. (5,227) (3,114) (11,598) (6,116)
Other, net ....................................... (228) 180 (569) 331
----------- ----------- ----------- -----------
Income before taxes, minority interest
and equity in earnings of affiliates ......... 66,989 63,102 119,510 108,767
Taxes on income ...................................... (24,787) (23,412) (44,219) (40,444)
Minority interest in net income of subsidiaries....... (2,476) (1,254) (2,527) (1,779)
Equity in earnings of affiliates ..................... 248 300 435 585
----------- ----------- ----------- -----------
Net income ........................................... $ 39,974 $ 38,736 $ 73,199 $ 67,129
=========== =========== =========== ===========
Earnings per share:
Basic ............................................ $ 0.46 $ 0.44 $ 0.84 $ 0.77
=========== =========== =========== ===========
Diluted .......................................... $ 0.45 $ 0.43 $ 0.82 $ 0.74
=========== =========== =========== ===========
Weighted-average common shares outstanding:
Basic ............................................ 86,927 87,829 86,818 87,699
=========== =========== =========== ===========
Diluted .......................................... 89,115 90,080 88,981 90,147
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 25, December 25,
2005 2004
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 187,108 $ 186,621
Accounts receivable, net of reserves of $45,198 and $44,852 ................ 580,699 554,666
Inventories ................................................................ 494,323 486,494
Deferred income taxes ...................................................... 30,633 28,795
Prepaid expenses and other ................................................. 127,101 174,167
----------- -----------
Total current assets ............................................... 1,419,864 1,430,743
Property and equipment, net .................................................... 184,287 176,103
Goodwill ....................................................................... 629,096 627,215
Other intangibles, net ......................................................... 131,784 129,285
Investments and other .......................................................... 74,857 70,324
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Total assets ....................................................... $ 2,439,888 $ 2,433,670
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 322,256 $ 367,213
Bank credit lines .......................................................... 4,302 5,969
Current maturities of long-term debt ....................................... 8,356 3,906
Accrued expenses:
Payroll and related ..................................................... 91,515 89,431
Taxes ................................................................... 56,884 70,970
Other ................................................................... 140,158 156,410
----------- -----------
Total current liabilities .......................................... 623,471 693,899
Long-term debt ................................................................. 518,954 525,682
Deferred income taxes ........................................................... 72,198 66,599
Other liabilities .............................................................. 48,514 28,999
Minority interest .............................................................. 14,367 12,438
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding ........................................................ -- --
Common stock, $.01 par value, 240,000,000 shares authorized,
87,127,631 and 86,650,428 outstanding ................................... 871 867
Additional paid-in capital .................................................. 464,660 445,573
Retained earnings ........................................................... 676,105 615,265
Accumulated other comprehensive income ...................................... 21,136 44,785
Deferred compensation ....................................................... (388) (437)
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Total stockholders' equity ......................................... 1,162,384 1,106,053
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Total liabilities and stockholders' equity ......................... $ 2,439,888 $ 2,433,670
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Periods Ended June 25, 2005 and June 26, 2004
Three Months Ended
--------------------------
2005 2004
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Cash flows from operating activities:
Net income ................................................................. $ 39,974 $ 38,736
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................................... 15,111 10,342
Provision for (recovery of) losses on trade and
other accounts receivable ..................................... 158 744
Deferred income taxes ............................................... 1,619 2,831
Undistributed earnings of affiliates ................................ (248) (300)
Minority interest in net income of subsidiaries ..................... 2,476 1,254
Other ............................................................... (1,079) (56)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... (19,500) (8,118)
Inventories ................................................... 12,653 1,959
Other current assets .......................................... 1,225 (12,697)
Accounts payable and accrued expenses ......................... 35,521 37,362
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Net cash provided by operating activities....................................... 87,910 72,057
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Cash flows from investing activities:
Purchases of fixed assets ................................................. (13,895) (8,135)
Payments for business acquisitions, net of cash acquired .................. (15,706) (88,441)
Payments related to pending business acquisitions ......................... -- (13,375)
Proceeds from sales of marketable securities .............................. -- --
Net proceeds from (payments for) foreign exchange
forward contract settlements.............................................. 19,993 3,362
Other...................................................................... 415 5,302
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Net cash used in investing activities .......................................... (9,193) (101,287)
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Cash flows from financing activities:
Net proceeds from (payments for) bank borrowings .......................... (1,599) 180,000
Repayments of debt assumed in business acquisitions........................ -- (113,779)
Principal payments for long-term debt ..................................... (1,869) (1,448)
Payments for establishing new credit facility.............................. (650) --
Proceeds from issuance of stock upon exercise of stock options ............ 8,109 5,195
Net proceeds from short-term bank borrowings............................... -- 26,278
Payments for repurchases of common stock .................................. (4,699) (34,910)
Other ..................................................................... (158) (160)
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Net cash provided by (used in) financing activities ............................ (866) 61,176
----------- -----------
Net change in cash and cash equivalents ........................................ 77,851 31,946
Effect of exchange rate changes on cash and cash equivalents ................... (5,484) 1,305
Cash and cash equivalents, beginning of period ................................. 114,741 73,086
----------- -----------
Cash and cash equivalents, end of period ....................................... $ 187,108 $ 106,337
=========== ===========
Six Months Ended
--------------------------
2005 2004
----------- -----------
Cash flows from operating activities:
Net income ................................................................. $ 73,199 $ 67,129
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................................... 28,348 19,984
Provision for (recovery of) losses on trade and
other accounts receivable ..................................... (50) 1,153
Deferred income taxes ............................................... 4,639 3,396
Undistributed earnings of affiliates ................................ (435) (585)
Minority interest in net income of subsidiaries ..................... 2,527 1,779
Other ............................................................... 10 88
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... (5,066) (14,933)
Inventories ................................................... 21,263 (21,150)
Other current assets .......................................... 34,015 9,698
Accounts payable and accrued expenses ......................... (85,835) (7,943)
----------- -----------
Net cash provided by operating activities....................................... 72,615 58,616
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets ................................................. (22,033) (13,789)
Payments for business acquisitions, net of cash acquired .................. (54,752) (135,807)
Payments related to pending business acquisitions ......................... -- (56,441)
Proceeds from sales of marketable securities .............................. -- 14,472
Net proceeds from (payments for) foreign exchange
forward contract settlements.............................................. 15,515 (683)
Other...................................................................... (1,887) (3,305)
----------- -----------
Net cash used in investing activities .......................................... (63,157) (195,553)
----------- -----------
Cash flows from financing activities:
Net proceeds from (payments for) bank borrowings .......................... (1,416) 180,000
Repayments of debt assumed in business acquisitions........................ -- (113,779)
Principal payments for long-term debt ..................................... (2,565) (1,710)
Payments for establishing new credit facility.............................. (650) --
Proceeds from issuance of stock upon exercise of stock options ............ 19,053 17,878
Net proceeds from short-term bank borrowings............................... -- 50,695
Payments for repurchases of common stock .................................. (21,009) (45,964)
Other ..................................................................... (559) (506)
----------- -----------
Net cash provided by (used in) financing activities ............................ (7,146) 86,614
----------- -----------
Net change in cash and cash equivalents ........................................ 2,312 (50,323)
Effect of exchange rate changes on cash and cash equivalents ................... (1,825) (691)
Cash and cash equivalents, beginning of period ................................. 186,621 157,351
----------- -----------
Cash and cash equivalents, end of period ....................................... $ 187,108 $ 106,337
=========== ===========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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Exhibit A
Henry Schein, Inc.
2005 Second Quarter
Sales Growth Rate Summary
(unaudited)
Q2 2005 over Q2 2004
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Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal 3.4% 10.1% -3.9% 2.4% 9.2%
Acquisitions 15.7% 8.1% 1.0% 61.6% --
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 19.1% 18.2% -2.9% 64.0% 9.2%
Foreign Currency Exchange 1.6% 0.6% -- 7.2% 0.3%
------------ ----------- ------------ ------------- ------------
Total Sales Growth 20.7% 18.8% -2.9% 71.2% 9.5%
============ =========== ============ ============= ============
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