falseNASDAQ0001000228 0001000228 2020-02-20 2020-02-20

 

 

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): February 20, 2020

 

 

 

Henry Schein, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction

of incorporation)

 

0-27078

(Commission

File Number)

 

11-3136595

(IRS Employer

Identification No.)

 

 

 

 

 

 

135 Duryea Road, Melville, New York

(Address of principal executive offices)

 

 

11747

(Zip Code)

 

 

 

Registrant’s telephone number, including area code: (631) 843-5500

 

(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:

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $.01 per share

 

HSIC

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


 

Item 2.02. Results of Operations and Financial Condition.

On February 20, 2020, Henry Schein, Inc. issued a press release reporting the financial results for the three months and full year ended December 28, 2019. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information in this Item 2.02 and the press release attached as Exhibit 99.1 are considered furnished to the Securities and Exchange Commission and are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

Item 9.01. Financial Statements and Exhibits

(a) Not applicable.

 

(b) Not applicable.

 

(c) Not applicable.

 

(d) Exhibit 99.1 – Press Release dated February 20, 2020.

 

Exhibit 104 - Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

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 and

Chief Financial Officer

(principal financial and accounting

officer)

February 20, 2020

 

 

 

 

 

FOR IMMEDIATE RELEASE

 

 

HENRY SCHEIN REPORTS RECORD FOURTH QUARTER 2019 FINANCIAL RESULTS

FROM CONTINUING OPERATIONS

 

·         GAAP diluted EPS from continuing operations of $2.25, up 192.2% over prior-year quarter, reflecting, among other things, a net gain on sale of equity investments

·         Non-GAAP diluted EPS from continuing operations of $0.97, up 9.0% over prior-year quarter

·         Affirms guidance range for 2020 non-GAAP diluted EPS from continuing operations of $3.65 to $3.75

 

MELVILLE, N.Y., February 20, 2020 – 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 from continuing operations. Results from continuing operations exclude contributions from Henry Schein’s former Animal Health business, which was spun off in February 2019 to form a new publicly traded company, Covetrus (Nasdaq: CVET).

Net sales from continuing operations for the quarter ended December 28, 2019, were $2.7 billion, an increase of 7.9% compared with the fourth quarter of 2018. The 7.9% increase included 8.9% growth in local currencies and a 1.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 5.8% and growth from acquisitions was 3.1%. Excluding sales to Covetrus under the transition services agreement entered into in connection with the Animal Health spin-off, internal sales growth in local currencies was approximately 4.9% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. from continuing operations for the fourth quarter of 2019 was $330.6 million, or $2.25 per diluted share, compared with prior-year net income from continuing operations of $117.8 million, or $0.77 per diluted share. Fourth quarter 2019 results include a net gain on sale of equity investments of approximately $186.8 million, or $1.27 per diluted share, as well as a reduction in estimated restructuring costs of $1.1 million, or $0.01 per diluted share. Excluding these items, non-GAAP net income from continuing operations for the fourth quarter of 2019 was $143.0 million, or $0.97 per diluted share, compared with non-GAAP net income from continuing operations of $136.2 million, or $0.89 per diluted share, for the fourth quarter of 2018. Exhibit B provides a reconciliation of GAAP net income and diluted EPS from continuing operations to non-GAAP net income and diluted EPS from continuing operations.

 

 

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“As our fourth quarter 2019 results attest, Henry Schein delivered an excellent conclusion to a transformative year in which we strategically positioned our business for continued success in the markets we serve,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “Strong revenue growth in our Medical and Technology and Value-Added Services businesses were a particular highlight, along with sales of North America Dental Equipment and International Consumable Merchandise. We continue to execute on our strategic plan and remain optimistic about the Company’s prospects in 2020 and beyond.”

Dental sales of $1.7 billion increased 2.9%, consisting of 4.2% growth in local currencies and a 1.3% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.5% and growth from acquisitions was 1.7%.

“North America dental consumable merchandise internal sales in local currencies were essentially flat in the fourth quarter, reflecting soft end-market demand from independent dental practices. Dental equipment internal sales increased by a healthy 7.2% in local currencies, primarily driven by high-tech equipment sales,” commented Mr. Bergman.

“Internationally, dental consumable merchandise internal sales in local currencies had growth of 4.4%, driven by broad-based strength across most of our business. Dental equipment internal sales in local currencies decreased by 0.8%, as we faced a difficult prior-year comparison when internal sales growth in local currencies was 7.5%. The sales decrease was also due in part to soft macroeconomic conditions in Australia,” said Mr. Bergman.

Medical sales of $788.7 million increased 15.2%, with no impact from foreign currency exchange. Internally generated sales increased 10.2% and growth from acquisitions was 5.0%, primarily driven by the contribution from North American Rescue.

“We believe our Medical business continued to gain market share, with internal sales in local currencies up double-digits in the fourth quarter,” remarked Mr. Bergman. “Our focus on providing a wide array of solutions, services, and support to a broad spectrum of health care customers has enabled the Company to grow its presence in the Medical market and positions Henry Schein well for the future.” 

Technology and Value-Added Services sales from continuing operations of $137.1 million increased 20.0%, consisting of 20.3% growth in local currencies and a 0.3% decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.4% and growth from acquisitions was 10.9%, primarily driven by the contribution from Lighthouse 360.

“North America Technology and Value-Added Services internal sales growth in local currencies was a strong 8.7% as the business benefited from service revenue associated with a product migration, as well as from solid financial services revenue. Internationally, Technology and Value-Added Services internal sales increased 13.4% in local currencies, led by strong financial services revenue,” said Mr. Bergman.

“Henry Schein One continues to advance its platform of delivering integrated technology to enhance dental practice management and allow dentists to focus on delivering quality patient care,” Mr. Bergman continued.

 

 

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Stock Repurchase Plan

The Company repurchased approximately 2.9 million shares of its common stock during the fourth quarter at an average price of $69.05 per share, for a total of $200 million. The impact of the repurchase of shares on fourth quarter 2019 diluted EPS was immaterial.

For fiscal year 2019, the Company repurchased approximately 8.2 million shares for a total of $525 million. At fiscal year-end, Henry Schein had $275 million authorized and available for future stock repurchases.

 

2019 Financial Results

Net sales from continuing operations for the year ended December 28, 2019, were $10.0 billion, an increase of 6.0% compared with 2018. This consisted of 7.7% growth in local currencies and a decrease of 1.7% related to foreign currency exchange. In local currencies, internally generated sales increased 4.4% and acquisition growth was 3.3%. Excluding sales to Covetrus, internal sales growth was 3.5% in local currencies.

Net income attributable to Henry Schein, Inc. from continuing operations for 2019 was $700.7 million, or $4.69 per diluted share, an increase of 62.7% and 67.5%, respectively, compared with 2018. Non-GAAP net income from continuing operations for 2019 was $523.6 million, or $3.51 per diluted share, an increase of 7.6% and 10.7%, respectively, compared with 2018. Non-GAAP results for 2019 and 2018 exclude certain items noted in Exhibit B, which provides a reconciliation of GAAP net income and diluted EPS from continuing operations to non-GAAP net income and diluted EPS from continuing operations.

 

2020 EPS Guidance

Henry Schein today affirmed 2020 non-GAAP diluted EPS guidance. At this time, the Company is not providing 2020 GAAP diluted EPS guidance as it is unable to provide an accurate estimate of expenses related to a planned restructuring intended to mitigate stranded costs associated with the spin-off of its Animal Health business and to drive operating efficiencies. Financial guidance is as follows:

 

·         2020 non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc. is expected to be $3.65 to $3.75, reflecting growth of 4% to 7% compared with 2019 non-GAAP diluted EPS from continuing operations of $3.51.

 

·         Guidance assumes no significant supply chain disruption related to the Novel Coronavirus Disease 2019 (COVID-19) for certain infection control products.

 

·         Guidance for 2020 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, and restructuring expenses. Guidance also assumes foreign exchange rates that are generally consistent with current levels, and that end markets remain stable and are consistent with current market conditions.

 

 

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Adjustments to Projected 2020 Diluted EPS

The Company has provided guidance for 2020 diluted EPS from continuing operations on a non-GAAP basis, as noted above. A reconciliation to the Company’s projected 2020 diluted EPS from continuing operations prepared on a GAAP basis is not provided because the Company is unable to provide an estimate of costs related to a restructuring to mitigate stranded costs and drive additional operating efficiencies and the corresponding tax effect that will be included in the Company’s 2020 diluted EPS from continuing operations prepared on a GAAP basis without unreasonable effort. The inability to provide these reconciliations is due to the uncertainty and inherent difficulty of predicting the occurrence, the financial impact, and the periods in which the non-GAAP adjustments may be recognized. 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.

 

Fourth Quarter and Full Year 2019 Conference Call Webcast

The Company will hold a conference call to discuss fourth quarter and full year 2019 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 by visiting www.henryschein.com/IRwebcasts. 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 19,000 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 laboratories, government and institutional healthcare 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® index, Henry Schein is headquartered in Melville, N.Y., and has operations or affiliates in 31 countries. The Company's sales from continuing operations reached $10.0 billion in 2019, and have grown at a compound annual rate of approximately 13 percent since Henry Schein became a public company in 1995.

For more information, visit Henry Schein at www.henryschein.com, Facebook.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

 

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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 include EPS guidance and are generally identified by the use of such terms as "may," "could," "expect," "intend," "believe," "plan," "estimate," "forecast," "project," "anticipate," “to be,” “to make” or other comparable terms.  A full discussion of our operations and financial condition, status of litigation matters, 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; increased competition by third party online commerce sites; 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; risks associated with the Novel Coronavirus Disease 2019 (COVID-19); risk associated with the United Kingdom’s withdrawal from the European Union; 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 and the status of litigation matters; 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; 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.

 

CONTACTS:   Investors 

Steven Paladino

Executive Vice President and Chief Financial Officer

steven.paladino@henryschein.com

(631) 843-5500

 

Carolynne Borders

Vice President, Investor Relations

carolynne.borders@henryschein.com

(631) 390-8105

             

Media

Ann Marie Gothard

Vice President, Corporate Media Relations

annmarie.gothard@henryschein.com

(631) 390-8169                                               (TABLES TO FOLLOW)

 

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HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

 

 

 

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,668,941

 

$

2,472,556

 

$

9,985,803

 

$

9,417,603

Cost of sales

 

 

1,858,343

 

 

1,721,625

 

 

6,894,917

 

 

6,506,856

 

 

Gross profit

 

 

810,598

 

 

750,931

 

 

3,090,886

 

 

2,910,747

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

615,323

 

 

558,285

 

 

2,357,920

 

 

2,217,273

 

Litigation settlements

 

 

-

 

 

-

 

 

-

 

 

38,488

 

Restructuring costs (credits)

 

 

(1,059)

 

 

34,644

 

 

14,705

 

 

54,367

 

 

Operating income

 

 

196,334

 

 

158,002

 

 

718,261

 

 

600,619

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

3,389

 

 

4,386

 

 

15,757

 

 

15,491

 

Interest expense

 

 

(9,333)

 

 

(21,447)

 

 

(50,792)

 

 

(76,016)

 

Other, net

 

 

(907)

 

 

(1,485)

 

 

(2,919)

 

 

(3,258)

 

 

Income from continuing operations before taxes, equity in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

earnings of affiliates and noncontrolling interests

 

189,483

 

 

139,456

 

 

680,307

 

 

536,836

Income taxes

 

 

(42,189)

 

 

(20,778)

 

 

(159,515)

 

 

(107,432)

Equity in earnings of affiliates

 

 

3,129

 

 

6,208

 

 

17,900

 

 

21,037

Net gain on sale of equity investments

 

 

186,769

 

 

-

 

 

186,769

 

 

-

Net income from continuing operations

 

 

337,192

 

 

124,886

 

 

725,461

 

 

450,441

Income (loss) from discontinued operations

 

 

(747)

 

 

14,124

 

 

(6,323)

 

 

111,685

Net Income

 

 

336,445

 

 

139,010

 

 

719,138

 

 

562,126

 

Less: Net income attributable to noncontrolling interests

 

 

(6,583)

 

 

(7,109)

 

 

(24,770)

 

 

(19,724)

 

Less: Net (income) loss attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

from discontinued operations

 

 

-

 

 

1,072

 

 

366

 

 

(6,521)

Net income attributable to Henry Schein, Inc.

 

$

329,862

 

$

132,973

 

$

694,734

 

$

535,881

Amounts attributable to Henry Schein Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

330,609

 

$

117,777

 

$

700,691

 

$

430,717

Discontinued operations

 

 

(747)

 

 

15,196

 

 

(5,957)

 

 

105,164

Net income attributable to Henry Schein, Inc.

 

$

329,862

 

$

132,973

 

$

694,734

 

$

535,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations attributable to Henry Schein, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.27

 

$

0.78

 

$

4.74

 

$

2.82

 

Diluted

 

$

2.25

 

$

0.77

 

$

4.69

 

$

2.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.01)

 

$

0.10

 

$

(0.04)

 

$

0.69

 

Diluted

 

$

(0.01)

 

$

0.10

 

$

(0.04)

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Henry Schein, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.27

 

$

0.88

 

$

4.70

 

$

3.51

 

Diluted

 

$

2.24

 

$

0.87

 

$

4.65

 

$

3.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

145,404

 

 

151,757

 

 

147,817

 

 

152,656

 

Diluted

 

 

147,078

 

 

152,991

 

 

149,257

 

 

153,707

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

 

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HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 28,

 

December 29,

 

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

106,097

 

$

56,885

 

Accounts receivable, net of reserves of $60,002 and $53,121

 

 

1,246,246

 

 

1,168,776

 

Inventories, net

 

 

1,428,799

 

 

1,415,512

 

Prepaid expenses and other

 

 

445,360

 

 

451,033

 

Assets of discontinued operations

 

 

-

 

 

1,083,014

 

 

 

Total current assets

 

 

3,226,502

 

 

4,175,220

Property and equipment, net

 

 

329,645

 

 

314,221

Operating lease right-of-use assets, net

 

 

231,662

 

 

-

Goodwill

 

 

2,462,495

 

 

2,081,029

Other intangibles, net

 

 

572,878

 

 

376,031

Investments and other

 

 

327,919

 

 

420,367

Assets of discontinued operations

 

 

-

 

 

1,133,659

 

 

 

Total assets

 

$

7,151,101

 

$

8,500,527

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

880,266

 

$

785,756

 

Bank credit lines

 

 

23,975

 

 

951,458

 

Current maturities of long-term debt

 

 

109,849

 

 

8,280

 

Operating lease liabilities

 

 

65,349

 

 

-

 

Liabilities of discontinued operations

 

 

-

 

 

577,607

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related

 

 

265,206

 

 

242,876

 

 

Taxes

 

 

165,171

 

 

154,613

 

 

Other

 

 

528,553

 

 

498,237

 

 

 

Total current liabilities

 

 

2,038,369

 

 

3,218,827

Long-term debt

 

 

622,908

 

 

980,344

Deferred income taxes

 

 

64,989

 

 

27,218

Operating lease liabilities

 

 

176,267

 

 

-

Other liabilities

 

 

331,173

 

 

357,741

Liabilities of discontinued operations

 

-

 

 

62,453

 

 

 

Total liabilities

 

 

3,233,706

 

 

4,646,583

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

287,258

 

 

219,724

Redeemable noncontrolling interests from discontinued operations

 

 

-

 

 

92,432

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,

 

 

 

 

 

 

 

 

143,353,459 outstanding on December 28, 2019 and

 

 

 

 

 

 

 

 

151,401,668 outstanding on December 29, 2018

 

 

1,434

 

 

1,514

 

Additional paid-in capital

 

 

47,768

 

 

-

 

Retained earnings

 

 

3,116,215

 

 

3,208,589

 

Accumulated other comprehensive loss

 

 

(167,373)

 

 

(248,771)

 

 

Total Henry Schein, Inc. stockholders' equity

 

 

2,998,044

 

 

2,961,332

 

Noncontrolling interests

 

 

632,093

 

 

580,456

 

 

 

Total stockholders' equity

 

 

3,630,137

 

 

3,541,788

 

 

Total liabilities, redeemable noncontrolling interests and stockholders' equity

 

$

7,151,101

 

$

8,500,527

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

-7- 

more 


 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

 

 

 

Three Months Ended

 

Years Ended

 

 

 

 

 

 

December 28,

 

December 29,

 

December 28,

 

December 29,

 

 

 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

336,445

 

$

139,010

 

$

719,138

 

$

562,126

 

Income (loss) from discontinued operations

 

 

(747)

 

 

14,124

 

 

(6,323)

 

 

111,685

 

Income from continuing operations

 

 

337,192

 

 

124,886

 

 

725,461

 

 

450,441

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

48,732

 

 

36,700

 

 

184,942

 

 

143,630

 

 

 

Net gain on sale of equity investments

 

 

(250,167)

 

 

-

 

 

(250,167)

 

 

-

 

 

 

Stock-based compensation expense

 

 

11,810

 

 

2,051

 

 

44,920

 

 

32,621

 

 

 

Provision for losses on trade and other accounts receivable

 

 

5,036

 

 

6,984

 

 

12,612

 

 

14,384

 

 

 

Benefit from deferred income taxes

 

 

(589)

 

 

(32,239)

 

 

(4,057)

 

 

(36,007)

 

 

 

Equity in earnings of affiliates

 

 

(3,129)

 

 

(6,208)

 

 

(17,900)

 

 

(21,037)

 

 

 

Distributions from equity affiliates

 

 

3,556

 

 

5,801

 

 

71,469

 

 

20,386

 

 

 

Changes in unrecognized tax benefits

 

 

(1,594)

 

 

(4,022)

 

 

1,941

 

 

(1,169)

 

 

 

Benefit from transition tax

 

 

-

 

 

(10,000)

 

 

-

 

 

(10,000)

 

 

 

Other

 

 

7,806

 

 

(134)

 

 

5,684

 

 

369

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

42,695

 

 

13,816

 

 

(72,689)

 

 

(127,201)

 

 

 

 

Inventories

 

 

(60,391)

 

 

18,752

 

 

14,702

 

 

(41,042)

 

 

 

 

Other current assets

 

 

13,057

 

 

(106,789)

 

 

(57,291)

 

 

(165,645)

 

 

 

 

Accounts payable and accrued expenses

 

 

141,284

 

 

131,962

 

 

160,851

 

 

191,225

Net cash provided by operating activities from continuing operations

 

 

295,298

 

 

181,560

 

 

820,478

 

 

450,955

Net cash provided by (used in) operating activities from discontinued operations

 

 

(2,738)

 

 

112,392

 

 

(166,391)

 

 

233,751

Net cash provided by operating activities

 

 

292,560

 

 

293,952

 

 

654,087

 

 

684,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

 

(27,263)

 

 

(21,964)

 

 

(76,219)

 

 

(71,283)

 

Payments from (for equity) investments and business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

acquisitions, net of cash acquired

 

 

1,214

 

 

(14,244)

 

 

(655,879)

 

 

(53,240)

 

Proceeds from sale of equity investments

 

 

296,751

 

 

1,000

 

 

307,251

 

 

1,000

 

Repayments from (borrowings for) loan to affiliate

 

 

265

 

 

(1,500)

 

 

16,713

 

 

(25,700)

 

Other

 

 

(1,927)

 

 

(3,544)

 

 

(14,175)

 

 

(15,101)

Net cash provided by (used in) investing activities from continuing operations

 

 

269,040

 

 

(40,252)

 

 

(422,309)

 

 

(164,324)

Net cash used in investing activities from discontinued operations

 

 

-

 

 

(6,345)

 

 

(2,064)

 

 

(28,630)

Net cash provided by (used in) investing activities

 

 

269,040

 

 

(46,597)

 

 

(424,373)

 

 

(192,954)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in bank borrowings

 

 

(84,066)

 

 

(193,357)

 

 

(927,912)

 

 

210,741

 

Proceeds from issuance of long-term debt

 

 

-

 

 

-

 

 

741

 

 

115,000

 

Principal payments for long-term debt

 

 

(250,692)

 

 

(252)

 

 

(260,944)

 

 

(24,735)

 

Debt issuance costs

 

 

-

 

 

(106)

 

 

(391)

 

 

(501)

 

Proceeds from issuance of stock upon exercise of stock options

 

 

-

 

 

-

 

 

34

 

 

3,076

 

Payments for repurchases of common stock

 

 

(200,000)

 

 

(85,894)

 

 

(525,000)

 

 

(200,000)

 

Payments for taxes related to shares withheld for employee taxes

 

 

(63)

 

 

(120)

 

 

(10,814)

 

 

(18,023)

 

Distribution received related to Animal Health Spin-off

 

 

-

 

 

-

 

 

1,120,000

 

 

-

 

Proceeds related to Animal Health Share Sale

 

 

-

 

 

-

 

 

361,090

 

 

-

 

Proceeds from (distributions to) noncontrolling shareholders

 

 

(1,931)

 

 

(1,209)

 

 

51,498

 

 

(7,351)

 

Acquisitions of noncontrolling interests in subsidiaries

 

 

-

 

 

(1,402)

 

 

(2,358)

 

 

(287,635)

 

Proceeds from (payments to) Henry Schein Animal Health Business

 

 

(2,738)

 

 

100,061

 

 

(169,295)

 

 

(192,745)

Net cash used in financing activities from continuing operations

 

 

(539,490)

 

 

(182,279)

 

 

(363,351)

 

 

(402,173)

Net cash provided by (used in) financing activities from discontinued operations

 

 

2,738

 

 

(102,981)

 

 

147,371

 

 

(201,603)

Net cash used in financing activities

 

 

(536,752)

 

 

(285,260)

 

 

(215,980)

 

 

(603,776)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash & cash equivalents continuing operations

 

 

5,993

 

 

(80)

 

 

14,394

 

 

14,425

Effect of exchange rate changes on cash & cash equivalents discontinued operations

 

 

-

 

 

(1,546)

 

 

(2,240)

 

 

3,150

Net change in cash and cash equivalents from continuing operations

 

 

30,841

 

 

(41,051)

 

 

49,212

 

 

(101,117)

Net change in cash and cash equivalents from discontinued operations

 

 

-

 

 

1,520

 

 

(23,324)

 

 

6,668

Cash and cash equivalents, beginning of period

 

 

75,256

 

 

97,936

 

 

56,885

 

 

158,002

Cash and cash equivalents, end of period

 

$

106,097

 

$

56,885

 

$

106,097

 

$

56,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

-8- 

more 


 

Exhibit A - QTD Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry Schein, Inc.

2019 Fourth Quarter

Sales Summary

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2019 over Q4 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

Q4 2019

 

Q4 2018

 

Total Sales Growth

 

Foreign Exchange Growth

 

Local Currency Growth

 

Acquisition Growth

 

Local Internal Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Dental

$

1,722,154

 

$

1,673,464

 

2.9%

 

-1.3%

 

4.2%

 

1.7%

 

2.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Medical

 

788,659

 

 

684,799

 

15.2%

 

0.0%

 

15.2%

 

5.0%

 

10.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

2,510,813

 

 

2,358,263

 

6.5%

 

-0.9%

 

7.4%

 

2.7%

 

4.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

137,102

 

 

114,293

 

20.0%

 

-0.3%

 

20.3%

 

10.9%

 

9.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

2,647,915

 

 

2,472,556

 

7.1%

 

-0.9%

 

8.0%

 

3.1%

 

4.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

21,026

 

 

-

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

Total Global

$

2,668,941

 

$

2,472,556

 

7.9%

 

-1.0%

 

8.9%

 

3.1%

 

5.8%

North America

Q4 2019

 

Q4 2018

 

Total Sales Growth

 

Foreign Exchange Growth

 

Local Currency Growth

 

Acquisition Growth

 

Local Internal Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Dental

$

1,061,077

 

$

1,035,787

 

2.4%

 

-0.1%

 

2.5%

 

0.3%

 

2.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Medical

 

769,135

 

 

665,752

 

15.5%

 

0.0%

 

15.5%

 

5.2%

 

10.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

1,830,212

 

 

1,701,539

 

7.6%

 

0.0%

 

7.6%

 

2.3%

 

5.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

117,608

 

 

98,407

 

19.5%

 

0.0%

 

19.5%

 

10.8%

 

8.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

1,947,820

 

 

1,799,946

 

8.2%

 

0.0%

 

8.2%

 

2.7%

 

5.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

-

 

 

-

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total North America

$

1,947,820

 

$

1,799,946

 

8.2%

 

0.0%

 

8.2%

 

2.7%

 

5.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

Q4 2019

 

Q4 2018

 

Total Sales Growth

 

Foreign Exchange Growth

 

Local Currency Growth

 

Acquisition Growth

 

Local Internal Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Dental

$

661,077

 

$

637,677

 

3.7%

 

-3.3%

 

7.0%

 

4.0%

 

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Medical

 

19,524

 

 

19,047

 

2.5%

 

-3.0%

 

5.5%

 

0.0%

 

5.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

680,601

 

 

656,724

 

3.6%

 

-3.4%

 

7.0%

 

3.9%

 

3.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

19,494

 

 

15,886

 

22.7%

 

-2.4%

 

25.1%

 

11.7%

 

13.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

700,095

 

 

672,610

 

4.1%

 

-3.3%

 

7.4%

 

4.0%

 

3.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

21,026

 

 

-

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

Total International

$

721,121

 

$

672,610

 

7.2%

 

-3.4%

 

10.6%

 

4.1%

 

6.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)     Corporate TSA revenues represents sales of certain products to Covetrus under the transition services agreement entered into in connection with the Animal Health spin-off, which we expect to continue through August 2020.

 

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

 

-9- 

more 


 

Exhibit A - YTD Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry Schein, Inc.

 

Full Year 2019

 

Sales Summary

 

(in thousands)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2019 over Full Year 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

Full Year 2019

 

Full Year 2018

 

Total Sales Growth

 

Foreign Exchange Growth

 

Local Currency Growth

 

Acquisition Growth

 

Local Internal Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Dental

$

6,415,865

 

$

6,347,998

 

1.1%

 

-2.3%

 

3.4%

 

1.4%

 

2.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Medical

 

2,973,586

 

 

2,661,166

 

11.7%

 

-0.2%

 

11.9%

 

4.9%

 

7.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

9,389,451

 

 

9,009,164

 

4.2%

 

-1.7%

 

5.9%

 

2.4%

 

3.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

515,085

 

 

408,439

 

26.1%

 

-0.9%

 

27.0%

 

22.7%

 

4.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

9,904,536

 

 

9,417,603

 

5.2%

 

-1.7%

 

6.9%

 

3.4%

 

3.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

81,267

 

 

-

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

Total Global

$

9,985,803

 

$

9,417,603

 

6.0%

 

-1.7%

 

7.7%

 

3.3%

 

4.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

Full Year 2019

 

Full Year 2018

 

Total Sales Growth

 

Foreign Exchange Growth

 

Local Currency Growth

 

Acquisition Growth

 

Local Internal Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Dental

$

3,911,746

 

$

3,866,171

 

1.2%

 

-0.2%

 

1.4%

 

0.2%

 

1.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Medical

 

2,894,137

 

 

2,581,696

 

12.1%

 

0.0%

 

12.1%

 

5.0%

 

7.1%