Celebrating
Our History.
Focused
On Our Future.
7 5 Y E A R S O F S U C C E S S • A N N U A L R E P O R T 2 0 0 6
A B O U T H E N R Y S C H E I N
Henry Schein, a FORTUNE 500® company, is the largest
distributor of healthcare products and services to office-
based practitioners in the combined North American
and European markets. The Company’s sales reached a
record $5.15 billion in 2006.
The Company provides innovative solutions for
healthcare professionals and is recognized for its
excellent customer service and highly competitive
prices. Henry Schein’s four business groups–
Dental, Medical/Animal Health,
International and
Technology–serve more
than 500,000 customers
worldwide, including:
• Approximately 85% of the estimated 135,000
U.S. and Canadian office-based dental practices
and 19,000 dental laboratories;
• Approximately 45% of the estimated 250,000
U.S. office-based physician practices, as well as
surgical centers and other alternate-care sites;
• Over 75% of the estimated 26,000 veterinary practices
in the United States;
• Approximately 240,000 office-based dental, medical
and veterinary practices outside North America,
primarily in Europe, Australia and New Zealand; and
• Government and other
institutions providing
healthcare services.
The Company operates through a centralized and
automated distribution network, which provides
customers in more than 200 countries with a
comprehensive selection of more than 70,000 branded
and Henry Schein private-brand products in stock,
as well as over 100,000 additional products available
to our customers as special order items.
Henry Schein also offers a wide range of innovative
for healthcare
value-added practice solutions
the Company’s
professionals,
such as ARUBA®,
electronic catalog and ordering system.
Its leading
software systems–DENTRIX® and Easy Dental® for
dental practices; MicroMD® for medical providers
for
in primary care and all specialties; LabNet®
dental laboratories; and AVImark®
for veterinary
clinics–have been installed in more than 50,000
healthcare practices.
Henry Schein has been included in the FORTUNE
list of America’s Most Admired Companies for three
consecutive years, and each of those years the Company
has led its industry in social responsibility.
Headquartered in Melville, N.Y., Henry Schein
employs more than 11,000 people and has operations
in 19 countries. For more information, visit the
Henry Schein Web site at www.henryschein.com.
TO OUR STOCKHOLDERS
Seventy-five years ago,
in the middle of the Great
However,
it is likely that even their
healthcare professions that we serve;
optimistic vision for what Henry
reinvention of our Company to take
Schein could become fell short of the
advantage of changing markets and
Depression, Henry and Esther
reality that we have been able to
emerging areas of opportunity;
Schein founded our Company
as a small pharmacy in Queens,
New York.
Their business
philosophy, commitment to their
achieve: a multinational FORTUNE
sustained growth in every facet of our
500® company that is the largest
Company; commitment to meeting
distributor of healthcare products
our customers’ many practice needs;
and services to office-based dental,
and preservation of our unique
medical, and veterinary practitioners
values-based culture, a legacy of
in the combined North American and
our founders.
customers and employees, and
European markets.
willingness
to adapt
their
It has been a remarkable journey, and
Celebrating Our Success – 2006
business to take advantage of
new opportunities drove our
Company’s early success and
laid the foundation for the
as we reach this milestone 75th
Our most recent year was also our most
anniversary, it is appropriate to reflect
successful. In 2006, we posted record
on and celebrate our past success. As
net sales of $5.15 billion, an increase
you will see in this Annual Report, the
of 11.2% over the prior year, including
history of our Company has been
10.6% growth in local currencies.
marked by innovation that has helped
Our operating margin expanded by 24
decades of growth that followed.
reshape our
industry and
the
basis points over 2005, while income
1
H E N R Y S C H E I N
“On a long journey such as ours, a significant milestone such as
from continuing operations increased
In 2006, our Company continued
We added new products to our
by 21.3% and earnings per diluted
to grow through several strategic
growing list of exclusive offerings:
share from continuing operations
acquisitions: NLS Animal Health, a
state-of-the-art dental radiography
grew by 19.3%. Each of our four
full-service animal health distribution
products from Imaging Sciences
business groups posted market share
business, which significantly enhanced
International,
including the i-CAT™
gains for the year with sales of $2.14
our presence in the U.S. veterinary
Cone Beam 3-D Imaging System; the
billion for Dental, $1.52 billion for
market; Darby Medical Supply, which
complete line of BIOLASE® dental laser
Medical (including Animal Health),
provides medical supplies and
systems, including the Waterlase MD™,
$1.4 billion for International, and $98
pharmaceuticals to U.S. medical
the industry’s leading “all-tissue” dental
million for Technology.
practices; Island Dental, a full-service
laser system; and the Milestone Single
These
financial
results were
supported by many operational
achievements throughout the year,
with the continued implementation of
global corporate programs in human
resources,
information technology,
inventory management, distribution
and other key operational areas.
U.S. distributor of dental merchandise
Tooth Anesthesia™ system.
and
equipment; Darby Dental
Laboratory Supply, a distributor that
has been serving the U.S. dental lab
community for more than 50 years;
and Provet Holding AG, the leading
animal health distributor in Switzerland,
which greatly expanded our European
Animal Health operations.
We
celebrated
several public
achievements during the year. Henry
Schein climbed to the FORTUNE 500
list and is now number 438. We have
been included in the FORTUNE list of
America’s Most Admired Companies
for three consecutive years, and each
2
H E N R Y S C H E I N
75 years is not a final destination, but simply a chance to reflect...”
of those years the Company has led
healthcare advocacy and education;
Focused On Our Future
our industry in social responsibility. In
increase access
to care among
2006, we were designated as one of
underserved populations; strengthen
only 12 “turbocharged” companies on
community wellness programs; and
FORBES Platinum list based on our
prepare for and respond to disasters.
multi-year double-digit growth in sales
These initiatives ranged from high-
and earnings per share. Henry Schein
profile access to care programs (such
is now included in NASDAQ’s highest
as Give Kids A Smile and Healthy
listing tier–the NASDAQ Global Select
Children, Healthy Lifestyles)
to
Market. And in 2006, we were pleased
community-based initiatives (such as
to celebrate 15 years of operations
the Back to School program in the
in the United Kingdom, Spain and
United States and Canada, and Crisis at
the Netherlands.
The year was marked by further
expansion of Henry Schein Cares™,
our global
social
responsibility
program
that
is “helping health
happen.” The activities we supported
during 2006 helped enhance
Christmas in the United Kingdom),
and
from product
support
for
healthcare missions to Africa
to
humanitarian relief around the world
(through Medshare
International,
Direct Relief International and the
International Medical Corps).
In addition to these many activities,
we looked forward during the year
as we started our 2007-2009 strategic
plan. We reaffirmed our commitment
to provide our customers with
a consistently superior experience
through innovative solutions to
practice issues enabling the best
quality patient care, and practice
efficiency and success. To achieve
this, we will share best practices and
services across borders and functions;
we will remain a technology leader
and consistently deliver superior
integrated solutions to meet our
customers’ practice needs; we will
become trusted advisors to the more
than 500,000 customers we serve
3
7 5 Y E A R S O F S U C C E S S
“We are certain that the road we are on is a positive path forward
and confident that our best years lie ahead.”
around the world; we will clearly
resistant markets. Team Schein will
We are certain that the road we are on
define and communicate our Henry
continue to grow, and Team Schein
is a positive path forward and confident
Schein global brand; and we will
Members will remain committed
that our best years lie ahead. On behalf
ensure
that Team Schein–now
to providing our customers with
of our Board of Directors and my Team
more than 11,000 members strong–
excellent service. Collectively we will
Schein colleagues, we are delighted
continues to be our greatest asset
preserve the values-based culture that
that you are our companions on this
through recruitment and professional
distinguishes our Company and has
exciting journey, and we thank you for
development.
been the foundation of our success.
your continued support.
On a long journey such as ours, a
significant milestone such as 75 years
is not a final destination, but simply a
chance to reflect and to look ahead at
the road not yet traveled. We are
confident that Henry Schein is in the
right markets at the right time. We are
a well-diversified industry leader in
healthy, technology-driven, recession-
We will continue to give back to
society through Henry Schein Cares™,
expanding this commitment as our
Company continues to grow. And we
will embrace change, as we have done
throughout our Company’s history,
strategically reinventing Henry Schein
as necessary to remain a strong,
forward-looking industry leader well
into the future.
Sincerely,
Stanley M. Bergman
Chairman and Chief Executive Officer
4
H E N R Y S C H E I N
FINANCIAL HIGHLIGHTS
NET SALES
From Continuing Operations
($ in millions)
OPERATING MARGIN
From Continuing Operations
(3)
See the Notes below for
discussion of Non-GAAP Disclosures
EARNINGS PER
DILUTED SHARE
From Continuing Operations
(3)
See the Notes below for
discussion of Non-GAAP Disclosures
RETURN ON
COMMITTED CAPITAL
(2)
OPERATING CASH FLOW
($ in millions)
(3)
NOTES:
Operating Margin and Earnings from Continuing Operations Per Diluted Share have been adjusted to exclude certain one-time items. Refer to Non-GAAP Disclosures on page 21.
Additionally, refer to our annual consolidated financial statements for a complete presentation of our Consolidated Statements of Cash Flows.
(1) During 2004, we recorded a non-recurring $13.2 million pre-tax ($8.4 million post-tax) charge related to the Fluvirin® contract with Chiron Corporation.
The effect that this charge had on earnings per share for the year ended December 25, 2004 was ($0.10). Excluding this charge, our earnings per diluted share for 2004 was $1.39.
(2) Return on Committed Capital represents operating income over average committed capital (committed capital equals inventory plus trade accounts receivables
and net property, plant and equipment less trade accounts payables.)
(3) Adjusted to reflect the effect of our adoption, on January 1, 2006, of FAS 123(R) using the modified retrospective application.
5
7 5 Y E A R S O F S U C C E S S
Serving Our Customers
With A World-Class Infrastructure
As the largest distributor of healthcare
feet of space in 31 distribution
as special-order items. To help meet
products and services to office-based
centers throughout North America,
virtually all of our customers’ practice
practitioners in the combined North
Europe, Australia and New Zealand–
needs are 2,425 field sales consultants
American and European markets,
the
to efficiently and accurately ship over
and equipment sales specialists; 1,375
world’s leading value-added dental
11 million customer orders annually. In
telesales representatives; 136 independent
distributor, and the only Pan-European
the United States and Canada, 99% of
software sales representatives; and
distributor
in
the
office-based
our orders are shipped the same day
more than 700 equipment service
healthcare industry, Henry Schein
the order is placed, are delivered within
technicians, all supported by over
serves more than 500,000 customers
two days of placement, and are shipped
35 million targeted direct-marketing
and has the capability to provide
with virtually 100% accuracy. And our
pieces annually.
door-to-door air package delivery to
state-of-the-art “cold chain” distribution
practitioners in over 200 countries
capabilities ensure the integrity of heat-
around the world.
sensitive products shipped.
More
than 11,000 Team Schein
Our customers can choose from more
Members in 19 countries use our
than 70,000 branded and Henry Schein
leveragable, world-class, centralized
private-brand products in stock, as well
infrastructure–nearly 3 million square
as 100,000 additional products available
6
H E N R Y S C H E I N
Henry Schein efficiently and accurately
shipped over 11 million orders during 2006.
In the U.S. and Canada, 99% of our orders
are shipped the same day the order is placed
and delivered within two days of placement.
Henry Schein’s state-of-the-art, cold-chain
distribution capabilities ensure the integrity
of vaccines and other heat-sensitive products.
Voice pick technology contributes to
Henry Schein’s average order accuracy
rate of virtually 100%.
7
7 5 Y E A R S O F S U C C E S S
Meeting Virtually All
Dental Customers’ Practice Needs
Dental spending continues to increase,
and diagnostic procedures in dental
strengthened with the acquisition of
driven in part by a growing awareness
practices are all accelerating dental
Island Dental, a full-service distributor
of the correlation between oral health
spending. These trends have resulted
of dental merchandise and equipment,
and overall well-being. Studies have
in a need for greater dental practice
and Darby Dental Laboratory Supply, a
demonstrated the relationship between
productivity, which is driving equipment
full-line distributor serving the U.S.
periodontal disease and stroke or heart
and technology sales.
dental lab community.
attack, while other research shows that
some chronic health conditions, such as
diabetes, may place a person at greater
risk for periodontal disease. Most
recently, a Harvard study has suggested
a link between poor oral health and
pancreatic cancer.
Henry Schein’s Dental Group, which
The Dental Group offers approximately
includes Sullivan-Schein Dental and
42,000 in-stock products to our dental
Zahn Dental Laboratory in the U.S. and
customers and many more as special-
Henry Schein Ash Arcona in Canada, is
order items.
This comprehensive
there to meet virtually all of our dental
selection includes many important
customers’ needs for operating an
product exclusives,
such as
the
efficient and successful practice while
Camlog™ dental
implant system;
As a result, the important role of dentists
providing a high quality of patient care.
Colgate® Oral Care line of products;
in the healthcare continuum is becoming
The Group serves approximately 85%
DEXIS® digital radiography products;
clearer, as they help in the early
of the estimated 135,000 U.S. and
BruxGuard™; Pentron®
Laboratory
detection of cardiovascular disease,
Canadian office-based dental practices
Products; ShadeVision™; the i-CAT™
asthma, oral cancer and other conditions.
and 19,000 laboratories, and has
Cone Beam 3-D
Imaging Systems
Additionally, the percentage of patients
approximately 38% of the estimated
from Imaging Sciences International;
with dental insurance coverage, a
$5.5 billion U.S.
and Canadian
BIOLASE® dental laser systems; and
greater emphasis on cosmetic dentistry,
distribution market.
In 2006, our
Milestone Single Tooth Anesthesia™
and the growing use of pharmaceuticals
position in the market was further
system.
8
H E N R Y S C H E I N
Among the many Henry Schein product
exclusives is the complete line of BIOLASE ®
dental laser systems, including the
Waterlase MD™, the industry’s leading
“all-tissue” dental laser system.
Henry Schein’s dental offering features
state-of-the-art radiography products from
Imaging Sciences International, including the
i-CAT™ Cone Beam 3-D Imaging System.
BUSINESS GROUP NET SALES
42%
DENTAL
•
Sales $2.14 billion
• % of Company sales 42%
Equipment repair services through ProRepair®
and COMPLETEcare are just part of the wide
range of value-added services that we offer to
our dental customers.
9
7 5 Y E A R S O F S U C C E S S
Providing Physicians With Products
To Meet Growing Demand
As baby boomers, the most educated
Henry Schein’s Medical Group is well
We offer our medical customers a
and affluent generation in history,
positioned to serve physician customers
selection of approximately 35,000
continue to age,
they are willing to
affected by this shift.
The Group
products in stock and many more as
spend more money on their health. At
currently serves approximately 45% of
special-order items.
the same time, advances in healthcare
the estimated 250,000 U.S. office-based
technology are helping physicians to
physician practices, surgical centers and
meet their patients’ desires to remain
other alternate-care sites, and holds
healthier longer.
approximately 17% of the estimated
As a result of these converging trends,
demand for physician and clinical
$8.5 billion medical and veterinary
distribution market.
In addition, we are a leading supplier
of vaccines,
injectables and other
pharmaceuticals to physicians and
alternate-care sites, providing our
customers with influenza,
tetanus/
diphtheria toxoid, pneumonococcal and
services continues to increase in
In 2006,
the Group added Darby
many other vaccines.
And we are
developed countries around the world.
Medical Supply, which supplies medical
pleased to offer formulary plans to
Diagnostic tests, screenings and other
supplies and pharmaceutical products,
many of
the
leading medical
elective surgical procedures are moving
including generic drugs, branded drugs
professional associations, such as the
from hospitals to physicians’ offices or
and vaccines,
to medical practices
American Medical Association,
the
alternate-care settings.
In fact, 63%
across the United States.
American Society of Plastic Surgeons,
of all surgeries in the United States
are now performed as outpatient
procedures.
the American Academy of Dermatology,
and
the American Academy of
Ophthalmology.
10
H E N R Y S C H E I N
Henry Schein offers formulary plans to
many of the leading medical professional
associations, such as the American Medical
Association, the American Society of Plastic
Surgeons, the American Academy of
Dermatology, and the American Academy
Henry Schein is a leading supplier of
of Ophthalmology.
vaccines, injectables, and other
pharmaceuticals to physicians and
alternate-care sites.
BUSINESS GROUP NET SALES
29%
MEDICAL
•
Sales $1.52 billion
(including Animal Health)
• % of Company sales 29%
(including Animal Health)
Henry Schein’s Medical Group supports our
physician customers—approximately 45% of the
estimated 250,000 U.S. office-based physician
practices—with a selection of over 35,000 products
in stock and many more as special-order items.
11
7 5 Y E A R S O F S U C C E S S
Helping Veterinarians Serve
A Burgeoning Pet Population
The U.S. companion animal market is
Henry Schein’s Animal Health Group is
Henry Schein’s leading software systems—DENTRIX ®
currently estimated to be growing at
ideally positioned to capitalize on this
5-7% annually, spurred by a number
growing market.
In 2006, we acquired
of demographic factors. Overall,
the
NLS Animal Health, which serves
number of U.S. households is growing,
veterinarians
in 26
states and
as is the proportion of households
significantly enhanced our position
with pets. While the overall pet
within the market. We now serve
population continues to increase,
over 75% of the estimated 26,000
annual expenditures per pet are also
U.S. veterinary practices, offering
rising. And studies have reported that
veterinarians a wide selection of
pet ownership may contribute to the
approximately 23,000 products in stock
overall well-being of pet owners
and many more as special-order items.
and Easy Dental ® for dental practices; MicroMD ® for
medical providers in primary care and all specialties;
LabNet ® for dental laboratories; and AVImark® for
veterinary clinics— have been installed in more
than 50,000 practices.
themselves.
As a result of these factors,
there is
greater demand for veterinary oncology
and oral health services, and an
increase in the specialty services
offered by veterinarians.
12
H E N R Y S C H E I N
Leading Through Technology
Office-based dental, medical and
certified as meeting all 2006 ambulatory
our Privileges™ customer
loyalty
veterinary practitioners turn to the
health
record
criteria by
the
program, which was designed to attract,
products and services offered by our
Certification Commission for Healthcare
retain and reward dental customers,
Technology Group to increase practice
Information Technology.
now with more than 25,000 U.S. Dental
efficiency and profitability and facilitate
delivery of quality healthcare to their
patients.
Practitioners also benefit from the wide
range of value-added services that we
offer, including: repair services through
Our proprietary software systems
ProRepair® and COMPLETEcare; office
include DENTRIX® and Easy Dental®
design services; continuing education;
for dental practices; MicroMD®
for
electronic health claims processing
medical providers in primary care and
(with more than 36 million claims
all major specialties; LabNet®
for
processed
in 2006);
Information
dental laboratories; and AVImark® for
Technology
Solutions
including
veterinary practices. These systems are
computer hardware,
integration and
installed in more than 50,000 practices.
support
services; 24/7 ordering
Ranked highest in customer satisfaction
capability through our ArubA® Web-
by
an
independent
research
based electronic catalog and ordering
organization, DENTRIX®
seamlessly
system and other options; Financial
integrates digital X-ray,
intraoral
Services such as equipment leasing and
imaging and other technology tools.
financing, patient
financing,
and
And MicroMD® EMR 4.5 has been
electronic credit card processing; and
members, with similar programs being
introduced
to our U.S. Medical
customers and already active in nine
international markets.
BUSINESS GROUP NET SALES
2%
TECHNOLOGY
•
Sales $98 million
• % of total Company sales 2%
13
7 5 Y E A R S O F S U C C E S S
Growing Our Global Presence
At Henry Schein, we now serve one
Republic, France, Germany,
Iceland,
We will continue to expand our
world of customers–a world that has
Ireland, Israel, Italy, Luxembourg,
the
successful full-service dental model
become a single global market for
Netherlands, New Zealand, Portugal,
throughout Europe, positioning our
dental, medical and veterinary office-
Spain, Switzerland and the United
field sales consultants and telesales
based practitioners who have similar
Kingdom. And through Schein Direct,
representatives as trusted advisors to
needs
regardless of
geographic
which provides door-to-door air
our customers. We also will continue
boundaries. Like their North American
package delivery service, we have
to explore expansion opportunities
colleagues, healthcare practitioners in
the capability to serve practitioners
abroad in countries where we currently
countries around
the world are
in more than 200 countries around
have a presence, as well as potential
searching for solutions to help them
the world.
operate more efficient and profitable
practices as they provide a high quality
of patient care.
Our
International Group currently
holds approximately 15% of
the
estimated $8 billion combined dental,
We meet our international customers’
medical and animal health market in
needs by providing superior service
the European countries in which we
and the most comprehensive selection
operate. With significant room for
of products. Our International Group
future growth, we will share best
serves approximately 240,000 office-
practices and operational efficiencies
based dental, medical and veterinary
across
international borders and
practices and has operations in 17
markets as we continue to build an
countries outside of North America:
infrastructure based on our successful
Austria, Australia, Belgium, the Czech
U.S. model.
expansion into new markets.
In 2006,
we were pleased to expand our
presence in the European animal health
market with the acquisition of Provet
Holding AG, the leading animal health
distribution company in Switzerland.
And we will further refine the Henry
Schein global brand to ensure that all of
our customers and suppliers around the
world clearly understand the benefits of
partnership with our Company.
14
H E N R Y S C H E I N
Among the more than 35 million
targeted direct-marketing pieces that
Henry Schein distributes annually are
catalogs in German, Spanish, English
and many other languages spoken by
the more than 500,000 customers we
serve around the world.
Henry Schein’s newly opened warehouse
in France is just one of the state-of-the-art
distribution centers throughout
North America, Europe, Australia and
New Zealand—nearly 3 million square feet
of space through which over 11 million
customer orders are efficiently and
accurately shipped each year.
In 2006, Henry Schein acquired Provet
Holding AG, the leading animal health
distribution company in Switzerland,
greatly expanding our European
Animal Health operations.
15
7 5 Y E A R S O F S U C C E S S
BUSINESS GROUP NET SALES
27%
INTERNATIONAL
•
Sales $1.4 billion
• % of total Company sales 27%
“Helping Health Happen” Through
Henry Schein Cares
Henry Schein’s unique culture, which
focuses on delivering the best possible
service to our customers, is defined by
our values of mutual responsibility,
ethical behavior, creativity and open
communication. We recognize that
each Team Schein Member is as
important as the next; are committed to
enhancing diversity and cultural
competency throughout our Company
to better serve our changing customer
base; and invest in ongoing sales force
training to make each interaction
as productive as possible for our
customers.
Our culture also includes a commitment
to social responsibility, which we put
into action through Henry Schein
Cares™, our global social responsibility
program.
Through the activities we
support, we enhance healthcare
advocacy and education; increase
access to care among underserved
populations; strengthen community
wellness programs; and help prepare
for and respond to disasters. By using
our core competencies–our extensive
healthcare product offerings and
logistical distribution capabilities, our
close relationships with customers and
supplier partners, and our extensive
communication network–in creative
and innovative ways, we further the
goals of many worthy programs. And
by “helping health happen” we believe
that we are furthering our Company’s
long-term success.
In 2006, Henry Schein Cares™ activities
broadened in scope. We sponsored
high-profile access to care programs
such as Give Kids A Smile and Healthy
Children, Healthy Lifestyles,
and
created the Henry Schein Comfort Cart
at New York’s Schneider Children’s
community-based
Hospital.
initiatives included our annual Back to
Our
16
H E N R Y S C H E I N
support
School and Holiday Cheer programs in
the U.S., and the Crisis at Christmas and
Help a Local Child initiatives in the U.K.
In Germany, we produced a play for
kindergartners to educate children
about the importance of oral health,
while in France we supported the
Bucco Bus to provide dental care
to the elderly in nursing homes. We
provided
for healthcare
missions to Africa, helped people in
through
need around
Medshare International and Direct
Relief International, and contributed
for
relief
humanitarian
Lebanon and
the
Israel
International Medical Corps.
Finally,
we helped to rebuild our customers’
practices on the U.S. Gulf Coast, and,
with the ADA, donated the state-of-the-
art mobile dental clinic Tomorrow’s
Dental Office Today to the State of
Mississippi for ongoing outreach.
supplies
through
the world
Through Henry Schein Cares, our global
social responsibility program, we help
enhance healthcare advocacy and
education; increase access to care among
underserved populations; strengthen
community wellness programs; and
prepare for and respond to disasters.
17
7 5 Y E A R S O F S U C C E S S
75 Years of Success
Henry Schein has a history of driving change and innovation in
the industries it serves. The Company has frequently transformed itself to
meet customers’ needs, take advantage of new technologies, and tap into
burgeoning markets. These are some of the changes that Henry Schein has
undergone and innovations it has introduced over the years.
1950s
1959
1962
1969
Henry Schein shifts
business focus
from customers to
office-based
practitioners
Sales: $1 Million;
15 TSMs
Company introduces
1st Henry Schein
Catalog
Sales: $5.7 Million;
35 TSMs
Up until the 1960s,
many Team Schein
Members called
Henry Schein “Papa.”
1985
1986
1989
1990
Company focuses on
veterinary dentistry;
acquires Zahn Dental
Henry Schein
introduces the Protex
program to educate
the dental profession
about infection control
Stanley Bergman
becomes Chairman
and CEO of Henry
Schein following the
untimely death of
Jay Schein;
Sales: $225 Million;
890 TSMs
Henry Schein begins
international expansion
(The Netherlands, United
Kingdom, and Spain)
Henry Schein’s European expansion
began in the Netherlands in 1990.
The most popular item sold internationally
on the first day was tennis balls.
1999
2000
2001
2002
2003
Company introduces the
Digital Dental Office,
Privileges customer
loyalty program, and
Customer Analysis Tool
(CAT) system; establishes
the Henry Schein Cares
global social
responsibility program
Henry Schein
establishes
Sullivan-Schein
University; begins role
as exclusive distributor
of professional products
for ADA’s Give Kids
A Smile! program;
Sales: $2.68 Billion;
6,900 TSMs
Company acquires
Colonial Surgical (U.S.)
and Hager Dental
(Germany)
Company acquires
Heiland (Germany)
and GIV (U.S.)
Henry Schein becomes
the only Pan-European
dental, medical, and
veterinary distributor;
Sales: $2.38 Billion;
6,200 TSMs
“This is what we are
really all about —
technology,
a concern for people,
and a concern for
results.”
- Jay Schein
18
H E N R Y S C H E I N
1932
1935
1940s
1942
1949
Henry Schein is
founded by Henry and
Esther Schein as a
storefront pharmacy
in Queens, NY;
2 TSMs
Company fulfills
mail order
prescriptions
using flyers
Company introduces
private-brand dental,
medical, and
veterinary products
Company begins
direct sale of
penicillin
to customers
Sales: $175,000;
4 TSMs
The initial investment
in Henry Schein, Inc.
in 1932 was $500.
“Through the years, we always insisted on making
our people feel special, like family.”
- Esther Schein
1971
1979
1980
1983
1984
Company focuses on
dental practitioners,
concentrating on
operational excellence
and discounted prices
Sales: $58 Million;
180 TSMs
Jay Schein becomes
Chairman and CEO
of Henry Schein, Inc.,
beginning a new
period of record
growth and prosperity
for the Company
Introduction of
TouchTone™
telephone ordering
Company becomes
first in the industry to
fully automate the
distribution cycle
In 1983, Henry Schein led the
industry with ProTONETM, the first
electronic system allowing customers
to order by TouchToneTM phone.
1994
1995
1996
1997
1998
Company leads the
industry with a
dental practice-management
software system; electronic
claims processing is offered
Henry Schein is listed
on NASDAQ Marketplace
(HSIC), raising $72.8
million in the initial
public offering;
acquires Veratex
Company introduces
unique integrated sales
and marketing approach
to serving customers
(field sales, telesales,
direct marketing);
Sales: $830 Million;
3,200 TSMs
Henry Schein acquires
Sullivan Dental Products,
Dentrix Dental Systems,
and Caligor; Company
becomes largest healthcare
distributor serving
office-based practitioners
Company acquires
Regional Healthcare
(Australia), Arcona
(Canada), and
Meer Dental (U.S.);
Sales: $1.92 Billion;
5,500 TSMs
Shares of Henry Schein traded
publicly on NASDAQ for the first time
on November 3,1995. The initial price
was $8 per share (split-adjusted).
2004
2005
2006
Henry Schein debuts on
FORTUNE 500; acquires
Demedis (Germany),
KRUGG (Italy),
Ash Temple (Canada),
and Barton-Cyker Dental
Supply (U.S.); introduces
Tomorrow’s Dental Office
Today (TDOT);
Sales: $3.9 Billion;
9,600 TSMs
Henry Schein celebrates
10 years as a publicly
traded company;
Company acquires
Ash Temple (Canada),
Halas Dental (Australia),
and Shalfoon Brothers
(New Zealand)
Henry Schein is again
included in FORTUNE’s list
of America’s Most Admired
Companies and ranked
Number 1 in the industry
for social responsibility;
Company acquires
NLS Animal Health,
Darby Medical Supply,
Island Dental, Darby
Dental Laboratory Supply,
and Provet Holding AG
(Switzerland);
Sales: $5.15 Billion;
More than 11,000 TSMs
19
7 5 Y E A R S O F S U C C E S S
2007
“For 75 years, our values-based Team Schein
culture, our unsurpassed level of customer
service, and our commitment to social
responsibility have distinguished Henry Schein
in the marketplace and made us one of
FORTUNE’s “Most Admired” companies.
As we continue to grow beyond this
milestone year, preservation of this unique
corporate culture will ensure that our best
years are still to come.”
- Stanley M. Bergman
SELECTED FINANCIAL DATA
The following selected financial data, with respect to our financial position and results of operations for each of the five fiscal years in the period ended December 30, 2006, set forth below, has been derived from, should be read in
conjunction with and is qualified in its entirety by reference to, our consolidated financial statements and notes thereto. The selected financial data presented below should also be read in conjunction with ITEM 7, “Management's
Discussion and Analysis of Financial Condition and Results of Operations” and ITEM 8, “Financial Statements and Supplementary Data.”
Income Statement Data:
Net sales
Gross profit
Selling, general and administrative expenses (2)
Operating income
Other expense, net
Income from continuing operations before taxes, minority interest and
equity in earnings of affiliates
Income taxes from continuing operations
Minority interest in net income of subsidiaries
Equity in earnings of affiliates
Income from continuing operations
Income (loss) from discontinued operations, net of tax (3)
Net income
Earnings from continuing operations per share:
Basic
Diluted
Earnings (loss) from discontinued operations per share:
Basic
Diluted
Earnings per share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Net Sales by Market Data:
Healthcare Distribution (4)
Dental (5)
Medical (6)
International (7)
Total Healthcare Distribution
Technology (8)
Total
Balance Sheet Data:
Total assets
Long-term debt
Minority interest
Stockholders' equity (1)
See page 21 for Notes For Selected Financial Data.
Years ended
December 30,
2006
December 31,
2005 (1)
December 25,
2004 (1)
(in thousands, except per share data)
December 27,
2003 (1)
December 28,
2002 (1)
$3,898,485
1,054,465
862,267
192,198
(11,121)
181,077
(67,016)
(1,486)
1,699
114,274
2,565
$ 116,839
$
$
$
1.31
1.29
0.03
0.03
1.34
1.32
87,253
88,646
Years ended
December 25,
2004
(in thousands)
$1,602,457
1,284,279
928,207
3,814,943
83,542
$3,898,485
As of
December 25,
2004
(in thousands)
$2,433,670
525,682
12,438
1,117,706
$3,194,031
908,163
690,393
217,770
(8,973)
208,797
(77,959)
(2,807)
931
128,962
(794)
$ 128,168
$
$
$
1.48
1.45
(0.01)
(0.01)
1.47
1.44
87,417
89,099
$2,675,645
771,538
591,915
179,623
(6,933)
172,690
(63,487)
(2,591)
659
107,271
4,146
$ 111,417
$
$
$
1.23
1.21
0.05
0.04
1.28
1.25
86,978
89,007
December 27,
2003
December 28,
2002
$1,364,812
1,178,310
576,628
3,119,750
74,281
$3,194,031
$1,227,273
944,600
437,046
2,608,919
66,726
$2,675,645
December 27,
2003
December 28,
2002
$1,819,370
247,100
11,532
1,006,551
$1,558,052
242,561
6,748
863,133
$5,153,097
1,480,055
1,175,158
304,897
(9,295)
295,602
(105,220)
(8,090)
835
183,127
(19,368)
$ 163,759
$
$
$
2.08
2.04
(0.22)
(0.22)
1.86
1.82
87,952
89,820
$4,635,929
1,316,936
1,053,798
263,138
(16,534)
246,604
(90,456)
(5,963)
827
151,012
(11,253)
$ 139,759
$
$
$
1.74
1.71
(0.13)
(0.13)
1.61
1.58
87,006
88,489
December 30,
2006
December 31,
2005
$2,136,830
1,516,155
1,401,889
5,054,874
98,223
$5,153,097
$1,896,643
1,394,121
1,256,910
4,547,674
88,255
$4,635,929
December 30,
2006
December 31,
2005
$2,881,146
455,806
21,746
1,470,963
$2,583,120
489,520
12,353
1,249,154
20
H E N R Y S C H E I N
NON-GAAP DISCLOSURES
The following table sets forth, for the periods indicated, a reconciliation of operating income and income from continuing operations adjusted to reflect the effects of discontinued operations, as reported to adjusted operating income
and adjusted income from continuing operations. The diluted earnings from continuing operations per share and weighted-average common shares outstanding information reflects a two-for-one stock split effected in the form of a
dividend that became effective on February 28, 2005.
December 25,
2004
December 27,
2003
Years ended
December 28,
2002
(in thousands, except per share data)
December 30,
1995
Operating income (loss), as reported
$ 192,198
$ 217,770
$ 179,623
$
(1,474)
Adjustments:
Merger, integration, and restructuring credits
Special management compensation costs
One-time charge related to influenza vaccine contract
Adjusted operating income
Adjusted operating margin
Income (loss) from continuing operations, as reported
Adjustments, net of tax:
Merger, integration, and restructuring credits
Special management compensation costs
Gains on real estate transactions
-
-
13,246
205,444
5.3%
114,274
-
-
-
One-time charge related to influenza vaccine contract
8,358
-
-
-
217,770
6.8%
128,962
-
-
(454)
-
(734)
-
-
178,889
6.7%
107,271
(734)
-
(890)
-
-
20,797
-
19,323
3.1%
(10,479)
-
19,623
-
-
Adjusted income from continuing operations
$ 122,632
$ 128,508
$ 105,647
$
9,144
Diluted earnings (loss) from continuing operations per share:
As reported
Adjusted
$
1.29
1.39
$
1.45
1.44
$
1.21
1.19
Diluted weighted-average common shares outstanding:
88,646
89,099
89,007
$
(0.39)
0.34
26,894
NOTES FOR SELECTED FINANCIAL DATA:
(1) Adjusted to reflect the effects of our adoption of FAS 123(R) using the modified retrospective application.
(2) During 2004, we recorded a $13.2 million pre-tax ($8.4 million post-tax) charge related to our Fluvirin® contract with Chiron Corporation. This charge, which
represented the write-off of a deferred expense associated with the 2005/2006 influenza season, occurred as a result of the significant uncertainty about whether
Chiron would be able to provide Fluvirin® for the 2005/2006 influenza season. The effect that this charge had on earnings per share for the year ended
December 25, 2004 was $(0.10).
(3) On April 1, 2006, we sold substantially all of the assets of our Hospital Supply Business, previously reported as part of our healthcare distribution reportable segment.
The sale price was $36.5 million, which was received during the second quarter of 2006. As a result of this sale, included in the operating results from discontinued
operations for 2006 is a $32.3 million ($19.4 million after-tax) loss on the sale, including $3.5 million ($2.1 million after-tax) of transitional service obligations and
selling costs. Also, because the decision to divest this business was reached in 2005, we recorded an impairment charge to our long-lived assets of approximately
$7.0 million, net of tax, or $(0.08) per diluted share in 2005.
In the third quarter of 2003, we sold PMA Bode GmbH, an X-ray film distribution business located in Germany, which was a component of our healthcare distribution
business. This sale resulted in a loss of $2.0 million, net of tax, or $(0.02) per diluted share. Due to immateriality, we have not reflected the operating results,
other than the loss on sale, of PMA Bode separately as a discontinued operation for any of the periods presented. This was partially offset by the Hospital discontinued
operation discussed above.
(4) Consists of consumable products, small equipment, laboratory products, large dental equipment, branded and generic pharmaceuticals, vaccines, surgical products,
diagnostic tests, infection-control products and vitamins.
(5) Consists of products sold in the United States and Canada.
(6) Consists of products sold in the United States' medical and animal health markets.
(7) Consists of products sold in the dental, medical and animal health markets, primarily in Europe.
(8) Consists of practice management software and other value-added products and services, which are sold primarily to healthcare providers in the United States and Canada.
21
7 5 Y E A R S O F S U C C E S S
USE OF NON-GAAP MEASURES:
The above information includes financial measures that
are not calculated and presented in accordance with
accounting principles generally accepted in the United
States ("GAAP"). The above table reconciles operating
income, income from continuing operations and diluted
earnings (loss) from continuing operations per share,
our most directly comparable measure calculated and
presented in accordance with GAAP, to comparable
amounts as adjusted to eliminate the effect of
one-time items.
We eliminated the effect of such one-time items
to assist in evaluating the underlying operational
performance of our business, excluding such one-time
items, over the periods presented. We believe that
this presentation is appropriate and facilitates such
an evaluation by us, investors and analysts. These
measures should be considered supplemental to,
and not a substitute for or superior to, financial
measures calculated in accordance with GAAP.
BOARD OF DIRECTORS
Stanley M. Bergman
Chairman and Chief Executive Officer
Barry Alperin (1) (2) (3)
Retired Vice Chairman, Hasbro, Inc.
Gerald A. Benjamin
Executive Vice President and Chief Administrative Officer
James P. Breslawski
President and Chief Operating Officer
Paul Brons (4)
Former Member, Board of Management, Akzo Nobel N.V.
Margaret A. Hamburg, M.D. (4)
Former Assistant Secretary for Planning and Evaluation,
U.S. Department of Health and Human Services;
Former Commissioner of Health for the City of New York
Donald Kabat (1) (2)
Retired Partner, Accentur
Philip Laskawy (1) (3) (4)
Retired Chairman, Ernst & Young
Norman Matthews (2) (4)
Former President, Federated Department Stores
Mark E. Mlotek
Executive Vice President, Corporate Business Development
Steven Paladino
Executive Vice President and Chief Financial Officer
Marvin H. Schein
Founder, Schein Dental Equipment Corp.
Louis W. Sullivan, M.D. (3) (4)
Former U.S. Secretary of Health and Human Services;
Founding Dean, Director and President Emeritus of
the Morehouse School of Medicine
Standing Row l to r:
Mark E. Mlotek,
Steven Paladino,
Paul Brons,
Louis W. Sullivan,
Norman Matthews,
Philip Laskawy,
Donald Kabat,
Gerald A. Benjamin
Seated Row l to r:
Barry Alperin,
Margaret A. Hamburg,
Stanley M. Bergman,
James P. Breslawski,
Marvin H. Schein
(1) Member Audit Committee
(2) Member Compensation Committee
(3) Member Nominating and
Governance Committee
(4) Member Strategic Advisory Committee
EXECUTIVE OFFICERS
Stanley M. Bergman
Chairman and Chief Executive Officer
Leonard A. David
Senior Vice President and Chief Compliance Officer
Steven Paladino
Executive Vice President and Chief Financial Officer
James P. Breslawski
President and Chief Operating Officer
Stanley Komaroff
Senior Advisor
Michael Racioppi
President, Medical Group
Gerald A. Benjamin
Executive Vice President and
Chief Administrative Officer
Mark E. Mlotek
Executive Vice President,
Corporate Business Development
Michael Zack
President, International Group
22
H E N R Y S C H E I N
ADVISORY BOARDS
Charles N. Aswad, M.D.
Jeffrey A. Gelfand, M.D.
Executive Vice President, CEO, Medical Society of the State of New York,
Emeritus
Herbert J. Conrad
Former Chairman, Board of Directors, Gen Vec, Inc.; former President,
Pharmaceuticals Division, Hoffmann-LaRoche, Inc.
Glenna Crooks, M.D.
President and CEO, Strategic Health Policy International, Inc.
Stanley Epstein, M.D.
Clinical Professor of Medicine, College of Physicians and Surgeons of Columbia
University; Associate Clinical Professor at Albert Einstein College of Medicine;
Founder, Westchester Cardiology Associates
Marilyn Hughes Gaston, M.D.
Former Assistant Surgeon General and Director, Bureau of Primary
Health Care, U.S. Public Health Service; Co-Director, Gaston & Porter
Health Improvement Center
Senior Advisor, International Medical Affairs, Partners HealthCare Systems; Director,
CIMIT Program (Center for Integration of Medicine and Innovative Technology
International); Professor of Medicine, Tufts University School of Medicine
Margaret A. Hamburg, M.D.
Former Assistant Secretary for Planning and Evaluation, U.S. Department of
Health and Human Services; Former Commissioner of Health for the City of
New York; Member, Henry Schein, Inc. Board of Directors
Norman Matthews
Former President, Federated Department Stores; Member, Henry Schein, Inc.
Board of Directors
Martin Sperber
Former Chairman and CEO, Schein Pharmaceutical; Chancellor,
Arnold & Marie Schwartz College of Pharmacy; Member, Board of Trustees,
Long Island University
Louis W. Sullivan, M.D.
Former U.S. Secretary of Health and Human Services; Founding Dean,
Director, and President Emeritus of the Morehouse School of Medicine;
Member, Henry Schein, Inc. Board of Directors
Medical Advisory Board
Standing Row l to r:
Herbert J. Conrad,
Margaret A. Hamburg,
Stanley Epstein,
Marilyn Hughes Gaston,
Glenna Crooks
Seated Row l to r:
Charles N. Aswad,
Louis W. Sullivan,
Martin Sperber,
Norman Matthews,
Jeffrey A. Gelfand
Oral Health Advisory Board
Standing Row l to r:
Greg Chadwick,
David Hoexter,
Raul Garcia,
Charles N. Aswad
Seated Row l to r:
Charles Babbash,
Leslie Grant,
Lawrence Meskin,
L. Jackson Brown
Charles N. Aswad, M.D.
Raul Garcia, D.M.D., MMedSc
Executive Vice President, CEO, Medical Society of the State of New York,
Emeritus
Professor and Chairman, Department of Health Policy & Health Services
Research, Boston University School of Dental Medicine
Charles Babbash, D.D.S., MScD
Director, Dental Implant Center, Cleveland, Ohio; Clinical Professor of
Oral and Maxillofacial Surgery, and Director of Dental Implant Research,
Case Western Reserve University, School of Dentistry
L. Jackson Brown, D.D.S., Ph.D.
Associate Executive Director, Health Policy Resources Center,
American Dental Association
Greg Chadwick, D.D.S., MS (Emeritus)
Private Practice; Former President, American Dental Association
Leslie Grant, D.D.S., MSPA
Immediate Past President, National Dental Association
David Hoexter, D.M.D.
Clinical Professor of Periodontology, Temple University School of Dentistry;
Editor-in-Chief, Dental Tribune; and past President of American College of Oral
Implantology and New England American Academy of Implant Dentistry
Lawrence Meskin, D.D.S., Ph.D.
Professor and Director of Continuing Education, past Dean University of
Colorado, School of Dentistry; former Editor, Journal of the American
Dental Association
23
7 5 Y E A R S O F S U C C E S S
CORPORATE INFORMATION
COMMON STOCK
Henry Schein Common Stock trades on the NASDAQ Stock Market® under the symbol “HSIC.”
ANNUAL SHAREHOLDERS MEETING
Our Annual Meeting of Shareholders will be held on May 15, 2007 at 9:00 a.m. EDT, at the Melville Marriott
Long Island, 1350 Old Walt Whitman Road, Melville, New York 11747.
HENRY SCHEIN ON THE INTERNET
For more information about Henry Schein and its products and services, go to www.henryschein.com. Other
Company Web sites include: www.sullivanschein.com; www.giv.com; www.dentrix.com; www.easydental.com;
www.labnet.com; www.digitaldentaloffice.com; www.zahndental.com; www.micromd.com;
www.camlogimplants.com; and www.avimark.com.
SHAREHOLDER REPORTS AND INVESTOR INQUIRIES
For shareholder inquiries, including requests for quarterly and annual reports, contact our Investor Relations
department at (631) 845-2820, or e-mail your request to investor@henryschein.com. Printed materials
can also be requested through the Company’s Web site.
FORM 10-K
A copy of the Company’s annual report on Form 10-K for the fiscal year ended December 30, 2006, is available
without charge to shareholders upon request to the Company’s Investor Relations department. The report also is
available on the Company’s Web site.
INDEPENDENT REGISTERED ACCOUNTANTS
BDO Seidman, LLP
330 Madison Avenue
New York, New York 10017
LEGAL COUNSEL
Proskauer Rose, LLP
1585 Broadway
New York, New York 10036
STOCK TRANSFER AGENT
For address changes, account cancellation, registration changes and lost stock certificates, please contact:
Continental Stock Transfer & Trust Company
17 Battery Place
New York, New York 10004
(212) 509-4000
24
H E N R Y S C H E I N
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 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 our actual results,
performance and achievements, or industry results to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These
statements are identified by the use of such terms as “may,” “could,”
“expect,” “intend,” “believe,” “plan,” “estimate,” “forecast,”
“project,” “anticipate” or other comparable terms. A full discussion of
our operations and financial condition, including factors that may affect
our business and future prospects, is contained in documents we have
filed with the U.S. Securities and Exchange Commission (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: competitive factors; changes in the healthcare industry; changes in
government regulations that affect us; financial risks associated with our
international operations; fluctuations in quarterly earnings; our
dependence on third parties for the manufacture and supply of our
products; transitional challenges associated with acquisitions; regulatory
and litigation risks; the dependence on our continued product
development, technical support and successful marketing in the
technology segment; our dependence upon sales personnel and key
customers; our dependence on our senior management; possible
increases in the cost of shipping our products or other service trouble
with our third-party shippers; risks from rapid technological change; risks
from potential increases in variable interest rates; financial risks
associated with acquisitions; possible volatility of the market price of our
common stock; certain provisions in our governing documents that may
discourage third-party acquisitions of us; and changes in tax legislation
that affect us. 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,
forward-looking statements should not be relied upon as a prediction of
actual results. We undertake no duty and have no obligation to update
forward-looking statements.
C O R P O R AT E M I S S I O N
To be the worldwide leader
in providing the best quality
and value in products and services
for our healthcare customers.
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
U.S.A.
(631) 843-5500
www.henryschein.com