A N N U A L R E P O R T 2 0 0 7
About
Henry Schein
Henry Schein, Inc., a FORTUNE 500® company and a member of the NASDAQ-100® Index, is the largest
distributor of healthcare products and services to office-based practitioners in the combined North American
and European markets. The Company has been named “Most Admired” in its industry in FORTUNE’s list
of America’s Most Admired Companies, and number one in social responsibility for four consecutive years.
Henry Schein is recognized for its excellent customer
The Company operates through a centralized and
service and highly competitive prices. The Company’s
automated distribution network, which provides
four business groups—Dental, Medical, International
customers in more than 200 countries with a
and Technology—serve more than 550,000 customers
comprehensive selection of more than 90,000
worldwide, including:
• Approximately 85% of the estimated 136,000
U.S. and Canadian office-based dental
practices, as well as dental laboratories;
national and Henry Schein private-brand products
in stock, as well as more than 100,000 additional
products available as special-order items.
Henry Schein also offers a wide range of innovative
value-added practice solutions for healthcare
• Approximately 45% of the estimated 250,000
professionals, such as ARUBA®, the Company’s
U.S. office-based physician practices,
as well as surgical centers and other
alternate-care sites;
• Over 75% of the estimated 27,000 animal
health clinics in the United States;
• Approximately 240,000 office-based dental,
medical and animal health clinics outside of
North America, primarily in Europe, Australia
and New Zealand; and
electronic catalog and ordering system. Its leading
practice-management software solutions have a
user base of more than 52,000 practices, including
DENTRIX®, Easy Dental®, Oasis® and EXACT® for
dental practices, MicroMD® for physician practices,
and AVImark® for animal health clinics.
Headquartered in Melville, New York, Henry Schein
employs more than 12,000 people and has
operations or affiliates in 20 countries.
The Company's net sales reached a record
• Government and other institutions providing
$5.9 billion in 2007. For more information, visit the
healthcare services.
Henry Schein Web site at www.henryschein.com.
1
HENRY SCHEIN
AT A GLANCE:
NET SALES
from Continuing Operations
($ in Millions)
CAGR 17%*
$5,920
$5,048
$4,526
$3,795
$6,000
$5,000
$4,000
$400
$300
Financial
Highlights
OPERATING INCOME
from Continuing Operations (1)
($ in Millions)
EARNINGS PER DILUTED SHARE
from Continuing Operations (1)
CAGR 17%*
$386
CAGR 17%*
$3.00
$304
$262
$2.00
$2.58
$2.03
$1.70
$1.44
$1.39
$1.19
$1.00
$2,000
$1,000
$0
$300
$250
$200
$150
$100
$3,000
$3,181
$2,676
$200
$217
$205
$179
$100
$0
2002
2003
2004
2005
2006
2007
*Compound Annual Growth Rate
2002
2003
2004
2005
2006
2007
$0.00
2002
2003
2004
2005
2006
2007
OPERATING CASH FLOW
AND CAPITAL EXPENDITURES
($ in Millions)
MARKET SIZE
vs. MARKET SHARE
($ in Billions)
Serving a Larger Portion of a Growing Market**
$270
$255
$235
Share: 6%
Share: 23%
$183
$129
$123
Size: $10.0
Size: $25.5
$50
$48
$39
$38
$51
$67
$57
1995
2007
$0
2002
2003
2004
2005
2006
2007
**Market is defined as the distribution of healthcare products
and services primarily to office-based practitioners in
the combined North American and European markets.
2
NOTES:
Operating Income and Earnings Per Diluted Share
from Continuing Operations have been adjusted to
exclude certain one-time items. Refer to Non-GAAP
Disclosures on page 9. 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 diluted share from
continuing operations for the year ended
December 25, 2004 was ($0.10). Excluding this
charge, our earnings per diluted share from
continuing operations for 2004 was $1.39.
Henry Schein At A Glance
DENTAL
MEDICAL
(cid:1) 2007 net sales: $2.46 billion
(cid:1) % of Company sales: 42%
(cid:1) Includes Henry Schein Dental,
Henry Schein Canada and
Zahn Dental Laboratory
(cid:1) Serves approximately 85% of the
(cid:1) 2007 net sales: $1.56 billion
(including Animal Health)
(cid:1) % of Company sales: 26%
(including Animal Health)
(cid:1) Serves approximately 45% of the
estimated 250,000 U.S. office-based
physician practices, as well as surgical
centers and alternate-care sites
estimated 136,000 U.S. and Canadian
(cid:1) Has approximately 17% of the
office-based dental practices,
as well as dental laboratories
(cid:1) Has approximately 40% of the
estimated $6 billion U.S. and
Canadian distribution market
(cid:1) Offers approximately 44,000
products in stock and many
more as special-order items
(cid:1) Key product exclusives/semi-
exclusives: Camlog™ dental implant
system; Colgate® Oral Care Products;
DEXIS® digital radiography products;
i-CAT™ 3-D Imaging Systems;
BIOLASE® dental laser systems;
Milestone Single Tooth Anesthesia™
system; KaVo; Noritake dental
materials; Pelton & Crane;
BruxGuard™; Pentron® Laboratory
Products; and ShadeVision™
estimated $9 billion U.S. distribution
market (including Animal Health)
(cid:1) Offers approximately 37,000 products in
stock and many more as special-order items
(cid:1) Leading supplier of vaccines
(influenza, tetanus/diphtheria toxoid,
pneumonococcal and many others),
injectables and other pharmaceuticals
to physicians and alternate-care sites
(cid:1) Purchase plans for the American
Medical Association, the American
Society of Plastic Surgeons, the American
Academy of Dermatology, and the
American Academy of Ophthalmology
ANIMAL HEALTH
(cid:1) Serves over 75% of the estimated
27,000 U.S. animal health clinics
(cid:1) Offers approximately 23,000 products in
stock and many more as special-order items
(cid:1) Important new product introductions in
2007: Bayer’s Advantage Multi and
ProFender products; Pfizer’s Clavamox;
Summit Vet Pharm’s Vectra 3D;
and Fort Dodge’s Promeris for
Dogs and Cats
INTERNATIONAL
(cid:1) 2007 net sales: $1.77 billion
(cid:1) % of total Company sales: 30%
(cid:1) Has approximately 17% of the
estimated $10.5 billion combined
dental, medical and animal health
market in the European countries in
which we operate
(cid:1) Serves approximately 240,000
office-based dental, medical and
animal health clinics through
operations or affiliates in 18
countries outside of North America:
Australia, Austria, Belgium,
the Czech Republic, France,
Germany, Iceland, Ireland, Israel,
Italy, Luxembourg, the Netherlands,
New Zealand, Portugal, Spain,
Switzerland, the United Arab
TECHNOLOGY AND
VALUE-ADDED SERVICES
(cid:1) 2007 net sales: $132 million
(cid:1) % of total Company sales: 2%
(cid:1) Doing business as Henry Schein Practice
Solutions for dental and Henry Schein
Medical Systems for medical
(cid:1) Practice management and electronic
medical records systems user base
of more than 52,000 dental, medical and
animal health clinics
(cid:1) Key products include: DENTRIX®,
Easy Dental®, DentalVision®, Oasis®, and
EXACT® for dental practices; MicroMD®
for physician practices; LabNet® for dental
laboratories; and AVImark® for animal
health clinics
(cid:1) Value-added services include: repair services
through ProRepair® and COMPLETEcare;
Emirates, the United Kingdom
office design services; continuing education
(cid:1) Schein Direct provides direct air
package delivery service to
practitioners in more than 200
countries around the world
(cid:1) Key 2007 acquisition: W&J Dunlop
Ltd. (U.K., animal health)
for healthcare professionals; electronic health
claims processing (41 million claims
processed in 2007); Office Automation
Technology Solutions; 24/7 ordering capability
through the ARUBA® Web-based electronic
catalog; Financial Services such as
equipment leasing and financing, patient
financing, electronic credit card processing
and credit facilities; and the Privileges™
customer loyalty program
(cid:1) Key 2007 acquisition: Software of
Excellence International Ltd. (U.K., Australia,
New Zealand, dental software)
3
To Our
Stockholders
In 2007, our 75th year of operations, we celebrated our commitment to the five constituencies that have led
to this important business milestone and our ongoing success—our investors, customers, Team Schein,
supplier partners and society. This steadfast commitment helped make 2007 the most successful year in
our Company’s history.
Record Results and Innovation
Growth
Our commitment to our investors was seen in the record
Our Company added important new resources to better serve
financial results we posted for the year. Our net sales for
our customers and expand Team Schein, our greatest asset,
2007 reached a record $5.9 billion, an increase of 17.3%
to more than 12,000 members. We acquired the full-service
over the prior year. This increase includes 14.3% local
and special markets business of Becker-Parkin Dental Supply,
currency growth (7.3% internally generated and 7.0% from
increasing our dental penetration in several important U.S.
acquisitions, net of divestiture) and 3.0% related to foreign
markets. W&J Dunlop Ltd., a leading supplier of animal
currency exchange. Income from continuing operations
health products and services to animal health clinics in
for 2007 was $235 million, or $2.58 per diluted share, an
the United Kingdom, joined the Henry Schein family of
increase of 28.6% and 27.1%, respectively, compared with
companies. We also acquired Software of Excellence
2006. Each of our four business groups posted double-digit
International Ltd., a New Zealand-based supplier of
sales gains for the year with net sales of $2.46 billion for
dental practice management systems and software in the
Dental, $1.56 billion for Medical (including Animal Health),
United Kingdom, Australia and New Zealand.
$1.77 billion for International, and $132 million for Technology.
Strong partnerships with our suppliers resulted in a growing
Additionally we achieved many operational milestones
number of important product exclusives and semi-exclusives,
throughout the year, with the continued implementation of
which now include the Camlog™ dental implant system;
global corporate programs in human resources, information
Colgate® Oral Care Products; DEXIS® digital radiography
technology, inventory management, distribution and other
products; i-CAT™ 3-D Imaging Systems; BIOLASE® dental
key areas. We rolled out innovative programs to leverage our
laser systems; Milestone Single Tooth Anesthesia™ system;
strengths, and our use of technology was recognized publicly
KaVo; Noritake dental materials; Pelton & Crane; Siemens
as Henry Schein ranked 81st in InformationWeek’s Most
refurbished ultrasound equipment; BruxGuard™; Pentron®
Innovative Business Technology Companies.
Laboratory Products; ShadeVision™; and others.
4
A Commitment to Caring
Our commitment to society and our reputation for corporate
is seen in our use of recycled and environmentally-friendly
citizenship continues to grow as Henry Schein has been
products in our catalogs, sales flyers, buyers’ guide and
ranked “Most Admired” in our industry in FORTUNE’s list of
business cards, as well as this annual report; in our Global
America’s Most Admired Companies, and number one in
Reflections offering of all-natural and recycled products; in
social responsibility for four consecutive years.
the use of energy-efficient products throughout our facilities;
Through Henry Schein Cares,
our global social responsibility
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We recognize that corporate social responsibility means much
“Helping Health Happen.”
program, we are
more than simply writing a check for charity—it includes a
commitment to good corporate governance, to environmental
responsibility and to philanthropic community support.
and in our new Henry Schein Dental trade show booth,
which incorporates innovations that makes 60% of the
booth’s construction environmentally-friendly.
We also are committed to using our core competencies
to enhance healthcare advocacy and education; increase
access to healthcare among underserved populations;
strengthen community wellness programs and volunteer
activities; and further humanitarian relief and disaster
response. We achieve this goal through the many activities
we support through Henry Schein Cares, our global social
responsibility program that is “helping health happen.”
Our Henry Schein Cares activities throughout the year were
as diverse as the Team Schein Members who drove their
success. With our supplier partners, we once again
In 2007, in the area of corporate governance, EthiSphere™
supported thousands of dental team volunteers who provided
Magazine awarded Henry Schein an “A”—the only one in our
free treatment to more than 750,000 underserved U.S.
industry—for our Code of Conduct, with particular praise for
children for the ADA’s fifth annual Give Kids A Smile® day.
our commitment to stakeholders and the presentation and
We expanded our Healthy Children, Healthy Lifestyles
style of information. Our ongoing environmental commitment
program to five U.S. cities. In 10 years, our Back to School
5
Looking Ahead
program has supported more than 7,000 children in nine
2007 will be remembered as a milestone year in our
U.S. states and Canada. And our Holiday Cheer for Children
Company’s history. We are confident that we can achieve
program again made the holidays a bit brighter for those who
even more by focusing on the five key priorities detailed in
are less fortunate.
our three-year strategic plan:
In addition to these broad initiatives, Team Schein supported
countless community-based programs throughout 2007.
We cleaned up parks in New Zealand; Denver, Pennsylvania;
Jacksonville, Florida; and Indianapolis, Indiana. We built
homes in Reno, Nevada, and constructed children’s
• Share best practices and services across borders
and business functions
• Consistently deliver superior integrated solutions—
consisting of innovative technology and services—
to meet our customers’ needs in managing their practices
playgrounds on Long Island, New York. We expanded dental
• Become trusted consultants and advisors
outreach programs in Australia, Germany, the Philippines,
to our customers
Mongolia, the Ukraine, and across the African continent. We
• Develop the strategic Henry Schein global brand
supported an orphanage in Ethiopia and helped the homeless
in New York. We also provided humanitarian relief around
the world through our support of MedShare International,
Direct Relief International and other organizations.
Henry Schein uses its core competencies—our distribution
• Ensure that Team Schein Members continue to be
our number one asset
By addressing these priorities and maintaining our strong
commitment to our constituencies, we are confident
that our best years are yet to come. On behalf of our
expertise and our relationships with suppliers and healthcare
Board of Directors and my Team Schein colleagues,
professionals—to create public-private partnerships
we thank you for your continued support.
that can expand the scale and scope of any program.
We encourage non-governmental organizations; local,
Sincerely,
state and Federal governments; professional associations;
educators; and others in industry to pool their resources
with a common goal.
Stanley M. Bergman
Chairman and Chief Executive Officer
6
Stanley M. Bergman
Chairman and Chief Executive Officer
Barry J. 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 J. Kabat (1) (2)
Retired Partner, Accenture, Ltd.
Board of Directors
Philip A. Laskawy (1) (3) (4)
Retired Chairman, Ernst & Young LLP
Norman S. Matthews (2) (4)
Former President, Federated
Department Stores, Inc.
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
Executive Officers
Standing Row, left to right:
Mark E. Mlotek,
Steven Paladino,
Paul Brons,
Louis W. Sullivan,
Norman S. Matthews,
Philip A. Laskawy,
Donald J. Kabat,
Gerald A. Benjamin
Seated Row, left to right:
Barry J. 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
Stanley M. Bergman
Chairman and
Chief Executive Officer
James P. Breslawski
President and
Chief Operating Officer
Gerald A. Benjamin
Executive Vice President and
Chief Administrative Officer
Leonard A. David
Senior Vice President and
Chief Compliance Officer
James Harding
Senior Vice President
and Corporate Chief
Technology Officer
Stanley Komaroff
Senior Advisor
Mark E. Mlotek
Executive Vice President,
Corporate Business
Development
Steven Paladino
Executive Vice President and
Chief Financial Officer
Michael Racioppi
Senior Vice President and
Chief Merchandising Officer
Michael Zack
President,
International Group
7
Henry Schein is Committed to its Five Key Constituencies
Customers
Supplier Partners
for whom we seek to be a trusted advisor
with whom we will achieve
and consultant in building the efficiency and
mutual business success.
success of their practices.
Team Schein
for whom we will continue to foster an
entrepreneurial environment marked by
dignity, respect, and opportunities for
personal and professional growth.
Investors
Society
for whom we will achieve continued growth
in which we will remain a responsible
and profitability and deliver an excellent
corporate citizen, using our core
return on investment.
competencies to give back to the
communities in which we operate.
8
Non-GAAP Disclosures
The following table sets forth, for the periods indicated, a reconciliation of operating income (loss) and income (loss) 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 (loss) 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
$ 191,949
$ 217,432
$ 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
205,195
5.4%
114,129
-
-
-
One-time charge related to influenza vaccine contract
8,358
-
-
-
217,432
6.8%
128,759
-
-
(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
$ 122,487
$ 128,305
$ 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
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 (loss), income (loss) 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.
9
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
U.S.A.
(631) 843-5500
www.henryschein.com