Henry Schein Reports Fourth Quarter 2020 Financial Results From Continuing Operations

MELVILLE, N.Y.–(BUSINESS WIRE)–Henry Schein, Inc. (Nasdaq: HSIC), the world’s largest provider of health care solutions to office-based dental and medical practitioners, today reported 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).

Total net sales for the quarter ended December 26, 2020, were $3.2 billion, an increase of 18.6% compared with the fourth quarter of 2019, driven by sales of personal protective equipment (PPE) and COVID-19 related products. The 18.6% increase included 17.1% internal growth in local currencies, 0.3% growth from acquisitions and 1.2% growth related to foreign currency exchange. (See Exhibit A for details of sales growth).

GAAP net income attributable to Henry Schein, Inc. from continuing operations for the fourth quarter of 2020 was $141.9 million, or $0.99 per diluted share, compared with prior-year GAAP net income from continuing operations of $330.6 million, or $2.25 per diluted share, which included a net gain on sale of equity investments of approximately $186.8 million, or $1.27 per diluted share. Non-GAAP net income from continuing operations for the fourth quarter of 2020 was $143.6 million, or $1.00 per diluted share, compared with prior-year non-GAAP net income from continuing operations of $143.0 million, or $0.97 per diluted share. 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. Operating margin was unfavorably impacted by significant inventory adjustments associated with PPE and COVID-19 related products, and lower supplier rebates, partially offset by lower expenses as a percentage of sales. Operating margin was also negatively impacted by a non-cash intangible asset impairment charge of approximately $18.1 million, or $0.07 per diluted share. Both GAAP and non-GAAP net income for the fourth quarter 2020 were favorably impacted by income tax resolutions in the U.S. and internationally, which lowered income tax expense by approximately $14.6 million, or $0.10 per diluted share.

“Against the backdrop of a most challenging year in our history due to the COVID-19 pandemic, with an unprecedented human toll and economic impact worldwide, Henry Schein’s unwavering focus on our customers, along with our resilience and agility, enabled us to deliver fourth quarter total net sales growth of 18.6%. In addition, we delivered record total net sales growth for the second half of 2020 as our end markets have rebounded, and we recognize the commitment and sacrifice of our Team Schein Members globally,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “We were successful in supporting practices that were initially open for emergency services and also assisting customers preparing to restore practices to increased operating capacity as restrictions eased. Over time, we expect that patient traffic will improve to pre-COVID-19 levels.”

“I remain confident that Henry Schein is well-positioned for future continued success given the breadth of our products, services and support across the global dental and medical markets,” Mr. Bergman continued.

Dental sales for the fourth quarter of 2020 of $1.8 billion increased 7.2% versus the prior-year. In local currencies, internally generated sales increased 5.1% with 0.4% growth from acquisitions and 1.7% growth related to foreign currency exchange. The 5.1% internal growth in local currencies included a decline of 0.7% in North America and an increase of 14.2% internationally.

Global dental consumable merchandise internal sales increased by 10.0% in local currencies. Excluding PPE and COVID-19 related products, sales increased by 5.0%. In North America, dental consumable merchandise internal sales in local currencies increased 5.3%, or 0.4% excluding PPE and COVID-19 related products, and dental equipment internal sales in local currencies decreased 13.2%. Dental equipment sales performance was impacted by a difficult prior-year comparison. In addition, we believe some practices potentially held off on year-end equipment purchases as U.S. tax incentives may be more favorable in 2021. Internationally, dental consumable merchandise internal sales in local currencies increased 16.7%, or 11.4% excluding PPE and COVID-19 related products, and dental equipment internal sales in local currencies increased 6.8%.

“We reported strong overall global dental sales growth in the fourth quarter. High-acuity procedures, including dental specialties and restorative procedures, also contributed to year-over-year sales growth. The 5.0% quarterly growth rate for global dental consumable sales is among the highest recorded by Henry Schein since 2017. International sales results for both consumable merchandise and equipment were strong. Dental patient traffic has remained at stable levels compared to the third quarter of 2020, even in countries experiencing more stringent lockdown rules, with the exception of the U.K.,” noted Mr. Bergman.

Medical sales for the fourth quarter of 2020 of $1.2 billion increased 48.5% compared with the same period last year, consisting of 48.2% growth in local currencies with 0.3% growth related to foreign currency exchange. There was no acquisition growth in the quarter.

“Our Medical business experienced strong year-over-year sales growth in the fourth quarter driven by continued demand for PPE and COVID-19 related products, most specifically for COVID-19 test sales. For the second quarter in a row, our global Medical business has achieved over $1 billion in quarterly sales,” remarked Mr. Bergman. “Excluding sales of PPE and COVID-19 related products, sales increased by approximately 3.6%. We believe solid COVID-19 test sales growth is likely to continue while COVID-19 cases remain at relatively high levels.”

Technology and Value-Added Services sales of $138.7 million increased 1.2% versus the prior-year. The 1.2% increase included a decline of 0.7% in internal local currency sales, offset by 1.2% growth from acquisitions and 0.7% growth related to foreign currency exchange.

“Technology and Value-Added Services sales in the quarter were impacted by lower transactional revenue associated with a lower number of patient visits compared to pre-COVID-19 practice volume. We also experienced a difficult prior-year comparison that benefited from hardware upgrades as we helped transition customers to address new operating system requirements. In addition, lower dental equipment sales volume in North America impacted our hardware revenue,” said Mr. Bergman. “We were pleased with solid growth in our Dentrix Ascend cloud-based software and North America financial services sales. We continue to invest in our technology solutions, including Henry Schein One, which is a key resource to help drive business success for dental practices.”

2020 Financial Results

Total net sales for 2020 were $10.1 billion, an increase of 1.3% compared with 2019. In local currencies, internally generated sales increased 0.8%. Changes in foreign currency exchange resulted in a 0.1% decline in sales, while acquisitions contributed 0.6% to growth.

GAAP net income attributable to Henry Schein, Inc. from continuing operations for 2020 was $402.8 million, or $2.81 per diluted share, compared with GAAP net income from continuing operations for 2019 of $700.7 million, or $4.69 per diluted share. Non-GAAP net income from continuing operations for 2020 was $425.3 million, or $2.97 per diluted share, compared with non-GAAP net income from continuing operations for 2019 of $523.6 million, or $3.51 per diluted share. The decline in non-GAAP net income was driven by COVID-19, primarily during the second quarter. 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.

Stock Repurchase Plan

Prior to the suspension of the Company’s share repurchase program due to COVID-19, for fiscal year 2020 Henry Schein repurchased approximately 1.2 million shares of common stock at an average price of $61.49 for a total of $73.8 million. At fiscal year-end, Henry Schein had $201 million authorized and available for future stock repurchases. Pursuant to amendments to certain credit facilities, Henry Schein is restricted from engaging in stock repurchases until the Company reports second-quarter 2021 financial results.

Financial Guidance

Henry Schein today introduced guidance for 2021 non-GAAP diluted EPS from continuing operations. At this time, the Company is not providing guidance for 2021 GAAP diluted EPS from continuing operations as it is unable to provide an accurate estimate of expenses related to an ongoing restructuring initiative in 2021. Financial guidance is as follows:

  • 2021 non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc. is expected to be at or above 2019 non-GAAP diluted EPS from continuing operations of $3.51. The Company believes the comparison to 2019 non-GAAP diluted EPS from continuing operations is most appropriate given the impact of COVID-19 on 2020 results of operations.
  • Guidance for 2021 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, restructuring expenses or share repurchases. 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. Guidance does not assume any material market changes associated with COVID-19.

Adjustments to Projected 2021 Non-GAAP Diluted EPS

The Company has provided guidance for 2021 non-GAAP diluted EPS from continuing operations, as noted above. A reconciliation to the Company’s projected 2021 diluted EPS from continuing operations prepared on a GAAP basis is not provided because the Company is unable to provide without unreasonable effort an estimate of costs related to an ongoing restructuring program to mitigate stranded costs and drive additional operating efficiencies, including the corresponding tax effect that will be included in the Company’s 2021 diluted EPS from continuing operations prepared on a GAAP basis. The inability to provide these reconciliations is due to the uncertainty and inherent difficulty of predicting the occurrence, magnitude, financial impact, and the timing of related costs. 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 2020 Conference Call Webcast

The Company will hold a conference call to discuss fourth quarter 2020 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 for a period of one week.

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 help 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 health care 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 and territories. The Company’s sales reached $10.1 billion in 2020, and have grown at a compound annual rate of approximately 12 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 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 fuller discussion of our operations, financial condition, and 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. Forward looking statements include the overall impact of the Novel Coronavirus Disease 2019 (COVID-19) on the Company, its results of operations, liquidity, and financial condition (including any estimates of the impact on these items), the rate and consistency with which dental and other practices resume or maintain normal operations in the United States and internationally, expectations regarding personal protective equipment (“PPE”) and COVID-19 related product sales and inventory levels and whether additional resurgences of the virus will adversely impact the resumption of normal operations, the impact of restructuring programs as well as of any future acquisitions, and more generally current expectations regarding performance in current and future periods. Forward looking statements also include the (i) ability of the Company to make additional testing available, the nature of those tests and the number of tests intended to be made available and the timing for availability, the nature of the target market, as well as the efficacy or relative efficacy of the test results given that the test efficacy has not been, or will not have been, independently verified under normal FDA procedures and (ii) potential for the Company to distribute the COVID-19 vaccines and ancillary supplies.

Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: risks associated with COVID-19, as well as other disease outbreaks, epidemics, pandemics, or similar wide spread public health concerns and other natural disasters or acts of terrorism; our dependence on third parties for the manufacture and supply of our products; our ability to develop or acquire and maintain and protect new products (particularly technology products) and technologies that achieve market acceptance with acceptable margins; 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; certain provisions in our governing documents that may discourage third-party acquisitions of us; effects of a highly competitive (including, without limitation, competition from third-party online commerce sites) and consolidating market; the potential repeal or judicial prohibition on implementation of the Affordable Care Act; changes in the health care industry; 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 and political conditions, including international trade agreements and potential trade barriers; failure to comply with existing and future regulatory requirements; risks associated with the EU Medical Device Regulation; failure to comply with laws and regulations relating to health care fraud or other laws and regulations; failure to comply with laws and regulations relating to the confidentiality of sensitive personal information or standards in electronic health records or transmissions; changes in tax legislation; litigation risks; new or unanticipated litigation developments and the status of litigation matters; cyberattacks or other privacy or data security breaches; risks associated with our global operations; our dependence on our senior management, as well as employee hiring and retention; and disruptions in financial markets. 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.

(TABLES TO FOLLOW)

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Years Ended

 

 

December 26,

 

December 28,

 

December 26,

 

December 28,

 

 

2020

 

2019

 

2020

 

2019

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

3,165,725

 

$

2,668,941

 

$

10,119,141

 

$

9,985,803

Cost of sales

 

 

2,306,014

 

 

1,858,343

 

 

7,304,798

 

 

6,894,917

Gross profit

 

 

859,711

 

 

810,598

 

 

2,814,343

 

 

3,090,886

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

674,131

 

 

615,323

 

 

2,246,947

 

 

2,357,920

Restructuring costs (credits)

 

 

4,380

 

 

(1,059)

 

 

32,093

 

 

14,705

Operating income

 

 

181,200

 

 

196,334

 

 

535,303

 

 

718,261

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,361

 

 

3,389

 

 

9,842

 

 

15,757

Interest expense

 

 

(11,968)

 

 

(9,333)

 

 

(41,377)

 

 

(50,792)

Other, net

 

 

(1,663)

 

 

(907)

 

 

(3,873)

 

 

(2,919)

Income from continuing operations before taxes, equity in earnings of affiliates and noncontrolling interests

 

 

169,930

 

 

189,483

 

 

499,895

 

 

680,307

Income taxes

 

 

(29,409)

 

 

(42,189)

 

 

(95,374)

 

 

(159,515)

Equity in earnings of affiliates

 

 

4,536

 

 

3,129

 

 

12,344

 

 

17,900

Net gain on sale of equity investments

 

 

1,572

 

 

186,769

 

 

1,572

 

 

186,769

Net income from continuing operations

 

 

146,629

 

 

337,192

 

 

418,437

 

 

725,461

Income (loss) from discontinued operations, net of tax

 

 

712

 

 

(747)

 

 

986

 

 

(6,323)

Net income

 

 

147,341

 

 

336,445

 

 

419,423

 

 

719,138

Less: Net income attributable to noncontrolling interests

 

 

(4,708)

 

 

(6,583)

 

 

(15,629)

 

 

(24,770)

Plus: Net loss attributable to noncontrolling interests from discontinued operations

 

 

 

 

 

 

 

 

366

Net income attributable to Henry Schein, Inc.

 

$

142,633

 

$

329,862

 

$

403,794

 

$

694,734

Amounts attributable to Henry Schein Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

141,921

 

$

330,609

 

$

402,808

 

$

700,691

Discontinued operations

 

 

712

 

 

(747)

 

 

986

 

 

(5,957)

Net income attributable to Henry Schein, Inc.

 

$

142,633

 

$

329,862

 

$

403,794

 

$

694,734

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.00

 

$

2.27

 

$

2.83

 

$

4.74

Diluted

 

$

0.99

 

$

2.25

 

$

2.81

 

$

4.69

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

$

(0.01)

 

$

0.01

 

$

(0.04)

Diluted

 

$

 

$

(0.01)

 

$

0.01

 

$

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Henry Schein, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.00

 

$

2.27

 

$

2.83

 

$

4.70

Diluted

 

$

1.00

 

$

2.24

 

$

2.82

 

$

4.65

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

142,379

 

 

145,404

 

 

142,504

 

 

147,817

Diluted

 

 

143,328

 

 

147,078

 

 

143,404

 

 

149,257

 

 

 

 

 

 

 

 

 

 

 

 

 

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

December 26,

 

December 28,

 

 

2020

 

2019

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

421,185

 

$

106,097

Accounts receivable, net of reserves of $88,030 and $60,002

 

 

1,424,787

 

 

1,246,246

Inventories, net

 

 

1,512,499

 

 

1,428,799

Prepaid expenses and other

 

 

432,944

 

 

445,360

Total current assets

 

 

3,791,415

 

 

3,226,502

Property and equipment, net

 

 

342,004

 

 

329,645

Operating lease right-of-use assets, net

 

 

288,847

 

 

231,662

Goodwill

 

 

2,504,392

 

 

2,462,495

Other intangibles, net

 

 

479,429

 

 

572,878

Investments and other

 

 

366,445

 

 

327,919

Total assets

 

$

7,772,532

 

$

7,151,101

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,005,655

 

$

880,266

Bank credit lines

 

 

73,366

 

 

23,975

Current maturities of long-term debt

 

 

109,836

 

 

109,849

Operating lease liabilities

 

 

64,716

 

 

65,349

Accrued expenses:

 

 

 

 

 

 

Payroll and related

 

 

295,329

 

 

265,206

Taxes

 

 

138,671

 

 

165,171

Other

 

 

595,529

 

 

528,553

Total current liabilities

 

 

2,283,102

 

 

2,038,369

Long-term debt

 

 

515,773

 

 

622,908

Deferred income taxes

 

 

30,065

 

 

64,989

Operating lease liabilities

 

 

238,727

 

 

176,267

Other liabilities

 

 

392,781

 

 

331,173

Total liabilities

 

 

3,460,448

 

 

3,233,706

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

327,699

 

 

287,258

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, 142,462,571 outstanding on December 26, 2020 and 143,353,459 outstanding on December 28, 2019

 

 

1,425

 

 

1,434

Additional paid-in capital

 

 

 

 

47,768

Retained earnings

 

 

3,454,831

 

 

3,116,215

Accumulated other comprehensive loss

 

 

(108,084)

 

 

(167,373)

Total Henry Schein, Inc. stockholders’ equity

 

 

3,348,172

 

 

2,998,044

Noncontrolling interests

 

 

636,213

 

 

632,093

Total stockholders’ equity

 

 

3,984,385

 

 

3,630,137

Total liabilities, redeemable noncontrolling interests and stockholders’ equity

 

$

7,772,532

 

$

7,151,101

 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended

 

Years Ended

 

 

December 26,

 

December 28,

 

December 26,

 

December 28,

 

 

2020

 

2019

 

2020

 

2019

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

147,341

 

$

336,445

 

$

419,423

 

$

719,138

Income (loss) from discontinued operations

 

 

712

 

 

(747)

 

 

986

 

 

(6,323)

Income from continuing operations

 

 

146,629

 

 

337,192

 

 

418,437

 

 

725,461

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

47,023

 

 

48,732

 

 

185,538

 

 

184,942

Impairment charge on intangible assets

 

 

18,126

 

 

 

 

20,275

 

 

Gain on sale of equity investments

 

 

(2,096)

 

 

(250,167)

 

 

(2,096)

 

 

(250,167)

Stock-based compensation expense

 

 

15,436

 

 

11,810

 

 

8,788

 

 

44,920

Provision for losses on trade and other accounts receivable

 

 

547

 

 

5,036

 

 

35,137

 

 

12,612

Benefit from deferred income taxes

 

 

(4,784)

 

 

(589)

 

 

(52,977)

 

 

(4,057)

Equity in earnings of affiliates

 

 

(4,536)

 

 

(3,129)

 

 

(12,344)

 

 

(17,900)

Distributions from equity affiliates

 

 

5,949

 

 

3,556

 

 

16,002

 

 

71,469

Changes in unrecognized tax benefits

 

 

(6,516)

 

 

(1,594)

 

 

(24,881)

 

 

1,941

Other

 

 

10,876

 

 

7,806

 

 

5,012

 

 

5,684

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

10,509

 

 

42,695

 

 

(189,349)

 

 

(72,689)

Inventories

 

 

(5,987)

 

 

(60,391)

 

 

(31,817)

 

 

14,702

Other current assets

 

 

45,267

 

 

13,057

 

 

(6,479)

 

 

(57,291)

Accounts payable and accrued expenses

 

 

68,662

 

 

141,284

 

 

224,273

 

 

160,851

Net cash provided by operating activities from continuing operations

 

 

345,105

 

 

295,298

 

 

593,519

 

 

820,478

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

 

 

4,743

 

 

(2,738)

 

 

5,391

 

 

(166,391)

Net cash provided by operating activities

 

 

349,848

 

 

292,560

 

 

598,910

 

 

654,087

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

 

(11,030)

 

 

(27,263)

 

 

(48,829)

 

 

(76,219)

Proceeds (payments) related to equity investments and business acquisitions, net of cash acquired

 

 

(7,965)

 

 

1,214

 

 

(60,173)

 

 

(655,879)

Proceeds from sale of equity investment

 

 

2,020

 

 

296,751

 

 

14,020

 

 

307,251

Proceeds from (repayments to) loan to affiliate

 

 

208

 

 

265

 

 

(1,243)

 

 

16,713

Other

 

 

(4,296)

 

 

(1,927)

 

 

(18,794)

 

 

(14,175)

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

 

 

(21,063)

 

 

269,040

 

 

(115,019)

 

 

(422,309)

Net cash used in investing activities from discontinued operations

 

 

 

 

 

 

 

 

(2,064)

Net cash provided by (used in) investing activities

 

 

(21,063)

 

 

269,040

 

 

(115,019)

 

 

(424,373)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net change in bank borrowings

 

 

(439,057)

 

 

(84,066)

 

 

45,082

 

 

(927,912)

Proceeds from issuance of long-term debt

 

 

 

 

 

 

501,421

 

 

741

Principal payments for long-term debt

 

 

(759)

 

 

(250,692)

 

 

(611,216)

 

 

(260,944)

Debt issuance costs

 

 

(196)

 

 

 

 

(3,879)

 

 

(391)

Debt extinguishment costs

 

 

 

 

 

 

(401)

 

 

Proceeds from issuance of stock upon exercise of stock options

 

 

 

 

 

 

 

 

34

Payments for repurchases of common stock

 

 

 

 

(200,000)

 

 

(73,789)

 

 

(525,000)

Payments for taxes related to shares withheld for employee taxes

 

 

(292)

 

 

(63)

 

 

(14,299)

 

 

(10,814)

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

 

 

(3,891)

 

 

(1,931)

 

 

(7,886)

 

 

51,498

Acquisitions of noncontrolling interests in subsidiaries

 

 

(4,604)

 

 

 

 

(19,538)

 

 

(2,358)

Proceeds from (payments to) Henry Schein Animal Health Business

 

 

2,572

 

 

(2,738)

 

 

2,711

 

 

(169,295)

Net cash used in financing activities from continuing operations

 

 

(446,227)

 

 

(539,490)

 

 

(181,794)

 

 

(363,351)

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

 

 

(4,743)

 

 

2,738

 

 

(5,391)

 

 

147,371

Net cash used in financing activities

 

 

(450,970)

 

 

(536,752)

 

 

(187,185)

 

 

(215,980)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents from continuing operations

 

 

9,875

 

 

5,993

 

 

18,382

 

 

14,394

Effect of exchange rate changes on cash and cash equivalents from discontinued operations

 

 

 

 

 

 

 

 

(2,240)

Net change in cash and cash equivalents from continuing operations

 

 

(112,310)

 

 

30,841

 

 

315,088

 

 

49,212

Net change in cash and cash equivalents from discontinued operations

 

 

 

 

 

 

 

 

(23,324)

Cash and cash equivalents, beginning of period

 

 

533,495

 

 

75,256

 

 

106,097

 

 

56,885

Cash and cash equivalents, end of period

 

$

421,185

 

$

106,097

 

$

421,185

 

$

106,097

 

Exhibit A – Fourth Quarter Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry Schein, Inc.

2020 Fourth Quarter

Sales Summary

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2020 over Q4 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

 

Q4 2020

 

Q4 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

1,846,372

 

$

1,722,154

 

7.2%

 

1.7%

 

5.5%

 

0.4%

 

5.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

1,171,373

 

 

788,659

 

48.5%

 

0.3%

 

48.2%

 

0.0%

 

48.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

3,017,745

 

 

2,510,813

 

20.2%

 

1.3%

 

18.9%

 

0.3%

 

18.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

138,711

 

 

137,102

 

1.2%

 

0.7%

 

0.5%

 

1.2%

 

-0.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

3,156,456

 

 

2,647,915

 

19.2%

 

1.2%

 

18.0%

 

0.4%

 

17.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

9,269

 

 

21,026

 

-55.9%

 

0.0%

 

-55.9%

 

0.0%

 

-55.9%

Total Global

 

$

3,165,725

 

$

2,668,941

 

18.6%

 

1.2%

 

17.4%

 

0.3%

 

17.1%

 

North America

 

Q4 2020

 

Q4 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

1,058,367

 

$

1,061,077

 

-0.3%

 

0.1%

 

-0.4%

 

0.3%

 

-0.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

1,137,313

 

 

769,135

 

47.9%

 

0.0%

 

47.9%

 

0.0%

 

47.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

2,195,680

 

 

1,830,212

 

20.0%

 

0.1%

 

19.9%

 

0.1%

 

19.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

119,456

 

 

117,608

 

1.6%

 

0.1%

 

1.5%

 

0.9%

 

0.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

2,315,136

 

 

1,947,820

 

18.9%

 

0.1%

 

18.8%

 

0.2%

 

18.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

 

 

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total North America

 

$

2,315,136

 

$

1,947,820

 

18.9%

 

0.1%

 

18.8%

 

0.2%

 

18.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

Q4 2020

 

Q4 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

788,005

 

$

661,077

 

19.2%

 

4.3%

 

14.9%

 

0.7%

 

14.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

34,060

 

 

19,524

 

74.5%

 

11.4%

 

63.1%

 

0.0%

 

63.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

822,065

 

 

680,601

 

20.8%

 

4.5%

 

16.3%

 

0.7%

 

15.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

19,255

 

 

19,494

 

-1.2%

 

4.4%

 

-5.6%

 

2.8%

 

-8.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

841,320

 

 

700,095

 

20.2%

 

4.6%

 

15.6%

 

0.6%

 

15.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

9,269

 

 

21,026

 

-55.9%

 

0.0%

 

-55.9%

 

0.0%

 

-55.9%

Total International

 

$

850,589

 

$

721,121

 

18.0%

 

4.4%

 

13.6%

 

0.7%

 

12.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 ended in December 2020.

Exhibit A – Full Year Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry Schein, Inc.

Full Year 2020

Sales Summary

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full Year 2020 over Full Year 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global

 

Full Year 2020

 

Full Year 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

5,912,593

 

$

6,415,865

 

-7.8%

 

-0.2%

 

-7.6%

 

0.4%

 

-8.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

3,617,017

 

 

2,973,586

 

21.6%

 

0.0%

 

21.6%

 

0.9%

 

20.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

9,529,610

 

 

9,389,451

 

1.5%

 

-0.1%

 

1.6%

 

0.5%

 

1.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

514,258

 

 

515,085

 

-0.2%

 

0.1%

 

-0.3%

 

2.9%

 

-3.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

10,043,868

 

 

9,904,536

 

1.4%

 

-0.1%

 

1.5%

 

0.6%

 

0.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

75,273

 

 

81,267

 

-7.4%

 

0.0%

 

-7.4%

 

0.0%

 

-7.4%

Total Global

 

$

10,119,141

 

$

9,985,803

 

1.3%

 

-0.1%

 

1.4%

 

0.6%

 

0.8%

   

North America

 

Full Year 2020

 

Full Year 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

3,471,521

 

$

3,911,746

 

-11.3%

 

-0.1%

 

-11.2%

 

0.0%

 

-11.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

3,514,670

 

 

2,894,137

 

21.4%

 

0.0%

 

21.4%

 

0.9%

 

20.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

6,986,191

 

 

6,805,883

 

2.6%

 

-0.1%

 

2.7%

 

0.4%

 

2.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

446,830

 

 

445,317

 

0.3%

 

-0.1%

 

0.4%

 

2.6%

 

-2.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

7,433,021

 

 

7,251,200

 

2.5%

 

0.0%

 

2.5%

 

0.5%

 

2.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

 

 

4,098

 

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total North America

 

$

7,433,021

 

$

7,255,298

 

2.4%

 

-0.1%

 

2.5%

 

0.5%

 

2.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

Full Year 2020

 

Full Year 2019

 

Total Sales

Growth

 

Foreign

Exchange

Growth

 

Local

Currency

Growth

 

Acquisition

Growth

 

Local

Internal

Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

$

2,441,072

 

$

2,504,119

 

-2.5%

 

-0.5%

 

-2.0%

 

0.8%

 

-2.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

 

102,347

 

 

79,449

 

28.8%

 

2.6%

 

26.2%

 

0.0%

 

26.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Health Care Distribution

 

 

2,543,419

 

 

2,583,568

 

-1.6%

 

-0.4%

 

-1.2%

 

0.7%

 

-1.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology and value-added services

 

 

67,428

 

 

69,768

 

-3.4%

 

0.9%

 

-4.3%

 

5.8%

 

-10.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total excluding Corporate TSA Revenue

 

 

2,610,847

 

 

2,653,336

 

-1.6%

 

-0.4%

 

-1.2%

 

0.9%

 

-2.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate TSA revenues (1)

 

 

75,273

 

 

77,169

 

-2.5%

 

0.0%

 

-2.5%

 

0.0%

 

-2.5%

Total International

 

$

2,686,120

 

$

2,730,505

 

-1.6%

 

-0.3%

 

-1.3%

 

0.8%

 

-2.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 ended in December 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Henry Schein, Inc.

 

2020 Fourth Quarter and Full Year

 

Reconciliation of reported GAAP net income from continuing operations and

 

diluted EPS from continuing operations attributable to Henry Schein, Inc.

 

to non-GAAP net income from continuing operations and

 

diluted EPS from continuing operations attributable to Henry Schein, Inc.

 

(in thousands, except per share data)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter

 

 

 

Full Year

 

 

 

 

 

 

 

 

 

%

 

 

 

 

 

 

 

 

%

 

 

 

 

2020

 

 

2019

 

Growth

 

 

 

2020

 

 

2019

 

Growth

 

Net Income from continuing operations attributable to Henry Schein, Inc.

 

$

141,921

 

$

330,609

 

(57.1)

%

 

$

402,808

 

$

700,691

 

(42.5)

%

Diluted EPS from continuing operations attributable to Henry Schein, Inc.

 

$

0.99

 

$

2.25

 

(56.0)

%

 

$

2.81

 

$

4.69

 

(40.1)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring costs (credits) – Pre-tax (1)

 

$

4,380

 

$

(1,059)

 

 

 

 

$

32,093

 

$

14,705

 

 

 

Income tax expense (benefit) for restructuring costs (credits) (1)

 

 

(1,095)

 

 

265

 

 

 

 

 

(8,023)

 

 

(3,676)

 

 

 

Net gain on sale of equity investments (2)

 

 

(1,572)

 

 

(186,769)

 

 

 

 

 

(1,572)

 

 

(186,769)

 

 

 

Tax credit related to Animal Health spin-off (3)

 

 

 

 

 

 

 

 

 

 

 

(1,333)

 

 

 

Total non-GAAP adjustments to Net Income from continuing operations

 

$

1,713

 

$

(187,563)

 

 

 

 

$

22,498

 

$

(177,073)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments to diluted EPS from continuing operations

 

$

0.01

 

$

(1.28)

 

 

 

 

$

0.16

 

$

(1.19)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income from continuing operations attributable to Henry Schein, Inc.

 

$

143,634

 

$

143,046

 

0.4

%

 

$

425,306

 

$

523,618

 

(18.8)

%

Non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc.

 

$

1.00

 

$

0.97

 

3.1

%

 

$

2.97

 

$

3.51

 

(15.4)

%

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. Earnings per share numbers may not sum due to rounding.

(1) 

Represents Q4 2020 restructuring costs of $4,380, net of $1,095 tax benefit, resulting in an after-tax effect of $3,285, and 2020 restructuring costs of $32,093, net of $8,023 tax benefit, resulting in an after-tax effect of $24,070. Represents Q4 2019 restructuring credits of $1,059, net of $265 tax expense, resulting in an after-tax effect of $794, and 2019 restructuring costs of $14,705 net of $3,676 tax benefit, resulting in an after-tax effect of $11,029.

(2) 

Represents a net after-tax gain on a sale of equity investments during Q4 2020 and Q4 2019.

(3) 

Represents a change in estimate of $1,333 to income tax expense related to a one-time tax expense recorded in Q4 2018 as a result of a reorganization of legal entities completed in preparation for the Animal Health spin-off, which was completed on February 7, 2019.