henry schein
DESCRIPTION
Presentation for investors I created while at Henry Schein. The information herein is public.TRANSCRIPT
NASDAQ: HSICwww.henryschein.com
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HSIC is the largest distributor of healthcare products and services to office-based practitioners
in North America and Europe
Serving Dental, Physician and Animal Health practitionersBroad range of value-added products and services
• One-stop shop for our customersOperations or affiliates in 20 countries Fortune 500® companyMember of the NASDAQ 100® Index
Corporate Overview
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1995 Worldwide Sales: $616 million
2007 Worldwide Sales: $5.9 billion
Dental52%
Tech4%
Int'l17%
Medical27%
Tech2%
Int'l30%
Dental42%
Medical26%
From Continuing Operations
12 Years as a Public Company
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(1) Includes Animal Health
Share Size Share SizeMarket ($ in billions) ($ in billions)U.S. & Canada Dental 11% $3.0 40% 6.0U.S. Medical (1) 3% 4.8 17% 9.0Europe Dental 5% 2.2 18% 6.5Europe Medical (1) ___ _____ 15% 4.0TOTAL 6% $10.0 23% $25.5
20071995Estimated Market
Serving Large and Growing Markets
5% Annual Market Growth
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Attractive Market Dynamics
(1) U.S. Census Bureau
144m
131m
75m
93m
115m
30m
60m
90m
120m
150m
180m
1990 2000 2010 2020 2030
U.S
. Pop
ulat
ion
Age
45-
84 (m
illio
ns)1
45-84 year-old population projected to almost double between 1990-2030
Aging Population Driving Healthcare Spending
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Consistent Growth
Recession Resistant
Fragmented Competitors
Positive Business Environment
Fragmented Customer Base
Markets Served
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Dental Demand is Increasing
Increased dental insurance coverage2
Greater emphasis on cosmetic dentistry3
Growing awareness of correlation between oral health and overall well-beingIncreasing use of dental pharmaceutical therapies and non-invasive diagnostic proceduresGreater dental practice productivity required(1) Centers for Medicare & Medicaid Services, National Health Expenditures Projections(2) 57% of the US population covered in 2006 v. 49% in 1996; NADP(3) Demand has increased 13% over the past 3 years; AACD
Dental services expenditures are expected to increase 6% in each of the next 5 years1
Key Growth Drivers
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Medical Demand is Increasing
Aging populationMigration of procedures from acute-care settings to physician and alternate-care setting
63% of all surgeries are out-patient procedures2
Continued growth in use of vaccines, injectables and other pharmaceuticals in the alternate-care settingStrong growth in companion animal health business
(1) Centers for Medicare & Medicaid Services, National Health Expenditures Projections(2) Centers for Disease Control and Prevention
Physician and clinical services expenditures are expected to increase 6% in
each of the next 5 years1
Key Growth Drivers
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EfficiencyProductivityProfitability
Allowing our customers to focus on delivering quality care to their patients
Company Objective
Improve Practice
Our primary objective is to partner with our customers
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Key Company Strengths
1) Unique Sales and Marketing Expertise
2) Centralized Leveragable Infrastructure
3) Broad Product and Services Offering
4) Superior Customer Service
5) Large Practice Management User Base
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1. Unique Sales and Marketing Expertise
• Strong brand identity with over 75 years of experience
• Extensive direct marketing programs • Highly trained sales professionals
2,600 field sales consultants and specialists1,450 telesales representativesExtensive training to develop consultative selling skills
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60% of reps visit the web site monthly60% of reps visit the web site monthly
Extensive Consultative Selling Skills
Classroom and Web-Based Training
Clinical Techniques
Practice Management
Solutions
Products
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Driving more productive customer interactions
Customer Analysis Tool (CAT)
Proprietary call planning systemColor coding ranks sales activity
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Scalable Centralized Supply Chain
Product Procurement
Expertise
Inventory Management
e-commerce
70-75% utilization……With Capacity for Growth
2. Centralized Leveragable Infrastructure
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3. Broad Product and Services Offering
90,000 SKUs in stock
100,000 special order
itemsavailable
~20,000 proprietary products
Competitive Prices
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Exclusive Product Offerings
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Design Services
Value-Added Services
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4. Superior Customer Service
99% Order Accuracy• 24/7 ordering by mail, fax, telephone, CD-Rom and Web
• In North America:99% fulfillment levels99% of orders shipped same day99% of orders delivered within 2 days (~ 90% next day)99% order accuracy
• 2007 web sales up over 25%
• Innovative Customer Loyalty programs
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Innovative Customer Loyalty Programs
• Designed to attract, retain, and reward dental customers
• Over 25,000 U.S. Dental members
• Drives faster sales and electronic ordering growth
• Similar programs active in 12 international markets• Program recently introduced in U.S. Medical
business
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5. Practice Management Solutions
Installed Base of Over 52,000 Users
Helping our customers become more efficient and profitable
• #1 in customer satisfaction• Integrates with digital
equipment• Provides cross-selling
opportunities
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Key Strategies for Future Growth
• Expand value-added products and services • Practice management software• Financing, Credit card processing and e-claims• Continuing education
• Increase customer penetration• Customer loyalty programs• Equipment sales and repair services
• Increase number of new customers• Increase number of field sales consultants
Transition from a Pure Distribution Company
Goal - Partner With Customers to Improve Quality of Care
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Key Strategies for Future Growth
• Continue to develop the specialty business• Implants, orthodontics, surgical, dermatology and pediatrics
• Expand product and service offering• Additional exclusive and semi-exclusive distribution
agreements
• Realize sourcing synergies and supply chain initiatives• Globalize inventory management• Increase sales of Henry Schein proprietary products
• Pursue strategic acquisitions
Pursue Complementary Initiatives…
… To Accelerate Sales and Operating Income Growth
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Safe Harbor Provision
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.
Certain portions of this presentation include information that is forward-looking. Certain risks and uncertainties could cause our future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied in this presentation. Such forward-looking statements should not be relied upon as a prediction of actual results.
We undertake no duty and have no obligation to update such forward-looking statements, and we refer you to the cautionary language contained in our filings with the Securities and Exchange Commission.
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21%
28%
28bp1
31%
18%
Sales
Operating Income
Operating Margin
Net Income
Diluted EPS
$616.2
$19.3
3.1%
$9.1
$0.34
1995
$5,920.2
$386.3
6.5%
$235.0
$2.58
Compound Annual
Growth Rate2007
($ in millions, except per share data)
From continuing operations and excluding certain non-recurring items1 Average annual expansion
Growth Since Going Public
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First Quarter 2008
Financial Highlights
Q1 2008 GrowthQ1 2007
Sales $1,525.6 $1,310.1 16.4%
Operating Income $85.2 $73.7 15.6%
Operating Margin 5.59% 5.63% (4) bp
Net Income $52.3 $43.5 20.3%
Diluted EPS $0.57 $0.48 18.8%
($ in millions, except per share data)
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Net Sales
$2,676$3,181
$3,795
$4,526$5,048
$5,920
$1,000
$3,000
$5,000
$7,000
2002 2003 2004 2005 2006 2007
($ in millions)
19%19%
19%12%
17%
11%
CAGR 17%
From Continuing Operations
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Long-Term Financial Objectives
Internal Sales Growth GoalIndustry growth rate 5%
+ Increase in market share 2- 4%Internal Sales Growth Goal 7- 9%
* Local currency ** Adjusted for extra week in 2005
2002 2003 2004 2005 2006**2007Internal 9% 13% 8% 8% 7% 7%Acquisition 1% 2% 11% 11% 5% 7%
Total Sales Growth 10% 15% 19% 19% 12% 14%As originally reported except as noted
Actual Sales Growth*
Future sales growth will be a balance of internal growth and acquisitions
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Strategic Acquisitions
2004 Key Strategic Benefit• Demedis Group Expands European dental equipment offering• Camlog Entrée into the growing market for dental implants
2005• Ash Temple Expands presence in Canadian Dental market• Halas / Shalfoon Strengthens position in Australia and New Zealand
2006• NLS Animal Health Expands presence in U.S. Veterinary market• Darby Companies Strengthens U.S. Dental, Medical and Lab presence• Provet Expands presence in European Veterinary market
2007• Software of
Excellence Provides leading position in U.K. Dental Software market• W&J Dunlop Expands presence in European Veterinary market
Successfully integrated over 30 acquisitions since 2000Revenue1
$345m
$60m
$110m$220m
1 Represents the approximate revenue in the fiscal year prior to acquisition or expectation for revenue contribution in the 12 months immediately following acquisition date
$100m
$50m
$20m$340m
$30m
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$179$217 $205
$262$304
$386
$0
$100
$200
$300
$400
2002 2003 2004 2005 2006 2007
($ in Millions)
Operating Income and Margin
21%
(1) Reflects absence of influenza vaccine profits
-6%28%
16%
27%
All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs
6.7% 6.8% 5.4% 5.8% 6.0% 6.5%Operating Margin
34%
CAGR 17%
1
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Actual Results: 1995 2007
Operating Margin 3.1% 6.5%
Long-Term Financial Objectives
All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs
Average 28 bp annual increase since going public
Goals:• Internal sales growth of at least 7-9%.
• Operating margin expansion of 30 to 50 bpper year
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Diluted EPS and Net Income
$1.19$1.44 $1.39
$1.70$2.03
$2.58
$0.00
$1.00
$2.00
$3.00
2002 2003 2004 2005 2006 2007
21% -3%22%
19%
27%
All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs
(1) Reflects absence of influenza vaccine profits
$105.6 $128.3 $122.5 $150.7 $182.7 $235.0Net Income
29%
CAGR 17%
1
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Long-Term Financial Objectives
Goals:• Internal sales growth of at least 7-9%
• Operating margin expansion of 30 to 50 bp per year
Actual Results:
1995 2007
EPS $.34 $2.58
All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs
18% CAGR since going public
• Earnings Per Share growth in the mid-teens or greater (before acquisitions)
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Operating Cash Flow
$129.1
$47.5
$123.2
$39.0
$182.6
$37.8
$254.8
$50.8
$235.3
$67.0
$270.2
$56.8
$0.0
$100.0
$200.0
$300.0
2002 2003 2004 2005 2006 2007
Operating Cash Flow Capital Expenditures
($ in Millions)
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Long-Term Financial Objectives
Goals:
• Internal sales growth of at least 7-9%
• Operating margin expansion of 30 to 50 bp per year
• Earnings Per Share growth in the mid-teens or greater (before acquisitions)
Since 2002 operating cash flow has exceeded net income by over $265 million
Actual Results
All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs
• Cash flow from operations to exceed net income
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Strong Balance Sheet
Cash & Equiv.
Working Capital
Total Assets
Total Debt
Equity
DSOs
Inventory Turns
Net Debt to Total Capitalization Ratio
22.5%20.3%
32.6%29.6%
25.3%
20.4%
0%
10%
20%
30%
40%
2002 2003 2004 2005 2006 2007
Debt to Total Capitalization Ratio$239.0
$983.8
$3,388.5
$458.6
$1,885.8
42.2 days
6.3x
10.4%
($ in millions)
March 29, 2008
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Investment Merits
• Leading presence in fragmented growing markets
• Providing high quality service to office-based healthcare practitioners
• Strong brand recognition
• Highly experienced management team
• Significant growth opportunities