8-K
HENRY SCHEIN INC (HSIC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
| FORM 8-K |
|---|
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2020
| Henry Schein, Inc. |
|---|
(Exact name of registrant as specified in its charter)
| Delaware<br><br>(State or other jurisdiction<br><br>of incorporation) | 0-27078<br><br>(Commission<br><br>File Number) | 11-3136595<br><br>(IRS Employer<br><br>Identification No.) |
|---|---|---|
| 135 Duryea Road, Melville, New York<br><br>(Address of principal executive offices) | 11747<br><br>(Zip Code) |
Registrant’s telephone number, including area code: (631) 843-5500
| (Former name or former address, if changed since last report.) |
|---|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange<br><br>on which registered |
|---|---|---|
| Common Stock, par value $.01 per share | HSIC | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 4, 2020, Henry Schein, Inc. issued a press release reporting the financial results for the three and six months ended June 27, 2020. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 2.02 and the press release attached as Exhibit 99.1 are considered furnished to the Securities and Exchange Commission and are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibit 99.1 – Press Release dated August 4, 2020.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HENRY SCHEIN, INC. | |
|---|---|
| By: | /s/ Steven Paladino |
| Steven Paladino | |
| Executive Vice President and | |
| Chief Financial Officer | |
| (principal financial and accounting | |
| officer) |
August 4, 2020
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated August 4, 2020. |
FOR IMMEDIATE RELEASE
HENRY SCHEIN REPORTS SECOND QUARTER 2020FINANCIAL RESULTS
· Q2 GAAP lossper diluted share from continuing operations of $0.08 versus prior-year GAAPdiluted EPS from continuing operations of $0.78
· Q2 non-GAAPdiluted EPS from continuing operations of $0.00 versus prior-year non-GAAPdiluted EPS from continuing operations of $0.84
· Companymaintains a strong balance sheet with access to significant liquidity
MELVILLE, N.Y., August 4, 2020 – Henry Schein, Inc. (Nasdaq: HSIC), the world’s largest provider of health care solutions to office-based dental and medical practitioners, today reported second quarter 2020 financial results from continuing operations. Results from continuing operations exclude contributions from Henry Schein’s former Animal Health business, which was spun off in February 2019 to form a new publicly traded company, Covetrus (Nasdaq: CVET).
Net sales for the quarter ended June 27, 2020, were $1.7 billion, a decrease of 31.2% compared with the second quarter of 2019 due to the impact of COVID-19. In local currencies, internally generated sales decreased 30.5%. Acquisition growth was immaterial (See Exhibit A for details of sales growth and a reconciliation of this non-GAAP measure to GAAP sales).
GAAP net loss attributable to Henry Schein, Inc. from continuing operations for the second quarter of 2020 was $11.4 million, or a loss of $0.08 per diluted share, compared with prior-year net income from continuing operations of $116.8 million, or $0.78 per diluted share. Non-GAAP net income from continuing operations for the second quarter of 2020 was $0.6 million, or $0.00 per diluted share, compared with prior-year non-GAAP net income from continuing operations of $125.7 million, or $0.84 per diluted share. Non-GAAP results for the second quarter of 2020 and 2019 exclude certain items noted in Exhibit B, which provides a reconciliation of GAAP net income/loss from continuing operations and diluted EPS from continuing operations to non-GAAP net income and diluted EPS from continuing operations.
"Team Schein rose to the significant challenges caused by the global COVID-19 pandemic. These efforts are clear attributes of our corporate culture, which is rooted in care and respect for one another, as well as a commitment to our customers, suppliers, investors, and corporate social responsibility," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "While results for the second quarter are reflective of the current challenging environment, we remain confident in our strategy. Throughout this pandemic, we have focused our dental and medical practice recovery programs to assist our customers with solutions ranging from management of temporary office closures to
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practice safety, new protocol implementation, patient communications, and financial assistance, among many other solutions to help restore practices.
“Regarding our second quarter financial results, COVID-19 significantly impacted our worldwide results, particularly in our Dental business, yet sales improved relative to our original expectations across all our business groups as we progressed through the quarter. This was directly related to a resumption of operations for both our dental and medical customers, which occurred faster than we had anticipated, first in our international markets and then in North America,” said Mr. Bergman. “We remain cautiously optimistic about the immediate future while closely monitoring global diagnosed COVID-19 cases and the potential impact on customer activity, and focusing on cash management. Our enthusiasm for both our near- and long-term business prospects remains unchanged.”
Dental sales for the second quarter of 2020 of $941.3 million decreased 41.2% versus the prior year. In local currencies, internally generated sales decreased 40.1%. Acquisition growth was immaterial. The 40.1% internal decline in local currencies included a decrease of 46.9% in North America and a decrease of 29.5% internationally.
In North America, dental consumable merchandise internal sales in local currencies declined 47.5% and dental equipment internal sales in local currencies declined 44.9%. Internationally, dental consumable merchandise internal sales in local currencies declined 29.2% and dental equipment internal sales in local currencies declined 30.5%.
“We saw positive trends in sales later in the quarter as practices reopened and patients returned for oral care, leading to dental sales in the second quarter that were ahead of our original expectations,” noted Mr. Bergman.
Medical sales for the second quarter of 2020 of $617.8 million decreased 11.4% compared to the same period last year. There was no acquisition growth in the quarter.
“Our second quarter medical sales were fairly resilient, due to strong demand for personal protective equipment (PPE),” remarked Mr. Bergman. “A portion of physician offices in North America remained open throughout the quarter, and sales of consumable merchandise experienced less of a decline than we anticipated. Henry Schein has also worked to make available a variety of COVID-19 point-of-care diagnostic tests and related solutions to our medical customers in response to the pandemic.”
Technology and Value-Added Services sales from continuing operations of $105.2 million decreased 15.9% versus the prior year. In local currencies, internally generated sales decreased 17.0%. Acquisition growth was immaterial.
“Henry Schein One dental software sales began to improve as we progressed through the second quarter, in line with the resumption of dental practice operations. In particular, the monthly trend for transactional software revenues improved as more patients visited dental offices worldwide. The ability for dentists to communicate with patients, providing information on practice reopening plans and safety measures, has been a critical solution for our customers in response to COVID-19,” said Mr. Bergman. “Dental practices have relied on Henry Schein for practice management, patient engagement, and demand creation software solutions, as well as financial services programs as they navigated office closures, staff furloughs, and a resumption of procedure bookings.”
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Year-to-Date Financial Results
Net sales from continuing operations for the first half of 2020 were $4.1 billion, a decrease of 14.5% compared with the first half of 2019. In local currencies, internally generated sales decreased 14.5%.
GAAP net income attributable to Henry Schein, Inc. from continuing operations for the first half of 2020 was $119.2 million, or $0.84 per diluted share, compared with GAAP net income from continuing operations for the first half of 2019 of $235.2 million, or $1.56 per diluted share. Non-GAAP net income from continuing operations for the first half of 2020 was $134.7 million, or $0.94 per diluted share, compared with non-GAAP net income from continuing operations for the first half of 2019 of $246.3 million, or $1.64 per diluted share. Non-GAAP results for the first half of 2020 and 2019 exclude certain items noted in Exhibit B, which provides a reconciliation of GAAP net income from continuing operations and diluted EPS from continuing operations to non-GAAP net income and diluted EPS from continuing operations.
Financial Guidance
Due to the continued uncertainty surrounding the COVID-19 pandemic and its impact to business operations, Henry Schein is not providing 2020 financial guidance at this time.
Second Quarter 2020 Conference Call Webcast
The Company will hold a conference call to discuss second 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.
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 approximately 19,000 Team Schein Members worldwide, the Company's network of trusted advisors provides more than 1 million customers globally with more than 300 valued solutions that improve operational success and clinical outcomes. Our Business, Clinical, Technology, and Supply Chain solutions help office-based dental and medical practitioners work more efficiently so they can provide quality care more effectively. These solutions also support dental laboratories, government and institutional 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. The Company's sales from continuing operations reached $10.0 billion in 2019, and have grown at a compound annual rate of approximately 13 percent since Henry Schein became a public company in 1995.
For more information, visit Henry Schein at www.henryschein.com, Facebook.com/HenrySchein, and @HenrySchein on Twitter.
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Cautionary NoteRegarding 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. 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 percentage impact on these items), the efficacy and impact of the Company’s cost reduction initiatives, the rate at which dental and other practices resume normal operations in the United States and internationally and whether one or more resurgences of the virus will adversely impact the resumption of normal operations. Forward looking statements also include the Company’s ability 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. A full discussion of our operations and financial condition, status of litigation matters, including factors that may affect our business and future prospects, is contained in documents we have filed with the United States Securities and Exchange Commission, or SEC, and will be contained in all subsequent periodic filings we make with the SEC. These documents identify in detail important risk factors that could cause our actual performance to differ materially from current expectations.
Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: effects of a highly competitive and consolidating market; increased competition by third party online commerce sites; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic conditions; risks associated with currency fluctuations; risks associated with political and economic uncertainty; disruptions in financial markets; volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; risks associated with COVID-19, as well as other disease outbreaks, epidemics, pandemics, or similar wide spread public health concerns and other natural disasters; risks associated with the United Kingdom’s withdrawal from the European Union; transitional challenges associated with acquisitions, dispositions and joint ventures, including the failure to achieve anticipated synergies/benefits; financial and tax risks associated with acquisitions, dispositions and joint ventures; litigation risks; new or unanticipated litigation developments and the status of litigation matters; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence on third parties for certain technologically advanced components; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation. The order in which these factors appear should not be construed to indicate their relative importance or priority.
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict. Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.
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Included within the press release are non-GAAP financial measures that supplement the Company’s Consolidated Statements of Income prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company’s actual results prepared under GAAP to exclude certain items. In the schedules attached to this press release, the non-GAAP measures have been reconciled to and should be considered together with the Consolidated Statements of Income. Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.
CONTACTS: Investors
Steven Paladino
Executive Vice President and Chief Financial Officer
steven.paladino@henryschein.com
(631) 843-5500
Carolynne Borders
Vice President, Investor Relations
carolynne.borders@henryschein.com
(631) 390-8105
Media
Ann Marie Gothard
Vice President, Corporate Media Relations
annmarie.gothard@henryschein.com
(631) 390-8169
(TABLES TO FOLLOW)
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| HENRY SCHEIN, INC. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (in thousands, except per share data) | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended | Six Months Ended | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 27, | June 29, | June 27, | June 29, | ||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||
| Net sales | $ | 1,684,399 | $ | 2,447,827 | $ | 4,113,270 | $ | 4,808,095 | |||
| Cost of sales | 1,230,105 | 1,680,396 | 2,912,937 | 3,288,974 | |||||||
| Gross profit | 454,294 | 767,431 | 1,200,333 | 1,519,121 | |||||||
| Operating<br> expenses: | **** | **** | |||||||||
| Selling, general<br> and administrative | 445,793 | 593,218 | 1,013,180 | 1,167,826 | |||||||
| Restructuring<br> costs | 15,934 | 11,925 | 20,721 | 16,566 | |||||||
| Operating income<br> (loss) | (7,433) | 162,288 | 166,432 | 334,729 | |||||||
| Other income<br> (expense): | **** | **** | |||||||||
| Interest income | 1,997 | 3,654 | 5,187 | 8,425 | |||||||
| Interest expense | (10,486) | (12,785) | (18,298) | (29,086) | |||||||
| Other, net | (291) | (1,416) | (511) | (1,835) | |||||||
| Income (loss)<br> from continuing operations before taxes, | **** | **** | |||||||||
| equity in<br> earnings of affiliates and noncontrolling interests | (16,213) | 151,741 | 152,810 | 312,233 | |||||||
| Income tax<br> benefit (expense) | 950 | (35,880) | (36,960) | (75,362) | |||||||
| Equity in<br> earnings of affiliates | 1,411 | 5,556 | 4,145 | 8,186 | |||||||
| Net income<br> (loss) from continuing operations | (13,852) | 121,417 | 119,995 | 245,057 | |||||||
| Income (loss)<br> from discontinued operations, net of tax | 585 | (2,221) | 303 | (11,217) | |||||||
| Net income<br> (loss) | (13,267) | 119,196 | 120,298 | 233,840 | |||||||
| Less: Net<br> (income) loss attributable to noncontrolling interests | 2,470 | (4,664) | (834) | (9,891) | |||||||
| Plus: Net loss attributable<br> to noncontrolling interests | **** | **** | |||||||||
| from<br> discontinued operations | - | - | - | 366 | |||||||
| Net income<br> (loss) attributable to Henry Schein, Inc. | $ | (10,797) | $ | 114,532 | $ | 119,464 | $ | 224,315 | |||
| Amounts<br> attributable to Henry Schein Inc.: | **** | **** | |||||||||
| Continuing<br> operations | $ | (11,382) | $ | 116,753 | $ | 119,161 | $ | 235,166 | |||
| Discontinued<br> operations | 585 | (2,221) | 303 | (10,851) | |||||||
| Net income<br> (loss) attributable to Henry Schein, Inc. | $ | (10,797) | $ | 114,532 | $ | 119,464 | $ | 224,315 | |||
| Earnings (loss) per share from continuing operations attributable to Henry Schein, Inc.: | **** | **** | **** | **** | **** | **** | |||||
| Basic | $ | (0.08) | $ | 0.79 | $ | 0.84 | $ | 1.58 | |||
| Diluted | $ | (0.08) | $ | 0.78 | $ | 0.84 | $ | 1.56 | |||
| Loss per share from discontinued operations attributable to<br><br> <br>Henry Schein, Inc.: | **** | **** | **** | **** | **** | **** | |||||
| Basic | $ | - | $ | (0.01) | $ | - | $ | (0.07) | |||
| Diluted | $ | - | $ | (0.01) | $ | - | $ | (0.07) | |||
| Earnings (loss) per share attributable to Henry Schein, Inc.: | **** | **** | **** | **** | **** | **** | |||||
| Basic | $ | (0.08) | $ | 0.77 | $ | 0.84 | $ | 1.50 | |||
| Diluted | $ | (0.08) | $ | 0.77 | $ | 0.84 | $ | 1.49 | |||
| Weighted-average<br> common shares outstanding: | **** | **** | |||||||||
| Basic | 142,350 | 148,148 | 142,654 | 149,310 | |||||||
| Diluted | 142,350 | 149,423 | 142,654 | 150,560 |
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| June 27, | December 28, | |||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| (unaudited) | **** | |||||
| ASSETS | **** | **** | ||||
| Current assets: | **** | **** | ||||
| Cash and cash<br> equivalents | $ | 296,110 | $ | 106,097 | ||
| Accounts<br> receivable, net of reserves of 80,825 and 60,002 | **** | 1,101,201 | 1,246,246 | |||
| Inventories, net | **** | 1,406,719 | 1,428,799 | |||
| Prepaid expenses<br> and other | **** | 605,176 | 445,360 | |||
| Total current<br> assets | **** | 3,409,206 | 3,226,502 | |||
| Property and<br> equipment, net | **** | 335,898 | 329,645 | |||
| Operating lease<br> right-of-use assets, net | **** | 211,473 | 231,662 | |||
| Goodwill | **** | 2,471,108 | 2,462,495 | |||
| Other<br> intangibles, net | **** | 527,875 | 572,878 | |||
| Investments and<br> other | **** | 362,565 | 327,919 | |||
| Total assets | $ | 7,318,125 | $ | 7,151,101 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | **** | **** | **** | |||
| Current<br> liabilities: | **** | **** | **** | |||
| Accounts payable | $ | 734,957 | $ | 880,266 | ||
| Bank credit<br> lines | **** | 503,178 | 23,975 | |||
| Current<br> maturities of long-term debt | **** | 109,587 | 109,849 | |||
| Operating lease<br> liabilities | **** | 61,710 | 65,349 | |||
| Accrued<br> expenses: | **** | **** | ||||
| **** | 212,178 | 265,206 | ||||
| **** | 210,439 | 165,171 | ||||
| **** | 475,192 | 528,553 | ||||
| Total current<br> liabilities | **** | 2,307,241 | 2,038,369 | |||
| Long-term debt | **** | 515,802 | 622,908 | |||
| Deferred income<br> taxes | **** | 56,925 | 64,989 | |||
| Operating lease<br> liabilities | **** | 163,342 | 176,267 | |||
| Other<br> liabilities | **** | 374,045 | 331,173 | |||
| Total<br> liabilities | **** | 3,417,355 | 3,233,706 | |||
| Redeemable<br> noncontrolling interests | **** | 279,225 | 287,258 | |||
| Commitments and<br> contingencies | **** | **** | ||||
| Stockholders'<br> equity: | **** | **** | ||||
| Preferred stock,<br> .01 par value, 1,000,000 shares authorized, | **** | **** | ||||
| **** | - | - | ||||
| Common stock,<br> .01 par value, 480,000,000 shares authorized, | **** | **** | ||||
| **** | ||||||
| **** | 1,424 | 1,434 | ||||
| Additional<br> paid-in capital | **** | 16,475 | 47,768 | |||
| Retained<br> earnings | **** | 3,172,439 | 3,116,215 | |||
| Accumulated<br> other comprehensive loss | **** | (199,251) | (167,373) | |||
| **** | 2,991,087 | 2,998,044 | ||||
| Noncontrolling<br> interests | **** | 630,458 | 632,093 | |||
| Total<br> stockholders' equity | **** | 3,621,545 | 3,630,137 | |||
| $ | 7,318,125 | $ | 7,151,101 |
All values are in US Dollars.
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
| **** | **** | **** | Three Months Ended | Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | **** | **** | June 27, | June 29, | June 27, | June 29, | ||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Cash flows from operating activities: | **** | **** | **** | **** | ||||||||
| Net income<br> (loss) | $ | (13,267) | $ | 119,196 | $ | 120,298 | $ | 233,840 | ||||
| Income (loss)<br> from discontinued operations | **** | 585 | (2,221) | **** | 303 | (11,217) | ||||||
| Income (loss)<br> from continuing operations | **** | (13,852) | 121,417 | **** | 119,995 | 245,057 | ||||||
| Adjustments to<br> reconcile net income (loss) to net cash provided by (used in) | **** | **** | **** | **** | ||||||||
| operating<br> activities: | **** | **** | **** | **** | ||||||||
| Depreciation and<br> amortization | **** | 47,112 | 49,055 | **** | 96,095 | 89,355 | ||||||
| Stock-based<br> compensation (credit) expense | **** | 5,156 | 12,662 | **** | (12,358) | 19,772 | ||||||
| Provision for<br> losses on trade and other accounts receivable | **** | 14,215 | 2,192 | **** | 28,758 | 3,976 | ||||||
| Provision for<br> (benefit from) deferred income taxes | **** | (35,516) | (5,648) | **** | (32,871) | 2,284 | ||||||
| Equity in<br> earnings of affiliates | **** | (1,411) | (5,556) | **** | (4,145) | (8,186) | ||||||
| Distributions<br> from equity affiliates | **** | 1,807 | 9,056 | **** | 4,220 | 61,357 | ||||||
| Changes in<br> unrecognized tax benefits | **** | 2,955 | 1,221 | **** | 1,380 | 4,435 | ||||||
| Other | **** | 14,151 | (2,284) | **** | 227 | (1,045) | ||||||
| Changes in<br> operating assets and liabilities, net of acquisitions: | **** | **** | **** | **** | ||||||||
| Accounts<br> receivable | **** | 100,955 | (5,872) | **** | 99,672 | (17,452) | ||||||
| Inventories | **** | (59,338) | 8,922 | **** | 13,700 | 86,803 | ||||||
| Other current<br> assets | **** | (166,614) | (44,316) | **** | (176,616) | (62,098) | ||||||
| Accounts payable<br> and accrued expenses | **** | (1,220) | 24,603 | **** | (138,900) | (125,472) | ||||||
| Net cash<br> provided by (used in) operating activities from continuing operations | **** | (91,600) | 165,452 | **** | (843) | 298,786 | ||||||
| Net cash<br> provided by (used in) operating activities from discontinued operations | **** | 855 | (2,221) | **** | 573 | (169,294) | ||||||
| Net cash<br> provided by (used in) operating activities | **** | (90,745) | 163,231 | **** | (270) | 129,492 | ||||||
| Cash flows from investing activities: | **** | **** | **** | **** | ||||||||
| Purchases of<br> fixed assets | **** | (7,580) | (14,790) | **** | (30,588) | (30,708) | ||||||
| Payments related<br> to equity investments and business | **** | **** | **** | **** | ||||||||
| acquisitions,<br> net of cash acquired | **** | 222 | (18,468) | **** | (37,725) | (622,441) | ||||||
| Proceeds from<br> sale of equity investment | **** | - | - | **** | - | 10,500 | ||||||
| Proceeds from<br> (repayments to) loan to affiliate | **** | (2,866) | (72) | **** | (1,729) | 15,868 | ||||||
| Other | **** | (5,812) | (5,686) | **** | (11,599) | (8,762) | ||||||
| Net cash used in<br> investing activities from continuing operations | **** | (16,036) | (39,016) | **** | (81,641) | (635,543) | ||||||
| Net cash used in<br> investing activities from discontinued operations | **** | - | - | **** | - | (2,064) | ||||||
| Net cash used in<br> investing activities | **** | (16,036) | (39,016) | **** | (81,641) | (637,607) | ||||||
| Cash flows from financing activities: | **** | **** | **** | **** | ||||||||
| Net change in<br> bank borrowings | **** | 121,063 | (56,895) | **** | 479,702 | (709,012) | ||||||
| Proceeds from<br> issuance of long-term debt | **** | 251,421 | - | **** | 501,421 | 741 | ||||||
| Principal<br> payments for long-term debt | **** | (601,102) | (1,662) | **** | (609,580) | (9,038) | ||||||
| Debt issuance<br> costs | **** | (3,597) | (391) | **** | (3,655) | (391) | ||||||
| Proceeds from<br> issuance of stock upon exercise of stock options | **** | - | - | **** | - | 34 | ||||||
| Payments for<br> repurchases of common stock | **** | - | (76,782) | **** | (73,789) | (226,782) | ||||||
| Payments for<br> taxes related to shares withheld for employee taxes | **** | (558) | (856) | **** | (13,713) | (10,527) | ||||||
| Distribution<br> received related to Animal Health Spin-off | **** | - | - | **** | - | 1,120,000 | ||||||
| Proceeds related<br> to Animal Health Share Sale | **** | - | - | **** | - | 361,090 | ||||||
| Proceeds from<br> (distributions to) noncontrolling shareholders | **** | 198 | (2,807) | **** | (3,466) | 49,398 | ||||||
| Acquisitions of<br> noncontrolling interests in subsidiaries | **** | (9) | 3,787 | **** | (14,934) | (2,270) | ||||||
| Proceeds from<br> (payments to) Henry Schein Animal Health Business | **** | 3,026 | 11,816 | **** | 64 | (212,957) | ||||||
| Net cash<br> provided by (used in) financing activities from continuing operations | **** | (229,558) | (123,790) | **** | 262,050 | 360,286 | ||||||
| Net cash<br> provided by (used in) financing activities from discontinued operations | **** | (855) | 2,221 | **** | (573) | 150,274 | ||||||
| Net cash<br> provided by (used in) financing activities | **** | (230,413) | (121,569) | **** | 261,477 | 510,560 | ||||||
| Effect of<br> exchange rate changes on cash and cash equivalents from | **** | **** | **** | **** | ||||||||
| continuing<br> operations | **** | 15,936 | (5,837) | **** | 10,447 | 4,510 | ||||||
| Effect of<br> exchange rate changes on cash and cash equivalents from | **** | **** | **** | **** | ||||||||
| discontinued<br> operations | **** | - | - | **** | - | (2,240) | ||||||
| Net change in<br> cash and cash equivalents from continuing operations | **** | (321,258) | (3,191) | **** | 190,013 | 28,039 | ||||||
| Net change in<br> cash and cash equivalents from discontinued operations | **** | - | - | **** | - | (23,324) | ||||||
| Cash and cash<br> equivalents, beginning of period | **** | 617,368 | 88,115 | **** | 106,097 | 56,885 | ||||||
| Cash and cash<br> equivalents, end of period | $ | 296,110 | $ | 84,924 | $ | 296,110 | $ | 84,924 |
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| Exhibit A - QTD Sales | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Henry Schein, Inc. | |||||||||
| 2020 Second Quarter | |||||||||
| Sales Summary | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| Q2 2020 over Q2 2019 | |||||||||
| Global | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 941,292 | $ | 1,601,350 | -41.2% | -1.2% | -40.0% | 0.1% | -40.1% |
| Medical | 617,810 | 697,558 | -11.4% | 0.0% | -11.4% | 0.0% | -11.4% | ||
| Total Health<br> Care Distribution | 1,559,102 | 2,298,908 | -32.2% | -0.9% | -31.3% | 0.1% | -31.4% | ||
| Technology and<br> value-added services | 105,227 | 125,051 | -15.9% | -0.5% | -15.4% | 1.6% | -17.0% | ||
| Total excluding<br> Corporate TSA Revenue | 1,664,329 | 2,423,959 | -31.3% | -0.8% | -30.5% | 0.1% | -30.6% | ||
| Corporate TSA<br> revenues (1) | 20,070 | 23,868 | -15.9% | 0.0% | -15.9% | 0.0% | -15.9% | ||
| Total Global | $ | 1,684,399 | $ | 2,447,827 | -31.2% | -0.9% | -30.3% | 0.2% | -30.5% |
| North America | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 515,946 | $ | 975,371 | -47.1% | -0.1% | -47.0% | -0.1% | -46.9% |
| Medical | 596,588 | 678,358 | -12.1% | 0.0% | -12.1% | 0.0% | -12.1% | ||
| Total Health<br> Care Distribution | 1,112,534 | 1,653,729 | -32.7% | -0.1% | -32.6% | 0.0% | -32.6% | ||
| Technology and<br> value-added services | 92,927 | 108,505 | -14.4% | -0.1% | -14.3% | 0.8% | -15.1% | ||
| Total excluding<br> Corporate TSA Revenue | 1,205,461 | 1,762,234 | -31.6% | -0.1% | -31.5% | 0.0% | -31.5% | ||
| Corporate TSA<br> revenues (1) | - | 1,760 | n/a | n/a | n/a | n/a | n/a | ||
| Total North America | $ | 1,205,461 | $ | 1,763,994 | -31.7% | -0.1% | -31.6% | 0.0% | -31.6% |
| International | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 425,346 | $ | 625,979 | -32.1% | -3.1% | -29.0% | 0.5% | -29.5% |
| Medical | 21,222 | 19,200 | 10.5% | -2.8% | 13.3% | 0.0% | 13.3% | ||
| Total Health<br> Care Distribution | 446,568 | 645,179 | -30.8% | -3.0% | -27.8% | 0.4% | -28.2% | ||
| Technology and<br> value-added services | 12,300 | 16,546 | -25.7% | -2.8% | -22.9% | 6.9% | -29.8% | ||
| Total excluding<br> Corporate TSA Revenue | 458,868 | 661,725 | -30.7% | -3.0% | -27.7% | 0.5% | -28.2% | ||
| Corporate TSA<br> revenues (1) | 20,070 | 22,108 | -9.2% | 0.0% | -9.2% | 0.0% | -9.2% | ||
| Total International | $ | 478,938 | $ | 683,833 | -30.0% | -2.9% | -27.1% | 0.5% | -27.6% |
| (1) Corporate<br> TSA revenues represents sales of certain products to Covetrus under the<br> transition services agreement entered into in connection with the Animal<br> Health spin-off, which we expect to continue through October 2020. | |||||||||
| Note: Certain<br> prior period amounts have been reclassified to conform to the current period<br> presentation. |
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| Exhibit A - YTD Sales | **** | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Henry Schein, Inc. | |||||||||
| 2020 Second Quarter Year-to-Date | |||||||||
| Sales Summary | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| Q2 2020 Year-to Date over Q2 2019 Year-to-Date | |||||||||
| Global | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 2,416,368 | $ | 3,147,730 | -23.2% | -1.4% | -21.8% | 0.4% | -22.2% |
| Medical | 1,418,498 | 1,381,218 | 2.7% | -0.1% | 2.8% | 1.9% | 0.9% | ||
| Total Health<br> Care Distribution | 3,834,866 | 4,528,948 | -15.3% | -1.0% | -14.3% | 0.8% | -15.1% | ||
| Technology and<br> value-added services | 237,192 | 240,649 | -1.4% | -0.4% | -1.0% | 4.8% | -5.8% | ||
| Total excluding<br> Corporate TSA Revenue | 4,072,058 | 4,769,597 | -14.6% | -1.0% | -13.6% | 1.1% | -14.7% | ||
| Corporate TSA<br> revenues (1) | 41,212 | 38,498 | 7.0% | 0.0% | 7.0% | 0.0% | 7.0% | ||
| Total Global | $ | 4,113,270 | $ | 4,808,095 | -14.5% | -1.0% | -13.5% | 1.0% | -14.5% |
| North America | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 1,404,318 | $ | 1,898,877 | -26.0% | 0.0% | -26.0% | 0.0% | -26.0% |
| Medical | 1,374,616 | 1,340,653 | 2.5% | 0.0% | 2.5% | 1.9% | 0.6% | ||
| Total Health<br> Care Distribution | 2,778,934 | 3,239,530 | -14.2% | 0.0% | -14.2% | 0.8% | -15.0% | ||
| Technology and<br> value-added services | 206,425 | 207,510 | -0.5% | 0.0% | -0.5% | 4.4% | -4.9% | ||
| Total excluding<br> Corporate TSA Revenue | 2,985,359 | 3,447,040 | -13.4% | 0.0% | -13.4% | 1.0% | -14.4% | ||
| Corporate TSA<br> revenues (1) | - | 3,021 | n/a | n/a | n/a | n/a | n/a | ||
| Total North America | $ | 2,985,359 | $ | 3,450,061 | -13.5% | -0.1% | -13.4% | 1.0% | -14.4% |
| International | Q2 2020 | Q2 2019 | Total Sales Growth | Foreign Exchange Growth | Local Currency Growth | Acquisition Growth | Local Internal Growth | ||
| Dental | $ | 1,012,050 | $ | 1,248,853 | -19.0% | -3.5% | -15.5% | 1.0% | -16.5% |
| Medical | 43,882 | 40,565 | 8.2% | -2.8% | 11.0% | 0.0% | 11.0% | ||
| Total Health<br> Care Distribution | 1,055,932 | 1,289,418 | -18.1% | -3.5% | -14.6% | 1.0% | -15.6% | ||
| Technology and<br> value-added services | 30,767 | 33,139 | -7.2% | -2.7% | -4.5% | 7.0% | -11.5% | ||
| Total excluding<br> Corporate TSA Revenue | 1,086,699 | 1,322,557 | -17.8% | -3.4% | -14.4% | 1.1% | -15.5% | ||
| Corporate TSA<br> revenues (1) | 41,212 | 35,477 | 16.2% | 0.0% | 16.2% | 0.0% | 16.2% | ||
| Total International | $ | 1,127,911 | $ | 1,358,034 | -16.9% | -3.3% | -13.6% | 1.1% | -14.7% |
| (1) Corporate<br> TSA revenues represents sales of certain products to Covetrus under the<br> transition services agreement entered into in connection with the Animal<br> Health spin-off, which we expect to continue through October 2020. | |||||||||
| Note: Certain<br> prior period amounts have been reclassified to conform to the current period<br> presentation. |
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| Exhibit B | **** | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Henry Schein, Inc. | ||||||||||||
| 2020 Second Quarter and Year-to-Date | ||||||||||||
| Reconciliation of reported GAAP net income (loss) 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) | ||||||||||||
| **** | **** | Second Quarter | Year-to-Date | **** | ||||||||
| **** | **** | **** | % | % | **** | |||||||
| 2020 | **** | 2019 | Growth | 2020 | **** | 2019 | Growth | **** | ||||
| Net income (loss) from continuing operations attributable to Henry Schein, Inc. | $ | (11,382) | $ | 116,753 | (109.7) | % | $ | 119,161 | $ | 235,166 | (49.3) | % |
| Diluted EPS from continuing operations attributable to Henry Schein, Inc. | $ | (0.08) | $ | 0.78 | (110.3) | % | $ | 0.84 | $ | 1.56 | (46.2) | % |
| Non-GAAP Adjustments | ||||||||||||
| Restructuring costs - Pre-tax<br> (1) | $ | 15,934 | $ | 11,925 | $ | 20,721 | $ | 16,566 | ||||
| Income tax benefit for<br> restructuring costs (1) | (3,983) | (2,982) | (5,180) | (4,142) | ||||||||
| Tax credit related to Animal<br> Health spin-off (2) | - | - | - | (1,333) | ||||||||
| Total non-GAAP adjustments to Net Income from continuing operations | $ | 11,951 | $ | 8,943 | **** | **** | $ | 15,541 | $ | 11,091 | ||
| Non-GAAP adjustments to diluted EPS from continuing operations | **** | 0.08 | **** | 0.06 | **** | **** | **** | 0.11 | **** | 0.07 | ||
| Non-GAAP Net income from continuing operations attributable to Henry Schein, Inc. | $ | 569 | $ | 125,696 | (99.5) | % | $ | 134,702 | $ | 246,257 | (45.3) | % |
| Non-GAAP diluted EPS from continuing operations attributable to Henry Schein, Inc. | $ | 0.00 | $ | 0.84 | (100.0) | % | $ | 0.94 | $ | 1.64 | (42.7) | % |
Management believes that non-GAAP financial measures provideinvestors with useful supplemental information about the financial performanceof our business, enable comparison of financial results between periods wherecertain items may vary independent of business performance and allow forgreater transparency with respect to key metrics used by management inoperating our business. These non-GAAP financial measures are presented solelyfor informational and comparative purposes and should not be regarded as areplacement for corresponding, similarly captioned, GAAP measures. Earningsper share numbers may not sum due to rounding.
(1) Represents Q2 2020 restructuring costs of $15,934, net of $3,983 tax benefit, resulting in an after-tax effect of $11,951, and YTD 2020 restructuring costs of 20,721, net of $5,180 tax benefit, resulting in an after-tax effect of $15,541. Represents Q2 2019 restructuring costs of $11,925, net of $2,982 tax benefit, resulting in an after-tax effect of $8,943, and YTD 2019 restructuring costs of 16,566, net of $4,142 tax benefit, resulting in an after-tax effect of $12,424.
(2) 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 7th, 2019.
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