================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
-----------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended June 29, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-27078
HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3136595
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
135 Duryea Road
Melville, New York 11747
(Address of principal executive
offices)
Telephone Number (516) 843-5500
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No [ ]
As of August 12, 1996, there were 22,037,394 shares of the Registrant's
Common Stock outstanding.
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<PAGE>
HENRY SCHEIN, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
June 29, 1996 and December 30, 1995...........................3
Consolidated Statements of Operations
Three and six months ended June 29, 1996 and July 1, 1995.....4
Consolidated Statements of Cash Flows
Six months ended June 29, 1996 and July 1, 1995...............5
Notes to Consolidated Financial Statements ........................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders ..............13
Item 5. Other Information ................................................13
Item 6. Exhibits and Reports on Form 8-K .................................13
Signature ........................................................13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 29, December 30,
1996 1995
----------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 92,851 $ 7,603
Accounts receivable, less reserves of
$5,841 and $6,335,
respectively 112,637 91,248
Inventories 97,600 96,515
Deferred income taxes 6,760 6,896
Other 19,230 19,492
--------- ---------
Total current assets 329,078 221,754
Property and equipment, net of accumulated
depreciation of $36,343
and $33,904, respectively 33,218 29,713
Goodwill and other intangibles, net of
accumulated amortization of
$2,541 and 1,795, respectively 28,612 24,389
Investments and other 23,089 21,011
--------- ---------
$ 413,997 $ 296,867
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,229 $ 65,105
Bank credit lines 8,156 9,325
Accruals:
Salaries and related expenses 9,632 9,074
Premium coupon redemptions 3,643 4,474
Other 20,410 26,534
Current maturities of long-term debt 3,259 3,343
--------- ---------
Total current liabilities 110,329 117,855
Long-term debt 25,274 30,381
Other liabilities 1,167 1,233
--------- ---------
Total liabilities 136,770 149,469
--------- ---------
Minority interest 4,308 4,547
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized
60,000,000; issued and
outstanding 22,093,048 and 18,358,673,
respectively 221 183
Additional paid-in capital 247,898 123,866
Retained earnings 26,424 19,746
Treasury stock, at cost, 55,654 and 51,679
shares, respectively (913) (769)
Foreign currency translation adjustment (711) (175)
--------- ---------
Total stockholders' equity 272,919 142,851
--------- ---------
$ 413,997 $ 296,867
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
------------------------ -----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ............................... $ 194,722 $ 139,753 $ 380,081 $ 275,793
Cost of sales ........................... 136,792 97,646 267,202 193,371
--------- --------- --------- ---------
Gross profit .......................... 57,930 42,107 112,879 82,422
Operating expenses:
Selling, general and administrative.... 51,460 37,418 101,705 74,747
Special management compensation ....... -- 15,497 -- 15,497
--------- --------- --------- ---------
Operating income (loss) ............ 6,470 (10,808) 11,174 (7,822)
Other income (expense):
Interest income ....................... 748 70 1,143 139
Interest expense ...................... (1,348) (1,393) (2,309) (2,681)
Other-net ............................. 79 78 (18) 175
--------- --------- --------- ---------
Income (loss) before taxes on
income, minority interest and
equity in earnings of affiliates . 5,949 (12,053) 9,990 (10,189)
Taxes on income ......................... 2,040 1,515 3,823 2,296
Minority interest in net income (loss) of
subsidiaries .......................... 56 124 (14) 296
Equity in earnings of affiliates ........ 361 261 497 286
--------- --------- --------- ---------
Net income (loss) ....................... $ 4,214 $ (13,431) $ 6,678 $ (12,495)
========= ========= ========= =========
Net income per common share ............. $ .22 $ .35
========= =========
Pro forma :
Historical net income (loss) .......... $ (13,431) $ (12,495)
Pro forma adjustments:
Special management compensation .... 15,497 15,497
--------- ---------
Pro forma net income .................... $ 2,066 $ 3,002
========= =========
Pro forma net income per common share ... $ .17 $ .25
========= =========
Weighted average common and common
equivalent shares outstanding ......... 19,092 18,887
========= =========
Pro forma weighted average common and
common equivalent shares outstanding .. 12,184 12,184
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
------------------------
June 29, July 1,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ....................................................... $ 6,678 $ (12,495)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................................ 3,513 1,871
Provision (benefit) for losses on accounts receivable ................ (216) 121
Benefit for deferred income taxes .................................... (358) (610)
Special management compensation ...................................... -- 15,497
Undistributed earnings of affiliates ................................. (497) (286)
Minority interest in net income (loss) of subsidiaries ............... (14) 296
Other ................................................................ 80 81
Changes in assets and liabilities:
Increase in accounts receivable .................................... (18,490) (12,309)
Decrease in inventories ............................................ 965 8,950
Decrease in other current assets ................................... 298 1,612
Decrease in accounts payable and accruals .......................... (9,239) (3,981)
--------- ---------
Net cash used in operating activities ..................................... (17,280) (1,253)
--------- ---------
Cash flows from investing activities:
Capital expenditures .................................................... (5,251) (3,951)
Business acquisitions, net of cash acquired.............................. (6,963) (518)
Other ................................................................... (1,496) (776)
--------- ---------
Net cash used in investing activities ..................................... (13,710) (5,245)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt ................................ 846 1,408
Principal payments on long-term debt .................................... (4,270) (943)
Proceeds from issuance of stock ......................................... 124,070 --
Proceeds from borrowings from banks ..................................... 2,392 5,525
Payments on borrowings from banks ....................................... (5,894) (43)
Purchase of treasury stock .............................................. (144) --
Other ................................................................... (762) 683
--------- ---------
Net cash provided by financing activities ................................. 116,238 6,630
--------- ---------
Net increase in cash and cash equivalents ................................. 85,248 132
Cash and cash equivalents, beginning of period ............................ 7,603 4,450
--------- ---------
Cash and cash equivalents, end of period .................................. $ 92,851 $ 4,582
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
(unaudited)
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of Henry Schein, Inc.
and its wholly-owned and majority-owned subsidiaries (collectively, the
"Company").
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the information set forth
therein. These consolidated financial statements are condensed and therefore do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 30, 1995. The Company
follows the same accounting policies in preparation of interim reports. The
results of operations for the six months ended June 29, 1996 are not necessarily
indicative of the results to be expected for the fiscal year ending December 28,
1996.
Note 2. Business Acquisitions
During 1995, the Company acquired fourteen healthcare distribution businesses
including, on July 7, 1995, the distribution business of The Veratex Corporation
("Veratex"), a national direct marketer of medical, dental and veterinary
products. Veratex had net sales of approximately $19,853 for the six months
ended July 1, 1995. The Veratex acquisition also provides for contingent
payments of up to approximately $2,000 if certain financial targets are
satisfied.
The 1995 acquisitions, except as set forth below, were accounted for using the
purchase method of accounting. One acquisition was from an affiliate and has
been accounted for using the purchase method of accounting, with carry-over of
predecessor basis with respect to the affiliate's proportionate share of net
assets. Operations of these businesses have been included in the consolidated
financial statements from their respective acquisition dates.
The Company completed three acquisitions during the six months ended June 29,
1996. The 1996 acquisitions were not material.
The excess of the acquisition costs over the fair value of identifiable net
assets acquired will be amortized on a straight-line basis over a period not to
exceed 30 years.
6
<PAGE>
HENRY SCHEIN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(in thousands, except share data)
(unaudited)
Note 2. Business Acquisitions (cont'd)
The summarized unaudited pro forma results of operations set forth below for the
six months ended July 1, 1995 assume the 1995 acquisitions occurred as of the
beginning of the period.
Six Months
Ended
------------
July 1, 1995
------------
Net sales............................................. $312,057
Pro forma net income.................................. 2,732
Pro forma net income per common share................. $0.20
Pro forma net income per common share, including acquisitions, may not be
indicative of actual results, primarily because the pro forma earnings include
historical results of operations of acquired entities and do not reflect any
cost savings that may result from the Company's integration efforts.
Note 3. Public Offering
On June 21, 1996, the Company sold 3,734,375 shares and certain of its
stockholders sold 2,812,000 shares of Common Stock of the Company in a public
offering at $35.00 per share, netting proceeds to the Company, after
underwriting discounts and expenses, of approximately $124,070. Proceeds from
the Offering were used to (i) repay $34,600 outstanding under the Company's
revolving credit agreement, and (ii) repay a $2.4 million note payable incurred
in connection with a 1995 acquisition; the remaining proceeds will be used for
general corporate purposes, including financing possible acquisitions.
Note 4. Supplemental Net Income per Share
Supplemental net income per share for the six months ended June 29, 1996 was
$0.37. For this calculation, the weighted average number of common shares
includes the shares assumed to provide the proceeds, at the public offering
price (see Note 3), needed to retire average revolving credit borrowings and
debt for the period from the beginning of the year (or the date the debt was
incurred) to the respective retirement date. The net income was adjusted to
exclude the related financing and interest expenses of the debt.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 29, 1996 compared to
Three Months Ended July 1, 1995
Net sales increased $54.9 million, or 39.3%, to $194.7 million for the three
months ended June 29, 1996 from $139.8 million for the three months ended July
1, 1995. The Company estimates that approximately 22.2% of the net sales growth
was due to internal growth, while the remaining 17.1% was due to acquisitions.
Of the $54.9 million increase, approximately $32.3 million represented a 43.9%
increase in the Company's dental business, $13.3 million represented a 47.3%
increase in its medical business, $7.6 million represented a 29.6% increase in
its international business, and $1.7 million represented a 23.0% increase in the
Company's veterinary business. Technology net sales remained consistent with
last year's results. The dental net sales increase was primarily the result of
the effectiveness of the Company's integrated sales and marketing approach
(which coordinates the efforts of its field sales consultants with its direct
marketing and telesales personnel), acquisitions and entering the U.S. market
for large dental equipment. The medical net sales increase was primarily due to
acquisitions, increased net sales to renal dialysis centers and increased
outbound telesales activity. In the international market, the increase in net
sales was primarily due to acquisitions and increased unit volume growth. In the
veterinary market, the increase in net sales was primarily due to increased
account penetration and an acquisition. In the technology market, the Company
has experienced a lengthening of the sales cycle for migrating "DOS" customers
to a Windows product, causing net sales to remain basically at last year's
level. The Company believes that for the balance of 1996, technology net sales
will experience modest growth over 1995 net sales levels.
Gross profit increased by $15.8 million, or 37.5%, to $57.9 million for the
three months ended June 29, 1996 from $42.1 million for the three months ended
July 1, 1995, while gross profit margin decreased to 29.7% from 30.1%. The $15.8
million increase in gross profit was primarily due to increased sales volume and
the effects of acquisitions. The decrease in gross profit margin was due to the
lower higher margin technology sales as a percentage of total net sales.
Selling, general and administrative expenses increased by $14.1 million, or
37.7%, to $51.5 million for the three months ended June 29, 1996 from $37.4
million for the three months ended July 1, 1995. Selling and shipping expenses
increased by $10.9 million, or 45.4%, to $34.9 million for the three months
ended June 29, 1996 from $24.0 million for the three months ended July 1, 1995.
As a percentage of net sales, selling and shipping expenses increased 0.7% to
17.9% for the three months ended June 29, 1996 from 17.2% for the three months
ended July 1, 1995. The increase in selling and shipping expenses as a
percentage of net sales was primarily due to an increase in the number of field
sales consultants. General and administrative expenses increased $3.2 million,
or 23.9%, to $16.6 million for the three months ended June 29, 1996 from $13.4
million for the three months ended July 1, 1995, primarily as a result of
acquisitions. As a percentage of net sales, general and administrative expenses
decreased 1.1% to 8.5% for the three months ended June 29, 1996 from 9.6% for
the three months ended July 1, 1995 due primarily to the relatively fixed nature
of general and administrative expenses when compared to the 39.3% increase in
net sales volume for the same period.
8
<PAGE>
Other income (expense) decreased by $0.7 million, or 58.3%, to $0.5 million for
the three months ended June 29, 1996 from $1.2 million for the three months
ended July 1, 1995. This decrease was primarily due to the recognition of
imputed interest resulting from certain customers' extended payment terms.
Equity in earnings of affiliates increased by $0.1 million, or 33.3%, to $0.4
million for the three months ended June 29, 1996 from $0.3 million for the three
months ended July 1, 1995. This increase was primarily due to an acquisition
during the fourth quarter of 1995.
For the three months ended June 29, 1996, the Company's provision for taxes was
$2.0 million, while pre-tax income was $5.9 million, resulting in an effective
tax rate of 33.9%. This effective tax rate is primarily a result of the
restructuring of certain foreign subsidiaries, thereby allowing the utilization
of losses currently. For the balance of the year, the Company expects its
effective tax rate to be slightly over 38.0%. For the three months ended July 1,
1995, the Company's provision for taxes was $1.5 million, while the pre-tax loss
was $12.1 million. The difference between the tax provision and the amount that
would have been recoverable by applying the statutory rate to the pre-tax loss
was attributable substantially to the non-deductibility for income tax purposes
of the $15.5 million appreciation in the value of the stock issued to senior
management. On a pro-forma basis, pre-tax income was $3.4 million, resulting in
a pro-forma effective tax rate of 44.1%. The difference between the pro-forma
effective tax rate and the Federal statutory rate relates primarily to state
income taxes and non-deductible net losses of certain foreign subsidiaries which
were not included in the Company's consolidated tax return.
Six Months Ended June 29, 1996 compared to
Six Months Ended July 1, 1995
Net sales increased $104.3 million, or 37.8%, to $380.1 million for the six
months ended June 29, 1996 from $275.8 million for the six months ended July 1,
1995. The Company estimates that approximately 21.1% of the net sales growth
represented internal growth, while the remaining 16.7% was due to acquisitions.
Of the $104.3 million increase, approximately $55.1 million represented a 37.9%
increase in the Company's dental business, $26.4 million represented a 47.9%
increase in its medical business, $19.0 million represented a 37.5% increase in
its international business, $3.4 million represented a 24.1% increase in the
Company's veterinary business and $0.4 million represented a 3.7% increase in
the Company's technology business. The dental net sales increase was primarily
the result of the effectiveness of the Company's integrated sales and marketing
approach (which coordinates the efforts of its field sales consultants with its
direct marketing and telesales personnel), entering the U.S. market for large
dental equipment and acquisitions. The medical net sales increase was primarily
due to the effects of acquisitions, increased net sales to renal dialysis
centers and increased outbound telesales activity. In the international market,
the increase in net sales was primarily due to acquisitions and increased unit
volume growth. In the veterinary market, the increase in net sales was primarily
due to increased account penetration and an acquisition. In the technology
market, the Company has experienced a lengthening of the sales cycle for
migrating "DOS" customers to a Windows product, causing net sales to increase
slightly over last year's level. The Company believes that for the balance of
1996, technology net sales will experience modest growth over 1995 net sales
levels.
Gross profit increased by $30.5 million, or 37.0% to $112.9 million for the six
months ended June 29, 1996 from $82.4 million for the six months ended July 1,
1995, while gross profit margin decreased to 29.7% from 29.9%. The $30.5 million
increase in gross profit was primarily due to
9
<PAGE>
increased sales volume and the effects of acquisitions. The decrease in gross
profit margin was due to the lower higher margin technology sales as a
percentage of total net sales.
Selling, general and administrative expenses increased by $27.0 million, or
36.1%, to $101.7 million for the six months ended June 29, 1996 from $74.7
million for the six months ended July 1, 1995. Selling and shipping expenses
increased by $21.0 million, or 43.9%, to $68.8 million for the six months ended
June 29, 1996 from $47.8 million for the six months ended July 1, 1995. As a
percentage of net sales, selling and shipping expenses increased 0.8% to 18.1%
for the six months ended June 29, 1996 from 17.3% for the six months ended July
1, 1995. The increase in selling and shipping expenses as a percentage of net
sales was primarily due to an increase in the number of field sales consultants.
General and administrative expenses increased $6.0 million, or 22.3%, to $32.9
million for the six months ended June 29, 1996 from $26.9 million for the six
months ended July 1, 1995, primarily as a result of acquisitions. As a
percentage of net sales, general and administrative expenses decreased 1.1% to
8.7% for the six months ended June 29, 1996 from 9.8% for the six months ended
July 1, 1995 due primarily to the relatively fixed nature of general and
administrative expenses when compared to the 37.8% increase in net sales volume
for the same period.
Other income (expense) decreased by $1.2 million, or 50.0%, to $1.2 million for
the six months ended June 29, 1996 from $2.4 million for the six months ended
July 1, 1995. The decrease was primarily due to the recognition of imputed
interest resulting from certain customers' extended payment terms.
Equity in earnings of affiliates increased by $0.2 million to $0.5 million for
the six months ended June 29, 1996 from $0.3 million for the six months ended
July 1, 1995. This increase was primarily due to the acquisition.
For the six months ended June 29, 1996, the Company's provision for taxes was
$3.8 million, while pre-tax income was $10.0 million, resulting in an effective
tax rate of 38.0%. The difference between the effective tax rate and the Federal
statutory rate is primarily a result of the restructuring of certain foreign
subsidiaries, thereby allowing the utilization of losses currently. For the
balance of the year, the Company expects its effective tax rate to be slightly
over 38.0%. For the six months ended July 1, 1995, the Company's provision for
taxes was $2.3 million, while the pre-tax loss was $10.2 million. The difference
between the tax provision and the amount that would have been recoverable by
applying the statutory rate to the pre-tax loss was attributable substantially
to the non-deductibility for income tax purposes of the $15.5 million
appreciation in the value of the stock issued to senior management. On a
pro-forma basis, pre-tax income was $5.3 million, resulting in a pro-forma
effective tax rate of 43.4%. The difference between the pro-forma effective tax
rate and the Federal statutory rate relates primarily to state income taxes and
non-deductible net losses of certain foreign subsidiaries which were not
included in the Company's consolidated tax return.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund (a) working
capital needs resulting from increased sales, extended payment terms on various
products and special inventory buying opportunities, (b) capital expenditures,
and (c) acquisitions. Since sales have traditionally been strongest during the
fourth quarter and special inventory buying opportunities have traditionally
been most prevalent just before the end of the year, the Company's working
capital requirements are generally higher from the end of the third quarter to
the end of the first quarter of the following year. The Company has historically
financed its business primarily through revolving credit facilities and recently
through public stock issuances.
10
<PAGE>
Net cash used in operating activities for the six months ended June 29, 1996 of
$17.3 million resulted primarily from a net increase in working capital of $26.5
million offset in part by net income (adjusted for non-cash charges relating to
primarily depreciation and amortization) of $10.2 million. The increase in
working capital was primarily due to a $18.5 million increase in accounts
receivable resulting from increased sales and extended payment terms, and a
decrease in accounts payable and other accrued expenses of $9.2 million. The
Company anticipates future increases in working capital as a result of its
continued sales growth.
Net cash used in investing activities for the six months ended June 29, 1996 of
$13.7 million was used primarily to make acquisitions of $7.0 million and
capital expenditures of $5.3 million. The increased amount of capital
expenditure over comparable prior periods was due to development of its new
order entry and accounts receivable systems, as well as expenditures for
additional operating facilities. The Company expects that it will continue to
incur capital expenditures for the development of its new order entry and
accounts receivable systems.
Net cash provided by financing activities for the six months ended June 29, 1996
of $116.2 million resulted primarily from the net cash proceeds of a public
offering of its common stock (completed on June 21, 1996) of $124.1 million,
partially offset by debt repayments of approximately $10.2 million.
A balloon payment of approximately $3.7 million is due on October 31, 1997 under
a term loan associated with a foreign acquisition.
In addition, with respect to the acquisitions completed during fiscal 1995, as
well as certain other acquisitions and ventures which have been completed or for
which agreements have been executed, holders of minority interest in the
acquired entities or ventures have the right at certain times to require the
Company to acquire their interest at either fair market value or a formula price
based on earnings of the entity. One of the acquisitions also provides for
contingent consideration of up to approximately $2.0 million if certain
financial targets are satisfied.
The Company's cash and cash equivalents as of June 29, 1996 of $92.9 million are
invested primarily in short-term tax exempt securities rated AAA by Standard &
Poors (or an equivalent rating). These investments have staggered maturity dates
and have a high degree of liquidity.
The Company entered into a $65.0 million, four-year revolving credit facility on
July 5, 1995. Borrowings under the facility were $14.5 million at June 29, 1996.
At June 29, 1996, this facility was unsecured. In addition, the Company's
subsidiaries have revolving credit facilities that total approximately $12.1
million.
The Company believes that its cash and cash equivalents of $92.9 million as of
June 29, 1996, its anticipated cash flow from operations, its ability to access
public debt and equity markets, and the availability of funds under its existing
credit agreements, will provide it with liquidity sufficient to meet its capital
needs for at least the forthcoming year.
Disclosure Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This report contains forward-looking statements
based on current expectations that could be affected by the risks and
uncertainties involved in the Company's business. These risks and uncertainties
include, but are not limited to, the effect of economic and market conditions,
the impact
11
<PAGE>
of the consolidation of healthcare practitioners, the impact of healthcare
reform, opportunities for acquisitions and the Company's ability to effectively
integrate acquired companies, the acceptance and quality of software products,
acceptance and ability to manage operations in foreign markets, possible
disruptions in the Company's computer systems or telephone systems, possible
increases in shipping rates or interruptions in shipping service, the level and
volatility of interest rates and currency values, the impact of current or
pending legislation and regulation, as well as the risks described from time to
time in the Company's reports to the Securities and Exchange Commission, which
include the Company's Annual Report on Form 10-K for the year ended December 30,
1995. Subsequent written or oral statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements in this Form 10-Q and those in the Company's reports
previously filed with the Securities and Exchange Commission.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4 -- Submission of Matters to a Vote of Security-Holders
At the Company's Annual Meeting of Stockholders held on May 8, 1996, the
stockholders of the Company approved the 1996 Non-Employee Director Stock Option
Plan (16,209,374 shares voting for; 430,881 shares against; 218,940 shares
abstaining; and 0 broker non-votes).
Item 5 -- Other Information
On June 21, 1996, the Company sold 3,734,375 shares and certain of its
stockholders sold 2,812,000 shares of Common Stock of the Company in an
underwritten public offering at a price to the public of $35.00 per share.
Item 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits.
11.1 -Computation of Earnings per Share
27.1 -Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
June 29, 1996.
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, thereunto duly authorized.
HENRY SCHEIN, INC.
(Registrant)
Dated: August 12, 1996 By: ________________
Steven Paladino
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
13
<PAGE>
EXHIBIT 11.1
<TABLE>
<CAPTION>
HENRY SCHEIN, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(unaudited)
Three months ended Six months ended
--------------------------- ---------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Pro forma net income per consolidated statements of
operations (in thousands) ........................ $ 4,214 $ 2,066 $ 6,678 $ 3,002
============ ============ ============ ============
Pro forma weighted average common shares
outstanding:
Shares outstanding at December 25, 1993 .......... 11,390,544 11,390,544 11,390,544 11,390,544
1994 issuances:
Shares issued, in part, to extinguish liability
under long-term executive incentive
compensation plan ........................... 489,456 489,456 489,456 489,456
Shares issued to ESOP trust in 12/94 .......... 128,257 128,257 128,257 128,257
Stock options granted and to be granted in 1995
at an exercise price of $4.21 per share (1) . 221,397 237,897 221,397 237,897
IPO Options (Class B) ......................... 408,400 -- 408,400 --
1995 issuances:
IPO Shares .................................... 5,090,000 -- 5,090,000 --
Shares issued as of September 1, 1995 in
connection with one of the Acquisitions ..... 1,260,416 -- 1,260,416 --
---------- ---------- ---------- ----------
18,988,470 12,246,154 18,988,470 12,246,154
Less treasury stock ........................... (55,654) -- (55,654) --
---------- ---------- ---------- ----------
18,932,816 12,246,154 18,932,816 12,246,154
1996 issuances:
Secondary Offering Shares ..................... 373,309 -- 188,642 --
---------- ---------- ---------- ----------
19,306,125 12,246,154 19,121,458 12,246,154
Less assumed repurchase of shares under treasury
stock method based on an average price of
$31.86 per share (2):
Stock options---221,397 shares
x $4.21
-------
$932,081 /$31.86 ............ (26,707) (4) (62,597) (3) (29,256) (5) (62,597) (3)
IPO options-----408,400 shares
x $16.00
--------
$6,534,400 /$31.86 .......... (187,232) (4) -- (205,097) (5) --
ESOP shares----Compensation expense
assumed to be proceeds for period prior
to issuance-$900,000 /$16.00 .............. -- -- -- --
---------- ---------- ---------- ----------
Pro forma weighted average common shares
outstanding ........................................ 19,092,186 12,183,557 18,887,105 12,183,557
============ ============ ============ ============
Pro forma net income per common share .............. $ .22 $ .17 $ .35 $ .25
============ ============ ============ ============
</TABLE>
- -----------
(1) Considered "cheap stock" and treated as outstanding since January 1, 1995.
(2) The treasury stock method was not used for the shares issued to settle the
long-term incentive plan liability and the compensatory portion of the
stock options granted because the related special compensation charges have
been/will be excluded from pro forma net income and, therefore,
were not assumed to be proceeds.
(3) Computed using IPO value per share of $16.00 on 237,897 stock options.
(4) Computed using the average closing value per share for the three months
ended June 29, 1996.
(5) Computed using the average closing value per share for the six months ended
June 29, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
HENRY SCHEIN, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 92,851
<SECURITIES> 0
<RECEIVABLES> 112,637
<ALLOWANCES> (2,903)
<INVENTORY> 97,600
<CURRENT-ASSETS> 329,078
<PP&E> 69,561
<DEPRECIATION> (36,343)
<TOTAL-ASSETS> 413,997
<CURRENT-LIABILITIES> 110,329
<BONDS> 28,533
0
0
<COMMON> 221
<OTHER-SE> 272,698
<TOTAL-LIABILITY-AND-EQUITY> 413,997
<SALES> 380,081
<TOTAL-REVENUES> 380,081
<CGS> 267,202
<TOTAL-COSTS> 267,202
<OTHER-EXPENSES> 101,705
<LOSS-PROVISION> 389
<INTEREST-EXPENSE> 2,309
<INCOME-PRETAX> 9,990
<INCOME-TAX> 3,823
<INCOME-CONTINUING> 6,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,678
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
