Henry Schein 2009 Annual Report Download

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UNCOVERING NEW
OPPORTUNITES...
EMERGING STRONGER
THAN EVER
ANNUAL REPORT 2009

Table of contents

  • Page 1
    UNCOVERING NEW OPPORTUNITES...EMERGING STRONGER THAN EVER ANNUAL REPORT 2009

  • Page 2

  • Page 3
    ... products available as special-order items. Henry Schein also provides exclusive, innovative technology offerings for dental, medical and veterinary professionals, including value-added practice management software and electronic health record solutions. Headquartered in Melville, New York, Henry...

  • Page 4
    ... ($ in Millions) CAGR 18%* *Five-year Compound Annual Growth Rate NOTE: Operating Income and Earnings Per Diluted Share from Continuing Operations attributable to Henry Schein, Inc. have been adjusted to exclude certain one-time items. Refer to Non-GAAP Disclosures on page 10. Additionally, refer...

  • Page 5
    ... office-based dental, medical and animal health practices through operations or affiliates in 21 countries outside of North America: • Australia, Austria, Belgium, China, the Czech Republic, France, Germany, Hong Kong SAR, Iceland, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand...

  • Page 6
    ... Zealand, China and Hong Kong SAR, Henry Schein now has operations or affiliates. And with a steady stream of strategic international mergers and acquisitions - most recently an animal health business in the Czech Republic, a dental business in Italy, and a medical business in Germany - the Company...

  • Page 7
    ... had double-digit growth in our International dental, medical and animal health businesses. We also saw continued strong growth in electronic services and solid sales of international products in our Technology and Value-Added Services Group. In 2009 we took advantage of new opportunities to expand...

  • Page 8
    ... exclusive marketing agreement for the Allscripts ProfessionalTM Electronic Health Records, an easy-to-deploy, physician-centric solution that improves the delivery of safe, cost-effective, high-quality care. Adding this award-winning product to Henry Schein's extensive portfolio of medical supplies...

  • Page 9
    ...provide to dentists to maximize productivity, manage overhead, and attract and retain patients. Through our exclusive Practice Discovery Service, Henry Schein Dental Consultants analyze a customer's practice and provide tailored solutions to meet that customer's unique professional goals. Whether it...

  • Page 10
    ... Global Product Donation Program, key initiatives in 2009 included: • The 7th annual American Dental Association "Give Kids A Smile"™ day, in which Henry Schein and 38 supplier partners donated products to provide free dental services for nearly 500,000 underserved children across the United...

  • Page 11
    ..., Federated Department Stores, Inc.; Mark E. Mlotek, Executive Vice President, Corporate Business Development; Bradley T. Sheares, Ph.D., Former CEO, Reliant Pharmaceuticals; Former President of U.S. Human Health, Merck & Co.; Steven Paladino, Executive Vice President and Chief Financial Officer...

  • Page 12
    ... had on earnings per diluted share from continuing operations attributable to Henry Schein, Inc. for the years ended December 26, 2009 and December 27, 2008 was $0.00 and ($0.03), respectively. (5) Other non-recurring income/expense, net consists of income of $2.4 million pre-tax ($1.6 million post...

  • Page 13
    ..., D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 26, 2009 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-27078 HENRY SCHEIN, INC...

  • Page 14
    ... Statements and Supplementary Data ...Changes In and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... 24 27 29 50 51 103 103 105 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 15
    ... York, employ more than 12,500 people (of which over 5,500 are based outside the United States) and have operations in the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand...

  • Page 16
    ... a large number of dental, medical and animal health product distributors and manufacturers in Australia, Austria, Belgium, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, Switzerland and the United Kingdom...

  • Page 17
    ...form of special order items. • Technology and other value-added products and services. We sell practice management software systems to our dental, medical and animal health customers. Our practice management software solutions provide practitioners with patient treatment history, billing, accounts...

  • Page 18
    ... customer service policy primarily focuses on: • Exceptional order fulfillment. Approximately 99% of items ordered in the United States and Canada are shipped without back ordering and are shipped on the same business day the order is received. • Streamlined ordering process. Customers may place...

  • Page 19
    ...dental implants, gypsum, acrylics, articulators and abrasives. (3) Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment. (4) Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products...

  • Page 20
    .... Our acquisition strategy includes acquiring businesses complementary to ours that will provide, among other things, additional sales to be channeled through our existing distribution infrastructure, access to additional product lines and networks of field sales consultants and an opportunity to...

  • Page 21
    ... higher in the third and fourth quarters due to the timing of sales of seasonal products (including influenza vaccine, equipment and software products), purchasing patterns of office-based healthcare practitioners and year-end promotions. Net sales and operating profits generally have been lower in...

  • Page 22
    ... of Health and Human Services, and various state boards of pharmacy, state health departments and/or comparable state agencies as well as foreign agencies, and certain accrediting bodies depending on the type of operations and location of product distribution, manufacturing or sale. These businesses...

  • Page 23
    ...securing the pharmaceutical supply chain against counterfeit drugs. These standards include any track and trace or authentication technologies, such as RFID and other technologies. The United States Food and Drug Administration is currently conducting pilot programs and seeking feedback from medical...

  • Page 24
    ...site at www.sec.gov, where the above information can be viewed. Our principal executive offices are located at 135 Duryea Road, Melville, New York 11747, and our telephone number is (631) 843-5500. Unless the context specifically requires otherwise, the terms the "Company," "Henry Schein," "we," "us...

  • Page 25
    ... President of Human Resources and Special Counsel from 1995 to 2005. Mr. David held the position of Vice President, General Counsel and Secretary from 1990 through 1994 and practiced corporate and business law for eight years prior to joining us. James Harding has been our Chief Technology Officer...

  • Page 26
    ... Controller. Before joining us, Mr. Paladino was employed in public accounting for seven years, most recently with the international accounting firm of BDO Seidman, LLP. Mr. Paladino is a certified public accountant. Michael Racioppi has been our Senior Vice President, Chief Merchandising Officer...

  • Page 27
    ... business and other factors beyond our control. Disruptions in the financial markets may adversely affect the availability and cost of credit to us. The healthcare products distribution industry is highly competitive, and we may not be able to compete successfully. We compete with numerous companies...

  • Page 28
    ..., sales and marketing practices, product integrity and supply tracking to the manufacturer of the product, personnel, privacy and security of health or other personal information, installation, maintenance and repair of equipment, and the importation and exportation of products. Our business also...

  • Page 29
    ... or our ability to participate in federal and state healthcare programs. Expansion of group purchasing organizations ("GPO") or hospital purchasing power and the multi-tiered costing structure may place us at a competitive disadvantage. The medical-products industry is subject to a multi-tiered...

  • Page 30
    ... higher in the third and fourth quarters due to the timing of sales of seasonal products (including influenza vaccine, equipment and software products), purchasing patterns of office-based healthcare practitioners and year-end promotions. Net sales and operating profits generally have been lower in...

  • Page 31
    ... credit markets. Our acquisitions may not result in the benefits and revenue growth we expect. We are in the process of integrating companies that we acquired and including the operations, services, products and personnel of each company within our management policies, procedures and strategies. We...

  • Page 32
    ... adverse publicity against us, could have an adverse effect on our business. Our technology segment depends upon continued software and e-services product development, technical support and successful marketing. Competition among companies supplying practice management software and/or e-services is...

  • Page 33
    ...Chief Executive Officer, among others. The loss of the services of Mr. Bergman could have a material adverse effect on our business. We have an employment agreement with Mr. Bergman. We do not currently have "key man" life insurance policies on any of our employees. Competition for senior management...

  • Page 34
    ... by relevant tax authorities or that we would be successful in any such challenge. Item 1B. Unresolved Staff Comments We have no unresolved comments from the staff of the United States Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2009 fiscal year. 22

  • Page 35
    ..., we lease numerous other distribution, office, showroom, manufacturing and sales space in locations including the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand, Portugal...

  • Page 36
    ... stock market index. The following table sets forth, for the periods indicated, the high and low reported sales prices of our common stock as reported on NASDAQ for each quarterly period in fiscal 2009 and 2008: High Fiscal 2009: 1st Quarter ...$ 2nd Quarter ...3rd Quarter ...4th Quarter ...Fiscal...

  • Page 37
    ... the fiscal quarter ended December 26, 2009, we did not repurchase any of our common stock. The maximum number of shares that may yet be purchased under this program, as shown below, is determined at the end of each month based on the closing price of our common stock at that time. Maximum Number of...

  • Page 38
    ... of our 2005 fiscal year, through the end of fiscal 2009 with the cumulative total return on $100 invested for the same period in the Dow Jones U.S. Health Care Index and the NASDAQ Stock Market (U.S. companies) Composite Index. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN ASSUMES $100 INVESTED...

  • Page 39
    ... Condition and Results of Operations" and ITEM 8, "Financial Statements and Supplementary Data." December 26, 2009 Years ended December 27, December 29, December 30, 2008 (1) (2) 2007 (1) (2) 2006 (1) (2) (in thousands, except per share data) December 31, 2005 (1) (2) Income Statement Data: Net...

  • Page 40
    ..., medical and animal health markets, primarily in Europe. Consists of practice management software and other value-added products and services, which are sold primarily to healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand for the years 2007 through 2009...

  • Page 41
    ... York, employ more than 12,500 people (of which over 5,500 are based outside the United States) and have operations in the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand...

  • Page 42
    ... and international operating segments. This segment consists of consumable products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and...

  • Page 43
    ...years is projected to more than double in the same time period. As a result of these market dynamics, annual expenditures for healthcare services continue to increase in the United States. Given current operating, economic and industry conditions, we believe that demand for our products and services...

  • Page 44
    ... products in the supply chain and potential litigation. E-Commerce Traditional healthcare supply and distribution relationships are being challenged by electronic online commerce solutions. Our distribution business is characterized by rapid technological developments and intense competition...

  • Page 45
    ..., net ...Income from continuing operations ...Income from continuing operations attributable to Henry Schein, Inc...308,551 247,347 Years ended December 26, 2009 Cash Flows: Net cash provided by operating activities ...Net cash used in investing activities ...Net cash used in financing activities...

  • Page 46
    ... products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. (3) Consists of products sold in the United States and Canada...

  • Page 47
    ... products, as well as certain financial services. For a number of reasons, the software industry typically realizes higher gross margins to recover investments in research and development. Healthcare distribution gross profit increased $38.9 million, or 2.2%, for the year ended December 26, 2009...

  • Page 48
    ... to discontinued operations (see Note 7 in the accompanying annual consolidated financial statements for further discussion). Net Income Net income increased $71.8 million, or 27.5%, for the year ended December 26, 2009 compared to the prior year period. The increase in net income is primarily...

  • Page 49
    ... products, small equipment, laboratory products, large dental and medical equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. (3) Consists of products sold in the United States and Canada...

  • Page 50
    ... of software products, as well as certain financial services. For a number of reasons, the software industry typically realizes higher gross margins to recover investments in research and development. Healthcare distribution gross profit increased $145.7 million, or 9.1%, for the year ended December...

  • Page 51
    ... in Other, net. The prior period's Other, net included a gain from the divestiture of certain non-core businesses related to the acquisition of a dental supply company in 2007. Income Taxes For the year ended December 27, 2008, our effective tax rate from continuing operations was 33.2% compared...

  • Page 52
    ...first quarter of the following year. We finance our business primarily through cash generated from our operations, revolving credit facilities and debt placements. Our ability to generate sufficient cash flows from operations is dependent on the continued demand of our customers for our products and...

  • Page 53
    ... from continuing operations decreased to 6.2 for the year ended December 26, 2009 from 6.5 for the year ended December 27, 2008. Our working capital accounts may be impacted by current and future economic conditions. The following table summarizes our contractual obligations related to fixed and...

  • Page 54
    ...of debt in connection with the acquisition of a majority interest in Butler Animal Health Supply, LLC. Under our common stock repurchase programs approved by our Board of Directors, we have $57.7 million available for future common stock share repurchases. During the year ended December 26, 2009, we...

  • Page 55
    ... and adjustments related to business acquisitions ...Net income attributable to noncontrolling interests ...Dividends paid ...Effect of foreign currency translation attributable to noncontrolling interests ...Change in fair value of redeemable securities ...Balance, end of year ...$ 233,035 (69,157...

  • Page 56
    ... revenue from the sale of dental, medical and animal health consumable products, as well as equipment, software products and services and other sources. Provisions for discounts, rebates to customers, customer returns and other contra-revenue adjustments are recorded based upon historical data...

  • Page 57
    ... and/or assumptions could materially affect such impairment analyses and our financial results. We regard our reporting units to be our operating segments (dental, medical (including animal health), international and technology). Goodwill was allocated to such reporting units, for the purposes of...

  • Page 58
    ... the Black-Scholes valuation model which requires us to make assumptions about the expected life of options, stock price volatility, risk-free interest rates and dividend yields. We issue restricted stock that vests based on the recipient's continued service over time (four-year cliff vesting) and...

  • Page 59
    ... are effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on our consolidated financial statements. In April 2009, the FASB issued guidance within ASC Topic 805, "Business Combinations." ASC Topic 805 amends...

  • Page 60
    ...denominated strike prices and market-based employee stock option valuation instruments on the evaluation. This guidance is effective for fiscal years beginning after December 15, 2008. The implementation of this guidance did not have a material impact on our consolidated financial statements. In May...

  • Page 61
    ... to business combinations and is effective for fiscal years beginning on or after December 15, 2008. ASC Topic 810-10-65 requires that a noncontrolling interest in a subsidiary be reported as equity in the consolidated financial statements. Consolidated net income includes the net income for...

  • Page 62
    ... million. For the year ended December 26, 2009, we had realized net gains of $1.2 million and unrealized losses of $2.5 million relating to such agreements. Short-Term Investments We limit our credit risk with respect to our cash equivalents, available-for-sale securities, short-term investments and...

  • Page 63
    ...Supplementary Data INDEX TO FINANCIAL STATEMENTS HENRY SCHEIN, INC. Page Report of Independent Registered Public Accounting Firm ...Consolidated Financial Statements: Balance Sheets as of December 26, 2009 and December 27, 2008 ...Statements of Income for the years ended December 26, 2009, December...

  • Page 64
    ... years in the period ended December 26, 2009, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Henry Schein, Inc.'s internal control...

  • Page 65
    HENRY SCHEIN, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 26, 2009 ASSETS Current assets: Cash and cash equivalents ...Accounts receivable, net of reserves of $51,724 and $42,855 ...Inventories, net ...Deferred income taxes ...Prepaid expenses and other ...

  • Page 66
    HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) December 26, 2009 Net sales ...Cost of sales ...Gross profit ...Operating expenses: Selling, general and administrative ...Restructuring costs ...Operating income ...Other income (expense): Interest income ......

  • Page 67
    ...Change in fair value of redeemable securities ...Stock issued to 401(k) plan ...Repurchase and retirement of common stock ...Stock issued upon exercise of stock options, including tax benefit of $6,977 ...Stock-based compensation expense ...Balance, December 27, 2008 ...Net income (excluding $21,975...

  • Page 68
    ...Stock-based compensation expense ...Provision for losses on trade and other accounts receivable ...Benefit from deferred income taxes ...Stock issued to 401(k) plan ...Undistributed (earnings) losses of affiliates ...Other ...Changes in operating assets and liabilities, net of acquisitions: Accounts...

  • Page 69
    ... American and European markets, with operations in the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Ireland, Israel, Italy, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, Switzerland and the United Kingdom. We also have...

  • Page 70
    ... share data) Note 1 - Significant Accounting Policies - (Continued) Revenue derived from the sale of equipment is recognized when products are delivered to customers. Such sales typically entail scheduled deliveries of large equipment primarily by equipment service technicians. Some equipment sales...

  • Page 71
    ...from continuing operations were $12.4 million, $18.4 million and $19.0 million for the years ended December 26, 2009, December 27, 2008 and December 29, 2007. Additionally, advertising and promotional costs incurred in connection with direct marketing, including product catalogs and printed material...

  • Page 72
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) Capitalized software costs consist of costs to purchase and develop software. Costs incurred during the application ...

  • Page 73
    ... multiples of sales or earnings, unless supportable information is available for using a present value technique, such as estimates of future cash flows. We regard our reporting units to be our operating segments (dental, medical (including animal health), international and technology). Goodwill was...

  • Page 74
    ...comparable to other distribution companies. Total distribution network costs from continuing operations were $54.6 million, $56.4 million and $48.8 million for the years ended December 26, 2009, December 27, 2008 and December 29, 2007. Comprehensive Income Comprehensive income includes certain gains...

  • Page 75
    ... SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) The following table summarizes our Accumulated other comprehensive income, net of applicable taxes as of: December 26, 2009...

  • Page 76
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) Accounting Pronouncements Adopted In June 2009, the Financial Accounting Standards Board ("FASB") issued Accounting ...

  • Page 77
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) In April 2009, the FASB issued guidance within ASC Topic 805, "Business Combinations." ASC Topic 805 amends the initial ...

  • Page 78
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) December 15, 2008. The implementation of this guidance did not have a material impact on our consolidated financial ...

  • Page 79
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 1 - Significant Accounting Policies - (Continued) ASC Topic 810-10-65 requires that a noncontrolling interest in a subsidiary be reported as equity in the consolidated ...

  • Page 80
    ..., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 2 - Earnings Per Share Basic earnings per share is computed by dividing net income attributable to Henry Schein, Inc. by the weighted-average number of common shares outstanding for...

  • Page 81
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 3 - Property and Equipment, Net Property and equipment consisted of the following: December 26, 2009 Land ...Buildings and permanent improvements ...Leasehold ...

  • Page 82
    ... $ $ Net 19,385 37,460 133,758 23,490 214,093 Non-compete agreements represent amounts paid primarily to key employees and prior owners of acquired businesses in exchange for placing restrictions on their ability to pose a competitive risk to us. Such amounts are amortized, on a straight-line basis...

  • Page 83
    ... affiliates ...Non-current deferred foreign, state and local income taxes ...Notes receivable (2) ...Auction rate securities, net of temporary impairment ...Distribution rights, net of amortization ...Security deposits ...Debt issuance costs, net of amortization ...Other long-term assets...

  • Page 84
    ... ($18.9 million net of temporary impairments) invested in auction-rate securities ("ARS"), which are included as part of Investments and other within our consolidated balance sheets. ARS are publicly issued securities that represent long-term investments, typically 10-30 years, in which interest...

  • Page 85
    ... was increased to $2.2 million during the year ended December 26, 2009. The temporary impairment has been recorded as part of Accumulated other comprehensive income within the equity section of our consolidated balance sheet. Money market fund As of December 26, 2009, we had an investment of...

  • Page 86
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 6 - Fair Value Measurements - (Continued) Redeemable noncontrolling interests Some minority shareholders in certain of our subsidiaries have the right, at certain times, ...

  • Page 87
    ... 7 - Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions Acquisitions The operating results of all acquisitions are reflected in our financial statements from their respective acquisition dates. We completed certain acquisitions during the year ended December 26, 2009...

  • Page 88
    ... other acquisitions were immaterial to our financial statements individually and in the aggregate. See Note 18 - Subsequent Event for a discussion regarding Butler Animal Health Supply, LLC. Discontinued Operations and Divestitures On August 5, 2009, we completed the sale of a wholesaler of dental...

  • Page 89
    ... and per share data) Note 7 - Business Acquisitions, Discontinued Operations, Divestitures and Other Transactions - (Continued) Net sales generated by our wholesaler of dental consumables were $8.0 million, $14.5 million and $14.5 million for the years ended December 26, 2009, December 27, 2008...

  • Page 90
    ... years ended December 26, 2009 and December 27, 2008, we incurred one-time restructuring costs of approximately $3.0 million (approximately $2.1 million after taxes) and $23.2 million (approximately $16.0 million after taxes), respectively, consisting of employee severance pay and benefits, facility...

  • Page 91
    ... SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 8 - Plans of Restructuring - (Continued) In addition, during the first quarter of 2010, we expect to complete an additional restructuring in order to further reduce operating...

  • Page 92
    ... mergers and acquisitions and liens. The agreements limit the distribution of dividends without the prior written consent of the lenders (limited to $25.0 million, plus 80% of cumulative net income, plus net proceeds from the issuance of additional capital stock). As of December 26, 2009, the amount...

  • Page 93
    ... $5.4 million ($3.5 million, net of taxes), respectively, representing the difference between the stated interest rate on our convertible debt and our non-convertible debt borrowing rate at the time of issuance of our convertible debt. For each of the years ended December 26, 2009, December 27, 2008...

  • Page 94
    ... attributable to continuing operations were as follows: Years ended December 27, 2008 (1) (2) $ 94,215 14,310 22,741 131,266 December 26, 2009 Current income tax expense: U.S. Federal ...State and local ...Foreign ...Total current ...Deferred income tax expense (benefit): U.S. Federal ...State and...

  • Page 95
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 10 - Income Taxes - (Continued) The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were as follows: Years Ended December...

  • Page 96
    ... tax rate from continuing operations for the year ended December 26, 2009 would have been 32.8%. During the third quarter of 2009, we substantially completed a plan of reorganization outside the United States that will allow us to utilize tax loss carryforwards to offset taxable income beginning in...

  • Page 97
    ... the change to have a material impact on our consolidated financial statements. The tax years subject to examination by major tax jurisdictions include the years 2006 and forward by the U.S. Internal Revenue Service, the years 1996 and forward for certain states and the years 1998 and forward for...

  • Page 98
    ... net sales in 2009. With respect to our sources of supply, our top 10 healthcare distribution suppliers and our single largest supplier accounted for approximately 31% and 8%, respectively, of our aggregate purchases in 2009. Our long-term notes receivable represent strategic financing arrangements...

  • Page 99
    ... consolidated statements of income, totaled $0.5 million for the year ended December 26, 2009. Cash Flow Hedges Our cash flow hedges consist of foreign exchange contracts. The amounts recorded in Accumulated other comprehensive income ("AOCI") primarily represent the change in spot rates at the time...

  • Page 100
    ... as hedges for accounting purposes, which consist of foreign exchange contracts. Losses associated with these foreign exchange contracts are recorded in Other, net within our consolidated statements of income and totaled $4.3 million for the year ended December 26, 2009. Forward points related...

  • Page 101
    ... in dental, medical and animal health markets, primarily in Europe. Consists of practice management software and other value-added products and services, which are distributed primarily to healthcare providers in the United States, Canada, the United Kingdom, Australia and New Zealand. Years ended...

  • Page 102
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 13 - Segment and Geographic Data - (Continued) December 26, 2009 Operating Income: Healthcare distribution ...$ Technology ...Total ...$ Income from continuing operations...

  • Page 103
    ...dental implants, gypsum, acrylics, articulators and abrasives. (3) Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment. (4) Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products...

  • Page 104
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 14 - Employee Benefit Plans Stock-based Compensation Our accompanying consolidated statements of income reflect pre-tax share-based compensation expense, recorded in ...

  • Page 105
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 14 - Employee Benefit Plans - (Continued) With respect to time-based restricted stock, we estimate the fair value on the date of grant based on our closing stock price. ...

  • Page 106
    ... TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 14 - Employee Benefit Plans - (Continued) A summary of the stock option activity under the Plans is presented below: December 26, 2009 Weighted Average Exercise Price Years ended December 27...

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    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 14 - Employee Benefit Plans - (Continued) The total cash received as a result of stock option exercises for the years ended December 26, 2009, December 27, 2008 and ...

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    ... to continuing operations for the years ended December 26, 2009, December 27, 2008 and December 29, 2007 was $56.1 million, $59.0 million and $50.4 million. Capital Leases We lease certain equipment under capital leases. Future minimum annual lease payments under our capital leases together...

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    ... business, and from time to time we are named as a defendant in cases as a result of our distribution of pharmaceutical, medical devices and other healthcare products. As a business practice, we generally obtain product liability indemnification from our suppliers. We have various insurance policies...

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    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 15 - Commitments and Contingencies - (Continued) Employment, Consulting and Non-Compete Agreements We have definite-lived employment, consulting and non-compete ...

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    ... SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (In thousands, except share and per share data) Note 17 - Quarterly Information (Unaudited) The following presents certain quarterly financial data: March 28, 2009 (1) (2) Net sales ...Gross profit ...Operating income ...Income...

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    ... STATEMENTS - (Continued) (In thousands, except share and per share data) Note 17 - Quarterly Information (Unaudited) - (Continued) March 29, 2008 (1) (2) (3) Net sales ...Gross profit ...Operating income ...Income from continuing operations ...Net income ...Amounts attributable to Henry Schein...

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    ... the third and fourth quarters due to the timing of sales of software, equipment and seasonal products (including influenza vaccine, equipment and software products), purchasing patterns of office-based healthcare practitioners and year-end promotions. Net sales and operating profits generally have...

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    ... our Annual Report on Form 10-K for the year ended December 26, 2009 with the Securities and Exchange Commission. With the exception of the item listed below, there have been no other subsequent events after December 26, 2009 for which disclosure is required. Butler Animal Health Effective December...

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    ... is recorded, processed, summarized and reported as specified in the SEC's rules and forms. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 26, 2009 that have materially...

  • Page 116
    ...of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Henry Schein, Inc. as of December 26, 2009 and December 27, 2008, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the...

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    ... any amendment to, or waiver of, a provision of the Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer or Vice President of Corporate Finance. ITEM 11. Executive Compensation The information required by this item is hereby incorporated by reference to the Section...

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    ...2010 Proxy Statement to be filed pursuant to Regulation 14A. ITEM 14. Principal Accountant Fees and Services The information required by this item is hereby incorporated by reference to the Section entitled "Independent Registered Public Accounting Firm Fees and Pre-Approval Policies and Procedures...

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    PART IV ITEM 15. Exhibits and Financial Statement Schedules 1. Financial Statements: Our Consolidated Financial Statements filed as a part of this report are listed on the index on page 51. 2. Financial Statement Schedules: Schedule II No other schedules are required. 3. Exhibits: The exhibits ...

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    ..., thereunto duly authorized. Henry Schein, Inc. By: /s/ STANLEY M. BERGMAN Stanley M. Bergman Chairman and Chief Executive Officer February 23, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

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    ... INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Henry Schein, Inc. Melville, New York The audits referred to in our report dated February 23, 2010 relating to the consolidated financial statements of Henry Schein, Inc. which is contained in Item 15 of this Form 10...

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    ... Charged to statement of income Charged to other accounts Balance at end of period Description Year ended December 26, 2009: Allowance for doubtful accounts, sales returns and other ...Year ended December 27, 2008: Allowance for doubtful accounts, sales returns and other ...Year ended December 29...

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    ... to our Annual Report on Form 10-K for the fiscal year ended December 27, 2008.)** Amendment No. Two to the Henry Schein, Inc. 1994 Stock Incentive Plan, effective as of May 28, 2009. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended June 27...

  • Page 124
    ... Report on Form 10-Q for the fiscal quarter ended June 27, 2009.)** Henry Schein, Inc. 2001 Non-Employee Director Incentive Plan. (Incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K for the fiscal year ended December 28, 2002.)** Henry Schein, Inc. 2004 Employee Stock...

  • Page 125
    ... AG, New York Branch, as co-syndication agents, dated as of September 5, 2008.+ Distribution Agreement entered into as of December 2, 2004, by and between us and ID Biomedical Corporation. (Incorporated by reference to Exhibit 10.31 to our Annual Report on form 10-K for the year ended December...

  • Page 126
    ..., 2009, by and among Henry Schein, Inc., National Logistics Services, LLC, Winslow Acquisition Company, Butler Animal Health Holding Company LLC, Butler Animal Health Supply, LLC, Oak Hill Capital Partners II, L.P., Oak Hill Capital Management Partners II, L.P., W.A. Butler Company, Burns Veterinary...

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    Henry Schein, Inc. 135 Duryea Road Melville, New York 11747 U.S.A. (631) 843-5500 www.henryschein.com