Henry Schein 2012 Annual Report Download

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H
ELPING
H
EALTH
H
APPEN
T
HROUGH
I
NTEGRATED
S
OLUTIONS
ANNUAL REPORT 2012

Table of contents

  • Page 1
    HELPING HEALTH HAPPEN THROUGH INTEGRATED SOLUTIONS A N N U A L R E P O RT 2 012

  • Page 2
    ... 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 8. Additionally, refer to our annual consolidated financial statements for a complete presentation of our Consolidated...

  • Page 3
    ... additional products available as special-order items. The Company also offers its customers exclusive, innovative technology solutions, including practice management software and e-commerce solutions, as well as a broad range of financial services. Headquartered in Melville, New York, Henry Schein...

  • Page 4
    HENRY SCHEIN HENRY SCHEIN GLOBAL BUSINESS UNITS: DENTAL • 53.4% of total net sales AT A GLANCE • Serves office-based dental practitioners, schools and other institutions ANIMAL HEALTH • 26.0% of total net sales • Serves animal health practices and clinics MEDICAL • 17.4% of total net ...

  • Page 5
    ... of our 2012-2014 Strategic Plan. We established three global business lines: Dental, Animal Health and Medical, each supported by our Technology and Value-Added Services group. This change sharpened our customer focus in each market we serve and more tightly integrated the management of our...

  • Page 6
    ... of corporate social responsibility, global competitiveness, quality of management, quality of products/ services and long-term investment. Examples of how we partner with our customers to help them achieve their goals: " "After 5 years as a missionary dentist in Hong Kong, I moved back to New...

  • Page 7
    ... your continued support. Sincerely, " "The Carolina Center for Occupational Health provides occupational and correctional medicine in South Carolina. We rely on Henry Schein for its high-tech, enterprise-wide solutions for inventory and materials management. These tools help us track our medical...

  • Page 8
    ...." Henry Schein Cares Foundation Health Kit Outreach Program Think Pink, Practice Pink Program Healthy Lifestyles, Healthy Communities Program Product Donations for Washoe County Sheriff's Office Non-Profit K-9 Unit American Dental Association's Give Kids A Smile Program Back To School Program...

  • Page 9
    ....; Chief Executive Officer, Henry Schein Global Dental Group; Director Leonard A. David Senior Vice President, Chief Compliance Officer James Harding Senior Vice President, Chief Technology Officer Stanley Komaroff Senior Advisor Mark E. Mlotek Executive Vice President, Chief Strategic Officer...

  • Page 10
    ...,221 2 USE OF NON-GAAP MEASURES: The above information includes financial measures that are not calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP"). The above table reconciles operating income, income attributable to Henry Schein, Inc...

  • Page 11
    ..., 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 29, 2012 __ 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 12
    ... Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... 29 32 34 56 57 103 103 105 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 13
    ... value-added services. These segments offer different products and services to the same customer base. The health care distribution reportable segment aggregates our global dental, medical and animal health operating segments. This segment consists of consumable products, small equipment, laboratory...

  • Page 14
    ... Ltd., National Veterinary Services and Alcyon SA, as well as 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...

  • Page 15
    ... 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 solutions provide practitioners with electronic medical records, patient treatment history, billing, accounts...

  • Page 16
    ... our products from our strategically located distribution centers. We strive to maintain optimal inventory levels in order to satisfy customer demand for prompt delivery and complete order fulfillment. These inventory levels are managed on a daily basis with the aid of our management information...

  • Page 17
    ... infection-control products, handpieces, preventatives, impression materials, composites, anesthetics, teeth, dental implants, gypsum, acrylics, articulators, abrasives, dental chairs, delivery units and lights, X-ray supplies and equipment, equipment repair and high-tech equipment. (2) Includes...

  • Page 18
    ... the distribution of biologicals, pharmaceuticals, supplies and equipment and by actively engaging in the development, sale and distribution of veterinary practice management software. Additionally, we are expanding our dental full-service model, our animal health presence and our medical offerings...

  • Page 19
    ...medical and dental insurance programs; • general market and economic conditions, as well as those specific to the health care industry and related industries; • our success in establishing or maintaining business relationships; • unexpected difficulties in developing and manufacturing products...

  • Page 20
    ... of operations and location of product distribution, manufacturing or sale. These businesses include those that distribute, manufacture and/or repackage prescription pharmaceuticals and/or medical devices and/or HCT/P products, or own pharmacy operations, or install, maintain or repair equipment. In...

  • Page 21
    ... or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are paid for by federal, state and other health care payers and programs. The fraud and abuse laws and...

  • Page 22
    ... programs and controls in place to ensure substantial compliance, we cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response, could adversely affect our business. Health Care Reform The Health Care Reform Law...

  • Page 23
    ... intended for use in health care settings, and has been developing policies on regulating clinical decision support tools as medical devices. Certain of our businesses involve the development and sale of software and related products to support physician and dental practice management, and it...

  • Page 24
    ...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" and "our" mean Henry Schein, Inc., a Delaware corporation, and...

  • Page 25
    ...of Materials Planning and Control. James P. Breslawski has been our President and Chief Operating Officer since 2005 and a director since 1992. Mr. Breslawski is also the Chief Executive Officer of our Henry Schein Global Dental Group. Mr. Breslawski held the position of Executive Vice President and...

  • Page 26
    ... has been President and Chief Executive Officer of the Global Animal Health and Strategic Partnerships Group since 2009. Prior to joining us, Ms. Shoff was employed with Roche Diagnostics, where she held a series of positions of increasing responsibility in the United States and Switzerland over the...

  • Page 27
    ...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 28
    ...medical and dental insurance programs; • general market and economic conditions, as well as those specific to the health care industry and related industries; • our success in establishing or maintaining business relationships; • unexpected difficulties in developing and manufacturing products...

  • Page 29
    ... products on a timely basis. Uncertain global macro-economic conditions could adversely affect our results of operations and financial condition. Uncertain global macro-economic conditions that affect the economy and the economic outlook of the United States, Europe and other parts of the world...

  • Page 30
    ...way health care is financed by both governmental and private payers. We expect expansion of access to health insurance to increase the demand for our products and services, but other provisions of the Health Care Reform Law could affect us adversely. Additionally, further federal and state proposals...

  • Page 31
    ... the Public Health Services Act. Among other things, such laws, and the regulations promulgated thereunder regulate the storage and distribution, labeling, packaging, handling, reporting, record keeping, introduction, manufacturing and marketing of drugs, HCT/P products and medical devices; subject...

  • Page 32
    ... things, licensure or registration, 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...

  • Page 33
    ... of sensitive personal information or standards in electronic health data transmissions, we could be required to make significant changes to our products, or incur penalties or other liabilities. State, federal and foreign laws, such as the federal Health Insurance Portability and Accountability Act...

  • Page 34
    ... the financial 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...

  • Page 35
    ... our business and our reputation. 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 intense and increasing. Our future sales of...

  • Page 36
    ...abide by electronic health data transmission standards, could also expose us to claims, fines and penalties and costs for remediation. Additionally, legislative or regulatory action related to cyber-security may increase our costs to develop or implement new technology products and services. We have...

  • Page 37
    ...public announcement of the pendency of the change in control. Tax legislation initiatives could adversely affect our net earnings and tax liabilities. We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as foreign jurisdictions. From time...

  • Page 38
    ..., 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, Mauritius, the Netherlands, New Zealand, Portugal, Slovakia, Spain, Switzerland, Thailand...

  • Page 39
    ... a component of the NASDAQ-100 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 2012 and 2011: High Fiscal 2012: 1st Quarter ...$ 2nd Quarter ...3rd...

  • Page 40
    ... repurchases were executed in the open market under our existing publicly announced authorized program. The maximum number of shares that may yet be purchased under this program is determined at the end of each month based on the closing price of our common stock at that time. Dividend Policy We...

  • Page 41
    ... of all dividends, on December 29, 2007, the last trading day before the beginning of our 2008 fiscal year, through the end of fiscal 2012 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 Composite Index...

  • Page 42
    ... presented below should also be read in conjunction with ITEM 7, "Management' s Discussion and Analysis of Financial Condition and Results of Operations" and ITEM 8, "Financial Statements and Supplementary Data." Years ended December 29, 2012 December 31, 2011 December 25, 2010 December 26...

  • Page 43
    Net Sales by Market Data: Health care distribution (3): Dental ...$ Medical ...Animal health ...Total health care distribution ...Technology and value-added services (4) ...Total ...$ Years ended December 29, 2012 December 31, 2011 December 25, 2010 (in thousands) December 26, 2009 December 27,...

  • Page 44
    ..., including the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Iceland, Ireland, Israel, Italy, Luxembourg, Mauritius, the Netherlands, New Zealand, Portugal, Slovakia, Spain, Switzerland, Thailand, Turkey and the United Kingdom. We...

  • Page 45
    ... products and services to the same customer base. The health care distribution reportable segment aggregates our global dental, medical and animal health operating segments. This segment consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services...

  • Page 46
    ...84 years is projected to increase over 85% during the same time period. As a result of these market dynamics, annual expenditures for health care services continue to increase in the United States. Given current operating, economic and industry conditions, we believe that demand for our products and...

  • Page 47
    ...sales of medical devices by manufacturers and importers beginning in 2013, and a fee on branded prescription drugs and biologics that was implemented in 2011, both of which may affect sales. On June 28, 2012, the United States Supreme Court upheld as constitutional a key provision in the Health Care...

  • Page 48
    ... or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are paid for by federal, state and other health care payers and programs. The fraud and abuse laws and...

  • Page 49
    ... intended for use in health care settings, and has been developing policies on regulating clinical decision support tools as medical devices. Certain of our businesses involve the development and sale of software and related products to support physician and dental practice management, and it...

  • Page 50
    ... health care. E-Commerce Electronic commerce solutions have become an integral part of traditional health care supply and distribution relationships. Our distribution business is characterized by rapid technological developments and intense competition. The continuing advancement of online commerce...

  • Page 51
    ...-off costs, and outside professional and consulting fees directly related to the restructuring plan. This restructuring program is complete and we do not expect any additional costs from this program. We expect that the majority of these costs will be paid in 2013. During the year ended December 25...

  • Page 52
    ...the fiscal year ended December 31, 2011, which consisted of 53 weeks. Beginning with the first quarter of 2012, we have reported net sales and prior-year sales comparisons for each of our global dental, medical, animal health and global technology and value-added services business groups. This sales...

  • Page 53
    ... growth in sales within our animal health businesses, which typically include a greater percentage of lower-margin pharmaceutical products than our other operating units. Technology and value-added services gross profit increased $19.4 million, or 11.8%, for the year ended December 29, 2012 compared...

  • Page 54
    ... Butler Animal Health Supply, LLC ("BAHS") debt. Other, net increased by $0.8 million due primarily to a gain related to an increase in the fair value of an equity affiliate which is now being reported as a consolidated entity beginning in the third quarter of 2012. Income Taxes For the year ended...

  • Page 55
    ... products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products and vitamins. Consists of practice management software and other value-added products, which are distributed primarily to health care...

  • Page 56
    ... growth in the United States and the acquisition of Provet Holdings Limited (see Note 9 "Business Acquisitions and Other Transactions" within our notes to our consolidated financial statements) at the beginning of our 2011 fiscal year. Technology and value-added services gross profit increased $27...

  • Page 57
    ... private placement facilities, as well as interest expense related to our credit ...federal statutory tax rate for both periods related primarily to foreign and state income taxes. Net Income Net income increased $52.5 million, or 14.9%, for the year ended December 31, 2011 compared to the prior year...

  • Page 58
    ...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 services, and access...

  • Page 59
    ... pharmaceutical products from a manufacturer through 2013, which require us to pay a price based on the prevailing market price or formula price in each respective year. The amounts included in the above table related to these purchase commitments were determined using current market conditions...

  • Page 60
    ... into a new agreement with one insurance company and amending our existing agreements with two insurance companies. These facilities are available on an uncommitted basis at fixed rate economic terms to be agreed upon at the time of issuance, from time to time during a three year issuance period...

  • Page 61
    ... related to the Butler Schein Animal Health transaction. The refinancing is expected to reduce interest expense and to be accretive to earnings per share by $0.02 to $0.03 on an annualized basis. We expect the refinancing to occur at the end of the first quarter of 2013. As part of that refinancing...

  • Page 62
    ... and will accrue liabilities for the estimated fair value of additional purchase price adjustments at the time of the acquisition. Any adjustments to these accrual amounts are recorded in our consolidated statement of income. On December 30, 2011, we acquired all of Oak Hill Capital Partners' ("OHCP...

  • Page 63
    ... 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 and estimates...

  • Page 64
    ...require a comparison of the fair value to the carrying value of reporting units. We regard our reporting units to be our operating segments: health care distribution (global dental, medical and animal health) and technology and value-added services. During the fiscal year ended December 31, 2011, we...

  • Page 65
    ... statements of income. Beginning with the first quarter of 2012, we changed our reporting units from dental, medical, animal health, international and technology to global dental, global medical, global animal health and global technology and value-added services. These groups have been formed...

  • Page 66
    ...by quoted market prices. A hypothetical 5% change in the value of the U.S. dollar would change the fair value of our foreign currency exchange agreements by $(0.6) million. Short-Term Investments We limit our credit risk with respect to our cash equivalents, available-for-sale securities, short-term...

  • Page 67
    ... Data INDEX TO FINANCIAL STATEMENTS HENRY SCHEIN, INC. Consolidated Financial Statements: Page 58 Report of Independent Registered Public Accounting Firm ... Balance Sheets as of December 29, 2012 and December 31, 2011 ...Statements of Income for the years ended...

  • Page 68
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Henry Schein, Inc. Melville, New York We have audited the accompanying consolidated balance sheets of Henry Schein, Inc. as of December 29, 2012 and December 31, 2011 and the related consolidated statements ...

  • Page 69
    ... ...Common stock, $.01 par value, 240,000,000 shares authorized, 87,850,671 outstanding on December 29, 2012 and 89,928,082 outstanding on December 31, 2011 ...Additional paid-in capital ...Retained earnings ...Accumulated other comprehensive income ...Total Henry Schein, Inc. stockholders...

  • Page 70
    HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) December 29, 2012 Net sales ...$ Cost of sales ...Gross profit ...Operating expenses: Selling, general and administrative ...Restructuring costs ...Operating income ...Other income (expense): Interest income ...

  • Page 71
    HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) December 29, 2012 Net income ...$ Other comprehensive income, net of tax: Foreign currency translation gain (loss) ...33,347 2,865 414 (5,451) 31,175 454,563 (35,312) (904) (36,216) 418,347 $ (2,310) (...

  • Page 72
    HENRY SCHEIN, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands, except share and per share data) Accumulated Common Stock Additional Other Total $.01 Par Value Paid-in Retained Comprehensive Noncontrolling Stockholders' Shares Amount Capital Earnings Income Interests ...

  • Page 73
    ...Amortization of bond discount ...Stock-based compensation expense ...Provision for losses on trade and other accounts receivable ...Provision for (benefit from) deferred income taxes ...Stock issued to 401(k) plan ...Equity in earnings of affiliates ...Distributions from equity affiliates ...Other...

  • Page 74
    ... office-based health care practitioners with operations or affiliates in the United States, Australia, Austria, Belgium, Canada, China, the Czech Republic, France, Germany, Hong Kong SAR, Iceland, Ireland, Israel, Italy, Luxembourg, Mauritius, the Netherlands, New Zealand, Portugal, Slovakia, Spain...

  • Page 75
    ...cost structure of our business, technical skill required, customer location and other market conditions. Each element that has standalone value is accounted for as a separate unit of accounting. Revenue allocated to each unit of accounting is recognized when the service is provided or the product is...

  • Page 76
    ... or actual cost for large equipment and high tech equipment. In accordance with our policy for inventory valuation, we consider many factors including the condition and salability of the inventory, historical sales, forecasted sales and market and economic trends. From time to time, we adjust our...

  • Page 77
    ... bought and further customized by outside suppliers for our use and software developed by a supplier for our proprietary use are capitalized. Costs incurred for our own personnel who are directly associated with software development are capitalized. Income Taxes We account for income taxes under an...

  • Page 78
    ...require a comparison of the fair value to the carrying value of reporting units. We regard our reporting units to be our operating segments: health care distribution (global dental, medical and animal health) and technology and value-added services. During the fiscal year ended December 31, 2011, we...

  • Page 79
    ... statements of income. Beginning with the first quarter of 2012, we changed our reporting units from dental, medical, animal health, international and technology to global dental, global medical, global animal health and global technology and value-added services. These groups have been formed...

  • Page 80
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 1 - Significant Accounting Policies - (Continued) Cost of Sales The primary components of cost of sales include the cost of the product (net of purchase discounts, supplier ...

  • Page 81
    ... Useful Lives (in years) 40 5-10 3-10 3-10 The net carrying value of equipment held under capital leases amounted to approximately $1.3 million and $2.7 million as of December 29, 2012 and December 31, 2011. Property and equipment related depreciation expense for the years ended December 29, 2012...

  • Page 82
    ... CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 3 - Goodwill and Other Intangibles, Net The changes in the carrying amount of goodwill for the years ended December 29, 2012 and December 31, 2011 were as follows: Technology and Value-Added Services 77,969...

  • Page 83
    ... 29, 2012, borrowings under all of our credit lines had a weighted average interest rate of 2.22%. Certain of our subsidiaries, excluding Butler Animal Health Supply, LLC, or BAHS, maintain credit lines which are collateralized by assets of those subsidiaries with an aggregate net carrying value of...

  • Page 84
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 5 - Debt - (Continued) Private Placement Facilities On August 10, 2010, we entered into $400 million private placement facilities with two insurance companies. On April 30, 2012, ...

  • Page 85
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 5 - Debt - (Continued) Butler Animal Health Supply Effective December 31, 2009, BAHS, a majority-owned subsidiary whose financial information is consolidated with ours, had incurred approximately...

  • Page 86
    ... (Continued) Long-term debt Long-term debt consisted of the following: December 29, 2012 250,000 $ 11,352 220,439 December 31, 2011 100,000 11,163 251,662 Private placement debt ...$ Notes payable to banks at a weighted-average interest rate of 6.82% ...Butler Schein Animal Health Supply...

  • Page 87
    ... STATEMENTS - (Continued) (in thousands, except per share data) Note 6 - Redeemable Noncontrolling Interests Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities at fair value. Accounting...

  • Page 88
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 7 - Comprehensive Income Comprehensive income includes certain gains and losses that, under U.S. GAAP, are excluded from net income as such amounts are recorded directly as an ...

  • Page 89
    ... the asset or liability. The following section describes the valuation methodologies that we used to measure different financial instruments at fair value. Investments and notes receivable There are no quoted market prices available for investments in unconsolidated affiliates and notes receivable...

  • Page 90
    ...the fair value of our debt include market conditions, prepayment and make-whole provisions, liquidity levels in the private placement market, variability in pricing from multiple lenders and term of debt. Derivative contracts Derivative contracts are valued using quoted market prices and significant...

  • Page 91
    ... in the year ended December 29, 2012 were immaterial to our financial results. On December 31, 2010, we acquired 100% of the outstanding shares of Provet Holdings Limited (ASX: PVT), an Australasian wholesale distributor of veterinary products with sales in its 2010 fiscal year of approximately...

  • Page 92
    ... the values of comparable companies which are publicly traded. The total consideration of $351.1 million was allocated as follows: Net assets of BAHS at fair value: Current assets ...$ Intangible assets: Trade name (useful life 3 years) ...Customer relationships (useful life 12 years) ...Non-compete...

  • Page 93
    ... A Term Loan B Revolver Original amount of debt (includes $55.0 million of debt provided by Henry Schein, Inc.) ...$ Number of remaining quarterly installments ...Quarterly payments from: December 31, 2012 through June 30, 2013 ...$ September 30, 2013 through June 30, 2014 ...July 1, 2014 through...

  • Page 94
    ...value of additional purchase price consideration at the time of the acquisition. Any adjustments to these accrual amounts are recorded in our consolidated statements of income. For the years ended December 29, 2012, December 31, 2011 and December 25, 2010, there were no material adjustments recorded...

  • Page 95
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 10 - Plans of Restructuring During the years ended December 29, 2012 and December 25, 2010, we incurred restructuring costs of approximately $15.2 million (approximately $10.5 ...

  • Page 96
    ...2010. A reconciliation of shares used in calculating earnings per basic and diluted share follows: Years Ended December 31, 2011 90,120 2,500 92,620 December 29, 2012 Basic ...87,499 Effect of dilutive securities: Stock options, restricted stock and restricted stock units ...2,324 Effect of assumed...

  • Page 97
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - Income Taxes Income before taxes and equity in earnings of affiliates was as follows: Domestic ...$ Foreign ...Total ...$ Years ended December 29, 2012 466,457 $ 137,731...

  • Page 98
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - 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 29, 2012...

  • Page 99
    ... FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - Income Taxes - (Continued) The tax provisions differ from the amount computed using the federal statutory income tax rate as follows: Income tax provision at federal statutory rate ...$ State income tax...

  • Page 100
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - Income Taxes - (Continued) The total amount of unrecognized tax benefits as of December 29, 2012 was approximately $40.7 million, all of which would affect the effective tax ...

  • Page 101
    ...No single customer accounted for more than 0.8% of our net sales in 2012. With respect to our sources of supply, our top 10 health care distribution suppliers and our single largest supplier accounted for approximately 37% and 7%, respectively, of our aggregate purchases in 2012. Our long-term notes...

  • Page 102
    ...present information about our reportable and operating segments: Years Ended December 31, 2011 December 29, 2012 Net Sales: Health care distribution (1): Dental ...$ Medical ...Animal health ...Total health care distribution ...Technology and value-added services (2) ...Total ...$ (1) (2) December...

  • Page 103
    ...care distribution ...$ Technology and value-added services ... Total ...$ Income Tax Expense: Health care distribution ...$ Technology and value-added services ... Total ...$ Interest Income: Health care distribution ...$ Technology and value-added services ... Total ...$ Interest Expense: Health...

  • Page 104
    ... CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 15 - Segment and Geographic Data - (Continued) The following table presents information about our operations by geographic area as of and for the three years ended December 29, 2012. Net sales by geographic...

  • Page 105
    ... and restricted stock unit grants. Certain stock-based compensation granted may require us to settle in the form of a cash payment. During the year ended December 29, 2012, we recorded a liability of $0.6 million relating to the grant date fair value of this stock-based compensation, as well as an...

  • Page 106
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) A summary of the stock option activity under the Plans is presented below: Years Ended December 29, 2012 Weighted Average Exercise Price ...

  • Page 107
    ... FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) The total intrinsic value per share of restricted stock (including restricted stock units) that vested was $75.98, $66.78 and $56.76 during the years ended December 29, 2012...

  • Page 108
    ... SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) Deferred Compensation Plan During 2011, we began to offer a deferred compensation plan to a select group of management or highly compensated...

  • Page 109
    ... one year. Purchase Commitments In our health care distribution business, we sometimes enter into long-term purchase commitments to ensure the availability of products for distribution. Future minimum annual payments for inventory purchase commitments as of December 29, 2012 were: 2013 ...$ 2014...

  • Page 110
    ... STATEMENTS - (Continued) (in thousands, except per share data) Note 18 - Quarterly Information (Unaudited) The following tables present certain quarterly financial data: Net sales ...$ Gross profit ...Operating income ...Net income ...Amounts attributable to Henry Schein, Inc.: Net income...

  • Page 111
    ...medical and dental insurance programs; • general market and economic conditions, as well as those specific to the health care industry and related industries; • our success in establishing or maintaining business relationships; • unexpected difficulties in developing and manufacturing products...

  • Page 112
    ..., INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 19 - Supplemental Cash Flow Information Cash paid for interest and income taxes was: Years ended December 29, December 31, December 25, 2012 2011 2010 Interest ...$ 23,358 $ 30,847 $ 25,531...

  • Page 113
    ... a material change in our internal control over financial reporting. During the quarter ended December 29, 2012, post-acquisition related activities continued for the global animal health, dental, medical and technology businesses acquired during 2012 and 2011, representing aggregate annual revenues...

  • Page 114
    ...of Independent Registered Public Accounting Firm Board of Directors and Stockholders Henry Schein, Inc. Melville, New York We have audited Henry Schein, Inc.' s internal control over financial reporting as of December 29, 2012, based on criteria established in Internal Control - Integrated Framework...

  • Page 115
    ... 2013 Proxy Statement. We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Vice President of Corporate Finance. We make available free of charge through our Internet Web site, www.henryschein.com, under the "About Henry Schein--Corporate...

  • Page 116
    ..." in our definitive 2013 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...

  • Page 117
    PART IV ITEM 15. Exhibits, Financial Statement Schedules 1. Financial Statements: Our Consolidated Financial Statements filed as a part of this report are listed on the index on page 57. 2. Financial Statement Schedules: Schedule II No other schedules are required. 3. Exhibits: The exhibits required...

  • Page 118
    ..., thereunto duly authorized. Henry Schein, Inc. By: /s/ STANLEY M. BERGMAN Stanley M. Bergman Chairman and Chief Executive Officer February 13, 2013 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...

  • Page 119
    ...OF 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 13, 2013 relating to the consolidated financial statements of Henry Schein, Inc. which is contained in Item 8 of this Form 10...

  • Page 120
    ... II Valuation and Qualifying Accounts Balance at beginning of period Additions Charged to statement of income (1) Charged to other accounts (2) Balance at end of period Description Deductions (3) Year ended December 29, 2012: Allowance for doubtful accounts, sales returns and...

  • Page 121
    ...Annual Report on Form 10-K for the fiscal year ended December 30, 2006 filed on February 28, 2007.) Certificate of Amendment of Amended and Restated Certificate of Incorporation of Henry Schein, Inc. dated June 16, 1998. (Incorporated by reference to Exhibit 3.3 to our Registration Statement on Form...

  • Page 122
    ... 10.5 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 27, 2010 filed on May 4, 2010.)** Form of Restricted Stock Unit Agreement for time-based restricted stock awards pursuant to the Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive Plan (as amended and restated...

  • Page 123
    ...Proxy Statement on Schedule 14A filed on April 27, 2004.)** Amendment Number Two to the Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive Plan, effective as of January 1, 2005. (Incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K for the fiscal year ended December...

  • Page 124
    ...the Henry Schein, Inc. Deferred Compensation Plan effective as of January 1, 2011. (Incorporated by reference to Exhibit 10.26 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on February 15, 2012.)** Henry Schein Management Team Performance Incentive Plan and Plan...

  • Page 125
    ... among Henry Schein, Inc., Burns Veterinary Supply, Inc. and Butler Animal Health Holding Company, LLC. (Incorporated by reference to Exhibit 10.45 to our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 filed on February 22, 2011.) List of our Subsidiaries.+ Consent of BDO USA...

  • Page 126
    ... of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended. ** Indicates management contract or compensatory plan or agreement. 116

  • Page 127
    ...'s annual report on Form 10-K for the fiscal year ended December 29, 2012, is available without charge to shareholders upon request to the Company's Investor Relations department. The report is also available on the Company's Web site. INDEPENDENT AUDITORS BDO USA, LLP 100 Park Avenue, New York, New...