Henry Schein 2003 Annual Report Download - page 26

The $105.9 million or 9.4% increase in dental net sales, consisted of an increase in dental consumable merchandise of $65.9 million or
7.3% and dental equipment of $40.0 million or 18.5%. The increase in dental net sales was primarily due to increased dental equipment
sales and increased account penetration of existing customers driven by our Privileges loyalty program. The $111.4 million or 11.3%
increase in medical net sales was primarily due to increased sales to physicians’ office and alternate care markets. The $39.0 million or
9.8% increase in international net sales was primarily due to increased account penetration in France, United Kingdom and Australia and
favorable exchange rates. Excluding the effect of the exchange rates, net sales for the international market increased $18.7 million or
4.7%.
The increase in technology net sales of $10.5 million or 18.7% was primarily due to increased sales of value-added products including
software products and related services, including the impact of a new marketing initiative, MarketOne. Under this initiative, certain
technology and equipment products were sold directly to end-user customers beginning with the third quarter of 2002, rather than through
resellers, which resulted in a higher growth rate for the technology business. Without this change, the technology business net sales
would have increased by 13.9%.
Gross Profit
Gross profit and gross margins for 2002 and 2001 by segment and in total were as follows (in thousands):
Gross Gross
2002 Margin % 2001 Margin %
Healthcare distribution $743,880 27.0% $659,092 26.3%
Technology 51,024 76.5% 40,232 71.6%
Total $794,904 28.1% $699,324 27.3%
Gross profit increased $95.6 million or 13.7% to $794.9 million for the year ended December 28, 2002 compared to the prior year period.
Gross profit margin increased to 28.1% for the year ended December 28, 2002 from 27.3% for the comparable prior year period.
Healthcare distribution gross profit increased $84.8 million or 12.9% to $743.9 million for the year ended December 28, 2002 compared
to the prior year period. Healthcare distribution gross profit margin increased to 27.0% for the year ended December 28, 2002 from 26.3%
for the comparable prior year period, primarily due to changes in sales mix.
Technology gross profit increased $10.8 million or 26.8% to $51.0 million for the year ended December 28, 2002 compared to the prior
year period. Technology gross profit margin increased to 76.5% for the year ended December 28, 2002 from 71.6% for the comparable
prior year period, primarily due to changes in sales mix.
Selling, General and Administrative
Selling, general and administrative expenses for 2002 and 2001 by segment and in total were as follows (in thousands):
% of % of
Respective Respective
2002 Net Sales 2001 Net Sales
Healthcare distribution $573,627 20.8% $530,755 21.2%
Technology 25,008 37.5% 20,819 37.0%
Total $598,635 21.2% $551,574 21.6%
Selling, general and administrative expenses increased $47.0 million or 8.5% to $598.6 million for the year ended December 28, 2002
compared to the prior year period. As a percentage of sales, selling, general and administrative expenses decreased to 21.2% from
21.6% for the comparable prior year period. This decrease was primarily due to lower rent costs in our healthcare distribution business
as a percentage of sales, realized through leveraging our infrastructure.
As a component of total selling, general and administrative expenses, selling and shipping expenses increased $36.0 million or 10.8% to
$370.1 million for the year ended December 28, 2002 from $334.1 million for the prior year period. The increase was primarily due to
expenses directly associated with supporting increased sales volume. As a percentage of net sales, selling and shipping expenses
remained constant at 13.1% compared to the prior year period.
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