Henry Schein 2011 Annual Report Download

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ANNUAL REPORT 2011

Table of contents

  • Page 1
    A NNUA L RE P ORT 2 011

  • Page 2
    ... 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 12. Additionally, refer to our annual consolidated financial statements...

  • 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
    ...electronic catalog; and Financial Services such as equipment leasing and financing, patient financing and electronic credit card processing * Dental, Medical and Animal Health practitioners in countries outside of North America are served by Henry Schein's International Group. 2011 GLOBAL NET SALES...

  • Page 5
    ... GERMANY HONG KONG SAR ICELAND IRELAND ISRAEL ITALY LUXEMBOURG MAURITIUS THE NETHERLANDS NEW ZEALAND PORTUGAL SAUDI ARABIA SLOVAKIA SPAIN SWITZERLAND TURKEY THE UNITED KINGDOM THE UNITED STATES HENRY SCHEIN'S MISSION STATEMENT: To provide innovative, integrated health care products and services...

  • Page 6
    ... management software solutions for companion animal health clinics in the United States; strengthened our presence in the California physician and medical laboratory market; and enhanced our position in the French fullservice dental market. > >1932 > > > > > 1935 1950s > > > > > 1940s Henry Schein...

  • Page 7
    ... and profitable practices. And we will be able to build stronger supplier partnerships, ensuring that our global product and service offerings remain unsurpassed in the markets we serve. > > > > 1962 > > > > > 1970s 1980 > > > > > 1989 > > > > > Henry Schein introduces its first catalog Company...

  • Page 8
    ... Netherlands, United Kingdom, and Spain) Henry Schein is listed on NASDAQ Marketplace (HSIC), raising $72.8 million in the initial public offering Company enhances its full-service distribution business through strategic dental, medical, and technology acquisitions Henry Schein Cares global social...

  • Page 9
    ... Executive Officer > > > >2004 2011 2012 Henry Schein debuts on FORTUNE 500 Company becomes the largest distributor of animal health products and services to office-based practitioners on three continents through strategic acquisitions in the United States, Australia/New Zealand and Europe; Henry...

  • Page 10
    ..., Team Schein Members and society. This year, Henry Schein was once again ranked first in our industry for social responsibility on FORTUNE's list of the World's Most Admired Companies, as well as first in our industry for Global Competitiveness, Quality of Management, Quality of Products/Services...

  • Page 11
    ... consecutive year, Henry Schein offered its customers a wide selection of "pink products" as part of the Company's "Think Pink, Practice Pink" program. A portion of the sales of these special products-ranging from health care consumables and practice supplies to apparel and gift items- were donated...

  • Page 12
    ... Pharmaceuticals; Former President of U.S. Human Health, Merck & Co. (1) Member Audit Committee (2) Member Compensation Committee (3) Member Nominating and Governance Committee (4) Member Strategic Advisory Committee HENRY SCHEIN: EXECUTIVE OFFICERS Stanley M. Bergman Chairman and Chief Executive...

  • Page 13
    ... Broadway, New York, New York 10036 STOCK TRANSFER AGENT For address changes, account cancellation, registration changes and lost stock certificates, please contact: Continental Stock Transfer & Trust Company 17 Battery Place, New York, New York 10004 (212) 509-4000 HENRY SCHEIN ANNUAL REPORT 11

  • Page 14
    ... 91,221 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 15
    ..., 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 31, 2011 __ 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 16
    ... Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... 27 30 32 53 54 103 103 105 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 17
    ..., medical, animal health and international operating segments. This segment consists of consumable products, small equipment, laboratory products, large dental equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control...

  • Page 18
    ... 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, Slovakia, Spain, Switzerland, Turkey and the United Kingdom...

  • Page 19
    ... customers in the 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 solutions provide practitioners with electronic medical records, patient...

  • Page 20
    ... reports. Our customer service policy primarily focuses on: • Exceptional order fulfillment. Approximately 99% of items ordered are shipped without back ordering and are shipped on the same business day the order is received. • Streamlined ordering process. Customers may place orders 24 hours...

  • Page 21
    ...abrasives. (2) (3) (4) (5) Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment. Includes branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, X-ray products, equipment and vitamins...

  • Page 22
    ... dental distribution customers. In the medical business, we have opportunities to expand our vaccine, injectables and other pharmaceuticals sales to medical distribution customers, as well as cross-selling core products and practice management software with these key products. In the animal health...

  • Page 23
    ... of developing new applications and services; • exclusivity requirements with certain vendors may prohibit us from distributing competitive products manufactured by other vendors; • loss of sales representatives; • costs related to acquisitions and/or integrations of technologies or businesses...

  • Page 24
    ... 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 25
    ... for the purpose of 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 has continued to develop its policies in this area...

  • Page 26
    ... in healthcare 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 is possible that the FDA...

  • Page 27
    ....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" and "our...

  • Page 28
    ... and practiced corporate and business law for eight years prior to joining us. James Harding has been our Chief Technology Officer since 2005 and Senior Vice President since 2001. Prior to holding his current position, Mr. Harding was Chief Information Officer since 2001, with primary responsibility...

  • Page 29
    .... Paladino was employed in public accounting for seven years, most recently with the international accounting firm of BDO USA, LLP. Mr. Paladino is a certified public accountant. Michael Racioppi has been our Senior Vice President, Chief Merchandising Officer since 2008. Prior to holding his current...

  • Page 30
    ... the supply of our influenza vaccine and any other high sales volume product, would have an adverse effect on our results of operations, which most likely would adversely affect the value of our common stock. Our revenues depend on our relationships with capable sales personnel as well as customers...

  • Page 31
    ... of developing new applications and services; • exclusivity requirements with certain vendors may prohibit us from distributing competitive products manufactured by other vendors; • loss of sales representatives; • costs related to acquisitions and/or integrations of technologies or businesses...

  • Page 32
    ... customers to pay us for our products and/or services or any demands by vendors for different payment terms may adversely affect our results of operations and financial condition. Approximately 28% of our total consolidated net sales for the year ended December 31, 2011 were derived from Europe...

  • Page 33
    ..., which may include primary offerings for cash, stock splits, issuances in connection with business acquisitions, restricted stock/units and the grant or exercise of stock options from time to time; general market and economic conditions; and any outbreak or escalation of hostilities in areas where...

  • Page 34
    ... keeping and documentation of transactions involving drug products; require us to design and operate a system to identify and report suspicious orders of controlled substances to the United States Drug Enforcement Agency; require us to manage returns of products that have been recalled and subject...

  • Page 35
    ..., 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 36
    ... of privacy and security breaches. Evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or disseminate patient information, or could require us to incur significant additional costs to re-design our products in a timely manner to reflect these legal...

  • Page 37
    ...result in a loss of customers or product lines of the acquired businesses or joint ventures; requires significant management attention; may place significant demands on our operations, information systems and financial resources; and results in additional acquisition and integration expenses. There...

  • Page 38
    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 practice management software and ...

  • Page 39
    ...market price of their shares. The provisions of our certificate of incorporation and by-laws may make it more difficult for a third party to acquire us, may discourage acquisition bids and may limit the price that certain investors might be willing to pay in the future for shares of our common stock...

  • Page 40
    ... 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, Slovakia, Spain, Switzerland, Turkey and the United Kingdom. We...

  • Page 41
    ...indicated, the high and low reported sales prices of our common stock as reported on NASDAQ for each quarterly period in fiscal 2011 and 2010: High Fiscal 2011: 1st Quarter ...$ 2nd Quarter ...3rd Quarter ...4th Quarter ...Fiscal 2010: 1st Quarter ...$ 2nd Quarter ...3rd Quarter ...4th Quarter ...69...

  • Page 42
    ... 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 have not declared any cash dividends on our common stock during fiscal years 2011 or...

  • Page 43
    ... last trading day before the beginning of our 2007 fiscal year, through the end of fiscal 2011 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. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN $140...

  • Page 44
    ... 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." Income Statement Data: Net sales ...$ Gross profit ...Selling, general and administrative expenses...

  • Page 45
    ..., medical and animal health markets, primarily in Europe, Australia and New Zealand. Consists of practice management software, financial services and other value-added products and services, which are distributed primarily to healthcare providers in the United States, Canada, the United Kingdom...

  • Page 46
    ... 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, Portugal, Slovakia, Spain, Switzerland and the United Kingdom. We...

  • Page 47
    ... dental, medical, animal health and international operating segments. This segment consists of consumable products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control...

  • Page 48
    ...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 49
    .... Appeals are pending, and the United States Supreme Court will review this issue during its 2012 term. In addition to the foregoing, the Health Care Reform Law imposed new reporting and disclosure requirements for pharmaceutical and device manufacturers with regard to payments or other...

  • Page 50
    ... Corrupt Practices Act and anti-bribery laws and laws pertaining to the accuracy of our internal books and records, which have been the focus of increasing enforcement activity in recent years. Operating and Security Standards Regulations adopted under the federal Prescription Drug Marketing Act...

  • Page 51
    ... of online commerce will require us to cost-effectively adapt to changing technologies, to enhance existing services and to develop and introduce a variety of new services to address the changing demands of consumers and our customers on a timely basis, particularly in response to competitive...

  • Page 52
    ... 2011 Operating results: Net sales ...$ Cost of sales ...Gross profit ...Operating expenses: Selling, general and administrative ...Restructuring costs ...Operating income ...$ Other expense, net ...$ Income from continuing operations ...Income from continuing operations attributable to Henry Schein...

  • Page 53
    ...the dental, medical and animal health markets, primarily in Europe, Australia and New Zealand. (6) 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...

  • Page 54
    ... from internal growth in the United States and the acquisition of Provet Holdings Limited (see Note 9 "Business Acquisitions, Discontinued Operation and Other Transactions" within our notes to our consolidated financial statements) at the beginning of our 2011 fiscal year. Technology gross profit...

  • Page 55
    ... and state income taxes. For 2012, we expect our effective tax rate to approximate 31.0%. Net Income Net income increased $52.5 million, or 14.9%, for the year ended December 31, 2011, compared to the prior year period due to the factors noted above. Excluding sales of seasonal influenza vaccines...

  • Page 56
    ...the dental, medical and animal health markets, primarily in Europe, Australia and New Zealand. (6) 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...

  • Page 57
    ... is primarily due to 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 gross profit increased $12.7 million, or 10.2%, for the year ended December 25, 2010 compared to...

  • Page 58
    ... $7.7 million to $19.1 million for the year ended December 25, 2010 from the comparable prior year period. Interest expense increased $10.3 million primarily due to debt associated with the acquisition of a majority interest in Butler Animal Health Supply, LLC, partially offset by reduced interest...

  • Page 59
    ...of working capital needs, purchases of securities and fixed assets and repurchases of common stock. Working capital requirements generally result from increased sales, special inventory forward buy-in opportunities and payment terms for receivables and payables. Historically, sales have tended to be...

  • Page 60
    ... 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 61
    ..., which was 0.75% during the year ended December 31, 2011, is based on the USD LIBOR plus a spread based on our leverage ratio at the end of each financial reporting quarter. As of December 31, 2011, we had various other short-term bank credit lines available, of which approximately $30.0 million...

  • Page 62
    ... rising above 3.0% through March 30, 2012. Acquisitions On December 31, 2010, we acquired 100% of the outstanding shares of Provet Holdings Limited (ASX: PVT), Australasia's largest wholesale distributor of veterinary products with sales in its 2010 fiscal year of approximately $278 million, for...

  • Page 63
    ... "Business Combinations," we have 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 will be recorded in our consolidated statement of income. On December 30, 2011, we acquired all...

  • Page 64
    ... of our financial statements: Revenue Recognition We generate 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...

  • Page 65
    ...the carrying value of reporting units. We regard our reporting units to be our operating segments (dental, medical, animal health and international) and technology. During the fiscal year ended December 31, 2011, we adopted the provisions of Accounting Standards Update 2011-08, "Intangibles-Goodwill...

  • Page 66
    .... Definite-lived intangible assets primarily consist of non-compete agreements, trademarks, trade names, customer lists, customer relationships and intellectual property. For long-lived assets used in operations, impairment losses are only recorded if the asset's carrying amount is not recoverable...

  • Page 67
    ... this as an accounting exposure, not an economic exposure. As of December 31, 2011, the net fair value of our foreign currency exchange agreements, which expire through December 27, 2012, recorded in other current liabilities was $0.8 million, as determined by quoted market prices. A hypothetical...

  • Page 68
    ... Supplementary Data INDEX TO FINANCIAL STATEMENTS HENRY SCHEIN, INC Consolidated Financial Statements: Page 55 Report of Independent Registered Public Accounting Firm ... Balance Sheets as of December 31, 2011 and December 25, 2010 ...Statements of Income for the years ended...

  • Page 69
    ... years in the period ended December 31, 2011, 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 70
    HENRY SCHEIN, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2011 ASSETS Current assets: Cash and cash equivalents ...$ Accounts receivable, net of reserves of $65,853 and $56,267 ...Inventories, net ...Deferred income taxes ...Prepaid expenses and ...

  • Page 71
    HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) December 31, 2011 Net sales ...$ Cost of sales ...Gross profit ...Operating expenses: Selling, general and administrative ...Restructuring costs ...Operating income ...Other income (expense): Interest income ...

  • Page 72
    ... tax benefit of $1,710 ...Total comprehensive income ...Dividends paid ...Reclassification of noncontrolling interest no longer subject to redemption ...Initial noncontrolling interests and adjustments related to business acquisitions ...Change in fair value of redeemable securities ...Stock issued...

  • Page 73
    ... provided by operating activities ...Cash flows from investing activities: Purchases of fixed assets ...Payments for equity investments and business acquisitions, net of cash acquired ...Cash received from business divestiture ...Purchases of available-for-sale securities ...Proceeds from sales of...

  • Page 74
    ... Operations We distribute healthcare products and services primarily to office-based healthcare practitioners 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...

  • Page 75
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 1 - Significant Accounting Policies - (Continued) Revenue derived from the sale of software products is recognized when products are shipped to customers. Such software is ...

  • Page 76
    ... million for the years ended December 31, 2011, December 25, 2010 and December 26, 2009. Additionally, advertising and promotional costs incurred in connection with direct marketing, including product catalogs and printed material, are deferred and amortized on a straight-line basis over the period...

  • Page 77
    ..., "Business Combinations," we have accrued liabilities for the estimated fair value of additional purchase price adjustments at the time of the acquisition. Any adjustments to these accrual amounts will be recorded in our consolidated statement of income. For the year ended December 31, 2011, there...

  • Page 78
    ...the carrying value of reporting units. We regard our reporting units to be our operating segments (dental, medical, animal health and international) and technology. During the fiscal year ended December 31, 2011, we adopted the provisions of Accounting Standards Update 2011-08, "Intangibles-Goodwill...

  • Page 79
    ... data) Note 1 - Significant Accounting Policies - (Continued) If we determine through the impairment review process that goodwill or other indefinite-lived intangible assets are impaired, we record an impairment charge in our consolidated statements of income. For the years ended December 31, 2011...

  • Page 80
    ... ASU 2010-29, which contains updated accounting guidance to clarify the acquisition date that should be used for reporting pro forma financial information when comparative financial statements are issued. This update requires that a company should disclose revenue and earnings of the combined entity...

  • Page 81
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 1 - Significant Accounting Policies - (Continued) In June 2009, the FASB issued ASU No. 2009-01, "Generally Accepted Accounting Principles" (ASC Topic 105) which establishes the ...

  • Page 82
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 1 - Significant Accounting Policies - (Continued) New Accounting Pronouncements Not Yet Adopted In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): ...

  • Page 83
    ... is computed using the straight-line method over the lesser of the useful life of the assets or the lease term. Property and equipment, including related estimated useful lives, consisted of the following December 31, 2011 13,238 $ 104,126 64,762 64,664 93,100 229,998 569,888 (307,800) 262,088...

  • Page 84
    ... primarily to key employees and prior owners of acquired businesses, as well as certain sales persons, in exchange for placing restrictions on their ability to pose a competitive risk to us. Such amounts are amortized, on a straight-line basis over the respective non-compete period, which generally...

  • Page 85
    ... ...$ Non-current deferred foreign, state and local income taxes ...Notes receivable (1) ...Auction rate securities, net of temporary impairment ...Distribution rights and exclusivity agreements, net of amortization ...Security deposits ...Debt issuance costs, net of amortization ...Other long-term...

  • Page 86
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 5 - Debt - (Continued) Butler Animal Health Supply Effective December 31, 2009, Butler Animal Health Supply, LLC, or BAHS, a majority-owned subsidiary whose financial information ...

  • Page 87
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 5 - Debt - (Continued) Long-term debt Long-term debt consisted of the following December 31, 2011 100,000 $ 262,825 December 25, 2010 100,000 279,055 Private placement debt ...

  • Page 88
    ...our consolidated statement of income. For the year ended December 31, 2011, there were no material adjustments recorded in our consolidated statement of income relating to changes in estimated contingent purchase price liabilities. See Note 9. "Business Acquisitions, Discontinued Operation and Other...

  • Page 89
    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 90
    ...by observable market data by correlation or other means. • Level 3- Inputs that are unobservable for the asset or liability. The following section describes the valuation methodologies that we used to measure different financial instruments at fair value. Cash equivalents and trade receivables Due...

  • Page 91
    ... ARS decreased by $0.6 million during the year ended December 31, 2011. The temporary impairment has been recorded as part of Accumulated other comprehensive income within the equity section of our consolidated balance sheet. Accounts payable and accrued expenses Financial liabilities with carrying...

  • Page 92
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 8 - Fair Value Measurements - (Continued) Redeemable noncontrolling interests Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require...

  • Page 93
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 8 - Fair Value Measurements - (Continued) As of December 31, 2011, we have estimated the value of our closed-end municipal bond fund ARS portfolio and our student loan backed ARS ...

  • Page 94
    ... purchase price allocations. Total acquisition transaction costs incurred in the year ended December 31, 2011 were immaterial to our financial results. Effective December 31, 2009, we acquired a majority interest in Butler Animal Health Holding Company, LLC ("Butler Holding"), the holding company...

  • Page 95
    ... data) Note 9 - Business Acquisitions, Discontinued Operation and Other Transaction - (Continued) 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...

  • Page 96
    ... purchase price allocations. We completed certain acquisitions during the year ended December 26, 2009, which were immaterial to our financial statements individually and in the aggregate. Discontinued Operation On August 5, 2009, we completed the sale of a wholesaler of dental consumables...

  • Page 97
    ... of a number of smaller locations. For the year ended December 25, 2010, we recorded restructuring costs of approximately $12.3 million (approximately $8.3 million after taxes) consisting of employee severance pay and benefits, facility closing costs, representing primarily lease termination and...

  • Page 98
    ... benefits for employees separated from the Company. Represents costs associated with the closing of certain smaller facilities (primarily lease termination costs) and property and equipment write-offs. The following table shows, by reportable segment, the restructuring costs incurred during 2011...

  • Page 99
    ... not applicable. A reconciliation of shares used in calculating earnings per basic and diluted share follows: Years Ended December 25, 2010 90,097 2,271 900 93,268 December 31, 2011 Basic ...90,120 Effect of dilutive securities: Stock options, restricted stock and restricted units ...2,500 Effect...

  • Page 100
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - Income Taxes Income from continuing operations before taxes, equity in earnings of affiliates and noncontrolling interests was as follows Years ended December 31, 2011 403,...

  • Page 101
    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 31, 2011...

  • Page 102
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 12 - Income Taxes - (Continued) The tax provisions from continuing operations differ from the amount computed using the federal statutory income tax rate as follows Years ended ...

  • Page 103
    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 31, 2011 was approximately $24.5 million, all of which would affect the effective tax ...

  • Page 104
    ...supplier accounted for approximately 33% and 8%, respectively, of our aggregate purchases in 2011. Our long-term notes receivable represent strategic financing arrangements with certain industry affiliates and amounts owed to us from sales of certain businesses. Generally, these notes are secured by...

  • Page 105
    ...dental, medical and animal health markets, primarily in Europe, Australia and New Zealand. 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...

  • Page 106
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 15 - Segment and Geographic Data - (Continued Years ended December 31, 2011 511,295 $ 70,854 582,149 $ December 25, 2010 454,882 $ 66,249 521,131 $ December 26, 2009 401,915 62,...

  • Page 107
    ...impression materials, composites, anesthetics, teeth, dental implants, gypsum, acrylics, articulators and abrasives. Includes dental chairs, delivery units and lights, X-ray equipment, equipment repair and high-tech equipment. Includes branded and generic pharmaceuticals, vaccines, surgical products...

  • Page 108
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans Stock-based Compensation Our accompanying consolidated statements of income reflect pre-tax share-based compensation expense of $36.9 million ($25.2 ...

  • Page 109
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) The Plans provide for adjustments to the performance-based restricted stock targets for significant events such as acquisitions, ...

  • Page 110
    HENRY SCHEIN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) The following weighted-average assumptions were used in determining the fair values of stock options using the Black-Scholes valuation ...

  • Page 111
    ... FINANCIAL STATEMENTS - (Continued) (in thousands, except per share data) Note 16 - Employee Benefit Plans - (Continued) The total intrinsic value of restricted stock (including RSUs) that vested was $8.9 million, $12.3 million and $8.7 million during the years ended December 31, 2011, December...

  • Page 112
    HENRY 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 ...

  • Page 113
    ... pharmaceutical products from a manufacturer through 2013, which require us to pay a price based on the prevailing market price or a 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 114
    ...Quarters ended September 25, 2010 December 25, 2010 2,023,568 574,743 141,998 97,226 Net sales ...$ Gross profit ...Operating income ...Net income ...Amounts attributable to Henry Schein, Inc.: Net income ...Earnings per share attributable to Henry Schein, Inc.: From net income...

  • Page 115
    ... of developing new applications and services; • exclusivity requirements with certain vendors may prohibit us from distributing competitive products manufactured by other vendors; • loss of sales representatives; • costs related to acquisitions and/or integrations of technologies or businesses...

  • Page 116
    HENRY SCHEIN, 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 31, December 25, December 26, 2011 2010 2009 Interest ...$ 30,847 $ 25,531...

  • Page 117
    ... in the aggregate, represents a material change in our internal control over financial reporting. During the quarter ended December 31, 2011, we completed system integration activities for the European Dental, Medical and Animal Health businesses with aggregate annual revenues of approximately $744...

  • Page 118
    ... our opinion, Henry Schein, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the...

  • Page 119
    ...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 entitled...

  • Page 120
    ... definitive 2012 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...

  • Page 121
    ... Financial Statements filed as a part of this report are listed on the index on page 54. 2. Financial Statement Schedules: Schedule II No other schedules are required. 3. Exhibits: The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit List immediately...

  • Page 122
    ..., thereunto duly authorized. Henry Schein, Inc. By: /s/ STANLEY M. BERGMAN Stanley M. Bergman Chairman and Chief Executive Officer February 15, 2012 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 123
    ...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 15, 2012 relating to the consolidated financial statements of Henry Schein, Inc. which is contained in Item 8 of this Form 10...

  • Page 124
    ... to statement of income (1) Charged to other accounts (2) Balance at end of period Description Deductions (3) Year ended December 31, 2011: Allowance for doubtful accounts, sales returns and other ...$ Year ended December 25, 2010: Allowance for doubtful accounts, sales returns...

  • Page 125
    ... the Company, Prudential Investment Management, Inc. and each Prudential affiliate which becomes party thereto. (Incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q for the fiscal quarter ended March 26, 2011 filed on May 3, 2011.)* Henry Schein, Inc. 1994 Stock Incentive...

  • Page 126
    ...(Incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 filed on February 22, 2011.)** Henry Schein, Inc. 1996 Non-Employee Director Stock Incentive Plan, as amended by Amendment Number One, effective as of May 25, 2004. (Incorporated...

  • Page 127
    ... to Exhibit 10.23 to our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 filed on February 22, 2011.)** Amendment to the Henry Schein, Inc. Deferred Compensation Plan effective as of January 1, 2011.+** Henry Schein Management Team Performance Incentive Plan and Plan Summary...

  • Page 128
    ... Vereinsbank AG, New York Branch, as co-syndication agents, dated as of September 5, 2008. (Incorporated by reference to Exhibit 10.31 to our Annual Report on Form 10-K for the fiscal year ended December 25, 2010 filed on February 22, 2011.) Credit Agreement among Butler Animal Health Supply, LLC...

  • Page 129
    ... Put Rights Agreement 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...

  • Page 130
    ... 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. *** This...

  • Page 131
    Henry Schein, Inc. 135 Duryea Road Melville, New York 11747 U.S.A. (631) 843-5500 www.henryschein.com