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Presentation for investors I created while at Henry Schein. The information herein is public.

Presentation for investors I created while at Henry Schein. The information herein is public.

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  • 1. NASDAQ: HSIC www.henryschein.com
  • 2. Corporate Overview HSIC is the largest distributor of healthcare products and services to office-based practitioners in North America and Europe Serving Dental, Physician and Animal Health practitioners Broad range of value-added products and services • One-stop shop for our customers Operations or affiliates in 20 countries Fortune 500® company Member of the NASDAQ 100® Index 2
  • 3. 12 Years as a Public Company 1995 Worldwide Sales: 2007 Worldwide Sales: $616 million $5.9 billion Int'l Medical Medical 17% 26% Tech 27% Int'l 4% 30% Tech 2% Dental Dental 52% 42% From Continuing Operations 3
  • 4. Serving Large and Growing Markets 5% Annual Market Growth Estimated Market 1995 2007 Share Size Share Size Market ($ in billions) ($ in billions) U.S. & Canada Dental 11% $3.0 40% 6.0 U.S. Medical (1) 3% 4.8 17% 9.0 Europe Dental 5% 2.2 18% 6.5 Europe Medical (1) ___ _____ 15% 4.0 TOTAL 6% $10.0 23% $25.5 (1) Includes Animal Health 4
  • 5. Attractive Market Dynamics Aging Population Driving 180m Healthcare Spending U.S. Population Age 45-84 (millions)1 150m 45-84 year-old population projected to almost double between 1990-2030 120m 144m 131m 90m 115m 93m 60m 75m 30m 1990 2000 2010 2020 2030 (1) U.S. Census Bureau 5
  • 6. Positive Business Environment Consistent Fragmented Growth Competitors Markets Served Recession Fragmented Resistant Customer Base 6
  • 7. Dental Demand is Increasing Dental services expenditures are expected to increase 6% in each of the next 5 years1 Key Growth Drivers Increased dental insurance coverage2 Greater emphasis on cosmetic dentistry3 Growing awareness of correlation between oral health and overall well-being Increasing use of dental pharmaceutical therapies and non-invasive diagnostic procedures Greater dental practice productivity required (1) Centers for Medicare & Medicaid Services, National Health Expenditures Projections (2) 57% of the US population covered in 2006 v. 49% in 1996; NADP (3) Demand has increased 13% over the past 3 years; AACD 7
  • 8. Medical Demand is Increasing Physician and clinical services expenditures are expected to increase 6% in each of the next 5 years 1 Key Growth Drivers Aging population Migration of procedures from acute-care settings to physician and alternate-care setting 63% of all surgeries are out-patient procedures2 Continued growth in use of vaccines, injectables and other pharmaceuticals in the alternate-care setting Strong growth in companion animal health business (1) Centers for Medicare & Medicaid Services, National Health Expenditures Projections (2) Centers for Disease Control and Prevention 8
  • 9. Company Objective Our primary objective is to partner with our customers Efficiency Improve Productivity Practice Profitability Allowing our customers to focus on delivering quality care to their patients 9
  • 10. Key Company Strengths 1) Unique Sales and Marketing Expertise 2) Centralized Leveragable Infrastructure 3) Broad Product and Services Offering 4) Superior Customer Service 5) Large Practice Management User Base 10
  • 11. 1. Unique Sales and Marketing Expertise • Strong brand identity with over 75 years of experience • Extensive direct marketing programs • Highly trained sales professionals 2,600 field sales consultants and specialists 1,450 telesales representatives Extensive training to develop consultative selling skills 11
  • 12. Extensive Consultative Selling Skills Classroom and Web-Based Training Clinical Products Techniques Practice Management Solutions 60% of reps visit the web site monthly 12
  • 13. Customer Analysis Tool (CAT) Driving more productive customer interactions Proprietary call planning system Color coding ranks sales activity 13
  • 14. 2. Centralized Leveragable Infrastructure Scalable Centralized Supply Chain Product Procurement Expertise Inventory Management e-commerce 70-75% utilization… …With Capacity for Growth 14
  • 15. 3. Broad Product and Services Offering Competitive Prices 90,000 SKUs in stock ~20,000 100,000 proprietary special order products items available 15
  • 16. Exclusive Product Offerings 16
  • 17. Value-Added Services Design Services 17
  • 18. 4. Superior Customer Service • 24/7 ordering by mail, fax, 99% Order Accuracy telephone, CD-Rom and Web • In North America: 99% fulfillment levels 99% of orders shipped same day 99% of orders delivered within 2 days (~ 90% next day) 99% order accuracy • 2007 web sales up over 25% • Innovative Customer Loyalty programs 18
  • 19. Innovative Customer Loyalty Programs • Designed to attract, retain, and reward dental customers • Over 25,000 U.S. Dental members • Drives faster sales and electronic ordering growth • Similar programs active in 12 international markets • Program recently introduced in U.S. Medical business 19
  • 20. 5. Practice Management Solutions Helping our customers become more efficient and profitable Installed Base of Over 52,000 Users • #1 in customer satisfaction • Integrates with digital equipment • Provides cross-selling opportunities 20
  • 21. Key Strategies for Future Growth Transition from a Pure Distribution Company • Expand value-added products and services • Practice management software • Financing, Credit card processing and e-claims • Continuing education • Increase customer penetration • Customer loyalty programs • Equipment sales and repair services • Increase number of new customers • Increase number of field sales consultants Goal - Partner With Customers to Improve Quality of Care 21
  • 22. Key Strategies for Future Growth Pursue Complementary Initiatives… • Continue to develop the specialty business • Implants, orthodontics, surgical, dermatology and pediatrics • Expand product and service offering • Additional exclusive and semi-exclusive distribution agreements • Realize sourcing synergies and supply chain initiatives • Globalize inventory management • Increase sales of Henry Schein proprietary products • Pursue strategic acquisitions … To Accelerate Sales and Operating Income Growth 22
  • 23. Safe Harbor Provision The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain portions of this presentation include information that is forward-looking. Certain risks and uncertainties could cause our future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied in this presentation. Such forward- looking statements should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update such forward-looking statements, and we refer you to the cautionary language contained in our filings with the Securities and Exchange Commission. 23
  • 24. Growth Since Going Public Compound 1995 2007 Annual Growth Rate ($ in millions, except per share data) Sales $616.2 $5,920.2 21% Operating Income $19.3 $386.3 28% Operating Margin 3.1% 6.5% 28bp1 Net Income $9.1 $235.0 31% Diluted EPS $0.34 $2.58 18% From continuing operations and excluding certain non-recurring items 1 Average annual expansion 24
  • 25. First Quarter 2008 Financial Highlights ($ in millions, except per share data) Q1 2008 Q1 2007 Growth Sales $1,525.6 $1,310.1 16.4% Operating Income $85.2 $73.7 15.6% Operating Margin 5.59% 5.63% (4) bp Net Income $52.3 $43.5 20.3% Diluted EPS $0.57 $0.48 18.8% 25
  • 26. Net Sales ($ in millions) $7,000 CAGR 17% $5,920 $5,048 $4,526 17% $5,000 $3,795 12% $3,181 19% $2,676 $3,000 19% 19% 11% $1,000 2002 2003 2004 2005 2006 2007 From Continuing Operations 26
  • 27. Long-Term Financial Objectives Future sales growth will be a balance of internal growth and acquisitions Internal Sales Growth Goal Industry growth rate 5% + Increase in market share 2- 4% Internal Sales Growth Goal 7- 9% Actual Sales Growth* 2002 2003 2004 2005 2006**2007 Internal 9% 13% 8% 8% 7% 7% Acquisition 1% 2% 11% 11% 5% 7% Total Sales Growth 10% 15% 19% 19% 12% 14% As originally reported except as noted * Local currency ** Adjusted for extra week in 2005 27
  • 28. Strategic Acquisitions Successfully integrated over 30 acquisitions since 2000 2004 Key Strategic Benefit Revenue1 • Demedis Group Expands European dental equipment offering $345m • Camlog Entrée into the growing market for dental implants $30m 2005 • Ash Temple Expands presence in Canadian Dental market $100m • Halas / Shalfoon Strengthens position in Australia and New Zealand $60m 2006 • NLS Animal Health Expands presence in U.S. Veterinary market $110m • Darby Companies Strengthens U.S. Dental, Medical and Lab presence $220m • Provet Expands presence in European Veterinary market $50m 2007 • Software of Excellence Provides leading position in U.K. Dental Software market $20m • W&J Dunlop Expands presence in European Veterinary market $340m 1 Represents the approximate revenue in the fiscal year prior to acquisition or expectation for revenue contribution in the 12 months immediately following acquisition date 28
  • 29. Operating Income and Margin ($ in Millions) CAGR 17% $386 $400 $304 $262 $300 $217 $205 27% $179 $200 16% 28% 21% -6% $100 34% $0 1 2002 2003 2004 2005 2006 2007 Operating 6.7% 6.8% 5.4% 5.8% 6.0% 6.5% Margin All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs (1) Reflects absence of influenza vaccine profits 29
  • 30. Long-Term Financial Objectives Goals: • Internal sales growth of at least 7-9%. • Operating margin expansion of 30 to 50 bp per year Actual Results: 1995 2007 Operating Margin 3.1% 6.5% Average 28 bp annual increase since going public All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs 30
  • 31. Diluted EPS and Net Income $3.00 CAGR 17% $2.58 $2.03 $2.00 $1.70 27% $1.44 $1.39 $1.19 19% 22% $1.00 21% -3% 29% $0.00 1 2002 2003 2004 2005 2006 2007 Net $105.6 $128.3 $122.5 $150.7 $182.7 $235.0 Income All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs (1) Reflects absence of influenza vaccine profits 31
  • 32. Long-Term Financial Objectives Goals: • Internal sales growth of at least 7-9% • Operating margin expansion of 30 to 50 bp per year • Earnings Per Share growth in the mid-teens or greater (before acquisitions) Actual Results: 1995 2007 EPS $.34 $2.58 18% CAGR since going public All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs 32
  • 33. Operating Cash Flow ($ in Millions) $300.0 $270.2 $254.8 $235.3 $182.6 $200.0 $129.1 $123.2 $100.0 $67.0 $47.5 $50.8 $56.8 $39.0 $37.8 $0.0 2002 2003 2004 2005 2006 2007 Operating Cash Flow Capital Expenditures 33
  • 34. Long-Term Financial Objectives Goals: • Internal sales growth of at least 7-9% • Operating margin expansion of 30 to 50 bp per year • Earnings Per Share growth in the mid-teens or greater (before acquisitions) • Cash flow from operations to exceed net income Actual Results Since 2002 operating cash flow has exceeded net income by over $265 million All amounts from continuing operations restated to include expensing of stock-based compensation and excludes non-recurring income and merger and restructuring costs 34
  • 35. Strong Balance Sheet ($ in millions) March 29, 2008 Debt to Total Capitalization Ratio Cash & Equiv. $239.0 Working Capital $983.8 40% Total Assets $3,388.5 Total Debt $458.6 30% 32.6% Equity 29.6% $1,885.8 20% 25.3% 22.5% DSOs 42.2 days 20.4% 20.3% Inventory Turns 6.3x 10% Net Debt to Total 10.4% Capitalization Ratio 0% 2002 2003 2004 2005 2006 2007 35
  • 36. Investment Merits • Leading presence in fragmented growing markets • Providing high quality service to office-based healthcare practitioners • Strong brand recognition • Highly experienced management team • Significant growth opportunities 36