HENRY SCHEIN 2008IRPresentation_Final
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Transcript of HENRY SCHEIN 2008IRPresentation_Final
NASDAQ: HSICwww.henryschein.com
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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 practitionersBroad range of value-added products and services
• One-stop shop for our customersOperations or affiliates in 20 countries Fortune 500® companyMember of the NASDAQ 100® Index
Corporate Overview
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1995 Worldwide Sales: $616 million
2008 Worldwide Sales: $6.4 billion
Dental52%
Tech4%
Int'l17%
Medical27%
Tech3%
Int'l35%
Dental40%
Medical22%
From Continuing Operations
13 Years as a Public Company
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(1) Includes Animal Health
Share Size Share SizeMarket ($ in billions) ($ in billions)U.S. & Canada Dental 11% $3.0 40% 6.3U.S. Medical (1) 3% 4.8 15% 9.5Europe Dental 5% 2.2 19% 7.2Europe Medical (1) ___ _____ 14% 4.5TOTAL 6% $10.0 23% $27.5
20081995Estimated Market
Serving Large and Growing Markets
Consistent Market Growth
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Attractive Market Dynamics
(1) U.S. Census Bureau
144m
131m
75m
93m
115m
30m
60m
90m
120m
150m
180m
1990 2000 2010 2020 2030
U.S
. Pop
ulat
ion
Age
45-
84 (m
illio
ns)1
45-84 year-old population projected to almost double between 1990-2030
Aging Population Driving Healthcare Spending
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Consistent Growth
Recession Resistant
Fragmented Competitors
Positive Business Environment
Fragmented Customer Base
Markets Served
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4.95.25.76.36.04.8
8.69.08.5
6.86.67.2
5.2
7.46.6
5.0
11.2
5.6
7.57.28.2
9.3
6.7
9.28.57.88.0
17.8
12.0
200820062004200220001998199619941992199019881986198419821980-4%
0%
4%
8%
12%
16%
20%
Dental Services Growth US GDP Growth (constant dollars)
Dental Services GrowthNever recorded a year of negative
growthProjected 2009 Growth:
2.0%
Source: -Dental Services Growth - CMS. -GDP - US Department of Commerce
▪▪
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Physician and Clinical Services Growth
6.26.55.9
7.47.38.5
7.98.5
7.0
5.26.4
5.04.0
4.84.6
6.1
8.4
11.111.011.5
14.0
12.210.9
17.3
12.811.5
10.8
16.615.8
200820062004200220001998199619941992199019881986198419821980
-4%
0%
4%
8%
12%
16%
20%
Physician and Clinical Services Growth US GDP Growth (constant dollars)▪▪Source: -Physician and Clinical Services Growth - CMS. -GDP - US Department of Commerce
Never recorded a year of negative
growth Projected 2009 Growth:6.0%
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EfficiencyProductivityProfitability
Allowing our customers to focus on delivering quality care to their patients
Company Objective
Improve Practice
Our primary objective is to partner with our customers
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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
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1. Unique Sales and Marketing Expertise
• Strong brand identity with over 75 years of experience
• Extensive direct marketing programs • Highly-trained sales professionals
2,800 field sales consultants and specialists1,500 telesales representativesExtensive training to develop consultative selling skills
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Reps visit the website regularlyReps visit the website regularly
Extensive Consultative Selling Skills
Classroom and Web-Based Training
Clinical Techniques
Practice Management
Solutions
Products
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Driving more productive customer interactions
Customer Analysis Tool (CAT)
Proprietary call planning systemColor coding ranks sales activity
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75-80% Utilization……With Capacity for Growth
2. Centralized Leveragable Infrastructure
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3. Broad Product and Services Offering
90,000 SKUs in stock
100,000 special order
itemsavailable
~20,000 proprietary products
Competitive Prices
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Exclusive Product Offerings
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Design Services
Value-Added Services
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4. Superior Customer Service
• 24/7 ordering by mail, fax, telephone, CD-Rom and Web
• Customer Service Statistics:North America Worldwide
Order fulfillment 99% 99%Orders shipped same day 99% 99%Orders delivered in 2 days 99% 99%Orders delivered next day 90% 95%Order accuracy 99.9% 99.9%
• 2008 Web sales up over 20%
• Innovative Customer Loyalty programs
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Innovative Customer Loyalty Programs
• Designed to attract, retain, and reward preferred customers
• Over 28,000 U.S. Dental members and 7,000 U.S. Medical members and 6,000 International
• Drives faster sales and electronic ordering growth
• Similar programs active in 9 international markets
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5. Practice Management Solutions
Active Base of Over 60,000 Users
Helping our customers become more efficient and profitable
• #1 in customer satisfaction• Integrates with digital
equipment• Provides cross-selling
opportunities
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Key Strategies for Future Growth
• 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
Transition from a Pure Distribution Company
Goal - Partner With Customers to Improve Quality of Care
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Key Strategies for Future Growth
• 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
Pursue Complementary Initiatives…
… To Accelerate Sales and Operating Income Growth
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Recent Acquisitions
DNA Anthos
• Provides entrée into orthodontic market• Expands dental specialties group• Sales of $30 million
• Leading Czech Republic Animal Health distributor• Provides base of operation for expansion into Eastern Europe• Makes Henry Schein largest Pan-European Animal Health distributor• Sales of $70 million
• Italian distribution arm of Cefla Dental (equipment manufacturer)• Leading distributor of Anthos dental equipment in Italy, nation’s largest installed user
base• Five-year exclusive agreement with Cefla to distribute Anthos in most regions of Italy• Sales of $43 million
• Full-service provider of Medical consumables, equipment and technical services primarily to physicians
• Complements current Henry Schein German operations and provides coverage where there previously was limited presence
• Sales of $36 million
Medka
Noviko
Acquired 10 companies in Q4 2008 with annual sales of $280 million. The more significant acquisitions include:
Ortho Organizers
Financial Update
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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.
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20%
27%
29bp
30%
18%
Sales
Operating Income
Operating Margin
Net Income
Diluted EPS
$616.2
$19.3
3.1%
$9.1
$0.34
1995
$6,394.9
$442.8
6.9%
$270.0
$2.96
Compound Annual
Growth Rate2008
From continuing operations and excluding certain non-recurring items.
Growth Since Going Public
($ in millions, except per share data)
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Full Year 2008
2008 Growth2007 ($ in millions, except per share data)
Sales $6,394.9 $5,904.4 8.3%
Operating Income $442.8 $387.9 14.2%
Operating Margin 6.92% 6.57% 35 bp
Net Income $270.0 $236.1 14.4%
Diluted EPS $2.96 $2.59 14.3%
From continuing operations and excluding certain non-recurring items.
Financial Highlights
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Net Sales
3,795
4,5265,036
5,9046,395
$1,000
$3,000
$5,000
$7,000
2004 2005 2006 2007 2008
($ in millions)
From Continuing Operations
19%19%
11%
17%
CAGR 14%
8%
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Long-Term Financial Objectives
¹Local currency ²Adjusted for extra week in 2005³Adjusted to exclude sales of certain lower-margin pharmaceutical products
2004 2005 2006² 2007 2008³Internal 8% 8% 7% 7% 4%Acquisition 11% 11% 5% 7% 6%
Total Sales Growth 19% 19% 12% 14% 10%As originally reported except as noted
Actual Sales Growth¹
Future sales growth will be a balance of internal growth and acquisitions
Goal:• To continue to grow internal sales faster
than market
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Strategic Acquisitions
Key Strategic Benefit2005
• 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 Provides leading position in U.K. Dental Software market $20m
Excellence• W&J Dunlop Expands presence in European Veterinary market $340m
2008• Minerva Dental Expands full-service dental presence in U.K. $40m
2009• Noviko Expands Veterinary presence in the Czech Republic $70m• DNA Anthos Strengthens Dental equipment presence in Italy $43m• Medka Expands Medical presence in Germany $36m• Ortho Organizers Provides entrée into orthodontic market $30m
Successfully integrated over 30 acquisitions since 2000
Revenue1
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.
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$205$262
$305
$388$443
$0
$100
$200
$300
$400
$500
2004 2005 2006 2007 2008
($ in Millions)
Operating Income and Margin
28%
From continuing operations and excluding certain non-recurring items.
16%
27%14%
5.4% 5.8% 6.1% 6.6% 6.9%Operating Margin
-6%
CAGR 21%
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Actual Results: 1995 2008
Operating Margin 3.1% 6.9%
Long-Term Financial Objectives
From continuing operations and excluding certain non-recurring items.
Average 29 bp annual increase since going public
Goals:• Balanced internal and acquisition sales growth
• Continued operating margin expansion
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Diluted EPS and Net Income
$1.39$1.70
$2.04
$2.59$2.96
$0.00
$1.00
$2.00
$3.00
2004 2005 2006 2007 2008
-3%22%
20%
27%
From continuing operations and excluding certain non-recurring items.
$122.5 $150.7 $183.5 $236.1 $270.0Net Income
CAGR 21%
14%
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Long-Term Financial Objectives
Actual Results:
1995 2008
EPS $.34 $2.96
All amounts from continuing operations and excluding certain non-recurring items.
18% CAGR since going public
Goals:• Balanced internal and acquisition sales growth• Continued operating margin expansion
• Predictable Earnings Per Share growth
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Operating Cash Flow
$191.0
$37.8
$254.8
$50.8
$235.3
$67.0
$270.2
$56.8
$384.6
$50.9
$0.0
$100.0
$200.0
$300.0
$400.0
2004 2005 2006 2007 2008Operating Cash Flow Capital Expenditures
($ in Millions)
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Long-Term Financial Objectives
Goals:
• Balanced internal and acquisition sales growth• Continued operating margin expansion• Predictable Earnings Per Share growth
All amounts are from continuing operations restated to exclude certain non-recurring items and restructuring costs.
Since 2004 operating cash flow has exceeded net income by over $381 million
• Strong cash flow from operations
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Strong Balance Sheet
Cash & Equiv.
Working Capital
Total Assets
Total Debt
Equity
DSO
Inventory Turns
Net Debt to Total Capitalization Ratio
32.6%29.6%
25.3%
20.4%18.1%
0%
10%
20%
30%
40%
2004 2005 2006 2007 2008
Debt to Total Capitalization Ratio$369.6
$882.6
$3,599.6
$428.0
$1,932.2
43.0 days
6.2x
2.9%
($ in millions)
December 27, 2008
HSIC has a $400m 5-year committed credit line at an attractive interest rate.
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Investment Merits
• Leading presence in fragmented growing markets
• Providing high quality service to office-based healthcare practitioners
• Strong brand recognition
• Highly experienced management team
• Excellent growth opportunities