Henry Schein Reports Record First Quarter Financial Results
Net sales for the quarter ended
Net income attributable to
"We believe that the markets we serve are generally healthy and are growing, and that our global Dental,
Dental sales of
"
"As part of our ongoing efforts to advance our leadership position in dental equipment, and specifically digital dentistry, we are pleased to announce that we entered into a three-year agreement with
Due to timing of the agreement with
"While the
Medical sales of
"Our Medical business delivered double-digit sales growth, reflecting particularly strong patient traffic to physician offices during the first quarter as well as our continued execution in serving a market that is consolidating among large group practices, including Integrated Delivery Networks," remarked Mr. Bergman. "We are well positioned to help primary care practices and ambulatory surgery centers operate efficiently so our customers can focus on patient outcomes. We believe that promoting wellness and prevention is key to the future of an improving health care landscape."
Technology and Value-Added Services sales of
"
Income Taxes
During the first quarter of 2017, the Company implemented ASU 2016-09 related to tax deductions associated with stock-based compensation. This resulted in a reduction in the effective tax rate for the quarter to 20.7%. The Company previously disclosed that this expense reduction would primarily impact the first quarter since the majority of its stock-based compensation vests in that period.
Stock Repurchase Plan
The Company announced that it repurchased approximately 308,000 shares of its common stock during the first quarter at an average price of
2017 EPS Guidance
- 2017 diluted EPS attributable to
Henry Schein, Inc. is expected to be$7.17 to $7.30 . This guidance reflects growth of 16% to 18% compared with 2016 GAAP diluted EPS of$6.19 , and growth of 8% to 10% compared with 2016 non-GAAP diluted EPS of$6.61 . The Company notes that fiscal year 2017 includes one less week than fiscal year 2016.
- Guidance for 2017 diluted EPS attributable to
Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any. Guidance also assumes foreign exchange rates that are generally consistent with current levels.
First Quarter 2017 Conference Call Webcast
The Company will hold a conference call to discuss first quarter 2017 financial results today, beginning at
About
The Company offers a comprehensive selection of products and services, including value-added solutions for operating efficient practices and delivering high-quality care. Henry Schein operates through a centralized and automated distribution network, with a selection of more than 120,000 branded products and Henry Schein private-brand products in stock, as well as more than 180,000 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
Cautionary Note Regarding Forward-Looking Statements and Use of Non-GAAP Financial Information
In accordance with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, we provide the following cautionary remarks regarding important factors that, among others, could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied herein. All forward-looking statements made by us are subject to risks and uncertainties and are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These statements are identified by the use of such terms as "may," "could," "expect," "intend," "believe," "plan," "estimate," "forecast," "project," "anticipate" or other comparable terms. A full discussion of our operations and financial condition, including factors that may affect our business and future prospects, is contained in documents we have filed with the
Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: effects of a highly competitive and consolidating market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic conditions; risks associated with currency fluctuations; risks associated with political and economic uncertainty; disruptions in financial markets; volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions and joint ventures, including the failure to achieve anticipated synergies; financial risks associated with acquisitions and joint ventures; litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; increased competition by third party online commerce sites; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation. The order in which these factors appear should not be construed to indicate their relative importance or priority.
We caution that these factors may not be exhaustive and that many of these factors are beyond our ability to control or predict. Accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.
Included within the press release are non-GAAP financial measures that supplement the Company's Consolidated Statements of Income prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company's actual results prepared under GAAP to exclude certain items. In the schedules attached to this press release, the non-GAAP measures have been reconciled to and should be considered together with the Consolidated Statements of Income. Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.
(TABLES TO FOLLOW)
HENRY SCHEIN, INC. |
|||||||||
CONSOLIDATED STATEMENTS OF INCOME |
|||||||||
(in thousands, except per share data) |
|||||||||
(unaudited) |
|||||||||
Three Months Ended |
|||||||||
April 1, |
March 26, |
||||||||
2017 |
2016 |
||||||||
Net sales |
$ |
2,922,948 |
$ |
2,712,956 |
|||||
Cost of sales |
2,100,028 |
1,935,114 |
|||||||
Gross profit |
822,920 |
777,842 |
|||||||
Operating expenses: |
|||||||||
Selling, general and administrative |
628,952 |
597,590 |
|||||||
Restructuring costs |
- |
4,058 |
|||||||
Operating income |
193,968 |
176,194 |
|||||||
Other income (expense): |
|||||||||
Interest income |
4,304 |
3,348 |
|||||||
Interest expense |
(11,430) |
(7,127) |
|||||||
Other, net |
(45) |
3,137 |
|||||||
Income before taxes and equity in earnings of affiliates |
186,797 |
175,552 |
|||||||
Income taxes |
(38,630) |
(53,533) |
|||||||
Equity in earnings of affiliates |
2,086 |
2,514 |
|||||||
Net income |
150,253 |
124,533 |
|||||||
Less: Net income attributable to noncontrolling interests |
(9,505) |
(10,781) |
|||||||
Net income attributable to Henry Schein, Inc. |
$ |
140,748 |
$ |
113,752 |
|||||
Earnings per share attributable to Henry Schein, Inc.: |
|||||||||
Basic |
$ |
1.78 |
$ |
1.39 |
|||||
Diluted |
$ |
1.76 |
$ |
1.37 |
|||||
Weighted-average common shares outstanding: |
|||||||||
Basic |
78,858 |
81,568 |
|||||||
Diluted |
79,879 |
82,739 |
|||||||
Note: Certain prior period amounts have been reclassified to conform to the current period presentation. |
HENRY SCHEIN, INC. |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(in thousands, except share and per share data) |
|||||||||
April 1, |
December 31, |
||||||||
2017 |
2016 |
||||||||
(unaudited) |
|||||||||
ASSETS |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ |
62,888 |
$ |
62,381 |
|||||
Accounts receivable, net of reserves of $90,691 and $90,329 |
1,362,832 |
1,254,139 |
|||||||
Inventories, net |
1,623,983 |
1,635,750 |
|||||||
Prepaid expenses and other |
342,554 |
360,510 |
|||||||
Total current assets |
3,392,257 |
3,312,780 |
|||||||
Property and equipment, net |
336,465 |
333,906 |
|||||||
Goodwill |
2,058,687 |
2,019,740 |
|||||||
Other intangibles, net |
599,183 |
621,180 |
|||||||
Investments and other |
458,028 |
442,790 |
|||||||
Total assets |
$ |
6,844,620 |
$ |
6,730,396 |
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ |
843,782 |
$ |
977,249 |
|||||
Bank credit lines |
671,724 |
437,476 |
|||||||
Current maturities of long-term debt |
18,604 |
65,923 |
|||||||
Accrued expenses: |
|||||||||
Payroll and related |
226,364 |
266,463 |
|||||||
Taxes |
168,532 |
151,750 |
|||||||
Other |
356,426 |
391,785 |
|||||||
Total current liabilities |
2,285,432 |
2,290,646 |
|||||||
Long-term debt |
708,422 |
715,457 |
|||||||
Deferred income taxes |
79,107 |
51,589 |
|||||||
Other liabilities |
256,875 |
264,264 |
|||||||
Total liabilities |
3,329,836 |
3,321,956 |
|||||||
Redeemable noncontrolling interests |
719,390 |
607,636 |
|||||||
Commitments and contingencies |
|||||||||
Stockholders' equity: |
|||||||||
Preferred stock, $.01 par value, 1,000,000 shares authorized, |
|||||||||
none outstanding |
- |
- |
|||||||
Common stock, $.01 par value, 240,000,000 shares authorized, |
|||||||||
79,468,025 outstanding on April 01, 2017 and |
|||||||||
79,402,505 outstanding on December 31, 2016 |
795 |
794 |
|||||||
Additional paid-in capital |
- |
127,536 |
|||||||
Retained earnings |
3,068,249 |
2,981,777 |
|||||||
Accumulated other comprehensive loss |
(281,819) |
(317,041) |
|||||||
Total Henry Schein, Inc. stockholders' equity |
2,787,225 |
2,793,066 |
|||||||
Noncontrolling interests |
8,169 |
7,738 |
|||||||
Total stockholders' equity |
2,795,394 |
2,800,804 |
|||||||
Total liabilities, redeemable noncontrolling interests and stockholders' equity |
$ |
6,844,620 |
$ |
6,730,396 |
HENRY SCHEIN, INC. |
||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
(in thousands) |
||||||||||
(unaudited) |
||||||||||
Three Months Ended |
||||||||||
April 1, |
March 26, |
|||||||||
2017 |
2016 |
|||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ |
150,253 |
$ |
124,533 |
||||||
Adjustments to reconcile net income to net cash used in |
||||||||||
operating activities: |
||||||||||
Depreciation and amortization |
44,749 |
40,967 |
||||||||
Stock-based compensation expense |
8,497 |
14,144 |
||||||||
Provision for losses on trade and other accounts receivable |
2,810 |
580 |
||||||||
Provision for deferred income taxes |
13,496 |
6,963 |
||||||||
Equity in earnings of affiliates |
(2,086) |
(2,514) |
||||||||
Distributions from equity affiliates |
3,038 |
2,181 |
||||||||
Changes in unrecognized tax benefits |
(10,876) |
2,504 |
||||||||
Other |
2,689 |
(173) |
||||||||
Changes in operating assets and liabilities, net of acquisitions: |
||||||||||
Accounts receivable |
(101,764) |
(39,767) |
||||||||
Inventories |
28,278 |
13,930 |
||||||||
Other current assets |
2,689 |
(24,918) |
||||||||
Accounts payable and accrued expenses |
(194,364) |
(216,228) |
||||||||
Net cash used in operating activities |
(52,591) |
(77,798) |
||||||||
Cash flows from investing activities: |
||||||||||
Purchases of fixed assets |
(17,311) |
(12,605) |
||||||||
Payments for equity investments and business |
||||||||||
acquisitions, net of cash acquired |
(11,820) |
(52,562) |
||||||||
Other |
(5,549) |
(5,829) |
||||||||
Net cash used in investing activities |
(34,680) |
(70,996) |
||||||||
Cash flows from financing activities: |
||||||||||
Proceeds from bank borrowings |
234,037 |
95,111 |
||||||||
Proceeds from issuance of debt |
- |
210,000 |
||||||||
Debt issuance costs |
- |
(58) |
||||||||
Principal payments for long-term debt |
(56,367) |
(7,554) |
||||||||
Proceeds from issuance of stock upon exercise of stock options |
3,952 |
6,398 |
||||||||
Payments for repurchases of common stock |
(50,006) |
(99,997) |
||||||||
Payments for taxes related to shares withheld for employee taxes |
(40,605) |
(23,714) |
||||||||
Distributions to noncontrolling shareholders |
(3,264) |
(2,096) |
||||||||
Acquisitions of noncontrolling interests in subsidiaries |
(4,089) |
(32,711) |
||||||||
Net cash provided by financing activities |
83,658 |
145,379 |
||||||||
Effect of exchange rate changes on cash and cash equivalents |
4,120 |
2,943 |
||||||||
Net change in cash and cash equivalents |
507 |
(472) |
||||||||
Cash and cash equivalents, beginning of period |
62,381 |
72,086 |
||||||||
Cash and cash equivalents, end of period |
$ |
62,888 |
$ |
71,614 |
||||||
Note: Certain prior period amounts have been reclassified to conform to the current period presentation. |
Exhibit A - QTD Sales |
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Henry Schein, Inc. |
|||||||||||||||
2017 First Quarter |
|||||||||||||||
Sales Summary |
|||||||||||||||
(in thousands) |
|||||||||||||||
(unaudited) |
|||||||||||||||
Q1 2017 over Q1 2016 |
|||||||||||||||
Global |
Q1 2017 |
Q1 2016 |
Total Sales |
Foreign |
Local |
Acquisition |
Local |
||||||||
Dental |
$ |
1,405,158 |
$ |
1,301,755 |
7.9% |
-0.3% |
8.2% |
5.3% |
2.9% |
||||||
Animal Health |
812,939 |
771,413 |
5.4% |
-2.7% |
8.1% |
1.0% |
7.1% |
||||||||
Medical |
598,886 |
538,117 |
11.3% |
-0.2% |
11.5% |
0.0% |
11.5% |
||||||||
Total Health Care Distribution |
2,816,983 |
2,611,285 |
7.9% |
-0.9% |
8.8% |
2.9% |
5.9% |
||||||||
Technology and value-added services |
105,965 |
101,671 |
4.2% |
-1.3% |
5.5% |
0.0% |
5.5% |
||||||||
Total Global |
$ |
2,922,948 |
$ |
2,712,956 |
7.7% |
-1.0% |
8.7% |
2.8% |
5.9% |
||||||
North America |
Q1 2017 |
Q1 2016 |
Total Sales |
Foreign |
Local |
Acquisition |
Local |
||||||||
Dental |
$ |
850,456 |
$ |
834,837 |
1.9% |
0.4% |
1.5% |
0.7% |
0.8% |
||||||
Animal Health |
422,644 |
399,327 |
5.8% |
0.0% |
5.8% |
0.3% |
5.5% |
||||||||
Medical |
580,037 |
519,441 |
11.7% |
0.0% |
11.7% |
0.0% |
11.7% |
||||||||
Total Health Care Distribution |
1,853,137 |
1,753,605 |
5.7% |
0.2% |
5.5% |
0.4% |
5.1% |
||||||||
Technology and value-added services |
89,053 |
86,035 |
3.5% |
0.1% |
3.4% |
0.0% |
3.4% |
||||||||
Total North America |
$ |
1,942,190 |
$ |
1,839,640 |
5.6% |
0.2% |
5.4% |
0.4% |
5.0% |
||||||
International |
Q1 2017 |
Q1 2016 |
Total Sales |
Foreign |
Local |
Acquisition |
Local |
||||||||
Dental |
$ |
554,702 |
$ |
466,918 |
18.8% |
-1.3% |
20.1% |
13.3% |
6.8% |
||||||
Animal Health |
390,295 |
372,086 |
4.9% |
-5.6% |
10.5% |
1.6% |
8.9% |
||||||||
Medical |
18,849 |
18,676 |
0.9% |
-4.6% |
5.5% |
0.0% |
5.5% |
||||||||
Total Health Care Distribution |
963,846 |
857,680 |
12.4% |
-3.2% |
15.6% |
8.0% |
7.6% |
||||||||
Technology and value-added services |
16,912 |
15,636 |
8.2% |
-9.0% |
17.2% |
0.0% |
17.2% |
||||||||
Total International |
$ |
980,758 |
$ |
873,316 |
12.3% |
-3.3% |
15.6% |
7.8% |
7.8% |
||||||
Note: Certain prior quarter amounts have been reclassified to conform to the current period presentation. |
Exhibit B |
||||||||
Henry Schein, Inc. |
||||||||
2017 First Quarter |
||||||||
Reconciliation of reported GAAP net income and diluted EPS attributable to Henry Schein, Inc. to |
||||||||
non-GAAP net income and diluted EPS attributable to Henry Schein, Inc. |
||||||||
(in thousands, except per share data) |
||||||||
(unaudited) |
||||||||
First Quarter |
||||||||
% |
||||||||
2017 |
2016 |
Growth |
||||||
Net Income attributable to Henry Schein, Inc. |
$ |
140,748 |
$ |
113,752 |
23.7 |
% |
||
Diluted EPS attributable to Henry Schein, Inc. |
$ |
1.76 |
$ |
1.37 |
28.5 |
% |
||
Non-GAAP Adjustments |
||||||||
Restructuring costs - Pre-tax |
$ |
- |
$ |
4,058 |
||||
Income tax benefit for restructuring costs |
- |
(1,014) |
||||||
Total non-GAAP adjustments to Net Income |
||||||||
attributable to Henry Schein, Inc. |
$ |
- |
$ |
3,044 |
||||
Total non-GAAP adjustments to diluted EPS |
||||||||
attributable to Henry Schein, Inc. |
$ |
- |
$ |
0.04 |
||||
% |
||||||||
2016 |
Growth |
|||||||
2017 |
(Non-GAAP) |
(Non-GAAP) |
||||||
Net Income attributable to Henry Schein, Inc. |
$ |
140,748 |
$ |
116,796 |
20.5 |
% |
||
Diluted EPS attributable to Henry Schein, Inc. |
$ |
1.76 |
$ |
1.41 |
24.8 |
% |
Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/henry-schein-reports-record-first-quarter-financial-results-300454046.html
SOURCE
Investors: Steven Paladino, Executive Vice President and Chief Financial Officer, steven.paladino@henryschein.com, (631) 843-5500 or Carolynne Borders, Vice President, Investor Relations, carolynne.borders@henryschein.com, (631) 390-8105 or Media: Gerard Meuchner, Vice President, Chief Global Communications Officer, gerard.meuchner@henryschein.com, (631) 390-8227