Henry Schein Reports 21% Increase in Q3 Diluted EPS from Continuing Operations on a Comparable Basis; Net Sales Increase 18% to $892.7 Million
MELVILLE, N.Y.--(BUSINESS WIRE)--Nov. 4, 2003--
Company raises 2003 EPS guidance, introduces 2004 EPS guidance
Henry Schein, Inc. (Nasdaq NM: HSIC), the largest provider of healthcare products and services to office-based practitioners in the combined North American and European markets, today reported record third quarter financial results.
Net sales for the third quarter ended September 27, 2003 were $892.7 million, an increase of 17.6% from the third quarter of 2002. In local currencies, net sales increased 15.3% including 12.1% internal growth, and 3.2% from acquisitions net of divestitures.
Dental sales increased 12.9%, or 12.1% in local currencies (including 7.3% internal growth). In local currencies, Dental consumable merchandise sales increased 12.2% (6.2% internal growth) and Dental equipment sales were up 11.7%, all internally generated.
Medical sales increased 17.5%, all internally generated, Technology and Value-Added Services sales grew 5.7% (4.7% internal growth), and International sales improved 33.9% or 19.3% in local currencies (including 9.7% internal growth). The Company noted that there was no material timing variance related to sales of influenza vaccine compared with 2002, and that flu vaccine sales were up 5.8% for the quarter. The Company also reported that it has successfully completed shipment of all committed quantities of injectable flu vaccine product for the current season, and has limited quantities available to satisfy future customer demand.
Net income for the third quarter of 2003 was $44.3 million or $0.99 per diluted share, reflecting a $0.04 per share loss on the divestiture of a non-strategic business. Net income from continuing operations for the third quarter of 2003 was $46.4 million, representing an increase of 18.2% (20.9% on a comparable basis) compared with the third quarter of 2002. Earnings per diluted share from continuing operations of $1.03 represented growth of 18.4% (21.2% on a comparable basis). (See Exhibit B for details of comparable basis analysis.)
"We posted excellent growth in net sales during the third quarter, with market share gains in our Dental, Medical and International Business Groups," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. "Record sales to our diversified global customer base and an expanding operating margin resulted in another quarter of outstanding bottom-line performance."
For the year-to-date 2003, net sales were $2.41 billion, an increase of 15.8% from the first nine months of 2002. Year-to-date 2003 net sales increased 12.8% in local currencies, including 11.2% internal growth. Net income from continuing operations for the year-to-date 2003 was $104.0 million, or $2.32 per diluted share, representing increases of 19.5% and 19.6%, respectively, over the prior year.
The Company reported that, under a stock repurchase program of up to two million shares of common stock announced on March 12, 2003, during the third quarter 212,000 shares were repurchased at an average price of $57.25 per share. The impact of this share repurchase on third quarter diluted EPS was not significant. Through the third quarter, the Company has repurchased 1,283,500 shares under this initiative.
2003 and 2004 EPS Guidance
The Company now expects full-year 2003 earnings per diluted share from continuing operations to be $3.08 to $3.10, resulting in Q4 EPS of $0.76 to $0.78. This reflects year-to-date financial results and the repurchase of stock completed through the end of the third quarter and represents growth of 18% to 19% over 2002 results on a comparable basis. This growth rate excludes the following non-recurring items: a $0.01 real estate gain during the first quarter of 2003, a $0.04 loss from discontinued operations during the third quarter of 2003, a $0.02 real estate gain during the third quarter of 2002, and a $0.02 restructure expense reversal during the fourth quarter of 2002.
Henry Schein also introduced guidance for full-year 2004 earnings per diluted share of $3.52 to $3.58. This represents growth of 14% to 16% compared with the mid-point of the Company's estimated 2003 results. The Company noted that this 2004 EPS guidance is for current operations and does not include the impact of potential future acquisitions.
Third Quarter Conference Call Webcast
The Company will hold a conference call to discuss third quarter financial results today, beginning at 10 a.m. Eastern Time. Individual investors are invited to listen to the conference call over the Internet through Henry Schein's Website at www.henryschein.com. In addition, a replay will be available beginning shortly after the call has ended.
Henry Schein, Inc. is the largest distributor of healthcare products and services to office-based healthcare practitioners in the combined North American and European markets. Recognized for its excellent customer service and low prices, the Company serves more than 400,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary clinics, as well as government and other institutions.
The Company operates its four business groups - Dental, Medical, International and Technology - through a centralized and automated distribution network, which provides customers in more than 125 countries with a comprehensive selection of over 90,000 national and Henry Schein private-brand products. Henry Schein also offers a wide range of innovative value-added practice solutions, including such leading practice management software systems as DENTRIX(R) and Easy Dental(R) for dental practices, and AVImark(R) for veterinary clinics, which are installed in over 50,000 practices; and ArubA(R), Henry Schein's electronic catalog and ordering system. Headquartered in Melville, New York, Henry Schein employs over 7,400 people in 16 countries. The Company's 2002 sales reached a record $2.8 billion. For more information, visit the Henry Schein Website at www.henryschein.com.
Certain information contained herein includes information that is forward-looking. The matters referred to in forward-looking statements may be affected by the risks and uncertainties involved in the Company's business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in the Company's Securities and Exchange Commission filings.
(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
---------------------------
September 27, September 28,
2003 2002
------------- -------------
Net sales $892,718 $759,073
Cost of sales 641,218 542,601
------------- -------------
Gross profit 251,500 216,472
Operating expenses:
Selling, general and administrative 175,100 152,187
------------- -------------
Operating income 76,400 64,285
Other income (expense):
Interest income 2,197 2,536
Interest expense (4,812) (4,787)
Other, net 328 877
------------- -------------
Income before taxes, minority
interest, equity in earnings of
affiliates and loss on sale of
discontinued operation 74,113 62,911
Taxes on income from continuing
operations (27,569) (23,468)
Minority interest in net income of
subsidiaries (363) (337)
Equity in earnings of affiliates 178 122
------------- -------------
Net income from continuing operations 46,359 39,228
Loss on sale of discontinued operation,
net of tax (2,012) -
------------- -------------
Net income $ 44,347 $ 39,228
============= =============
Net income from continuing operations
per common share:
Basic $ 1.06 $ 0.90
============= =============
Diluted $ 1.03 $ 0.87
============= =============
Loss on sale of discontinued operation,
net of tax per common share:
Basic $ (0.05) $ -
============= =============
Diluted $ (0.04) $ -
============= =============
Net income per common share:
Basic $ 1.02 $ 0.90
============= =============
Diluted $ 0.99 $ 0.87
============= =============
Weighted average common shares
outstanding:
Basic 43,609 43,808
============= =============
Diluted 44,885 45,000
============= =============
Nine Months Ended
-------------------------------
September 27, September 28,
2003 2002
--------------- ---------------
Net sales $2,406,881 $2,077,598
Cost of sales 1,733,435 1,490,340
------------- -------------
Gross profit 673,446 587,258
Operating expenses:
Selling, general and administrative 498,811 440,786
------------- -------------
Operating income 174,635 146,472
Other income (expense):
Interest income 6,510 7,456
Interest expense (14,140) (13,982)
Other, net 1,255 1,017
------------- -------------
Income before taxes, minority
interest, equity in earnings of
affiliates and loss on sale of
discontinued operation 168,260 140,963
Taxes on income from continuing
operations (62,982) (52,528)
Minority interest in net income of
subsidiaries (1,974) (1,838)
Equity in earnings of affiliates 676 427
------------- -------------
Net income from continuing operations 103,980 87,024
Loss on sale of discontinued operation,
net of tax (2,012) -
------------- -------------
Net income $ 101,968 $ 87,024
============= =============
Net income from continuing operations
per common share:
Basic $ 2.38 $ 2.01
============= =============
Diluted $ 2.32 $ 1.94
============= =============
Loss on sale of discontinued operation,
net of tax per common share:
Basic $ (0.05) $ -
============= =============
Diluted $ (0.04) $ -
============= =============
Net income per common share:
Basic $ 2.33 $ 2.01
============= =============
Diluted $ 2.27 $ 1.94
============= =============
Weighted average common shares
outstanding:
Basic 43,706 43,329
============= =============
Diluted 44,896 44,779
============= =============
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 27, December 28,
2003 2002
--------------- ---------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 92,857 $ 200,651
Marketable securities 12,902 31,209
Accounts receivable, net of
reserves of $40,116 and $36,200 498,016 368,263
Inventories, net 372,082 323,080
Deferred income taxes 26,839 29,919
Prepaid expenses and other 85,067 74,407
--------------- ---------------
Total current assets 1,087,763 1,027,529
Property and equipment, net 150,817 142,532
Goodwill 354,402 302,687
Other intangibles, net 22,997 7,661
Investments and other 81,008 77,643
--------------- ---------------
Total assets $1,696,987 $1,558,052
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 246,710 $ 243,166
Bank credit lines 6,475 4,790
Current maturities of long-term
debt 4,357 2,662
Accruals:
Salaries and related expenses 52,946 53,954
Taxes 56,792 32,196
Other expenses 93,202 86,562
--------------- ---------------
Total current liabilities 460,482 423,330
Long-term debt 245,389 242,561
Other liabilities 28,955 24,196
Minority interest 10,041 6,748
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value,
1,000,000 authorized,
none outstanding - -
Common stock, $.01 par value,
120,000,000 authorized,
43,645,938 and 44,041,591
outstanding 436 440
Additional paid-in capital 439,337 436,554
Retained earnings 501,024 430,389
Treasury stock, at cost, 0 and
62,479 shares - (1,156)
Accumulated other comprehensive
income (loss) 11,445 (4,794)
Deferred compensation (122) (216)
--------------- ---------------
Total stockholders' equity 952,120 861,217
--------------- ---------------
Total liabilities and
stockholders' equity $1,696,987 $1,558,052
=============== ===============
NOTE: Certain prior period amounts have been
reclassified to conform with the current period
presentation.
HENRY SCHEIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
---------------------------
September 27, September 28,
2003 2002
------------- -------------
Cash flows from
operating activities of continuing
operations:
Net income $ 44,347 $ 39,228
Loss on sale of discontinued
operation, net of tax 2,012 -
-------- --------
Net income from continuing
operations 46,359 39,228
Adjustments to reconcile net
income to net cash provided by
operating activities of
continuing operations:
Depreciation and amortization 8,841 7,077
Other 6,252 1,119
Changes in operating assets and
liabilities, net of effect of
acquisitions:
Increase in accounts receivable (82,095) (54,460)
Increase in inventories, net (31,937) (376)
(Increase) decrease in other
current assets (7,634) (3,955)
Increase in accounts payable
and accruals 37,274 63,636
Net cash (used in) provided by ------------- -------------
operating activities of continuing (22,940) 52,269
operations ------------- -------------
Cash flows from investing
activities:
Purchases of capital expenditures (7,724) (8,140)
Payments for business
acquisitions, net of cash
acquired (1,043) -
Purchases of marketable
securities (17,944) (29,654)
Proceeds from sales of marketable
securities 20,104 -
Proceeds from maturities of
marketable securities 9,600 -
Other, including discontinued
operation (2,532) (2,473)
------------- -------------
Net cash provided by (used in)
investing activities 461 (40,267)
------------- -------------
Cash flows from financing
activities:
Principal payments on long-term
debt (2,232) (784)
Proceeds from issuance of stock
upon exercise of stock options 7,049 6,263
Net proceeds from borrowings from
banks 1,622 2,178
Payments for repurchases of common
stock (11,575) -
Other (25) (2,331)
------------- -------------
Net cash (used in) provided by
financing activities (5,161) 5,326
------------- -------------
Net change in cash and cash
equivalents (27,640) 17,328
Effect of exchange rate changes on
cash and cash equivalents (664) (537)
Cash and cash equivalents,
beginning of period 121,161 132,508
------------- -------------
Cash and cash equivalents, end of
period $ 92,857 $149,299
============= =============
NOTE: Certain prior period amounts have been reclassified to
conform with the current period presentation.
Nine Months Ended
---------------------------
September 27, September 28,
2003 2002
------------- -------------
Cash flows from operating
activities of continuing
operations:
Net income $ 101,968 $ 87,024
Loss on sale of discontinued
operation, net of tax 2,012 -
--------- ---------
Net income from continuing
operations 103,980 87,024
Adjustments to reconcile net
income to net cash provided by
operating activities of
continuing operations:
Depreciation and amortization 25,956 20,086
Other 14,832 5,687
Changes in operating assets and
liabilities, net of effect of
acquisitions:
Increase in accounts receivable (115,673) (52,958)
Increase in inventories, net (27,456) (18,136)
(Increase) decrease in other
current assets 4,893 (8,662)
Increase in accounts payable
and accruals 11,559 32,609
Net cash (used in) ------------- -------------
provided by operating 18,091 65,650
activities of continuing ------------- -------------
operations
Cash flows from investing
activities:
Purchases of capital expenditures (29,045) (36,260)
Payments for business
acquisitions, net of cash
acquired (67,797) (34,887)
Purchases of marketable
securities (39,139) (50,293)
Proceeds from sales of marketable
securities 20,104 -
Proceeds from maturities of
marketable securities 38,130 -
Other, including discontinued
operation (671) (3,047)
------------- -------------
Net cash provided by (used in)
investing activities (78,418) (124,487)
------------- -------------
Cash flows from financing
activities:
Principal payments on long-term
debt (7,186) (14,388)
Proceeds from issuance of stock
upon exercise of stock options 18,378 32,753
Net proceeds from borrowings from
banks 682 1,743
Payments for repurchases of
common stock (57,727) -
Other (118) (2,757)
------------- -------------
Net cash (used in) provided by
financing activities (45,971) 17,351
------------- -------------
Net change in cash and cash
equivalents (106,298) (41,486)
Effect of exchange rate changes on
cash and cash equivalents (1,496) (2,582)
Cash and cash equivalents,
beginning of period 200,651 193,367
------------- -------------
Cash and cash equivalents, end of
period $ 92,857 $ 149,299
============= =============
NOTE: Certain prior period amounts have been reclassified to
conform with the current period presentation.
Exhibit A
HENRY SCHEIN, INC.
2003 Third Quarter and Year to Date
Details of "Comparable Basis" Growth Comparison
Net Sales by Category
(in thousands)
(unaudited)
Third Quarter % Year to Date %
2003 2002 Growth 2003 2002 Growth
Net Sales As
Reported
---------------------------------------------------------------------
Dental $339,409 $300,714 12.9% $985,318 $902,282 9.2%
Medical 396,464 337,529 17.5% 957,909 811,634 18.0%
International 138,411 103,386 33.9% 409,181 316,003 29.5%
Technology 18,434 17,444 5.7% 54,473 47,679 14.2%
--------- --------- ----------- -----------
Total $892,718 $759,073 17.6% $2,406,881 $2,077,598 15.8%
---------------------------------------------------------------------
Add: Technology Sales Methodology(1)
Dental - - - $1,449
Medical - - - -
International - - - -
Technology - - - 2,031
Total - - - 3,480
Net Sales Comparable Basis
---------------------------------------------------------------------
Dental $339,409 $300,714 12.9% $985,318 $903,731 9.0%
Medical 396,464 337,529 17.5% 957,909 811,634 18.0%
International 138,411 103,386 33.9% 409,181 316,003 29.5%
Technology 18,434 17,444 5.7% 54,473 49,710 9.6%
--------- --------- ----------- -----------
Total $892,718 $759,073 17.6% $2,406,881 $2,081,078 15.7%
---------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative,
MarketOne, effective at the beginning of the third quarter of 2002,
certain technology and equipment products are being sold directly to
end-user customers rather than through resellers. This had no impact
on net income since the increase in net sales was directly offset by
an increase in commission expense.
Exhibit B
HENRY SCHEIN, INC.
2003 Third Quarter and Year to Date
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
Third Quarter % Year to Date %
2003 2002 Growth 2003 2002 Growth
As Reported
----------------------------------------------------------------------
Net Sales $892,718 $759,073 17.6% $2,406,881 $2,077,598 15.8%
Operating Income 76,400 64,285 18.8% 174,635 146,472 19.2%
Margin 8.6% 8.5% 9 bp 7.3% 7.1% 21 bp
Net Income from
Continuing
Operations $46,359 $39,228 18.2% $103,980 $87,024 19.5%
Diluted EPS from
Continuing
Operations 1.03 0.87 18.4% 2.32 1.94 19.6%
Net Income 44,347 39,228 13.0% 101,968 87,024 17.2%
Diluted EPS 0.99 0.87 13.8% 2.27 1.94 17.0%
----------------------------------------------------------------------
Add: Technology Sales Methodology (1)
Net Sales - - - $3,480
Operating Income - - - -
Net Income from
Continuing
Operations - - - -
Diluted EPS from
Continuing
Operations - - - -
Net Income - - - -
Diluted EPS - - - -
Subtract: Gains on Real Estate Transactions (2)
Net Sales - - - -
Operating Income - - - -
Net Income from
Continuing
Operations - $(890) $(454) $(890)
Diluted EPS from
Continuing
Operations - (0.02) (0.01) (0.02)
Net Income - (890) (454) (890)
Diluted EPS - (0.02) (0.01) (0.02)
Comparable Basis
----------------------------------------------------------------------
Net Sales $892,718 $759,073 17.6% $2,406,881 $2,081,078 15.7%
Operating Income 76,400 64,285 18.8% 174,635 146,472 19.2%
Margin 8.6% 8.5% 9 bp 7.3% 7.0% 22 bp
Net Income from
Continuing
Operations $46,359 $38,338 20.9% $103,526 $86,134 20.2%
Diluted EPS from
Continuing
Operations 1.03 0.85 21.2% 2.31 1.92 20.3%
Net Income 44,347 38,338 15.7% 101,514 86,134 17.9%
Diluted EPS 0.99 0.85 16.5% 2.26 1.92 17.7%
----------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative,
MarketOne, effective at the beginning of the third quarter of 2002,
certain technology and equipment products are being sold directly to
end-user customers rather than through resellers. This had no impact
on net income since the increase in net sales was directly offset by
an increase in commission expense.
(2) In the third quarter of 2002, there was a $1.4 million pre-tax
($890 thousand after-tax) gain primarily related to the settlement of
a real estate transaction. In the first quarter of 2003, there was a
$726 thousand pre-tax ($454 thousand after-tax) gain also related to a
real estate transaction. Both gains were included in the "Other, net"
line on the income statements.
CONTACT: Henry Schein, Inc.
Steven Paladino, 631-843-5500 or
Susan Vassallo, 631-843-5562
svassa@henryschein.com
SOURCE: Henry Schein, Inc.