Henry Schein Reports First Quarter Diluted EPS of $0.63, up 17% on a Comparable Basis; Net Sales Increase 20% to $886.6 Million
MELVILLE, N.Y.--(BUSINESS WIRE)--April 27, 2004--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 financial results for the quarter ended March 27, 2004.
Net sales for the first quarter of 2004 were $886.6 million, an increase of 20.1% from the first quarter of 2003. In local currencies, net sales increased 16.5% including 9.6% internal growth.
Dental sales increased 14.0%, or 13.2% in local currencies (8.1% internal growth). In local currencies, Dental consumable merchandise sales increased 13.1% (7.8% internal growth) and Dental equipment sales and service revenues were up 13.6% (9.5% internal growth).
Medical sales increased 22.5% (12.3% internal growth), International sales improved 30.8% or 12.2% in local currencies (7.4% internal growth), and Technology and Value-Added Services sales grew 12.4% (8.6% internal growth).
Net income for the first quarter of 2004 was $28.4 million or $0.63 per diluted share. Both net income and diluted EPS were up 15%, while on a comparable basis both increased by 17%. (See Exhibit A for details.)
"With 20% growth in net sales and 17% growth in diluted EPS on a comparable basis, our first quarter financial results were solid across the board. We continued to gain market share in each of our business groups, with excellent internal growth bolstered by contributions from several strategic acquisitions," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein.
"The quarterly performance of our Dental Group reflects continued market share gains in both dental consumable merchandise and equipment sales and service. In part, these results are reflective of our innovative Privileges and MarketOne customer-loyalty programs, which helped drive internal dental sales growth at a rate well above our estimate of market growth," explained Mr. Bergman. "International Group internal sales gains in local currencies were also ahead of our growth estimate for that market and were complemented by last year's acquisition of Hager Dental. We look forward to further International success, particularly in Europe, as we continue to execute our full service strategy."
With regard to the recently announced acquisition of the demedis/EDH Group, the Company reported that the review by the German and the Austrian governmental agencies has entered the second phase, and the transaction remains subject to their approvals.
First quarter operating margin reflects a continued change in product sales mix, particularly in our Technology and Value-Added Services Group and in the injectable pharmaceutical component of our Medical Group, where we continue adding new product lines and value added services while growing existing ones. "Our strategy to expand Medical Group product offerings further establishes Henry Schein as a full-service partner with our physician customers, grows our customer base and was a source of great enthusiasm among our field sales consultants at our recently completed annual Medical National Sales Meeting," Mr. Bergman added.
The Company reported that under a repurchase program of up to two million shares of common stock announced last year, 258,400 shares were repurchased during the first quarter of 2004 at an average price of $69.74 per share. The impact of this share repurchase on first quarter diluted EPS was insignificant. Through the close of the first quarter, the Company has repurchased 1,593,400 shares under this initiative.
2004 EPS Guidance
Henry Schein confirmed financial guidance for 2004. Assuming the acquisition of the demedis/EDH Group closes by the end of the second quarter of 2004, Henry Schein expects full-year 2004 earnings per diluted share of $3.57 to $3.63. This represents growth of 15% to 17% compared with 2003 results from continuing operations. The Company noted that this 2004 EPS guidance is for current operations and the acquisition of the demedis/EDH Group, and does not include the impact of other potential future acquisitions.
First Quarter Conference Call Webcast
The Company will hold a conference call to discuss first 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 Web site at www.henryschein.com. In addition, a replay will be available beginning shortly after the call has ended.
About Henry Schein
Henry Schein, Inc., a Fortune 500(R) company, is the largest distributor of healthcare products and services to office-based practitioners in the combined North American and European markets. Recognized for its excellent customer service and highly competitive prices, the Company's four business groups--Dental, Medical, International and Technology--serve more than 425,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary clinics, as well as government and other institutions. The Company's sales reached a record $3.4 billion in 2003.
The Company operates through a centralized and automated distribution network that serves customers in more than 125 countries. The Company offers 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 have been installed in over 50,000 practices; and ArubA(R), Henry Schein's electronic catalog and ordering system.
Headquartered in Melville, N.Y., Henry Schein employs nearly 8,000 people in 16 countries. For more information, visit the Henry Schein Web site 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.
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
---------------------------
March 27, March 29,
2004 2003
------------- -------------
Net sales $ 886,631 $ 737,997
Cost of sales 655,804 536,580
------------- -------------
Gross profit 230,827 201,417
Operating expenses:
Selling, general and administrative 184,527 159,212
------------- -------------
Operating income 46,300 42,205
Other income (expense):
Interest income 2,216 2,392
Interest expense (3,002) (4,733)
Other, net 151 685
------------- -------------
Income before taxes, minority
interest and equity in earnings
of affiliates 45,665 40,549
Taxes on income (17,032) (15,206)
Minority interest in net income of
subsidiaries (525) (737)
Equity in earnings of affiliates 285 160
------------- -------------
Net income $ 28,393 $ 24,766
============= =============
Net income per common share:
Basic $ 0.65 $ 0.56
============= =============
Diluted $ 0.63 $ 0.55
============= =============
Weighted-average common shares
outstanding:
Basic 43,786 44,008
============= =============
Diluted 45,110 45,069
============= =============
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per
share data)
March 27, December 27,
2004 2003
------------------ ---------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 73,086 $ 157,351
Accounts receivable, net of
reserves of $43,005 and
$43,203 472,927 467,085
Inventories 408,073 385,846
Deferred income taxes 30,754 30,559
Prepaid expenses and other 101,190 115,643
-------------------- --------------
Total current assets 1,086,030 1,156,484
Property and equipment, net 151,496 154,205
Goodwill 401,318 398,888
Other intangibles, net 38,883 37,551
Investments and other 154,861 72,242
-------------------- --------------
Total assets $ 1,832,588 $1,819,370
==================== ==============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 258,704 $ 278,163
Bank credit lines 10,542 6,059
Current maturities of long-term
debt 3,259 3,253
Accrued expenses:
Payroll and related 51,778 68,214
Taxes 48,385 45,969
Other 106,530 117,530
-------------------- --------------
Total current
liabilities 479,198 519,188
Long-term debt 273,327 247,100
Other liabilities 38,582 37,432
Minority interest 11,999 11,532
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,
43,957,099 and 43,761,973
outstanding 440 438
Additional paid-in capital 457,078 445,118
Retained earnings 552,191 533,654
Accumulated other comprehensive
income 19,833 24,999
Deferred compensation (60) (91)
-------------------- --------------
Total stockholders'
equity 1,029,482 1,004,118
-------------------- --------------
Total liabilities and
stockholders' equity $ 1,832,588 $1,819,370
==================== ==============
NOTE: Certain prior period amounts have been reclassified to conform
with the current period presentation.
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
---------------------------
March 27, March 29,
2004 2003
------------- -------------
Cash flows from operating activities:
Net income $ 28,393 $ 24,766
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 9,642 8,544
Provision for losses and
allowances on trade receivables 409 2,160
Provision for deferred income taxes 565 2,068
Undistributed earnings of affiliates (285) (160)
Minority interest in net
income of subsidiaries 525 737
Other 144 (85)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable (6,815) (13,162)
Inventories (23,109) (8,824)
Other current assets 18,338 10,837
Accounts payable and accruals (48,109) (40,966)
------------- -------------
Net cash used in operating activities (20,302) (14,085)
------------- -------------
Cash flows from investing activities:
Purchases of capital expenditures (5,654) (13,508)
Payments for business acquisitions,
net of cash acquired (4,401) (2,281)
Payments related to pending purchase
acquisitions (86,031) -
Purchases of marketable securities - (4,101)
Proceeds from sales of marketable
securities 14,472 -
Proceeds from maturities of
marketable securities - 26,430
Other (6,257) (1,487)
------------- -------------
Net cash (used in) provided by investing
activities (87,871) 5,053
------------- -------------
Cash flows from financing activities:
Principal payments on long-term debt (262) (254)
Proceeds from issuance of stock upon
exercise of stock options 12,683 4,600
Net proceeds from (payments on) bank
borrowings 24,417 (1,675)
Payments for repurchases of common
stock (11,054) (6,483)
Other (346) 65
------------- -------------
Net cash provided by (used in) financing
activities 25,438 (3,747)
------------- -------------
Net change in cash and cash equivalents (82,735) (12,779)
Effect of exchange rate changes on cash
and cash equivalents (1,530) (877)
Cash and cash equivalents, beginning of
period 157,351 200,651
------------- -------------
Cash and cash equivalents, end of period $ 73,086 $186,995
============= =============
NOTE: Certain prior period amounts have been reclassified to conform
with the current period presentation.
Exhibit A
HENRY SCHEIN, INC.
2004 First Quarter
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
First Quarter %
2004 2003 Growth
As Reported
----------------------------------------------------------------------
Net Sales $886,631 $737,997 20.1%
Operating Income 46,300 42,205 9.7%
Margin 5.2% 5.7% -50 bp
Net Income $ 28,393 $ 24,766 14.6%
Diluted EPS 0.63 0.55 14.5%
----------------------------------------------------------------------
Subtract: Gain on Real Estate Transaction (1)
Net Sales - -
Operating Income - -
Net Income - (454)
Diluted EPS - (0.01)
Comparable Basis
----------------------------------------------------------------------
Net Sales $886,631 $737,997 20.1%
Operating Income 46,300 42,205 9.7%
Margin 5.2% 5.7% -50 bp
Net Income $ 28,393 $ 24,312 16.8%
Diluted EPS 0.63 0.54 16.7%
-------------------------------------------- -------- ----------------
(1) In the first quarter of 2003, there was a $726 thousand pre-tax
($454 thousand after-tax) gain related to a real estate
transaction. This gain was included in the "Other, net" line on
the consolidated income statement.
CONTACT: Henry Schein, Inc.
Steven Paladino, 631/843-5500
stepal@henryschein.com
or
Susan Vassallo, 631/843-5562
svassa@henryschein.com
SOURCE: Henry Schein, Inc.