Henry Schein Reports Fourth Quarter Diluted EPS of $0.79, up 18% on a Comparable Basis
MELVILLE, N.Y.--(BUSINESS WIRE)--March 2, 2004--
Net Sales Increase 27% to $946.9 Million; Internal Sales Growth of 18% in Local Currencies
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 and year ended December 27, 2003.
Net sales for the fourth quarter of 2003 were a record $946.9 million, an increase of 26.7% from the fourth quarter of 2002. In local currencies, net sales increased 22.9% including 18.0% internal growth.
Dental sales increased 16.8%, or 15.6% in local currencies (11.6% internal growth). In local currencies, Dental consumable merchandise sales increased 12.7% (7.4% internal growth) and Dental equipment sales were up 23.8%, all internally generated.
Medical sales increased 34.7% (29.8% internal growth), International sales improved 38.3% or 18.0% in local currencies (10.0% internal growth), and Technology and Value-Added Services sales grew 4.0%.
Net income for the fourth quarter of 2003 was $35.5 million or $0.79 per diluted share. Both net income and diluted EPS were up approximately 15%, or approximately 18% on a comparable basis. (See Exhibit B for details.)
"Excellent growth in sales and earnings during the fourth quarter concludes a year of outstanding financial performance, marking the 14th consecutive quarter of net income and EPS growth in the high teens to 20% range on a comparable basis," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. "I am extremely pleased to report market share gains in our Dental, Medical and International Business Groups, with internal sales growth at a multiple of estimated market growth rates. This internal growth was complemented by our strategic acquisitions of Damer & Cartwright Pharmaceutical and American Medical Services, both completed in the fourth quarter of 2003, which provide us entree into the high-growth specialty and oncology pharmaceutical distribution markets. Also, our strategic acquisitions of Colonial Surgical and Hager Dental, completed in mid-year 2003, expand our market share in the important glove product category and strengthen our European operations specifically in the German equipment full service sector, respectively," continued Mr. Bergman.
Operating margin for the fourth quarter reflects a change in product sales mix in our Technology and Value Added Services group and the injectable pharmaceutical component of our Medical group, as well as strategic investments in expanding our European technology and infrastructure. "Our increasing presence in the injectable pharmaceutical marketplace expands our product offerings and brings additional benefits in sales of companion products," commented Mr. Bergman, "while the European investments will facilitate the continued success of our International strategy."
For the full year 2003, net sales were $3.35 billion, an increase of 18.7% from 2002. In local currencies, net sales increased 15.4% including 13.0% internal growth. Highlighting the full year sales growth were local currency internal sales growth of 8% for our Dental Group (including 5% growth in merchandise and 17% growth in equipment sales and service revenue) and 21% internal growth for our Medical Group. "Sales at our Dental and Medical Groups were bolstered by a growing number of field sales consultants, a continued commitment to education and sales training, and our investments in technology. Medical Group sales were further impacted by our growing presence in the injectable pharmaceutical distribution marketplace," said Mr. Bergman.
For the year, International local currency internal sales growth of 7% was highlighted by particular strength in France, Spain, and Austria. "Including completed and announced acquisitions, our International Group is becoming increasingly important to our company as our global presence continues to expand. We continue to expect a mid-year closing for the acquisition of the demedis/EDH Group, which we announced in early January," Mr. Bergman added.
Net income from continuing operations for the full year 2003 was $139.5 million, up 18.3% (19.5% on a comparable basis) compared with 2002. Diluted EPS for 2003 was $3.10, up 17.9% (19.3% on a comparable basis) over the prior year.
"This past year also marked a strengthening of our board of directors with the appointments of Dr. Margaret Hamburg and Dr. Louis Sullivan, both leaders in the healthcare field. We look forward to benefiting from their valuable insight and contributions," Mr. Bergman concluded.
The Company reported that under a repurchase program of up to two million shares of common stock announced on March 12, 2003, during the fourth quarter 51,500 shares were repurchased at an average price of $67.85 per share. The impact of this share repurchase on fourth quarter diluted EPS was not significant. Through the close of the fourth quarter, the Company has repurchased 1,335,000 shares under this initiative.
2004 EPS Guidance
Henry Schein confirmed 2004 financial guidance as previously announced on January 8, 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. 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.
Fourth Quarter Conference Call Webcast
The Company will hold a conference call to discuss fourth 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. 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 low 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, 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, 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)
Three Months Ended Years Ended
------------------------ ------------------------
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
2003 2002 2003 2002
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Net sales $ 946,924 $ 747,403 $3,353,805 $2,825,001
Cost of sales 693,176 539,757 2,426,611 2,030,097
----------- ----------- ----------- -----------
Gross profit 253,748 207,646 927,194 794,904
Operating expenses:
Selling, general
and
administrative 194,664 157,849 693,475 598,635
Merger, integration
and restructuring
costs - (734) - (734)
----------- ----------- ----------- -----------
Operating
income 59,084 50,531 233,719 197,003
Other income
(expense):
Interest income 6,139 2,990 12,649 10,446
Interest expense (8,074) (3,978) (22,214) (17,960)
Other, net 367 (77) 1,622 940
----------- ----------- ----------- -----------
Income before
taxes, minority
interest, equity
in earnings of
affiliates and
loss on sale of
discontinued
operation 57,516 49,466 225,776 190,429
Taxes on income from
continuing
operations (21,396) (17,982) (84,378) (70,510)
Minority interest in
net income of
subsidiaries (833) (753) (2,807) (2,591)
Equity in earnings
of affiliates 255 232 931 659
----------- ----------- ----------- -----------
Net income from
continuing
operations 35,542 30,963 139,522 117,987
Loss on sale of
discontinued
operation,
net of tax - - (2,012) -
----------- ----------- ----------- -----------
Net income $ 35,542 $ 30,963 $ 137,510 $ 117,987
=========== =========== =========== ===========
Net income from
continuing
operations per
common share:
Basic $ 0.81 $ 0.70 $ 3.19 $ 2.71
=========== =========== =========== ===========
Diluted $ 0.79 $ 0.69 $ 3.10 $ 2.63
=========== =========== =========== ===========
Loss on sale of
discontinued
operation, net of
tax per common
share:
Basic $ - $ - $ (0.04) $ -
=========== =========== =========== ===========
Diluted $ - $ - $ (0.04) $ -
=========== =========== =========== ===========
Net income per
common share:
Basic $ 0.81 $ 0.70 $ 3.15 $ 2.71
=========== =========== =========== ===========
Diluted $ 0.79 $ 0.69 $ 3.06 $ 2.63
=========== =========== =========== ===========
Weighted average
common shares
outstanding:
Basic 43,717 43,956 43,709 43,489
=========== =========== =========== ===========
Diluted 45,045 45,101 44,988 44,872
=========== =========== =========== ===========
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 27, December 28,
2003 2002
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 157,351 $ 200,651
Marketable securities 3,012 31,209
Accounts receivable, net of reserves
of $43,203 and $36,200 467,085 368,263
Inventories, net 385,846 323,080
Deferred income taxes 30,559 29,919
Prepaid expenses and other 112,631 74,407
------------- -------------
Total current assets 1,156,484 1,027,529
Property and equipment, net 154,205 142,532
Goodwill 398,888 302,687
Other intangibles, net 37,551 7,661
Investments and other 72,242 77,643
------------- -------------
Total assets $ 1,819,370 $ 1,558,052
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 278,163 $ 243,166
Bank credit lines 6,059 4,790
Current maturities of long-term debt 3,253 2,662
Accruals:
Payroll and related expenses 68,214 53,954
Taxes 45,969 32,196
Other expenses 117,530 86,562
------------- -------------
Total current liabilities 519,188 423,330
Long-term debt 247,100 242,561
Other liabilities 37,432 24,196
Minority interest 11,532 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, 43,761,973
and 44,041,591 outstanding 438 440
Additional paid-in capital 445,118 436,554
Retained earnings 533,654 430,389
Treasury stock, at cost, 0 and 62,479
shares - (1,156)
Accumulated other comprehensive income
(loss) 24,999 (4,794)
Deferred compensation (91) (216)
------------- -------------
Total stockholders' equity 1,004,118 861,217
------------- -------------
Total liabilities and
stockholders' equity $ 1,819,370 $ 1,558,052
============= =============
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)
Three Months Ended Years Ended
------------------------ ------------------------
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
2003 2002 2003 2002
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Cash flows from
operating activities
of continuing
operations:
Net income $ 35,542 $ 30,963 $ 137,510 $ 117,987
Loss on sale of
discontinued
operation, net
of tax - - 2,012 -
----------- ----------- ----------- -----------
Net income from
continuing
operations 35,542 30,963 139,522 117,987
Adjustments to
reconcile net
income to net
cash provided by
operating
activities of
continuing
operations:
Depreciation and
amortization 10,887 8,186 36,843 28,272
Provision for
losses
and allowances on
trade receivables 2,174 3,848 6,548 8,962
Stock issued to
ESOP trust - - 2,300 1,340
Provision for
deferred income
taxes (1,438) 2,373 5,524 226
Undistributed
earnings of
affiliates (255) (232) (931) (659)
Minority interest
in
net income of
subsidiaries 833 753 2,807 2,591
Other 2,107 176 2,005 145
Changes in
operating
assets and
liabilities, net
of
effect of
acquisitions:
Accounts
receivable 46,130 46,244 (69,543) (6,714)
Inventories,
net (1,325) (4,939) (28,781) (23,075)
Other current
assets (21,850) (9,783) (16,957) (18,445)
Accounts
payable and
accruals 37,947 (8,570) 49,506 24,039
----------- ----------- ----------- -----------
Net cash provided
by operating
activities
of continuing
operations 110,752 69,019 128,843 134,669
----------- ----------- ----------- -----------
Cash flows from
investing
activities:
Purchases of
capital
expenditures (9,933) (11,283) (38,978) (47,543)
Payments for
business
acquisitions, net
of cash acquired (50,383) (1,337) (118,180) (36,224)
Purchases of
marketable
securities (528) (4,918) (39,667) (55,211)
Proceeds from
sales of
marketable
securities 20,515 - 40,619 -
Proceeds from
maturities of
marketable
securities 900 - 39,030 -
Other, including
discontinued
operation (275) (733) (946) (3,780)
----------- ----------- ----------- -----------
Net cash used in
investing
activities (39,704) (18,271) (118,122) (142,758)
----------- ----------- ----------- -----------
Cash flows from
financing
activities:
Principal payments
on long-term debt (1,481) (553) (8,667) (14,941)
Proceeds from
issuance of stock
upon exercise of
stock options 3,970 1,369 22,348 34,122
Net (payments on)
proceeds from
bank borrowings (862) (1,349) (180) 394
Payments for
repurchases of
common stock (4,027) - (61,754) -
Other (4) 1,865 (122) (892)
----------- ----------- ----------- -----------
Net cash (used in)
provided by
financing
activities (2,404) 1,332 (48,375) 18,683
----------- ----------- ----------- -----------
Net change in cash
and cash
equivalents 68,644 52,080 (37,654) 10,594
Effect of exchange
rate changes on
cash and cash
equivalents (4,150) (728) (5,646) (3,310)
Cash and cash
equivalents,
beginning of period 92,857 149,299 200,651 193,367
----------- ----------- ----------- -----------
Cash and cash
equivalents, end
of period $ 157,351 $ 200,651 $ 157,351 $ 200,651
=========== =========== =========== ===========
NOTE: Certain prior period amounts have been reclassified to conform
with the current period presentation.
Exhibit A
HENRY SCHEIN, INC.
2003 Fourth Quarter and Full Year
Details of "Comparable Basis" Growth Comparison
Net Sales by Category
(in thousands)
(unaudited)
Fourth Quarter % Full Year %
2003 2002 Growth 2003 2002 Growth
Net Sales As Reported
----------------------------------------------------------------------
Dental $379,494 $324,991 16.8% $1,364,812 $1,227,273 11.2%
Medical 380,175 282,322 34.7% 1,338,084 1,093,956 22.3%
International 167,447 121,043 38.3% 576,628 437,046 31.9%
Technology 19,808 19,047 4.0% 74,281 66,726 11.3%
--------- --------- ----------- -----------
Total $946,924 $747,403 26.7% $3,353,805 $2,825,001 18.7%
----------------------------------------------------------------------
Add: Technology Sales Methodology (1)
Dental - - - $1,449
Medical - - - -
International - - - -
Technology - - - 2,031
-----------
Total - - - 3,480
Net Sales Comparable Basis
----------------------------------------------------------------------
Dental $379,494 $324,991 16.8% $1,364,812 $1,228,722 11.1%
Medical 380,175 282,322 34.7% 1,338,084 1,093,956 22.3%
International 167,447 121,043 38.3% 576,628 437,046 31.9%
Technology 19,808 19,047 4.0% 74,281 68,757 8.0%
--------- --------- ----------- -----------
Total $946,924 $747,403 26.7% $3,353,805 $2,828,481 18.6%
----------------------------------------------------------------------
(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 Fourth Quarter and Full Year
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
Fourth Quarter % Full Year %
2003 2002 Growth 2003 2002 Growth
As Reported
----------------------------------------------------------------------
Net Sales $946,924 $747,403 26.7% $3,353,805 $2,825,001 18.7%
Operating
Income 59,084 50,531 16.9% 233,719 197,003 18.6%
Margin 6.2% 6.8% -52 bp 7.0% 7.0% 0 bp
Net Income
from
Continuing
Operations $35,542 $30,963 14.8% $139,522 $117,987 18.3%
Diluted EPS
from
Continuing
Operations 0.79 0.69 14.5% 3.10 2.63 17.9%
Net Income 35,542 30,963 14.8% 137,510 117,987 16.5%
Diluted EPS 0.79 0.69 14.5% 3.06 2.63 16.3%
----------------------------------------------------------------------
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 - - $(454) $(890)
Diluted EPS
from
Continuing
Operations - - (0.01) (0.02)
Net Income - - (454) (890)
Diluted EPS - - (0.01) (0.02)
Subtract: Restructuring Accrual Reversal (3)
Net Sales - - - -
Operating
Income - $(734) - $(734)
Net Income
from
Continuing
Operations - (734) - (734)
Diluted EPS
from
Continuing
Operations - (0.02) - (0.02)
Net Income - (734) - (734)
Diluted EPS - (0.02) - (0.02)
Comparable Basis
----------------------------------------------------------------------
Net Sales $946,924 $747,403 26.7% $3,353,805 $2,828,481 18.6%
Operating
Income 59,084 49,797 18.6% 233,719 196,269 19.1%
Margin 6.2% 6.7% -42 bp 7.0% 6.9% 3 bp
Net Income
from
Continuing
Operations $35,542 $30,229 17.6% $139,068 $116,363 19.5%
Diluted EPS
from
Continuing
Operations 0.79 0.67 17.9% 3.09 2.59 19.3%
Net Income 35,542 30,229 17.6% 137,056 116,363 17.8%
Diluted EPS 0.79 0.67 17.9% 3.05 2.59 17.8%
----------------------------------------------------------------------
(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.
(3) In the fourth quarter of 2002, we recorded a net credit related to
a reversal of previously accrued merger, integration and
restructuring costs.
CONTACT: Henry Schein, Inc., Melville
Steven Paladino, 631-843-5500
steve.paladino@henryschein.com
or
Susan Vassallo, 631-843-5562
susan.vassallo@henryschein.com
SOURCE: Henry Schein, Inc.