Henry Schein Reports Record Fourth Quarter and Full Year Results
Fourth quarter diluted EPS from continuing operations increases 19% to $0.83 Annual diluted EPS from continuing operations increases 27%
MELVILLE, N.Y., Feb 25, 2008 (BUSINESS WIRE) -- Henry Schein, Inc. (NASDAQ: 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 December 29, 2007.
Net sales for the fourth quarter of 2007 were $1.7 billion, an increase of 16.4% compared with the fourth quarter of 2006. This increase includes 12.3% local currency growth (3.8% internally generated and 8.5% from acquisitions) and 4.1% related to foreign currency exchange. (See Exhibit A for details of sales growth.)
Income from continuing operations for the fourth quarter of 2007 was $76.4 million or $0.83 per diluted share, up 21.3% and 18.6%, respectively, compared with the prior-year fourth quarter.
Net income for the fourth quarter of 2007 was $78.3 million or $0.85 per diluted share. Results include income from discontinued operations of approximately $1.8 million or $0.02 per diluted share, primarily related to the gain on the sale of the Company's specialty pharmacy business.
"Our strong fourth quarter financial results close out a very solid year for Henry Schein," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "For the year our Dental, Medical, International and Technology Groups each reported double-digit sales growth and market share gains, and we are proud to have once again achieved our key long-term financial objectives for internal sales growth, operating margin expansion, EPS growth and cash flow from operations."
Dental Group sales increased 12.8% during the fourth quarter, including 11.2% growth in local currencies (9.4% internally generated and 1.8% from acquisitions) and 1.6% growth related to foreign currency exchange. Of the 11.2% local currency growth, Dental consumable merchandise sales increased 6.5% (4.6% internal growth and 1.9% acquisition growth) and Dental equipment sales and service revenues were up 21.3% (19.6% internal growth and 1.7% acquisition growth).
"Our Dental Group continues to be successful in delivering profitable growth and expanding our presence in the marketplace," commented Mr. Bergman. "Fourth quarter performance was highlighted by impressive internal growth in equipment sales and service revenues, with strong gains in both traditional equipment and high-tech products."
Medical Group sales declined 5.5% during the fourth quarter (6.0% decline in internal growth and 0.5% acquisition growth). Medical Group sales were impacted by the timing of influenza vaccine sales which, while higher in the third quarter of 2007 due to earlier shipments, were significantly lower in the fourth quarter of 2007 when compared with the fourth quarter of 2006. Excluding sales of influenza vaccine, Medical Group sales increased 3.8% for the quarter, with 3.3% internal growth. For the year influenza vaccine sales were more than 20% higher than 2006.
"During the fourth quarter we achieved our stated goal of reducing sales of certain lower-margin pharmaceutical products, thereby allowing our Medical Group to focus on driving profitable revenue growth in the office-based physician market," said Mr. Bergman.
"Early in 2008 we announced the appointment of Michael Racioppi to Chief Merchandising Officer, a new corporate leadership position with responsibility for optimizing the Company's global gross profit, and named David McKinley as President of Henry Schein's Medical Group," he added. "I am very excited about the future contributions of each of these two executives."
For the quarter International Group sales increased 42.5%, including 30.1% growth in local currencies (5.0% internally generated and 25.1% from acquisitions) and 12.4% related to foreign currency exchange.
"Sales growth in our International Group was driven by strong gains in the United Kingdom, Spain, Italy and the Benelux countries," commented Mr. Bergman. "I am pleased to report that W. & J. Dunlop, a leading United Kingdom animal health products supplier we acquired during the third quarter of 2007, is performing consistent with our expectations."
Technology and Value-Added Services Group sales increased 44.8% during the fourth quarter of 2007, including 44.0% growth in local currencies (15.5% internally generated and 28.5% acquisition growth) and 0.8% growth related to foreign currency exchange.
"Technology and Value-Added Services results reflect continued strong electronic services, software and financial services revenue growth," stated Mr. Bergman. "Revenue includes a full quarter contribution from Software of Excellence, a leading supplier of practice management systems in the United Kingdom, Australia and New Zealand."
Full-Year 2007 Results
For 2007 net sales of $5.9 billion represent an increase of 17.3% compared with 2006. This increase includes 14.3% local currency growth (7.3% internally generated and 7.0% from acquisitions, net of divestiture) and 3.0% related to foreign currency exchange. Income from continuing operations for 2007 was $235.0 million or $2.58 per diluted share, up 28.6% and 27.1%, respectively, compared with 2006.
2008 EPS Guidance
Henry Schein affirms 2008 financial guidance, as follows:
-- 2008 diluted EPS is expected to be $2.93 to $3.00, representing growth of 14% to 16% compared with 2007.
-- This 2008 diluted EPS guidance includes Henry Schein's expectation that it will distribute 12 million to 15 million doses of influenza vaccine during the year, representing earnings of $0.13 to $0.16 per diluted share.
-- 2008 diluted EPS guidance is for current continuing operations including completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.
Fourth Quarter Conference Call Webcast
The Company will hold a conference call to discuss fourth quarter financial results today, beginning at 10:00 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, a Fortune 500(R) company and a member of the NASDAQ 100(R) Index, is recognized for its excellent customer service and highly competitive prices. The Company's four business groups - Dental, Medical, International and Technology - serve more than 550,000 customers worldwide, including dental practitioners and laboratories, physician practices and animal health clinics, as well as government and other institutions. The Company operates through a centralized and automated distribution network, which provides customers in more than 200 countries with a comprehensive selection of more than 90,000 national and Henry Schein private-brand products in stock, as well as more than 100,000 additional products available as special-order items.
Henry Schein also offers a wide range of innovative value-added practice solutions for healthcare professionals, such as ArubA(R), the Company's electronic catalog and ordering system. Its leading practice-management software solutions have an installed user base of more than 52,000 practices, including DENTRIX(R), Easy Dental(R), Oasis(R) and EXACT(R) for dental practices, MicroMD(R) for physician practices, and AVImark(R) for animal health clinics.
Headquartered in Melville, N.Y., Henry Schein employs over 12,000 people and has operations or affiliates in 20 countries. The Company's net sales reached a record $5.9 billion in 2007. For more information, visit the Henry Schein Web site at www.henryschein.com.
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 which, 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 SEC and will be contained in all subsequent periodic filings we make with the SEC. These documents identify in detail important risk factors that could cause our actual performance to differ materially from current expectations.
Risk factors and uncertainties that could cause actual results to differ materially from current and historical results include, but are not limited to: competitive factors; changes in the healthcare industry; changes in regulatory requirements that affect us; risks associated with our international operations; fluctuations in quarterly earnings; our dependence on third parties for the manufacture and supply of our products; transitional challenges associated with acquisitions, including the failure to achieve anticipated synergies; financial risks associated with acquisitions; regulatory and litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence upon sales personnel and key customers; our dependence on our senior management; possible increases in the cost of shipping our products or other service trouble with our third-party shippers; risks from rapid technological change; risks from potential increases in variable interest rates; possible volatility of the market price of our common stock; certain provisions in our governing documents that may discourage third-party acquisitions of us; and changes in tax legislation that affect us. 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, forward-looking statements should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements.
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Years Ended
----------------------- -----------------------
December December December December
29, 30, 29, 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Net sales $1,717,470 $1,475,064 $5,920,190 $5,048,191
Cost of sales 1,233,339 1,054,931 4,201,906 3,576,234
----------- ----------- ----------- -----------
Gross profit 484,131 420,133 1,718,284 1,471,957
Operating expenses:
Selling, general
and administrative 359,145 315,594 1,332,025 1,167,822
----------- ----------- ----------- -----------
Operating income 124,986 104,539 386,259 304,135
Other income
(expense):
Interest income 3,765 4,398 16,531 16,378
Interest expense (6,796) (6,520) (25,177) (27,627)
Other, net 288 (120) 4,630 2,045
----------- ----------- ----------- -----------
Income from
continuing
operations
before taxes,
minority
interest and
equity in
earnings
(losses) of
affiliates 122,243 102,297 382,243 294,931
Income taxes (39,974) (35,870) (129,762) (104,932)
Minority interest in
net income of
subsidiaries (6,438) (3,643) (17,442) (8,090)
Equity in earnings
(losses) of
affiliates 614 254 (73) 835
----------- ----------- ----------- -----------
Income from
continuing
operations 76,445 63,038 234,966 182,744
Discontinued
operations:
Income (loss) from
operations of
discontinued
components
(including write-
down of long-lived
assets of $32.7
million in 2007
and a net gain on
sale of
discontinued
operations of $1.1
million in 2007
and a $32.3
million loss on
sale of
discontinued
operation in 2006) 2,882 (7) (31,420) (31,608)
Income tax benefit
(expense) (1,058) (34) 11,627 12,623
----------- ----------- ----------- -----------
Income (loss) from
discontinued
operations 1,824 (41) (19,793) (18,985)
----------- ----------- ----------- -----------
Net income $ 78,269 $ 62,997 $ 215,173 $ 163,759
=========== =========== =========== ===========
Earnings from
continuing
operations per
share:
Basic $ 0.86 $ 0.71 $ 2.65 $ 2.08
=========== =========== =========== ===========
Diluted $ 0.83 $ 0.70 $ 2.58 $ 2.03
=========== =========== =========== ===========
Income (loss) from
discontinued
operations per
share:
Basic $ 0.02 $ 0.00 $ (0.22) $ (0.22)
=========== =========== =========== ===========
Diluted $ 0.02 $ 0.00 $ (0.22) $ (0.21)
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.88 $ 0.71 $ 2.43 $ 1.86
=========== =========== =========== ===========
Diluted $ 0.85 $ 0.70 $ 2.36 $ 1.82
=========== =========== =========== ===========
Weighted-average
common shares
outstanding:
Basic 89,082 88,580 88,559 87,952
=========== =========== =========== ===========
Diluted 92,031 90,488 91,163 89,820
=========== =========== =========== ===========
Note: The above prior period amounts have been restated to reflect the
effects of our discontinued operations.
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 29, December 30,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 247,590 $ 248,647
Available-for-sale securities 997 47,999
Accounts receivable, net of reserves of
$41,315 and $40,536 708,307 610,020
Inventories, net 666,786 584,103
Deferred income taxes 32,827 28,240
Prepaid expenses and other 192,292 125,839
------------ ------------
Total current assets 1,848,799 1,644,848
Property and equipment, net 247,671 225,038
Goodwill 917,194 773,801
Other intangibles, net 192,420 161,542
Investments and other 107,900 75,917
------------ ------------
Total assets $ 3,313,984 $ 2,881,146
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 474,009 $ 414,062
Bank credit lines 8,977 2,528
Current maturities of long-term debt 24,319 41,036
Accrued expenses:
Payroll and related 136,291 110,401
Taxes 73,278 59,007
Other 223,765 183,054
----------- -----------
Total current liabilities 940,639 810,088
Long-term debt 423,274 455,806
Deferred income taxes 80,260 62,334
Other liabilities 53,906 60,209
Minority interest 35,923 21,746
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,
89,603,660 outstanding on December
29, 2007 and
88,499,321 outstanding on December
30, 2006 896 885
Additional paid-in capital 673,763 614,551
Retained earnings 1,005,055 808,164
Accumulated other comprehensive income 100,268 47,363
------------ ------------
Total stockholders' equity 1,779,982 1,470,963
------------ ------------
Total liabilities and
stockholders' equity $ 3,313,984 $ 2,881,146
============ ============
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Years Ended
----------------------- ---------------------
December December December December
29, 30, 29, 30,
2007 2006 2007 2006
----------- ----------- ---------- ----------
(unaudited) (unaudited)
Cash flows from
operating activities:
Net income $ 78,269 $ 62,997 $ 215,173 $ 163,759
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Loss (gain) on sale
of discontinued
operation, net of
tax (1,602) - (673) 19,363
Depreciation and
amortization 20,915 18,039 73,936 64,930
Stock-based
compensation
expense 5,833 5,531 22,553 19,464
Impairment from
write down of
long-lived assets
of
discontinued
operations - - 32,667 -
Provision for
losses on trade
and other accounts
receivable 322 529 1,384 2,872
Provision for
(benefit from)
deferred income
taxes 9,326 3,959 (7,404) 1,297
Stock issued to
401(k) plan - - 4,104 3,565
Undistributed
(earnings) losses
of affiliates (614) (254) 73 (835)
Minority interest
in net income of
subsidiaries 6,438 3,643 17,442 8,090
Other (3,642) 483 (6,512) (2,066)
Changes in
operating assets
and liabilities,
net of
acquisitions:
Accounts
receivable 60,557 (287) (21,964) (9,705)
Inventories 15,995 (5,991) (15,946) (41,958)
Other current
assets (48,353) 11,048 (58,194) 18,424
Accounts payable
and accrued
expenses (23,158) 70,994 13,572 (11,883)
----------- ----------- ---------- ----------
Net cash provided by
operating activities 120,286 170,691 270,211 235,317
----------- ----------- ---------- ----------
Cash flows from
investing activities:
Purchases of fixed
assets (23,798) (17,073) (56,821) (67,000)
Payments for equity
investment and
business
acquisitions, net of
cash acquired (81,884) (13,748) (206,182) (199,880)
Cash received from
business
divestitures 10,766 - 15,827 36,527
Purchases of
available-for-sale
securities - (57,999) (115,066) (222,036)
Proceeds from sales
of available-for-
sale securities 27,750 8,000 163,065 294,767
Proceeds from
maturities of
available-for-sale
securities - 2,000 - 3,280
Net payments for
foreign exchange
forward contract
settlements (15,261) (5,633) (32,241) (22,528)
Other 408 3,113 (10,629) (3,491)
----------- ----------- ---------- ----------
Net cash used in
investing activities (82,019) (81,340) (242,047) (180,361)
----------- ----------- ---------- ----------
Cash flows from
financing activities:
Proceeds from
issuance of long-
term debt - 1,201 483 1,201
Proceeds from
(repayments of) bank
borrowings 5,766 (113) 1,212 184
Principal payments
for long-term debt (5,374) (3,860) (47,903) (34,537)
Proceeds from
issuance of stock
upon exercise of
stock options 2,740 2,722 35,459 35,622
Payments for
repurchases of
common stock - (14,563) (30,689) (40,263)
Excess tax benefits
related to stock-
based compensation 1,071 1,700 12,668 14,850
Other (471) 4 (2,350) 1,669
----------- ----------- ---------- ----------
Net cash provided by
(used in) financing
activities 3,732 (12,909) (31,120) (21,274)
----------- ----------- ---------- ----------
Net change in cash and
cash equivalents 41,999 76,442 (2,956) 33,682
Effect of exchange rate
changes on cash and
cash equivalents (1,867) (3,865) 1,899 4,282
Cash and cash
equivalents, beginning
of period 207,458 176,070 248,647 210,683
----------- ----------- ---------- ----------
Cash and cash
equivalents, end of
period $247,590 $248,647 $ 247,590 $ 248,647
=========== =========== ========== ==========
Exhibit A
Henry Schein, Inc.
2007 Fourth Quarter
Sales Growth Rate Summary
(unaudited)
Q4 2007 over Q4 2006
----------------------------------------------------------------------
Consolidated Dental Medical International Technology
------------ ------ ------- ------------- ----------
Internal Sales
Growth 3.8% 9.4% -6.0% 5.0% 15.5%
Acquisitions 8.5% 1.8% 0.5% 25.1% 28.5%
------------ ------ ------- ------------- ----------
Local
Currency
Sales
Growth 12.3% 11.2% -5.5% 30.1% 44.0%
Foreign Currency
Exchange 4.1% 1.6% - 12.4% 0.8%
------------ ------ ------- ------------- ----------
Total Sales
Growth 16.4% 12.8% -5.5% 42.5% 44.8%
============ ====== ======= ============= ==========
Q4 YTD 2007 over Q4 YTD 2006
----------------------------------------------------------------------
Consolidated Dental Medical International Technology
------------ ------ ------- ------------- ----------
Internal Sales
Growth 7.3% 10.0% 5.5% 4.3% 18.4%
Acquisitions, net
of divestiture 7.0% 4.6% 4.8% 12.3% 15.6%
------------ ------ ------- ------------- ----------
Local
Currency
Sales
Growth 14.3% 14.6% 10.3% 16.6% 34.0%
Foreign Currency
Exchange 3.0% 0.6% - 9.6% 0.3%
------------ ------ ------- ------------- ----------
Total Sales
Growth 17.3% 15.2% 10.3% 26.2% 34.3%
============ ====== ======= ============= ==========
SOURCE: Henry Schein, Inc.
Henry Schein, Inc.
Steven Paladino, 631-843-5500
Executive Vice President and Chief Financial Officer
steven.paladino@henryschein.com
or
Investors:
Neal Goldner, 631-845-2820
Vice President, Investor Relations
neal.goldner@henryschein.com
or
Media:
Susan Vassallo, 631-843-5562
Vice President, Corporate Communications
susan.vassallo@henryschein.com