Henry Schein Reports Record Fourth Quarter Results
Net sales for the fourth quarter of 2009 were $1.8 billion, an increase of 13.0% compared with the fourth quarter of 2008. This consists of 8.0% growth in local currencies and 5.0% growth related to foreign currency exchange (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the fourth quarter of 2009 was $86.4 million or $0.94 per diluted share, an increase of 36.9% and 32.4%, respectively, compared with the fourth quarter of 2008. Current and prior-year results include certain unusual items. Excluding these items, non-GAAP income from continuing operations was $85.7 million or $0.93 per share, an increase of 8.3% and 5.7%, respectively, compared with the fourth quarter of 2008 (see Exhibit B for reconciliation of GAAP income and EPS from continuing operations to non-GAAP income and EPS from continuing operations).
"We are pleased to report growth in local currencies for each of our four business Groups, with particular strength in our International Group," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "For the year, despite a challenging macroeconomic environment we posted solid gains in net sales of 5.7% in local currencies."
Dental Group sales of $671.7 million increased 1.5%, consisting of 0.2% growth in local currencies and 1.3% growth related to foreign currency exchange. The 0.2% growth in local currencies included 4.0% growth in Dental consumable merchandise sales and a 7.2% decline in Dental equipment sales and service revenues.
"Quarterly growth in Dental consumable merchandise provides further evidence of positive market trends and the decline in sales of Dental equipment has improved for two consecutive quarters," commented Mr. Bergman.
Medical Group sales of $368.2 million increased 5.5%. Excluding sales of seasonal influenza vaccines, which declined from last year's fourth quarter, Medical Group sales increased 8.1%.
"Medical sales growth reflects strong sales of consumable products, as well as sales of products related to the treatment and prevention of the H1N1 virus," said Mr. Bergman. "During the quarter we announced the formation of Butler Schein Animal Health, which now is in operation as the leading U.S. companion animal health distribution company. On a worldwide basis, our veterinary business will represent approximately $1.4 billion in annual sales."
International Group sales of $699.1 million increased 32.4%, consisting of 19.3% growth in local currencies and 13.1% growth related to foreign currency exchange.
"For the first time ever our International Group sales were the largest of our four Groups during the quarter, as we reap the benefits of a multi-year global strategy. Once again we had double-digit sales growth in local currencies in our International dental, medical and veterinary businesses," added Mr. Bergman.
Technology and Value-Added Services Group sales of $47.1 million increased 11.2% during the quarter, consisting of 9.8% growth in local currencies and 1.4% growth related to foreign currency exchange.
"During the quarter we saw continued strong growth in electronic services, as well as solid sales of International software products," explained Mr. Bergman.
Full Year Results
For the 2009 full year, net sales of $6.5 billion represent growth of 2.5% compared with 2008. This includes 5.7% growth in local currencies and 3.2% decline related to foreign currency exchange.
Income from continuing operations attributable to Henry Schein, Inc. for 2009 was $308.6 million or $3.41 per diluted share, an increase of 24.7% and 25.8%, respectively, compared with 2008. Excluding unusual items as detailed in Exhibit B, income from continuing operations attributable to Henry Schein, Inc. for 2009 was $289.5 million or $3.20 per diluted share, an increase of 8.7% and 9.6%, respectively, compared with 2008 (see Exhibit B for reconciliation of GAAP income and EPS from continuing operations to non-GAAP income and EPS from continuing operations).
2010 EPS Guidance
Henry Schein today affirmed 2010 financial guidance, as follows:
- 2010 diluted EPS attributable to Henry Schein, Inc. is expected to be $3.40 to $3.56.
- Guidance for 2010 diluted EPS attributable to Henry Schein, Inc. is for current continuing operations including Butler Schein Animal Health as well as other completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.
- 2010 guidance excludes the impact of restructuring costs which are expected to be in the range of $10-12 million and are expected to occur primarily in the first quarter.
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 600,000 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 provides exclusive, innovative technology offerings for dental, medical and veterinary professionals, including value-added practice management software and electronic health record solutions.
Headquartered in Melville, N.Y., Henry Schein employs more than 13,500 people and has operations or affiliates in 23 countries. The Company's net sales reached a record $6.5 billion in 2009. 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 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 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: decreased customer demand and changes in vendor credit terms; disruptions in financial markets; general economic conditions; effects of a highly competitive market; changes in the healthcare industry; changes in regulatory requirements; risks from expansion of customer purchasing power and multi-tiered costing structures; 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; risks from disruption to our information systems; our dependence upon sales personnel, manufacturers and customers; our dependence on our senior management; possible increases in the cost of shipping our products or other service issues with our third-party shippers; risks from rapid technological change; 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. 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.
(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Years Ended
------------------ -----------
December 26, December 27, December 26, December 27,
2009 2008 2009 2008
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Net sales $1,786,081 $1,581,179 $6,538,336 $6,380,413
Cost of sales 1,259,809 1,116,271 4,621,516 4,506,118
--------- --------- --------- ---------
Gross profit 526,272 464,908 1,916,820 1,874,295
Operating expenses:
Selling, general
and administrative 389,653 337,257 1,449,715 1,431,769
Restructuring costs
(credits) (1,023) 23,240 3,020 23,240
------ ------ ----- ------
Operating income 137,642 104,411 464,085 419,286
Other income
(expense):
Interest income 2,305 4,138 9,979 16,355
Interest expense (5,041) (7,789) (23,370) (34,605)
Other, net 431 (63) 2,026 (5,587)
--- --- ----- ------
Income from
continuing
operations before
taxes, equity
in earnings of
affiliates and
noncontrolling
interests 135,337 100,697 452,720 395,449
Income taxes (44,119) (32,423) (127,521) (131,210)
Equity in earnings
of affiliates 1,466 1,017 5,243 5,037
----- ----- ----- -----
Income from continuing
operations 92,684 69,291 330,442 269,276
Income (loss) from
discontinued
operations, net
of tax - (7,074) 2,715 (7,902)
--- ------ ----- ------
Net income 92,684 62,217 333,157 261,374
Less: Net income
attributable to
noncontrolling
interests (6,276) (6,258) (22,004) (21,917)
------ ------ ------- -------
Net income
attributable to
Henry Schein, Inc. $86,408 $55,959 $311,153 $239,457
======= ======= ======== ========
Amounts attributable
to Henry Schein, Inc.:
Income from
continuing
operations $86,408 $63,108 $308,551 $247,347
Income (loss)
from discontinued
operations, net
of tax - (7,149) 2,602 (7,890)
--- ------ ----- ------
Net income $86,408 $55,959 $311,153 $239,457
======= ======= ======== ========
Earnings (loss) per
share attributable
to Henry Schein, Inc.:
From continuing
operations:
Basic $0.97 $0.71 $3.47 $2.78
===== ===== ===== =====
Diluted $0.94 $0.71 $3.41 $2.71
===== ===== ===== =====
From discontinued
operations:
Basic $0.00 $(0.08) $0.03 $(0.09)
===== ====== ===== ======
Diluted $0.00 $(0.08) $0.03 $(0.08)
===== ====== ===== ======
From net
income:
Basic $0.97 $0.63 $3.50 $2.69
===== ===== ===== =====
Diluted $0.94 $0.63 $3.44 $2.63
===== ===== ===== =====
Weighted-average
common shares
outstanding:
Basic 89,179 88,673 88,872 89,080
====== ====== ====== ======
Diluted 92,010 89,405 90,556 91,221
====== ====== ====== ======
Note: The above prior period amounts have been restated to reflect the
effects of discontinued operations, the adoption of ASC Topic 470-20
related to convertible debt and ASC Topic 810-10-65 related to the
presentation of noncontrolling interests.
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 26, December 27,
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $471,154 $369,570
Accounts receivable, net of reserves
of $51,724 and $42,855 725,397 734,027
Inventories, net 775,199 731,654
Deferred income taxes 48,001 36,974
Prepaid expenses and other 183,782 193,841
------- -------
Total current assets 2,203,533 2,066,066
Property and equipment, net 259,576 247,835
Goodwill 986,395 922,952
Other intangibles, net 204,445 214,093
Investments and other 182,036 148,264
------- -------
Total assets $3,835,985 $3,599,210
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $521,079 $554,773
Bank credit lines 932 4,936
Current maturities of long-term debt 23,560 156,405
Accrued expenses:
Payroll and related 155,298 135,523
Taxes 86,034 69,792
Other 289,351 262,236
------- -------
Total current liabilities 1,076,254 1,183,665
Long-term debt 243,373 256,648
Deferred income taxes 100,976 95,399
Other liabilities 75,304 58,109
------ ------
Total liabilities 1,495,907 1,593,821
Redeemable noncontrolling interests 178,570 233,035
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,
90,630,889 outstanding on
December 26, 2009 and 89,351,849
outstanding on December 27, 2008 906 894
Additional paid-in capital 603,772 560,023
Retained earnings 1,492,607 1,181,454
Accumulated other
comprehensive income 64,194 29,721
------ ------
Total Henry Schein, Inc.
stockholders' equity 2,161,479 1,772,092
Noncontrolling interest 29 262
--- ---
Total stockholders' equity 2,161,508 1,772,354
--------- ---------
Total liabilities, redeemable
noncontrolling interests and
stockholders' equity $3,835,985 $3,599,210
========== ==========
Note: The above prior period amounts have been restated to reflect the
adoption of ASC Topic 480-10 related to redeemable noncontrolling
interests, ASC Topic 470-20 related to convertible debt and ASC Topic
810-10-65 related to the presentation of noncontrolling interests.
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Years Ended
------------------ -----------
December December December December
26, 27, 26, 27,
2009 2008 2009 2008
-------- -------- -------- --------
(unaudited) (unaudited)
Cash flows from operating
activities:
Net income $92,684 $62,217 $333,157 $261,374
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Gain on sale of
discontinued operation,
net of tax - - (2,382) -
Depreciation and
amortization 20,563 18,944 81,493 78,127
Amortization of bond
discount 1,517 1,435 5,990 5,649
Stock-based compensation
expense 7,580 2,369 25,924 25,429
Impairment from write-down
of long-lived assets of
discontinued operation - 8,484 - 8,484
Provision for losses on
trade and other accounts
receivable 1,993 2,544 4,747 6,255
Provision for (benefit from)
deferred income taxes 3,419 (3,253) (26,214) (5,958)
Stock issued to 401(k)
plan - - 5,301 4,662
Undistributed earnings of
affiliates (1,466) (1,017) (5,243) (5,037)
Other (162) 2,282 2,373 150
Changes in operating
assets and liabilities,
net of acquisitions:
Accounts receivable 33,233 39,917 20,445 (26,834)
Inventories (9,008) (178) (19,242) (68,360)
Other current assets 1,181 14,721 375 11,261
Accounts payable
and accrued expenses 26,979 47,653 (29,834) 89,580
------ ------ ------- ------
Net cash provided by
operating activities 178,513 196,118 396,890 384,782
------- ------- ------- -------
Cash flows from investing
activities:
Purchases of fixed assets (13,210) (12,751) (51,627) (50,870)
Payments for equity
investment and business
acquisitions, net of cash
acquired (11,190) (102,540) (56,648) (128,470)
Cash received from business
divestiture - - 12,716 -
Purchases of available-
for-sale securities - - - (35,925)
Proceeds from sales of
available-for-sale
securities 1,225 4,150 9,955 5,722
Net proceeds from foreign
exchange forward contract
settlements - 32,246 275 41,336
Other (861) (3,410) (12,119) 197
---- ------ ------- ---
Net cash used in investing
activities (24,036) (82,305) (97,448) (168,010)
------- ------- ------- --------
Cash flows from financing
activities:
Repayments of bank
borrowings (652) (1,411) (4,481) (7,197)
Principal payments for
long-term debt (877) (3,582) (154,329) (33,721)
Proceeds from issuance of
stock upon exercise
of stock options 2,181 608 11,870 25,649
Payments for repurchases of
common stock - (27,843) - (82,788)
Excess tax benefits related
to stock-based compensation 1,859 406 4,680 11,041
Acquisitions of
noncontrolling interests in
subsidiaries - - (52,453) -
Other (835) 902 (2,962) (954)
---- --- ------ ----
Net cash provided by
(used in) financing
activities 1,676 (30,920) (197,675) (87,970)
----- ------- -------- -------
Net change in cash and cash
equivalents 156,153 82,893 101,767 128,802
Effect of exchange rate
changes on cash and
cash equivalents (2,606) (1,687) (183) (6,822)
Cash and cash equivalents,
beginning of period 317,607 288,364 369,570 247,590
------- ------- ------- -------
Cash and cash
equivalents, end of
period $471,154 $369,570 $471,154 $369,570
======== ======== ======== ========
Note: The above prior period amounts have been restated to reflect the
adoption of ASC Topic 470-20 related to convertible debt and ASC Topic
810-10-65 related to the presentation of noncontrolling interests.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Exhibit A
Henry Schein, Inc.
2009 Fourth Quarter
Sales Growth Rate Summary
(unaudited)
Q4 2009 over Q4 2008
--------------------
Consolidated Dental Medical International Technology
------------ ------ ------- ------------- ----------
Internal Sales
Growth 3.0% -2.5% 4.3% 8.7% 6.4%
Acquisitions 5.0% 2.7% 1.2% 10.6% 3.4%
--- --- --- ---- ---
Local Currency
Sales Growth 8.0% 0.2% 5.5% 19.3% 9.8%
Foreign Currency
Exchange 5.0% 1.3% 0.0% 13.1% 1.4%
--- --- --- ---- ---
Total Sales Growth 13.0% 1.5% 5.5% 32.4% 11.2%
==== === === ==== ====
Total Sales Growth
excluding influenza
vaccine sales 13.6% 1.5% 8.1% 32.4% 11.2%
Local Currency Sales
Growth excluding
influenza vaccine
sales 8.6% 0.2% 8.1% 19.3% 9.8%
Q4 YTD 2009 over Q4 YTD 2008
----------------------------
Consolidated Dental Medical International Technology
------------ ------ ------- ------------- ----------
Internal Sales
Growth 0.9% -4.0% 0.8% 6.2% 6.7%
Acquisitions 4.8% 2.4% 1.2% 10.2% 1.6%
--- --- --- ---- ---
Local Currency
Sales Growth 5.7% -1.6% 2.0% 16.4% 8.3%
Foreign Currency
Exchange -3.2% -0.6% 0.0% -8.4% -2.2%
---- ---- --- ---- ----
Total Sales Growth 2.5% -2.2% 2.0% 8.0% 6.1%
=== ==== === === ===
Total Sales Growth
excluding influenza
vaccine sales 3.3% -2.2% 5.9% 8.0% 6.1%
Local Currency Sales
Growth excluding
influenza vaccine
sales 6.6% -1.6% 5.9% 16.4% 8.3%
Exhibit B
Henry Schein, Inc.
2009 Fourth Quarter and YTD
Reconciliation of GAAP results of continuing operations to non-GAAP
results of continuing operations
(in thousands, except per share data)
(unaudited)
Fourth Quarter % YTD %
2009 2008 Growth 2009 2008 Growth
---- ---- ------ ---- ---- ------
From Continuing Operations
--------------------------
Income from Continuing
Operations attributable
to Henry Schein, Inc. $86,408 $63,108 36.9% $308,551 $247,347 24.7%
Diluted EPS from
Continuing Operations
attributable to Henry
Schein, Inc. 0.94 0.71 32.4% 3.41 2.71 25.8%
Non-GAAP Adjustments
(after-tax)
Foreign tax benefit - - $(20,845) -
Costs related to foreign
tax benefit - - 1,080 -
Adjustments related to
Lehman Brothers Bankruptcy - - (338) $3,045
Other non-recurring
income/expense, net - - (1,028) -
Restructuring costs
(credits) $(726) $15,991 2,058 15,991
----- ------- ----- ------
Income from Continuing
Operations attributable
to Henry Schein, Inc. $(726) $15,991 $(19,073) $19,036
Diluted EPS from
Continuing Operations
attributable to Henry
Schein, Inc. (0.01) 0.18 (0.21) 0.21
Adjusted Results From
Continuing Operations
----------------------
Income from Continuing
Operations attributable
to Henry Schein, Inc. $85,682 $79,099 8.3% $289,478 $266,383 8.7%
Diluted EPS from
Continuing Operations
attributable to Henry
Schein, Inc. 0.93 0.88 5.7% 3.20 2.92 9.6%
---------------------- ---- ---- --- ---- ---- ---
This non-GAAP comparison is being presented in order to provide a more
comparable basis for analysis. Earnings per share numbers may not sum due
to rounding.
SOURCE Henry Schein, Inc.