Henry Schein Reports Record Second Quarter Results

08/04/14

EPS up 9.8% to $1.35 Raises lower end of 2014 financial guidance range

MELVILLE, N.Y., Aug. 4, 2014 /PRNewswire/ -- Henry Schein, Inc. (NASDAQ: HSIC), the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, today reported record financial results for the quarter ended June 28, 2014.

Net sales for the second quarter of 2014 were $2.6 billion, an increase of 9.3% compared with the second quarter of 2013. This consisted of 7.9% growth in local currencies and 1.4% growth related to foreign currency exchange. In local currencies, internally generated sales increased 4.3% and acquisition growth was 3.6% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2014 was $116.2 million, or $1.35 per diluted share, an increase of 7.2% and 9.8%, respectively, compared with the second quarter of 2013.

"Sales growth was solid during the second quarter with internal sales growth in local currencies the highest we have reported in the past year and a half. Domestic sales rebounded from the effects of severe winter weather in the preceding quarter," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "We are also pleased to be raising the lower end of our 2014 financial guidance range."

Dental sales of $1.4 billion increased 8.6%, consisting of 7.5% growth in local currencies and 1.1% growth related to foreign currency exchange. In local currencies, internally generated sales increased 2.6% and acquisition growth was 4.9%. The 2.6% internal growth in local currencies included 4.3% growth in North America while International sales were flat.

"We gained market share in our Dental group with growth in North America exceeding 8% and International growth above 9%. North America internal Dental merchandise sales growth was bolstered by strategic acquisitions, and equipment sales and service revenue growth was nearly 11% in local currencies. International Dental growth also reflects strategic acquisitions, while internal equipment sales and service revenue in local currencies declined from a strong prior-year comparison that included the biennial IDS in Germany," commented Mr. Bergman. "Through strategic dental transactions during the quarter, we expanded our reach in France and entered Brazil, our first operation in South America."

Animal Health sales of $754.5 million increased 13.2%, consisting of 10.7% growth in local currencies and 2.5% growth related to foreign currency exchange. In local currencies, internally generated sales increased 7.3% and acquisition growth was 3.4%. The 7.3% internal growth in local currencies included 7.9% growth in North America and 6.8% growth in International.

"We also gained market share in our Animal Health group with internal sales growth in local currencies at its highest level in six quarters. International internal Animal Health sales growth in local currencies was at a multi-year record," commented Mr. Bergman. "We also significantly strengthened our position in the U.S. equine-products market with the acquisition of a majority ownership position in SmartPak, which was completed early in the third quarter."

Medical sales of $403.3 million increased 4.0%, including 3.7% growth in local currencies and 0.3% growth related to foreign currency exchange.

"Medical sales growth in North America, which represents 95% of the group's total, accelerated sharply from the preceding quarter as we recovered from the impact of weather and made progress with our strategic focus on large group practices and integrated delivery networks. Pre-bookings of seasonal influenza vaccines are running in-line with the prior year," remarked Mr. Bergman.

Technology and Value-Added Services sales of $89.1 million increased 14.2%, including 13.2% growth in local currencies and 1.0% growth related to foreign currency exchange. In local currencies, internally generated sales increased 9.3% and acquisition growth was 3.9%.

"Technology and Value-Added Services sales growth also accelerated in North America compared with the preceding quarter to its highest growth rate in more than a year, with particular strength in software sales and value-added services," commented Mr. Bergman. "We continue to be pleased with our performance internationally in this category, with double-digit internal sales growth in local currencies for the past six quarters."

Stock Repurchase Plan
The Company announced that it repurchased approximately 654,000 shares of its common stock during the second quarter at an average price of $116.43 per share, or approximately $76.1 million. The impact of the repurchase of shares on second quarter diluted EPS was immaterial. At the close of the second quarter, Henry Schein had approximately $148 million authorized for future repurchases of its common stock.

Year-to-Date Results
Net sales for the first half of 2014 were $5.0 billion, an increase of 7.7% compared with the first half of 2013. This consisted of 6.8% growth in local currencies and 0.9% growth related to foreign currency exchange. In local currencies, internally generated sales increased 3.6% and acquisition growth was 3.2%.

Net income attributable to Henry Schein, Inc. for the first half of 2014 was $218.3 million or $2.53 per diluted share, an increase of 7.8% and 10.0%, respectively, compared with the first half of 2013 excluding a non-cash, one-time expense related to debt refinancing.

2014 EPS Guidance
Henry Schein today raised the lower end of its 2014 financial guidance range, as follows:

For 2014, the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.33 to $5.39. This represents growth of 8% to 9% compared with 2013 results excluding certain one-time items, and compares with previous guidance for 2014 diluted EPS to be $5.29 to $5.39.
Guidance for 2014 diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.

Second Quarter Conference Call Webcast
The Company will hold a conference call to discuss second 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 website at www.henryschein.com. In addition, a replay will be available beginning shortly after the call has ended.

About Henry Schein, Inc.
Henry Schein, Inc. is the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners. The Company also serves dental laboratories, government and institutional health care clinics, and other alternate care sites. A Fortune 500® Company and a member of the NASDAQ 100® Index, Henry Schein employs more than 17,000 Team Schein Members and serves more than 800,000 customers.

The Company offers a comprehensive selection of products and services, including value-added solutions for operating efficient practices and delivering high-quality care. Henry Schein operates through a centralized and automated distribution network, with a selection of more than 96,000 branded products and Henry Schein private-brand products in stock, as well as more than 110,000 additional products available as special-order items. The Company also offers its customers exclusive, innovative technology solutions, including practice management software and e-commerce solutions, as well as a broad range of financial services.

Headquartered in Melville, N.Y., Henry Schein has operations or affiliates in 27 countries. The Company's sales reached a record $9.6 billion in 2013, and have grown at a compound annual rate of approximately 16 percent since Henry Schein became a public company in 1995. For more information, visit the Henry Schein website at www.henryschein.com.

Cautionary Note Regarding Forward-Looking Statements

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: effects of a highly competitive market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; possible increases in the cost of shipping our products or other service issues with our third-party shippers; general global macroeconomic conditions; disruptions in financial markets; possible volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions and joint ventures, including the failure to achieve anticipated synergies; financial risks associated with acquisitions and joint ventures; litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; risks from challenges associated with the emergence of potential increased competition by third party online commerce sites; risks from disruption to our information systems; 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)
(unaudited)

		Three Months Ended				Six Months Ended
		June 28,		June 29,		June 28,		June 29,
		2014		2013		2014		2013

Net sales	$	2,615,406	$	2,391,810	$	5,045,565	$	4,685,321
Cost of sales		1,886,934		1,721,954		3,620,380		3,368,474
Gross profit		728,472		669,856		1,425,185		1,316,847
Operating expenses:
Selling, general and administrative		547,628		493,791		1,087,073		987,153
Operating income		180,844		176,065		338,112		329,694
Other income (expense):
Interest income		3,416		3,303		6,871		6,508
Interest expense		(5,670)		(4,890)		(10,928)		(17,617)
Other, net		1,032		(34)		4,612		(404)
Income before taxes and equity in earnings
of affiliates		179,622		174,444		338,667		318,181
Income taxes		(55,322)		(54,775)		(104,945)		(100,627)
Equity in earnings of affiliates		2,817		1,766		3,523		2,567
Net income		127,117		121,435		237,245		220,121
Less: Net income attributable to noncontrolling interests		(10,881)		(13,005)		(18,910)		(20,213)
Net income attributable to Henry Schein, Inc.	$	116,236	$	108,430	$	218,335	$	199,908

Earnings per share attributable to Henry Schein, Inc.:

Basic	$	1.37	$	1.26	$	2.58	$	2.31
Diluted	$	1.35	$	1.23	$	2.53	$	2.27

Weighted-average common shares outstanding:
Basic		84,620		86,370		84,716		86,483
Diluted		85,980		87,968		86,189		88,205

HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

				June 28,		December 28,
				2014		2013
				(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	89,698	$	188,616
	Accounts receivable, net of reserves of $81,932 and $78,298				1,188,143		1,055,216
	Inventories, net				1,257,235		1,250,403
	Deferred income taxes				66,431		63,865
	Prepaid expenses and other				310,496		276,565
			Total current assets		2,912,003		2,834,665
Property and equipment, net					292,972		275,888
Goodwill					1,832,377		1,635,005
Other intangibles, net					594,358		417,133
Investments and other					360,044		461,945
			Total assets	$	5,991,754	$	5,624,636

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	755,999	$	824,495
	Bank credit lines				83,671		29,508
	Current maturities of long-term debt				6,302		5,441
	Accrued expenses:
		Payroll and related			208,886		216,629
		Taxes			158,363		145,161
		Other			330,680		329,429
			Total current liabilities		1,543,901		1,550,663
Long-term debt					665,909		450,233
Deferred income taxes					278,456		198,674
Other liabilities					152,029		139,526
			Total liabilities		2,640,295		2,339,096

Redeemable noncontrolling interests					497,927		497,539
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,
		85,022,123 outstanding on June 28, 2014 and
		85,622,452 outstanding on December 28, 2013			850		856
	Additional paid-in capital				265,469		318,225
	Retained earnings				2,505,721		2,398,267
	Accumulated other comprehensive income				78,703		67,849
		Total Henry Schein, Inc. stockholders' equity			2,850,743		2,785,197
	Noncontrolling interests				2,789		2,804
			Total stockholders' equity		2,853,532		2,788,001
		Total liabilities, redeemable noncontrolling interests and stockholders' equity		$	5,991,754	$	5,624,636

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 28,

June 29,

June 28,

June 29,

2014

2013

2014

2013

Cash flows from operating activities:

Net income

127,117

121,435

237,245

220,121

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

37,353

31,843

73,489

64,236

Accelerated amortization of deferred financing costs

6,203

Stock-based compensation expense

10,542

11,422

19,505

16,732

Provision for losses on trade and other

accounts receivable

1,092

1,314

2,415

2,154

Provision for (benefit from) deferred income taxes

(9,735)

9,179

6,009

15,550

Equity in earnings of affiliates

(2,817)

(1,766)

(3,523)

(2,567)

Distributions from equity affiliates

3,368

3,569

5,340

6,450

Other

13,480

2,076

15,453

5,367

Changes in operating assets and liabilities,

net of acquisitions:

Accounts receivable

(56,597)

(19,763)

(86,199)

(45,155)

Inventories

6,991

28,026

48,550

82,037

Other current assets

195

(26,927)

(23,251)

(12,924)

Accounts payable and accrued expenses

68,243

114,390

(151,050)

(121,453)

Net cash provided by operating activities

199,232

274,798

143,983

236,751

Cash flows from investing activities:

Purchases of fixed assets

(19,492)

(10,072)

(37,976)

(21,934)

Payments for equity investments and business

acquisitions, net of cash acquired

(78,178)

(1,349)

(222,857)

(33,708)

Other

(2,566)

(5,003)

(6,497)

(5,071)

Net cash used in investing activities

(100,236)

(16,424)

(267,330)

(60,713)

Cash flows from financing activities:

Proceeds from (repayments of) bank borrowings

(61,529)

(34,467)

53,239

(11,640)

Proceeds from issuance of long-term debt

124,400

155,781

314,787

483,781

Debt issuance costs

(1,083)

(1,319)

Principal payments for long-term debt

(100,470)

(305,095)

(100,866)

(538,000)

Proceeds from issuance of stock upon exercise

of stock options

4,827

7,653

21,277

19,452

Payments for repurchases of common stock

(76,137)

(78,062)

(151,443)

(151,511)

Excess tax benefits related to stock-based

compensation

1,229

1,964

4,579

5,328

Distributions to noncontrolling shareholders

(13,926)

(10,216)

(17,689)

(13,008)

Acquisitions of noncontrolling interests in

subsidiaries

(18,759)

(5,219)

(102,552)

(5,754)

Net cash provided by (used in) financing activities

(140,365)

(268,744)

21,332

(212,671)

Effect of exchange rate changes on cash and

cash equivalents

1,952

(1,353)

3,097

(6,608)

Net change in cash and cash equivalents

(39,417)

(11,723)

(98,918)

(43,241)

Cash and cash equivalents, beginning of period

129,115

90,562

188,616

122,080

Cash and cash equivalents, end of period

89,698

78,839

89,698

78,839

Exhibit A - QTD Sales

Henry Schein, Inc.
2014 Second Quarter
Sales Summary
(in thousands)
(unaudited)

Q2 2014 over Q2 2013

Global	Q2 2014		Q2 2013		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	1,368,481	$	1,259,581	8.6%	1.1%	7.5%	4.9%	2.6%

Animal Health		754,549		666,297	13.2%	2.5%	10.7%	3.4%	7.3%

Medical		403,257		387,887	4.0%	0.3%	3.7%	0.0%	3.7%

Total Health Care Distribution		2,526,287		2,313,765	9.2%	1.4%	7.8%	3.6%	4.2%

Technology and value-added services		89,119		78,045	14.2%	1.0%	13.2%	3.9%	9.3%

Total Global	$	2,615,406	$	2,391,810	9.3%	1.4%	7.9%	3.6%	4.3%

North America	Q2 2014		Q2 2013		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	833,055	$	768,800	8.4%	-0.7%	9.1%	4.8%	4.3%

Animal Health		351,523		325,821	7.9%	0.0%	7.9%	0.0%	7.9%

Medical		381,811		367,312	3.9%	0.0%	3.9%	0.0%	3.9%

Total Health Care Distribution		1,566,389		1,461,933	7.1%	-0.4%	7.5%	2.5%	5.0%

Technology and value-added services		72,145		66,675	8.2%	-0.3%	8.5%	0.0%	8.5%

Total North America	$	1,638,534	$	1,528,608	7.2%	-0.4%	7.6%	2.4%	5.2%

International	Q2 2014		Q2 2013		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	535,426	$	490,781	9.1%	4.2%	4.9%	4.9%	0.0%

Animal Health		403,026		340,476	18.4%	5.0%	13.4%	6.6%	6.8%

Medical		21,446		20,575	4.2%	5.6%	-1.4%	0.0%	-1.4%

Total Health Care Distribution		959,898		851,832	12.7%	4.6%	8.1%	5.4%	2.7%

Technology and value-added services		16,974		11,370	49.3%	8.4%	40.9%	26.5%	14.4%

Total International	$	976,872	$	863,202	13.2%	4.6%	8.6%	5.8%	2.8%

Exhibit A - YTD Sales

Henry Schein, Inc.
2014 Second Quarter Year to Date
Sales Summary
(in thousands)
(unaudited)

Q2 2014 YTD over Q2 2013 YTD

Global	Q2 2014 YTD		Q2 2013 YTD		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	2,665,409	$	2,450,376	8.8%	0.8%	8.0%	4.9%	3.1%

Animal Health		1,409,037		1,305,439	7.9%	1.4%	6.5%	1.8%	4.7%

Medical		800,671		776,749	3.1%	0.3%	2.8%	0.0%	2.8%

Total Health Care Distribution		4,875,117		4,532,564	7.6%	0.9%	6.7%	3.2%	3.5%

Technology and value-added services		170,448		152,757	11.6%	0.7%	10.9%	3.1%	7.8%

Total Global	$	5,045,565	$	4,685,321	7.7%	0.9%	6.8%	3.2%	3.6%

North America	Q2 2014 YTD		Q2 2013 YTD		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	1,602,651	$	1,481,754	8.2%	-0.8%	9.0%	5.0%	4.0%

Animal Health		657,172		632,651	3.9%	0.0%	3.9%	0.0%	3.9%

Medical		756,929		734,944	3.0%	0.0%	3.0%	0.0%	3.0%

Total Health Care Distribution		3,016,752		2,849,349	5.9%	-0.4%	6.3%	2.6%	3.7%

Technology and value-added services		139,029		130,537	6.5%	-0.3%	6.8%	0.1%	6.7%

Total North America	$	3,155,781	$	2,979,886	5.9%	-0.4%	6.3%	2.5%	3.8%

International	Q2 2014 YTD		Q2 2013 YTD		Total Sales Growth	Foreign Exchange Growth	Local Currency Growth	Acquisition Growth	Local Internal Growth

Dental	$	1,062,758	$	968,622	9.7%	3.2%	6.5%	4.9%	1.6%

Animal Health		751,865		672,788	11.8%	2.9%	8.9%	3.4%	5.5%

Medical		43,742		41,805	4.6%	4.8%	-0.2%	0.0%	-0.2%

Total Health Care Distribution		1,858,365		1,683,215	10.4%	3.1%	7.3%	4.1%	3.2%

Technology and value-added services		31,419		22,220	41.4%	6.2%	35.2%	20.9%	14.3%

Total International	$	1,889,784	$	1,705,435	10.8%	3.1%	7.7%	4.4%	3.3%

Exhibit B

Henry Schein, Inc.
2014 Second Quarter and YTD
Reconciliation of reported GAAP net income and diluted EPS attributable to Henry Schein, Inc. to
non-GAAP net income and diluted EPS attributable to Henry Schein, Inc.
(in thousands, except per share data)
(unaudited)


		Second Quarter						YTD
					%						%
		2014		2013	Growth			2014		2013	Growth
Net Income attributable to Henry Schein, Inc.	$	116,236	$	108,430	7.2	%	$	218,335	$	199,908	9.2	%
Diluted EPS attributable to Henry Schein, Inc.	$	1.35	$	1.23	9.8	%	$	2.53	$	2.27	11.5	%

Non-GAAP Adjustments (after-tax)
Accelerated amortization of deferred
financing costs (1)	$	-	$	-			$	-	$	2,679
Total non-GAAP adjustments to Net Income
attributable to Henry Schein, Inc.	$	-	$	-			$	-	$	2,679
Total non-GAAP adjustments to diluted EPS
attributable to Henry Schein, Inc.	$	-	$	-			$	-	$	0.03

Non-GAAP Net Income attributable to
Henry Schein, Inc.	$	116,236	$	108,430	7.2	%	$	218,335	$	202,587	7.8	%
Non-GAAP diluted EPS attributable to
Henry Schein, Inc.	$	1.35	$	1.23	9.8	%	$	2.53	$	2.30	10.0	%


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.

(1)	Represents non-cash, one-time expenses related to the debt refinancing of Henry Schein Animal Health.

SOURCE Henry Schein, Inc.

Investors: Steven Paladino, Executive Vice President and Chief Financial Officer, steven.paladino@henryschein.com, (631) 843-5500 or Carolynne Borders, Vice President, Investor Relations, carolynne.borders@henryschein.com, (631) 390-8105; Media: Susan Vassallo, Vice President, Corporate Communications, susan.vassallo@henryschein.com, (631) 843-5562

Press Release Details

Henry Schein Reports Record Second Quarter Results