Henry Schein Reports Second Quarter Diluted EPS up 18% To $0.74
MELVILLE, N.Y.--(BUSINESS WIRE)--Aug. 5, 2003-- 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 record second quarter financial results.
Net sales for the second quarter ended June 28, 2003 were $776.2 million, an increase of 15.6% from the second quarter of 2002 (15.3% on a comparable basis - See Exhibit A for details of comparable basis sales growth comparisons in all categories). In local currencies, net sales increased 11.8%. Acquisitions contributed approximately 1.4% to net sales growth.
Dental sales increased 8.4%, or 7.7% in local currencies. Dental acquisition growth was approximately 1.5%. In local currencies Dental consumable merchandise sales increased 5.3% and Dental equipment sales were up 18.1%.
Medical sales increased 17.2%, Technology and Value-Added Services sales grew 19.5%, and International sales improved 32.2% (10.2% in local currencies). Medical and Technology sales growth was all internally generated, while approximately one-half of local currency International sales growth was due to an acquisition. European Dental sales increased 12.4% in local currencies (5.4% internal).
Net income for the second quarter of 2003 was $32.9 million, or $0.74 per diluted share, representing increases of 17.1% and 17.5%, respectively, compared with the second quarter of 2002. Operating cash flow for the quarter was $55.1 million.
"We posted strong sales growth during the second quarter, and believe we gained market share in each of our four business Groups," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. "Continued growth in sales across our diversified customer base coupled with an expanding operating margin resulted in another quarter of outstanding bottom-line results."
"The success of our multi-faceted strategy to augment internal growth through strategic acquisitions was evident during the second quarter," he added. "We announced and closed the acquisitions of Hager Dental and Colonial Surgical, thereby strengthening our European and North American dental businesses, respectively. We also expanded our drug distribution offering by signing a distribution agreement for Remicade(R), a treatment for rheumatoid arthritis and Crohn's disease. Remicade is manufactured by Centocor, Inc., a subsidiary of Johnson & Johnson. And, we extended our distribution agreement with Broadlane Inc. for five years and now serve its Surgery Center members, as well as its physician membership." Broadlane is a leading group purchasing organization and provider of total cost management services to the healthcare industry.
For the first half of 2003, net sales were $1.51 billion, an increase of 14.8% from the first half of 2002 (11.3% in local currencies). Acquisitions contributed approximately 0.7% to first-half 2003 net sales growth. On a year-to-date basis, net income of $57.6 million represents a 20.6% increase over the prior year, while earnings per diluted share of $1.29 were also up 20.6% from the prior year.
The Company reported that, under a stock repurchase program of up to two million shares of common stock announced on March 12, 2003, during the second quarter 919,000 shares were repurchased at an average price of $43.17 per share. The positive impact of this share repurchase on second quarter diluted EPS was approximately $0.01.
2003 EPS Guidance
Reflecting second quarter financial results, the impact of the Hager Dental and Colonial Surgical acquisitions and the repurchase of stock completed through the end of the second quarter, the Company now expects full-year 2003 earnings per diluted share to be $3.06 to $3.09. This represents a growth rate of 18% to 19% compared with 2002 results. This growth rate excludes a $0.01 one-time gain during the first quarter of 2003 and $0.04 in one-time gains during 2002. The Company noted that this 2003 EPS guidance is for current operations and completed acquisitions, and does not include the impact of potential future acquisitions.
Second Quarter Conference Call Webcast
The Company will hold a conference call to discuss second 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 Website at www.henryschein.com. In addition, a replay will be available beginning shortly after the call has ended.
Henry Schein, Inc. is the largest distributor of healthcare products and services to office-based healthcare practitioners in the combined North American and European markets.
Recognized for its excellent customer service and low prices, the Company serves more than 400,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary clinics, as well as government and other institutions.
The Company operates its four business groups - Dental, Medical, International and Technology - 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, New York, Henry Schein employs over 7,000 people in 16 countries. The Company's 2002 sales reached a record $2.8 billion. For more information, visit the Henry Schein Website 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.
(TABLES TO FOLLOW)
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Six Months
Ended Ended
----------------------- -----------------------------
June 28, June 29, June 28, June 29,
2003 2002 2003 2002
---------- ---------- ------------ ------------
Net sales $776,166 $671,432 $1,514,163 $1,318,525
Cost of sales 555,637 479,036 1,092,217 947,739
---------- ---------- ------------ ------------
Gross profit 220,529 192,396 421,946 370,786
Operating
expenses:
Selling,
general and
administrative 164,499 145,407 323,711 288,599
---------- ---------- ------------ ------------
Operating
income 56,030 46,989 98,235 82,187
Other income
(expense):
Interest
income 1,921 2,481 4,313 4,920
Interest
expense (4,595) (4,367) (9,328) (9,195)
Other - net 242 706 927 140
---------- ---------- ------------ ------------
Income
before
taxes on
income,
minority
interest
and equity
in
earnings
of
affiliates 53,598 45,809 94,147 78,052
Taxes on
income 20,207 16,996 35,413 29,060
Minority
interest in
net income of
subsidiaries 874 932 1,611 1,501
Equity in
earnings of
affiliates 338 185 498 305
---------- ---------- ------------ ------------
Net income $ 32,855 $ 28,066 $ 57,621 $ 47,796
========== ========== ============ ============
Net income per
common share:
Basic $ 0.76 $ 0.65 $ 1.32 $ 1.11
========== ========== ============ ============
Diluted $ 0.74 $ 0.63 $ 1.29 $ 1.07
========== ========== ============ ============
Weighted
average
common shares
outstanding:
Basic 43,500 43,389 43,754 43,090
========== ========== ============ ============
Diluted 44,549 44,747 44,780 44,559
========== ========== ============ ============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 28, December 28,
2003 2002
------------ ------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 121,161 $ 200,651
Marketable securities 16,151 31,209
Accounts receivable, less reserves of
$40,789 and $36,200, respectively 418,470 368,263
Inventories 343,745 323,080
Deferred income taxes 27,936 29,919
Prepaid expenses and other 73,216 74,407
------------ -----------
Total current assets 1,000,679 1,027,529
Property and equipment, net of accumulated
depreciation and amortization of $114,098
and $101,519, respectively 150,437 142,532
Goodwill 353,746 302,687
Other intangibles, net of accumulated
amortization of $6,537 and $4,151,
respectively 23,748 7,661
Investments and other 85,186 77,643
------------ -----------
$ 1,613,796 $1,558,052
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 228,467 $ 243,166
Bank credit lines 4,764 4,790
Accruals:
Salaries and related expenses 54,949 53,954
Merger and integration, and
restructuring costs 2,568 3,044
Acquisition earnout payments 0 1,460
Taxes and other expenses 128,233 114,254
Current maturities of long-term debt 4,816 2,662
------------ -----------
Total current liabilities 423,797 423,330
Long-term debt 247,179 242,561
Other liabilities 26,339 24,196
------------ -----------
Total liabilities 697,315 690,087
------------ -----------
Minority interest 9,466 6,748
------------ -----------
Stockholders' equity:
Preferred stock, $.01 par value,
authorized 1,000,000, issued and
outstanding: 0 and 0, respectively 0 0
Common stock, $.01 par value, authorized
120,000,000, issued: 43,470,989 and
44,041,591, respectively 435 440
Additional paid-in capital 431,117 436,554
Retained earnings 463,519 430,389
Treasury stock, at cost, 0 and 62,479
shares, respectively 0 (1,156)
Accumulated comprehensive income (loss) 12,098 (4,794)
Deferred compensation (154) (216)
------------ -----------
Total stockholders' equity 907,015 861,217
------------ -----------
$ 1,613,796 $1,558,052
============ ===========
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
------------------ ------------------
June 28, June 29, June 28, June 29,
2003 2002 2003 2002
-------- -------- -------- --------
Cash flows from operating
activities:
Net income $ 32,855 $ 28,066 $ 57,621 $ 47,796
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 8,571 7,211 17,115 13,009
Other 5,155 2,002 9,250 1,999
Changes in operating
assets and liabilities
(net of purchase
acquisitions):
(Increase) decrease in
accounts receivable (21,711) (542) (34,248) 4,071
Decrease (increase)
in inventories 13,305 (13,964) 4,481 (17,760)
Decrease (increase) in
other current assets 1,690 (4,512) 12,527 (4,707)
Increase (decrease) in
accounts payable and
accruals 15,251 33,906 (25,715) (31,027)
-------- --------- -------- ---------
Net cash provided by operating
activities 55,116 52,167 41,031 13,381
--------- --------- -------- ---------
Cash flows from investing
activities:
Capital expenditures (7,813) (10,530) (21,321) (28,120)
Business acquisitions, net
of cash acquired (64,473) (6,737) (66,754) (34,887)
Purchase of marketable
securities with
maturities of more than
three months (17,094) (10,184) (21,195) (20,639)
Maturities of marketable
securities with maturities
of more than three months 2,100 0 28,530 0
Other 3,348 (272) 1,861 (574)
--------- --------- -------- ---------
Net cash used in investing
activities (83,932) (27,723) (78,879) (84,220)
--------- --------- -------- ---------
Cash flows from financing
activities:
Principal payments on
long-term debt (4,700) (1,591) (4,954) (13,604)
Proceeds from issuance of
stock upon exercise of
stock options by
employees 6,729 19,307 11,329 26,490
Payments for repurchases
of common stock (39,669) 0 (46,152) 0
Net proceeds from
(payments on) borrowings
from banks 735 (522) (940) (435)
Other (158) (3) (93) (426)
--------- --------- -------- ---------
Net cash (used in) provided by
financing activities (37,063) 17,191 (40,810) 12,025
--------- --------- -------- ---------
Net (decrease) increase in cash
and cash equivalents (65,879) 41,635 (78,658) (58,814)
Effect of exchange rate changes
on cash and cash equivalents 45 (2,548) (832) (2,045)
Cash and cash equivalents,
beginning of period 186,995 93,421 200,651 193,367
--------- --------- --------- ---------
Cash and cash equivalents, end
of period $121,161 $132,508 $121,161 $132,508
========= ========= ========= =========
Exhibit A
Henry Schein, Inc.
2003 Second Quarter and Year to Date
Details of "Comparable Basis" Growth Comparison
Net Sales by Category
(in thousands)
(unaudited)
Second Quarter % Year to Date %
2003 2002 Growth 2003 2002 Growth
Net Sales As Reported
---------------------------------------------------------------------
Dental 331,953 306,287 8.4% 645,909 601,568 7.4%
Medical 284,305 242,683 17.2% 561,445 474,105 18.4%
International 141,170 106,779 32.2% 270,770 212,617 27.4%
Technology 18,738 15,683 19.5% 36,039 30,235 19.2%
Total 776,166 671,432 15.6% 1,514,163 1,318,525 14.8%
---------------------------------------------------------------------
Add: Technology Sales Methodology (1)
Dental - 823 - 1,449
Medical - - - -
International - - - -
Technology - 1,195 - 2,031
Total - 2,018 - 3,480
Net Sales Comparable Basis
---------------------------------------------------------------------
Dental 331,953 307,110 8.1% 645,909 603,017 7.1%
Medical 284,305 242,683 17.2% 561,445 474,105 18.4%
International 141,170 106,779 32.2% 270,770 212,617 27.4%
Technology 18,738 16,878 11.0% 36,039 32,266 11.7%
Total 776,166 673,450 15.3% 1,514,163 1,322,005 14.5%
---------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative,
MarketOne, certain technology and equipment products are now 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 Second Quarter and Year to Date
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
Second Quarter Year to Date
% %
2003 2002 Growth 2003 2002 Growth
As Reported
----------------------------------------------------------------------
Net Sales 776,166 671,432 15.6% 1,514,163 1,318,525 14.8%
Operating Income 56,030 46,989 19.2% 98,235 82,187 19.5%
Margin 7.2% 7.0% 22 bp 6.5% 6.2% 25 bp
Net Income 32,855 28,066 17.1% 57,621 47,796 20.6%
EPS 0.74 0.63 17.5% 1.29 1.07 20.6%
----------------------------------------------------------------------
Add: Technology Sales
Methodology (1)
Net Sales - 2,018 - 3,480
Operating Income - - - -
Net Income - - - -
EPS - - - -
Subtract: Gain on Real
Estate Transaction (2)
Net Sales - - - -
Operating Income - - - -
Net Income - - (454) -
EPS - - (0.01) -
Comparable Basis
----------------------------------------------------------------------
Net Sales 776,166 673,450 15.3% 1,514,163 1,322,005 14.5%
Operating Income 56,030 46,989 19.2% 98,235 82,187 19.5%
Margin 7.2% 7.0% 24 bp 6.5% 6.2% 27 bp
Net Income 32,855 28,066 17.1% 57,167 47,796 19.6%
EPS 0.74 0.63 17.5% 1.28 1.07 19.6%
----------------------------------------------------------------------
(1) As part of the Company's Dental marketing initiative,
MarketOne, certain technology and equipment products are now 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 first quarter of 2003, the company recorded a net non-
recurring gain related to the sale of a building. The pretax gain was
$726 thousand, and was reflected on the "Other-net" line of the income
statement.
CONTACT: For Henry Schein, Inc. Steven Paladino, 631-843-5500or
Susan Vassallo, 631-843-5562
svassa@henryschein.com
SOURCE: Henry Schein, Inc.