Henry Schein Reports Second Quarter Results; EPS Increases 17% to $0.48, Operating Cash Flow Exceeds $41 Million; Company Reaffirms 2001 EPS Guidance
For the three months ended June 30, 2001, net sales increased 6.6% to $606.3 million, from $568.6 million in the second quarter of last year. In local currencies, net sales increased 8%. Net income for the second quarter of 2001 was $20.9 million, or $0.48 per diluted share, compared with adjusted net income of $17.0 million, or $0.41 per diluted share, in the second quarter of 2000. Second quarter 2001 net income increased 23%, and earnings per diluted share were up 17.1%, both compared to the adjusted figures from the second quarter of 2000.
For the first half of 2001, net sales increased 6.9% to $1.20 billion, from $1.12 billion for the first half of 2000. In local currencies, first-half net sales increased by approximately 8.4%. Year-to-date net income was $35.0 million, or $0.81 per diluted share, compared with adjusted net income of $28.4 million, or $0.69 per diluted share, in the prior year. First-half 2001 net income increased 24%, and year-to-date earnings per diluted share increased 17.4%, both compared to adjusted figures from the comparable prior-year period.
"Our financial performance continues to strengthen, highlighted by strong growth in net sales, net income and EPS," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. "Net sales growth of 8% in local currencies remains 2%- 3% ahead of what we believe to be the consolidated growth rate of the markets we serve. These markets continue to do well, and remain resistant to periodic negative swings in overall economic conditions."
Mr. Bergman continued, "In addition, I am pleased to report that we continue to generate strong cash flow from operations, with more than $41 million generated during the second quarter 2001."
The Company reported second quarter Dental sales of $276.5 million, an increase of 4.3% compared with the comparable prior-year period. Both Dental merchandise sales and Dental equipment sales and service revenues were each up 4.3% for the second quarter of 2001, compared with the second quarter of 2000.
Led by sales to the Company's core physician office and alternate-care markets, Henry Schein's Medical Group posted sales of $202.4 million for the second quarter of 2001, a 16.1% increase over the prior year's second quarter. The Medical Group continues to be a major force in the industry, growing sales at a rate four times higher than the Company's estimated industry growth rate.
International sales growth in local currencies increased 5.3% for the second quarter 2001, while in U.S. dollars, International sales declined 1.8% to $95.7 million. Veterinary sales declined 6.2% to $13.4 million for the same period. Despite the decline in Veterinary sales, the Group's profitability continued to improve in the second quarter 2001, compared to the prior year.
Sales of Technology and Value-Added Services were $18.3 million for the second quarter 2001, a 4.5% increase over last year.
"More than 40,000 of our practice management software systems are now in use by practitioners who demand the latest in technological advancements and streamlined office operations," said Mr. Bergman. "Among other growth initiatives, we expect to further leverage Henry Schein's presence on the practitioner's desktop by cross-selling many of our other value-added products and services designed to help our customers operate a more efficient and profitable business."
Looking at the balance of 2001, Mr. Bergman commented, "We look forward to Henry Schein's continued success and have confidence in achieving EPS growth in the mid teens for the second half of the year."
Live WebcastThe Company will hold a conference call to discuss these 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 for 30 days 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 five business groups - Dental, Medical, Veterinary, International and Technology - through a centralized and automated distribution network, which provides customers in more than 125 countries with a comprehensive selection of over 80,000 national and Henry Schein private-brand products. Henry Schein also offers a wide range of innovative value-added practice solutions, such as its leading dental practice management software systems DENTRIX(R) and Easy Dental(R), which are installed in over 37,000 practices; and ArubA(R), Henry Schein's electronic catalog and ordering system. Headquartered in Melville, New York, Henry Schein employs over 6,500 people in 16 countries. The Company's 2000 sales reached a record $2.4 billion. 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. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 24, June 30, June 24,
2001 2000 2001 2000
--------- --------- ------------ -----------
(reclassified) (reclassified)
Net sales $ 606,285 $ 568,631 $ 1,200,180 $ 1,122,770
Cost of sales 439,393 409,816 873,931 814,839
--------- --------- ----------- ------------
Gross profit 166,892 158,815 326,249 307,931
Operating expenses:
Selling, general
and administrative 131,620 127,248 263,394 252,887
Merger and
integration costs 0 585 0 585
--------- --------- ----------- ------------
Operating income 35,272 30,982 62,855 54,459
Other income (expense):
Interest income 3,177 924 4,418 2,020
Interest expense (4,896) (4,847) (10,264) (10,699)
Other - net 651 (495) 297 (646)
--------- --------- ----------- ------------
Income before
taxes on income,
minority
interest and
equity in
earnings of
affiliates 34,204 26,564 57,306 45,134
Taxes on income 12,656 9,774 21,204 16,552
Minority interest in
net income of
subsidiaries 794 549 1,325 1,037
Equity in earnings
of affiliates 156 140 265 234
--------- --------- ----------- ------------
Net income $ 20,910 $ 16,381 $ 35,042 $ 27,779
========= ========= =========== ============
Adjusted net income:
Net income $ 20,910 $ 16,381 $ 35,042 $ 27,779
Adjustments:
Merger and
integration costs 0 585 0 585
--------- --------- ----------- ------------
Adjusted net income $ 20,910 $ 16,966 $ 35,042 $ 28,364
========= ========= =========== ============
Adjusted net income per
common share:
Basic $ 0.49 $ 0.41 $ 0.83 $ 0.69
========= ========= =========== ============
Diluted $ 0.48 $ 0.41 $ 0.81 $ 0.69
========= ========= =========== ============
Weighted average shares:
Basic 42,363 41,204 42,168 40,959
========= ========= =========== ============
Diluted 43,543 41,702 43,125 41,401
========= ========= =========== ============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 30,
2001 2000
-------------- ---------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 75,847 $ 58,362
Accounts receivable,
less reserves of $28,506
and $27,556, respectively 366,316 371,668
Inventories 258,662 276,473
Deferred income taxes 21,842 21,001
Prepaid expenses and other 46,169 60,900
------------ -------------
Total current assets 768,836 788,404
Property and equipment,
net of accumulated
depreciation
and amortization of
$83,061 and $73,134,
respectively 96,650 94,663
Goodwill and other
intangibles, net of
accumulated amortization
of $49,739 and $44,419,
respectively 278,768 292,018
Investments and other 57,533 55,983
------------ -------------
$ 1,201,787 $ 1,231,068
============ =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 169,629 $ 216,535
Bank credit lines 9,117 4,390
Accruals:
Salaries and
related expenses 38,671 39,830
Merger, integration
and restructuring
costs 8,506 13,735
Other 80,453 84,288
Current maturities
of long-term debt 4,596 6,079
------------ -------------
Total current
liabilities 310,972 364,857
Long-term debt 250,799 266,224
Other liabilities 13,449 12,931
------------ -------------
Total liabilities 575,220 644,012
------------ -------------
Minority interest 6,954 7,996
------------ -------------
Stockholders' equity:
Common stock, $.01 par
value, authorized
120,000,000; issued and
outstanding 42,521,192
and 41,946,284,
respectively 425 419
Additional paid-in
capital 386,276 373,413
Retained earnings 260,071 225,029
Treasury stock, at cost
(62,479 shares) (1,156) (1,156)
Accumulated comprehensive
income (25,599) (18,179)
Deferred compensation (404) (466)
------------ -------------
Total stockholders'
equity 619,613 579,060
------------ -------------
$ 1,201,787 $ 1,231,068
============ =============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
June 30, June 24,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income $ 20,910 $ 16,381
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,590 8,024
Provision for losses and allowances on
accounts receivable 400 623
Benefit for deferred income taxes (916) (170)
Undistributed earnings of affiliates (156) (140)
Minority interest in net income of
subsidiaries 794 549
Other 35 (93)
Changes in assets and liabilities (net of
purchase acquisitions):
Increase in accounts receivable (9,117) (867)
Decrease in inventories 13,363 16,618
Decrease in other current assets 6,584 4,218
Increase in accounts payable and accruals 1,883 11,347
--------- ---------
Net cash provided by operating activities 41,370 56,490
--------- ---------
Cash flows from investing activities:
Capital expenditures (6,829) (5,532)
Business acquisitions, net of cash acquired 0 (701)
Other (9) 1,592
--------- ---------
Net cash used in investing activities (6,838) (4,641)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt (2,001) (445)
Proceeds from issuance of stock upon exercise
of stock options by employees 3,539 110
Proceeds from (repayments on) borrowings from
banks 1,337 (24,584)
Other 158 902
--------- ---------
Net cash provided by (used in) financing
activities 3,033 (24,017)
--------- ---------
Net increase in cash and cash equivalents 37,565 27,832
Effect of exchange rate changes on cash 170 663
Cash and cash equivalents, beginning of period 38,112 17,405
--------- ---------
Cash and cash equivalents, end of period $ 75,847 $ 45,900
========= =========
CONTACT: Henry Schein, Inc.
Steven Paladino, 631/843-5500
Susan Vassallo, 631/843-5562
svassa@henryschein.com