UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported)
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May 4, 2010
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HENRY SCHEIN, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE
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0-27078
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11-3136595
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(State or other jurisdiction
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(Commission File
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(IRS Employer
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of incorporation)
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Number)
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Identification No.)
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135 DURYEA ROAD, MELVILLE, NEW YORK
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11747
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code
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(631) 843-5500
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On May 4, 2010, Henry Schein, Inc. issued a press release reporting the financial results for the three months ended March 27, 2010. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 2.02 and the press release attached as Exhibit 99.1 are considered furnished to the Securities and Exchange Commission and are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibit 99.1 – Press Release dated May 4, 2010.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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HENRY SCHEIN, INC.
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By:
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/s/ Steven Paladino
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Steven Paladino
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Executive Vice President and
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Chief Financial Officer
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(principal financial and accounting
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officer)
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May 4, 2010
EXHIBIT INDEX
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Exhibit No.
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Description
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99.1
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Press Release dated May 4, 2010.
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FOR IMMEDIATE RELEASE
HENRY SCHEIN REPORTS RECORD FIRST QUARTER RESULTS
Net sales up 14.6% in local currencies
Company increases low end of 2010 guidance range
MELVILLE, N.Y. – May 4, 2010 – Henry Schein, Inc. (NASDAQ: HSIC), the largest provider of healthcare products and services to office-based practitioners, today reported record financial results for the quarter ended
March 27, 2010.
Net sales for the first quarter of 2010 were $1.8 billion, an increase of 18.5% compared with the first quarter of 2009. This consists of 14.6% growth in local currencies and 3.9% growth related to foreign currency exchange. Internal sales growth in local currencies was 3.2% (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the first quarter of 2010 was $60.9 million, or $0.66 per diluted share. These results include restructuring costs of $12.3 million (or $0.09 per diluted share) related to previously announced headcount reductions and facilities closings. Excluding restructuring costs, income from continuing operations attributable to Henry Schein, Inc. for the quarter was $69.2 million, or $0.75 per diluted share, an increase of 20.2% and 17.2%, respectively, compared with the first quarter of 2009 also excluding restructuring costs (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
“We are pleased to report internal growth in local currencies in each of our five businesses for the quarter, and we continue to see indications of positive market trends throughout our operations,” said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. “This performance combined with a continuing commitment to control expenses resulted in diluted EPS growth of 17%, excluding restructuring costs. In addition, because of these strong results and a favorable outlook we are increasing the low end of our 2010 EPS guidance range.”
North American Dental sales of $614.6 million increased 3.5%, consisting of 1.8% growth in local currencies and 1.7% growth related to foreign currency exchange. The 1.8% growth in local currencies included 2.0% growth in Dental consumable merchandise sales and 0.8% growth in Dental equipment sales and service revenues.
“Growth in Dental consumable merchandise sales compared with last year as well as the preceding quarter gives us further confidence that the market will continue to show gradual improvement for the rest of the year. In addition, we are pleased to report positive sales growth in Dental equipment for the first time in more than a year, which is another positive market indicator,” commented Mr. Bergman.
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North American Medical sales increased 4.7% to $284.6 million. “We are pleased with our continued sales growth in the medical arena,” said Mr. Bergman.
North American Veterinary sales increased 271.5% to $206.6 million, which included sales of Butler Schein Animal Health since January 1, 2010.
“Butler Schein Animal Health is the largest distributor to veterinary practices in North America, and we are pleased that the integration of that business is progressing according to plan,” commented Mr. Bergman.
International sales of $609.5 million increased 16.4%, consisting of 7.5% growth in local currencies and 8.9% growth related to foreign currency exchange.
“International growth reflects strong performance in the dental and veterinary businesses, as well as particular strength in France, Australia, Germany, Spain and Switzerland,” added Mr. Bergman. “With continuing sales growth in our International business combined with the effects of a restructuring completed in the first quarter of 2010, we look forward to further increasing our International operating margins.”
Technology and Value-Added Services sales of $45.0 million increased 11.5% during the quarter, consisting of 9.4% growth in local currencies and 2.1% growth related to foreign currency exchange.
“During the quarter we saw continued strong growth in our electronic services and software businesses,” explained Mr. Bergman.
Restructuring Costs
The Company completed a restructuring during the first quarter of 2010 to further reduce operating expenses, and recorded $12.3 million of costs pre-tax or $0.09 per diluted share. The restructuring included headcount reductions as well as facilities closings as part of the Company’s continuing efforts to expand operating margins.
2010 EPS Guidance
Henry Schein today increased the low end of the 2010 financial guidance range, as follows:
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·
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2010 diluted EPS attributable to Henry Schein, Inc. now is expected to be $3.44 to $3.56, compared with previous guidance of $3.40 to $3.56. Growth in diluted EPS for the second quarter of 2010 is expected to be in the mid-single digits compared with the second quarter of 2009 due to Butler Schein Animal Health integration expenses and other factors.
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·
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Guidance for 2010 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.
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·
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2010 guidance excludes the impact of restructuring costs, as described above.
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First Quarter Conference Call Webcast
The Company will hold a conference call to discuss first 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® company and a member of the NASDAQ 100® Index, is recognized for its excellent customer service and highly competitive prices. The Company's five businesses – North American Dental, North American Medical, North American Veterinary, 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.&
#160; 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 ar
e 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.
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CONTACTS: Investors: Steven Paladino
Executive Vice President and Chief Financial Officer
steven.paladino@henryschein.com
(631) 843-5500
Media: Susan Vassallo
Vice President, Corporate Communications
susan.vassallo@henryschein.com
(631) 843-5562
(TABLES TO FOLLOW)
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HENRY SCHEIN, INC.
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CONSOLIDATED STATEMENTS OF INCOME
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(in thousands, except per share data)
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(unaudited)
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Three Months Ended
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March 27,
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March 28,
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2010
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2009
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Net sales
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$ | 1,760,310 | $ | 1,485,388 | ||||
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Cost of sales
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1,247,277 | 1,047,025 | ||||||
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Gross profit
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513,033 | 438,363 | ||||||
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Operating expenses:
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Selling, general and administrative
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396,989 | 343,732 | ||||||
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Restructuring costs
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12,285 | 4,043 | ||||||
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Operating income
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103,759 | 90,588 | ||||||
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Other income (expense):
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Interest income
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3,388 | 2,801 | ||||||
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Interest expense
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(9,087 | ) | (6,752 | ) | ||||
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Other, net
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(115 | ) | 30 | |||||
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Income from continuing operations before taxes, equity in earnings
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of affiliates and noncontrolling interests
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97,945 | 86,667 | ||||||
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Income taxes
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(32,224 | ) | (28,849 | ) | ||||
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Equity in earnings of affiliates
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1,531 | 1,365 | ||||||
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Income from continuing operations
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67,252 | 59,183 | ||||||
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Income from discontinued operation, net of tax
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- | 117 | ||||||
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Net income
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67,252 | 59,300 | ||||||
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Less: Net income attributable to noncontrolling interests
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(6,352 | ) | (4,449 | ) | ||||
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Net income attributable to Henry Schein, Inc.
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$ | 60,900 | $ | 54,851 | ||||
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Amounts attributable to Henry Schein, Inc.:
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Income from continuing operations
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$ | 60,900 | $ | 54,774 | ||||
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Income from discontinued operation, net of tax
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- | 77 | ||||||
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Net income
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$ | 60,900 | $ | 54,851 | ||||
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Earnings per share attributable to Henry Schein, Inc.:
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From continuing operations:
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Basic
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$ | 0.68 | $ | 0.62 | ||||
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Diluted
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$ | 0.66 | $ | 0.61 | ||||
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From discontinued operation:
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Basic
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$ | 0.00 | $ | 0.00 | ||||
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Diluted
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$ | 0.00 | $ | 0.00 | ||||
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From net income:
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Basic
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$ | 0.68 | $ | 0.62 | ||||
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Diluted
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$ | 0.66 | $ | 0.61 | ||||
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Weighted-average common shares outstanding:
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Basic
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89,508 | 88,731 | ||||||
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Diluted
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92,721 | 89,589 | ||||||
Note: The above prior period amounts have been restated to reflect the effects of a discontinued operation.
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HENRY SCHEIN, INC.
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CONSOLIDATED BALANCE SHEETS
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(in thousands, except share and per share data)
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March 27,
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December 26,
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2010
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2009
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(unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 355,388 | $ | 471,154 | ||||
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Available-for-sale securities
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26,980 | - | ||||||
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Accounts receivable, net of reserves of $48,159 and $51,724
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803,044 | 725,397 | ||||||
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Inventories, net
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806,115 | 775,199 | ||||||
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Deferred income taxes
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44,445 | 48,001 | ||||||
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Prepaid expenses and other
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183,400 | 183,782 | ||||||
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Total current assets
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2,219,372 | 2,203,533 | ||||||
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Property and equipment, net
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249,720 | 259,576 | ||||||
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Goodwill
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1,258,722 | 986,395 | ||||||
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Other intangibles, net
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349,657 | 204,445 | ||||||
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Investments and other
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185,160 | 182,036 | ||||||
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Total assets
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$ | 4,262,631 | $ | 3,835,985 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$ | 483,299 | $ | 521,079 | ||||
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Bank credit lines
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9 | 932 | ||||||
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Current maturities of long-term debt
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25,630 | 23,560 | ||||||
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Accrued expenses:
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Payroll and related
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129,727 | 155,298 | ||||||
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Taxes
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97,379 | 86,034 | ||||||
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Other
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277,827 | 289,351 | ||||||
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Total current liabilities
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1,013,871 | 1,076,254 | ||||||
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Long-term debt
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522,882 | 243,373 | ||||||
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Deferred income taxes
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173,269 | 100,976 | ||||||
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Other liabilities
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74,504 | 75,304 | ||||||
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Total liabilities
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1,784,526 | 1,495,907 | ||||||
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Redeemable noncontrolling interests
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286,535 | 178,570 | ||||||
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Commitments and contingencies
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Stockholders' equity:
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Preferred stock, $.01 par value, 1,000,000 shares authorized,
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none outstanding
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- | - | ||||||
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Common stock, $.01 par value, 240,000,000 shares authorized,
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91,319,162 outstanding on March 27, 2010 and
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90,630,889 outstanding on December 26, 2009
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913 | 906 | ||||||
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Additional paid-in capital
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607,679 | 603,772 | ||||||
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Retained earnings
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1,553,507 | 1,492,607 | ||||||
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Accumulated other comprehensive income
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29,307 | 64,194 | ||||||
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Total Henry Schein, Inc. stockholders' equity
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2,191,406 | 2,161,479 | ||||||
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Noncontrolling interest
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164 | 29 | ||||||
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Total stockholders' equity
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2,191,570 | 2,161,508 | ||||||
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Total liabilities, redeemable noncontrolling interests and stockholders' equity
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$ | 4,262,631 | $ | 3,835,985 | ||||
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HENRY SCHEIN, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands)
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(unaudited)
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Three Months Ended
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March 27,
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March 28,
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2010
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2009
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Cash flows from operating activities:
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Net income
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$ | 67,252 | $ | 59,300 | ||||
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Adjustments to reconcile net income to net cash
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provided by (used in) operating activities:
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Depreciation and amortization
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24,572 | 19,921 | ||||||
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Amortization of bond discount
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1,548 | 1,464 | ||||||
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Stock-based compensation expense
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6,142 | 6,067 | ||||||
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Provision for losses on trade and other accounts receivable
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994 | 1,186 | ||||||
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Provision for (benefit from) deferred income taxes
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272 | (5,485 | ) | |||||
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Undistributed earnings of affiliates
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(1,531 | ) | (1,365 | ) | ||||
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Other
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1,361 | 1,616 | ||||||
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Changes in operating assets and liabilities, net of acquisitions:
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||||||||
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Accounts receivable
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(7,394 | ) | 43,397 | |||||
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Inventories
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14,482 | (21,039 | ) | |||||
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Other current assets
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7,730 | 12,669 | ||||||
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Accounts payable and accrued expenses
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(93,753 | ) | (144,859 | ) | ||||
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Net cash provided by (used in) operating activities
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21,675 | (27,128 | ) | |||||
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Cash flows from investing activities:
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Purchases of fixed assets
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(9,062 | ) | (12,866 | ) | ||||
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Payments for equity investment and business
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acquisitions, net of cash acquired
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(108,946 | ) | (13,743 | ) | ||||
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Purchases of available-for-sale securities
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(26,984 | ) | - | |||||
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Proceeds from sales of available-for-sale securities
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1,300 | 2,740 | ||||||
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Net proceeds from foreign exchange forward
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||||||||
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contract settlements
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- | 283 | ||||||
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Other
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(720 | ) | (4,294 | ) | ||||
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Net cash used in investing activities
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(144,412 | ) | (27,880 | ) | ||||
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Cash flows from financing activities:
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Repayments of bank borrowings
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(931 | ) | (3,189 | ) | ||||
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Principal payments for long-term debt
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(1,843 | ) | (1,712 | ) | ||||
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Proceeds from issuance of stock upon exercise of stock options
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15,280 | 377 | ||||||
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Excess tax benefits related to stock-based compensation
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4,522 | 180 | ||||||
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Acquisitions of noncontrolling interests in subsidiaries
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(10,000 | ) | - | |||||
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Other
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(1,388 | ) | (2,090 | ) | ||||
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Net cash provided by (used in) financing activities
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5,640 | (6,434 | ) | |||||
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Net change in cash and cash equivalents
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(117,097 | ) | (61,442 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents
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1,331 | 28 | ||||||
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Cash and cash equivalents, beginning of period
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471,154 | 369,570 | ||||||
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Cash and cash equivalents, end of period
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$ | 355,388 | $ | 308,156 | ||||
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
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Exhibit A
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Henry Schein, Inc.
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2010 First Quarter
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|||||||||||
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Sales Growth Rate Summary
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(unaudited)
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|||||||||||
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Q1 2010 over Q1 2009
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|||||||||||
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Consolidated
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Dental
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Medical
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Veterinary
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International
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Technology
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||||||
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Internal Sales Growth
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3.2%
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1.0%
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2.4%
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2.5%
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6.2%
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4.6%
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|||||
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Acquisitions
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11.4%
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0.8%
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2.3%
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269.0%
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1.3%
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4.8%
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|||||
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Local Currency Sales Growth
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14.6%
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1.8%
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4.7%
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271.5%
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7.5%
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9.4%
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|||||
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Foreign Currency Exchange
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3.9%
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1.7%
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0.0%
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0.0%
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8.9%
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2.1%
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|||||
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Total Sales Growth
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18.5%
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3.5%
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4.7%
|
271.5%
|
16.4%
|
11.5%
|
|||||
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Exhibit B
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|||||||||||
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Henry Schein, Inc.
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|||||||||||
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2010 First Quarter
|
|||||||||||
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Reconciliation of GAAP results of continuing operations to non-GAAP results of continuing operations
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|||||||||||
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(in thousands, except per share data)
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|||||||||||
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(unaudited)
|
|||||||||||
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First Quarter and YTD
|
|||||||||||
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%
|
|||||||||||
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2010
|
2009
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Growth
|
|||||||||
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From Continuing Operations
|
|||||||||||
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Income from Continuing Operations attributable to
|
|||||||||||
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Henry Schein, Inc.
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$ | 60,900 | $ | 54,774 | 11.2 | % | |||||
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Diluted EPS from Continuing Operations attributable
|
|||||||||||
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to Henry Schein, Inc.
|
0.66 | 0.61 | 8.2 | % | |||||||
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Non-GAAP Adjustments (after-tax)
|
|||||||||||
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Restructuring costs
|
$ | 8,260 | $ | 2,784 | |||||||
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Income from Continuing Operations attributable to
|
|||||||||||
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Henry Schein, Inc.
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$ | 8,260 | $ | 2,784 | |||||||
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Diluted EPS from Continuing Operations attributable
|
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to Henry Schein, Inc.
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0.09 | 0.03 | |||||||||
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Adjusted Results From Continuing Operations
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|||||||||||
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Income from Continuing Operations attributable to
|
|||||||||||
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Henry Schein, Inc.
|
$ | 69,160 | $ | 57,558 | 20.2 | % | |||||
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Diluted EPS from Continuing Operations attributable
|
|||||||||||
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to Henry Schein, Inc.
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0.75 | 0.64 | 17.2 | % | |||||||
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.
9
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