Henry Schein Reports 18% Growth in Third Quarter Earnings; Net Sales Increase 4%, Dental Equipment Sales Up 5%; Year-To-Date Cash Flow From Operations Improves 95% to $85 Million
MELVILLE, N.Y.--(BUSINESS WIRE)--Oct. 31, 2000--Henry Schein, Inc. (Nasdaq: HSIC), the largest provider of healthcare supplies to office-based practitioners in the combined North American and European markets, today announced financial results for the third quarter of 2000.
For the three months ended September 23, 2000, net sales increased more than 4% to $603 million, from $579 million in the third quarter of last year. Excluding one-time costs of $5.4 million ($3.4 million after tax) related to the Company's recently announced restructuring plans, adjusted net income rose 18% to $19.6 million, or $0.47 per diluted share, compared with adjusted net income of $16.6 million, or $0.40 per diluted share, in the third quarter of 1999.
"We are very pleased to report strong earnings growth, which was primarily driven by a sales increase of 6.4% in local currencies, a 60 basis point improvement in gross margin, and significantly lower interest expense due to a reduction in our debt," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein.
For the first nine months of 2000, the Company reported net sales increased 3% to $1.7 billion, compared with the first nine months of 1999. Year-to-date adjusted net income increased 8% to $48.0 million, or $1.15 per diluted share, compared with $44.3 million, or $1.07 per diluted share, in the prior year. Year-to-date cash flow from operations increased 95% to $85.1 million, compared with $43.6 million for the same period last year.
"We continue to see positive cash flow from operations, which has enabled us to further strengthen our balance sheet by paying down debt," said Mr. Bergman. "In fact, for the first nine months of 2000, our free cash flow was used to reduce debt by $57 million."
The Company reported third quarter Dental sales of $264.9 million, which is 2.2% above the same period in the prior year. Highlighting this category was the Company's Dental equipment sales and service business, which reported a 5.1% increase in net sales over last year's third quarter. This represents the first quarter of growth in the equipment business following four consecutive quarters of declining or flat results. Dental merchandise sales were up 1.6% for the third quarter of 2000, compared with the third quarter of 1999.
Henry Schein's Medical and Veterinary businesses sustained above-market growth rates in the third quarter of 2000, rising 12% and 9%, respectively, compared to the third quarter of 1999. Medical sales to the Company's core physician office and alternate care markets were particularly strong.
International sales for the third quarter of 2000 were approximately 7% below the third quarter of 1999, while in local currencies sales grew by 6%. Technology and Value-Added Services sales in the third quarter of 2000 were essentially flat compared to the same period in the prior year, when sales were exceptionally strong due to Y2K conversions.
The Company also reported that its recently announced restructuring programs are proceeding as planned. As previously announced, total pre-tax cost savings from both of these initiatives are estimated at $20 million annually ($12 million after taxes), or $0.29 per diluted share. As expected, cost savings from these programs in the third quarter of 2000 were minimal, but will accelerate in the fourth quarter of this year with the full impact of cost savings expected in 2001.
The Company confirmed that it expects to record a one-time restructuring charge of approximately $14 million ($8.4 million after tax) during the second half of 2000, as it announced last quarter. For the third quarter of 2000, the Company reported $5.4 million ($3.4 million after tax) in one-time costs related to the restructuring initiatives. Live Webcast
The Company will hold a conference call to discuss these results today, beginning at 10:00 a.m. Eastern Standard Time. Individual investors are invited to listen to the conference call over the Internet through Henry Schein's Web site at www.henryschein.com. To listen to the live call, please navigate to the Corporate Information area of the site at least 15 minutes prior to the start of the call to download and install any necessary audio software. 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 70,000 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 35,000 practices; and ArubA(R), Henry Schein's electronic catalog and ordering system. Headquartered in Melville, New York, Henry Schein employs over 6,000 people in 15 countries. The Company's 1999 sales reached a record $2.3 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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------
(in thousands, except per share data)
--------------------------------------
(unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 23, Sept. 25, Sept. 23, Sept. 25,
2000 1999 2000 1999
------------- ------------ ------------ ------------
Net sales $ 603,037 $ 578,794 $ 1,725,021 $ 1,674,439
Cost of sales 417,927 404,830 1,187,976 1,163,008
------------- ------------ ------------ -------------
Gross profit 185,110 173,964 537,045 511,431
Operating expenses:
Selling, general
and
administrative 150,779 141,452 447,670 423,222
Merger and
integration costs 0 5,993 585 13,467
Restructuring costs 5,387 0 5,387 0
------------- ------------ ------------ -------------
Operating
income 28,944 26,519 83,403 74,742
Other income
(expense):
Interest income 2,322 1,386 4,342 5,207
Interest expense (4,841) (5,526) (15,540) (16,566)
Other - net 108 207 (538) 315
------------- ------------ ------------ -------------
Income before
taxes on income,
minority interest
and equity in
losses of
affiliates 26,533 22,586 71,667 63,698
Taxes on income 9,623 10,114 26,175 26,199
Minority interest in
net income of
subsidiaries 338 353 1,375 1,272
Equity in losses
of affiliates (334) (596) (100) (1,454)
------------- ------------ ------------ -------------
Net income $ 16,238 $ 11,523 $ 44,017 $ 34,773
============= ============ ============ =============
Adjusted net income:
Net income $ 16,238 $ 11,523 $ 44,017 $ 34,773
Adjustments:
Merger and
integration
costs 0 5,993 585 13,467
Tax effect on
merger and
integration
costs 0 (961) 0 (3,983)
Restructuring
costs 5,387 0 5,387 0
Tax effect on
restructuring
costs (2,030) 0 (2,030) 0
------------- ------------ ------------ -------------
Adjusted net
income $ 19,595 $ 16,555 $ 47,959 $ 44,257
============= ============ ============ =============
Adjusted net
income per
common share:
Basic $ 0.48 $ 0.41 $ 1.17 $ 1.09
============= ============ ============ =============
Diluted $ 0.47 $ 0.40 $ 1.15 $ 1.07
============= ============ ============ =============
Weighted average
shares:
Basic 41,251 40,608 41,062 40,546
============= ============ ============ =============
Diluted 41,860 41,104 41,568 41,437
============= ============ ============ =============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 23, Dec. 25,
2000 1999
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 37,242 $ 26,019
Accounts receivable, less reserves of
$24,174 and $20,391, respectively 386,672 388,063
Inventories 260,194 285,590
Deferred income taxes 19,982 15,520
Prepaid expenses and other 62,143 63,617
------------ ----------
Total current assets 766,233 778,809
Property and equipment, net of accumulated
depreciation and amortization of $70,084
and $60,702, respectively 89,111 86,627
Goodwill and other intangibles, net of
accumulated amortization of $40,936 and
$31,356, respectively 280,293 295,113
Investments and other 48,669 43,553
------------ ----------
$ 1,184,306 $ 1,204,102
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 198,679 $ 198,983
Bank credit lines 29,359 41,527
Accruals:
Salaries and related expenses 33,665 31,188
Merger, integration and restructuring
costs 8,805 10,093
Other 66,655 64,710
Current maturities of long-term debt 4,246 3,879
----------- ----------
Total current liabilities 341,409 350,380
Long-term debt 272,176 318,218
Other liabilities 11,207 9,782
------------ ----------
Total liabilities 624,792 678,380
------------ ----------
Minority interest 7,297 7,855
------------ ----------
Stockholders' equity:
Common stock, $.01 par value, authorized
120,000,000;
issued and outstanding 41,447,857 414 407
and 40,768,306, respectively
Additional paid-in capital 365,132 361,757
Retained earnings 212,297 167,809
Treasury stock, at cost (62,479 shares) (1,156) (1,156)
Accumulated comprehensive income (23,973) (10,359)
Deferred compensation (497) (591)
------------ ----------
Total stockholders' equity 552,217 517,867
------------ ----------
$ 1,184,306 $ 1,204,102
============ =========
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| CONTACT: | Henry Schein, Inc. |
|---|---|
| Steven Paladino | |
| Executive Vice President and | |
| Chief Financial Officer | |
| 631/843-5500 | |
| or | |
| Susan Vassallo | |
| Manager, Investor and | |
| Public Relations | |
| 631/843-5562 | |
| svassa@henryschein.com | |