Henry Schein Reports Record Quarterly Results; Third Quarter EPS Increases 23% to $0.58, Net Sales Up 9.4%, Operating Cash Flow Reaches $50 Million
MELVILLE, N.Y.--(BUSINESS WIRE)--Nov. 6, 2001--
Company Updates 2001 EPS Guidance, Introduces 2002 EPS Guidance
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 2001.
For the three months ended September 30, 2001, the Company reported all-time record financial performance, including:
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Record quarterly sales of $659.8 million
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Record operating income of $41.9 million
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Record net income of $25.2 million
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Record diluted EPS of $0.58
Net sales for the third quarter of 2001 increased 9.4% to $659.8 million, from $603.3 million in the third quarter of last year. In local currencies, net sales increased 9.7%. Net income for the third quarter of 2001 was $25.2 million, or $0.58 per diluted share, compared with adjusted net income of $19.6 million, or $0.47 per diluted share, in the third quarter of 2000. Third quarter 2001 net income increased 28.6%, and earnings per diluted share were up 23.4%, both compared with the adjusted figures from the third quarter of 2000.
For the first nine months of 2001, net sales increased 7.8% to $1.86 billion, from $1.73 billion for the first nine months of 2000. In local currencies, nine-month net sales increased by approximately
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8.8%. Year-to-date net income was $60.2 million, or $1.39 per diluted share, compared with adjusted net income of $48.0 million, or $1.15 per diluted share, in the prior year. Nine-month 2001 net income increased 25.6%, and year-to-date earnings per diluted share increased
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20.9%, both compared with adjusted figures from the comparable prior-year period.
"We are extremely proud of our record setting third quarter financial performance. Net sales growth of nearly 10% in local currencies remains almost double ahead of what we believe to be the consolidated growth rate of the markets we serve, which continue to do well and remain largely resistant to periodic negative swings in overall economic conditions," said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. "We continue to see the benefits of the various cost-saving initiatives put in place last year. For the quarter, our operating margin improved by 70 basis points when compared with last year, and now stands at 6.4%. A growing top line, coupled with these operating efficiencies, has generated record high quarterly net income and earnings per diluted share."
Mr. Bergman continued, "Our operating cash flow continues to be excellent, reaching $50 million during the third quarter."
The Company reported third quarter Dental sales of $276.2 million, an increase of 4.5% compared with the comparable prior-year period. Dental merchandise sales increased 4.8% while Dental equipment sales and service revenues were up 3.0% for the third quarter of 2001, compared with the third quarter of 2000.
"We continue to build upon several recent initiatives to drive sales of dental products, including a gross profit-based field sales consultant compensation program," said Mr. Bergman. "Among additional growth initiatives, we expect to further leverage Henry Schein's presence on more than 39,000 dental practitioner desktops by cross-selling our other value-added products and services designed to help our customers operate a more efficient and profitable business. We are encouraged by our progress in this area, as evidenced by a 40% increase in e-claims revenue generated last quarter."
Led by sales to the Company's core physician office and alternate-care markets, Henry Schein's Medical Group continues to be a major force in the industry and posted sales of $260.0 million for the third quarter of 2001, an increase of 18.5% over the prior year's third quarter.
International sales for the third quarter of 2001 were $92.8 million, an increase of 3.8% in U.S. dollars and an increase of 5.2% in local currencies, compared with the third quarter of 2000. Veterinary sales declined 6.4% to $13.4 million for the same period. Sales of Technology and Value-Added Services were $17.4 million for the third quarter of 2001, an increase of 9.1% over last year.
Looking at the balance of 2001 and at 2002, Mr. Bergman commented, "We continue to be comfortable with fourth quarter 2001 EPS growth in the mid-teens. This growth is compared to last year's adjusted EPS which excludes $0.22 per diluted share related to restructuring costs (net of tax benefits) and one-time losses on divestitures. For 2002, we anticipate a full-year base growth rate in EPS of about 15%, plus approximately $0.17 per share due to accounting changes in the amortization of goodwill under SFAS 142, and $0.01-$0.02 accretion related to our recent acquisition of the full-service dental business of Zila, Inc."
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. 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, 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 44,000 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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
------------------------ --------------------------
Sept 29, Sept 23, Sept 29, Sept 23,
2001 2000 2001 2000
---------- ----------- ----------- -----------
(reclassified) (reclassified)
Net sales $ 659,774 $ 603,319 $ 1,859,954 $ 1,726,089
Cost of sales 480,918 441,368 1,354,849 1,256,207
---------- ----------- ------------ -----------
Gross profit 178,856 161,951 505,105 469,882
Operating expenses:
Selling, general and
administrative 136,981 127,620 400,375 380,507
Merger and
integration costs 0 0 0 585
Restructuring costs 0 5,387 0 5,387
---------- ----------- ------------ -----------
Operating income 41,875 28,944 104,730 83,403
Other income (expense):
Interest income 2,266 2,322 6,684 4,342
Interest expense (3,843) (4,841) (14,107) (15,540)
Other - net 87 108 384 (538)
---------- ----------- ------------ -----------
Income before taxes
on income, minority
interest and equity in
earnings (losses)
of affiliates 40,385 26,533 97,691 71,667
Taxes on income 14,942 9,623 36,146 26,175
Minority interest in
net income of
subsidiaries 322 338 1,647 1,375
Equity in earnings
(losses) of
affiliates 74 (334) 339 (100)
---------- ----------- ------------ -----------
Net income $ 25,195 $ 16,238 $ 60,237 $ 44,017
========== =========== ============ ===========
Adjusted net income:
Net income $ 25,195 $ 16,238 $ 60,237 $ 44,017
Adjustments:
Merger and
integration costs 0 0 0 585
Restructuring costs 0 5,387 0 5,387
Tax effect on
restructuring costs 0 (2,030) 0 (2,030)
---------- ----------- ------------ -----------
Adjusted net
income $ 25,195 $ 19,595 $ 60,237 $ 47,959
========== =========== ============ ===========
Adjusted net income
per common share:
Basic $ 0.59 $ 0.48 $ 1.42 $ 1.17
========== =========== ============ ===========
Diluted $ 0.58 $ 0.47 $ 1.39 $ 1.15
========== =========== ============ ===========
Weighted average shares:
Basic 42,488 41,251 42,276 41,062
========== =========== ============ ===========
Diluted 43,517 41,860 43,188 41,568
========== =========== ============ ===========
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Sept 29, December 30,
2001 2000
---------------- --------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 107,854 $ 58,362
Accounts receivable, less reserves
of $28,863 and $27,556, respectively 416,106 371,668
Inventories 248,956 276,473
Deferred income taxes 22,945 21,001
Prepaid expenses and other 45,917 60,900
---------------- --------------
Total current assets 841,778 788,404
Property and equipment, net of
accumulated depreciation and amortization
of $89,113 and $73,134, respectively 109,008 94,663
Goodwill and other intangibles, net of
accumulated amortization of
$53,216 and $44,419, respectively 276,189 292,018
Investments and other 54,461 55,983
--------------- --------------
$ 1,281,436 $ 1,231,068
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 200,243 $ 216,535
Bank credit lines 8,878 4,390
Accruals:
Salaries and related expenses 32,737 39,830
Merger, integration and restructuring costs 7,489 13,735
Accrued income taxes 23,731 1,720
Other 76,213 82,568
Current maturities of long-term debt 8,459 6,079
--------------- --------------
Total current liabilities 357,750 364,857
Long-term debt 250,651 266,224
Other liabilities 12,477 12,931
--------------- --------------
Total liabilities 620,878 644,012
--------------- --------------
Minority interest 6,161 7,996
--------------- --------------
Stockholders' equity:
Common stock, $.01 par value,
authorized 120,000,000; issued and outstanding
42,668,355 and 41,946,284, respectively 426 419
Additional paid-in capital 390,789 373,413
Retained earnings 285,266 225,029
Treasury stock, at cost, 62,479 shares (1,156) (1,156)
Accumulated comprehensive income (20,556) (18,179)
Deferred compensation (372) (466)
--------------- --------------
Total stockholders' equity 654,397 579,060
--------------- --------------
$ 1,281,436 $ 1,231,068
=============== ==============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
----------------------------
Sept 29, Sept 23,
2001 2000
------------ -----------
Cash flows from operating activities:
Net income $ 25,195 $ 16,238
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,193 8,052
Provision for losses and allowances
on trade and other receivables 3,971 2,421
Other 5,492 1,464
Changes in assets and liabilities
(net of purchase acquisitions):
Increase in accounts receivable (47,067) (35,362)
Decrease in inventories 11,691 10,576
Decrease (increase) in other
current assets 927 (7,406)
Increase in accounts payable
and accruals 40,442 23,777
------------ -----------
Net cash provided by operating activities 49,844 19,760
------------ -----------
Cash flows from investing activities:
Capital expenditures (17,024) (7,943)
Business acquisitions, net of cash acquired (336) (5,667)
Other (1,556) (3,525)
------------ -----------
Net cash used in investing activities (18,916) (17,135)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 10,166 0
Principal payments on long-term debt (8,083) (1,147)
Proceeds from issuance of stock upon
exercise of stock options by employees 1,993 294
Payments on borrowings from banks (296) (12,521)
Other (221) 89
------------ -----------
Net cash provided by
(used in) financing activities 3,559 (13,285)
------------ -----------
Net increase (decrease) in
cash and cash equivalents 34,487 (10,660)
Effect of exchange rate changes on cash (2,480) 2,002
Cash and cash equivalents,
beginning of period 75,847 45,900
------------ -----------
Cash and cash equivalents, end of period $ 107,854 $ 37,242
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--30--sds/ny*
| CONTACT: | FOR: Henry Schein, Inc. |
|---|---|
| Steven Paladino, 631/843-5500 | |
| Executive Vice President and Chief Financial Officer | |
| or | |
| Susan Vassallo, 631/843-5562 | |
| Manager, Investor and Public Relations | |
| svassa@henryschein.com | |