Henry Schein Reports Record First Quarter EPS of $0.45 and Net Sales of $647.1 Million; Dental Net Sales Increase 10% Over Prior Year
As previously announced, beginning in 2002 and in compliance with Statement of Financial Accounting Standard 142, the Company is not amortizing goodwill. Prior-year comparisons adjusted to exclude the favorable impact of this change are referred to as "excluding goodwill amortization."
First quarter 2002 financial highlights include:
-- Net sales of $647.1 million, up 9.0% over the prior year or
9.6% in local currencies
-- Dental net sales of $295.3 million, up 9.7% over the prior
year or 10.0% in local currencies
-- Medical net sales to physicians and alternate care sites up
15.3% over the prior year
-- European dental net sales up by 11.6% over the prior year in
local currencies
-- Operating income of $35.2 million, up 15.5% over the prior
year excluding goodwill amortization
-- Net income of $19.7 million, up 23.6% over the prior year
excluding goodwill amortization
-- Diluted EPS of $0.45, up 21.6% over the prior year excluding
goodwill amortization
Net sales for the first quarter of 2002 increased 9.0% to $647.1 million, from
$593.9 million in the first quarter of 2001. Excluding the impact of foreign
exchange, first quarter 2002 net sales were up 9.6%. Net income for the first
quarter of 2002 of $19.7 million represents a 39.6% increase over the prior year
quarter, or a 23.6% increase excluding goodwill amortization net of taxes.
Earnings per diluted share were $0.45 in the first quarter of 2002, up 36.4%
compared with the prior year first quarter or up 21.6% excluding goodwill
amortization net of taxes.
"Among many financial highlights for the quarter is the performance of our Dental Group, which posted a 10% increase in net sales over the prior year, " said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein. Mr. Bergman noted that recent Dental Group financial results are directly attributable to several factors, including:
-- Stabilization of the Company's field sales force, with
voluntary departures for reasons other than retirement now at
insignificant levels
-- Success in adding high-quality new field sales consultants,
with a net increase of more than 60 sales professionals
joining the Company since January 2001 including many seasoned
dental sales consultants
-- An expanded and strengthened field sales management team and
an ongoing commitment to field sales consultant training
-- The new, innovative Privileges(TM) customer loyalty program,
designed to attract, retain and reward dental customers for
life
The Company reported first quarter 2002 Dental net sales of $295.3 million, an
increase of 9.7% compared with the first quarter of 2001 or an increase of 10.0%
in local currencies. Dental merchandise net sales increased 8.3%, and Dental
equipment sales and service net revenues increased 16.6%. Beginning in 2002, the
Company is including certain dental digital camera, x-ray and office supply
revenues in the Dental Group's performance, which previously had been reported
in Technology and Value-Added Services. This change was made in both current and
prior-year periods, and is designed to more accurately represent the Company's
consumable and equipment sales to this customer group. The reclassification of
sales had no meaningful impact on the year-over-year Dental growth rate.
"I am particularly pleased with our success in stabilizing and expanding our Dental field sales force," added Mr. Bergman. "For Dental sales professionals, we believe that Henry Schein is the most attractive alternative in the industry. Our period of integration is behind us, and our strategy of leveraging our field sales presence, equipment sales and service capabilities, industry leading practice management software systems, and unmatched array of products and value - added services is in full swing. Supported by our world class marketing programs and distribution network, this synergistic approach to the customer is the industry standard."
Henry Schein's Medical Group, which serves primarily the physician office and alternate care markets, and now includes sales previously reported as Veterinary net sales, reported first quarter 2002 net sales of $231.4 million, an increase of 10.9% compared with combined Medical and Veterinary net sales in the prior-year first quarter. Sales to the Medical Group's core physician and alternate care business during the first quarter of 2002 increased 15.3%, and sales to the Group's Veterinary customers increased 7.8%.
"Our Medical Group has a long history of above-market growth, and we are delighted with our continued gains in market share. Adding Veterinary sales to the Medical Group is a logical step, as our Medical and Veterinary businesses share common management and operational structures," added Mr. Bergman.
International net sales for the first quarter of 2002 were $105.8 million, an increase of 3.0% in U.S. dollars and an increase of 6.2% in local currencies, compared with the first quarter of 2001. European dental sales, which account for more than 60% of International sales, increased by 11.6% in local currencies, double the overall growth rate in that market.
"During 2001 we committed considerable executive resources to our European operations. The opportunities in Western Europe are similar to those we have capitalized on in the U.S., and the ease of conducting business in multiple European nations has increased considerably since the introduction of the Euro. We are very optimistic about future growth in our International business," commented Mr. Bergman.
Technology and Value-Added Services net sales were $14.6 million for the first quarter of 2002, an increase of 9.5% over last year, excluding revenues now included in Dental net sales for both periods as described above. Reclassified 2001 sales for all four Groups is attached.
"At the end of the quarter, we opened our new 290,000-square-foot distribution facility in Indianapolis, which replaces our previous facilities in that location with state-of-the-art technology and enhanced efficiency. Our new Southeast distribution center in Jacksonville, Florida is set to begin operations this summer, significantly improving our service levels in that key area of the country," noted Mr. Bergman. "Our commitment to helping our customers build profitable businesses through exceptional service and operating efficiencies remains the cornerstone of Henry Schein."
Commenting on the outlook for the remainder of 2002, based on the strength of first quarter financial results the Company now expects full-year 2002 earnings per diluted share to be $2.49-$2.53.
Live Webcast
The 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 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 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 2001 sales reached a record $2.6 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 INCOME
(in thousands, except per share data)
(unaudited)
Quarter Ended
----------------------------------
March 30, March 31,
2002 2001
---------------- ----------------
Net sales $ 647,093 $ 593,895
Cost of sales 468,703 434,538
---------------- ----------------
Gross profit 178,390 159,357
Operating expenses:
Selling, general and
administrative 143,192 131,774
---------------- ----------------
Operating income 35,198 27,583
Other income (expense):
Interest income 2,439 1,241
Interest expense (4,828) (5,368)
Other - net (566) (354)
---------------- ----------------
Income before taxes
on income, minority
interest and equity in
earnings of affiliates 32,243 23,102
Taxes on income 12,064 8,548
Minority interest in net
income of subsidiaries 569 531
Equity in earnings
of affiliates 120 109
---------------- ----------------
Net income $ 19,730 $ 14,132
================ ================
Net income per common share:
Basic $ 0.46 $ 0.34
================ ================
Diluted $ 0.45 $ 0.33
================ ================
Weighted average common
shares outstanding:
Basic 42,791 41,975
================ ================
Diluted 44,069 43,146
================ ================
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 30, December 29,
2002 2001
------------- ------------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 93,421 $ 193,367
Accounts receivable, less
reserves of $33,163 and
$31,929, respectively 356,453 363,700
Inventories 293,764 291,231
Deferred income taxes 26,626 25,751
Prepaid expenses and other 57,145 52,922
-------------- -------------
Total current assets 827,409 926,971
Property and equipment, net of
accumulated depreciation
and amortization of $93,354
and $90,823, respectively 129,498 117,980
Goodwill, net 284,844 279,981
Other intangibles, net
of accumulated amortization
of $3,513 and $3,348, respectively 8,262 8,023
Investments and other 59,506 52,473
-------------- -------------
$ 1,309,519 $ 1,385,428
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 205,717 $ 263,190
Bank credit lines 4,031 4,025
Accruals:
Salaries and related expenses 32,353 41,602
Merger and integration,
and restructuring costs 5,067 5,867
Acquisition earnout payments 4,680 26,800
Other 79,353 80,355
Current maturities of long-term debt 3,212 15,223
-------------- -------------
Total current liabilities 334,413 437,062
Long-term debt 241,968 242,169
Other liabilities 18,174 18,954
-------------- -------------
Total liabilities 594,555 698,185
-------------- -------------
Minority interest 7,539 6,786
-------------- -------------
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: 43,020,590 and
42,745,204, respectively 430 427
Additional paid-in capital 401,629 393,047
Retained earnings 332,132 312,402
Treasury stock, at cost,
62,479 shares (1,156) (1,156)
Accumulated comprehensive loss (25,300) (23,922)
Deferred compensation (310) (341)
-------------- -------------
Total stockholders' equity 707,425 680,457
-------------- -------------
$ 1,309,519 $ 1,385,428
============== =============
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Quarter Ended
---------------------------
March 30, March 31,
2002 2001
------------ -------------
Cash flows from operating activities:
Net income $ 19,730 $ 14,132
Adjustments to reconcile
net income to net
cash used in operating activities:
Depreciation and amortization 5,798 9,466
Provision for allowances
on trade receivables 1,234 550
Other (1,237) (195)
Changes in assets and liabilities
(net of purchase acquisitions):
Decrease in accounts receivable 4,613 8,742
Increase in inventories (3,796) (331)
(Increase) decrease in
other current assets (195) 7,190
Decrease in accounts
payable and accruals (64,933) (51,645)
------------ ------------
Net cash used in operating activities (38,786) (12,091)
------------ ------------
Cash flows from investing activities:
Capital expenditures (17,590) (6,157)
Business acquisitions,
net of cash acquired (28,150) 0
Purchase of marketable
securities with maturities
of more than three months (10,455) 0
Other (302) (1,022)
------------ ------------
Net cash used in investing activities (56,497) (7,179)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (12,013) (1,888)
Proceeds from issuance
of stock upon exercise
of stock options by employees 7,183 6,842
Proceeds from borrowings
from banks 481 4,798
Payments on borrowings
from banks (394) (11,663)
Other (423) (333)
------------ ------------
Net cash used in financing activities (5,166) (2,244)
------------ ------------
Net decrease in cash
and cash equivalents (100,449) (21,514)
Effect of exchange
rate changes on cash 503 1,264
Cash and cash equivalents,
beginning of period 193,367 58,362
------------ ------------
Cash and cash equivalents,
end of period $ 93,421 $ 38,112
============ ============
HENRY SCHEIN, INC. AND SUBSIDIARIES
RECLASSIFIED 2001 NET SALES BY QUARTER
(in thousands)
(unaudited)
Q1 Q2 Q3 Q4 Total
2001 2001 2001 2001 2001
-------- --------- --------- ---------- -----------
Dental $269,186 $280,146 $279,577 $292,485 $1,121,394
Medical 208,674 215,761 273,434 284,700 982,569
International 102,744 95,729 92,811 106,787 398,071
Technology 13,291 14,649 13,952 14,317 56,209
--------- --------- --------- --------- -----------
Total $593,895 $606,285 $659,774 $698,289 $2,558,243
========= ========= ========= ========= ===========
CONTACT: Henry Schein, Inc., Melville
Steven Paladino, 631/843-5500
or Susan Vassallo, 631/843-5562
svassa@henryschein.com