Henry Schein Reports Record Second Quarter EPS of $0.63; Net Income up 23.5%, Diluted EPS up 21.2%, Both On a Comparable Basis, On 10.7% Sales Growth
MELVILLE, N.Y., Aug 6, 2002 (BUSINESS WIRE) -- Henry Schein, Inc. (Nasdaq NM: HSIC), the largest provider of healthcare products and services to office-based practitioners in the combined North American and European markets, today reported financial results for the three months ended June 29, 2002.
Second quarter 2002 financial highlights include:
- Dental net sales up 9.3% over the prior year
- Medical net sales to physician offices and alternate care sites up 15.4% over the prior year
- European dental net sales up 16.5% over the prior year or 12.7% in local currencies
- Operating cash flow of $52.2 million, up 26.1% over the prior year
- Operating margin expansion of 70 basis points on a comparable basis
Net sales for the second quarter of 2002 were $671.4 million, an increase of 10.7% from the second quarter of 2001. Excluding the impact of foreign exchange, second quarter 2002 net sales were up 10.1%. Net income for the second quarter of 2002 of $28.1 million represents a 34.2% increase over the prior year quarter or a 23.5% increase excluding goodwill amortization net of taxes in 2001 in compliance with the Statement of Financial Accounting Standard 142. Earnings per diluted share were $0.63 in the second quarter of 2002, up 31.3% compared with the prior year second quarter or up 21.2% excluding goodwill amortization net of taxes.
For the first half of 2002, net sales were $1.32 billion, an increase of 9.9% from the first half of 2001. Excluding the impact of foreign exchange, first half 2002 net sales were up 9.9%, as well. Year-to-date 2002 net income of $47.8 million represents a 36.4% increase over the prior year or a 23.5% increase excluding goodwill amortization net of taxes. Earnings per diluted share for the first six months of 2002 were $1.07, up 32.1% compared with the prior-year period or up 18.9% excluding goodwill amortization net of taxes.
"Our financial performance for the first half of 2002 has been excellent, with consolidated sales growth at approximately twice the rate of growth for the markets we serve. We are particularly pleased with the strong gains posted in the first half by our Dental Group, where dental merchandise sales were up 9.0% and dental equipment sales were up 12.0% over the prior year, " said Stanley M. Bergman, Chairman, Chief Executive Officer and President of Henry Schein.
"Among the highlights of the second quarter was the opening of our new 135,000-square-foot Southeast Distribution Center in Jacksonville, Florida, which began shipping orders on July 1st. This new, state-of-the-art facility will greatly enhance the reliable, dependable service we offer, with service to approximately 62,000 Southeast customers improving from two-day to next-day delivery. This accomplishment is due to the facility's strategic location and operating efficiency," added Mr. Bergman. "Our next-day delivery rate on more than 26,000 SKU's for all our dental, dental laboratory, medical and veterinary customers in the Southeast region of the United States is expected to increase to more than 90%, up from 26% currently. The importance of this new facility is clear, in that the Southeast is among the largest growth areas in the U.S., and represents approximately 15% of our current domestic volume."
The Company reported second quarter 2002 Dental net sales of $306.3 million, an increase of 9.3% compared with the second quarter of 2001 or an increase of 9.4% in local currencies. Dental merchandise net sales increased 9.6% (9.7% in local currencies), and Dental equipment sales and service net revenues increased 8.0% (8.0% in local currencies).
"In May, we introduced a new program intended to further increase our sales to current Dental customers, and gain additional Dental customers. This program, called MarketOne, became effective on July 1st," stated Mr. Bergman. "In summary, MarketOne is designed to provide tools and incentives for Sullivan-Schein Dental's field sales consultants to sell Dentrix software products to their more than 75,000 customers. This program also enables Dentrix technology sales representatives to sell other high-technology Henry Schein products to Dentrix customers, and facilitates additional consumable merchandise sales to this customer base, as well.
"This new program of leveraging our software, consumable merchandise, and equipment sales and service offerings represents a powerful sales strategy to increase our penetration of current customers as well as reach dentists who currently are not Henry Schein customers. We recently held an extremely successful Dental national sales meeting," continued Mr. Bergman, "and the MarketOne program was one of the major focuses of the event, which was attended by more than 600 dental field sales consultants."
Henry Schein's Medical Group, which serves primarily the physician office and alternate care markets, reported second quarter 2002 net sales of $242.7 million, an increase of 12.5% compared with the Group's net sales in the prior-year second quarter. Sales to the Medical Group's core physician and alternate care business during the second quarter of 2002 increased 15.4% compared with the second quarter of 2001.
"During June we held our annual Medical national sales meeting. The meeting was attended by more than 400 Henry Schein Medical sales representatives including approximately 250 field sales consultants representing the Eastern and Midwestern segments of the U.S. as well as Texas and California", said Mr. Bergman. "Our major vendor partners were also in attendance, providing valuable product information and education to enable our sales consultants to more effectively serve their customers. Of course, a major theme of the event was to celebrate the success of our Medical Group, which has enjoyed sales growth far in excess of market growth over an extended period."
International net sales for the second quarter of 2002 were $106.8 million, an increase of 11.5% in U.S. dollars and an increase of 7.5% in local currencies, compared with the second quarter of 2001. European dental sales, which account for more than 60% of International sales, continued to gain market share and increased by 16.5% in U.S. dollars or by 12.7% in local currencies.
Technology and Value-Added Services net sales were $15.7 million for the second quarter of 2002, an increase of 7.1% compared with the second quarter of 2001. Technology net sales, comprised of software, electronic claims processing and related items and representing the vast majority of the Group's sales, were up 16.2% compared with the prior year.
Commenting on the outlook for the remainder of 2002, based on the strength of second quarter financial results the Company now expects full-year 2002 earnings per diluted share to approximate $2.53-$2.57.
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 6,700 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)
Three Months Ended Six Months Ended
------------------ -----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------- ------- ------- -------
Net sales $ 671,432 $ 606,285 $1,318,525 $1,200,180
Cost of sales 479,036 439,393 947,739 873,931
------- ------- ------- -------
Gross profit 192,396 166,892 370,786 326,249
Operating expenses:
Selling, general and
administrative 145,407 131,620 288,599 263,394
------- ------- ------- -------
Operating income 46,989 35,272 82,187 62,855
Other income (expense):
Interest income 2,481 3,177 4,920 4,418
Interest expense (4,367) (4,896) (9,195) (10,264)
Other - net 706 651 140 297
----- ----- ----- ------
Income before taxes on income,
minority interest and equity
in earnings of affiliates 45,809 34,204 78,052 57,306
Taxes on income 16,996 12,656 29,060 21,204
Minority interest in net
income of subsidiaries 932 794 1,501 1,325
Equity in earnings of affiliates 185 156 305 265
------ ------ ------ ------
Net income $ 28,066 $ 20,910 $ 47,796 $ 35,042
====== ====== ====== ======
Net income per common share:
Basic $ 0.65 $ 0.49 $ 1.11 $ 0.83
==== ==== ==== ====
Diluted $ 0.63 $ 0.48 $ 1.07 $ 0.81
==== ==== ==== ====
Weighted average common
shares outstanding:
Basic 43,389 42,363 43,090 42,168
====== ====== ====== ======
Diluted 44,747 43,543 44,559 43,125
====== ====== ====== ======
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 29, December 29,
2002 2001
--------- ---------
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 132,508 $ 193,367
Marketable securities 14,640 0
Accounts receivable, less reserves
of $33,147 and $31,929, respectively 362,744 363,700
Inventories 314,512 291,231
Deferred income taxes 26,227 25,751
Prepaid expenses and other 59,518 52,922
------- -------
Total current assets 910,149 926,971
Property and equipment, net of
accumulated depreciation and
amortization of $94,739 and $90,823,
respectively 135,409 117,980
Goodwill, net 295,319 279,981
Other intangibles, net of accumulated
amortization of $3,881 and $3,348,
respectively 8,834 8,023
Investments and other 60,446 52,473
--------- ---------
$ 1,410,157 $ 1,385,428
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 204,959 $ 263,190
Bank credit lines 3,914 4,025
Accruals:
Salaries and related expenses 42,155 41,602
Merger and integration, and
restructuring costs 4,706 5,867
Acquisition earnout payments 0 26,800
Other 104,446 80,355
Current maturities of long-term debt 2,548 15,223
------- -------
Total current liabilities 362,728 437,062
Long-term debt 242,990 242,169
Other liabilities 19,622 18,954
------- -------
Total liabilities 625,340 698,185
------- -------
Minority interest 7,882 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:
43,773,451 and 42,745,204, respectively 437 427
Additional paid-in capital 428,218 393,047
Retained earnings 360,198 312,402
Treasury stock, at cost, 62,479 shares (1,156) (1,156)
Accumulated comprehensive loss (10,483) (23,922)
Deferred compensation (279) (341)
--------- ---------
Total stockholders' equity 776,935 680,457
--------- ---------
$1,410,157 $ 1,385,428
========= =========
HENRY SCHEIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
------------------ -----------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------- ------- ------- -------
Cash flows from operating
activities:
Net income $ 28,066 $ 20,910 $ 47,796 $ 35,042
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 7,211 7,590 13,009 17,056
Other 2,002 157 1,999 512
Changes in assets and
liabilities (net of
purchase acquisitions):
(Increase) decrease in
accounts receivable (542) (9,117) 4,071 (375)
(Increase) decrease in
inventories (13,964) 13,363 (17,760) 13,032
(Increase) decrease in
other current assets (4,512) 6,584 (4,707) 13,774
Increase (decrease) in
accounts payable and
accruals 33,906 1,883 (31,027) (49,762)
------ ------ ------ ------
Net cash provided by operating
activities 52,167 41,370 13,381 29,279
------ ------ ------ ------
Cash flows from investing
activities:
Capital expenditures (10,530) (6,829) (28,120) (12,986)
Business acquisitions, net
of cash acquired (6,737) 0 (34,887) 0
Purchase of marketable
securities with maturities
of more than three months (10,184) 0 (20,639) 0
Other (272) (9) (574) (1,031)
------ ------ ------ ------
Net cash used in investing
activities (27,723) (6,838) (84,220) (14,017)
------ ------ ------ ------
Cash flows from financing
activities:
Principal payments on
long-term debt (1,591) (2,001) (13,604) (3,889)
Proceeds from issuance
of stock upon exercise of
stock options by employees 19,307 3,539 26,490 10,381
Proceeds from borrowings
from banks 0 1,337 481 5,340
Payments on borrowings
from banks (522) 0 (916) (10,868)
Other (3) 158 (426) (175)
------ ------ ------ ------
Net cash provided by
financing activities 17,191 3,033 12,025 789
------ ------ ------ ------
Net increase (decrease) in
cash and cash equivalents 41,635 37,565 (58,814) 16,051
Effect of exchange rate
changes on cash (2,548) 170 (2,045) 1,434
Cash and cash equivalents,
beginning of period 93,421 38,112 193,367 58,362
------ ------ ------- ------
Cash and cash equivalents,
end of period $ 132,508 $ 75,847 $ 132,508 $ 75,847
========= ======== ========= ========
CONTACT:Henry Schein, Inc.
Steven Paladino, 631/843-5500
or
Susan Vassallo
631/843-5562
svassa@henryschein.com
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