Henry Schein Reports Record Second Quarter Results
Net sales of $1.8 billion, diluted EPS up 11% to $0.90
Company increases low end of annual guidance
MELVILLE, N.Y., Aug 02, 2010 /PRNewswire via COMTEX/ --
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 June 26, 2010.
Net sales for the second quarter of 2010 were $1.8 billion, an increase of 15.1% compared with the second quarter of 2009. This consists of 15.6% growth in local currencies and a decline of 0.5% related to foreign currency exchange. Internal sales growth in local currencies was 2.1% (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the second quarter of 2010 was $84.0 million or $0.90 per diluted share, an increase of 14.6% and 11.1%, respectively, compared with the second quarter of 2009.
"We are reporting strong top-line growth in local currencies for the quarter and we continue to see indications of positive market trends throughout our global business," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "We also are pleased to report that diluted EPS for the first half of 2010 is up 13.8% compared with the first half of 2009, excluding restructuring costs from both periods."
North American Dental sales of $677.6 million increased 8.9%, consisting of 7.5% growth in local currencies and 1.4% growth related to foreign currency exchange. The 7.5% growth in local currencies included 7.1% growth in Dental consumable merchandise sales and 8.6% growth in Dental equipment sales and service revenues.
"Continued internal Dental consumable merchandise sales growth in local currencies affirms our confidence that the market will show gradual improvement for the rest of the year. Strong internal growth in Dental equipment sales reflects higher demand for basic and for high-tech equipment and is another positive market indicator," commented Mr. Bergman.
North American Medical sales declined 0.4% to $286.3 million. "Results for the second quarter of 2010 were negatively impacted by reduced sales of products related to the H1N1 virus, which were significant in the prior-year quarter," remarked Mr. Bergman.
North American Animal Health sales increased 269.7% to $234.7 million, which included sales of Butler Schein Animal Health. "Integration of the Butler Schein Animal Health business continues to progress according to plan and is expected to be completed during the third quarter," commented Mr. Bergman.
International sales of $602.4 million increased 1.8%, consisting of 4.7% growth in local currencies and a decline of 2.9% related to foreign currency exchange. "International results for the second quarter of 2009 were positively impacted, particularly in Germany, by the timing of the biennial IDS trade show in Europe, resulting in a difficult comparison for Q2 2010. Our International results for the second quarter of 2010 reflect continued growth in the Dental and Animal Health businesses, with particular strength in Spain, France, Holland and the U.K.," added Mr. Bergman.
Technology and Value-Added Services sales of $48.4 million increased 13.7% during the quarter, including 8.0% internal sales growth in local currencies. "During the quarter we saw continued strong growth in our electronic services and software businesses," explained Mr. Bergman.
Year-to-Date Results
For the first half of 2010, net sales of $3.6 billion increased 16.7% compared with the first half of 2009. This increase includes 15.1% growth in local currencies and 1.6% growth related to foreign currency exchange.
Income from continuing operations attributable to Henry Schein, Inc. for the first half of 2010 was $144.9 million or $1.56 per diluted share. Excluding first quarter 2010 restructuring costs of $12.3 million pre-tax or $0.09 per diluted share, and first quarter 2009 restructuring costs of $4.0 million pre-tax or $0.03 per diluted share, income from continuing operations attributable to Henry Schein, Inc. for the first half of 2010 was $153.2 million or $1.65 per diluted share, an increase of 17.0% and 13.8%, respectively, compared with the first half of 2009 (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
2010 EPS Guidance
Today, Henry Schein increased the low end of its 2010 financial guidance range, as follows:
- 2010 diluted EPS attributable to Henry Schein, Inc. is expected to be $3.46 to $3.56, compared with previous guidance of $3.44 to $3.56.
- 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.
- 2010 guidance excludes the impact of restructuring costs.
The Company noted that it is increasing the low end of its 2010 diluted EPS guidance range despite a strengthening of the U.S. dollar against the euro and pound sterling, which is expected to adversely impact 2010 diluted EPS by $0.05 to $0.06 compared with its initial expectations for the year.
Second Quarter Conference Call Webcast
The Company will hold a conference call to discuss second 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(R) company and a member of the NASDAQ 100(R) 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 Animal Health, 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. 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 are 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.
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
------------------
June 26, June 27,
2010 2009
---- ----
Net sales $1,849,401 $1,607,434
Cost of sales 1,303,757 1,131,516
--------- ---------
Gross profit 545,644 475,918
Operating expenses:
Selling, general and
administrative 407,638 353,948
Restructuring costs - -
--- ---
Operating income 138,006 121,970
Other income (expense):
Interest income 3,508 2,486
Interest expense (9,185) (6,406)
Other, net 474 (373)
--- ----
Income from continuing
operations before
taxes, equity in earnings of
affiliates and
noncontrolling interests 132,803 117,677
Income taxes (41,435) (38,689)
Equity in earnings of affiliates 1,795 1,212
----- -----
Income from continuing
operations 93,163 80,200
Income from discontinued
operation, net
of tax - 225
--- ---
Net income 93,163 80,425
Less: Net income attributable to
noncontrolling
interests (9,162) (6,952)
------ ------
Net income attributable to Henry
Schein, Inc. $84,001 $73,473
======= =======
Amounts attributable to Henry
Schein, Inc.:
Income from continuing
operations $84,001 $73,324
Income from discontinued
operation, net
of tax - 149
--- ---
Net income $84,001 $73,473
======= =======
Earnings per share attributable
to
Henry Schein, Inc.:
From continuing operations:
Basic $0.93 $0.83
===== =====
Diluted $0.90 $0.81
===== =====
From discontinued operation:
Basic $0.00 $0.00
===== =====
Diluted $0.00 $0.00
===== =====
From net income:
Basic $0.93 $0.83
===== =====
Diluted $0.90 $0.81
===== =====
Weighted-average common shares
outstanding:
Basic 90,021 88,815
====== ======
Diluted 93,352 90,534
====== ======
Six Months Ended
----------------
June 26, June 27,
2010 2009
---- ----
Net sales $3,609,711 $3,092,822
Cost of sales 2,551,034 2,178,541
--------- ---------
Gross profit 1,058,677 914,281
Operating expenses:
Selling, general and
administrative 804,627 697,680
Restructuring costs 12,285 4,043
------ -----
Operating income 241,765 212,558
Other income (expense):
Interest income 6,896 5,287
Interest expense (18,272) (13,158)
Other, net 359 (343)
--- ----
Income from continuing
operations before
taxes, equity in earnings of
affiliates and
noncontrolling interests 230,748 204,344
Income taxes (73,659) (67,538)
Equity in earnings of affiliates 3,326 2,577
----- -----
Income from continuing
operations 160,415 139,383
Income from discontinued
operation, net
of tax - 342
--- ---
Net income 160,415 139,725
Less: Net income attributable to
noncontrolling
interests (15,514) (11,401)
------- -------
Net income attributable to Henry
Schein, Inc. $144,901 $128,324
======== ========
Amounts attributable to Henry
Schein, Inc.:
Income from continuing
operations $144,901 $128,098
Income from discontinued
operation, net
of tax - 226
--- ---
Net income $144,901 $128,324
======== ========
Earnings per share attributable
to
Henry Schein, Inc.:
From continuing operations:
Basic $1.61 $1.44
===== =====
Diluted $1.56 $1.42
===== =====
From discontinued operation:
Basic $0.00 $0.00
===== =====
Diluted $0.00 $0.01
===== =====
From net income:
Basic $1.61 $1.44
===== =====
Diluted $1.56 $1.43
===== =====
Weighted-average common shares
outstanding:
Basic 89,733 88,838
====== ======
Diluted 92,984 90,021
====== ======
Note: The above prior period amounts have been restated to reflect
the effects of a discontinued operation.
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 26, December 26,
2010 2009
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $321,116 $471,154
Available-for-sale
securities 14,989 -
Accounts receivable, net of
reserves of $48,706 and
$51,724 829,917 725,397
Inventories, net 797,603 775,199
Deferred income taxes 42,934 48,001
Prepaid expenses and other 205,986 183,782
------- -------
Total current assets 2,212,545 2,203,533
Property and equipment, net 248,233 259,576
Goodwill 1,368,106 986,395
Other intangibles, net 406,828 204,445
Investments and other 181,953 182,036
------- -------
Total assets $4,417,665 $3,835,985
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $504,248 $521,079
Bank credit lines 255 932
Current maturities of long-
term debt 25,215 23,560
Accrued expenses:
Payroll and related 139,290 155,298
Taxes 91,721 86,034
Other 265,468 289,351
------- -------
Total current liabilities 1,026,197 1,076,254
Long-term debt 523,421 243,373
Deferred income taxes 187,602 100,976
Other liabilities 72,348 75,304
------ ------
Total liabilities 1,809,568 1,495,907
Redeemable noncontrolling
interests 341,099 178,570
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par
value, 1,000,000 shares
authorized,
none outstanding - -
Common stock, $.01 par value,
240,000,000 shares
authorized,
91,514,440 outstanding on
June 26, 2010 and
90,630,889 outstanding on
December 26, 2009 915 906
Additional paid-in capital 632,240 603,772
Retained earnings 1,637,508 1,492,607
Accumulated other
comprehensive income (loss) (3,849) 64,194
------ ------
Total Henry Schein, Inc.
stockholders' equity 2,266,814 2,161,479
Noncontrolling interest 184 29
Total stockholders' equity 2,266,998 2,161,508
--------- ---------
Total liabilities, redeemable
noncontrolling interests and
stockholders' equity $4,417,665 $3,835,985
========== ==========
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
------------------
June 26, June 27,
2010 2009
---- ----
Cash flows from operating
activities:
Net income $93,163 $80,425
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 25,772 20,813
Amortization of bond
discount 1,587 1,500
Stock-based compensation
expense 6,857 6,236
Provision for losses on
trade and other
accounts receivable 1,328 526
Benefit from deferred
income taxes (6,103) (436)
Undistributed earnings of
affiliates (1,795) (1,212)
Other 1,288 (125)
Changes in operating assets
and liabilities,
net of acquisitions:
Accounts receivable (26,460) (28,954)
Inventories 17,782 34,287
Other current assets (26,141) (10,199)
Accounts payable and
accrued expenses 20,035 3,842
Net cash provided by
operating activities 107,313 106,703
------- -------
Cash flows from investing
activities:
Purchases of fixed assets (8,480) (15,537)
Payments for equity
investment and business
acquisitions, net of cash
acquired (142,629) (12,746)
Purchases of available-
for-sale securities - -
Proceeds from sales of
available-for-sale
securities 100 1,300
Proceeds from maturities of
available-for-sale
securities 11,996 -
Net proceeds from (payments
for) foreign exchange
forward contract
settlements - (8)
Other 1,027 1,614
Net cash used in investing
activities (137,986) (25,377)
-------- -------
Cash flows from financing
activities:
Proceeds from (repayments
of) bank borrowings 263 (204)
Principal payments for
long-term debt (1,355) (900)
Proceeds from issuance of
stock upon exercise
of stock options 5,756 3,551
Excess tax benefits related
to stock-based
compensation 1,829 503
Distributions to
noncontrolling
shareholders (6,438) (1,581)
Acquisitions of
noncontrolling interests
in
subsidiaries - -
Other (90) 1,923
Net cash provided by (used
in) financing activities (35) 3,292
--- -----
Net change in cash and cash
equivalents (30,708) 84,618
Effect of exchange rate
changes on cash and
cash equivalents (3,564) 1,099
Cash and cash equivalents,
beginning of period 355,388 308,156
------- -------
Cash and cash equivalents,
end of period $321,116 $393,873
======== ========
Six Months Ended
----------------
June 26, June 27,
2010 2009
---- ----
Cash flows from
operating activities:
Net income $160,415 $139,725
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 50,344 40,734
Amortization of bond
discount 3,135 2,964
Stock-based
compensation expense 12,999 12,303
Provision for losses on
trade and other
accounts receivable 2,322 1,712
Benefit from deferred
income taxes (5,831) (5,921)
Undistributed earnings
of affiliates (3,326) (2,577)
Other 2,649 1,491
Changes in operating
assets and liabilities,
net of acquisitions:
Accounts receivable (33,854) 14,443
Inventories 32,264 13,248
Other current assets (18,411) 2,470
Accounts payable and
accrued expenses (73,718) (141,017)
Net cash provided by
operating activities 128,988 79,575
------- ------
Cash flows from
investing activities:
Purchases of fixed
assets (17,542) (28,403)
Payments for equity
investment and business
acquisitions, net of
cash acquired (251,575) (26,489)
Purchases of available-
for-sale securities (26,984) -
Proceeds from sales of
available-for-sale
securities 1,400 4,040
Proceeds from maturities
of available-for-sale
securities 11,996 -
Net proceeds from
(payments for) foreign
exchange
forward contract
settlements - 275
Other 307 (2,680)
Net cash used in
investing activities (282,398) (53,257)
-------- -------
Cash flows from
financing activities:
Proceeds from
(repayments of) bank
borrowings (668) (3,393)
Principal payments for
long-term debt (3,198) (2,612)
Proceeds from issuance
of stock upon exercise
of stock options 21,036 3,928
Excess tax benefits
related to stock-based
compensation 6,351 683
Distributions to
noncontrolling
shareholders (7,736) (1,569)
Acquisitions of
noncontrolling
interests in
subsidiaries (10,000) -
Other (180) (179)
Net cash provided by
(used in) financing
activities 5,605 (3,142)
----- ------
Net change in cash and
cash equivalents (147,805) 23,176
Effect of exchange rate
changes on cash and
cash equivalents (2,233) 1,127
Cash and cash
equivalents, beginning
of period 471,154 369,570
------- -------
Cash and cash
equivalents, end of
period $321,116 $393,873
======== ========
Note: Certain prior period amounts have been reclassified to conform
to the current period presentation.
Exhibit A
Henry Schein, Inc.
2010 Second Quarter
Sales Growth Rate Summary
(unaudited)
Q2 2010 over Q2 2009
--------------------
N.A. N.A.
Consolidated Dental Medical
------------ ------ -------
Internal Sales Growth 2.1% 2.8% -4.2%
Acquisitions 13.5% 4.7% 3.8%
---- --- ---
Local Currency Sales
Growth 15.6% 7.5% -0.4%
Foreign Currency Exchange -0.5% 1.4% 0.0%
---- --- ---
Total Sales Growth 15.1% 8.9% -0.4%
==== === ====
Q2 YTD 2010 over Q2 YTD
2009
-----------------------
N.A. N.A.
Consolidated Dental Medical
------------ ------- --------
Internal Sales Growth 2.6% 2.0% -1.0%
Acquisitions 12.5% 2.7% 3.1%
---- --- ---
Local Currency Sales
Growth 15.1% 4.7% 2.1%
Foreign Currency Exchange 1.6% 1.6% 0.0%
--- --- ---
Total Sales Growth 16.7% 6.3% 2.1%
==== === ===
N.A. Animal Technology/
Health International VAS
----------- ------------- -----------
Internal Sales Growth 0.0% 4.1% 8.0%
Acquisitions 269.7% 0.6% 5.2%
----- --- ---
Local Currency Sales
Growth 269.7% 4.7% 13.2%
Foreign Currency Exchange 0.0% -2.9% 0.5%
--- ---- ---
Total Sales Growth 269.7% 1.8% 13.7%
===== === ====
Q2 YTD 2010 over Q2 YTD
2009
-----------------------
N.A. Animal Technology/
Health International VAS
------------ ------------- ------------
Internal Sales Growth 1.2% 5.1% 6.3%
Acquisitions 269.4% 0.9% 4.9%
----- --- ---
Local Currency Sales
Growth 270.6% 6.0% 11.2%
Foreign Currency Exchange 0.0% 2.6% 1.4%
--- --- ---
Total Sales Growth 270.6% 8.6% 12.6%
===== === ====
Exhibit B
Henry Schein, Inc.
2010 Second Quarter and YTD
Reconciliation of GAAP results of continuing operations to
non-GAAP results of continuing operations
(in thousands, except per share data)
(unaudited)
Second Quarter
2010 2009%
Growth
From Continuing Operations
--------------------------
Income from Continuing Operations
attributable to Henry Schein, Inc. $84,001 $73,324 14.6%
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 0.90 0.81 11.1%
Non-GAAP Adjustments (after-tax)
Restructuring costs $- $-
--- ---
Income from Continuing Operations
attributable to Henry Schein, Inc. $0 $0
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 0.00 0.00
Adjusted Results From Continuing
Operations
--------------------------------
Income from Continuing Operations
attributable to Henry Schein, Inc. $84,001 $73,324 14.6%
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 0.90 0.81 11.1%
--------------------------------- ---- ---- ----
YTD
2010 2009%
Growth
From Continuing Operations
--------------------------
Income from Continuing Operations
attributable to Henry Schein, Inc. $144,901 $128,098 13.1%
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 1.56 1.42 9.9%
Non-GAAP Adjustments (after-tax)
Restructuring costs $8,260 $2,784
------ ------
Income from Continuing Operations
attributable to Henry Schein, Inc. $8,260 $2,784
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 0.09 0.03
Adjusted Results From Continuing
Operations
--------------------------------
Income from Continuing Operations
attributable to Henry Schein, Inc. $153,161 $130,882 17.0%
Diluted EPS from Continuing
Operations attributable to Henry
Schein, Inc. 1.65 1.45 13.8%
--------------------------------- ---- ---- ----
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.
SOURCE Henry Schein, Inc.