Henry Schein Reports Record First Quarter Results
MELVILLE, N.Y., May 4, 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 March 27, 2010.
Net sales for the first quarter of 2010 were $1.8 billion, an increase of 18.5% compared with the first quarter of 2009. This consists of 14.6% growth in local currencies and 3.9% growth related to foreign currency exchange. Internal sales growth in local currencies was 3.2% (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the first quarter of 2010 was $60.9 million, or $0.66 per diluted share. These results include restructuring costs of $12.3 million (or $0.09 per diluted share) related to previously announced headcount reductions and facilities closings. Excluding restructuring costs, income from continuing operations attributable to Henry Schein, Inc. for the quarter was $69.2 million, or $0.75 per diluted share, an increase of 20.2% and 17.2%, respectively, compared with the first quarter of 2009 also excluding restructuring costs (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
"We are pleased to report internal growth in local currencies in each of our five businesses for the quarter, and we continue to see indications of positive market trends throughout our operations," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "This performance combined with a continuing commitment to control expenses resulted in diluted EPS growth of 17%, excluding restructuring costs. In addition, because of these strong results and a favorable outlook we are increasing the low end of our 2010 EPS guidance range."
North American Dental sales of $614.6 million increased 3.5%, consisting of 1.8% growth in local currencies and 1.7% growth related to foreign currency exchange. The 1.8% growth in local currencies included 2.0% growth in Dental consumable merchandise sales and 0.8% growth in Dental equipment sales and service revenues.
"Growth in Dental consumable merchandise sales compared with last year as well as the preceding quarter gives us further confidence that the market will continue to show gradual improvement for the rest of the year. In addition, we are pleased to report positive sales growth in Dental equipment for the first time in more than a year, which is another positive market indicator," commented Mr. Bergman.
North American Medical sales increased 4.7% to $284.6 million. "We are pleased with our continued sales growth in the medical arena," said Mr. Bergman.
North American Veterinary sales increased 271.5% to $206.6 million, which included sales of Butler Schein Animal Health since January 1, 2010.
"Butler Schein Animal Health is the largest distributor to veterinary practices in North America, and we are pleased that the integration of that business is progressing according to plan," commented Mr. Bergman.
International sales of $609.5 million increased 16.4%, consisting of 7.5% growth in local currencies and 8.9% growth related to foreign currency exchange.
"International growth reflects strong performance in the dental and veterinary businesses, as well as particular strength in France, Australia, Germany, Spain and Switzerland," added Mr. Bergman. "With continuing sales growth in our International business combined with the effects of a restructuring completed in the first quarter of 2010, we look forward to further increasing our International operating margins."
Technology and Value-Added Services sales of $45.0 million increased 11.5% during the quarter, consisting of 9.4% growth in local currencies and 2.1% growth related to foreign currency exchange.
"During the quarter we saw continued strong growth in our electronic services and software businesses," explained Mr. Bergman.
Restructuring Costs
The Company completed a restructuring during the first quarter of 2010 to further reduce operating expenses, and recorded $12.3 million of costs pre-tax or $0.09 per diluted share. The restructuring included headcount reductions as well as facilities closings as part of the Company's continuing efforts to expand operating margins.
2010 EPS Guidance
Henry Schein today increased the low end of the 2010 financial guidance range, as follows:
- 2010 diluted EPS attributable to Henry Schein, Inc. now is expected to be $3.44 to $3.56, compared with previous guidance of $3.40 to $3.56. Growth in diluted EPS for the second quarter of 2010 is expected to be in the mid-single digits compared with the second quarter of 2009 due to Butler Schein Animal Health integration expenses and other factors.
- 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, as described above.
First Quarter Conference Call Webcast
The Company will hold a conference call to discuss first 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 Veterinary, 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
------------------
March 27, March 28,
2010 2009
---- ----
Net sales $1,760,310 $1,485,388
Cost of sales 1,247,277 1,047,025
--------- ---------
Gross profit 513,033 438,363
Operating expenses:
Selling, general and
administrative 396,989 343,732
Restructuring costs 12,285 4,043
------ -----
Operating income 103,759 90,588
Other income (expense):
Interest income 3,388 2,801
Interest expense (9,087) (6,752)
Other, net (115) 30
---- ---
Income from continuing
operations before
taxes, equity in earnings of
affiliates and
noncontrolling interests 97,945 86,667
Income taxes (32,224) (28,849)
Equity in earnings of
affiliates 1,531 1,365
----- -----
Income from continuing
operations 67,252 59,183
Income from discontinued
operation, net of tax - 117
--- ---
Net income 67,252 59,300
Less: Net income attributable
to noncontrolling interests (6,352) (4,449)
------ ------
Net income attributable to
Henry Schein, Inc. $60,900 $54,851
======= =======
Amounts attributable to Henry
Schein, Inc.:
Income from continuing
operations $60,900 $54,774
Income from discontinued
operation, net of tax - 77
--- ---
Net income $60,900 $54,851
======= =======
Earnings per share
attributable to Henry Schein,
Inc.:
From continuing operations:
Basic $0.68 $0.62
===== =====
Diluted $0.66 $0.61
===== =====
From discontinued operation:
Basic $0.00 $0.00
===== =====
Diluted $0.00 $0.00
===== =====
From net income:
Basic $0.68 $0.62
===== =====
Diluted $0.66 $0.61
===== =====
Weighted-average common
shares outstanding:
Basic 89,508 88,731
====== ======
Diluted 92,721 89,589
====== ======
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)
March 27, December 26,
2010 2009
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $355,388 $471,154
Available-for-sale securities 26,980 -
Accounts receivable, net of
reserves of $48,159 and
$51,724 803,044 725,397
Inventories, net 806,115 775,199
Deferred income taxes 44,445 48,001
Prepaid expenses and other 183,400 183,782
------- -------
Total current assets 2,219,372 2,203,533
Property and equipment, net 249,720 259,576
Goodwill 1,258,722 986,395
Other intangibles, net 349,657 204,445
Investments and other 185,160 182,036
------- -------
Total assets $4,262,631 $3,835,985
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $483,299 $521,079
Bank credit lines 9 932
Current maturities of long-
term debt 25,630 23,560
Accrued expenses:
Payroll and related 129,727 155,298
Taxes 97,379 86,034
Other 277,827 289,351
------- -------
Total current liabilities 1,013,871 1,076,254
Long-term debt 522,882 243,373
Deferred income taxes 173,269 100,976
Other liabilities 74,504 75,304
------ ------
Total liabilities 1,784,526 1,495,907
Redeemable noncontrolling
interests 286,535 178,570
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,
91,319,162 outstanding on March
27, 2010 and
90,630,889 outstanding on
December 26, 2009 913 906
Additional paid-in capital 607,679 603,772
Retained earnings 1,553,507 1,492,607
Accumulated other comprehensive
income 29,307 64,194
------ ------
Total Henry Schein, Inc.
stockholders' equity 2,191,406 2,161,479
Noncontrolling interest 164 29
Total stockholders' equity 2,191,570 2,161,508
--------- ---------
Total liabilities, redeemable
noncontrolling interests and
stockholders' equity $4,262,631 $3,835,985
========== ==========
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
------------------
March 27, March 28,
2010 2009
---- ----
Cash flows from operating
activities:
Net income $67,252 $59,300
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 24,572 19,921
Amortization of bond
discount 1,548 1,464
Stock-based compensation
expense 6,142 6,067
Provision for losses on
trade and other accounts
receivable 994 1,186
Provision for (benefit
from) deferred income
taxes 272 (5,485)
Undistributed earnings of
affiliates (1,531) (1,365)
Other 1,361 1,616
Changes in operating
assets and liabilities,
net of acquisitions:
Accounts receivable (7,394) 43,397
Inventories 14,482 (21,039)
Other current assets 7,730 12,669
Accounts payable and
accrued expenses (93,753) (144,859)
------- --------
Net cash provided by
(used in) operating
activities 21,675 (27,128)
------ -------
Cash flows from investing
activities:
Purchases of fixed assets (9,062) (12,866)
Payments for equity
investment and business
acquisitions, net of cash
acquired (108,946) (13,743)
Purchases of available-
for-sale securities (26,984) -
Proceeds from sales of
available-for-sale
securities 1,300 2,740
Net proceeds from foreign
exchange forward
contract settlements - 283
Other (720) (4,294)
---- ------
Net cash used in
investing activities (144,412) (27,880)
-------- -------
Cash flows from financing
activities:
Repayments of bank
borrowings (931) (3,189)
Principal payments for
long-term debt (1,843) (1,712)
Proceeds from issuance of
stock upon exercise of
stock options 15,280 377
Excess tax benefits
related to stock-based
compensation 4,522 180
Acquisitions of
noncontrolling interests
in subsidiaries (10,000) -
Other (1,388) (2,090)
------ ------
Net cash provided by
(used in) financing
activities 5,640 (6,434)
----- ------
Net change in cash and
cash equivalents (117,097) (61,442)
Effect of exchange rate
changes on cash and cash
equivalents 1,331 28
Cash and cash
equivalents, beginning
of period 471,154 369,570
------- -------
Cash and cash
equivalents, end of
period $355,388 $308,156
======== ========
Note: Certain prior period amounts have been reclassified to conform
to the current period presentation.
Exhibit A
Henry Schein, Inc.
2010 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2010 over Q1 2009
--------------------
Consolidated Dental Medical
------------ ------ -------
Internal Sales
Growth 3.2% 1.0% 2.4%
Acquisitions 11.4% 0.8% 2.3%
---- --- ---
Local Currency
Sales Growth 14.6% 1.8% 4.7%
Foreign Currency
Exchange 3.9% 1.7% 0.0%
--- --- ---
Total Sales Growth 18.5% 3.5% 4.7%
==== === ===
Veterinary International Technology
---------- ------------- ----------
Internal Sales
Growth 2.5% 6.2% 4.6%
Acquisitions 269.0% 1.3% 4.8%
----- --- ---
Local Currency
Sales Growth 271.5% 7.5% 9.4%
Foreign Currency
Exchange 0.0% 8.9% 2.1%
--- --- ---
Total Sales Growth 271.5% 16.4% 11.5%
===== ==== ====
Exhibit B
Henry Schein, Inc.
2010 First Quarter
Reconciliation of GAAP results of continuing operations to
non-GAAP results of continuing operations
(in thousands, except per share data)
(unaudited)
First Quarter and YTD
2010 2009 % Growth
From Continuing Operations
--------------------------
Income from Continuing Operations
attributable to Henry Schein, Inc. $60,900 $54,774 11.2%
Diluted EPS from Continuing Operations
attributable to Henry Schein, Inc. 0.66 0.61 8.2%
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. $69,160 $57,558 20.2%
Diluted EPS from Continuing Operations
attributable to Henry Schein, Inc. 0.75 0.64 17.2%
-------------------------------------- ---- ---- ----
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.