Henry Schein Reports Record First Quarter Results
Diluted EPS increases 19% to $0.57
Company affirms 2008 financial guidance
MELVILLE, N.Y.--(BUSINESS WIRE)--May 6, 2008--Henry Schein, Inc. (NASDAQ: 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 quarter ended March 29, 2008.
Net sales for the first quarter of 2008 were $1.5 billion, an increase of 16.4% compared with the first quarter of 2007. This increase includes 12.0% local currency growth (3.0% internally generated and 9.0% from acquisitions) and 4.4% related to foreign currency exchange. (See Exhibit A for details of sales growth.) The Company previously announced an initiative of reducing sales of certain lower-margin pharmaceutical products. Excluding sales of those products, internal net sales growth in local currencies was 5.4%.
Net income for the first quarter of 2008 was $52.3 million or $0.57 per diluted share, up 20.3% and 18.8%, respectively, compared with the prior-year first quarter.
"We are pleased with our earnings growth during the first quarter, which reflects the benefits of our diversified business model serving dental, medical and veterinary office practitioners in the U.S. and international markets," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "Our International Group was a particularly strong contributor to both sales and earnings growth this quarter."
Dental Group sales of $612 million increased 8.7%, including 7.2% growth in local currencies (5.5% internally generated and 1.7% from acquisitions) and 1.5% growth related to foreign currency exchange. Of the 7.2% local currency growth, Dental consumable merchandise sales increased 6.0% (4.3% internal growth and 1.7% acquisition growth) and Dental equipment sales and service revenues were up 11.1% (9.8% internal growth and 1.3% acquisition growth).
"Double-digit growth in equipment sales and service revenues once again reflected gains in both traditional equipment and high-tech products," commented Mr. Bergman. "One of the Dental Group highlights during the quarter was initial sales of the E4D dental CAD/CAM product. This product is in its controlled launch period and feedback from dentists continues to be very encouraging."
Medical Group sales of $335 million declined 3.7% (4.4% decline in internal growth and 0.7% acquisition growth). As mentioned, the Company previously announced an initiative of reducing sales of certain lower-margin pharmaceutical products. Excluding sales of those products, internal Medical net sales growth was 4.5%.
"We have completed the Medical One World initiative, consolidating three Medical brands into one, and we are very pleased that there was virtually no sales erosion during the process," said Mr. Bergman. "With this consolidation behind us, we are excited to be implementing our integrated sales and marketing approach and look forward to bringing new products and value-added services to our Medical customers."
For the quarter International Group sales of $540 million increased 45.5%, including 32.2% growth in local currencies (5.6% internally generated and 26.6% from acquisitions) and 13.3% related to foreign currency exchange.
"International Group results featured strong internal sales growth in the United Kingdom, Germany, Australia and New Zealand, bolstered by the contribution from our recent acquisition of W. & J. Dunlop, a leading United Kingdom animal health products supplier," added Mr. Bergman. "I am also delighted to report that Dunlops is performing above our expectations."
Technology and Value-Added Services Group sales of $39 million increased 36.5%, including 35.9% growth in local currencies (10.2% internally generated and 25.7% acquisition growth) and 0.6% growth related to foreign currency exchange.
"Strong organic growth in our electronic and financial services businesses contributed to very solid revenue growth in the quarter," stated Mr. Bergman.
2008 EPS Guidance
Henry Schein affirms 2008 financial guidance, as follows:
-- 2008 diluted EPS is expected to be $2.93 to $3.00,
representing growth of 14% to 16% compared with 2007.
-- This 2008 diluted EPS guidance includes Henry Schein's
expectation that it will distribute 12 million to 15 million
doses of influenza vaccine during the year, representing
earnings of $0.13 to $0.16 per diluted share.
-- 2008 diluted EPS guidance is for current continuing operations
including completed or previously announced acquisitions, and
does not include the impact of potential future acquisitions,
if any.
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 four business groups - Dental, Medical, International and Technology - serve more than 550,000 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 offers a wide range of innovative value-added practice solutions for healthcare professionals, such as ArubA(R), the Company's electronic catalog and ordering system. Its leading practice-management software solutions have an installed user base of more than 52,000 practices, including DENTRIX(R), Easy Dental(R), Oasis(R) and EXACT(R) for dental practices, MicroMD(R) for physician practices, and AVImark(R) for animal health clinics.
Headquartered in Melville, N.Y., Henry Schein employs over 12,000 people and has operations or affiliates in 20 countries. The Company's net sales reached a record $5.9 billion in 2007. 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 which, 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: competitive factors; changes in the healthcare industry; changes in regulatory requirements that affect us; 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; our dependence upon sales personnel and key customers; our dependence on our senior management; possible increases in the cost of shipping our products or other service trouble with our third-party shippers; risks from rapid technological change; risks from potential increases in variable interest rates; 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 that affect us. 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, forward-looking statements 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 29, March 31,
2008 2007
---------- ----------
Net sales $1,525,619 $1,310,128
Cost of sales 1,074,386 919,082
---------- ----------
Gross profit 451,233 391,046
Operating expenses:
Selling, general and administrative 366,006 317,325
---------- ----------
Operating income 85,227 73,721
Other income (expense):
Interest income 3,983 4,119
Interest expense (6,902) (5,942)
Other, net (383) (122)
---------- ----------
Income from continuing operations before
taxes, minority interest and equity in
earnings of affiliates 81,925 71,776
Income taxes (27,855) (25,470)
Minority interest in net income of subsidiaries (3,250) (2,915)
Equity in earnings of affiliates 1,510 23
---------- ----------
Income from continuing operations 52,330 43,414
Discontinued operations:
Income from operations of discontinued
components - 140
Income tax expense - (60)
---------- ----------
Income from discontinued operations - 80
---------- ----------
Net income $ 52,330 $ 43,494
========== ==========
Earnings from continuing operations per share:
Basic $ 0.59 $ 0.49
========== ==========
Diluted $ 0.57 $ 0.48
========== ==========
Income from discontinued operations per share:
Basic $ 0.00 $ 0.00
========== ==========
Diluted $ 0.00 $ 0.00
========== ==========
Earnings per share:
Basic $ 0.59 $ 0.49
========== ==========
Diluted $ 0.57 $ 0.48
========== ==========
Weighted-average common shares outstanding:
Basic 89,223 87,911
========== ==========
Diluted 92,259 89,984
========== ==========
Note: The above prior period amounts have been restated to reflect the
effects of our discontinued operations.
HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 29, December
2008 29, 2007
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 203,036 $ 247,590
Available-for-sale securities 35,925 997
Accounts receivable, net of reserves of
$40,981 and $41,315 702,519 708,307
Inventories, net 701,767 666,786
Deferred income taxes 37,328 32,827
Prepaid expenses and other 192,727 192,292
----------- ----------
Total current assets 1,873,302 1,848,799
Property and equipment, net 255,765 247,671
Goodwill 947,885 917,194
Other intangibles, net 193,150 192,420
Investments and other 118,367 107,900
----------- ----------
Total assets $3,388,469 $3,313,984
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 428,691 $ 474,009
Bank credit lines 5,569 8,977
Current maturities of long-term debt 24,475 24,319
Accrued expenses:
Payroll and related 114,881 136,291
Taxes 92,910 73,278
Other 222,994 223,765
----------- ----------
Total current liabilities 889,520 940,639
Long-term debt 428,541 423,274
Deferred income taxes 91,850 80,260
Other liabilities 52,709 53,906
Minority interest 40,052 35,923
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, 90,218,436 outstanding
on March 29, 2008 and 89,603,660
outstanding on December 29, 2007 902 896
Additional paid-in capital 693,369 673,763
Retained earnings 1,057,385 1,005,055
Accumulated other comprehensive income 134,141 100,268
----------- ----------
Total stockholders' equity 1,885,797 1,779,982
----------- ----------
Total liabilities and stockholders'
equity $3,388,469 $3,313,984
=========== ==========
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-------------------
March 29, March 31,
2008 2007
--------- ---------
Cash flows from operating activities:
Net income $ 52,330 $ 43,494
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 19,438 17,557
Stock-based compensation expense 9,260 4,117
Provision for losses on trade and
other accounts receivable 1,137 231
Benefit from deferred income taxes (3,339) (6,855)
Undistributed earnings of affiliates (1,510) (23)
Minority interest in net income of
subsidiaries 3,250 2,915
Other (426) (721)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable 16,504 (3,947)
Inventories (21,087) 3,936
Other current assets 2,503 11,882
Accounts payable and accrued
expenses (64,720) (106,488)
--------- ---------
Net cash provided by (used in) operating
activities 13,340 (33,902)
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets (13,743) (8,933)
Payments for equity investment and business
acquisitions, net of cash acquired (8,524) (27,432)
Purchases of available-for-sale securities (35,925) (17,500)
Proceeds from sales of available-for-sale
securities 847 18,000
Net payments for foreign exchange forward
contract settlements (2,004) (3,921)
Other (735) (5,262)
--------- ---------
Net cash used in investing activities (60,084) (45,048)
--------- ---------
Cash flows from financing activities:
Repayments of bank borrowings (3,919) (255)
Proceeds from issuance of long-term debt - 428
Principal payments for long-term debt (973) (457)
Proceeds from issuance of stock upon exercise
of stock options 7,172 10,691
Payments for repurchases of common stock - (30,689)
Excess tax benefits related to stock-based
compensation 3,429 5,853
Other (424) (736)
--------- ---------
Net cash provided by (used in) financing
activities 5,285 (15,165)
--------- ---------
Net change in cash and cash equivalents (41,459) (94,115)
Effect of exchange rate changes on cash and cash
equivalents (3,095) (76)
Cash and cash equivalents, beginning of period 247,590 248,647
--------- ---------
Cash and cash equivalents, end of period $ 203,036 $ 154,456
========= =========
Exhibit A
Henry Schein, Inc.
2008 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2008 over Q1 2007
----------------------------------------------------------------------
Consolidated Dental Medical International Technology
------------ ------ ------- ------------- ----------
Internal Sales
Growth 3.0% 5.5% -4.4% 5.6% 10.2%
Acquisitions 9.0% 1.7% 0.7% 26.6% 25.7%
------------ ------ ------- ------------- ----------
Local
Currency
Sales Growth 12.0% 7.2% -3.7% 32.2% 35.9%
Foreign Currency
Exchange 4.4% 1.5% - 13.3% 0.6%
------------ ------ ------- ------------- ----------
Total Sales
Growth 16.4% 8.7% -3.7% 45.5% 36.5%
============ ====== ======= ============= ==========
CONTACT: Henry Schein, Inc.
Steven Paladino, 631-843-5500
Executive Vice President and Chief Financial Officer
steven.paladino@henryschein.com
or
Investors:
Neal Goldner, 631-845-2820
Vice President, Investor Relations
neal.goldner@henryschein.com
or
Media:
Susan Vassallo, 631-843-5562
Vice President, Corporate Communications
susan.vassallo@henryschein.com
SOURCE: Henry Schein, Inc.