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. 2 /PRNewswire-FirstCall/ -- 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® company and a member of the NASDAQ 100® 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 |
Six Months Ended |
|||||||||||||||
June 26, |
June 27, |
June 26, |
June 27, |
|||||||||||||
2010 |
2009 |
2010 |
2009 |
|||||||||||||
Net sales |
$ |
1,849,401 |
$ |
1,607,434 |
$ |
3,609,711 |
$ |
3,092,822 |
||||||||
Cost of sales |
1,303,757 |
1,131,516 |
2,551,034 |
2,178,541 |
||||||||||||
Gross profit |
545,644 |
475,918 |
1,058,677 |
914,281 |
||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative |
407,638 |
353,948 |
804,627 |
697,680 |
||||||||||||
Restructuring costs |
- |
- |
12,285 |
4,043 |
||||||||||||
Operating income |
138,006 |
121,970 |
241,765 |
212,558 |
||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
3,508 |
2,486 |
6,896 |
5,287 |
||||||||||||
Interest expense |
(9,185) |
(6,406) |
(18,272) |
(13,158) |
||||||||||||
Other, net |
474 |
(373) |
359 |
(343) |
||||||||||||
Income from continuing operations before |
||||||||||||||||
taxes, equity in earnings of affiliates and |
||||||||||||||||
noncontrolling interests |
132,803 |
117,677 |
230,748 |
204,344 |
||||||||||||
Income taxes |
(41,435) |
(38,689) |
(73,659) |
(67,538) |
||||||||||||
Equity in earnings of affiliates |
1,795 |
1,212 |
3,326 |
2,577 |
||||||||||||
Income from continuing operations |
93,163 |
80,200 |
160,415 |
139,383 |
||||||||||||
Income from discontinued operation, net |
||||||||||||||||
of tax |
- |
225 |
- |
342 |
||||||||||||
Net income |
93,163 |
80,425 |
160,415 |
139,725 |
||||||||||||
Less: Net income attributable to noncontrolling |
||||||||||||||||
interests |
(9,162) |
(6,952) |
(15,514) |
(11,401) |
||||||||||||
Net income attributable to Henry Schein, Inc. |
$ |
84,001 |
$ |
73,473 |
$ |
144,901 |
$ |
128,324 |
||||||||
Amounts attributable to Henry Schein, Inc.: |
||||||||||||||||
Income from continuing operations |
$ |
84,001 |
$ |
73,324 |
$ |
144,901 |
$ |
128,098 |
||||||||
Income from discontinued operation, net |
||||||||||||||||
of tax |
- |
149 |
- |
226 |
||||||||||||
Net income |
$ |
84,001 |
$ |
73,473 |
$ |
144,901 |
$ |
128,324 |
||||||||
Earnings per share attributable to |
||||||||||||||||
Henry Schein, Inc.: |
||||||||||||||||
From continuing operations: |
||||||||||||||||
Basic |
$ |
0.93 |
$ |
0.83 |
$ |
1.61 |
$ |
1.44 |
||||||||
Diluted |
$ |
0.90 |
$ |
0.81 |
$ |
1.56 |
$ |
1.42 |
||||||||
From discontinued operation: |
||||||||||||||||
Basic |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
||||||||
Diluted |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
$ |
0.01 |
||||||||
From net income: |
||||||||||||||||
Basic |
$ |
0.93 |
$ |
0.83 |
$ |
1.61 |
$ |
1.44 |
||||||||
Diluted |
$ |
0.90 |
$ |
0.81 |
$ |
1.56 |
$ |
1.43 |
||||||||
Weighted-average common shares outstanding: |
||||||||||||||||
Basic |
90,021 |
88,815 |
89,733 |
88,838 |
||||||||||||
Diluted |
93,352 |
90,534 |
92,984 |
90,021 |
||||||||||||
|
||||||||||||||||
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 |
Six Months Ended |
||||||||||||||
June 26, |
June 27, |
June 26, |
June 27, |
||||||||||||
2010 |
2009 |
2010 |
2009 |
||||||||||||
Cash flows from operating activities: |
|||||||||||||||
Net income |
$ |
93,163 |
$ |
80,425 |
$ |
160,415 |
$ |
139,725 |
|||||||
Adjustments to reconcile net income to net cash |
|||||||||||||||
provided by operating activities: |
|||||||||||||||
Depreciation and amortization |
25,772 |
20,813 |
50,344 |
40,734 |
|||||||||||
Amortization of bond discount |
1,587 |
1,500 |
3,135 |
2,964 |
|||||||||||
Stock-based compensation expense |
6,857 |
6,236 |
12,999 |
12,303 |
|||||||||||
Provision for losses on trade and other |
|||||||||||||||
accounts receivable |
1,328 |
526 |
2,322 |
1,712 |
|||||||||||
Benefit from deferred income taxes |
(6,103) |
(436) |
(5,831) |
(5,921) |
|||||||||||
Undistributed earnings of affiliates |
(1,795) |
(1,212) |
(3,326) |
(2,577) |
|||||||||||
Other |
1,288 |
(125) |
2,649 |
1,491 |
|||||||||||
Changes in operating assets and liabilities, |
|||||||||||||||
net of acquisitions: |
|||||||||||||||
Accounts receivable |
(26,460) |
(28,954) |
(33,854) |
14,443 |
|||||||||||
Inventories |
17,782 |
34,287 |
32,264 |
13,248 |
|||||||||||
Other current assets |
(26,141) |
(10,199) |
(18,411) |
2,470 |
|||||||||||
Accounts payable and accrued expenses |
20,035 |
3,842 |
(73,718) |
(141,017) |
|||||||||||
Net cash provided by operating activities |
107,313 |
106,703 |
128,988 |
79,575 |
|||||||||||
Cash flows from investing activities: |
|||||||||||||||
Purchases of fixed assets |
(8,480) |
(15,537) |
(17,542) |
(28,403) |
|||||||||||
Payments for equity investment and business |
|||||||||||||||
acquisitions, net of cash acquired |
(142,629) |
(12,746) |
(251,575) |
(26,489) |
|||||||||||
Purchases of available-for-sale securities |
- |
- |
(26,984) |
- |
|||||||||||
Proceeds from sales of available-for-sale securities |
100 |
1,300 |
1,400 |
4,040 |
|||||||||||
Proceeds from maturities of available-for-sale |
|||||||||||||||
securities |
11,996 |
- |
11,996 |
- |
|||||||||||
Net proceeds from (payments for) foreign exchange |
|||||||||||||||
forward contract settlements |
- |
(8) |
- |
275 |
|||||||||||
Other |
1,027 |
1,614 |
307 |
(2,680) |
|||||||||||
Net cash used in investing activities |
(137,986) |
(25,377) |
(282,398) |
(53,257) |
|||||||||||
Cash flows from financing activities: |
|||||||||||||||
Proceeds from (repayments of) bank borrowings |
263 |
(204) |
(668) |
(3,393) |
|||||||||||
Principal payments for long-term debt |
(1,355) |
(900) |
(3,198) |
(2,612) |
|||||||||||
Proceeds from issuance of stock upon exercise |
|||||||||||||||
of stock options |
5,756 |
3,551 |
21,036 |
3,928 |
|||||||||||
Excess tax benefits related to stock-based |
|||||||||||||||
compensation |
1,829 |
503 |
6,351 |
683 |
|||||||||||
Distributions to noncontrolling shareholders |
(6,438) |
(1,581) |
(7,736) |
(1,569) |
|||||||||||
Acquisitions of noncontrolling interests in |
|||||||||||||||
subsidiaries |
- |
- |
(10,000) |
- |
|||||||||||
Other |
(90) |
1,923 |
(180) |
(179) |
|||||||||||
Net cash provided by (used in) financing activities |
(35) |
3,292 |
5,605 |
(3,142) |
|||||||||||
Net change in cash and cash equivalents |
(30,708) |
84,618 |
(147,805) |
23,176 |
|||||||||||
Effect of exchange rate changes on cash and |
|||||||||||||||
cash equivalents |
(3,564) |
1,099 |
(2,233) |
1,127 |
|||||||||||
Cash and cash equivalents, beginning of period |
355,388 |
308,156 |
471,154 |
369,570 |
|||||||||||
Cash and cash equivalents, end of period |
$ |
321,116 |
$ |
393,873 |
$ |
321,116 |
$ |
393,873 |
|||||||
|
|||||||||||||||
Exhibit A |
||||||||||||
Henry Schein, Inc. |
||||||||||||
2010 Second Quarter |
||||||||||||
Sales Growth Rate Summary |
||||||||||||
(unaudited) |
||||||||||||
Q2 2010 over Q2 2009 |
||||||||||||
Consolidated |
N.A. Dental |
N.A. Medical |
N.A. Animal Health |
International |
Technology/VAS |
|||||||
Internal Sales Growth |
2.1% |
2.8% |
-4.2% |
0.0% |
4.1% |
8.0% |
||||||
Acquisitions |
13.5% |
4.7% |
3.8% |
269.7% |
0.6% |
5.2% |
||||||
Local Currency Sales Growth |
15.6% |
7.5% |
-0.4% |
269.7% |
4.7% |
13.2% |
||||||
Foreign Currency Exchange |
-0.5% |
1.4% |
0.0% |
0.0% |
-2.9% |
0.5% |
||||||
Total Sales Growth |
15.1% |
8.9% |
-0.4% |
269.7% |
1.8% |
13.7% |
||||||
Q2 YTD 2010 over Q2 YTD 2009 |
||||||||||||
Consolidated |
N.A. Dental |
N.A. Medical |
N.A. Animal Health |
International |
Technology/VAS |
|||||||
Internal Sales Growth |
2.6% |
2.0% |
-1.0% |
1.2% |
5.1% |
6.3% |
||||||
Acquisitions |
12.5% |
2.7% |
3.1% |
269.4% |
0.9% |
4.9% |
||||||
Local Currency Sales Growth |
15.1% |
4.7% |
2.1% |
270.6% |
6.0% |
11.2% |
||||||
Foreign Currency Exchange |
1.6% |
1.6% |
0.0% |
0.0% |
2.6% |
1.4% |
||||||
Total Sales Growth |
16.7% |
6.3% |
2.1% |
270.6% |
8.6% |
12.6% |
||||||
Exhibit B |
|||||||
Henry Schein, Inc. |
|||||||
Reconciliation of GAAP results of continuing operations to |
|||||||
(in thousands, except per share data) |
|||||||
(unaudited) |
|||||||
Second Quarter |
YTD |
||||||
2010 |
2009 |
% |
2010 |
2009 |
% |
||
From Continuing Operations |
|||||||
Income from Continuing Operations attributable to Henry Schein, Inc. |
$84,001 |
$73,324 |
14.6% |
$144,901 |
$128,098 |
13.1% |
|
Diluted EPS from Continuing Operations attributable to Henry Schein, Inc. |
0.90 |
0.81 |
11.1% |
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. |
$ 0 |
$ 0 |
$8,260 |
$2,784 |
|||
Diluted EPS from Continuing Operations attributable to Henry Schein, Inc. |
0.00 |
0.00 |
0.09 |
0.03 |
|||
Adjusted Results From Continuing Operations |
|||||||
Income from Continuing Operations attributable to Henry Schein, Inc. |
$84,001 |
$73,324 |
14.6% |
$153,161 |
$130,882 |
17.0% |
|
Diluted EPS from Continuing Operations attributable to Henry Schein, Inc. |
0.90 |
0.81 |
11.1% |
1.65 |
1.45 |
13.8% |
|
|
|||||||
SOURCE Henry Schein, Inc.
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