2014

Henry Schein Reports Record Second Quarter Results EPS up 10.8% to $1.23

Company raises bottom of 2013 financial guidance range

MELVILLE, N.Y., Aug. 6, 2013 /PRNewswire/ -- Henry Schein, Inc. (NASDAQ: HSIC), the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, today reported record financial results for the quarter ended June 29, 2013.

Net sales for the second quarter of 2013 were $2.4 billion, an increase of 8.6% compared with the second quarter of 2012.  This consisted of 8.7% growth in local currencies and a 0.1% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 4.0% and acquisition growth was 4.7% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2013 was $108.4 million or $1.23 per diluted share, an increase of 8.1% and 10.8%, respectively, compared with the second quarter of 2012 excluding restructuring costs of $3.4 million pretax or $0.03 per diluted share.

"We continue to reap the benefits of our diversified business strategy as market share gains in each of our operating units resulted in record second quarter global sales results.  We are on target with our full-year plan and are pleased to be raising the bottom of our 2013 financial guidance range," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.  "Our second quarter sales growth and share gains were enhanced by the timing of the IDS dental trade show and the spring holidays as discussed during our last quarterly conference call."

Global Dental sales of $1.3 billion increased 6.2%, consisting of 6.0% growth in local currencies and a 0.2% gain related to foreign currency exchange.  In local currencies, internally generated sales increased 3.0% and acquisition growth was 3.0%.  The 3.0% increase in internal growth in local currencies included 3.6% growth in North America and 1.9% growth in International.

"Internal sales results in local currencies were particularly strong in North America Dental consumable merchandise and International Dental equipment, which was bolstered by the IDS trade show in Germany," commented Mr. Bergman.  "On an overall basis, we continue to gain dental market share through a combination of organic and acquisition growth."  

Global Animal Health sales of $666.3 million increased 13.7%, including 14.1% growth in local currencies and a 0.4% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 4.2% and acquisition growth was 9.9%.  The 4.2% internal growth in local currencies included 9.6% growth in North America and a 1.4% decline in International.

"Our Global Animal Health business continued to gain market share during the quarter," commented Mr. Bergman.  "Sales growth in North America, all organic, continued to be solid while acquisitions fueled international sales growth."

Global Medical sales of $387.9 million increased 7.4%; there was no impact from foreign currency exchange on Global Medical sales growth.  In local currencies, internally generated sales increased 6.2% and acquisition growth was 1.2%.  The 6.2% internal growth in local currencies included 6.2% growth in North America and 5.6% growth in International.

"Our Medical business gained further domestic market share with particularly strong sales growth in integrated delivery networks, urgent care settings and ambulatory surgery centers," remarked Mr. Bergman, "and we continue to be pleased with our success in this arena."

Global Technology and Value-Added Services sales of $78.0 million increased 14.5%, including 14.9% growth in local currencies and a 0.4% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 9.6% and acquisition growth was 5.3%.  The 9.6% internal growth in local currencies included 8.1% growth in North America and 18.4% International growth.

"Technology and Value-Added Services sales growth was particularly strong in electronic services recurring revenue, as well as software sales, and featured another quarter of double-digit growth in International markets," commented Mr. Bergman. "These products and services continue to strengthen our connection with customers across all of our business units."

Stock Repurchase Plan

The Company announced that it repurchased approximately 840,000 shares of its common stock during the second quarter at an average price of $92.99 per share, or approximately $78.1 million.  The impact of the repurchase of shares on second quarter diluted EPS was immaterial.  At the close of the second quarter, Henry Schein had approximately $149 million authorized for future repurchases of its common stock.

Year-to-Date Results

For the first half of 2013, net sales of $4.7 billion increased 8.9% compared with the first half of 2012; there was no impact from foreign currency exchange on net sales growth.  In local currencies, internally generated sales increased 3.7% and acquisition growth was 5.2%.

Net income attributable to Henry Schein, Inc. for the first half of 2013 was $199.9 million or $2.27 per diluted share.  Excluding non-cash, one-time expenses related to the debt refinancing of Butler Schein Animal Health (now known as Henry Schein Animal Health) of $6.2 million pretax or $0.03 per diluted share, net income attributable to Henry Schein, Inc. for the first half of 2013 was $202.6 million or $2.30 per diluted share, an increase of 7.0% and 10.0%, respectively, compared with the first half of 2012 excluding restructuring costs of $15.2 million pretax or $0.12 per diluted share (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).

2013 EPS Guidance

Henry Schein today raised the bottom of its 2013 financial guidance range, as follows:

  • For 2013 the Company expects diluted EPS attributable to Henry Schein, Inc. to be $4.86 to $4.91. This represents growth of 9% to 11% compared with 2012 results excluding restructuring costs, and compares with previous guidance for 2013 diluted EPS to be $4.81 to $4.91.
  • Guidance for 2013 diluted EPS attributable to Henry Schein, Inc. excludes a one-time, non-cash charge of $0.03 per diluted share related to the debt refinancing of Butler Schein Animal Health (now known as Henry Schein Animal Health), as well as an estimated loss of $0.13 to $0.15 per diluted share to be taken in the third quarter related to divesting a non-controlling interest in a dental wholesale distributor in the Middle East, as previously announced.
  • Guidance for 2013 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.

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, Inc.

Henry Schein, Inc. is the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners.  The Company also serves dental laboratories, government and institutional health care clinics, and other alternate care sites.  A Fortune 500® Company and a member of the NASDAQ 100® Index, Henry Schein employs nearly 16,000 Team Schein Members and serves more than 775,000 customers.

The Company offers a comprehensive selection of products and services, including value-added solutions for operating efficient practices and delivering high-quality care.  Henry Schein operates through a centralized and automated distribution network, with a selection of more than 96,000 branded products and Henry Schein private-brand products in stock, as well as more than 110,000 additional products available as special-order items. The Company also offers its customers exclusive, innovative technology solutions, including practice management software and e-commerce solutions, as well as a broad range of financial services.

Headquartered in Melville, N.Y., Henry Schein has operations or affiliates in 24 countries.  The Company's sales reached a record $8.9 billion in 2012, and have grown at a compound annual rate of 17% since Henry Schein became a public company in 1995.  For more information, visit the Henry Schein Web site at www.henryschein.com.

Cautionary Note Regarding Forward-Looking Statements

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: effects of a highly competitive market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; possible increases in the cost of shipping our products or other service issues with our third-party shippers; general global macro-economic conditions; disruptions in financial markets; possible volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions and joint ventures, including the failure to achieve anticipated synergies; financial risks associated with acquisitions and joint ventures; litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; risks from rapid technological change; risks from disruption to our information systems; 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.

(TABLES TO FOLLOW)

































HENRY SCHEIN, INC.

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,






2013


2012


2013


2012

















Net sales


$

2,391,810


$

2,201,452


$

4,685,321


$

4,300,471

Cost of sales



1,721,954



1,577,057



3,368,474



3,065,497



Gross profit



669,856



624,395



1,316,847



1,234,974

Operating expenses:














Selling, general and administrative



493,791



466,333



987,153



931,785


Restructuring costs



-



3,360



-



15,192



Operating income



176,065



154,702



329,694



287,997

Other income (expense):














Interest income



3,303



3,609



6,508



6,939


Interest expense



(4,890)



(7,711)



(17,617)



(15,351)


Other, net



(34)



830



(404)



1,355



Income before taxes and equity in earnings

of affiliates



174,444



151,430



318,181



280,940

Income taxes



(54,775)



(47,201)



(100,627)



(89,041)

Equity in earnings of affiliates



1,766



3,073



2,567



4,464

Net income



121,435



107,302



220,121



196,363


Less: Net income attributable to noncontrolling interests



(13,005)



(9,216)



(20,213)



(17,525)

Net income attributable to Henry Schein, Inc.


$

108,430


$

98,086


$

199,908


$

178,838

















Earnings per share attributable to Henry Schein, Inc.:






























Basic


$

1.26


$

1.11


$

2.31


$

2.03


Diluted


$

1.23


$

1.08


$

2.27


$

1.98

















Weighted-average common shares outstanding:














Basic



86,370



88,490



86,483



88,161


Diluted



87,968



90,553



88,205



90,431

 

 












HENRY SCHEIN, INC.


CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)


















June 29,


December 29,







2013


2012








(unaudited)





ASSETS








Current assets:









Cash and cash equivalents


$

78,839


$

122,080



Accounts receivable, net of reserves of $72,040 and $75,240



1,039,914



1,015,194



Inventories, net



1,099,012



1,203,507



Deferred income taxes



63,085



64,049



Prepaid expenses and other



292,416



299,547





Total current assets



2,573,266



2,704,377


Property and equipment, net



256,775



273,458


Goodwill



1,607,731



1,601,046


Other intangibles, net



435,412



462,182


Investments and other



291,322



292,934





Total assets


$

5,164,506


$

5,333,997













LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:









Accounts payable


$

682,604


$

787,658



Bank credit lines



15,588



27,166



Current maturities of long-term debt



5,894



17,992



Accrued expenses:










Payroll and related



182,587



207,381




Taxes



139,605



132,774




Other



288,057



299,738





Total current liabilities



1,314,335



1,472,709


Long-term debt



446,709



488,121


Deferred income taxes



200,709



196,814


Other liabilities



119,291



125,314





Total liabilities



2,081,044



2,282,958













Redeemable noncontrolling interests



466,024



435,175


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,










86,726,281 outstanding on June 29, 2013 and










87,850,671 outstanding on December 29, 2012



867



879



Additional paid-in capital



337,731



375,946



Retained earnings



2,275,516



2,183,905



Accumulated other comprehensive income



1,265



52,855




Total Henry Schein, Inc. stockholders' equity



2,615,379



2,613,585



Noncontrolling interests



2,059



2,279





Total stockholders' equity



2,617,438



2,615,864




Total liabilities, redeemable noncontrolling interests and stockholders' equity


$

5,164,506


$

5,333,997


 

 



















HENRY SCHEIN, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)


(unaudited)


























Three Months Ended


Six Months Ended








June 29,


June 30,


June 29,


June 30,








2013


2012


2013


2012




















Cash flows from operating activities:















Net income


$

121,435


$

107,302


$

220,121


$

196,363



Adjustments to reconcile net income to net cash
















provided by operating activities:

















Depreciation and amortization



31,843



30,969



64,236



61,389





Accelerated amortization of deferred financing costs



-



-



6,203



-





Stock-based compensation expense



11,422



11,295



16,732



20,049





Provision for losses on trade and other


















accounts receivable



1,314



1,493



2,154



2,637





Provision for (benefit from) deferred income taxes



9,179



467



15,550



(7,715)





Equity in earnings of affiliates



(1,766)



(3,073)



(2,567)



(4,464)





Distributions from equity affiliates



3,569



2,683



6,450



6,007





Other



2,076



958



5,367



3,859





Changes in operating assets and liabilities,

















  net of acquisitions:


















Accounts receivable



(19,763)



(1,896)



(45,155)



(59,329)






Inventories



28,026



1,192



82,037



(11,340)






Other current assets



(26,927)



(20,482)



(12,924)



(8,078)






Accounts payable and accrued expenses



114,390



47,590



(121,453)



(69,485)


Net cash provided by operating activities



274,798



178,498



236,751



129,893




















Cash flows from investing activities:















Purchases of fixed assets



(10,072)



(9,149)



(21,934)



(21,372)



Payments for equity investments and business
















acquisitions, net of cash acquired



(1,349)



(101,368)



(33,708)



(120,348)



Proceeds from sales of available-for-sale securities



-



2,875



-



4,025



Other



(5,003)



(2,334)



(5,071)



(4,385)


Net cash used in investing activities



(16,424)



(109,976)



(60,713)



(142,080)




















Cash flows from financing activities:















Proceeds from (repayments of) bank borrowings



(34,467)



76,400



(11,640)



26,384



Proceeds from issuance of long-term debt



155,781



50



483,781



100,050



Debt issuance costs



(1,083)



(213)



(1,319)



(213)



Principal payments for long-term debt



(305,095)



(24,725)



(538,000)



(35,375)



Proceeds from issuance of stock upon exercise
















of stock options



7,653



10,676



19,452



40,715



Payments for repurchases of common stock



(78,062)



(118,326)



(151,511)



(156,891)



Excess tax benefits related to stock-based
















compensation



1,964



1,503



5,328



10,051



Distributions to noncontrolling shareholders



(10,216)



(6,514)



(13,008)



(8,595)



Acquisitions of noncontrolling interests in
















subsidiaries



(5,219)



(13,647)



(5,754)



(20,013)


Net cash used in financing activities



(268,744)



(74,796)



(212,671)



(43,887)




















Net change in cash and cash equivalents



(10,370)



(6,274)



(36,633)



(56,074)


Effect of exchange rate changes on cash and















cash equivalents



(1,353)



(7,643)



(6,608)



(3,314)


Cash and cash equivalents, beginning of period



90,562



101,813



122,080



147,284


Cash and cash equivalents, end of period


$

78,839


$

87,896


$

78,839


$

87,896


 

 

Exhibit A1 - QTD Sales











Henry Schein, Inc.


2013 Second Quarter


Sales Summary


(in thousands)


(unaudited)











Q2 2013 over Q2 2012











Global

Q2 2013


Q2 2012


Total Sales
Growth











   Dental

$

1,259,581


$

1,185,919


6.2%











   Animal Health


666,297



586,258


13.7%











   Medical


387,887



361,122


7.4%











Total Health Care Distribution


2,313,765



2,133,299


8.5%











Technology and value-added services


78,045



68,153


14.5%











Total Global

$

2,391,810


$

2,201,452


8.6%




















North America

Q2 2013


Q2 2012


Total Sales
Growth











   Dental

$

768,800


$

738,340


4.1%











   Animal Health


325,821



297,236


9.6%











   Medical


367,312



341,795


7.5%











Total Health Care Distribution


1,461,933



1,377,371


6.1%











Technology and value-added services


66,675



58,372


14.2%











Total North America

$

1,528,608


$

1,435,743


6.5%




















International

Q2 2013


Q2 2012


Total Sales
Growth











   Dental

$

490,781


$

447,579


9.7%











   Animal Health


340,476



289,022


17.8%











   Medical


20,575



19,327


6.5%











Total Health Care Distribution


851,832



755,928


12.7%











Technology and value-added services


11,370



9,781


16.2%











Total International

$

863,202


$

765,709


12.7%


 

 

Exhibit A1 - YTD Sales


















Henry Schein, Inc.


2013 Second Quarter Year to Date


Sales Summary


(in thousands)


(unaudited)











Q2 2013 YTD over Q2 2012 YTD











Global

Q2 2013 YTD


Q2 2012 YTD


Total Sales
Growth











   Dental

$

2,450,376


$

2,341,585


4.6%











   Animal Health


1,305,439



1,111,848


17.4%











   Medical


776,749



715,948


8.5%











Total Health Care Distribution


4,532,564



4,169,381


8.7%











Technology and value-added services


152,757



131,090


16.5%











Total Global

$

4,685,321


$

4,300,471


8.9%




















North America

Q2 2013 YTD


Q2 2012 YTD


Total Sales
Growth











   Dental

$

1,481,754


$

1,437,801


3.1%











   Animal Health


632,651



564,246


12.1%











   Medical


734,944



674,839


8.9%











Total Health Care Distribution


2,849,349



2,676,886


6.4%











Technology and value-added services


130,537



112,829


15.7%











Total North America

$

2,979,886


$

2,789,715


6.8%




















International

Q2 2013 YTD


Q2 2012 YTD


Total Sales
Growth











   Dental

$

968,622


$

903,784


7.2%











   Animal Health


672,788



547,602


22.9%











   Medical


41,805



41,109


1.7%











Total Health Care Distribution


1,683,215



1,492,495


12.8%











Technology and value-added services


22,220



18,261


21.7%











Total International

$

1,705,435


$

1,510,756


12.9%


 

 

Exhibit A2 - QTD Sales Growth



















Henry Schein, Inc.

2013 Second Quarter

Sales Growth Rate Summary

(unaudited)












Q2 2013 over Q2 2012

Global


Consolidated


Dental


Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


4.0%


3.0%


4.2%


6.2%


9.6%












Acquisitions


4.7%


3.0%


9.9%


1.2%


5.3%












Local Currency Sales Growth


8.7%


6.0%


14.1%


7.4%


14.9%












Foreign Currency Exchange


-0.1%


0.2%


-0.4%


0.0%


-0.4%












     Total Sales Growth


8.6%


6.2%


13.7%


7.4%


14.5%



































































North America


Consolidated


Dental


Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


5.6%


3.6%


9.6%


6.2%


8.1%












Acquisitions


0.9%


0.7%


0.0%


1.3%


6.2%












Local Currency Sales Growth


6.5%


4.3%


9.6%


7.5%


14.3%












Foreign Currency Exchange


0.0%


-0.2%


0.0%


0.0%


-0.1%












     Total Sales Growth


6.5%


4.1%


9.6%


7.5%


14.2%



































































International


Consolidated


Dental


 Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


1.0%


1.9%


-1.4%


5.6%


18.4%












Acquisitions


11.7%


7.1%


20.1%


0.0%


0.0%












Local Currency Sales Growth


12.7%


9.0%


18.7%


5.6%


18.4%












Foreign Currency Exchange


0.0%


0.7%


-0.9%


0.9%


-2.2%












     Total Sales Growth


12.7%


9.7%


17.8%


6.5%


16.2%

 

 

Exhibit A2 - YTD Sales Growth



















Henry Schein, Inc.

2013 Second Quarter Year to Date

Sales Growth Rate Summary

(unaudited)












Q2 2013 YTD over Q2 2012 YTD

Global


Consolidated


Dental


Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


3.7%


1.4%


5.6%


7.2%


10.6%












Acquisitions


5.2%


3.1%


12.1%


1.2%


6.2%












Local Currency Sales Growth


8.9%


4.5%


17.7%


8.4%


16.8%












Foreign Currency Exchange


0.0%


0.1%


-0.3%


0.1%


-0.3%












     Total Sales Growth


8.9%


4.6%


17.4%


8.5%


16.5%























North America


Consolidated


Dental


Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


5.9%


2.4%


12.1%


7.6%


9.7%












Acquisitions


1.0%


0.7%


0.0%


1.3%


6.0%












Local Currency Sales Growth


6.9%


3.1%


12.1%


8.9%


15.7%












Foreign Currency Exchange


-0.1%


0.0%


0.0%


0.0%


0.0%












     Total Sales Growth


6.8%


3.1%


12.1%


8.9%


15.7%























International


Consolidated


Dental


 Animal Health


Medical


Technology /   VAS












Local Internal Sales Growth


-0.3%


-0.2%


-1.2%


0.9%


16.6%












Acquisitions


13.0%


6.8%


24.7%


0.0%


6.7%












Local Currency Sales Growth


12.7%


6.6%


23.5%


0.9%


23.3%












Foreign Currency Exchange


0.2%


0.6%


-0.6%


0.8%


-1.6%












     Total Sales Growth


12.9%


7.2%


22.9%


1.7%


21.7%

 

 



















Exhibit B




































Henry Schein, Inc.

2013 Second Quarter and YTD

Reconciliation of GAAP results of net income attributable to Henry Schein, Inc. to

non-GAAP results of net income attributable to Henry Schein, Inc.

(in thousands, except per share data)

(unaudited)







































Second Quarter




YTD









%









%




2013



2012


Growth




2013



2012


Growth


From Net Income Attributable to Henry Schein, Inc.


















Net Income attributable to Henry Schein, Inc.

$

108,430


$

98,086


10.5

%


$

199,908


$

178,838


11.8

%

Diluted EPS from Net Income attributable to Henry


















Schein, Inc.

$

1.23


$

1.08


13.9

%


$

2.27


$

1.98


14.6

%



















Non-GAAP Adjustments (after-tax)


















Restructuring costs

$

-


$

2,236





$

-


$

10,537




Accelerated amortization of deferred financing costs


-



-






2,679



-




Net Income attributable to Henry Schein, Inc.

$

0


$

2,236





$

2,679


$

10,537




Diluted EPS from Net Income attributable to Henry


















Schein, Inc.

$

0.00


$

0.03





$

0.03


$

0.12






















Adjusted Results From Net Income Attributable to Henry Schein, Inc.


















Net Income attributable to Henry Schein, Inc.

$

108,430


$

100,322


8.1

%


$

202,587


$

189,375


7.0

%

Diluted EPS from Net Income attributable to Henry


















Schein, Inc.

$

1.23


$

1.11


10.8

%


$

2.30


$

2.09


10.0

%

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.



RELATED LINKS
http://www.henryschein.com

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