Henry Schein Reports Record Second Quarter Results

EPS up 10.8% to $1.23

Company raises bottom of 2013 financial guidance range

06 Aug, 2013, 07:00 ET from Henry Schein, Inc.

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