Henry Schein Reports Record Second Quarter Results

Net sales increase 15%, or 10% in local currencies

Company raises low end of 2011 Guidance

Aug 02, 2011, 07:00 ET from Henry Schein, Inc.

MELVILLE, N.Y., Aug. 2, 2011 /PRNewswire/ -- 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 25, 2011.

Net sales for the second quarter of 2011 were $2.1 billion, an increase of 15.2% compared with the second quarter of 2010.  This consists of 10.1% growth in local currencies and 5.1% growth related to foreign currency exchange.  Internal sales growth in local currencies was 5.6% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2011 was $94.5 million or $1.01 per diluted share, an increase of 12.5% and 12.2%, respectively, compared with the second quarter of 2010.

"We are proud to report double-digit sales growth in local currencies during the second quarter, as each of our five business groups continued to gain market share," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein.

North American Dental sales of $709.3 million increased 4.7%, consisting of 4.0% growth in local currencies and 0.7% growth related to foreign currency exchange.  The 4.0% growth in local currencies included 4.8% growth in Dental consumable merchandise sales and 1.3% growth in Dental equipment sales and service revenues.

"The North American Dental group had internal sales growth in local currencies of 3.4%, which is the highest quarterly growth rate we have reported in nearly three years," commented Mr. Bergman.  "Sales of Dental consumable merchandise have increased for eight consecutive quarters and Dental equipment sales and service revenues have increased for six consecutive quarters.  We view this as a positive indication of continued gradual improvement in the dental market and of our strength in that business."

North American Medical sales of $317.3 million increased 10.8%.  "We are very pleased to report a second consecutive quarter of double-digit sales growth in our North American Medical business, and we believe that we continue to gain share in this market," remarked Mr. Bergman.

North American Animal Health sales of $260.3 million increased 10.9%.  "We are delighted to be reporting internal sales growth of nearly 11% and believe our performance is well in excess of market growth.  We continue to drive sales by expanding the breadth and depth of our product offerings, and strengthening customer relationships," commented Mr. Bergman.

International sales of $781.7 million increased 29.8%, consisting of 15.1% growth in local currencies and 14.7% growth related to foreign currency exchange.

"Solid International internal sales growth in local currencies during the quarter was complemented by the acquisition of Provet Holdings, which was completed at the beginning of this year.  As we expected, we saw a significant increase in sales of dental equipment in Europe, particularly in Germany, following the biennial IDS trade show in March.  This contributed to internal dental equipment growth of more than 4% in the second quarter for the International group as a whole," added Mr. Bergman.

Technology and Value-Added Services sales of $62.1 million increased 28.3% during the quarter, consisting of 26.3% growth in local currencies and 2.0% growth related to foreign currency exchange.

"Our Technology and Value-Added Services group has posted double-digit sales growth in local currencies for five consecutive quarters, with growth in excess of 20% for the past three quarters," explained Mr. Bergman.  "Second quarter results include particular strength in our electronic services and financial services businesses."

Stock Repurchase Plan

The Company announced that it repurchased 71,338 shares of its common stock during the second quarter at an average price of $70.09 per share.  The impact of the repurchase of shares on second quarter diluted EPS was immaterial.  At the end of the second quarter, the Company had $67.9 million authorized for future repurchases of its common stock.

Year-to-Date Results

For the first half of 2011, net sales of $4.1 billion increased 13.0% compared with the first half of 2010.  This increase includes 10.0% growth in local currencies and 3.0% growth related to foreign currency exchange.

Net income attributable to Henry Schein, Inc. for the first half of 2011 was $171.0 million or $1.83 per diluted share, an increase of 11.6% and 10.9%, respectively, compared with first half 2010 adjusted net income, which excludes restructuring costs of $12.3 million or $0.09 per diluted share.  EPS growth was 17.3% on an as-reported basis (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).

2011 EPS Guidance

Henry Schein today updated 2011 financial guidance, as follows:

  • 2011 diluted EPS attributable to Henry Schein, Inc. is expected to be in the range of $3.92 to $3.98.  This compares to our previous guidance of $3.88 to $3.98.
  • Guidance for 2011 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

Henry Schein, a Fortune 500® company and a member of the NASDAQ 100® Index, is the largest provider of health care products and services to office-based practitioners.  The Company 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 700,000 customers worldwide, including dental practitioners and laboratories, physician practices and animal health practices, 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 14,000 people and has operations or affiliates in 25 countries.  The Company's net sales reached a record $7.5 billion in 2010.  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: recently enacted healthcare legislation; 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; general economic conditions; decreased customer demand and changes in vendor credit terms; disruptions in financial markets; 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.

(TABLES TO FOLLOW)

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 25,

June 26,

June 25,

June 26,

2011

2010

2011

2010

Net sales

$

2,130,640

$

1,849,401

$

4,078,401

$

3,609,711

Cost of sales

1,518,416

1,303,757

2,900,355

2,551,034

      Gross profit

612,224

545,644

1,178,046

1,058,677

Operating expenses:

   Selling, general and administrative

461,009

407,638

902,531

804,627

   Restructuring costs

-

-

-

12,285

      Operating income

151,215

138,006

275,515

241,765

Other income (expense):

   Interest income

4,192

3,508

8,125

6,896

   Interest expense

(7,902)

(9,185)

(15,987)

(18,272)

   Other, net

758

474

1,081

359

      Income before taxes, equity in earnings

        of affiliates and noncontrolling interests

148,263

132,803

268,734

230,748

Income taxes

(47,340)

(41,435)

(86,493)

(73,659)

Equity in earnings of affiliates

4,133

1,795

5,786

3,326

Net income

105,056

93,163

188,027

160,415

   Less: Net income attributable to noncontrolling

     interests

(10,581)

(9,162)

(17,057)

(15,514)

Net income attributable to Henry Schein, Inc.

$

94,475

$

84,001

$

170,970

$

144,901

Earnings per share attributable to

 Henry Schein, Inc.:

   Basic

$

1.04

$

0.93

$

1.88

$

1.61

   Diluted

$

1.01

$

0.90

$

1.83

$

1.56

Weighted-average common shares outstanding:

   Basic

90,766

90,021

90,710

89,733

   Diluted

93,446

93,352

93,330

92,984

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

June 25,

December 25,

2011

2010

(unaudited)

ASSETS

Current assets:

   Cash and cash equivalents

$

161,789

$

150,348

   Accounts receivable, net of reserves of $61,216 and $56,267

963,073

885,784

   Inventories, net

926,722

870,206

   Deferred income taxes

54,178

48,951

   Prepaid expenses and other

243,248

214,013

           Total current assets

2,349,010

2,169,302

Property and equipment, net

270,021

252,573

Goodwill

1,512,702

1,424,794

Other intangibles, net

447,501

405,468

Investments and other

304,525

295,334

           Total assets

$

4,883,759

$

4,547,471

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable

$

605,785

$

590,029

   Bank credit lines

49,236

41,508

   Current maturities of long-term debt

21,186

4,487

   Accrued expenses:

      Payroll and related  

170,314

172,746

      Taxes

125,721

91,581

      Other  

264,703

267,736

           Total current liabilities

1,236,945

1,168,087

Long-term debt

372,924

395,309

Deferred income taxes

197,538

190,225

Other liabilities

77,368

76,753

           Total liabilities

1,884,775

1,830,374

Redeemable noncontrolling interests

424,164

304,140

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,

      92,384,610 outstanding on June 25, 2011 and

      91,939,477 outstanding on December 25, 2010

924

919

  Additional paid-in capital

541,373

601,014

  Retained earnings

1,928,138

1,779,178

  Accumulated other comprehensive income

102,921

30,514

  Total Henry Schein, Inc. stockholders' equity

2,573,356

2,411,625

  Noncontrolling interests

1,464

1,332

           Total stockholders' equity

2,574,820

2,412,957

           Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

4,883,759

$

4,547,471

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 25,

June 26,

June 25,

June 26,

2011

2010

2011

2010

Cash flows from operating activities:

   Net income

$

105,056

$

93,163

$

188,027

$

160,415

   Adjustments to reconcile net income to net cash

      provided by operating activities:

           Depreciation and amortization

29,121

25,772

57,469

50,344

           Amortization of bond discount

-

1,587

-

3,135

           Stock-based compensation expense

9,615

6,857

17,960

12,999

           Provision for losses on trade and other

                accounts receivable

994

1,328

2,722

2,322

           Benefit from deferred income taxes

(3,493)

(6,103)

(10,265)

(5,831)

           Undistributed earnings of affiliates

(4,133)

(1,795)

(5,786)

(3,326)

           Other

407

1,288

2,242

2,649

           Changes in operating assets and liabilities,

                net of acquisitions:

                  Accounts receivable

(20,892)

(26,460)

(9,902)

(33,854)

                  Inventories

10,846

17,782

3,902

32,264

                  Other current assets

(9,969)

(26,141)

(11,100)

(18,411)

                  Accounts payable and accrued expenses

20,161

20,035

(49,977)

(73,718)

Net cash provided by operating activities

137,713

107,313

185,292

128,988

Cash flows from investing activities:

   Purchases of fixed assets

(10,306)

(8,480)

(20,764)

(17,542)

   Payments for equity investments and business

       acquisitions, net of cash acquired

(10,022)

(95,652)

(143,636)

(204,598)

   Purchases of available-for-sale securities

-

-

-

(26,984)

   Proceeds from sales of available-for-sale securities

50

100

2,150

1,400

   Proceeds from maturities of available-for-sale

       securities

-

11,996

-

11,996

   Other

(1,078)

1,027

230

307

Net cash used in investing activities

(21,356)

(91,009)

(162,020)

(235,421)

Cash flows from financing activities:

   Proceeds from (repayments of) bank borrowings

(47,989)

263

7,671

(668)

   Proceeds from issuance of long-term debt

101

-

3,101

-

   Principal payments for long-term debt

(22,390)

(48,332)

(23,916)

(50,175)

   Proceeds from issuance of stock upon exercise

       of stock options

9,124

5,756

27,938

21,036

   Payments for repurchases of common stock

(5,000)

-

(32,098)

-

   Excess tax benefits related to stock-based

       compensation

1,055

1,829

6,852

6,351

   Distributions to noncontrolling shareholders

(5,355)

(6,438)

(6,417)

(7,736)

   Acquisition of noncontrolling interests in

       subsidiaries

(3,000)

-

(3,366)

(10,000)

   Other

-

(90)

(90)

(180)

Net cash used in financing activities

(73,454)

(47,012)

(20,325)

(41,372)

Net change in cash and cash equivalents

42,903

(30,708)

2,947

(147,805)

Effect of exchange rate changes on cash and

   cash equivalents

2,174

(3,564)

8,494

(2,233)

Cash and cash equivalents, beginning of period

116,712

355,388

150,348

471,154

Cash and cash equivalents, end of period

$

161,789

$

321,116

$

161,789

$

321,116

  Note:  Certain prior period amounts have been reclassified to conform to the current period presentation.

Exhibit A

Henry Schein, Inc.

2011 Second Quarter

Sales Growth Rate Summary

(unaudited)

Q2 2011 over Q2 2010

Consolidated

N.A.

Dental

N.A.

Medical

N.A. Animal

Health

International

Technology/

VAS

Internal Sales Growth

5.6%

3.4%

8.7%

10.9%

3.8%

12.6%

Acquisitions

4.5%

0.6%

2.1%

0.0%

11.3%

13.7%

Local Currency Sales Growth

10.1%

4.0%

10.8%

10.9%

15.1%

26.3%

Foreign Currency Exchange

5.1%

0.7%

0.0%

0.0%

14.7%

2.0%

    Total Sales Growth

15.2%

4.7%

10.8%

10.9%

29.8%

28.3%

Q2 YTD 2011 over Q2 YTD 2010

Consolidated

N.A.

Dental

N.A.

Medical

N.A. Animal

Health

International

Technology/

VAS

Internal Sales Growth

4.7%

3.2%

9.3%

9.3%

1.9%

13.2%

Acquisitions

5.3%

2.3%

2.3%

1.9%

10.5%

11.5%

Local Currency Sales Growth

10.0%

5.5%

11.6%

11.2%

12.4%

24.7%

Foreign Currency Exchange

3.0%

0.7%

0.0%

0.0%

8.1%

1.4%

    Total Sales Growth

13.0%

6.2%

11.6%

11.2%

20.5%

26.1%

Exhibit B

Henry Schein, Inc.

2011 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

2011

2010

% Growth

2011

2010

% Growth

From Net Income Attributable to Henry Schein, Inc.

Net Income Attributable to Henry Schein, Inc.

$94,475

$84,001

12.5%

$170,970

$144,901

18.0%

Diluted EPS from Net Income attributable to Henry Schein, Inc.

$    1.01

$    0.90

12.2%

$     1.83

$      1.56

17.3%

Non-GAAP Adjustments (after-tax)

Restructuring costs

$          -

$           -

$           -

$   8,260

Net Income attributable to Henry Schein, Inc.

$         0

$          0

$          0

$   8,260

Diluted EPS from Net Income attributable to Henry Schein, Inc.

$    0.00

$     0.00

$     0.00

$     0.09

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

Net Income attributable to Henry Schein, Inc.

$94,475

$84,001

12.5%

$170,970

$153,161

11.6%

Diluted EPS from Net Income attributable to Henry Schein, Inc.

$    1.01

$    0.90

12.2%

$      1.83

$      1.65

10.9%

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