Henry Schein Reports Record Second Quarter Results

Adjusted EPS up 8.1% to $1.46

Company Affirms 2015 Financial Guidance Range

Jul 29, 2015, 07:00 ET from Henry Schein, Inc.

MELVILLE, N.Y., July 29, 2015 /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 second quarter financial results.

Net sales for the quarter ended June 27, 2015 were $2.6 billion, an increase of 0.5% compared with the second quarter of 2014.  This consisted of 7.5% growth in local currencies and a 7.0% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 3.9% and acquisition growth was 3.6% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2015 was $117.9 million, or $1.40 per diluted share.  Excluding restructuring costs of $7.2 million pretax or $0.06 per diluted share, net income attributable to Henry Schein, Inc. for the second quarter of 2015 was $123.2 million or $1.46 per diluted share, an increase of 6.0% and 8.1%, respectively, compared with the second quarter of 2014 (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).

"Our second quarter financial results were solid with internal sales growth in local currencies in each of our four business groups.  Total sales growth was again negatively impacted by the strength of the U.S. dollar against various foreign currencies, in particular the euro," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.  "Overall the global markets we serve were healthy during the quarter, and we believe we continued to gain market share.  We are pleased to affirm our guidance range for 2015 adjusted diluted EPS and expect that our restructuring activities will continue to favorably impact our ongoing results."

Dental sales of $1.3 billion declined 3.5%, consisting of 4.5% growth in local currencies and an 8.0% decline related to foreign currency exchange.  However, in local currencies internally generated sales increased 4.1% and acquisition growth was 0.4%.  The 4.1% internal growth in local currencies included 3.7% growth in North America and 4.6% growth internationally.

"In North America, consumable merchandise internal sales growth in local currencies was strong, at 5.4%, and indicates solid patient traffic to dental offices.  Equipment sales and service revenue in local currencies declined 1.9% against a difficult prior-year comparison, as last year's second quarter sales grew nearly 11%," commented Mr. Bergman.  "International consumable merchandise internal sales in local currencies returned to positive growth of 2.0% for the quarter, and international equipment sales and service internal growth in local currencies of 11.8% was at a multi-year high and included the favorable impact of the biennial International Dental Show."

Animal Health sales of $748.6 million declined 0.8%, consisting of 7.9% growth in local currencies and an 8.7% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 0.6% and acquisition growth was 7.3%.  The 0.6% internal growth in local currencies included a 4.1% decline in North America and 4.8% growth internationally.

"Growth in our Animal Health group was aided by strategic acquisitions in North America and internationally.  North America internal results reflect shifts between agency sales and direct sales as well as the impact from changes in our diagnostic product mix.  Normalizing for these two items, North America internal sales growth in local currency was 5.2%," commented Mr. Bergman.  "We recently announced plans to acquire a majority interest in Jorgen Kruuse A/S, thereby expanding our direct presence to Denmark, Norway and Sweden, and also acquired a 50% ownership investment in Maravet, which expands our presence to Romania.  Both of these companies are leading distributors of veterinary supplies in the markets they serve."

Medical sales of $470.5 million increased 16.7%, consisting of 17.7% growth in local currencies and a 1.0% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 9.9% and acquisition growth was 7.8%.

"Internal sales growth in our Medical group continued at a double-digit pace in North America as we made further progress with large group practices and integrated delivery networks.  We recorded sales under our strategic agreement with Cardinal Health as agency sales and as direct sales as we integrate the business," remarked Mr. Bergman.  "Our transaction with Cardinal Health continues on plan with the majority of Cardinal Health acquired customers now successfully transitioned to the Henry Schein platform."

Technology and Value-Added Services sales of $89.5 million increased 0.4%, including 3.3% growth in local currencies and a 2.9% decline related to foreign currency exchange.  In local currencies, internally generated sales increased 2.9% and acquisition growth was 0.4%.

"Technology and Value-Added Services internal sales growth in North America was 2.6% in local currencies and international internal growth was 3.9% in local currencies," commented Mr. Bergman.  "The advanced-technology products and services we offer support our commitment to the efficient delivery of health care services, and provide a platform for sales opportunities across all of our businesses."

Stock Repurchase Plan

The Company announced that it repurchased approximately 267,000 shares of its common stock during the second quarter at an average price of $140.58 per share, or approximately $37.5 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 $187 million authorized for future repurchases of its common stock.

Year-to-Date Results

Net sales for the first half of 2015 were $5.1 billion, an increase of 0.9% compared with the first half of 2014.  This consisted of 7.5% growth in local currencies and a decline of 6.6% related to foreign currency exchange.  In local currencies, internally generated sales increased 4.4% and acquisition growth was 3.1%.

Net income attributable to Henry Schein, Inc. for the first half of 2015 was $221.4 million, or $2.62 per diluted share.  Excluding restructuring costs of $14.1 million pretax or $0.12 per diluted share, net income attributable to Henry Schein, Inc. for the first half of 2015 was $231.6 million or $2.74 per diluted share, an increase of 6.1% and 8.3%, respectively, compared with the first half of 2014.

2015 EPS Guidance

Henry Schein today affirms 2015 financial guidance, as follows:

  • For 2015 the Company expects adjusted diluted EPS attributable to Henry Schein, Inc. to be $5.90 to $6.00, which represents growth of 8% to 10% compared with 2014.
  • This 2015 guidance excludes restructuring costs of approximately $0.29 to $0.33 per diluted share related to a previously announced corporate initiative to rationalize the Company's operations and provide significant expense efficiencies.
  • Guidance for 2015 adjusted 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 through Henry Schein's website 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. (NASDAQ: HSIC) 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 S&P 500® and the NASDAQ 100® indexes, Henry Schein employs more than 18,000 Team Schein Members and serves more than one million 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 100,000 branded products and Henry Schein private-brand products in stock, as well as more than 150,000 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 30 countries. The Company's sales reached a record $10.4 billion in 2014, and have grown at a compound annual rate of approximately 16 percent since Henry Schein became a public company in 1995. For more information, visit Henry Schein at www.henryschein.com, Facebook.com/HenrySchein and @HenrySchein on Twitter.

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 macroeconomic 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 challenges associated with the emergence of potential increased competition by third party online commerce sites; 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.

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 27,

June 28,

June 27,

June 28,

2015

2014

2015

2014

Net sales

$

2,629,320

$

2,615,406

$

5,092,966

$

5,045,565

Cost of sales

1,878,642

1,886,934

3,628,893

3,620,380

Gross profit

750,678

728,472

1,464,073

1,425,185

Operating expenses:

Selling, general and administrative

560,426

547,628

1,105,592

1,087,073

Restructuring costs

7,222

-

14,084

-

Operating income

183,030

180,844

344,397

338,112

Other income (expense):

Interest income

3,257

3,416

6,712

6,871

Interest expense

(6,290)

(5,670)

(12,553)

(10,928)

Other, net

(177)

1,032

(57)

4,612

Income before taxes and equity in earnings

of affiliates

179,820

179,622

338,499

338,667

Income taxes

(53,784)

(55,322)

(102,911)

(104,945)

Equity in earnings of affiliates

3,572

2,817

5,600

3,523

Net income

129,608

127,117

241,188

237,245

Less: Net income attributable to noncontrolling interests

(11,680)

(10,881)

(19,813)

(18,910)

Net income attributable to Henry Schein, Inc.

$

117,928

$

116,236

$

221,375

$

218,335

Earnings per share attributable to Henry Schein, Inc.:

Basic

$

1.42

$

1.37

$

2.66

$

2.58

Diluted

$

1.40

$

1.35

$

2.62

$

2.53

Weighted-average common shares outstanding:

Basic

83,053

84,620

83,139

84,716

Diluted

84,249

85,980

84,433

86,189

 

 

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

June 27,

December 27,

2015

2014

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

47,068

$

89,474

Accounts receivable, net of reserves of $75,142 and $80,671

1,164,380

1,127,517

Inventories, net

1,314,220

1,327,796

Deferred income taxes

57,535

56,591

Prepaid expenses and other

322,134

311,788

Total current assets

2,905,337

2,913,166

Property and equipment, net

310,333

311,496

Goodwill

1,871,844

1,884,123

Other intangibles, net

601,118

643,736

Investments and other

416,994

386,286

Total assets

$

6,105,626

$

6,138,807

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

778,748

$

860,996

Bank credit lines

132,428

182,899

Current maturities of long-term debt

14,716

5,815

Accrued expenses:

Payroll and related

221,335

237,511

Taxes

155,420

151,162

Other

334,095

341,728

Total current liabilities

1,636,742

1,780,111

Long-term debt

588,523

542,776

Deferred income taxes

252,969

253,118

Other liabilities

193,704

181,830

Total liabilities

2,671,938

2,757,835

Redeemable noncontrolling interests

567,672

564,527

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,

83,654,154 outstanding on June 27, 2015 and

84,008,537 outstanding on December 27, 2014

837

840

Additional paid-in capital

248,772

265,363

Retained earnings

2,779,521

2,642,523

Accumulated other comprehensive loss

(165,737)

(95,132)

Total Henry Schein, Inc. stockholders' equity

2,863,393

2,813,594

Noncontrolling interests

2,623

2,851

Total stockholders' equity

2,866,016

2,816,445

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

6,105,626

$

6,138,807

 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

Six Months Ended

June 27,

June 28,

June 27,

June 28,

2015

2014

2015

2014

Cash flows from operating activities:

Net income

$

129,608

$

127,117

$

241,188

$

237,245

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

39,026

37,353

76,175

73,489

Stock-based compensation expense

13,502

10,542

22,001

19,505

Provision for losses on trade and other

accounts receivable

1,039

1,092

2,290

2,415

Provision for (benefit from) deferred income taxes

(4,891)

(9,735)

12,335

6,009

Equity in earnings of affiliates

(3,572)

(2,817)

(5,600)

(3,523)

Distributions from equity affiliates

3,778

3,368

6,113

5,340

Changes in unrecognized tax benefits

3,029

4,979

4,297

7,434

Other

1,182

8,501

4,862

8,019

Changes in operating assets and liabilities,

  net of acquisitions:

Accounts receivable

(45,591)

(56,597)

(55,452)

(86,199)

Inventories

8,882

6,991

(3,024)

48,550

Other current assets

(22,690)

195

(26,349)

(23,251)

Accounts payable and accrued expenses

84,454

68,243

(97,734)

(151,050)

Net cash provided by operating activities

207,756

199,232

181,102

143,983

Cash flows from investing activities:

Purchases of fixed assets

(17,937)

(19,492)

(33,430)

(37,976)

Payments for equity investments and business

acquisitions, net of cash acquired

(47,679)

(78,178)

(61,316)

(222,857)

Proceeds from sales of available-for-sale securities

20

-

20

-

Other

(1,994)

(2,566)

(3,179)

(6,497)

Net cash used in investing activities

(67,590)

(100,236)

(97,905)

(267,330)

Cash flows from financing activities:

Proceeds from (repayments of) bank borrowings

(30,103)

(61,529)

(49,989)

53,239

Proceeds from issuance of long-term debt

-

124,400

125,000

314,787

Debt issuance costs

(150)

-

(150)

-

Principal payments for long-term debt

(68,507)

(100,470)

(69,243)

(100,866)

Proceeds from issuance of stock upon exercise

of stock options

3,281

4,827

10,858

21,277

Payments for repurchases of common stock

(37,500)

(76,137)

(113,207)

(151,443)

Excess tax benefits related to stock-based

compensation

88

1,229

2,932

4,579

Distributions to noncontrolling shareholders

(11,568)

(13,926)

(14,681)

(17,689)

Acquisitions of noncontrolling interests in

subsidiaries

(8,052)

(18,759)

(8,257)

(102,552)

Net cash provided by (used in) financing activities

(152,511)

(140,365)

(116,737)

21,332

Effect of exchange rate changes on cash and

cash equivalents

211

1,952

(8,866)

3,097

Net change in cash and cash equivalents

(12,134)

(39,417)

(42,406)

(98,918)

Cash and cash equivalents, beginning of period

59,202

129,115

89,474

188,616

Cash and cash equivalents, end of period

$

47,068

$

89,698

$

47,068

$

89,698

 

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

 

Exhibit A - QTD Sales

Henry Schein, Inc.

2015 Second Quarter

Sales Summary

(in thousands)

(unaudited)

Q2 2015 over Q2 2014

Global

Q2 2015

Q2 2014

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

1,320,743

$

1,368,481

-3.5%

-8.0%

4.5%

0.4%

4.1%

   Animal Health

748,558

754,549

-0.8%

-8.7%

7.9%

7.3%

0.6%

   Medical

470,519

403,257

16.7%

-1.0%

17.7%

7.8%

9.9%

Total Health Care Distribution

2,539,820

2,526,287

0.5%

-7.1%

7.6%

3.6%

4.0%

Technology and value-added services

89,500

89,119

0.4%

-2.9%

3.3%

0.4%

2.9%

Total Global

$

2,629,320

$

2,615,406

0.5%

-7.0%

7.5%

3.6%

3.9%

North America

Q2 2015

Q2 2014

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

847,429

$

826,357

2.5%

-1.3%

3.8%

0.1%

3.7%

   Animal Health

375,575

351,523

6.8%

-0.1%

6.9%

11.0%

-4.1%

   Medical

452,735

381,811

18.6%

0.0%

18.6%

8.2%

10.4%

Total Health Care Distribution

1,675,739

1,559,691

7.4%

-0.7%

8.1%

4.5%

3.6%

Technology and value-added services

74,154

72,145

2.8%

-0.3%

3.1%

0.5%

2.6%

Total North America

$

1,749,893

$

1,631,836

7.2%

-0.7%

7.9%

4.4%

3.5%

International

Q2 2015

Q2 2014

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

473,314

$

542,124

-12.7%

-18.4%

5.7%

1.1%

4.6%

   Animal Health

372,983

403,026

-7.5%

-16.2%

8.7%

3.9%

4.8%

   Medical

17,784

21,446

-17.1%

-18.4%

1.3%

0.0%

1.3%

Total Health Care Distribution

864,081

966,596

-10.6%

-17.5%

6.9%

2.3%

4.6%

Technology and value-added services

15,346

16,974

-9.6%

-13.6%

4.0%

0.1%

3.9%

Total International

$

879,427

$

983,570

-10.6%

-17.4%

6.8%

2.2%

4.6%

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

 

Exhibit A - YTD Sales

Henry Schein, Inc.

2015 Second Quarter Year to Date

Sales Summary

(in thousands)

(unaudited)

Q2 2015 YTD over Q2 2014 YTD

Global

Q2 2015 YTD

Q2 2014 YTD

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

2,570,816

$

2,665,409

-3.5%

-7.5%

4.0%

0.5%

3.5%

   Animal Health

1,432,882

1,409,037

1.7%

-8.2%

9.9%

7.5%

2.4%

   Medical

914,052

800,671

14.2%

-0.9%

15.1%

4.3%

10.8%

Total Health Care Distribution

4,917,750

4,875,117

0.9%

-6.7%

7.6%

3.2%

4.4%

Technology and value-added services

175,216

170,448

2.8%

-2.8%

5.6%

0.3%

5.3%

Total Global

$

5,092,966

$

5,045,565

0.9%

-6.6%

7.5%

3.1%

4.4%

North America

Q2 2015 YTD

Q2 2014 YTD

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

1,636,612

$

1,589,214

3.0%

-1.2%

4.2%

0.1%

4.1%

   Animal Health

713,924

657,172

8.6%

-0.1%

8.7%

10.3%

-1.6%

   Medical

877,379

756,929

15.9%

0.0%

15.9%

4.6%

11.3%

Total Health Care Distribution

3,227,915

3,003,315

7.5%

-0.6%

8.1%

3.4%

4.7%

Technology and value-added services

144,819

139,029

4.2%

-0.3%

4.5%

0.3%

4.2%

Total North America

$

3,372,734

$

3,142,344

7.3%

-0.7%

8.0%

3.4%

4.6%

International

Q2 2015 YTD

Q2 2014 YTD

Total Sales Growth

Foreign Exchange Growth

Local Currency Growth

Acquisition Growth

Local Internal Growth

   Dental

$

934,204

$

1,076,195

-13.2%

-17.1%

3.9%

1.3%

2.6%

   Animal Health

718,958

751,865

-4.4%

-15.4%

11.0%

5.1%

5.9%

   Medical

36,673

43,742

-16.2%

-17.4%

1.2%

0.0%

1.2%

Total Health Care Distribution

1,689,835

1,871,802

-9.7%

-16.4%

6.7%

2.8%

3.9%

Technology and value-added services

30,397

31,419

-3.3%

-13.4%

10.1%

0.1%

10.0%

Total International

$

1,720,232

$

1,903,221

-9.6%

-16.3%

6.7%

2.7%

4.0%

 

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

 

 

Exhibit B

Henry Schein, Inc.

2015 Second Quarter and YTD

Reconciliation of reported GAAP net income and diluted EPS attributable to Henry Schein, Inc. to

non-GAAP net income and diluted EPS attributable to Henry Schein, Inc.

(in thousands, except per share data)

(unaudited)

Second Quarter

YTD

%

%

2015

2014

Growth

2015

2014

Growth

Net Income attributable to Henry Schein, Inc.

$

117,928

$

116,236

1.5

%

$

221,375

$

218,335

1.4

%

Diluted EPS attributable to Henry Schein, Inc.

$

1.40

$

1.35

3.7

%

$

2.62

$

2.53

3.6

%

Non-GAAP Adjustments (after-tax)

Restructuring costs (1)

$

5,269

$

-

$

10,271

$

-

Total non-GAAP adjustments to Net Income

attributable to Henry Schein, Inc.

$

5,269

$

-

$

10,271

$

-

Total non-GAAP adjustments to diluted EPS

attributable to Henry Schein, Inc.

$

0.06

$

-

$

0.12

$

-

Non-GAAP Net Income attributable to

Henry Schein, Inc.

$

123,197

$

116,236

6.0

%

$

231,646

$

218,335

6.1

%

Non-GAAP diluted EPS attributable to

Henry Schein, Inc.

$

1.46

$

1.35

8.1

%

$

2.74

$

2.53

8.3

%

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.

 

(1)

 Represents quarter-to-date restructuring costs of $7,222, net of $1,953 tax benefit, resulting in an after-tax effect of $5,269 and year-to-date restructuring costs of $14,084, net of $3,813 tax benefit, resulting in an after-tax effect of $10,271.

 

SOURCE Henry Schein, Inc.



RELATED LINKS

http://www.henryschein.com