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Henry Schein Reports Record First Quarter Results
EPS up 11.3% to $1.18
Affirms 2014 financial guidance

MELVILLE, N.Y., May 6, 2014 /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 March 29, 2014.

Net sales for the first quarter of 2014 were $2.4 billion, an increase of 6.0% compared with the first quarter of 2013.  This consisted of 5.6% growth in local currencies and 0.4% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 2.9% and acquisition growth was 2.7% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the first quarter of 2014 was $102.1 million or $1.18 per diluted share, an increase of 8.4% and 11.3%, respectively, compared with the first quarter of 2013 excluding a non-cash, one-time expense related to debt refinancing.

"We are pleased to begin 2014 with solid first quarter financial results despite severe winter weather throughout many parts of the U.S.," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.  "While we believe our U.S. sales in each of our business groups were adversely impacted by weather, we are pleased with our first quarter EPS performance and to be affirming our 2014 financial guidance."

Dental sales of $1.3 billion increased 8.9%, consisting of 8.6% growth in local currencies and 0.3% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 3.5% and acquisition growth was 5.1%.  The 3.5% internal growth in local currencies included 3.6% growth in North America and 3.3% growth in International.

"Our North America Dental sales were highlighted by equipment sales and service revenue growing 16% internally in local currency," commented Mr. Bergman.  "In our International Dental business, consumable merchandise sales growth accelerated sequentially with internal growth in local currencies the highest it has been in nearly two years, and strategic acquisitions bolstered equipment sales and service revenue growth."

Animal Health sales of $654.5 million increased 2.4%, consisting of 2.0% growth in local currencies and 0.4% growth related to foreign currency exchange.  There was no acquisition impact for the quarter.  The 2.0% internal growth in local currencies included a 0.4% decline in North America and 4.2% growth in International.

"The decline in North America Animal Health sales is largely attributed to adverse weather conditions.  International Animal Health internal sales growth in local currencies was the highest we have reported in a year and a half," commented Mr. Bergman.

Medical sales of $397.4 million increased 2.2%, including 2.0% growth in local currencies and 0.2% growth related to foreign currency exchange. "Our Medical group continues to focus on large group practices and integrated delivery networks in the U.S.  We are making good progress in advancing the new customer on-boarding process and are seeing positive results," remarked Mr. Bergman.

Technology and Value-Added Services sales of $81.3 million increased 8.9%, including 8.6% growth in local currencies and 0.3% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 6.2% and acquisition growth was 2.4%.

"Technology and Value-Added Services growth was driven by software sales and value-added services," commented Mr. Bergman.  "We are particularly pleased with our performance internationally in this category."

Stock Repurchase Plan

The Company announced that it repurchased approximately 647,000 shares of its common stock during the first quarter at an average price of $116.34 per share, or approximately $75.3 million.  The impact of the repurchase of shares on first quarter diluted EPS was immaterial.  At the close of the first quarter, Henry Schein had approximately $225 million authorized for future repurchases of its common stock.

2014 EPS Guidance

Henry Schein today affirmed 2014 financial guidance, as follows:

  • For 2014, the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.29 to $5.39, which represents growth of 7% to 9% compared with 2013 results excluding certain one-time items.
  • Guidance for 2014 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.

First Quarter Conference Call Webcast

The Company will hold a conference call to discuss first 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 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. 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 17,000 Team Schein Members and serves more than 800,000 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 26 countries.  The Company's sales reached a record $9.6 billion in 2013, and have grown at a compound annual rate of approximately 16% since Henry Schein became a public company in 1995.  For more information, visit the Henry Schein website 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 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.

(TABLES TO FOLLOW)

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)






Three Months Ended





March 29,


March 30,





2014


2013










Net sales


$

2,430,159


$

2,293,511

Cost of sales



1,733,446



1,646,520



Gross profit



696,713



646,991

Operating expenses:








Selling, general and administrative



539,445



493,362



Operating income



157,268



153,629

Other income (expense):








Interest income



3,455



3,205


Interest expense (1)



(5,258)



(12,727)


Other, net



3,580



(370)



Income before taxes and equity in earnings of affiliates



159,045



143,737

Income taxes



(49,623)



(45,852)

Equity in earnings of affiliates



706



801

Net income



110,128



98,686


Less: Net income attributable to noncontrolling interests



(8,029)



(7,208)

Net income attributable to Henry Schein, Inc.


$

102,099


$

91,478








Earnings per share attributable to Henry Schein, Inc.:















Basic


$

1.20


$

1.06


Diluted


$

1.18


$

1.03








Weighted-average common shares outstanding:








Basic



84,808



86,654


Diluted



86,518



88,792

(1)

Includes approximately $6.2 million of one-time expenses related to the refinancing of Henry Schein Animal Health debt during the three months ended March 30, 2013.  These expenses reflect non-cash deferred financing costs and represent $.03 per diluted share during the three months ended March 30, 2013.

 

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)
















March 29,


December 28,






2014


2013






(unaudited)




ASSETS







Current assets:








Cash and cash equivalents


$

129,115


$

188,616


Accounts receivable, net of reserves of $80,286 and $78,298



1,116,502



1,055,216


Inventories, net



1,246,873



1,250,403


Deferred income taxes



77,388



63,865


Prepaid expenses and other



307,028



276,565




Total current assets



2,876,906



2,834,665

Property and equipment, net



285,528



275,888

Goodwill



1,802,905



1,635,005

Other intangibles, net



587,202



417,133

Investments and other



327,569



461,945




Total assets


$

5,880,110


$

5,624,636











LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:








Accounts payable


$

685,915


$

824,495


Bank credit lines



144,042



29,508


Current maturities of long-term debt



105,984



5,441


Accrued expenses:









Payroll and related



182,007



216,629



Taxes



165,814



145,161



Other



329,499



329,429




Total current liabilities



1,613,261



1,550,663

Long-term debt



541,687



450,233

Deferred income taxes



287,151



198,674

Other liabilities



136,253



139,526




Total liabilities



2,578,352



2,339,096











Redeemable noncontrolling interests



482,701



497,539

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,









85,563,353 outstanding on March 29, 2014 and









85,622,452 outstanding on December 28, 2013



856



856


Additional paid-in capital



297,057



318,225


Retained earnings



2,445,536



2,398,267


Accumulated other comprehensive income



72,862



67,849



Total Henry Schein, Inc. stockholders' equity



2,816,311



2,785,197


Noncontrolling interests



2,746



2,804




Total stockholders' equity



2,819,057



2,788,001



Total liabilities, redeemable noncontrolling interests and stockholders' equity


$

5,880,110


$

5,624,636

 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


















Three Months Ended







March 29,


March 30,







2014


2013












Cash flows from operating activities:








Net income


$

110,128


$

98,686


Adjustments to reconcile net income to net cash used in









operating activities:










Depreciation and amortization



36,136



32,393




Accelerated amortization of deferred financing costs



-



6,203




Stock-based compensation expense



8,963



5,310




Provision for losses on trade and other accounts receivable



1,323



840




Provision for deferred income taxes



15,744



6,371




Equity in earnings of affiliates



(706)



(801)




Distributions from equity affiliates



1,972



2,881




Other



1,973



3,291




Changes in operating assets and liabilities, net of acquisitions:











Accounts receivable



(29,602)



(25,392)





Inventories



41,559



54,011





Other current assets



(23,446)



14,003





Accounts payable and accrued expenses



(219,293)



(235,843)

Net cash used in operating activities



(55,249)



(38,047)












Cash flows from investing activities:








Purchases of fixed assets



(18,484)



(11,862)


Payments for equity investments and business









acquisitions, net of cash acquired



(144,679)



(32,359)


Other



(3,931)



(68)

Net cash used in investing activities



(167,094)



(44,289)












Cash flows from financing activities:








Proceeds from bank borrowings



114,768



22,827


Proceeds from issuance of debt



190,387



328,000


Debt issuance costs



-



(236)


Principal payments for long-term debt



(396)



(232,905)


Proceeds from issuance of stock upon exercise of stock options



16,450



11,799


Payments for repurchases of common stock



(75,306)



(73,449)


Excess tax benefits related to stock-based compensation



3,350



3,364


Distributions to noncontrolling shareholders



(3,763)



(2,792)


Acquisitions of noncontrolling interests in subsidiaries



(83,793)



(535)

Net cash provided by financing activities



161,697



56,073












Effect of exchange rate changes on cash and cash equivalents



1,145



(5,255)

Net change in cash and cash equivalents



(59,501)



(31,518)

Cash and cash equivalents, beginning of period



188,616



122,080

Cash and cash equivalents, end of period


$

129,115


$

90,562


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

 

Exhibit A - QTD Sales







Henry Schein, Inc.

2014 First Quarter

Sales Summary

(in thousands)

(unaudited)

















Q1 2014 over Q1 2013

















Global

Q1 2014


Q1 2013


Total

Sales

Growth


Foreign

Exchange

Growth


Local

Currency

Growth


Acquisition

Growth


Local

Internal

Growth

















   Dental

$

1,296,928


$

1,190,795


8.9%


0.3%


8.6%


5.1%


3.5%

















   Animal Health


654,488



639,142


2.4%


0.4%


2.0%


0.0%


2.0%

















   Medical


397,414



388,862


2.2%


0.2%


2.0%


0.0%


2.0%

















Total Health Care Distribution


2,348,830



2,218,799


5.9%


0.4%


5.5%


2.7%


2.8%

















Technology and value-added services


81,329



74,712


8.9%


0.3%


8.6%


2.4%


6.2%

















Total Global

$

2,430,159


$

2,293,511


6.0%


0.4%


5.6%


2.7%


2.9%

















North America

Q1 2014


Q1 2013


Total

Sales

Growth


Foreign

Exchange 

Growth


Local

Currency

Growth


Acquisition

Growth


Local

Internal

Growth

















   Dental

$

769,596


$

712,954


7.9%


-1.0%


8.9%


5.3%


3.6%

















   Animal Health


305,649



306,830


-0.4%


0.0%


-0.4%


0.0%


-0.4%

















   Medical


375,118



367,632


2.0%


0.0%


2.0%


0.0%


2.0%

















Total Health Care Distribution


1,450,363



1,387,416


4.5%


-0.5%


5.0%


2.7%


2.3%

















Technology and value-added services


66,884



63,862


4.7%


-0.4%


5.1%


0.3%


4.8%

















Total North America

$

1,517,247


$

1,451,278


4.5%


-0.5%


5.0%


2.6%


2.4%

















International

Q1 2014


Q1 2013


Total

Sales

Growth


Foreign

Exchange 

Growth


Local

Currency

Growth


Acquisition

Growth


Local

Internal

Growth

















   Dental

$

527,332


$

477,841


10.4%


2.2%


8.2%


4.9%


3.3%

















   Animal Health


348,839



332,312


5.0%


0.8%


4.2%


0.0%


4.2%

















   Medical


22,296



21,230


5.0%


4.1%


0.9%


0.0%


0.9%

















Total Health Care Distribution


898,467



831,383


8.1%


1.7%


6.4%


2.8%


3.6%

















Technology and value-added services


14,445



10,850


33.1%


3.9%


29.2%


15.0%


14.2%

















Total International

$

912,912


$

842,233


8.4%


1.7%


6.7%


2.9%


3.8%

 










Exhibit B


















Henry Schein, Inc.

2014 First Quarter

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)





















First Quarter









%




2014



2013


Growth


Net Income attributable to Henry Schein, Inc.

$

102,099


$

91,478


11.6

%

Diluted EPS attributable to Henry Schein, Inc.

$

1.18


$

1.03


14.6

%










Non-GAAP Adjustments (after-tax)









Accelerated amortization of deferred financing costs (1)

$

-


$

2,679




Total non-GAAP adjustments to Net Income attributable to









Henry Schein, Inc.

$

-


$

2,679




Total non-GAAP adjustments to diluted EPS attributable to









Henry Schein, Inc.

$

-


$

0.03













Non-GAAP Net Income attributable to Henry Schein, Inc.

$

102,099


$

94,157


8.4

%

Non-GAAP diluted EPS attributable to Henry Schein, Inc.

$

1.18


$

1.06


11.3

%

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 non-cash, one-time expenses related to the debt refinancing of Henry Schein Animal Health.

 

SOURCE Henry Schein, Inc.

Investors: Steven Paladino, Executive Vice President and Chief Financial Officer, steven.paladino@henryschein.com, (631) 843-5500, or Carolynne Borders, Vice President, Investor Relations, carolynne.borders@henryschein.com, (631) 390-8105; or Media: Susan Vassallo, Vice President, Corporate Communications, susan.vassallo@henryschein.com, (631) 843-5562