2008-08-05 06:00:00
Henry Schein Reports Record Second Quarter Results
Sales increase 19% to $1.6 billion
Diluted EPS from continuing operations up 18% to $0.71
MELVILLE, N.Y.–(EMWNews)–Henry Schein, Inc. (NASDAQ: HSIC), the largest provider of healthcare
products and services to office-based practitioners in the combined
North American and European markets, today reported record
financial results for the quarter ended June 28, 2008.
Net sales for the second quarter of 2008 were $1.6 billion, an increase
of 18.6% compared with the second quarter of 2007. This increase
includes 13.6% local currency growth (4.0% internally generated and 9.6%
from acquisitions) and 5.0% related to foreign currency exchange. (See
Exhibit A for details of sales growth.) The Company previously announced
an initiative of reducing sales of certain lower-margin pharmaceutical
products. Excluding sales of those products, internal net sales growth
in local currencies was 6.6%.
Income from continuing operations for the second quarter of 2008 was
$65.5 million, or $0.71 per diluted share, up 20.3% and 18.3%,
respectively, compared with the prior-year second quarter. There was no
impact from discontinued operations on our 2008 results.
“Second quarter financial results reflect a
strong contribution from our International Group, as well as solid
growth in our Dental Group,” said Stanley M.
Bergman, Chairman and Chief Executive Officer of Henry Schein. “These
results illustrate Henry Schein’s ability to
deliver consistent sales and earnings growth.”
Dental Group sales of $660 million increased 9.7%, including 8.7% growth
in local currencies (7.2% internally generated and 1.5% from
acquisitions) and 1.0% growth related to foreign currency exchange. Of
the 8.7% local currency growth, Dental consumable merchandise sales
increased 7.9% (6.3% internal growth and 1.6% acquisition growth) and
Dental equipment sales and service revenues were up 11.0% (9.9% internal
growth and 1.1% acquisition growth).
“Our Dental Group continues to gain market
share in consumable merchandise and in equipment,”
commented Mr. Bergman. “We recorded another
quarter of double-digit growth in equipment sales and service revenues,
highlighted by gains in high-tech products, including acceleration in
sales of the E4D CAD/CAM product compared with the first quarter.”
Medical Group sales of $329 million declined 8.3% (8.9% decline in
internal growth and 0.6% acquisition growth). Excluding sales of certain
lower-margin pharmaceutical products, noted above, internal Medical
Group net sales growth was approximately 1%.
“With the progress we have made under the
Medical One World initiative, coupled with the growth we have seen in
Privileges enrollment, we look forward to capitalizing on future sales
growth opportunities within our Medical Group,”
said Mr. Bergman. “We are also optimistic
about the upcoming influenza vaccine season, based on current market
conditions and customer order activity.”
For the quarter, International Group sales of $615 million increased
55.7%, including 39.7% growth in local currencies (10.9% internally
generated and 28.8% from acquisitions) and 16.0% related to foreign
currency exchange.
“Our International Group reported strong
growth in all major markets, highlighted by solid Dental growth,”
added Mr. Bergman. “We are also pleased to
report that W. & J. Dunlop continues to perform above expectations.”
Technology and Value-Added Services Group sales of $41 million increased
29.0%, including 28.6% growth in local currencies (1.8% internally
generated and 26.8% acquisition growth) and 0.4% growth related to
foreign currency exchange.
“Results reflect good growth in electronic
and financial services, as well as last year’s
acquisition of Software of Excellence, a leading supplier of innovative
clinical and practice management solutions to dentists,”
stated Mr. Bergman. “During the second
quarter we launched Easy Dental 2008, offering dentists increased
functionality and improved productivity.”
Year-to-Date Results
For the first six months of 2008, net sales of $3.2 billion represent an
increase of 17.6% compared with the first six months of 2007. This
increase includes 12.8% local currency growth (3.5% internally generated
and 9.3% from acquisitions) and 4.8% related to foreign currency
exchange. Excluding sales of certain lower-margin pharmaceutical
products, noted above, internal net sales growth was 6.0%. Income from
continuing operations for the first six months of 2008 was $117.8
million, reflecting 20.4% growth compared with the prior year. Earnings
per diluted share from continuing operations of $1.28 for the first six
months of 2008 represents 18.5% growth over the comparable period in
2007.
Stock Repurchase Plan
Henry Schein announced that it repurchased 602,000 shares of common
stock during the second quarter of 2008 for a total purchase price of
nearly $32 million. Approximately $109 million remains authorized for
future common stock repurchases. The impact of the share repurchases
during the quarter was immaterial to diluted EPS.
2008 EPS Guidance
Henry Schein affirms 2008 financial guidance, as follows:
-
2008 diluted EPS is expected to be $2.93 to $3.00, representing growth
of 14% to 16% compared with 2007.
-
This 2008 diluted EPS guidance includes Henry Schein’s
expectation that it will distribute 12 million to 15 million doses of
influenza vaccine during the year, representing earnings of $0.13 to
$0.16 per diluted share.
-
2008 diluted EPS guidance is for current continuing operations
including 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
recognized for its excellent customer service and highly competitive
prices. The Company’s four business groups –
Dental, Medical, International and Technology –
serve more than 550,000 customers worldwide, including dental
practitioners and laboratories, physician practices and animal health
clinics, 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 offers a wide range of innovative value-added practice
solutions for healthcare professionals, such as ArubA®,
the Company’s electronic catalog and ordering
system. Its leading practice-management software solutions have an
installed user base of more than 52,000 practices, including DENTRIX®,
Easy Dental®, Oasis®
and EXACT® for dental practices, MicroMD®
for physician practices, and AVImark® for
animal health clinics.
Headquartered in Melville, N.Y., Henry Schein employs over 12,000 people
and has operations or affiliates in 20 countries. The Company’s
net sales reached a record $5.9 billion in 2007. 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: competitive factors; changes in the healthcare industry;
changes in regulatory requirements that affect us; 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; our dependence upon
sales personnel and key customers; our dependence on our senior
management; possible increases in the cost of shipping our products or
other service trouble with our third-party shippers; risks from rapid
technological change; risks from potential increases in variable
interest rates; 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 that
affect us. 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.
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HENRY SCHEIN, INC. |
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CONSOLIDATED STATEMENTS OF INCOME |
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(in thousands, except per share data) |
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(unaudited) |
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Three Months Ended |
Six Months Ended |
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June 28, |
June 30, |
June 28, |
June 30, |
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2008 |
2007 |
2008 |
2007 |
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Net sales |
$ |
1,644,977 |
$ |
1,387,017 |
$ |
3,170,596 |
$ |
2,697,145 |
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Cost of sales |
|
1,156,562 |
|
973,240 |
|
2,230,948 |
|
1,892,322 |
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Gross profit |
488,415 |
413,777 |
939,648 |
804,823 |
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Operating expenses: |
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Selling, general and administrative |
|
375,058 |
|
322,925 |
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741,064 |
|
640,250 |
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Operating income |
113,357 |
90,852 |
198,584 |
164,573 |
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Other income (expense): |
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Interest income |
3,974 |
4,269 |
7,957 |
8,388 |
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Interest expense |
(8,205 |
) |
(6,223 |
) |
(15,107 |
) |
(12,165 |
) |
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Other, net |
|
(291 |
) |
|
547 |
|
(674 |
) |
|
425 |
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Income from continuing operations before taxes, minority interest and equity in earnings (losses) of affiliates |
108,835 |
89,445 |
190,760 |
161,221 |
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Income taxes |
(37,135 |
) |
(30,636 |
) |
(64,990 |
) |
(56,106 |
) |
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Minority interest in net income of subsidiaries |
(7,131 |
) |
(3,842 |
) |
(10,381 |
) |
(6,757 |
) |
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Equity in earnings (losses) of affiliates |
|
908 |
|
(528 |
) |
|
2,418 |
|
(505 |
) |
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Income from continuing operations |
65,477 |
54,439 |
117,807 |
97,853 |
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Discontinued operations: |
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Loss from operations of discontinued components (including write-down of long-lived assets of $32.7 million) |
– |
(32,700 |
) |
– |
(32,560 |
) |
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Income tax benefit |
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– |
|
12,098 |
|
– |
|
12,038 |
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Loss from discontinued operations |
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– |
|
(20,602 |
) |
|
– |
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(20,522 |
) |
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Net income |
$ |
65,477 |
$ |
33,837 |
$ |
117,807 |
$ |
77,331 |
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Earnings from continuing operations per share: |
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Basic |
$ |
0.73 |
$ |
0.62 |
$ |
1.32 |
$ |
1.11 |
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Diluted |
$ |
0.71 |
$ |
0.60 |
$ |
1.28 |
$ |
1.08 |
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Loss from discontinued operations per share: |
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Basic |
$ |
– |
$ |
(0.24 |
) |
$ |
– |
$ |
(0.23 |
) |
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Diluted |
$ |
– |
$ |
(0.23 |
) |
$ |
– |
$ |
(0.22 |
) |
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Earnings per share: |
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