HENRY SCHEIN REPORTS RECORD THIRD QUARTER RESULTS
Adjusted EPS up 9.8% to $1.34
Company raises low end of 2014 financial guidance range, expects 2015 EPS growth of 10-12%
MELVILLE, N.Y. – November 6, 2014 – 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 September 27, 2014.
Net sales for the third quarter of 2014 were $2.6 billion, an increase of 11.7% compared with the third quarter of 2013. This consisted of 10.9% growth in local currencies and 0.8% growth related to foreign currency exchange. In local currencies, internally generated sales increased 6.4% and acquisition growth was 4.5% (see Exhibit A for details of sales growth).
Net income attributable to Henry Schein, Inc. for the third quarter of 2014 was $114.8 million or $1.34 per diluted share, an increase of 7.8% and 9.8%, respectively, compared with adjusted net income for the third quarter of 2013 excluding the net impact of certain one-time items (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
“I’m delighted to report excellent third quarter results as we gained market share in our four business groups, with each group posting strong sales growth both in North America as well as internationally. Growth in net sales was the highest we have reported in more than three years while internal sales growth in local currencies was at a seven-year high,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “We are pleased to be raising the low end of 2014 financial guidance while introducing guidance for 2015 diluted EPS that represents growth of 10% to 12%.”
Dental sales of $1.3 billion increased 9.7%, consisting of 9.4% growth in local currencies and 0.3% growth related to foreign currency exchange. In local currencies, internally generated sales increased 4.8% and acquisition growth was 4.6%. The 4.8% internal growth in local currencies included 5.5% growth in North America and 3.7% growth in International.
“We gained market share in our Dental group with growth of approximately 10% both in North America and in International. In addition, internal sales growth in local currencies was at a multi-year high for North America merchandise, for International Dental as a whole and for the group in its entirety,” commented Mr. Bergman. “Subsequent to the close of the quarter we were delighted to announce our entry into Japan, the world’s second-largest dental market, through a non-controlling investment in Iwase Dental Supply as we continue to expand our global footprint. This follows our recent entry into the Brazilian and South African dental markets.”
Animal Health sales of $758.0 million increased 18.0%, consisting of 15.9% growth in local currencies and 2.1% growth related to foreign currency exchange. In local currencies, internally generated sales increased 8.1% and acquisition growth was 7.8%. The 8.1% internal growth in local currencies included 10.9% growth in North America and 5.6% growth in International.
“We also gained market share in our Animal Health group with strong internal sales growth bolstered by strategic acquisitions. Internal sales growth in local currencies was at a seven-quarter high for the group,” commented Mr. Bergman. “Our companion animal health business is the largest in North America, and our customers consistently rely on us for a comprehensive line of products and services. Accordingly, we were pleased to announce new strategic relationships with Abaxis and with Heska to sell their full lines of veterinary diagnostic products.”
Medical sales of $480.3 million increased 8.0%; there was no material impact on sales growth from foreign currency exchange. “Quarterly Medical sales growth was at the highest level in a year and a half as we made continued progress with large group practices and integrated delivery networks,” remarked Mr. Bergman.
Technology and Value-Added Services sales of $87.1 million increased 10.4%, including 9.5% growth in local currencies and 0.9% growth related to foreign currency exchange. In local currencies, internally generated sales increased 6.5% and acquisition growth was 3.0%.
“Technology and Value-Added Services sales growth reflects particular strength in software sales and financial services, as well as strategic acquisitions overseas,” commented Mr. Bergman. “We are delighted to report the continuation of double-digit internal sales growth in local currencies in International Technology and Value-Added Services.”
Stock Repurchase Plan
The Company announced that it repurchased approximately 633,000 shares of its common stock during the third quarter at an average price of $118.32 per share, or approximately $74.8 million. The impact of the repurchase of shares on third quarter diluted EPS was immaterial. At the close of the third quarter, Henry Schein had approximately $74.0 million authorized for future repurchases of its common stock.
Year-to-Date Results
Net sales for the first nine months of 2014 were $7.7 billion, an increase of 9.0% compared with the first nine months of 2013. This consisted of 8.2% growth in local currencies and 0.8% growth related to foreign currency exchange. In local currencies, internally generated sales increased 4.6% and acquisition growth was 3.6%.
Net income attributable to Henry Schein, Inc. for the first nine months of 2014 was $333.1 million or $3.88 per diluted share, an increase of 7.8% and 10.5%, respectively, compared with adjusted net income for the first nine months of 2013 excluding the net impact of certain one-time items.
2014 EPS Guidance
Henry Schein today raised the low end of its 2014 financial guidance range, as follows:
| · | For 2014 the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.36 to $5.39. This compares with previous guidance for diluted EPS attributable to Henry Schein, Inc. of $5.33 to $5.39, and represents growth of 8% to 9% compared with 2013 results excluding the net impact of 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. |
2015 EPS Guidance
Henry Schein today introduced 2015 financial guidance, as follows:
| · | For 2015 the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.90 to $6.00, which represents growth of 10% to 12% compared with the midpoint of the 2014 guidance range. |
| · | This 2015 guidance excludes restructuring costs related to a planned corporate initiative to rationalize the Company’s operations and provide significant expense efficiencies. The costs related to this initiative are estimated at approximately $0.29 to $0.33 per diluted share. The Company believes that it is important to reduce its cost structure to fund new initiatives in order to drive future growth as its 2015 – 2017 strategic planning cycle begins. |
| · | Guidance for 2015 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. |
Third Quarter Conference Call Webcast
The Company will hold a conference call to discuss third 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 more than 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 28 countries. The Company's sales reached a record $9.6 billion in 2013, 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 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.
| CONTACTS: | | Investors |
| | | Steven Paladino |
| | | Executive Vice President and Chief Financial Officer |
| | | steven.paladino@henryschein.com |
| | | (631) 843-5500 |
| | | |
| | | Carolynne Borders |
| | | Vice President, Investor Relations |
| | | carolynne.borders@henryschein.com |
| | | (631) 390-8105 |
| | | |
| | | Media |
| | | Susan Vassallo |
| | | Vice President, Corporate Communications |
| | | susan.vassallo@henryschein.com |
| | | (631) 843-5562 |
(TABLES TO FOLLOW)
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.
