HENRY SCHEIN REPORTS RECORD FOURTH QUARTER AND ANNUAL RESULTS
Q4 EPS up 9.1% to $1.56
Affirms 2015 financial guidance range
MELVILLE, N.Y. – February 11, 2015 – 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 fourth quarter.
For the quarter ended December 27, 2014, net sales were $2.7 billion, an increase of 7.0% compared with the fourth quarter of 2013. This consisted of 9.9% growth in local currencies and a 2.9% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.9% and acquisition growth was 5.0% (see Exhibit A for details of sales growth).
Net income attributable to Henry Schein, Inc. for the fourth quarter of 2014 was $133.0 million or $1.56 per diluted share, an increase of 7.0% and 9.1%, respectively, compared with the fourth quarter of 2013.
“We closed out 2014 with strong fourth quarter financial results that once again included market share gains in each of our four business groups. The global markets we serve remain generally healthy, highlighted by continued strong patient traffic in North America, and we are particularly pleased with the solid internal sales growth in local currencies in our international businesses,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “We also achieved EPS growth for the year of 10% and are affirming our guidance for 2015 diluted EPS. I am also pleased to mention that for the first time we exceeded the $10 billion sales mark on an annual basis.”
Dental sales of $1.4 billion increased 3.9%, consisting of 7.5% growth in local currencies and a 3.6% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.3% and acquisition growth was 5.2%. The 2.3% internal growth in local currencies included 1.9% growth in North America and 2.9% growth internationally.
“In North America, internal consumable merchandise sales growth in local currencies remained strong at nearly 5%. Equipment sales declined in North America, which we believe was substantially due to the late reinstatement of tax incentives for our U.S. customers in 2014,” commented Mr. Bergman. “Our International Dental growth was solid for both consumable merchandise and equipment, with internal growth bolstered by strategic acquisitions made earlier in the year.”
Animal Health sales of $731.6 million increased 12.3%, consisting of 15.9% growth in local currencies and a 3.6% decline related to foreign currency exchange. In local currencies, internally generated sales increased 7.8% and acquisition growth was 8.1%. The 7.8% internal growth in local currencies included 6.9% growth in North America and 8.6% growth internationally.
“Growth in our Animal Health group featured double-digit gains in local currencies in North America and internationally, with international internal sales growth in local currencies at a multi-year high,” commented Mr. Bergman. “We recently expanded our animal health equipment capabilities in North America and Europe with the addition of scil animal care. The scil animal care professionals will enhance our Animal Health equipment sales and support capabilities, representing our key supplier partners and introducing veterinarians to important diagnostic options. This will significantly expand our diagnostics product category and gain market share for our animal health diagnostics partners.”
Medical sales of $461.7 million increased 9.4%, consisting of 9.9% growth in local currencies and a 0.5% decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.4% and acquisition growth was 0.5%.
“Quarterly Medical sales growth accelerated compared with the third quarter and was at a multi-year high as we made continued progress with large group practices and integrated delivery networks,” remarked Mr. Bergman. “During the quarter we announced a strategic agreement with Cardinal Health to provide office-based medical practices with one of the most comprehensive service and product offerings. We expect to complete the integration of this business in the second quarter and, until that transition is complete, we will record agency revenue. Our fourth quarter results included a month and a half of this agency revenue.”
Technology and Value-Added Services sales of $91.3 million increased 3.3%, including 4.4% growth in local currencies and a 1.1% decline related to foreign currency exchange. In local currencies, internally generated sales increased 1.5% and acquisition growth was 2.9%.
“We are delighted to report that our internal international Technology and Value-Added Services sales in local currencies grew by double digits for the eighth consecutive quarter. We believe that equipment financing as well as software sales in North America were also negatively impacted by the late reinstatement of tax incentives in the U.S. in 2014,” commented Mr. Bergman.
Stock Repurchase Plan
The Company announced that it repurchased approximately 595,000 shares of its common stock during the fourth quarter at an average price of $124.00 per share, or approximately $73.7 million. The impact of the repurchase of shares on fourth quarter diluted EPS was immaterial. At the close of the fourth quarter, Henry Schein had approximately $300 million authorized for future repurchases of its common stock, as a result of a $300 million increase to the share repurchase plan authorized by the Company’s Board of Directors in early December 2014.
Full Year Results
Henry Schein reports full year results including the following highlights:
| · | Net sales for 2014 were $10.4 billion, an increase of 8.5% compared with 2013. This consisted of 8.6% growth in local currencies and a 0.1% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.6% and acquisition growth was 4.0%. |
| · | 2014 was the first year the Company’s annual sales exceeded the $10 billion mark. |
| · | Net income attributable to Henry Schein, Inc. for 2014 was $466.1 million or $5.44 per diluted share, an increase of 7.5% and 9.9%, respectively, compared with adjusted net income for 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). |
| · | The Company’s reported diluted EPS for the year of $5.44 exceeded the top of the EPS guidance range established in November 2013 by $0.05. |
| · | The Company achieved operating cash flow of $592.5 million and free cash flow of $510.4 million, both well in excess of net income. |
2015 EPS Guidance
Henry Schein today affirms 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 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 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. |
Fourth Quarter Conference Call Webcast
The Company will hold a conference call to discuss fourth 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 more than 17,500 Team Schein Members and serves more than 1 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 28 countries. The Company's sales reached a record $10.4 billion in 2014, 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.
| 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 |
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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.
