HENRY SCHEIN
NEWS RELEASE
Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747
FOR: Henry Schein, Inc.
CONTACT: Steven Paladino
Executive Vice President and
Chief Financial Officer
stepal@henryschein.com
(631) 843-5500
Susan Vassallo
Director, Investor and
Public Relations
svassa@henryschein.com
FOR IMMEDIATE RELEASE (631) 843-5562
HENRY SCHEIN REPORTS FIRST QUARTER DILUTED EPS
OF $0.63, UP 17% ON A COMPARABLE BASIS
Net sales increase 20% to $886.6 million
MELVILLE, N.Y. - April 27, 2004 - Henry Schein, Inc. (Nasdaq NM: HSIC), the
largest provider of healthcare products and services to office-based
practitioners in the combined North American and European markets, today
reported financial results for the quarter ended March 27, 2004.
Net sales for the first quarter of 2004 were $886.6 million, an
increase of 20.1% from the first quarter of 2003. In local currencies, net sales
increased 16.5% including 9.6% internal growth.
Dental sales increased 14.0%, or 13.2% in local currencies (8.1%
internal growth). In local currencies, Dental consumable merchandise sales
increased 13.1% (7.8% internal growth) and Dental equipment sales and service
revenues were up 13.6% (9.5% internal growth).
Medical sales increased 22.5% (12.3% internal growth), International
sales improved 30.8% or 12.2% in local currencies (7.4% internal growth), and
Technology and Value-Added Services sales grew 12.4% (8.6% internal growth).
Net income for the first quarter of 2004 was $28.4 million or $0.63 per
diluted share. Both net income and diluted EPS were up 15%, while on a
comparable basis both increased by 17%. (See Exhibit A for details.)
"With 20% growth in net sales and 17% growth in diluted EPS on a
comparable basis, our first quarter financial results were solid across the
board. We continued to gain market share in each of our business groups, with
excellent internal growth bolstered by contributions from several strategic
acquisitions," said Stanley M. Bergman, Chairman, Chief Executive Officer and
President of Henry Schein.
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"The quarterly performance of our Dental Group reflects continued
market share gains in both dental consumable merchandise and equipment sales and
service. In part, these results are reflective of our innovative Privileges and
MarketOne customer-loyalty programs, which helped drive internal dental sales
growth at a rate well above our estimate of market growth," explained Mr.
Bergman. "International Group internal sales gains in local currencies were also
ahead of our growth estimate for that market and were complemented by last
year's acquisition of Hager Dental. We look forward to further International
success, particularly in Europe, as we continue to execute our full service
strategy."
With regard to the recently announced acquisition of the demedis/EDH
Group, the Company reported that the review by the German and the Austrian
governmental agencies has entered the second phase, and the transaction remains
subject to their approvals.
First quarter operating margin reflects a continued change in product
sales mix, particularly in our Technology and Value-Added Services Group and in
the injectable pharmaceutical component of our Medical Group, where we continue
adding new product lines and value added services while growing existing ones.
"Our strategy to expand Medical Group product offerings further establishes
Henry Schein as a full-service partner with our physician customers, grows our
customer base and was a source of great enthusiasm among our field sales
consultants at our recently completed annual Medical National Sales Meeting,"
Mr. Bergman added.
The Company reported that under a repurchase program of up to two
million shares of common stock announced last year, 258,400 shares were
repurchased during the first quarter of 2004 at an average price of $69.74 per
share. The impact of this share repurchase on first quarter diluted EPS was
insignificant. Through the close of the first quarter, the Company has
repurchased 1,593,400 shares under this initiative.
2004 EPS Guidance
Henry Schein confirmed financial guidance for 2004. Assuming the
acquisition of the demedis/EDH Group closes by the end of the second quarter of
2004, Henry Schein expects full-year 2004 earnings per diluted share of $3.57 to
$3.63. This represents growth of 15% to 17% compared with 2003 results from
continuing operations. The Company noted that this 2004 EPS guidance is for
current operations and the acquisition of the demedis/EDH Group, and does not
include the impact of other potential future acquisitions.
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First Quarter Conference Call Webcast
The Company will hold a conference call to discuss first quarter
financial results today, beginning at 10 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, Inc., a Fortune 500(R) company, is the largest
distributor of healthcare products and services to office-based practitioners in
the combined North American and European markets. Recognized for its excellent
customer service and highly competitive prices, the Company's four business
groups--Dental, Medical, International and Technology--serve more than 425,000
customers worldwide, including dental practices and laboratories, physician
practices and veterinary clinics, as well as government and other institutions.
The Company's sales reached a record $3.4 billion in 2003.
The Company operates through a centralized and automated distribution
network that serves customers in more than 125 countries. The Company offers a
comprehensive selection of over 90,000 national and Henry Schein private-brand
products.
Henry Schein also offers a wide range of innovative value-added
practice solutions, including such leading practice management software systems
as DENTRIX(R) and Easy Dental(R) for dental practices, and AVImark(R) for
veterinary clinics, which have been installed in over 50,000 practices; and
ArubA(R), Henry Schein's electronic catalog and ordering system.
Headquartered in Melville, N.Y., Henry Schein employs nearly 8,000
people in 16 countries. For more information, visit the Henry Schein Web site at
www.henryschein.com.
Certain information contained herein includes information that is
forward-looking. The matters referred to in forward-looking statements may be
affected by the risks and uncertainties involved in the Company's business.
These forward-looking statements are qualified in their entirety by the
cautionary statements contained in the Company's Securities and Exchange
Commission filings.
(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
------------------------
March 27, March 29,
2004 2003
--------- ---------
Net sales ........................................ $ 886,631 $ 737,997
Cost of sales .................................... 655,804 536,580
--------- ---------
Gross profit .............................. 230,827 201,417
Operating expenses:
Selling, general and administrative .......... 184,527 159,212
--------- ---------
Operating income .......................... 46,300 42,205
Other income (expense):
Interest income .............................. 2,216 2,392
Interest expense ............................. (3,002) (4,733)
Other, net ................................... 151 685
--------- ---------
Income before taxes, minority interest
and equity in earnings of affiliates .... 45,665 40,549
Taxes on income .................................. (17,032) (15,206)
Minority interest in net income of subsidiaries .. (525) (737)
Equity in earnings of affiliates ................. 285 160
--------- ---------
Net income ....................................... $ 28,393 $ 24,766
========= =========
Net income per common share:
Basic ........................................ $ 0.65 $ 0.56
========= =========
Diluted ...................................... $ 0.63 $ 0.55
========= =========
Weighted-average common shares outstanding:
Basic ........................................ 43,786 44,008
========= =========
Diluted ...................................... 45,110 45,069
========= =========
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 27, December 27,
2004 2003
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ...................................... $ 73,086 $ 157,351
Accounts receivable, net of reserves of $43,005 and $43,203 .... 472,927 467,085
Inventories .................................................... 408,073 385,846
Deferred income taxes .......................................... 30,754 30,559
Prepaid expenses and other ..................................... 101,190 115,643
----------- -----------
Total current assets ................................... 1,086,030 1,156,484
Property and equipment, net ........................................ 151,496 154,205
Goodwill ........................................................... 401,318 398,888
Other intangibles, net ............................................. 38,883 37,551
Investments and other .............................................. 154,861 72,242
----------- -----------
Total assets ........................................... $ 1,832,588 $ 1,819,370
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $ 258,704 $ 278,163
Bank credit lines .............................................. 10,542 6,059
Current maturities of long-term debt ........................... 3,259 3,253
Accrued expenses:
Payroll and related ......................................... 51,778 68,214
Taxes ....................................................... 48,385 45,969
Other ....................................................... 106,530 117,530
----------- -----------
Total current liabilities .............................. 479,198 519,188
Long-term debt ..................................................... 273,327 247,100
Other liabilities .................................................. 38,582 37,432
Minority interest .................................................. 11,999 11,532
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 authorized,
none outstanding ............................................ -- --
Common stock, $.01 par value, 120,000,000 authorized,
43,957,099 and 43,761,973 outstanding ...................... 440 438
Additional paid-in capital ...................................... 457,078 445,118
Retained earnings ............................................... 552,191 533,654
Accumulated other comprehensive income .......................... 19,833 24,999
Deferred compensation ........................................... (60) (91)
----------- -----------
Total stockholders' equity ............................. 1,029,482 1,004,118
----------- -----------
Total liabilities and stockholders' equity ............. $ 1,832,588 $ 1,819,370
=========== ===========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
------------------------
March 27, March 29,
2004 2003
--------- ---------
Cash flows from operating activities:
Net income ......................................................... $ 28,393 $ 24,766
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ............................... 9,642 8,544
Provision for losses and allowances on trade receivables .... 409 2,160
Provision for deferred income taxes ......................... 565 2,068
Undistributed earnings of affiliates ........................ (285) (160)
Minority interest in net income of subsidiaries ............. 525 737
Other ....................................................... 144 (85)
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable ................................... (6,815) (13,162)
Inventories ........................................... (23,109) (8,824)
Other current assets .................................. 18,338 10,837
Accounts payable and accruals ......................... (48,109) (40,966)
--------- ---------
Net cash used in operating activities .................................. (20,302) (14,085)
--------- ---------
Cash flows from investing activities:
Purchases of capital expenditures .................................. (5,654) (13,508)
Payments for business acquisitions, net of cash acquired ........... (4,401) (2,281)
Payments related to pending purchase acquisitions .................. (86,031) --
Purchases of marketable securities ................................. -- (4,101)
Proceeds from sales of marketable securities ....................... 14,472 --
Proceeds from maturities of marketable securities .................. -- 26,430
Other .............................................................. (6,257) (1,487)
--------- ---------
Net cash (used in) provided by investing activities .................... (87,871) 5,053
--------- ---------
Cash flows from financing activities:
Principal payments on long-term debt ............................... (262) (254)
Proceeds from issuance of stock upon exercise
of stock options ................................................ 12,683 4,600
Net proceeds from (payments on) bank borrowings .................... 24,417 (1,675)
Payments for repurchases of common stock ........................... (11,054) (6,483)
Other .............................................................. (346) 65
--------- ---------
Net cash provided by (used in) financing activities .................... 25,438 (3,747)
--------- ---------
Net change in cash and cash equivalents ................................ (82,735) (12,779)
Effect of exchange rate changes on cash and cash
equivalents ......................................................... (1,530) (877)
Cash and cash equivalents, beginning of period ......................... 157,351 200,651
--------- ---------
Cash and cash equivalents, end of period ............................... $ 73,086 $ 186,995
========= =========
NOTE: Certain prior period amounts have been reclassified to conform with the
current period presentation.
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Exhibit A
HENRY SCHEIN, INC.
2004 First Quarter
Details of "Comparable Basis" Growth Comparison
Income Statement Summary
(in thousands, except per share data)
(unaudited)
First Quarter %
2004 2003 Growth
As Reported
- ------------------------------------------------------------------------------------------------
Net Sales ........................................ $ 886,631 $ 737,997 20.1%
Operating Income ................................. 46,300 42,205 9.7%
Margin ........................................... 5.2% 5.7% -50 bp
Net Income ....................................... $ 28,393 $ 24,766 14.6%
Diluted EPS ...................................... 0.63 0.55 14.5%
- ------------------------------------------------------------------------------------------------
Subtract: Gain on Real Estate Transaction (1)
Net Sales ........................................ -- --
Operating Income ................................. -- --
Net Income ....................................... -- (454)
Diluted EPS ...................................... -- (0.01)
Comparable Basis
- ------------------------------------------------------------------------------------------------
Net Sales ........................................ $ 886,631 $ 737,997 20.1%
Operating Income ................................. 46,300 42,205 9.7%
Margin ........................................... 5.2% 5.7% -50 bp
Net Income ....................................... $ 28,393 $ 24,312 16.8%
Diluted EPS ...................................... 0.63 0.54 16.7%
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(1) In the first quarter of 2003, there was a $726 thousand pre-tax ($454
thousand after-tax) gain related to a real estate transaction. This gain
was included in the "Other, net" line on the consolidated income statement.
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