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
steven.paladino@henryschein.com
(631) 843-5500
Susan Vassallo
Director, Corporate Communications
susan.vassallo@henryschein.com
FOR IMMEDIATE RELEASE (631) 843-5562
HENRY SCHEIN REPORTS RECORD FIRST QUARTER RESULTS
Income from Continuing Operations grows by 17%
MELVILLE, N.Y. - April 27, 2006 - 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 financial
results for the quarter ended April 1, 2006.
Net sales for the first quarter of 2006 were $1.16 billion, an increase
of 9.3% from the first quarter of 2005 (See Exhibit A for details of sales
growth). This increase includes 11.7% local currency growth (8.3% internally
generated and 3.4% from acquisitions) offset by a 2.4% decline related to
foreign currency exchange.
First quarter income from continuing operations was $35.6 million, up
16.8% compared with the first quarter of 2005, and earnings per diluted share
from continuing operations were $0.40, up 14.3% compared with the prior-year
quarter. Income from continuing operations excludes an after-tax charge of
$19.4 million, or $0.22 per diluted share, for the loss on disposal of the
Hospital Supply business, which has previously been treated as a discontinued
operation. Effective January 1, 2006, the Company adopted the new accounting
rules on expensing stock-based compensation per Financial Accounting Standards
No. 123(R) on a retrospective basis. All periods presented have been adjusted
to give effect to FAS No. 123(R) which amounted to approximately $0.03 per share
in Q1 2006 and Q1 2005.
"Our financial results from continuing operations feature first quarter
records for sales, income and diluted EPS," said Stanley M. Bergman, Chairman
and Chief Executive Officer of Henry Schein. "Internal sales growth in local
currencies once again exceeded our estimate for market growth and reflected
strength in all business Groups."
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For the quarter, Dental sales increased 10.4%, including 9.8% growth in
local currencies (9.1% internally generated and 0.7% from acquisitions) and 0.6%
related to foreign currency exchange. Of the 9.8% local currency growth, Dental
consumable merchandise sales increased 9.9% (9.3% internal growth and 0.6%
acquisition growth) and Dental equipment sales and service revenues were up 9.1%
(8.4% internal growth and 0.7% acquisition growth).
"The first quarter marks the 11th consecutive quarter of double-digit
sales growth in our Dental Group as we continue to gain market share. Dental
sales growth reflects a highly trained field sales force, effective and
innovative marketing initiatives, and an ongoing commitment to expanding the
products and services we bring to our customers," explained Mr. Bergman.
Medical sales increased 6.8% during the first quarter (4.9% internal
growth and 1.9% acquisition growth).
"At the end of Q1 we completed the sale of our Hospital Supply
business," commented Mr. Bergman. "This divestiture sharpens our focus on our
office-based physician operations, which represents our core competency and is
our foundation for future growth. Also, at the end of the quarter we completed
our acquisition of NLS Animal Health. This acquisition represents a significant
increase in Henry Schein's veterinary footprint in the United States, which
along with our growing European veterinary presence, offers Henry Schein's
vendor partners a unique opportunity to access veterinarians on an international
basis."
For the quarter, International sales increased 10.3%, including 20.3%
growth in local currencies (10.8% internally generated and 9.5% from
acquisitions) offset by a 10.0% decline related to foreign currency exchange.
Internal sales growth was bolstered by the acquisitions of the Demedis
operations in Austria, Halas Dental in Australia and Shalfoon Bros. in New
Zealand.
"Internal International sales growth in local currencies is
approximately double our estimate for growth in the markets we serve. We enjoy
tremendous opportunities overseas, and look forward to building upon our
formidable presence particularly in Europe," added Mr. Bergman.
Technology and Value-Added Services sales were 8.6% ahead of prior
year, including 8.3% growth in local currencies (all internal) and 0.3% related
to foreign currency exchange. Electronic services revenues continued a strong
double-digit growth trend.
2006 EPS Guidance
Henry Schein affirms 2006 financial guidance, as follows:
o 2006 diluted EPS is expected to be $2.08 to $2.14 including the impact
of expensing stock-based compensation per Financial Accounting
Standards No. 123(R).
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o Diluted EPS growth is expected to be in the low double digits
percentage range for the second quarter of 2006, and then to accelerate
for the second half of the year due to the impact of seasonal influenza
vaccine sales and the timing of certain expenses.
o This 2006 diluted EPS guidance includes Henry Schein's expectations
that it will distribute approximately 15 million to 17 million doses of
influenza vaccine during 2006, including product manufactured by
GlaxoSmithKline Biologicals (which includes the former ID Biomedical),
Chiron Corporation and sanofi pasteur.
o All guidance is for current continuing operations including completed
acquisitions, and does not include the impact of potential future
acquisitions.
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 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(R) company, 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 500,000
customers worldwide, including dental practices and laboratories, physician
practices and veterinary 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 70,000 national and Henry Schein private-brand products
in stock, as well as over 100,000 additional products available to our customers
as special order items.
Henry Schein also offers a wide range of innovative value-added
practice solutions for healthcare professionals, such as ArubA(R), the Company's
electronic catalog and ordering system. Its leading practice-management
software solutions have been installed in more than 50,000 practices, including
DENTRIX(R) and Easy Dental(R) for dental practices, and AVImark(R) for
veterinary clinics.
Headquartered in Melville, N.Y., Henry Schein employs nearly 11,000
people and has operations in 19 countries. The Company's sales reached a record
$4.6 billion in 2005. For more information, visit the Henry Schein Web site at
www.henryschein.com.
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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 which, 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
government regulations that affect us; financial 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; 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; financial risks associated with
acquisitions; 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,
forward-looking statements 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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(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
--------------------------
April 1, March 26,
2006 2005
----------- -----------
Net sales ................................................ $ 1,161,781 $ 1,062,997
Cost of sales ............................................ 824,179 761,603
----------- -----------
Gross profit ...................................... 337,602 301,394
Operating expenses:
Selling, general and administrative .................. 276,684 248,132
----------- -----------
Operating income .................................. 60,918 53,262
Other income (expense):
Interest income ...................................... 4,556 1,299
Interest expense ..................................... (7,394) (6,226)
Other, net ........................................... 221 (113)
----------- -----------
Income from continuing operations before
taxes, minority interest and equity in
earnings of affiliates ........................... 58,301 48,222
Income taxes ............................................. (21,222) (17,861)
Minority interest in net income of subsidiaries .......... (1,560) (45)
Equity in earnings of affiliates ......................... 108 187
----------- -----------
Income from continuing operations ........................ 35,627 30,503
Discontinued operations:
Income (loss) from operations of discontinued
components (including loss on disposal of
$32,272) .......................................... (32,279) 560
Income tax benefit (expense).......................... 12,911 (190)
----------- -----------
Income (loss) from discontinued operations ........... (19,368) 370
----------- -----------
Net income ............................................... $ 16,259 $ 30,873
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Earnings from continuing operations per share:
Basic ................................................ $ 0.41 $ 0.35
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Diluted .............................................. $ 0.40 $ 0.35
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Earnings (loss) from discontinued operations per share:
Basic ................................................ $ (0.22) $ 0.01
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Diluted .............................................. $ (0.22) $ 0.00
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Earnings per share:
Basic ................................................ $ 0.19 $ 0.36
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Diluted .............................................. $ 0.18 $ 0.35
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Weighted-average common shares outstanding:
Basic ................................................ 87,310 86,679
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Diluted .............................................. 89,242 88,221
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Note: The above prior period amounts have been restated to reflect the effects
of our discontinued operations and the expensing of stock-based compensation
pursuant to our adoption of FAS 123(R) using the modified retrospective
application.
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
April 1, December 31,
2006 2005
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 159,890 $ 254,498
Available-for-sale securities............................................... 80,175 80,195
Accounts receivable, net of reserves of $39,494 and $52,308 ................ 546,414 582,617
Inventories ................................................................ 511,949 505,542
Deferred income taxes ...................................................... 30,108 35,505
Prepaid expenses and other ................................................. 164,970 126,052
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Total current assets ............................................... 1,493,506 1,584,409
Property and equipment, net .................................................... 194,258 190,746
Goodwill ....................................................................... 682,482 626,869
Other intangibles, net ......................................................... 133,936 123,204
Investments and other .......................................................... 62,762 57,892
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Total assets ....................................................... $ 2,566,944 $ 2,583,120
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 340,651 $ 371,392
Bank credit lines .......................................................... 3,380 2,093
Current maturities of long-term debt ....................................... 30,717 33,013
Accrued expenses:
Payroll and related ..................................................... 83,318 96,113
Taxes ................................................................... 44,532 65,070
Other ................................................................... 146,477 156,433
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Total current liabilities .......................................... 649,075 724,114
Long-term debt ................................................................. 488,214 489,520
Deferred income taxes ........................................................... 60,374 54,432
Other liabilities .............................................................. 56,146 53,547
Minority interest .............................................................. 14,258 12,353
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,
88,256,957 outstanding on April 1, 2006 and
87,092,238 outstanding on December 31, 2005 ............................. 883 871
Additional paid-in capital .................................................. 587,107 559,266
Retained earnings ........................................................... 684,217 667,958
Accumulated other comprehensive income ...................................... 26,670 21,059
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Total stockholders' equity ......................................... 1,298,877 1,249,154
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Total liabilities and stockholders' equity ......................... $ 2,566,944 $ 2,583,120
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Note: The above prior period amounts have been restated to reflect the effects
of our adoption of FAS 123(R) using the modified retrospective application.
Also, included above, as of December 31, 2005, there are approximately $44
million of accounts receivable, net of reserves, and approximately $16 million
of inventories, net of reserves, related to discontinued operations which were
sold during the three months ended April 1, 2006.
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
--------------------------
April 1, March 26,
2006 2005
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Cash flows from operating activities:
Net income ................................................................. $ 16,259 $ 30,873
Adjustments to reconcile net income to net cash
used in operating activities:
Loss on sale of discontinued operation, net of tax .................. 19,363 --
Depreciation and amortization ....................................... 14,352 13,237
Stock-based compensation expense .................................... 3,857 3,740
Provision for (recovery of) losses on trade and other
accounts receivable ........................................... 118 (208)
Deferred income taxes ............................................... 4,978 1,638
Undistributed earnings of affiliates ................................ (108) (187)
Minority interest in net income of subsidiaries ..................... 1,560 45
Other ............................................................... (1,113) 1,089
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... 4,599 14,434
Inventories ................................................... (12,481) 8,610
Other current assets .......................................... 3,143 29,908
Accounts payable and accrued expenses ......................... (92,527) (121,356)
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Net cash used in operating activities........................................... (38,000) (18,177)
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Cash flows from investing activities:
Purchases of fixed assets ................................................. (11,168) (8,138)
Payments for business acquisitions, net of cash acquired .................. (72,712) (39,046)
Purchases of available-for-sale securities ................................ (60,875) --
Proceeds from sales of available-for-sale securities ...................... 60,895 --
Net payments for foreign exchange forward contract settlements ............ (1,161) (4,478)
Other ..................................................................... 191 (2,302)
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Net cash used in investing activities .......................................... (84,830) (53,964)
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Cash flows from financing activities:
Net proceeds from bank borrowings ......................................... 1,223 183
Principal payments for long-term debt ..................................... (2,645) (696)
Proceeds from issuance of stock upon exercise of stock options ............ 17,108 10,944
Payments for repurchases of common stock .................................. -- (16,310)
Proceeds from excess tax benefits related to stock-based compensation ..... 6,925 2,882
Other ..................................................................... (186) (401)
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Net cash provided by (used in) financing activities ............................ 22,425 (3,398)
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Net change in cash and cash equivalents ........................................ (100,405) (75,539)
Effect of exchange rate changes on cash and cash equivalents ................... 5,797 3,659
Cash and cash equivalents, beginning of period ................................. 254,498 186,621
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Cash and cash equivalents, end of period ....................................... $ 159,890 $ 114,741
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NOTE: The above prior period amounts have been restated to reflect the effects
of our adoption of FAS 123(R) using the modified retrospective application.
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Exhibit A
Henry Schein, Inc.
2006 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2006 over Q1 2005
--------------------
Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal 8.3% 9.1% 4.9% 10.8% 8.3%
Acquisitions 3.4% 0.7% 1.9% 9.5% --
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 11.7% 9.8% 6.8% 20.3% 8.3%
Foreign Currency Exchange -2.4% 0.6% -- -10.0% 0.3%
------------ ----------- ------------ ------------- ------------
Total Sales Growth 9.3% 10.4% 6.8% 10.3% 8.6%
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