HENRY SCHEIN
NEWS RELEASE
Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747
FOR IMMEDIATE RELEASE
HENRY SCHEIN REPORTS RECORD FIRST QUARTER RESULTS
Diluted EPS from continuing operations increases 20% to $0.48
MELVILLE, N.Y. - May 8, 2007 - 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 March 31, 2007.
Net sales for the first quarter of 2007 were $1.3 billion, an increase
of 14.8% from the first quarter of 2006. This increase includes 12.4% local
currency growth (4.2% internally generated and 8.2% from acquisitions net of
divestiture) and 2.4% related to foreign currency exchange. (See Exhibit A for
details of sales growth.)
Net income and income from continuing operations for the first quarter
of 2007 were $43.5 million or $0.48 per diluted share. First quarter 2007
income and diluted earnings per share from continuing operations were up 22.1%
and 20.0%, respectively, compared with the prior-year first quarter. There was
no impact of discontinued operations in the current quarter.
"Once again our quarterly results featured double-digit sales growth in
each of our business groups as we continued to gain market share across the
board," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry
Schein. "Also, operating margin expanded as we continue to leverage a growing
top line across our established infrastructure and focus on selling higher-
margin products."
For the first quarter, Dental sales increased 16.7%, including 16.9%
growth in local currencies (9.9% internally generated and 7.0% from
acquisitions) offset by a 0.2% decline related to foreign currency exchange. Of
the 16.9% local currency growth, Dental consumable merchandise sales increased
14.6% (6.2% internal growth and 8.4% acquisition growth) and Dental equipment
sales and service revenues were up 25.6% (23.5% internal growth and 2.1%
acquisition growth).
"Strong market-share gains in our Dental Group were led by
equipment sales and service growth, which reflects continued strength in basic
equipment sales and strong demand for high-tech
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products as dentists strive for greater practice efficiencies and patient
satisfaction," commented Mr. Bergman. "The dental markets we serve remain
strong, based on our positive experience with customers and manufacturers at two
large dental trade shows during the quarter."
Medical sales increased 11.3% during the first quarter (1.9% decline in
internal sales growth offset by 13.2% acquisition growth net of divestiture).
The Company estimates that its Medical Group internal sales growth, excluding
sales of all pharmaceutical products, represents a market share gain for the
quarter.
"In April we combined our major physician brands under the Henry Schein
Medical brand, with the goal of leveraging our unique strengths in field sales,
telesales, telemarketing and direct marketing," added Mr. Bergman. "While we
are confident in the long-term benefit of this initiative to our customers and
to our Company, Medical Group results over the next several quarters will
reflect the elimination of duplicate costs and may reflect some sales erosion as
well."
For the quarter, International sales increased 15.1%, including 6.1%
growth in local currencies (1.1% internally generated and 5.0% from
acquisitions), and 9.0% related to foreign currency exchange. "International
sales growth was negatively impacted by the timing of the International Dental
Show (IDS) in Germany, the world's largest dental trade show which was held near
the end of the first quarter, among other factors," commented Mr. Bergman.
Technology and Value-Added Services sales increased 24.6% during the
first quarter of 2007, including 24.7% growth in local currencies (17.7%
internally generated and 7.0% acquisition growth) offset by a 0.1% decline
related to foreign currency exchange. "Our Technology and Value-Added Services
sales growth for the quarter was fueled by strong growth in electronic services,
software and financial services revenues," stated Mr. Bergman.
Stock Repurchase Plan
Henry Schein announced that it repurchased 639,100 shares of common
stock during the first quarter of 2007 at an average price of $48.02 per share.
Approximately $140 million remains authorized for future common stock
repurchases. The impact of the repurchase of shares under this program on first
quarter diluted EPS was immaterial.
2007 EPS Guidance
Henry Schein affirms 2007 financial guidance, as follows:
o 2007 diluted EPS is expected to be $2.51 to $2.57. This represents an
increase of 23% to 26% compared with 2006 diluted EPS from continuing
operations.
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o This 2007 diluted EPS guidance includes Henry Schein's expectations
that it will distribute approximately 20 million doses of influenza
vaccine during the year.
o We expect mid-teens diluted EPS growth in the second quarter of 2007.
o 2007 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.
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 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 70,000 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(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, MicroMd(R) for physician
practices, and AVImark(R) for animal health clinics.
Headquartered in Melville, N.Y., Henry Schein employs more than 11,000
people and has operations in 19 countries. The Company's net sales reached a
record $5.15 billion in 2006. 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; 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, 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.
(TABLES TO FOLLOW)
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
-----------------------------
March 31, April 1,
2007 2006
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Net sales ................................................ $ 1,334,143 $ 1,161,781
Cost of sales ............................................ 941,170 824,179
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Gross profit ...................................... 392,973 337,602
Operating expenses:
Selling, general and administrative .................. 319,074 276,684
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Operating income .................................. 73,899 60,918
Other income (expense):
Interest income ...................................... 4,138 4,556
Interest expense ..................................... (6,004) (7,394)
Other, net ........................................... (117) 221
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Income from continuing operations before
taxes, minority interest and equity in
earnings of affiliates ........................... 71,916 58,301
Income taxes ............................................. (25,530) (21,222)
Minority interest in net income of subsidiaries .......... (2,915) (1,560)
Equity in earnings of affiliates ......................... 23 108
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Income from continuing operations ........................ 43,494 35,627
Discontinued operations:
Loss from operations of discontinued
components ........................................ -- (32,279)
Income tax benefit ................................... -- 12,911
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Loss from discontinued operations .................... -- (19,368)
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Net income ............................................... $ 43,494 $ 16,259
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Earnings from continuing operations per share:
Basic ................................................ $ 0.49 $ 0.41
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Diluted .............................................. $ 0.48 $ 0.40
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Loss from discontinued operations per share:
Basic ................................................ $ -- $ (0.22)
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Diluted .............................................. $ -- $ (0.22)
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Earnings per share:
Basic ................................................ $ 0.49 $ 0.19
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Diluted .............................................. $ 0.48 $ 0.18
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Weighted-average common shares outstanding:
Basic ................................................ 87,911 87,310
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Diluted .............................................. 89,984 89,242
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, December 30,
2007 2006
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 154,456 $ 248,647
Available-for-sale securities............................................... 47,499 47,999
Accounts receivable, net of reserves of $40,379 and $40,536 ................ 617,427 610,020
Inventories, net ........................................................... 583,236 584,103
Deferred income taxes ...................................................... 29,992 28,240
Prepaid expenses and other ................................................. 119,169 125,839
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Total current assets ............................................... 1,551,779 1,644,848
Property and equipment, net .................................................... 221,234 225,038
Goodwill ....................................................................... 787,018 773,801
Other intangibles, net ......................................................... 157,874 161,542
Investments and other .......................................................... 97,487 75,917
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Total assets ....................................................... $ 2,815,392 $ 2,881,146
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 343,491 $ 414,062
Bank credit lines .......................................................... 2,359 2,528
Current maturities of long-term debt ....................................... 37,495 41,036
Accrued expenses:
Payroll and related ..................................................... 96,994 110,401
Taxes ................................................................... 52,720 59,007
Other ................................................................... 165,113 183,054
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Total current liabilities .......................................... 698,172 810,088
Long-term debt ................................................................. 457,318 455,806
Deferred income taxes ........................................................... 67,551 62,334
Other liabilities .............................................................. 61,291 60,209
Minority interest .............................................................. 21,926 21,746
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,
88,806,126 outstanding on March 31, 2007 and
88,499,321 outstanding on December 30, 2006 ............................. 888 885
Additional paid-in capital .................................................. 629,051 614,551
Retained earnings ........................................................... 833,376 808,164
Accumulated other comprehensive income ...................................... 45,819 47,363
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Total stockholders' equity ......................................... 1,509,134 1,470,963
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Total liabilities and stockholders' equity ......................... $ 2,815,392 $ 2,881,146
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-----------------------------
March 31, April 1,
2007 2006
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Cash flows from operating activities:
Net income ................................................................. $ 43,494 $ 16,259
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 ....................................... 17,557 14,352
Stock-based compensation expense .................................... 4,117 3,857
Provision for losses on trade and other accounts
receivable .................................................... 231 118
Deferred income taxes ............................................... (6,855) 4,978
Undistributed earnings of affiliates ................................ (23) (108)
Minority interest in net income of subsidiaries ..................... 2,915 1,560
Other ............................................................... (721) (1,113)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... (3,947) 4,599
Inventories ................................................... 3,936 (12,481)
Other current assets .......................................... 11,882 3,143
Accounts payable and accrued expenses ......................... (106,488) (92,527)
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Net cash used in operating activities .......................................... (33,902) (38,000)
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Cash flows from investing activities:
Purchases of fixed assets ................................................. (8,933) (11,168)
Payments for equity investment and business acquisitions,
net of cash acquired ................................................... (27,432) (72,712)
Purchases of available-for-sale securities ................................ (17,500) (84,421)
Proceeds from sales of available-for-sale securities ...................... 18,000 107,031
Proceeds from maturities of available-for-sale securities ................. -- 80
Net payments for foreign exchange forward contract settlements ............ (3,921) (1,161)
Other ..................................................................... (5,262) 191
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Net cash used in investing activities .......................................... (45,048) (62,160)
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Cash flows from financing activities:
Proceeds from issuance of long-term debt .................................. 428 --
Proceeds from (repayments of) bank borrowings ............................. (255) 1,223
Principal payments for long-term debt ..................................... (457) (2,645)
Proceeds from issuance of stock upon exercise of stock options ............ 10,691 17,108
Payments for repurchases of common stock .................................. (30,689) --
Excess tax benefits related to stock-based compensation ................... 5,853 6,925
Other ..................................................................... (736) (186)
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Net cash provided by (used in) financing activities ............................ (15,165) 22,425
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Net change in cash and cash equivalents ........................................ (94,115) (77,735)
Effect of exchange rate changes on cash and cash equivalents ................... (76) 5,797
Cash and cash equivalents, beginning of period ................................. 248,647 210,683
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Cash and cash equivalents, end of period ....................................... $ 154,456 $ 138,745
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Note: The prior period amounts have been restated to reflect the effects of a
reclassification of variable-rate demand notes from 'cash and cash equivalents'
to 'available-for-sale securities' retrospective to December 31, 2005.
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Exhibit A
Henry Schein, Inc.
2007 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2007 over Q1 2006
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Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal Sales Growth 4.2% 9.9% -1.9% 1.1% 17.7%
Acquisitions, net of divestiture 8.2% 7.0% 13.2% 5.0% 7.0%
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 12.4% 16.9% 11.3% 6.1% 24.7%
Foreign Currency Exchange 2.4% -0.2% -- 9.0% -0.1%
------------ ----------- ------------ ------------- ------------
Total Sales Growth 14.8% 16.7% 11.3% 15.1% 24.6%
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FOR: Henry Schein, Inc.
CONTACT: Steven Paladino
Executive Vice President and
Chief Financial Officer
steven.paladino@henryschein.com
(631) 843-5500
Investors:
Neal Goldner
Vice President, Investor Relations
neal.goldner@henryschein.com
(631) 845-2820
Media:
Susan Vassallo
Vice President, Corporate
Communications
susan.vassallo@henryschein.com
(631) 843-5562
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