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 increases 19% to $0.57
Company affirms 2008 financial guidance
MELVILLE, N.Y. - May 6, 2008 - 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 29, 2008.
Net sales for the first quarter of 2008 were $1.5 billion, an increase
of 16.4% compared with the first quarter of 2007. This increase includes 12.0%
local currency growth (3.0% internally generated and 9.0% from acquisitions) and
4.4% related to foreign currency exchange. (See Exhibit A for details of sales
growth.) The Company previously announced an initiative of reducing sales of
certain lower-margin pharmaceutical products. Excluding sales of those
products, internal net sales growth in local currencies was 5.4%.
Net income for the first quarter of 2008 was $52.3 million or $0.57 per
diluted share, up 20.3% and 18.8%, respectively, compared with the prior-year
first quarter.
"We are pleased with our earnings growth during the first quarter,
which reflects the benefits of our diversified business model serving dental,
medical and veterinary office practitioners in the U.S. and international
markets," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry
Schein. "Our International Group was a particularly strong contributor to both
sales and earnings growth this quarter."
Dental Group sales of $612 million increased 8.7%, including 7.2%
growth in local currencies (5.5% internally generated and 1.7% from
acquisitions) and 1.5% growth related to foreign currency exchange. Of the 7.2%
local currency growth, Dental consumable merchandise sales increased 6.0% (4.3%
internal growth and 1.7% acquisition growth) and Dental equipment sales and
service revenues were up 11.1% (9.8% internal growth and 1.3% acquisition
growth).
"Double-digit growth in equipment sales and service revenues once again
reflected gains in both traditional equipment and high-tech products," commented
Mr. Bergman. "One of the Dental Group highlights during the quarter was initial
sales of the E4D dental CAD/CAM product. This product is in its controlled
launch period and feedback from dentists continues to be very encouraging."
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Medical Group sales of $335 million declined 3.7% (4.4% decline in
internal growth and 0.7% acquisition growth). As mentioned, the Company
previously announced an initiative of reducing sales of certain lower-margin
pharmaceutical products. Excluding sales of those products, internal Medical
net sales growth was 4.5%.
"We have completed the Medical One World initiative, consolidating
three Medical brands into one, and we are very pleased that there was virtually
no sales erosion during the process," said Mr. Bergman. "With this
consolidation behind us, we are excited to be implementing our integrated sales
and marketing approach and look forward to bringing new products and value-added
services to our Medical customers."
For the quarter International Group sales of $540 million increased
45.5%, including 32.2% growth in local currencies (5.6% internally generated and
26.6% from acquisitions) and 13.3% related to foreign currency exchange.
"International Group results featured strong internal sales growth in
the United Kingdom, Germany, Australia and New Zealand, bolstered by the
contribution from our recent acquisition of W. & J. Dunlop, a leading United
Kingdom animal health products supplier," added Mr. Bergman. "I am also
delighted to report that Dunlops is performing above our expectations."
Technology and Value-Added Services Group sales of $39 million
increased 36.5%, including 35.9% growth in local currencies (10.2% internally
generated and 25.7% acquisition growth) and 0.6% growth related to foreign
currency exchange.
"Strong organic growth in our electronic and financial services
businesses contributed to very solid revenue growth in the quarter," stated Mr.
Bergman.
2008 EPS Guidance
Henry Schein affirms 2008 financial guidance, as follows:
o 2008 diluted EPS is expected to be $2.93 to $3.00, representing growth
of 14% to 16% compared with 2007.
o This 2008 diluted EPS guidance includes Henry Schein's expectation
that it will distribute 12 million to 15 million doses of influenza
vaccine during the year, representing earnings of $0.13 to $0.16 per
diluted share.
o 2008 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.
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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 10:00 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 and a member of the NASDAQ
100(R) Index, 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 550,000 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 90,000 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 an installed user base of more than 52,000 practices,
including DENTRIX(R), Easy Dental(R), Oasis(R) and EXACT(R) for dental
practices, MicroMD(R) for physician practices, and AVImark(R) for animal health
clinics.
Headquartered in Melville, N.Y., Henry Schein employs over 12,000
people and has operations or affiliates in 20 countries. The Company's net
sales reached a record $5.9 billion in 2007. For more information, visit the
Henry Schein Web site at www.henryschein.com.
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 regulatory
requirements that affect us; 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, including the failure to achieve anticipated synergies; 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;
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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.
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(TABLES TO FOLLOW)
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
-----------------------------
March 29, March 31,
2008 2007
------------- -------------
Net sales .................................................... $ 1,525,619 $ 1,310,128
Cost of sales ................................................ 1,074,386 919,082
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Gross profit .......................................... 451,233 391,046
Operating expenses:
Selling, general and administrative ...................... 366,006 317,325
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Operating income ...................................... 85,227 73,721
Other income (expense):
Interest income .......................................... 3,983 4,119
Interest expense ......................................... (6,902) (5,942)
Other, net ............................................... (383) (122)
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Income from continuing operations before
taxes, minority interest and equity in
earnings of affiliates ............................... 81,925 71,776
Income taxes ................................................. (27,855) (25,470)
Minority interest in net income of subsidiaries .............. (3,250) (2,915)
Equity in earnings of affiliates ............................. 1,510 23
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Income from continuing operations ............................ 52,330 43,414
Discontinued operations:
Income from operations of discontinued components ........ -- 140
Income tax expense ....................................... -- (60)
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Income from discontinued operations ...................... -- 80
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Net income ................................................... $ 52,330 $ 43,494
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Earnings from continuing operations per share:
Basic .................................................... $ 0.59 $ 0.49
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Diluted .................................................. $ 0.57 $ 0.48
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Income from discontinued operations per share:
Basic .................................................... $ 0.00 $ 0.00
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Diluted .................................................. $ 0.00 $ 0.00
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Earnings per share:
Basic .................................................... $ 0.59 $ 0.49
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Diluted .................................................. $ 0.57 $ 0.48
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Weighted-average common shares outstanding:
Basic .................................................... 89,223 87,911
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Diluted .................................................. 92,259 89,984
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Note: The above prior period amounts have been restated to reflect the effects
of our discontinued operations.
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 29, December 29,
2008 2007
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 203,036 $ 247,590
Available-for-sale securities............................................... 35,925 997
Accounts receivable, net of reserves of $40,981 and $41,315 ................ 702,519 708,307
Inventories, net ........................................................... 701,767 666,786
Deferred income taxes ...................................................... 37,328 32,827
Prepaid expenses and other ................................................. 192,727 192,292
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Total current assets ............................................... 1,873,302 1,848,799
Property and equipment, net .................................................... 255,765 247,671
Goodwill ....................................................................... 947,885 917,194
Other intangibles, net ......................................................... 193,150 192,420
Investments and other .......................................................... 118,367 107,900
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Total assets ....................................................... $ 3,388,469 $ 3,313,984
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 428,691 $ 474,009
Bank credit lines .......................................................... 5,569 8,977
Current maturities of long-term debt ....................................... 24,475 24,319
Accrued expenses:
Payroll and related ..................................................... 114,881 136,291
Taxes ................................................................... 92,910 73,278
Other ................................................................... 222,994 223,765
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Total current liabilities .......................................... 889,520 940,639
Long-term debt ................................................................. 428,541 423,274
Deferred income taxes ........................................................... 91,850 80,260
Other liabilities .............................................................. 52,709 53,906
Minority interest .............................................................. 40,052 35,923
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,
90,218,436 outstanding on March 29, 2008 and
89,603,660 outstanding on December 29, 2007 ............................. 902 896
Additional paid-in capital .................................................. 693,369 673,763
Retained earnings ........................................................... 1,057,385 1,005,055
Accumulated other comprehensive income ...................................... 134,141 100,268
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Total stockholders' equity ......................................... 1,885,797 1,779,982
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Total liabilities and stockholders' equity ......................... $ 3,388,469 3,313,984
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-----------------------------
March 29, March 31,
2008 2007
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Cash flows from operating activities:
Net income ................................................................. $ 52,330 $ 43,494
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ....................................... 19,438 17,557
Stock-based compensation expense .................................... 9,260 4,117
Provision for losses on trade and other accounts receivable ......... 1,137 231
Benefit from deferred income taxes .................................. (3,339) (6,855)
Undistributed earnings of affiliates ................................ (1,510) (23)
Minority interest in net income of subsidiaries ..................... 3,250 2,915
Other ............................................................... (426) (721)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... 16,504 (3,947)
Inventories ................................................... (21,087) 3,936
Other current assets .......................................... 2,503 11,882
Accounts payable and accrued expenses ......................... (64,720) (106,488)
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Net cash provided by (used in) operating activities ............................ 13,340 (33,902)
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Cash flows from investing activities:
Purchases of fixed assets ................................................. (13,743) (8,933)
Payments for equity investment and business acquisitions,
net of cash acquired ................................................... (8,524) (27,432)
Purchases of available-for-sale securities ................................ (35,925) (17,500)
Proceeds from sales of available-for-sale securities ...................... 847 18,000
Net payments for foreign exchange forward contract settlements ............ (2,004) (3,921)
Other ..................................................................... (735) (5,262)
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Net cash used in investing activities .......................................... (60,084) (45,048)
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Cash flows from financing activities:
Repayments of bank borrowings ............................................. (3,919) (255)
Proceeds from issuance of long-term debt .................................. -- 428
Principal payments for long-term debt ..................................... (973) (457)
Proceeds from issuance of stock upon exercise of stock options ............ 7,172 10,691
Payments for repurchases of common stock .................................. -- (30,689)
Excess tax benefits related to stock-based compensation ................... 3,429 5,853
Other ..................................................................... (424) (736)
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Net cash provided by (used in) financing activities ............................ 5,285 (15,165)
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Net change in cash and cash equivalents ........................................ (41,459) (94,115)
Effect of exchange rate changes on cash and cash equivalents ................... (3,095) (76)
Cash and cash equivalents, beginning of period ................................. 247,590 248,647
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Cash and cash equivalents, end of period ....................................... $ 203,036 $ 154,456
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Exhibit A
Henry Schein, Inc.
2008 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2008 over Q1 2007
--------------------
Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal Sales Growth 3.0% 5.5% -4.4% 5.6% 10.2%
Acquisitions 9.0% 1.7% 0.7% 26.6% 25.7%
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 12.0% 7.2% -3.7% 32.2% 35.9%
Foreign Currency Exchange 4.4% 1.5% -- 13.3% 0.6%
------------ ----------- ------------ ------------- ------------
Total Sales Growth 16.4% 8.7% -3.7% 45.5% 36.5%
============ =========== ============ ============= ============
CONTACTS: 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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