HENRY SCHEIN
NEWS RELEASE
Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747
FOR IMMEDIATE RELEASE
HENRY SCHEIN REPORTS FIRST QUARTER RESULTS
EPS from continuing operations increases 14% to $0.64,
excluding restructuring costs
Company affirms 2009 guidance
MELVILLE, N.Y. - May 4, 2009 - Henry Schein, Inc. (NASDAQ: HSIC), the largest
provider of healthcare products and services to office-based practitioners,
today reported financial results for the quarter ended March 28, 2009.
Net sales for the first quarter of 2009 were $1.5 billion, a decrease
of 2.2% compared with the first quarter of 2008. This consists of 5.5% growth
in local currencies offset by a 7.7% decline related to foreign currency
exchange (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc.
for the first quarter of 2009 was $54.9 million, or $0.61 per diluted share.
These results include restructuring costs of $4.0 million (or $0.03 per diluted
share, after-tax) related to the completion of the expense reduction program
announced in November 2008. Excluding the impact of these restructuring costs,
income from continuing operations attributable to Henry Schein, Inc. for the
quarter was $57.6 million, or $0.64 per diluted share, an increase of 11.9% and
14.3%, respectively, compared with the first quarter of 2008 (see Exhibit B for
reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and
EPS).
Income from continuing operations for the first quarter of 2008 has
been restated for the adoption of FASB Staff Position APB 14-1, which requires
the recognition of non-cash interest expense related to convertible debt. The
impact of this adoption decreased first quarter 2008 diluted EPS by
approximately $0.01.
"With market conditions largely as we expected during the quarter, we
remain committed to managing expenses and delivering growth in diluted EPS from
continuing operations," said Stanley M. Bergman, Chairman and Chief Executive
Officer of Henry Schein. "Our operating margin excluding restructuring costs
once again expanded, up 77 basis points for the quarter to 6.4%. This is
primarily a reflection of effective expense management. We continue to have a
very strong balance sheet with $308 million in cash at quarter-end, and access
to capital at favorable terms."
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Dental Group sales of $597 million declined 2.4%, consisting of a 0.4%
decline in local currencies and a 2.0% decline related to foreign currency
exchange. The 0.4% decline in local currencies consists of 1.0% growth in
Dental consumable merchandise sales and a 5.1% decline in Dental equipment sales
and service revenues.
Medical Group sales of $327 million declined 1.2%, and were negatively
impacted by higher sales of private label products, increased sales of generic
pharmaceuticals, and manufacturer shortages of certain vaccines.
International Group sales of $524 million declined 3.0%, consisting of
16.2% growth in local currencies and a 19.2% decline related to foreign currency
exchange.
"International internal sales growth in local currencies was nearly 6%,
reflecting particular strength in Australia and New Zealand, as well as with our
European veterinary business," added Mr. Bergman. "We were encouraged by the
excellent attendance at the biennial International Dental Show held late in the
quarter in Cologne, Germany, which is one of the largest and most important
gatherings of dentists from across Europe. Our booth was busy, and equipment
orders exceeded those received at the 2007 show."
Technology and Value-Added Services Group sales of $40 million
increased 3.9% during the quarter, consisting of 8.8% growth in local currencies
and a 4.9% decline related to foreign currency exchange.
"Our electronic services business was particularly strong during the
quarter, up more than 20%, while financial services revenue reflects 3.5% growth
in equipment and practice financing," stated Mr. Bergman.
Restructuring Costs
The Company recorded $4.0 million of costs in the first quarter of 2009
for restructuring actions taken to complete the expense reduction program
initiated in the fourth quarter of 2008. The program, which resulted in the
elimination of approximately 400 positions and the closure of several smaller
facilities, is now complete and is expected to provide approximately $24 to $27
million in annual pretax cost savings.
2009 EPS Guidance
Henry Schein today affirmed 2009 financial guidance, as follows:
o 2009 diluted EPS attributable to Henry Schein, Inc. is expected to be
$3.11 to $3.26, representing growth of 7% to 12% compared with restated
2008 results of $2.92, excluding charges related to the Lehman Brothers
bankruptcy as well as restructuring costs. The 2009
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guidance also excludes the effects of restructuring costs.
o Guidance for 2009 diluted EPS attributable to Henry Schein, Inc. 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 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 575,000 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 active user base of more than 60,000 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 12,500
people and has operations or affiliates in 23 countries. The Company's net
sales reached a record $6.4 billion in 2008. 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 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:
decreased customer demand and changes in vendor credit terms; disruptions in
financial markets; general economic conditions; 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; 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 issues 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, 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.
(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 28, March 29,
2009 2008
-------------- --------------
Net sales ...................................................... $ 1,488,605 $ 1,521,777
Cost of sales .................................................. 1,047,595 1,071,146
-------------- --------------
Gross profit ............................................ 441,010 450,631
Operating expenses:
Selling, general and administrative ........................ 346,080 365,356
Restructuring costs ........................................ 4,043 --
-------------- --------------
Operating income ........................................ 90,887 85,275
Other income (expense):
Interest income ............................................ 2,801 3,983
Interest expense ........................................... (6,814) (8,167)
Other, net ................................................. (17) (383)
-------------- --------------
Income from continuing operations before
taxes, noncontrolling interest and equity in
earnings of affiliates ................................. 86,857 80,708
Income taxes ................................................... (28,922) (27,446)
Equity in earnings of affiliates ............................... 1,365 1,510
-------------- --------------
Income from continuing operations .............................. 59,300 54,772
Loss from discontinued operations, net of tax .............. -- (82)
-------------- --------------
Net income ..................................................... 59,300 54,690
Less: Net income attributable to noncontrolling interests .. (4,449) (3,250)
-------------- --------------
Net income attributable to Henry Schein, Inc. .................. $ 54,851 $ 51,440
============== ==============
Amounts attributable to Henry Schein, Inc.:
Income from continuing operations ............................ $ 54,851 $ 51,522
Loss from discontinued operations, net of tax ................ -- (82)
-------------- --------------
Net income ................................................... $ 54,851 $ 51,440
============== ==============
Earnings per share attributable to Henry Schein, Inc.:
From continuing operations:
Basic ..................................................... $ 0.62 $ 0.58
============== ==============
Diluted ................................................... $ 0.61 $ 0.56
============== ==============
From discontinued operations:
Basic ..................................................... $ 0.00 $ 0.00
============== ==============
Diluted ................................................... $ 0.00 $ 0.00
============== ==============
From net income:
Basic ..................................................... $ 0.62 $ 0.58
============== ==============
Diluted ................................................... $ 0.61 $ 0.56
============== ==============
Weighted-average common shares outstanding:
Basic ...................................................... 88,731 89,223
============== ==============
Diluted .................................................... 89,589 92,259
============== ==============
Note: The above prior period amounts have been restated to reflect the effects
of discontinued operations, the adoption of FASB Staff Position APB 14-1 related
to convertible debt and FAS 160 related to the presentation of noncontrolling
interests.
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HENRY SCHEIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 28, December 27,
2009 2008
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 308,156 $ 369,570
Accounts receivable, net of reserves of $43,966 and $42,855 ................ 677,193 734,027
Inventories, net ........................................................... 740,947 731,654
Deferred income taxes ...................................................... 37,386 36,974
Prepaid expenses and other ................................................. 176,634 193,841
------------- -------------
Total current assets ............................................... 1,940,316 2,066,066
Property and equipment, net .................................................... 242,175 247,835
Goodwill ....................................................................... 899,884 922,952
Other intangibles, net ......................................................... 203,163 214,093
Investments and other .......................................................... 147,006 148,264
------------- -------------
Total assets ....................................................... $ 3,432,544 $ 3,599,210
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 426,066 $ 554,773
Bank credit lines .......................................................... 1,911 4,936
Current maturities of long-term debt ....................................... 155,044 156,405
Accrued expenses:
Payroll and related ..................................................... 106,768 135,523
Taxes ................................................................... 84,304 69,792
Other ................................................................... 237,792 262,236
------------- -------------
Total current liabilities .......................................... 1,011,885 1,183,665
Long-term debt ................................................................. 256,333 256,648
Deferred income taxes .......................................................... 86,135 95,399
Other liabilities .............................................................. 56,131 58,109
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,
90,150,568 outstanding on March 28, 2009 and
89,351,849 outstanding on December 27, 2008 ............................. 902 894
Additional paid-in capital .................................................. 729,939 725,540
Retained earnings ........................................................... 1,236,305 1,181,454
Accumulated other comprehensive income (loss) ............................... (15,580) 29,721
------------- -------------
Total Henry Schein, Inc. stockholders' equity ............................... 1,951,566 1,937,609
Noncontrolling interest ..................................................... 70,494 67,780
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Total stockholders' equity ......................................... 2,022,060 2,005,389
------------- -------------
Total liabilities and stockholders' equity ......................... $ 3,432,544 $ 3,599,210
============= =============
Note: The above prior period amounts have been restated to reflect the adoption
of FASB Staff Position APB 14-1 related to convertible debt and FAS 160 related
to the presentation of noncontrolling interests.
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HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-----------------------------
March 28, March 29,
2009 2008
------------- -------------
Cash flows from operating activities:
Net income attributable to Henry Schein, Inc. .............................. $ 54,851 $ 51,440
Adjustments to reconcile net income attributable to Henry Schein, Inc. to
net cash provided by (used in) operating activities:
Depreciation and amortization ....................................... 19,921 19,438
Amortization of bond discount ....................................... 1,464 1,382
Stock-based compensation expense .................................... 6,067 9,260
Provision for losses on trade and other accounts receivable ......... 1,186 1,137
Benefit from deferred income taxes .................................. (5,485) (3,809)
Undistributed earnings of affiliates ................................ (1,365) (1,510)
Net income attributable to noncontrolling interests ................. 4,449 3,250
Other ............................................................... 1,616 (426)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... 43,397 16,504
Inventories ................................................... (21,039) (21,087)
Other current assets .......................................... 12,669 2,514
Accounts payable and accrued expenses ......................... (144,859) (64,720)
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Net cash provided by (used in) operating activities ............................ (27,128) 13,373
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Cash flows from investing activities:
Purchases of fixed assets ................................................. (12,866) (13,743)
Payments for equity investment and business acquisitions,
net of cash acquired ................................................... (13,743) (8,524)
Purchases of available-for-sale securities ................................ -- (35,925)
Proceeds from sales of available-for-sale securities ...................... 2,740 847
Net proceeds from (payments for) foreign exchange forward
contract settlements ................................................... 283 (2,004)
Other ..................................................................... (4,294) (768)
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Net cash used in investing activities .......................................... (27,880) (60,117)
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Cash flows from financing activities:
Repayments of bank borrowings ............................................. (3,189) (3,919)
Principal payments for long-term debt ..................................... (1,712) (973)
Proceeds from issuance of stock upon exercise of stock options ............ 377 7,172
Excess tax benefits related to stock-based compensation ................... 180 3,429
Other ..................................................................... (2,090) (424)
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Net cash provided by (used in) financing activities ............................ (6,434) 5,285
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Net change in cash and cash equivalents ........................................ (61,442) (41,459)
Effect of exchange rate changes on cash and cash equivalents ................... 28 (3,095)
Cash and cash equivalents, beginning of period ................................. 369,570 247,590
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Cash and cash equivalents, end of period ....................................... $ 308,156 $ 203,036
============= =============
Note: The above prior period amounts have been restated to reflect the adoption
of FASB Staff Position APB 14-1 related to convertible debt and FAS 160 related
to the presentation of noncontrolling interests.
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Exhibit A
Henry Schein, Inc.
2009 First Quarter
Sales Growth Rate Summary
(unaudited)
Q1 2009 over Q1 2008
--------------------
Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal Sales Growth 0.5% -3.0% -2.4% 5.8% 8.8%
Acquisitions 5.0% 2.6% 1.2% 10.4% 0.0%
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 5.5% -0.4% -1.2% 16.2% 8.8%
Foreign Currency Exchange -7.7% -2.0% 0.0% -19.2% -4.9%
------------ ----------- ------------ ------------- ------------
Total Sales Growth -2.2% -2.4% -1.2% -3.0% 3.9%
============ =========== ============ ============= ============
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Exhibit B
Henry Schein, Inc.
2009 First Quarter
Reconciliation of GAAP results of
continuing operations to non-GAAP results
of continuing operations
(in thousands, except per share data)
(unaudited)
First Quarter %
2009 2008 Growth
From Continuing Operations
- ----------------------------------------------------------------------------------------------
Net Sales $1,488,605 $1,521,777 -2.2%
Operating Income 90,887 85,275 6.6%
Margin 6.1% 5.6% 50 bp
Income from Continuing Operations attributable
to Henry Schein, Inc. $ 54,851 $ 51,522 6.5%
Diluted EPS from Continuing Operations
attributable to Henry Schein, Inc. 0.61 0.56 8.9%
Net Income attributable to Henry Schein, Inc. 54,851 51,440 6.6%
Diluted EPS 0.61 0.56 8.9%
- ----------------------------------------------------------------------------------------------
Add: Non-GAAP Adjustments
Net Sales -- --
Operating Income $ 4,043 --
Income from Continuing Operations attributable
to Henry Schein, Inc. 2,784 --
Diluted EPS from Continuing Operations
attributable to Henry Schein, Inc. 0.03 --
Net Income attributable to Henry Schein, Inc. 2,784 --
Diluted EPS 0.03 --
Adjusted Results from Continuing Operations
- ----------------------------------------------------------------------------------------------
Net Sales $1,488,605 $1,521,777 -2.2%
Operating Income 94,930 85,275 11.3%
Margin 6.4% 5.6% 77 bp
Income from Continuing Operations attributable
to Henry Schein, Inc. $ 57,635 $ 51,522 11.9%
Diluted EPS from Continuing Operations
attributable to Henry Schein, Inc. 0.64 0.56 14.3%
Net Income attributable to Henry Schein, Inc. 57,635 51,440 12.0%
Diluted EPS 0.64 0.56 14.3%
- ----------------------------------------------------------------------------------------------
Note:
Above reflects adjusted results from continuing operations excluding
restructuring costs of $4,043 ($2,784 after tax and $.03 per diluted share)
recorded in the first quarter of 2009. This non-GAAP comparison is being
presented in order to provide a more comparable basis for analysis.
CONTACTS: Investors: Steven Paladino
Executive Vice President and Chief Financial Officer
steven.paladino@henryschein.com
(631) 843-5500
Media: Susan Vassallo
Vice President, Corporate Communications
susan.vassallo@henryschein.com
(631) 843-5562
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