HENRY SCHEIN
NEWS RELEASE
Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747
FOR IMMEDIATE RELEASE
HENRY SCHEIN REPORTS SECOND QUARTER RESULTS
EPS from continuing operations increases 14% to a record $0.81
Company affirms 2009 guidance
MELVILLE, N.Y. - August 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 June 27, 2009.
Net sales for the second quarter of 2009 were $1.6 billion, a decrease
of 1.8% compared with the second quarter of 2008. This consists of a 7.1%
decline related to foreign currency exchange, offset by a 5.3% growth in local
currencies (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc.
for the second quarter of 2009 was $73.5 million, or $0.81 per diluted share, an
increase of 13.1% and 14.1%, respectively, compared with the second quarter of
2008. Income from continuing operations for the second quarter of 2008 has been
restated for the adoption of FASB Staff Position APB 14-1, which decreased
diluted EPS by approximately $0.01.
"We are pleased to report growth in diluted EPS from continuing
operations of 14% and operating margin expansion of 65 basis points," said
Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "Our
financial results for the quarter demonstrate a commitment to efficient
operations and prudent cash management. The markets Henry Schein serves were
largely as we expected them to be during the second quarter."
Dental Group sales of $626 million declined 5.1%, consisting of a 1.5%
decline related to foreign currency exchange and a 3.6% decline in local
currencies. The 3.6% decline in local currencies included 1.3% growth in Dental
consumable merchandise sales and a 17.5% decline in Dental equipment sales and
service revenues.
"Dental consumable merchandise sales figures suggest stabilization in
the market and dentists continue to be cautious when committing to purchasing
equipment," commented Mr. Bergman.
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Medical Group sales of $351 million increased 8.0%, and were positively
impacted by strong sales of consumable products, as well as by sales of products
related to the H1N1 virus.
International Group sales of $592 million declined 3.8%, consisting of
a 17.2% decline related to foreign currency exchange and 13.4% growth in local
currencies. International sales growth in local currencies included particular
strength in the Company's dental equipment and veterinary businesses.
Technology and Value-Added Services Group sales of $43 million
increased 3.5% during the quarter, consisting of a 3.8% decline related to
foreign currency exchange and a 7.3% growth in local currencies.
Year-to-Date Results
For the first half of 2009, net sales of $3.1 billion represent a
decrease of 2.0% compared with the first half of 2008. This decrease includes a
7.4% decline related to foreign currency exchange offset by 5.4% growth in
local currencies.
Income from continuing operations attributable to Henry Schein, Inc.
for the first half of 2009 was $128.3 million, or $1.43 per diluted share.
These results include first quarter 2009 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 first half of 2009 was $131.1 million, or $1.46 per diluted
share, an increase of 12.5% and 15.9%, respectively, compared with the first
half 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 half of 2008 has been restated for the adoption of FASB Staff Position
APB 14-1, which decreased diluted EPS by approximately $0.02.
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 guidance also
excludes 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.
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Second Quarter Conference Call Webcast
The Company will hold a conference call to discuss second 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 provides exclusive, innovative technology offerings for
dental, medical and veterinary professionals, including value-added practice
management software and electronic health record solutions.
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.
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.
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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)
- 4 -
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
-------------- -------------- -------------- --------------
Net sales ...................................................... $ 1,611,006 $ 1,640,851 $ 3,099,611 $ 3,162,628
Cost of sales .................................................. 1,132,494 1,152,741 2,180,089 2,223,887
-------------- -------------- -------------- --------------
Gross profit ............................................ 478,512 488,110 919,522 938,741
Operating expenses:
Selling, general and administrative ........................ 356,202 374,118 702,282 739,474
Restructuring costs ........................................ -- -- 4,043 --
-------------- -------------- -------------- --------------
Operating income ........................................ 122,310 113,992 213,197 199,267
Other income (expense):
Interest income ............................................ 2,486 3,974 5,287 7,957
Interest expense ........................................... (6,467) (9,593) (13,281) (17,760)
Other, net ................................................. (272) (291) (289) (674)
-------------- -------------- -------------- --------------
Income from continuing operations before
taxes, noncontrolling interest and equity in
earnings of affiliates ................................. 118,057 108,082 204,914 188,790
Income taxes ................................................... (38,841) (36,874) (67,763) (64,320)
Equity in earnings of affiliates ............................... 1,212 908 2,577 2,418
-------------- -------------- -------------- --------------
Income from continuing operations .............................. 80,428 72,116 139,728 126,888
Loss from discontinued operations, net of tax .............. -- (415) -- (497)
-------------- -------------- -------------- --------------
Net income ..................................................... 80,428 71,701 139,728 126,391
Less: Net income attributable to noncontrolling interests .. (6,955) (7,131) (11,404) (10,381)
-------------- -------------- -------------- --------------
Net income attributable to Henry Schein, Inc. .................. $ 73,473 $ 64,570 $ 128,324 $ 116,010
============== ============== ============== ==============
Amounts attributable to Henry Schein, Inc.:
Income from continuing operations ............................ $ 73,473 $ 64,985 $ 128,324 $ 116,507
Loss from discontinued operations, net of tax ................ -- (415) -- (497)
-------------- -------------- -------------- --------------
Net income ................................................... $ 73,473 $ 64,570 $ 128,324 $ 116,010
============== ============== ============== ==============
Earnings per share attributable to Henry Schein, Inc.:
From continuing operations:
Basic ..................................................... $ 0.83 $ 0.73 $ 1.44 $ 1.30
============== ============== ============== ==============
Diluted ................................................... $ 0.81 $ 0.71 $ 1.43 $ 1.26
============== ============== ============== ==============
From discontinued operations:
Basic ..................................................... $ 0.00 $ (0.01) $ 0.00 $ 0.00
============== ============== ============== ==============
Diluted ................................................... $ 0.00 $ (0.01) $ 0.00 $ 0.00
============== ============== ============== ==============
From net income:
Basic ..................................................... $ 0.83 $ 0.72 $ 1.44 $ 1.30
============== ============== ============== ==============
Diluted ................................................... $ 0.81 $ 0.70 $ 1.43 $ 1.26
============== ============== ============== ==============
Weighted-average common shares outstanding:
Basic ...................................................... 88,815 89,587 88,838 89,417
============== ============== ============== ==============
Diluted .................................................... 90,534 92,012 90,021 92,212
============== ============== ============== ==============
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)
June 27, December 27,
2009 2008
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................................. $ 393,873 $ 369,570
Accounts receivable, net of reserves of $46,419 and $42,855 ................ 730,996 734,027
Inventories, net ........................................................... 737,956 731,654
Deferred income taxes ...................................................... 38,667 36,974
Prepaid expenses and other ................................................. 187,798 193,841
------------- -------------
Total current assets ............................................... 2,089,290 2,066,066
Property and equipment, net .................................................... 254,008 247,835
Goodwill ....................................................................... 948,862 922,952
Other intangibles, net ......................................................... 206,429 214,093
Investments and other .......................................................... 146,901 148,264
------------- -------------
Total assets ....................................................... $ 3,645,490 $ 3,599,210
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 435,579 $ 554,773
Bank credit lines .......................................................... 2,014 4,936
Current maturities of long-term debt ....................................... 154,251 156,405
Accrued expenses:
Payroll and related ..................................................... 123,182 135,523
Taxes ................................................................... 91,091 69,792
Other ................................................................... 251,495 262,236
------------- -------------
Total current liabilities .......................................... 1,057,612 1,183,665
Long-term debt ................................................................. 261,229 256,648
Deferred income taxes .......................................................... 96,542 95,399
Other liabilities .............................................................. 58,482 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,
90,167,656 outstanding on June 27, 2009 and
89,351,849 outstanding on December 27, 2008 ............................. 902 894
Additional paid-in capital .................................................. 740,186 725,540
Retained earnings ........................................................... 1,309,778 1,181,454
Accumulated other comprehensive income ...................................... 45,578 29,721
------------- -------------
Total Henry Schein, Inc. stockholders' equity ............................... 2,096,444 1,937,609
Noncontrolling interest ..................................................... 75,181 67,780
------------- -------------
Total stockholders' equity ......................................... 2,171,625 2,005,389
------------- -------------
Total liabilities and stockholders' equity ......................... $ 3,645,490 $ 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.
- 6 -
HENRY SCHEIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
-----------------------------
June 27, June 28,
2009 2008
------------- -------------
Cash flows from operating activities:
Net income ................................................................ $ 80,428 $ 71,701
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ....................................... 20,813 20,270
Amortization of bond discount ....................................... 1,500 1,410
Stock-based compensation expense .................................... 6,236 6,956
Provision for losses on trade and other accounts receivable ......... 526 1,467
Benefit from deferred income taxes .................................. (436) (33)
Undistributed earnings of affiliates ................................ (1,212) (908)
Other ............................................................... (125) (891)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... (28,954) (23,256)
Inventories ................................................... 34,287 16,023
Other current assets .......................................... (10,199) 8,464
Accounts payable and accrued expenses ......................... 3,839 24,108
------------- -------------
Net cash provided by operating activities ...................................... 106,703 125,311
------------- -------------
Cash flows from investing activities:
Purchases of fixed assets ................................................. (15,537) (9,723)
Payments for equity investment and business acquisitions,
net of cash acquired ................................................... (12,746) (15,057)
Purchases of available-for-sale securities ................................ -- --
Proceeds from sales of available-for-sale securities ...................... 1,300 --
Net proceeds from (payments for) foreign exchange forward
contract settlements ................................................... (8) (3,048)
Other ..................................................................... 1,614 5,272
------------- -------------
Net cash used in investing activities .......................................... (25,377) (22,556)
------------- -------------
Cash flows from financing activities:
Repayments of bank borrowings ............................................. (204) (2,589)
Principal payments for long-term debt ..................................... (900) (4,976)
Proceeds from issuance of stock upon exercise of stock options ............ 3,551 5,523
Payments for repurchases of common stock .................................. -- (31,647)
Excess tax benefits related to stock-based compensation ................... 503 1,244
Other ..................................................................... 342 (977)
------------- -------------
Net cash provided by (used in) financing activities ............................ 3,292 (33,422)
------------- -------------
Net change in cash and cash equivalents ........................................ 84,618 69,333
Effect of exchange rate changes on cash and cash equivalents ................... 1,099 (937)
Cash and cash equivalents, beginning of period ................................. 308,156 203,036
------------- -------------
Cash and cash equivalents, end of period ....................................... $ 393,873 $ 271,432
============= =============
Six Months Ended
-----------------------------
June 27, June 28,
2009 2008
------------- -------------
Cash flows from operating activities:
Net income ................................................................ $ 139,728 $ 126,391
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ....................................... 40,734 39,708
Amortization of bond discount ....................................... 2,964 2,792
Stock-based compensation expense .................................... 12,303 16,216
Provision for losses on trade and other accounts receivable ......... 1,712 2,604
Benefit from deferred income taxes .................................. (5,921) (3,842)
Undistributed earnings of affiliates ................................ (2,577) (2,418)
Other ............................................................... 1,491 (1,317)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ........................................... 14,443 (6,752)
Inventories ................................................... 13,248 (5,064)
Other current assets .......................................... 2,470 10,978
Accounts payable and accrued expenses ......................... (141,020) (40,612)
------------- -------------
Net cash provided by operating activities ...................................... 79,575 138,684
------------- -------------
Cash flows from investing activities:
Purchases of fixed assets ................................................. (28,403) (23,466)
Payments for equity investment and business acquisitions,
net of cash acquired ................................................... (26,489) (23,581)
Purchases of available-for-sale securities ................................ -- (35,925)
Proceeds from sales of available-for-sale securities ...................... 4,040 847
Net proceeds from (payments for) foreign exchange forward
contract settlements ................................................... 275 (5,052)
Other ..................................................................... (2,680) 4,504
------------- -------------
Net cash used in investing activities .......................................... (53,257) (82,673)
------------- -------------
Cash flows from financing activities:
Repayments of bank borrowings ............................................. (3,393) (6,508)
Principal payments for long-term debt ..................................... (2,612) (5,949)
Proceeds from issuance of stock upon exercise of stock options ............ 3,928 12,695
Payments for repurchases of common stock .................................. -- (31,647)
Excess tax benefits related to stock-based compensation ................... 683 4,673
Other ..................................................................... (1,748) (1,401)
------------- -------------
Net cash provided by (used in) financing activities ............................ (3,142) (28,137)
------------- -------------
Net change in cash and cash equivalents ........................................ 23,176 27,874
Effect of exchange rate changes on cash and cash equivalents ................... 1,127 (4,032)
Cash and cash equivalents, beginning of period ................................. 369,570 247,590
------------- -------------
Cash and cash equivalents, end of period ....................................... $ 393,873 $ 271,432
============= =============
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.
- 7 -
Exhibit A
Henry Schein, Inc.
2009 Second Quarter
Sales Growth Rate Summary
(unaudited)
Q2 2009 over Q2 2008
--------------------
Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal Sales Growth 0.7% -6.0% 6.7% 4.1% 7.3%
Acquisitions 4.6% 2.4% 1.3% 9.3% 0.0%
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 5.3% -3.6% 8.0% 13.4% 7.3%
Foreign Currency Exchange -7.1% -1.5% 0.0% -17.2% -3.8%
------------ ----------- ------------ ------------- ------------
Total Sales Growth -1.8% -5.1% 8.0% -3.8% 3.5%
============ =========== ============ ============= ============
Q2 YTD 2009 over Q2 YTD 2008
----------------------------
Consolidated Dental Medical International Technology
------------ ----------- ------------ ------------- ------------
Internal Sales Growth 0.5% -4.3% 2.1% 4.5% 8.0%
Acquisitions 4.9% 2.2% 1.2% 10.2% 0.0%
------------ ----------- ------------ ------------- ------------
Local Currency Sales Growth 5.4% -2.1% 3.3% 14.7% 8.0%
Foreign Currency Exchange -7.4% -1.7% 0.0% -18.1% -4.3%
------------ ----------- ------------ ------------- ------------
Total Sales Growth -2.0% -3.8% 3.3% -3.4% 3.7%
============ =========== ============ ============= ============
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Exhibit B
Henry Schein, Inc.
2009 Second Quarter and YTD
Reconciliation of GAAP results of
continuing operations to non-GAAP results
of continuing operations
(in thousands, except per share data)
(unaudited)
Second Quarter % YTD %
2009 2008 Growth 2009 2008 Growth
From Continuing Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales $1,611,006 $1,640,851 -1.8% $3,099,611 $3,162,628 -2.0%
Operating Income 122,310 113,992 7.3% 213,197 199,267 7.0%
Margin 7.6% 6.9% 65 bp 6.9% 6.3% 58 bp
Income from Continuing Operations attributable to
Henry Schein, Inc. $ 73,473 $ 64,985 13.1% $ 128,324 $ 116,507 10.1%
Diluted EPS from Continuing Operations attributable
to Henry Schein, Inc. 0.81 0.71 14.1% 1.43 1.26 13.5%
Net Income attributable to Henry Schein, Inc. 73,473 64,570 13.8% 128,324 116,010 10.6%
Diluted EPS 0.81 0.70 15.7% 1.43 1.26 13.5%
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1,611,006 $1,640,851 -1.8% $3,099,611 $3,162,628 -2.0%
Operating Income 122,310 113,992 7.3% 217,240 199,267 9.0%
Margin 7.6% 6.9% 65 bp 7.0% 6.3% 71 bp
Income from Continuing Operations attributable to
Henry Schein, Inc. $ 73,473 $ 64,985 13.1% $ 131,108 $ 116,507 12.5%
Diluted EPS from Continuing Operations attributable
to Henry Schein, Inc. 0.81 0.71 14.1% 1.46 1.26 15.9%
Net Income attributable to Henry Schein, Inc. 73,473 64,570 13.8% 131,108 116,010 13.0%
Diluted EPS 0.81 0.70 15.7% 1.46 1.26 15.9%
- ------------------------------------------------------------------------------------------------------------------------------------
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
###