MELVILLE, N.Y., Oct. 29 /PRNewswire-FirstCall/ -- Henry Schein, Inc. (Nasdaq: HSIC), the largest provider of healthcare products and services to office-based practitioners, today reported record financial results for the quarter ended September 25, 2010.
Net sales for the third quarter of 2010 were $1.9 billion, an increase of 14.1% compared with the third quarter of 2009. This consists of 16.4% growth in local currencies and a decline of 2.3% related to foreign currency exchange. Internal sales growth in local currencies was 3.7% (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the third quarter of 2010 was $87.9 million or $0.94 per diluted share, an increase of 20.5% and 17.5%, respectively, compared with third quarter 2009 adjusted net income, which excludes certain unusual items (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
"We are pleased to be reporting strong top-line growth in local currencies for the quarter as we continue to see indications of market stability throughout our global business," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "We also are pleased to increase the low end of our 2010 financial guidance, and to introduce financial guidance for 2011 diluted EPS growth of 10% to 13% compared with the midpoint of our new 2010 guidance range."
North American Dental sales of $665.9 million increased 7.1%, consisting of 6.5% growth in local currencies and 0.6% growth related to foreign currency exchange. The 6.5% growth in local currencies included 8.1% growth in Dental consumable merchandise sales and 1.4% growth in Dental equipment sales and service revenues.
"Internal Dental consumable merchandise sales growth in local currencies has increased modestly244,699)(153,452)Proceeds from issuance of stock upon exerciseof stock options 4,3145,76125,3509,689Payments for repurchases of common stock(4,819)-(4,819)-Excess tax benefits related to stock-basedcompensation 1,2352,1387,5862,821Distributions to noncontrolling shareholders(2,003)(289)(9,739)(1,858)Acquisitions of noncontrolling interests in subsidiaries(139,845)(52,453)(149,845)(52,453)Other (89)(90)(269)(269)Net cash used in financing activities (81,845)(196,209)(76,240)(199,351)Net change in cash and cash equivalents (125,572)(77,562)(273,377)(54,386)Effect of exchange rate changes on cash andcash equivalents 8,1861,2965,9532,423Cash and cash equivalents, beginning of period 321,116393,873471,154369,570Cash and cash equivalents, end of period $203,730$
317,607Note: Certain prior period amounts have been reclassified to conform to the current period presentation.Exhibit AHenry Schein, Inc.2010 Third QuarterSales Growth Rate Summary(unaudited)Q3 2010 over Q3 2009ConsolidatedN.A. DentalN.A. MedicalN.A. Animal HealthInternationalTechnology/VASInternal Sales Growth
12.7%5.0%3.7%259.2%0.5%3.4%Local Currency Sales Growth
16.4%6.5%12.6%259.2%3.4%14.1%Foreign Currency Exchange
-2.3%0.6%0.0%0.0%-7.2%-0.4%Total Sales Growth14.1%7.1%12.6%259.2%-3.8%13.7%Total Sales Growth excluding influenza vaccine sales11.9%7.1%0.5%259.2%-3.8%13.7%Local Currency Sales Growth excluding influenza vaccine sales14.2%6.5%0.5%259.2%3.4%14.1%Q3 YTD 2010 over Q3 YTD 2009ConsolidatedN.A. DentalN.A. MedicalN.A. Animal HealthInternationalTechnology/VASInternal Sales Growth
12.6%3.4%3.3%265.8%0.8%4.4%Local Currency Sales Growth
15.6%5.3%6.1%266.6%5.1%12.2%Foreign Currency Exchange
0.2%1.2%0.0%0.0%-0.7%0.8%Total Sales Growth15.8%6.5%6.1%266.6%4.4%13.0%Total Sales Growth excluding influenza vaccine sales15.0%6.5%1.5%266.6%4.4%13.0%Local Currency Sales Growth excluding influenza vaccine sales14.8%5.3%1.5%266.6%5.1%12.2%Exhibit BHenry Schein, Inc.
2010 Third Quarter and YTDReconciliation of GAAP results of continuing operations to
non-GAAP results of continuing operations(in thousands, except per share data)(unaudited)Third QuarterYTD20102009% Growth20102009% GrowthFrom Continuing OperationsIncome from Continuing Operations attributable to Henry Schein, Inc.$87,893$94,045-6.5%$232,794$222,1434.8%Diluted EPS from Continuing Operations attributable to Henry Schein, Inc.$
2.452.0%Non-GAAP Adjustments (after-tax)Foreign tax benefit
$(20,845)Costs related to foreign tax benefit
1,080Adjustments related to Lehman Brothers Bankruptcy
(338)Other non-recurring income/expense, net
2,784Income from Continuing Operations attributable to Henry Schein, Inc.$$(21,131)$ 8,260$(18,347)Diluted EPS from Continuing Operations attributable to Henry Schein, Inc.$
(0.20)Adjusted Results From Continuing OperationsIncome from Continuing Operations attributable to Henry Schein, Inc.$87,893$72,91420.5%$241,054$203,79618.3%Diluted EPS from Continuing Operations attributable to Henry Schein, Inc.$
2.2515.1%This non-GAAP comparison is being presented in order to provide a more comparable basis for analysis. Earnings per share numbers may not sum due to rounding. for each of the past four quarters. This trend and continued sales growth in Dental equipment affirm our confidence that the market will continue to show gradual improvement," commented Mr. Bergman.
North American Medical sales of $391.9 million increased 12.6%. Sales of seasonal influenza vaccines were very strong during the third quarter of 2010. Excluding sales of seasonal influenza vaccines from both periods, North American Medical sales increased 0.5%.
"During the third quarter we sold more than 11 million doses of seasonal influenza vaccines, and we expect to sell approximately 13 million doses in total for the year," remarked Mr. Bergman. "We believe that we gained market share in the office-based physician market during the quarter and that this market continued to experience a decline in patient visits."
North American Animal Health sales increased 259.2% to $225.2 million, reflecting the combined Butler Schein Animal Health business.
"Integration of Butler Schein Animal Health is complete, and we are now turning our focus to various initiatives to drive sales growth by expanding the breadth and depth of our product offering," commented Mr. Bergman.
International sales of $561.4 million declined 3.8%, consisting of 3.4% growth in local currencies and a decline of 7.2% related to foreign currency exchange.
"Our International results reflect continued growth in the Dental business, with notable gains in dental equipment sales and particular strength in Spain, Italy, France, Germany and the U.K." added Mr. Bergman. "After the close of the quarter we announced a further expansion of our global veterinary operations with an agreement to acquire Provet Holdings Limited, Australasia's largest distributor of animal health products with annual sales of approximately 280 million Australian dollars. We also entered the Turkish dental market by acquiring a 50% interest in Guney, the largest full-service dental distribution business in Turkey, with annual sales of approximately 17 million Euros. Including Turkey, we now have operations or affiliates in 24 countries."
Technology and Value-Added Services sales of $49.1 million increased 13.7% during the quarter, including 10.7% internal sales growth in local currencies. "Our electronic services and software businesses continued to show healthy growth with software sales in Australia, New Zealand and Canada particularly strong for the quarter," explained Mr. Bergman.
Year-to-Date ResultsFor the first nine months of 2010, net sales of $5.5 billion increased 15.8% compared with the first nine months of 2009. This increase includes 15.6% growth in local currencies and 0.2% growth related to foreign currency exchange.
Income from continuing operations attributable to Henry Schein, Inc. for the first nine months of 2010 was $232.8 million or $2.50 per diluted share. Non-GAAP income from continuing operations attributable to Henry Schein, Inc. for the first nine months of 2010 was $241.1 million or $2.59 per diluted share, an increase of 18.3% and 15.1%, respectively, compared with the first nine months of 2009 excluding restructuring costs in both periods, as well as certain unusual items in the prior-year period (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
Stock Repurchase PlanThe Company announced that it repurchased 86,171 shares of common stock during the third quarter at an average price of $55.92 per share, and that it expects to purchase a total of $50 million of common stock by the end of the year. The impact of the repurchase of shares on third quarter diluted EPS was immaterial.
2010 EPS GuidanceToday Henry Schein increased the low end of its 2010 financial guidance, as follows:
2011 EPS GuidanceHenry Schein today introduced 2011 financial guidance, as follows:
Third Quarter Conference Call WebcastThe Company will hold a conference call to discuss third 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 ScheinHenry Schein, a Fortune 500® company and a member of the NASDAQ 100® Index, is recognized for its excellent customer service and highly competitive prices. The Company's five businesses – North American Dental, North American Medical, North American Animal Health, International and Technology – serve more than 700,000 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 more than 13,500 people and has operations or affiliates in 24 countries. The Company's net sales reached a record $6.5 billion in 2009. 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; effects of a highly competitive market; changes in the healthcare industry; changes in regulatory requirements; risks from expansion of customer purchasing power and multi-tiered costing structures; 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; risks from disruption to our information systems; our dependence upon sales personnel, manufacturers and 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; 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. 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)HENRY SCHEIN, INC.CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share data)(unaudited)Three Months EndedNine Months EndedSeptember 25,September 26,September 25,September 26,2010200920102009Net sales$1,893,511$
4,752,255Cost of sales1,356,0551,183,1663,907,0893,361,707Gross profit537,456476,2671,596,1331,390,548Operating expenses:Selling, general and administrative400,088362,3821,204,7151,060,062Restructuring costs--12,2854,043Operating income137,368113,885379,133326,443Other income (expense):Interest income3,4222,38710,3187,674Interest expense(7,824)(5,171)(26,096)(18,329)Other, net291,9383881,595Income from continuing operations before taxes, equity in earnings of affiliates andnoncontrolling interests132,995113,039363,743317,383Income taxes(42,226)(15,864)(115,885)(83,402)Equity in earnings of affiliates3,7211,2007,0473,777Income from continuing operations94,49098,375254,905237,758Income from discontinued operation, netof tax-2,373-2,715Net income94,490100,748254,905240,473Less: Net income attributable to noncontrollinginterests(6,597)(4,327)(22,111)(15,728)Net income attributable to Henry Schein, Inc.$87,893$
224,745Amounts attributable to Henry Schein, Inc.: Income from continuing operations$87,893$
222,143 Income from discontinued operation, netof tax -2,376-2,602 Net income$87,893$
224,745Earnings per share attributable to Henry Schein, Inc.:From continuing operations:Basic$0.97$
2.45From discontinued operation:Basic$0.00$
0.03From net income:Basic$0.97$
2.48Weighted-average common shares outstanding:Basic90,32688,79689,93288,843Diluted93,27091,51393,09890,576HENRY SCHEIN, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share data)September 25,December 26,20102009(unaudited)ASSETSCurrent assets:Cash and cash equivalents $203,730$
471,154Accounts receivable, net of reserves of $54,226 and $51,724 923,026725,397Inventories, net 849,541775,199Deferred income taxes 40,86048,001Prepaid expenses and other 230,617183,782Total current assets2,247,7742,203,533Property and equipment, net 254,004259,576Goodwill 1,425,651986,395Other intangibles, net 413,701204,445Investments and other 263,329182,036Total assets $4,604,459$
3,835,985LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable $532,274$
521,079Bank credit lines 201,142932Current maturities of long-term debt 25,12223,560Accrued expenses:Payroll and related 154,103155,298Taxes 107,04086,034Other 267,966289,351Total current liabilities 1,287,6471,076,254Long-term debt 383,495243,373Deferred income taxes 190,565100,976Other liabilities 75,58275,304Total liabilities 1,937,2891,495,907Redeemable noncontrolling interests299,101178,570Commitments and contingenciesStockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding-- Common stock, $.01 par value, 240,000,000 shares authorized,92,366,321 outstanding on September 25, 2010 and 90,630,889 outstanding on December 26, 2009 924906 Additional paid-in capital 592,646603,772 Retained earnings 1,722,1461,492,607 Accumulated other comprehensive income50,93264,194 Total Henry Schein, Inc. stockholders' equity2,366,6482,161,479 Noncontrolling interest1,42129Total stockholders' equity 2,368,0692,161,508Total liabilities, redeemable noncontrolling interests and stockholders' equity $4,604,459$
3,835,985HENRY SCHEIN, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Three Months EndedNine Months EndedSeptember 25,September 26,September 25,September 26,2010200920102009Cash flows from operating activities:Net income$94,490$
240,473Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of discontinued operation,net of tax -(2,382)-(2,382)Depreciation and amortization 25,16620,19675,51060,930Amortization of bond discount 8721,5094,0074,473Stock-based compensation expense 6,7466,04119,74518,344Provision for losses on trade and otheraccounts receivable 6071,0422,9292,754Provision for (benefit from) deferredincome taxes3,763(23,712)(2,068)(29,633)Stock issued to 401(k) plan5,7215,3015,7215,301Undistributed earnings of affiliates (3,721)(1,200)(7,047)(3,777)Other 2,6261,0445,2752,535Changes in operating assets and liabilities,net of acquisitions:Accounts receivable (70,865)(27,231)(104,719)(12,788)Inventories (26,465)(23,482)5,799(10,234)Other current assets (19,115)(3,276)(37,526)(806)Accounts payable and accrued expenses 28,01284,204(45,706)(56,813)Net cash provided by operating activities 47,837138,802176,825218,377Cash flows from investing activities:Purchases of fixed assets (9,384)(10,014)(26,926)(38,417)Payments for equity investment and businessacquisitions, net of cash acquired (101,730)(18,969)(353,305)(45,458)Cash received from business divestiture-12,716-12,716Purchases of available-for-sale securities --(26,984)-Proceeds from sales of available-for-sale securities 4,5504,6905,9508,730Proceeds from maturities of available-for-sale securities14,988-26,984-Net proceeds from foreign exchange forwardcontract settlements ---275Other 12(8,578)319(11,258)Net cash used in investing activities (91,564)(20,155)(373,962)(73,412)Cash flows from financing activities:Proceeds from (repayments of) bank borrowings 200,863(436)200,195(3,829)Proceeds from issuance of long-term debt 100,000-100,000-Principal payments for long-term debt (241,501)(150,840)(
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