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Henry Schein Reports Record Second Quarter Results

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SOURCE Henry Schein, Inc.

EPS up 9.8% to $1.35

Raises lower end of 2014 financial guidance range

MELVILLE, N.Y., Aug. 4, 2014 /PRNewswire/ -- Henry Schein, Inc. (NASDAQ: HSIC), the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, today reported record financial results for the quarter ended June 28, 2014.

Net sales for the second quarter of 2014 were $2.6 billion, an increase of 9.3% compared with the second quarter of 2013.  This consisted of 7.9% growth in local currencies and 1.4% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 4.3% and acquisition growth was 3.6% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2014 was $116.2 million, or $1.35 per diluted share, an increase of 7.2% and 9.8%, respectively, compared with the second quarter of 2013.

"Sales growth was solid during the second quarter with internal sales growth in local currencies the highest we have reported in the past year and a half.  Domestic sales rebounded from the effects of severe winter weather in the preceding quarter," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.  "We are also pleased to be raising the lower end of our 2014 financial guidance range."

Dental sales of $1.4 billion increased 8.6%, consisting of 7.5% growth in local currencies and 1.1% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 2.6% and acquisition growth was 4.9%.  The 2.6% internal growth in local currencies included 4.3% growth in North America while International sales were flat.

"We gained market share in our Dental group with growth in North America exceeding 8% and International growth above 9%.  North America internal Dental merchandise sales growth was bolstered by strategic acquisitions, and equipment sales and service revenue growth was nearly 11% in local currencies.  International Dental growth also reflects strategic acquisitions, while internal equipment sales and service revenue in local currencies declined from a strong prior-year comparison that included the biennial IDS in Germany," commented Mr. Bergman.  "Through strategic dental transactions during the quarter, we expanded our reach in France and entered Brazil, our first operation in South America."

Animal Health sales of $754.5 million increased 13.2%, consisting of 10.7% growth in local currencies and 2.5% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 7.3% and acquisition growth was 3.4%.  The 7.3% internal growth in local currencies included 7.9% growth in North America and 6.8% growth in International.

"We also gained market share in our Animal Health group with internal sales growth in local currencies at its highest level in six quarters.  International internal Animal Health sales growth in local currencies was at a multi-year record," commented Mr. Bergman.  "We also significantly strengthened our position in the U.S. equine-products market with the acquisition of a majority ownership position in SmartPak, which was completed early in the third quarter."

Medical sales of $403.3 million increased 4.0%, including 3.7% growth in local currencies and 0.3% growth related to foreign currency exchange.

"Medical sales growth in North America, which represents 95% of the group's total, accelerated sharply from the preceding quarter as we recovered from the impact of weather and made progress with our strategic focus on large group practices and integrated delivery networks.  Pre-bookings of seasonal influenza vaccines are running in-line with the prior year," remarked Mr. Bergman.

Technology and Value-Added Services sales of $89.1 million increased 14.2%, including 13.2% growth in local currencies and 1.0% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 9.3% and acquisition growth was 3.9%.

"Technology and Value-Added Services sales growth also accelerated in North America compared with the preceding quarter to its highest growth rate in more than a year, with particular strength in software sales and value-added services," commented Mr. Bergman.  "We continue to be pleased with our performance internationally in this category, with double-digit internal sales growth in local currencies for the past six quarters."

Stock Repurchase Plan
The Company announced that it repurchased approximately 654,000 shares of its common stock during the second quarter at an average price of $116.43 per share, or approximately $76.1 million.  The impact of the repurchase of shares on second quarter diluted EPS was immaterial.  At the close of the second quarter, Henry Schein had approximately $148 million authorized for future repurchases of its common stock.

Year-to-Date Results
Net sales for the first half of 2014 were $5.0 billion, an increase of 7.7% compared with the first half of 2013.  This consisted of 6.8% growth in local currencies and 0.9% growth related to foreign currency exchange.  In local currencies, internally generated sales increased 3.6% and acquisition growth was 3.2%.

Net income attributable to Henry Schein, Inc. for the first half of 2014 was $218.3 million or $2.53 per diluted share, an increase of 7.8% and 10.0%, respectively, compared with the first half of 2013 excluding a non-cash, one-time expense related to debt refinancing.

2014 EPS Guidance
Henry Schein today raised the lower end of its 2014 financial guidance range, as follows:

  • For 2014, the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.33 to $5.39. This represents growth of 8% to 9% compared with 2013 results excluding certain one-time items, and compares with previous guidance for 2014 diluted EPS to be $5.29 to $5.39.
  • Guidance for 2014 diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.

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 website at www.henryschein.com.  In addition, a replay will be available beginning shortly after the call has ended.

About Henry Schein, Inc.
Henry Schein, Inc. is the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners.  The Company also serves dental laboratories, government and institutional health care clinics, and other alternate care sites.  A Fortune 500® Company and a member of the NASDAQ 100® Index, Henry Schein employs more than 17,000 Team Schein Members and serves more than 800,000 customers.

The Company offers a comprehensive selection of products and services, including value-added solutions for operating efficient practices and delivering high-quality care.  Henry Schein operates through a centralized and automated distribution network, with a selection of more than 96,000 branded products and Henry Schein private-brand products in stock, as well as more than 110,000 additional products available as special-order items. The Company also offers its customers exclusive, innovative technology solutions, including practice management software and e-commerce solutions, as well as a broad range of financial services.

Headquartered in Melville, N.Y., Henry Schein has operations or affiliates in 27 countries.  The Company's sales reached a record $9.6 billion in 2013, and have grown at a compound annual rate of approximately 16 percent since Henry Schein became a public company in 1995.  For more information, visit the Henry Schein website at www.henryschein.com.

Cautionary Note Regarding Forward-Looking Statements

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: effects of a highly competitive market; our dependence on third parties for the manufacture and supply of our products; our dependence upon sales personnel, customers, suppliers and manufacturers; our dependence on our senior management; fluctuations in quarterly earnings; risks from expansion of customer purchasing power and multi-tiered costing structures; possible increases in the cost of shipping our products or other service issues with our third-party shippers; general global macroeconomic conditions; disruptions in financial markets; possible volatility of the market price of our common stock; changes in the health care industry; implementation of health care laws; failure to comply with regulatory requirements and data privacy laws; risks associated with our global operations; transitional challenges associated with acquisitions and joint ventures, including the failure to achieve anticipated synergies; financial risks associated with acquisitions and joint ventures; litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; risks from challenges associated with the emergence of potential increased competition by third party online commerce sites; risks from disruption to our information systems; 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 Ended


Six Months Ended






June 28,


June 29,


June 28,


June 29,






2014


2013


2014


2013

















Net sales


$

2,615,406


$

2,391,810


$

5,045,565


$

4,685,321

Cost of sales



1,886,934



1,721,954



3,620,380



3,368,474

      Gross profit



728,472



669,856



1,425,185



1,316,847

Operating expenses:













   Selling, general and administrative



547,628



493,791



1,087,073



987,153

      Operating income



180,844



176,065



338,112



329,694

Other income (expense):













   Interest income



3,416



3,303



6,871



6,508

   Interest expense



(5,670)



(4,890)



(10,928)



(17,617)

   Other, net



1,032



(34)



4,612



(404)

      Income before taxes and equity in earnings













         of affiliates



179,622



174,444



338,667



318,181

Income taxes



(55,322)



(54,775)



(104,945)



(100,627)

Equity in earnings of affiliates



2,817



1,766



3,523



2,567

Net income



127,117



121,435



237,245



220,121

   Less: Net income attributable to noncontrolling interests



(10,881)



(13,005)



(18,910)



(20,213)

Net income attributable to Henry Schein, Inc.


$

116,236


$

108,430


$

218,335


$

199,908

















Earnings per share attributable to Henry Schein, Inc.:





























   Basic


$

1.37


$

1.26


$

2.58


$

2.31

   Diluted


$

1.35


$

1.23


$

2.53


$

2.27

















Weighted-average common shares outstanding:













   Basic



84,620



86,370



84,716



86,483

   Diluted



85,980



87,968



86,189



88,205

 

 

HENRY SCHEIN, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)
















June 28,


December 28,






2014


2013






(unaudited)




ASSETS







Current assets:








Cash and cash equivalents


$

89,698


$

188,616


Accounts receivable, net of reserves of $81,932 and $78,298



1,188,143



1,055,216


Inventories, net



1,257,235



1,250,403


Deferred income taxes



66,431



63,865


Prepaid expenses and other



310,496



276,565




Total current assets



2,912,003



2,834,665

Property and equipment, net



292,972



275,888

Goodwill



1,832,377



1,635,005

Other intangibles, net



594,358



417,133

Investments and other



360,044



461,945




Total assets


$

5,991,754


$

5,624,636











LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:








Accounts payable


$

755,999


$

824,495


Bank credit lines



83,671



29,508


Current maturities of long-term debt



6,302



5,441


Accrued expenses:









Payroll and related



208,886



216,629



Taxes



158,363



145,161



Other



330,680



329,429




Total current liabilities



1,543,901



1,550,663

Long-term debt



665,909



450,233

Deferred income taxes



278,456



198,674

Other liabilities



152,029



139,526




Total liabilities



2,640,295



2,339,096











Redeemable noncontrolling interests



497,927



497,539

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,









85,022,123 outstanding on June 28, 2014 and









85,622,452 outstanding on December 28, 2013



850



856


Additional paid-in capital



265,469



318,225


Retained earnings



2,505,721



2,398,267


Accumulated other comprehensive income



78,703



67,849



Total Henry Schein, Inc. stockholders' equity



2,850,743



2,785,197


Noncontrolling interests



2,789



2,804




Total stockholders' equity



2,853,532



2,788,001



Total liabilities, redeemable noncontrolling interests and stockholders' equity


$

5,991,754


$

5,624,636

 

 

HENRY SCHEIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)
























Three Months Ended


Six Months Ended







June 28,


June 29,


June 28,


June 29,







2014


2013


2014


2013


















Cash flows from operating activities:














Net income


$

127,117


$

121,435


$

237,245


$

220,121


Adjustments to reconcile net income to net cash















provided by operating activities:
















Depreciation and amortization



37,353



31,843



73,489



64,236




Accelerated amortization of deferred financing costs



-



-



-



6,203




Stock-based compensation expense



10,542



11,422



19,505



16,732




Provision for losses on trade and other

















accounts receivable



1,092



1,314



2,415



2,154




Provision for (benefit from) deferred income taxes



(9,735)



9,179



6,009



15,550




Equity in earnings of affiliates



(2,817)



(1,766)



(3,523)



(2,567)




Distributions from equity affiliates



3,368



3,569



5,340



6,450




Other



13,480



2,076



15,453



5,367




Changes in operating assets and liabilities,
















  net of acquisitions:

















Accounts receivable



(56,597)



(19,763)



(86,199)



(45,155)





Inventories



6,991



28,026



48,550



82,037





Other current assets



195



(26,927)



(23,251)



(12,924)





Accounts payable and accrued expenses



68,243



114,390



(151,050)



(121,453)

Net cash provided by operating activities



199,232



274,798



143,983



236,751


















Cash flows from investing activities:














Purchases of fixed assets



(19,492)



(10,072)



(37,976)



(21,934)


Payments for equity investments and business















acquisitions, net of cash acquired



(78,178)



(1,349)



(222,857)



(33,708)


Other



(2,566)



(5,003)



(6,497)



(5,071)

Net cash used in investing activities



(100,236)



(16,424)



(267,330)



(60,713)


















Cash flows from financing activities:














Proceeds from (repayments of) bank borrowings



(61,529)



(34,467)



53,239



(11,640)


Proceeds from issuance of long-term debt



124,400



155,781



314,787



483,781


Debt issuance costs



-



(1,083)



-



(1,319)


Principal payments for long-term debt



(100,470)



(305,095)



(100,866)



(538,000)


Proceeds from issuance of stock upon exercise















of stock options



4,827



7,653



21,277



19,452


Payments for repurchases of common stock



(76,137)



(78,062)



(151,443)



(151,511)


Excess tax benefits related to stock-based















compensation



1,229



1,964



4,579



5,328


Distributions to noncontrolling shareholders



(13,926)



(10,216)



(17,689)



(13,008)


Acquisitions of noncontrolling interests in















subsidiaries



(18,759)



(5,219)



(102,552)



(5,754)

Net cash provided by (used in) financing activities



(140,365)



(268,744)



21,332



(212,671)


















Effect of exchange rate changes on cash and














cash equivalents



1,952



(1,353)



3,097



(6,608)

Net change in cash and cash equivalents



(39,417)



(11,723)



(98,918)



(43,241)

Cash and cash equivalents, beginning of period



129,115



90,562



188,616



122,080

Cash and cash equivalents, end of period


$

89,698


$

78,839


$

89,698


$

78,839

 

 

Exhibit A - QTD Sales
































Henry Schein, Inc.

2014 Second Quarter

Sales Summary

(in thousands)

(unaudited)

















Q2 2014 over Q2 2013

















Global

Q2 2014


Q2 2013


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

1,368,481


$

1,259,581


8.6%


1.1%


7.5%


4.9%


2.6%

















   Animal Health


754,549



666,297


13.2%


2.5%


10.7%


3.4%


7.3%

















   Medical


403,257



387,887


4.0%


0.3%


3.7%


0.0%


3.7%

















Total Health Care Distribution


2,526,287



2,313,765


9.2%


1.4%


7.8%


3.6%


4.2%

















Technology and value-added services


89,119



78,045


14.2%


1.0%


13.2%


3.9%


9.3%

















Total Global

$

2,615,406


$

2,391,810


9.3%


1.4%


7.9%


3.6%


4.3%

















North America

Q2 2014


Q2 2013


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

833,055


$

768,800


8.4%


-0.7%


9.1%


4.8%


4.3%

















   Animal Health


351,523



325,821


7.9%


0.0%


7.9%


0.0%


7.9%

















   Medical


381,811



367,312


3.9%


0.0%


3.9%


0.0%


3.9%

















Total Health Care Distribution


1,566,389



1,461,933


7.1%


-0.4%


7.5%


2.5%


5.0%

















Technology and value-added services


72,145



66,675


8.2%


-0.3%


8.5%


0.0%


8.5%

















Total North America

$

1,638,534


$

1,528,608


7.2%


-0.4%


7.6%


2.4%


5.2%

















International

Q2 2014


Q2 2013


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

535,426


$

490,781


9.1%


4.2%


4.9%


4.9%


0.0%

















   Animal Health


403,026



340,476


18.4%


5.0%


13.4%


6.6%


6.8%

















   Medical


21,446



20,575


4.2%


5.6%


-1.4%


0.0%


-1.4%

















Total Health Care Distribution


959,898



851,832


12.7%


4.6%


8.1%


5.4%


2.7%

















Technology and value-added services


16,974



11,370


49.3%


8.4%


40.9%


26.5%


14.4%

















Total International

$

976,872


$

863,202


13.2%


4.6%


8.6%


5.8%


2.8%

 

 

Exhibit A - YTD Sales
































Henry Schein, Inc.

2014 Second Quarter Year to Date

Sales Summary

(in thousands)

(unaudited)

















Q2 2014 YTD over Q2 2013 YTD

















Global

Q2 2014 YTD


Q2 2013 YTD


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

2,665,409


$

2,450,376


8.8%


0.8%


8.0%


4.9%


3.1%

















   Animal Health


1,409,037



1,305,439


7.9%


1.4%


6.5%


1.8%


4.7%

















   Medical


800,671



776,749


3.1%


0.3%


2.8%


0.0%


2.8%

















Total Health Care Distribution


4,875,117



4,532,564


7.6%


0.9%


6.7%


3.2%


3.5%

















Technology and value-added services


170,448



152,757


11.6%


0.7%


10.9%


3.1%


7.8%

















Total Global

$

5,045,565


$

4,685,321


7.7%


0.9%


6.8%


3.2%


3.6%

















North America

Q2 2014 YTD


Q2 2013 YTD


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

1,602,651


$

1,481,754


8.2%


-0.8%


9.0%


5.0%


4.0%

















   Animal Health


657,172



632,651


3.9%


0.0%


3.9%


0.0%


3.9%

















   Medical


756,929



734,944


3.0%


0.0%


3.0%


0.0%


3.0%

















Total Health Care Distribution


3,016,752



2,849,349


5.9%


-0.4%


6.3%


2.6%


3.7%

















Technology and value-added services


139,029



130,537


6.5%


-0.3%


6.8%


0.1%


6.7%

















Total North America

$

3,155,781


$

2,979,886


5.9%


-0.4%


6.3%


2.5%


3.8%

















International

Q2 2014 YTD


Q2 2013 YTD


Total
Sales
Growth


Foreign
Exchange
Growth


Local
Currency
Growth


Acquisition
Growth


Local
Internal
Growth

















   Dental

$

1,062,758


$

968,622


9.7%


3.2%


6.5%


4.9%


1.6%

















   Animal Health


751,865



672,788


11.8%


2.9%


8.9%


3.4%


5.5%

















   Medical


43,742



41,805


4.6%


4.8%


-0.2%


0.0%


-0.2%

















Total Health Care Distribution


1,858,365



1,683,215


10.4%


3.1%


7.3%


4.1%


3.2%

















Technology and value-added services


31,419



22,220


41.4%


6.2%


35.2%


20.9%


14.3%

















Total International

$

1,889,784


$

1,705,435


10.8%


3.1%


7.7%


4.4%


3.3%

 

 

Exhibit B




































Henry Schein, Inc.

2014 Second Quarter and YTD

Reconciliation of reported GAAP net income and diluted EPS attributable to Henry Schein, Inc. to

non-GAAP net income and diluted EPS attributable to Henry Schein, Inc.

(in thousands, except per share data)

(unaudited)







































Second Quarter




YTD









%









%




2014



2013


Growth




2014



2013


Growth


Net Income attributable to Henry Schein, Inc.

$

116,236


$

108,430


7.2

%


$

218,335


$

199,908


9.2

%

Diluted EPS attributable to Henry Schein, Inc.

$

1.35


$

1.23


9.8

%


$

2.53


$

2.27


11.5

%



















Non-GAAP Adjustments (after-tax)


















Accelerated amortization of deferred


















  financing costs (1)

$

-


$

-





$

-


$

2,679




Total non-GAAP adjustments to Net Income


















attributable to Henry Schein, Inc.

$

-


$

-





$

-


$

2,679




Total non-GAAP adjustments to diluted EPS


















attributable to Henry Schein, Inc.

$

-


$

-





$

-


$

0.03






















Non-GAAP Net Income attributable to


















Henry Schein, Inc.

$

116,236


$

108,430


7.2

%


$

218,335


$

202,587


7.8

%

Non-GAAP diluted EPS attributable to


















Henry Schein, Inc.

$

1.35


$

1.23


9.8

%


$

2.53


$

2.30


10.0

%



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.



(1)

Represents non-cash, one-time expenses related to the debt refinancing of Henry Schein Animal Health.

 

 

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