Henry Schein, Inc. Reports Record Third Quarter Results

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 modestly 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 Results

For 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 Plan

The 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 Guidance

Today Henry Schein increased the low end of its 2010 financial guidance, as follows:

• 2010 diluted EPS attributable to Henry Schein, Inc. is expected to be $3.50 to $3.56, compared with previous guidance of $3.46 to $3.56.
• Guidance for 2010 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.
• 2010 guidance excludes the impact of restructuring costs.

2011 EPS Guidance

Henry Schein today introduced 2011 financial guidance, as follows:

• 2011 diluted EPS attributable to Henry Schein, Inc. is expected to be $3.88 to $3.98, up 10% to 13% compared with the midpoint of the Company’s 2010 diluted EPS guidance range.
• Guidance for 2011 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.

Third Quarter Conference Call Webcast

The 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 Schein

Henry 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.

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