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Press Release

Henry Schein Reports Record Second Quarter Financial Results

Henry Schein
Posted on: 10 Aug 17

MELVILLE, N.Y., Aug. 8, 2017 /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 second quarter financial results.

Net sales for the quarter ended July 1, 2017 were $3.1 billion, an increase of 6.5% compared with the second quarter of 2016. This consisted of 7.7% growth in local currencies and a 1.2% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.4% and acquisition growth was 3.3% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the second quarter of 2017 was $136.1 million, or $1.71 per diluted share. This represents growth of 13.3% and 17.1%, respectively, compared with GAAP results for the second quarter of 2016. Non-GAAP net income for the second quarter of 2017 was $139.3 million, or $1.75 per diluted share. This represents growth of 2.9% and 6.7%, respectively, compared with non-GAAP results for the second quarter of 2016. Note that the second quarter of 2017 included a litigation settlement expense of $5.3 million pretax, or $0.04 per diluted share, and the second quarter of 2016 included restructuring costs of $20.4 million pretax, or $0.18 per diluted share (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP net income and EPS).

"We are pleased with overall sales results for the second quarter of 2017 in each of our global Dental, Animal Health, and Medical businesses. We delivered solid earnings per share growth as we continue to implement our strategy of growing the business organically and through acquisitions," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein.

Dental sales of $1.5 billion increased 8.4%, consisting of 9.4% growth in local currencies and a 1.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 3.1% and acquisition growth was 6.3%. The 3.1% internal growth in local currencies included 3.8% growth in North America and 2.0% growth internationally.

"In North America, dental consumable merchandise internal sales in local currencies grew by 0.8%. Dental equipment internal sales in local currencies increased 14.8%, due in part to an easier prior-year comparable," commented Mr. Bergman. "Beginning September 1, 2017, we look forward to offering the full range of Dentsply Sirona dental equipment across North America, including the leading CEREC CAD/CAM restoration system, to complement our offering from key suppliers including 3M, 3Shape, A-dec, Danaher, Ivoclar, Midmark, Planmeca, and many others."

Mr. Bergman continued, "International dental consumable merchandise internal sales increased by 1.4% in local currencies, reflecting a generally stable market environment. International dental equipment internal sales grew by 3.6% in local currencies with strength in Germany following the International Dental Show, partially offset by softness in Australia and Italy."

Animal Health sales of $891.3 million increased 4.4%, consisting of 6.7% growth in local currencies and a 2.3% decline related to foreign currency exchange. In local currencies, internally generated sales increased 5.8% and acquisition growth was 0.9%. The 5.8% internal growth in local currencies included 5.9% growth in North America and 5.7% growth internationally.

"Global Animal Health internal sales growth in local currencies reflects healthy end markets domestically and in the international markets we serve," commented Mr. Bergman. "Through organic growth and strategic acquisitions we continue to build on our success in partnering with our animal health customers to deliver high-quality solutions and support that help promote longer, healthier pet lives."

Medical sales of $571.4 million increased 6.1%, consisting of 6.2% growth in local currencies and a 0.1% decline related to foreign currency exchange. In local currencies, internally generated sales increased 6.1% and acquisition growth was 0.1%.

"We believe continued market share gains in our Medical group are the result of our ability to meet the needs of a dynamic, evolving health care market, particularly among large group practices, where we expect to see further consolidation," remarked Mr. Bergman.

Technology and Value-Added Services sales of $108.5 million increased 1.4%, including 2.8% growth in local currencies and a 1.4% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.2% and acquisition growth was 0.6%.

"In North America, our Technology and Value-Added Services internal sales growth in local currencies was a modest 0.3%. This growth included 13.6% sales growth in our North America financial services business related to strong dental equipment revenue," said Mr. Bergman. "Sales growth was negatively impacted by a difficult comparison in the prior year related to revenue associated with a government contract as well as reduced sales primarily related to discontinued lower margin products."

Mr. Bergman continued, "In international markets, internal growth in local currencies was a robust 12.4%, highlighted by strong software revenue in the U.K. as well as solid growth in our financial services business. We remain confident in our strategic portfolio of technology solutions and value-added services and look forward to continued enhancements as we grow that business over time."   

Stock Repurchase Plan

The Company announced that it repurchased approximately 289,000 shares of its common stock during the second quarter at an average price of $173.16 per share, or approximately $50 million. The impact of the repurchase of shares on second quarter 2017 diluted EPS was immaterial. At the close of the second quarter, Henry Schein had approximately $150 million authorized for future repurchases of its common stock.

Year-to-Date Results

Net sales for the first half of 2017 were $6.0 billion, an increase of 7.1% compared with the first half of 2016.  This consisted of 8.2% growth in local currencies and a decline of 1.1% related to foreign currency exchange. In local currencies, internally generated sales increased 5.2% and acquisition growth was 3.0%.

Net income attributable to Henry Schein, Inc. for the first half of 2017 was $276.8 million, or $3.48 per diluted share, an increase of 18.4% and 23.0%, respectively, compared with the first half of 2016. Excluding the litigation settlement expense in the first half of 2017, non-GAAP net income for the first half of 2017 was $280.0 million, or $3.52 per diluted share, an increase of 11.0% and 15.4%, respectively, compared with non-GAAP net income for the first half of 2016 (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).

2017 EPS Guidance

Henry Schein expects full year 2017 diluted EPS to be in the same range as previously disclosed, except for the $0.04 litigation settlement expense.

2017 GAAP diluted EPS attributable to Henry Schein, Inc., which includes the litigation settlement expense of $0.04 per diluted share, is expected to be $7.13 to $7.26. This guidance reflects growth of 15% to 17% compared with 2016 GAAP diluted EPS of $6.19. The prior GAAP diluted EPS guidance range was $7.17 to $7.30.

2017 non-GAAP diluted EPS, which excludes the litigation settlement expense of $0.04 per diluted share, is expected to be $7.17 to $7.30. This guidance reflects growth of 8% to 10% compared with 2016 non-GAAP diluted EPS of $6.61. Note that full year 2016 non-GAAP diluted EPS excludes restructuring charges of $0.42 per diluted share.

The Company notes that fiscal year 2017 includes one less week than fiscal year 2016.

Guidance for 2017 GAAP and non-GAAP diluted EPS 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. Guidance also assumes foreign exchange rates that are generally consistent with current levels.

Second Quarter 2017 Conference Call Webcast

The Company will hold a conference call to discuss second quarter 2017 financial results today, beginning at 10:00 a.m. Eastern time. Individual investors are invited to listen to the conference call 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. (Nasdaq: HSIC) 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 S&P 500® and the Nasdaq 100® indexes, Henry Schein employs more than 21,000 Team Schein Members and serves more than 1 million 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 120,000 branded products and Henry Schein private-brand products in stock, as well as more than 180,000 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 32 countries. The Company's sales reached a record $11.6 billion in 2016, and have grown at a compound annual rate of approximately 15% since Henry Schein became a public company in 1995. For more information, visit Henry Schein at www.henryschein.com, Facebook.com/HenrySchein and @HenrySchein on Twitter.

Cautionary Note Regarding Forward-Looking Statements and Use of Non-GAAP Financial Information

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 United States Securities and Exchange Commission, or 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 and consolidating 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; increases in shipping costs for our products or other service issues with our third-party shippers; general global macro-economic conditions; risks associated with currency fluctuations; risks associated with political and economic uncertainty; disruptions in financial markets; 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; increased competition by third party online commerce sites; risks from disruption to our information systems; cyberattacks or other privacy or data security breaches; 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.

Included within the press release are non-GAAP financial measures that supplement the Company's Consolidated Statements of Income prepared under generally accepted accounting principles (GAAP).  These non-GAAP financial measures adjust the Company's actual results prepared under GAAP to exclude certain items.  In the schedules attached to this press release, the non-GAAP measures have been reconciled to and should be considered together with the Consolidated Statements of Income.  Management believes that non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance and allow for greater transparency with respect to key metrics used by management in operating our business. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.

Editor's Details

Mike Wood
PharmiWeb.com
www.pharmiweb.com
editor@pharmiweb.com

Last updated on: 10/08/2017

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