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 March 27, 2010.
Net sales for the first quarter of 2010 were $1.8 billion, an increase of 18.5% compared with the first quarter of 2009. This consists of 14.6% growth in local currencies and 3.9% growth related to foreign currency exchange. Internal sales growth in local currencies was 3.2% (see Exhibit A for details of sales growth).
Income from continuing operations attributable to Henry Schein, Inc. for the first quarter of 2010 was $60.9 million, or $0.66 per diluted share. These results include restructuring costs of $12.3 million (or $0.09 per diluted share) related to previously announced headcount reductions and facilities closings. Excluding restructuring costs, income from continuing operations attributable to Henry Schein, Inc. for the quarter was $69.2 million, or $0.75 per diluted share, an increase of 20.2% and 17.2%, respectively, compared with the first quarter of 2009 also excluding restructuring costs (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
"We are pleased to report internal growth in local currencies in each of our five businesses for the quarter, and we continue to see indications of positive market trends throughout our operations," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "This performance combined with a continuing commitment to control expenses resulted in diluted EPS growth of 17%, excluding restructuring costs. In addition, because of these strong results and a favorable outlook we are increasing the low end of our 2010 EPS guidance range."
North American Dental sales of $614.6 million increased 3.5%, consisting of 1.8% growth in local currencies and 1.7% growth related to foreign currency exchange. The 1.8% growth in local currencies included 2.0% growth in Dental consumable merchandise sales and 0.8% growth in Dental equipment sales and service revenues.
"Growth in Dental consumable merchandise sales compared with last year as well as the preceding quarter gives us further confidence that the market will continue to show gradual improvement for the rest of the year. In addition, we are pleased to report positive sales growth in Dental equipment for the first time in more than a year, which is another positive market indicator," commented Mr. Bergman.
North American Medical sales increased 4.7% to $284.6 million. "We are pleased with our continued sales growth in the medical arena," said Mr. Bergman.
North American Veterinary sales increased 271.5% to $206.6 million, which included sales of Butler Schein Animal Health since January 1, 2010.
"Butler Schein Animal Health is the largest distributor to veterinary practices in North America, and we are pleased that the integration of that business is progressing according to plan," commented Mr. Bergman.
International sales of $609.5 million increased 16.4%, consisting of 7.5% growth in local currencies and 8.9% growth related to foreign currency exchange.
"International growth reflects strong performance in the dental and veterinary businesses, as well as particular strength in France, Australia, Germany, Spain and Switzerland," added Mr. Bergman. "With continuing sales growth in our International business combined with the effects of a restructuring completed in the first quarter of 2010, we look forward to further increasing our International operating margins."
Technology and Value-Added Services sales of $45.0 million increased 11.5% during the quarter, consisting of 9.4% growth in local currencies and 2.1% growth related to foreign currency exchange.
"During the quarter we saw continued strong growth in our electronic services and software businesses," explained Mr. Bergman.
Restructuring Costs
The Company completed a restructuring during the first quarter of 2010 to further reduce operating expenses, and recorded $12.3 million of costs pre-tax or $0.09 per diluted share. The restructuring included headcount reductions as well as facilities closings as part of the Company's continuing efforts to expand operating margins.
2010 EPS Guidance
Henry Schein today increased the low end of the 2010 financial guidance range, as follows:
- 2010 diluted EPS attributable to Henry Schein, Inc. now is expected to be $3.44 to $3.56, compared with previous guidance of $3.40 to $3.56. Growth in diluted EPS for the second quarter of 2010 is expected to be in the mid-single digits compared with the second quarter of 2009 due to Butler Schein Animal Health integration expenses and other factors.
- 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, as described above.
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