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 June 27, 2015 were $2.6 billion, an increase of 0.5% compared with the second quarter of 2014. This consisted of 7.5% growth in local currencies and a 7.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 3.9% 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 2015 was $117.9 million, or $1.40 per diluted share. Excluding restructuring costs of $7.2 million pretax or $0.06 per diluted share, net income attributable to Henry Schein, Inc. for the second quarter of 2015 was $123.2 million or $1.46 per diluted share, an increase of 6.0% and 8.1%, respectively, compared with the second quarter of 2014 (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
"Our second quarter financial results were solid with internal sales growth in local currencies in each of our four business groups. Total sales growth was again negatively impacted by the strength of the U.S. dollar against various foreign currencies, in particular the euro," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "Overall the global markets we serve were healthy during the quarter, and we believe we continued to gain market share. We are pleased to affirm our guidance range for 2015 adjusted diluted EPS and expect that our restructuring activities will continue to favorably impact our ongoing results."
Dental sales of $1.3 billion declined 3.5%, consisting of 4.5% growth in local currencies and an 8.0% decline related to foreign currency exchange. However, in local currencies internally generated sales increased 4.1% and acquisition growth was 0.4%. The 4.1% internal growth in local currencies included 3.7% growth in North America and 4.6% growth internationally.
"In North America, consumable merchandise internal sales growth in local currencies was strong, at 5.4%, and indicates solid patient traffic to dental offices. Equipment sales and service revenue in local currencies declined 1.9% against a difficult prior-year comparison, as last year's second quarter sales grew nearly 11%," commented Mr. Bergman. "International consumable merchandise internal sales in local currencies returned to positive growth of 2.0% for the quarter, and international equipment sales and service internal growth in local currencies of 11.8% was at a multi-year high and included the favorable impact of the biennial International Dental Show."
Animal Health sales of $748.6 million declined 0.8%, consisting of 7.9% growth in local currencies and an 8.7% decline related to foreign currency exchange. In local currencies, internally generated sales increased 0.6% and acquisition growth was 7.3%. The 0.6% internal growth in local currencies included a 4.1% decline in North America and 4.8% growth internationally.
"Growth in our Animal Health group was aided by strategic acquisitions in North America and internationally. North America internal results reflect shifts between agency sales and direct sales as well as the impact from changes in our diagnostic product mix. Normalizing for these two items, North America internal sales growth in local currency was 5.2%," commented Mr. Bergman. "We recently announced plans to acquire a majority interest in Jorgen Kruuse A/S, thereby expanding our direct presence to Denmark, Norway and Sweden, and also acquired a 50% ownership investment in Maravet, which expands our presence to Romania. Both of these companies are leading distributors of veterinary supplies in the markets they serve."
Medical sales of $470.5 million increased 16.7%, consisting of 17.7% growth in local currencies and a 1.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.9% and acquisition growth was 7.8%.
"Internal sales growth in our Medical group continued at a double-digit pace in North America as we made further progress with large group practices and integrated delivery networks. We recorded sales under our strategic agreement with Cardinal Health as agency sales and as direct sales as we integrate the business," remarked Mr. Bergman. "Our transaction with Cardinal Health continues on plan with the majority of Cardinal Health acquired customers now successfully transitioned to the Henry Schein platform."
Technology and Value-Added Services sales of $89.5 million increased 0.4%, including 3.3% growth in local currencies and a 2.9% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.9% and acquisition growth was 0.4%.
"Technology and Value-Added Services internal sales growth in North America was 2.6% in local currencies and international internal growth was 3.9% in local currencies," commented Mr. Bergman. "The advanced-technology products and services we offer support our commitment to the efficient delivery of health care services, and provide a platform for sales opportunities across all of our businesses."
Stock Repurchase Plan
The Company announced that it repurchased approximately 267,000 shares of its common stock during the second quarter at an average price of $140.58 per share, or approximately $37.5 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 $187 million authorized for future repurchases of its common stock.
Year-to-Date Results
Net sales for the first half of 2015 were $5.1 billion, an increase of 0.9% compared with the first half of 2014. This consisted of 7.5% growth in local currencies and a decline of 6.6% related to foreign currency exchange. In local currencies, internally generated sales increased 4.4% and acquisition growth was 3.1%.
Net income attributable to Henry Schein, Inc. for the first half of 2015 was $221.4 million, or $2.62 per diluted share. Excluding restructuring costs of $14.1 million pretax or $0.12 per diluted share, net income attributable to Henry Schein, Inc. for the first half of 2015 was $231.6 million or $2.74 per diluted share, an increase of 6.1% and 8.3%, respectively, compared with the first half of 2014.
2015 EPS Guidance
Henry Schein today affirms 2015 financial guidance, as follows:
- For 2015 the Company expects adjusted diluted EPS attributable to Henry Schein, Inc. to be $5.90 to $6.00, which represents growth of 8% to 10% compared with 2014.
- This 2015 guidance excludes restructuring costs of approximately $0.29 to $0.33 per diluted share related to a previously announced corporate initiative to rationalize the Company's operations and provide significant expense efficiencies.
- Guidance for 2015 adjusted 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.
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