Henry Schein, Inc. (Nasdaq: HSIC), the largest provider of healthcare products and services to office-based practitioners in the combined North American and European markets, today reported financial results for the quarter ended April 1, 2006.
Net sales for the first quarter of 2006 were $1.16 billion, an increase of 9.3% from the first quarter of 2005 (See Exhibit A for details of sales growth). This increase includes 11.7% local currency growth (8.3% internally generated and 3.4% from acquisitions) offset by a 2.4% decline related to foreign currency exchange.
First quarter income from continuing operations was $35.6 million, up 16.8% compared with the first quarter of 2005, and earnings per diluted share from continuing operations were $0.40, up 14.3% compared with the prior-year quarter. Income from continuing operations excludes an after-tax charge of $19.4 million, or $0.22 per diluted share, for the loss on disposal of the Hospital Supply business, which has previously been treated as a discontinued operation. Effective January 1, 2006, the Company adopted the new accounting rules on expensing stock-based compensation per Financial Accounting Standards No. 123(R) on a retrospective basis. All periods presented have been adjusted to give effect to FAS No. 123(R) which amounted to approximately $0.03 per share in Q1 2006 and Q1 2005.
"Our financial results from continuing operations feature first quarter records for sales, income and diluted EPS," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "Internal sales growth in local currencies once again exceeded our estimate for market growth and reflected strength in all business Groups."
For the quarter, Dental sales increased 10.4%, including 9.8% growth in local currencies (9.1% internally generated and 0.7% from acquisitions) and 0.6% related to foreign currency exchange. Of the 9.8% local currency growth, Dental consumable merchandise sales increased 9.9% (9.3% internal growth and 0.6% acquisition growth) and Dental equipment sales and service revenues were up 9.1% (8.4% internal growth and 0.7% acquisition growth).
"The first quarter marks the 11th consecutive quarter of double-digit sales growth in our Dental Group as we continue to gain market share. Dental sales growth reflects a highly trained field sales force, effective and innovative marketing initiatives, and an ongoing commitment to expanding the products and services we bring to our customers," explained Mr. Bergman.
Medical sales increased 6.8% during the first quarter (4.9% internal growth and 1.9% acquisition growth).
"At the end of Q1 we completed the sale of our Hospital Supply business," commented Mr. Bergman. "This divestiture sharpens our focus on our office-based physician operations, which represents our core competency and is our foundation for future growth. Also, at the end of the quarter we completed our acquisition of NLS Animal Health. This acquisition represents a significant increase in Henry Schein's veterinary footprint in the United States, which along with our growing European veterinary presence, offers Henry Schein's vendor partners a unique opportunity to access veterinarians on an international basis."
For the quarter, International sales increased 10.3%, including 20.3% growth in local currencies (10.8% internally generated and 9.5% from acquisitions) offset by a 10.0% decline related to foreign currency exchange. Internal sales growth was bolstered by the acquisitions of the Demedis operations in Austria, Halas Dental in Australia and Shalfoon Bros. in New Zealand.
"Internal International sales growth in local currencies is approximately double our estimate for growth in the markets we serve. We enjoy tremendous opportunities overseas, and look forward to building upon our formidable presence particularly in Europe," added Mr. Bergman.
Technology and Value-Added Services sales were 8.6% ahead of prior year, including 8.3% growth in local currencies (all internal) and 0.3% related to foreign currency exchange. Electronic services revenues continued a strong double-digit growth trend.
2006 EPS Guidance
Henry Schein affirms 2006 financial guidance, as follows:
-- 2006 diluted EPS is expected to be $2.08 to $2.14 including the impact of expensing stock-based compensation per Financial Accounting Standards No. 123(R).
-- Diluted EPS growth is expected to be in the low double digits percentage range for the second quarter of 2006, and then to accelerate for the second half of the year due to the impact of seasonal influenza vaccine sales and the timing of certain expenses.
-- This 2006 diluted EPS guidance includes Henry Schein's expectations that it will distribute approximately 15 million to 17 million doses of influenza vaccine during 2006, including product manufactured by GlaxoSmithKline Biologicals (which includes the former ID Biomedical), Chiron Corporation and sanofi pasteur.
-- All guidance is for current continuing operations including completed acquisitions, and does not include the impact of potential future acquisitions.
First Quarter Conference Call Webcast
The Company will hold a conference call to discuss first 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.