EX-99 2 exh99.txt EXHIBITS HENRY SCHEIN NEWS RELEASE Henry Schein, Inc. - 135 Duryea Road - Melville, New York 11747 FOR: Henry Schein, Inc. CONTACT: Steven Paladino Executive Vice President and Chief Financial Officer steven.paladino@henryschein.com (631) 843-5500 Susan Vassallo Director, Corporate Communications susan.vassallo@henryschein.com FOR IMMEDIATE RELEASE (631) 843-5562 HENRY SCHEIN REPORTS RECORD SECOND QUARTER RESULTS Net sales increase 10.5% to $1.22 billion, diluted EPS from continuing operations up 16% to $0.50 MELVILLE, N.Y. - July 27, 2006 - 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 July 1, 2006. Net sales for the second quarter of 2006 were $1.22 billion, an increase of 10.5% from the second quarter of 2005 (See Exhibit A for details of sales growth). This increase includes 10.3% local currency growth (5.9% internally generated and 4.4% from acquisitions net of divestiture) and 0.2% related to foreign currency exchange. Net income and income from continuing operations for the second quarter of 2006 were both $45.2 million or $0.50 per diluted share. There was no impact of discontinued operations for the quarter. Second quarter 2006 income and diluted earnings per share from continuing operations were up 19.7% and 16.3% respectively, compared to the prior year quarter. 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 $0.04 per share in the second quarter of 2006, and $0.03 per share in the second quarter of 2005. "Our second quarter financial results from continuing operations were strong, with solid top-line internal growth bolstered by the contribution of several strategic acquisitions," said Stanley M. Bergman, Chairman and Chief Executive Officer of Henry Schein. "Internal sales growth in local currencies exceeded our estimate for market growth, and reflects particular strength in our Dental Group." - more - For the quarter, Dental sales increased 10.8%, including 9.4% growth in local currencies (essentially all internally generated) and 1.4% related to foreign currency exchange. Of the 9.4% local currency growth, Dental consumable merchandise sales increased 6.9% and Dental equipment sales and service revenues were up 18.1%. "Our Dental Group has posted double-digit sales growth each quarter for the past three years. Dental sales growth reflects an ongoing commitment to expanding the products and services we bring to our customers, as well as effective and innovative marketing initiatives and a highly trained field sales force," explained Mr. Bergman. "As an example of our commitment to an expanding product offering, we were delighted to announce earlier this month that Henry Schein was named the exclusive distributor for Imaging Sciences International's line of 3-D diagnostic imaging technology, which previously was sold directly to dentists." Mr. Bergman continued, "We look forward to closing our acquisition of certain businesses of Darby Group Companies during the third quarter, which will afford deeper penetration by our Dental and Medical divisions." Medical sales increased 14.3% during the second quarter (3.3% internal growth and 11.0% acquisition growth net of divestiture). "Medical Group growth was highlighted by our acquisition of NLS Animal Health, which is performing well in its first quarter as a Henry Schein company," said Mr. Bergman. "Our Medical group is in the process of planning and executing our influenza vaccine strategy for the upcoming season, and at this time pre-bookings for influenza vaccine are strong. We continue to estimate that we will distribute approximately 15 to 17 million doses of flu vaccine this year." For the quarter, International sales increased 6.9%, including 8.1% growth in local currencies (3.6% internally generated and 4.5% from acquisitions) offset by a 1.2% decline related to foreign currency exchange. Mr. Bergman noted that after the close of the second quarter the company announced its acquisition of Provet AG, the leading veterinary distribution company in Switzerland. Together with the purchase of NLS Animal Health, Henry Schein has essentially doubled the size of its worldwide veterinary business. Technology and Value-Added Services sales during the second quarter of 2006 were 3.7% ahead of prior year, including 3.1% growth in local currencies (all internal) and 0.6% related to foreign currency exchange. Electronic claims services revenues continued a strong double-digit growth trend. Year-to-Date Results For the year-to-date, net sales of $2.4 billion represents an increase of 9.9% compared to the prior year-to-date. This increase includes 10.9% local currency growth (7.1% internally generated and 3.8% from acquisitions net of divestiture) offset by a 1.0% decline related to foreign currency 2 -more- exchange. Income from continuing operations for the first half of 2006 was $80.8 million reflecting 18.4% growth compared to the prior year. Earnings per diluted share from continuing operations of $0.90 for the first half of 2006 represents 16.9% growth over the same period in the prior year. Stock Repurchase Plan The Company announced that 512,034 shares were repurchased during the second quarter at an average price of $45.78 per share. Approximately $88 million remains authorized for future stock repurchases. The impact of the repurchase of shares under this program on second quarter diluted EPS was immaterial. 2006 EPS Guidance Henry Schein provides 2006 financial guidance, as follows: o 2006 diluted EPS is expected to be $2.10 to $2.16 including the impact of expensing stock-based compensation per Financial Accounting Standards No. 123(R). o This represents an increase to previous guidance of $2.08 to $2.14. The increase in guidance is related to a number of factors including the strength of first half results, contributions from recent acquisitions, and expansion of product portfolio. o 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. o All guidance is for current continuing operations including completed or previously announced acquisitions, and does not include the impact of potential future acquisitions. Second Quarter Conference Call Webcast The Company will hold a conference call to discuss second 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(R) company, is recognized for its excellent customer service and highly competitive prices. The Company's four business groups - Dental, Medical, International and 3 - more - Technology - serve more than 500,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary 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 70,000 national and Henry Schein private-brand products in stock, as well as over 100,000 additional products available to our customers as special order items. Henry Schein also offers a wide range of innovative value-added practice solutions for healthcare professionals, such as ArubA(R), the Company's electronic catalog and ordering system. Its leading practice-management software solutions have been installed in more than 50,000 practices, including DENTRIX(R) and Easy Dental(R) for dental practices, and AVImark(R) for veterinary clinics. Headquartered in Melville, N.Y., Henry Schein employs nearly 11,000 people and has operations in 19 countries. The Company's sales reached a record $4.6 billion in 2005. 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 which, 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: competitive factors; changes in the healthcare industry; changes in government regulations that affect us; financial 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; regulatory and litigation risks; the dependence on our continued product development, technical support and successful marketing in the technology segment; our dependence upon sales personnel and key customers; our dependence on our senior management; possible increases in the cost of shipping our products or other service trouble with our third-party shippers; risks from rapid technological change; risks from potential increases in variable interest rates; financial risks associated with acquisitions; 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 that affect us. 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, forward-looking statements should not be relied upon as a prediction of actual results. We undertake no duty and have no obligation to update forward-looking statements. (TABLES TO FOLLOW) -4- HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended -------------------------- -------------------------- July 1, June 25, July 1, June 25, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net sales ................................................ $ 1,220,360 $ 1,104,428 $ 2,382,141 $ 2,167,425 Cost of sales ............................................ 860,900 783,092 1,685,079 1,544,695 ----------- ----------- ----------- ----------- Gross profit ...................................... 359,460 321,336 697,062 622,730 Operating expenses: Selling, general and administrative .................. 282,712 254,278 559,396 502,410 ----------- ----------- ----------- ----------- Operating income .................................. 76,748 67,058 137,666 120,320 Other income (expense): Interest income ...................................... 3,969 1,228 8,525 2,527 Interest expense ..................................... (7,302) (5,084) (14,696) (11,310) Other, net ........................................... (339) -- (118) (113) ----------- ----------- ----------- ----------- Income from continuing operations before taxes, minority interest and equity in earnings of affiliates ........................... 73,076 63,202 131,377 111,424 Income taxes ............................................. (26,379) (23,211) (47,601) (41,072) Minority interest in net income of subsidiaries .......... (1,706) (2,469) (3,266) (2,514) Equity in earnings of affiliates ......................... 227 248 335 435 ----------- ----------- ----------- ----------- Income from continuing operations ........................ 45,218 37,770 80,845 68,273 Discontinued operations: Loss from operations of discontinued components ........................................ -- (1,008) (32,279) (448) Income tax benefit ................................... -- 195 12,911 5 ----------- ----------- ----------- ----------- Loss from discontinued operations .................... -- (813) (19,368) (443) ----------- ----------- ----------- ----------- Net income ............................................... $ 45,218 $ 36,957 $ 61,477 $ 67,830 =========== =========== =========== =========== Earnings from continuing operations per share: Basic ................................................ $ 0.51 $ 0.43 $ 0.92 $ 0.79 =========== =========== =========== =========== Diluted .............................................. $ 0.50 $ 0.43 $ 0.90 $ 0.77 =========== =========== =========== =========== Loss from discontinued operations per share: Basic ................................................ $ -- $ 0.00 $ (0.22) $ (0.01) =========== =========== =========== =========== Diluted .............................................. $ -- $ (0.01) $ (0.21) $ 0.00 =========== =========== =========== =========== Earnings per share: Basic ................................................ $ 0.51 $ 0.43 $ 0.70 $ 0.78 =========== =========== =========== =========== Diluted .............................................. $ 0.50 $ 0.42 $ 0.69 $ 0.77 =========== =========== =========== =========== Weighted-average common shares outstanding: Basic ................................................ 88,381 86,927 87,713 86,818 =========== =========== =========== =========== Diluted .............................................. 89,823 88,154 89,344 88,196 =========== =========== =========== ===========
Note: The above prior period amounts have been restated to reflect the effects of our discontinued operations and the expensing of stock-based compensation pursuant to our adoption of FAS 123(R) using the modified retrospective application. 5 - more -
HENRY SCHEIN, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) July 1, December 31, 2006 2005 ----------- ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents .................................................. $ 138,334 $ 210,683 Available-for-sale securities............................................... 101,107 124,010 Accounts receivable, net of reserves of $41,648 and $52,308 ................ 579,766 582,617 Inventories ................................................................ 551,552 505,542 Deferred income taxes ...................................................... 27,868 35,505 Prepaid expenses and other ................................................. 124,113 126,052 ----------- ----------- Total current assets ............................................... 1,522,740 1,584,409 Property and equipment, net .................................................... 209,876 190,746 Goodwill ....................................................................... 717,734 626,869 Other intangibles, net ......................................................... 140,270 123,204 Investments and other .......................................................... 59,433 57,892 ----------- ----------- Total assets ....................................................... $ 2,650,053 $ 2,583,120 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................................................... $ 351,566 $ 371,392 Bank credit lines .......................................................... 2,262 2,093 Current maturities of long-term debt ....................................... 31,182 33,013 Accrued expenses: Payroll and related ..................................................... 87,538 96,113 Taxes ................................................................... 41,414 65,070 Other ................................................................... 158,122 156,433 ----------- ----------- Total current liabilities .......................................... 672,084 724,114 Long-term debt ................................................................. 486,014 489,520 Deferred income taxes ........................................................... 60,282 54,432 Other liabilities .............................................................. 59,572 53,547 Minority interest .............................................................. 17,253 12,353 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding ........................................................ -- -- Common stock, $.01 par value, 240,000,000 shares authorized, 88,160,672 outstanding on July 1, 2006 and 87,092,238 outstanding on December 31, 2005 ............................. 882 871 Additional paid-in capital .................................................. 593,120 559,266 Retained earnings ........................................................... 716,100 667,958 Accumulated other comprehensive income ...................................... 44,746 21,059 ----------- ----------- Total stockholders' equity ......................................... 1,354,848 1,249,154 ----------- ----------- Total liabilities and stockholders' equity ......................... $ 2,650,053 $ 2,583,120 =========== ===========
Note: Certain prior period amounts have been restated to reflect the effects of our adoption of FAS 123(R) using the modified retrospective application and our reclassification of variable rate demand notes from 'cash and cash equivalents' to 'available-for-sale securities'. Also, included in the prior period amounts are approximately $44 million of accounts receivable, net of reserves, and approximately $16 million of inventories, net of reserves, related to discontinued operations which were sold on April 1, 2006. 6 - more -
HENRY SCHEIN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended ----------------------------- July 1, 2006 June 25, 2005 ------------- ------------- Cash flows from operating activities: Net income ................................................................. $ 45,218 $ 36,957 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of discontinued operation, net of tax .................. -- -- Depreciation and amortization ....................................... 15,806 15,111 Stock-based compensation expense .................................... 5,517 4,796 Provision for (recovery of) losses on trade and other accounts receivable ........................................... 561 158 Provision (benefit) for deferred income taxes ....................... 959 (153) Undistributed earnings of affiliates ................................ (227) (248) Minority interest in net income of subsidiaries ..................... 1,706 2,469 Other ............................................................... 701 (1,079) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ........................................... (7,622) (19,500) Inventories ................................................... (19,274) 12,653 Other current assets .......................................... 5,003 (1,351) Accounts payable and accrued expenses ......................... (9,731) 35,521 ------------- ------------- Net cash provided by operating activities ...................................... 38,617 85,334 ------------- ------------- Cash flows from investing activities: Purchases of fixed assets ................................................. (21,486) (13,895) Payments for business acquisitions, net of cash acquired .................. (32,475) (15,706) Cash received from business divestiture ................................... 36,527 -- Purchases of available-for-sale securities ................................ (62,919) -- Proceeds from sales of available-for-sale securities ...................... 61,930 -- Proceeds from maturities of available-for-sale securities ................. 1,200 -- Net proceeds from (payments for) foreign exchange forward contract settlements ................................................... (13,644) 19,993 Other ..................................................................... (26) 415 ------------- ------------- Net cash used in investing activities .......................................... (30,893) (9,193) ------------- ------------- Cash flows from financing activities: Net payments on bank borrowings ........................................... (1,223) (1,599) Principal payments for long-term debt ..................................... (3,830) (1,869) Payments for establishing a new credit facility ........................... -- (650) Proceeds from issuance of stock upon exercise of stock options ............ 8,492 8,109 Payments for repurchases of common stock .................................. (23,439) (4,699) Proceeds from excess tax benefits related to stock-based compensation ..... 2,863 2,576 Other ..................................................................... 2,235 (158) ------------- ------------- Net cash provided by (used in) financing activities ............................ (14,902) 1,710 ------------- ------------- Net change in cash and cash equivalents ........................................ (7,178) 77,851 Effect of exchange rate changes on cash and cash equivalents ................... 6,767 (5,484) Cash and cash equivalents, beginning of period ................................. 138,745 114,741 ------------- ------------- Cash and cash equivalents, end of period ....................................... $ 138,334 $ 187,108 ============= ============= Six Months Ended ----------------------------- July 1, 2006 June 25, 2005 ------------- ------------- Cash flows from operating activities: Net income ................................................................. $ 61,477 $ 67,830 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale of discontinued operation, net of tax .................. 19,363 -- Depreciation and amortization ....................................... 30,158 28,348 Stock-based compensation expense .................................... 9,374 8,536 Provision for (recovery of) losses on trade and other accounts receivable ........................................... 679 (50) Provision (benefit) for deferred income taxes ....................... 5,937 1,485 Undistributed earnings of affiliates ................................ (335) (435) Minority interest in net income of subsidiaries ..................... 3,266 2,514 Other ............................................................... (412) 10 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ........................................... (3,023) (5,066) Inventories ................................................... (31,755) 21,263 Other current assets .......................................... 8,146 28,557 Accounts payable and accrued expenses ......................... (102,258) (85,835) ------------- ------------- Net cash provided by operating activities ...................................... 617 67,157 ------------- ------------- Cash flows from investing activities: Purchases of fixed assets ................................................. (32,654) (22,033) Payments for business acquisitions, net of cash acquired .................. (105,187) (54,752) Cash received from business divestiture ................................... 36,527 -- Purchases of available-for-sale securities ................................ (147,340) -- Proceeds from sales of available-for-sale securities ...................... 168,961 -- Proceeds from maturities of available-for-sale securities ................. 1,280 -- Net proceeds from (payments for) foreign exchange forward contract settlements ................................................... (14,805) 15,515 Other ..................................................................... 165 (1,887) ------------- ------------- Net cash used in investing activities .......................................... (93,053) (63,157) ------------- ------------- Cash flows from financing activities: Net payments on bank borrowings ........................................... -- (1,416) Principal payments for long-term debt ..................................... (6,475) (2,565) Payments for establishing a new credit facility ........................... -- (650) Proceeds from issuance of stock upon exercise of stock options ............ 25,600 19,053 Payments for repurchases of common stock .................................. (23,439) (21,009) Proceeds from excess tax benefits related to stock-based compensation ..... 9,788 5,458 Other ..................................................................... 2,049 (559) ------------- ------------- Net cash provided by (used in) financing activities ............................ 7,523 (1,688) ------------- ------------- Net change in cash and cash equivalents ........................................ (84,913) 2,312 Effect of exchange rate changes on cash and cash equivalents ................... 12,564 (1,825) Cash and cash equivalents, beginning of period ................................. 210,683 186,621 ------------- ------------- Cash and cash equivalents, end of period ....................................... $ 138,334 $ 187,108 ============= =============
NOTE: The above prior period amounts have been restated to reflect the effects of our adoption of FAS 123(R) using the modified retrospective application. Additionally, for the three and six months ended July 1, 2006 we reflected the effects of a reclassification of variable rate demand notes from 'cash and cash equivalents' to 'available-for-sale securities' retrospective to December 31, 2005. 7 - more -
Exhibit A Henry Schein, Inc. 2006 Second Quarter Sales Growth Rate Summary (unaudited) Q2 2006 over Q2 2005 -------------------- Consolidated Dental Medical International Technology ------------ ----------- ------------ ------------- ------------ Internal 5.9% 9.3% 3.3% 3.6% 3.1% Acquisitions, net of divestiture 4.4% 0.1% 11.0% 4.5% -- ------------ ----------- ------------ ------------- ------------ Local Currency Sales Growth 10.3% 9.4% 14.3% 8.1% 3.1% Foreign Currency Exchange 0.2% 1.4% -- -1.2% 0.6% ------------ ----------- ------------ ------------- ------------ Total Sales Growth 10.5% 10.8% 14.3% 6.9% 3.7% ============ =========== ============ ============= ============ Q2 YTD 2006 over Q2 YTD 2005 ---------------------------- Consolidated Dental Medical International Technology ------------ ----------- ------------ ------------- ------------ Internal 7.1% 9.2% 4.3% 7.0% 5.6% Acquisitions, net of divestiture 3.8% 0.4% 6.2% 6.8% -- ------------ ----------- ------------ ------------- ------------ Local Currency Sales Growth 10.9% 9.6% 10.5% 13.8% 5.6% Foreign Currency Exchange -1.0% 1.0% -- -5.2% 0.4% ------------ ----------- ------------ ------------- ------------ Total Sales Growth 9.9% 10.6% 10.5% 8.6% 6.0% ============ =========== ============ ============= ============
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