Adjusted EPS up 10.2 per cent to $1.41 Affirms 2016 guidance range
Henry Schein, Inc. reported record first quarter financial results.
Net sales for the quarter ended March 26, 2016 were $2.7 billion, an increase of 10.1 per cent compared with the first quarter of 2015. This consisted of 12.0 per cent growth in local currencies and a 1.9 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.3 per cent and acquisition growth was 2.7 per cent.
Net income attributable to Henry Schein, Inc. for the first quarter of 2016 was $113.8 million, or $1.37 per diluted share. Excluding restructuring costs of $4.1 million pre-tax or $0.04 per diluted share, adjusted net income attributable to Henry Schein, Inc. for the first quarter of 2016 was $116.8 million or $1.41 per diluted share. This represents growth of 7.7 per cent and 10.2 per cent, respectively, compared with the first quarter of 2015, excluding restructuring costs.
“We are pleased with our first-quarter financial results, and we believe we gained market share in each of our business groups. The global markets we serve remained generally healthy, and although we faced continued headwinds from foreign currency exchange in our international business, the impact was far less than in 2015,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “Double-digit growth in adjusted diluted EPS represents a solid start to the year. We also are pleased to affirm guidance for 2016 adjusted diluted EPS, which represents growth of 10 to 12 per cent compared with adjusted 2015 results.”
Dental sales of $1.3 billion increased 4.1 per cent, consisting of 6.1 per cent growth in local currencies and a 2.0 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.9 per cent and acquisition growth was 1.2 per cent. The 4.9 per cent internal growth in local currencies included 6.4 per cent growth in North America and 2.3 per cent growth internationally.
“In North America, consumable merchandise internal sales growth in local currencies was 4.6 per cent, which we believe reflects continued healthy patient traffic to dental offices as well as market share gains. Equipment sales and service internal sales growth in local currencies of 13.5 per cent was excellent and was driven by sales of high-tech equipment,” commented Mr. Bergman. “International consumable merchandise internal sales growth in local currencies was 1.6 per cent and was led by France, Australia and Spain. International equipment sales and service internal sales in local currencies increased 4.3 per cent over the prior year, with particular strength in Germany, France and Australia.”
“During the quarter we expanded our presence in Japan by acquiring a 50 per cent interest in the One Piece subsidiary of J. Morita, one of the world’s largest manufacturers and distributors of dental equipment and supplies,” he added. “We also signed an agreement to acquire a majority interest in Dental Cremer, a distributor of dental supplies and equipment in Brazil.”
Animal Health sales of $771.4 million increased 12.7 per cent, consisting of 15.6 per cent growth in local currencies and a 2.9 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.8 per cent and acquisition growth was 5.8 per cent. The 9.8 per cent internal growth in local currencies included 16.7 per cent growth in North America and 3.1 per cent growth internationally.
“Normalising Animal Health results to account for the impact of certain products switching between agency sales and direct sales, internal sales growth in local currencies was 5.2 per cent for the quarter, including 7.4 per cent growth in North America,” commented Mr. Bergman. “Growth in our Animal Health group benefitted from multiple strategic acquisitions made during 2015, in particular in Europe.”
Medical sales of $538.1 million increased 21.3 per cent, consisting of 21.5 per cent growth in local currencies and a 0.2 per cent decline related to foreign currency exchange. In local currencies, sales increased 21.5 per cent, all internally generated.
“When normalising results for the impact of agency sales in the prior year, North America Medical internal sales growth was 11.2 per cent. This represents the fifth consecutive quarter of double-digit sales gains. This growth reflects continued success with large group practices and integrated delivery networks,” remarked Mr. Bergman.
Technology and Value-Added Services sales of $101.7 million increased 18.6 per cent, including 19.9 per cent growth in local currencies and a 1 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 7.5 per cent and acquisition growth was 12.4 per cent.
“North America Technology and Value-Added Services internal sales growth was 8.0 per cent in local currencies, representing the highest growth rate in nearly two years and reflecting particular strength in software and financial services. International internal growth in local currencies was 5.1 per cent,” commented Mr. Bergman. “Early in the quarter, we completed the acquisition of a majority interest in Vetstreet, a leading domestic provider of marketing solutions and health information analytics, and a month later we acquired RxWorks, a practice management software company serving veterinarians in Australia, New Zealand, the U.K. and the Netherlands. Both transactions strengthen our position of leadership and add value to our customers worldwide.”
Stock repurchase plan
The company announced that it repurchased approximately 664,000 shares of its common stock during the first quarter at an average price of $150.51 per share, or approximately $100 million. The impact of the repurchase of shares on first-quarter diluted EPS was less than one cent. At the close of the first quarter, Henry Schein had approximately $300 million authorised for future repurchases of its common stock.
2016 EPS Guidance
Henry Schein today affirms 2016 financial guidance, as follows:
- For 2016, the Company expects adjusted diluted EPS attributable to Henry Schein, Inc. to be $6.55 to $6.65, which represents growth of 10 to 12 per cent compared with 2015 adjusted diluted EPS of $5.96.
- Guidance for 2016 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, or restructuring costs, which are expected to be in the range of $0.10 to $0.13 per diluted share.
First-quarter conference call webcast
The company will hold a conference call to discuss first-quarter financial results today, beginning at 10am Eastern time. Individual investors are invited to listen to the conference call through Henry Schein’s website. In addition, a replay will be available beginning shortly after the call has ended.
