Q4 internal sales in local currencies up 6.5 per cent, an eight-year high; Q4 adjusted EPS of $1.67; affirms 2016 guidance range
Melville, NY, USA – Henry Schein, Inc., the world’s largest provider of health care products and services to office-based dental, animal health and medical practitioners, today reported record fourth quarter financial results.Net sales for the quarter ended December 26, 2015 were $2.9 billion, an increase of 5.5 per cent compared with the fourth quarter of 2014. This consisted of 10.3 per cent growth in local currencies and a 4.8 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 6.5 per cent and acquisition growth was 3.8 per cent.
Net income attributable to Henry Schein, Inc. for the fourth quarter of 2015 was $129.9 million, or $1.56 per diluted share. Excluding restructuring costs of $12.4 million pre-tax or $0.11 per diluted share, adjusted net income attributable to Henry Schein, Inc. for the fourth quarter of 2015 was $139.3 million or $1.67 per diluted share. This represents an increase of 4.7 per cent and 7.1 per cent, respectively, compared with the fourth quarter of 2014.
“We are delighted to report that sales growth during the fourth quarter was particularly strong, and we believe we gained market share on an overall basis during the quarter both in North America and internationally, as we successfully continued our long-standing strategy of organic growth complemented by strategic acquisitions. We are especially pleased with our worldwide internal sales growth in local currencies for the quarter of 6.5 per cent, which represents the highest quarterly growth rate in eight years,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “Adjusted diluted EPS for the fourth quarter was $1.67. This caps off a successful 2015 performance with adjusted EPS growth for the year of nearly 10 per cent, despite the continued negative impact from the strength of the US dollar. We are pleased to affirm guidance for 2016 adjusted diluted EPS, which represents growth of 10 per cent to 12 per cent compared with 2015 adjusted diluted EPS.”
Dental sales of $1.4 billion increased 1.5 per cent, consisting of 7.3 per cent growth in local currencies and a 5.8 per cent decline related to foreign currency exchange. In local currencies internally generated sales increased 6.6 per cent and acquisition growth was 0.7 per cent. The 6.6 per cent internal growth in local currencies included 7.6 per cent growth in North America and 4.9 per cent growth internationally.
“We achieved local internal sales growth at multiyear high levels across our dental business – in North America, internationally and for the group as a whole. In North America, consumable merchandise internal sales growth in local currencies of 6.1 per cent was particularly strong. Equipment sales and service internal sales growth in local currencies of 11.5 per cent also was excellent and reflected strength in sales of traditional equipment,” commented Mr. Bergman. “International consumable merchandise internal sales growth in local currencies grew by 4.0 per cent, led by the UK and France. International equipment sales and service internal growth in local currencies was a solid 7.0 per cent, led by Germany, Australia, Austria and the UK. During the fourth quarter, we acquired a 90 per cent ownership in Dental Trey, which complements our existing business in Italy with a solid product offering and long-standing customer relationships. We also recently signed an agreement to acquire a majority interest in Dental Cremer, a distributor of dental supplies and equipment in Brazil. This investment will build upon our existing business in Brazil, which we established in 2014.”
Animal Health sales of $756.2 million increased 3.4 per cent, consisting of 9.5 per cent growth in local currencies and a 6.1 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.3 per cent and acquisition growth was 7.2 per cent. The 2.3 per cent internal growth in local currencies included 1.2 per cent growth in North America and 3.3 per cent growth internationally.
“Normalising Animal Health results to account for the impact of certain products switching between agency sales and direct sales, as well as changes to our veterinary diagnostics manufacturer relationships, internal sales growth in local currencies was 5.6 per cent for the quarter, including 8.4 per cent growth in North America,” commented Mr. Bergman. “Growth in our Animal Health group in the fourth quarter continued to benefit from strategic acquisitions, primarily our recent scil and Jorgen Kruuse A/S acquisitions.”
Medical sales of $561.6 million increased 21.6 per cent, consisting of 22.2 per cent growth in local currencies and a 0.6 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 13.4 per cent and acquisition growth was 8.8 per cent.
“North America Medical sales growth was a robust 23.2 per cent, including internal sales growth of 14.0 per cent. When normalising for the impact of agency sales under our strategic agreement with Cardinal Health, North America Medical internal sales growth was 10.2 per cent, resulting in the fourth consecutive quarter of double-digit sales gains. This reflects continued success with large group practices and integrated delivery networks. We are delighted with the successful transition of the Cardinal Health customers to the Henry Schein platform, which is substantially complete, and provides a broad continuum of care solutions,” remarked Mr. Bergman.
Technology and Value-Added Services sales of $93.8 million increased 2.8 per cent, including 4.5 per cent growth in local currencies and a 1.7 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.0 per cent and acquisition growth was 0.5 per cent.
“Technology and Value-Added Services internal sales growth in North America was 4.2 per cent in local currencies, with particular strength in electronic services and value-added services. International internal growth in local currencies was 2.7 per cent,” commented Mr. Bergman. “Early in 2016 we completed the acquisition of a majority interest in Vetstreet, a leading domestic provider of marketing solutions and health information analytics. We are particularly excited about the potential to pair our practice management software solutions with the data analytics capabilities from Vetstreet, which can offer valuable market insight to help manufacturers and veterinarians improve the success of treatments and business efficiency. We also acquired RxWorks, a practice management software company serving veterinarians in Australia, New Zealand, the U.K. and the Netherlands.”
Stock Repurchase Plan
The company announced that it repurchased approximately 1 million shares of its common stock during the fourth quarter at an average price of $146.90 per share, or approximately $150 million. The impact of the repurchase of shares on fourth quarter diluted EPS was less than one cent. At the close of the fourth quarter, Henry Schein had approximately $400 million authorised for future repurchases of its common stock.
Full Year Results
Henry Schein reports full year results including the following highlights:
- Net sales for 2015 were $10.6 billion, an increase of 2.5 per cent compared with 2014. This consisted of 8.4 per cent growth in local currencies and a 5.9 per cent decline related to foreign currency exchange. In local currencies, internally generated sales increased 5.0 per cent and acquisition growth was 3.4 per cent.
- Net income attributable to Henry Schein, Inc. for 2015 was $479.1 million, or $5.69 per diluted share. Excluding restructuring costs of $34.9 million pretax or $0.32 per diluted share, as well as an income tax benefit net of non-controlling interest of $3.8 million or $0.05 per diluted share, adjusted net income attributable to Henry Schein, Inc. for 2015 was $501.5 million or $5.96 per diluted share, an increase of 7.6 per cent and 9.6 per cent, respectively, compared with 2014.
- The Company achieved operating cash flow of $586.8 million and free cash flow of $515.2 million in 2015, both well in excess of net income attributable to Henry Schein, Inc.
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 $0.05 to $0.10 per diluted share.
