Healthcare products and services provider Henry Schein Inc. (HSIC) on Tuesday reported a 14% increase in profit for the second quarter from last year as a small decline in sales was offset by lower operating expenses. Earnings per share from continuing operations for the quarter increased 14% from the prior-year period and beat analysts' consensus estimate by five cents. The company also reaffirmed its earnings outlook for fiscal year 2009.
The company, the largest U.S. supplier of products and equipment to dental practices, has been hurt by a decline in sales of dental and medical equipment as dentists and doctors continue to defer purchase of equipment amid the economic slowdown. The recession has also led many patients to defer nonessential dental work, as a big chunk of dental spending is discretionary.
Second-Quarter Results
For the second quarter, net income attributable to Henry Schein increased to $73.47 million, or $0.81 per share, from $64.57 million, or $0.70 per share, in the year-ago quarter.
Income from continuing operations attributable to Henry Schein for the quarter was $73.47 million, or $0.81 per share, up from $64.99 million, or $0.71 per share, in the prior-year quarter. On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude special items.
The Melville, New York-based company's net sales for the quarter declined 1.8% to $1.61 billion from $1.64 billion a year ago, but matched analysts' consensus revenue estimate of $1.61 billion.
The decline in net sales for the quarter consists of a 7.1% decline related to foreign currency exchange, offset by a 5.3% growth in local currencies.
Stanley Bergman, Chairman and Chief Executive Officer of Henry Schein said, "We are pleased to report growth in diluted EPS from continuing operations of 14% and operating margin expansion of 65 basis points. Our financial results for the quarter demonstrate a commitment to efficient operations and prudent cash management. The markets Henry Schein serves were largely as we expected them to be during the second quarter."
Peer Performance
Patterson Companies Inc. (PDCO) is yet to report its financial results for the first quarter. Analysts expect the company to report earnings of $0.37 per share for the quarter on revenues of $755.90 million.
Other Metrics
Henry Schein's gross profit for the quarter declined to $478.51 million from $488.11 million a year ago. Selling, general and administrative expenses for the quarter were $356.20 million, down 4.8% from $374.12 million in the prior-year period.
Operating income for the quarter was $122.31 million, up from $113.99 million in the previous-year quarter.
Segmental Results
Dental Group sales for the quarter declined 5.1% from the year-ago period to $626 million and includes a 17.5% decline in dental equipment sales and service revenues, as dentists continued to be cautious when committing to purchasing equipment.
Medical Group sales, however, increased 8% from the prior-year quarter to $351 million, aided by strong sales of consumable products as well as sales of products related to the H1N1 virus.
International Group sales decreased 3.8% from a year ago to $592 million, consisting of a 17.2% decline related to foreign currency exchange and 13.4% growth in local currencies. International sales growth in local currencies included particular strength in the company's dental equipment and veterinary businesses.
Technology and Value-Added Services Group sales grew 3.5% from the year-ago quarter to $43 million, consisting of a 3.8% decline related to foreign currency exchange and a 7.3% growth in local currencies.
Year-To-Date Results
For the first half of 2009, net income attributable to Henry Schein increased to $128.32 million, or $1.43 per share, from $116.01 million, or $1.26 per share, in the prior-year period.
Income from continuing operations attributable to the company for the half-year period was $128.32 million, or $1.43 per share, up from $116.51 million, or $1.26 per share, in the year-ago period. This represents an increase of 12.5% and 15.9%, respectively, compared with the first half of 2008.
The results for the half year include restructuring costs of $4.0 million, or $0.03 per share, after-tax, related to the completion of the expense reduction program announced in November 2008. Excluding the impact of restructuring costs, income from continuing operations increased to $131.1 million, or $1.46 per share, from a year ago.
Net sales for the period declined 2% to $3.10 billion from $3.16 billion in the same period last year.
Outlook
For fiscal year 2009, Henry Schein maintained its outlook for earnings per share in a range of $3.11-$3.26. This represents growth of 7%-12% compared with restated earnings of $2.92 per share for the prior year, excluding charges related to the Lehman Brothers bankruptcy and restructuring costs. Analysts currently expect the company to report earnings of $3.20 per share for the year.
Stock Quotes
In Tuesday's regular trading session, HSIC is trading at $50.68, down $1.76 or 3.36% on a volume of 0.61 million shares. In the past 52 weeks, the stock has been trading in a range of $32.08-$60.42.
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