Henry Schein, Inc. (HSIC)

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Henry Schein (HSIC)

Q1 2013 Earnings Call

May 07, 2013 10:00 am ET


Carolynne Borders - Vice President of Investor Relations

Stanley M. Bergman - Executive Chairman and Chief Executive Officer

Steven Paladino - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Executive Director


Glen J. Santangelo - Crédit Suisse AG, Research Division

Robert P. Jones - Goldman Sachs Group Inc., Research Division

Michael Cherny - ISI Group Inc., Research Division

Steven Valiquette - UBS Investment Bank, Research Division

Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

John Kreger - William Blair & Company L.L.C., Research Division



Good morning, ladies and gentlemen, and welcome to the Henry Schein First Quarter Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Carolynne Borders, Henry Schein's Vice President of Investor Relations. Please go ahead, Carolynne.

Carolynne Borders

Thank you, operator, and my thanks to each of you for joining us today to discuss Henry Schein's first quarter results. With me this morning are Stanley Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein; and Steven Paladino, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to state that certain comments made during this call will include information that is forward-looking. As you know, risks and uncertainties involved in the company’s business may affect the matters referred to in forward-looking statements. As a result, the company's performance may differ from those expressed in or indicated by such forward-looking statements.

Also, these forward-looking statements are qualified in their entirety by the cautionary statements contained in Henry Schein's Securities and Exchange Commission filings.

The contents of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, May 7, 2013. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. [Operator Instructions]

With that said, I would like to turn the call over to Stanley Bergman.

Stanley M. Bergman

Good morning, and thank you, Carolynne. Before I begin to discuss the quarter, let me note that just this week, Henry Schein placed #296 in the 2013 Fortune 500 ranking of America's Largest Corporations. Achieving a milestone as significant as being ranked 1 of the 300 largest companies in America reflects the successful strides our Team Schein Members have made in growing the company, specifically over the last 17 years since we went public. To climb more than 190 spots on the Fortune 500 list in less than a decade is testament to our success in executing on our strategic plan that focuses on our customers' needs by taking advantage of new technologies and tapping into growing markets.

Now turning to our results for the quarter. We are very pleased to report positive growth in local currencies in each of our 4 business groups during the quarter. The performance was driven by organic growth in North America and, of course, strategic acquisitions worldwide. Sales growth was negatively impacted by a number of factors that Steven will discuss in greater detail shortly, yet overall, our bottom line performance was in line with our internal expectations, and we are pleased to affirm earnings per share guidance for the full year of 2013.

Of course, I'll provide additional commentary after Steven reviews the numbers in greater detail, and then, of course, we'll be open to questions and we'll give appropriate answers. So first, let me ask Steven to give you a review of our quarterly financial results.

Steven Paladino

Okay, thank you, Stan, and good morning to all. I am also pleased to report overall solid results for the first quarter of 2013.

Before we begin, I'd like to point out that Q1 2013 results include onetime non-cash expenses related to the refinancing of the Butler Schein Animal Health debt. This was previously announced during our last quarterly conference call. I would also note that the first quarter of last year of 2012 results include restructuring costs of $11.8 million on a pretax basis or $0.09 per diluted share. Exhibit B of this morning's earnings news release reconciles these onetime non-GAAP items to GAAP net income and EPS from continuing operations.

So with that, I'd like to begin by discussing the 4 factors that affected our sales results for the quarter.

First, our exceptionally strong performance in last year's Q1 2012 made for a difficult comparison in 2013. Specifically, our Q1 2012 local internal sales growth was exceptional at 7.8% on a worldwide basis, and that translated into EPS growth of 19.5%.

Second, in 2013, both the Easter and Passover holidays occurred in the first quarter, whereas last year in 2012, they both fell in the second quarter. So note that the Easter holiday had a more pronounced effect in certain international markets, resulting in 1 less selling day because Good Friday is a national holiday with businesses generally closed in Canada and many European countries.

Third, our Dental equipment sales growth was negatively impacted in both the U.S. and internationally by 2 separate factors. We experienced an acceleration of U.S. Dental equipment sales in the fourth quarter of 2012 from the first quarter of 2013, due primarily to customers taking advantage of Section 179 tax benefits and the possible increased cost impact related to the medical device excise tax. Internationally, the IDS trade show, which occurred in the late -- in late in first quarter of 2013, resulted in lower European Dental equipment sales in the first quarter as practitioners generally delay purchases in anticipation of the show.

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