Henry Schein (HSIC)
Q1 2011 Earnings Call
May 03, 2011 10:00 am ET
S. Paladino - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Executive Director
Susan Vassallo - Vice President of Corporate Communications
Stanley Bergman - Executive Chairman and Chief Executive Officer
Jeffrey Johnson - Robert W. Baird & Co. Incorporated
Lisa Gill - JP Morgan Chase & Co
Steven Valiquette - UBS Investment Bank
Albert Rice - Susquehanna Financial Group, LLLP
Larry Marsh - Lehman Brothers
Glen Santangelo - Crédit Suisse AG
Verdell Walker - Goldman Sachs Group Inc.
Unknown Analyst -
Previous Statements by HSIC
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Thank you, operator, and my thanks to each of you for joining us today to discuss Henry Schein's first quarter results. If you have not received a copy of our earnings news release, you can access it on our website at henryschein.com. With me this morning are Stanley Bergman, Chairman 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 content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, today, May 3, 2011. Henry Schein undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. I ask that during the Q&A portion of today's call you limit yourself to a single question and a follow-up before returning to the queue. This will provide the opportunity for as many listeners as possible to ask a question within the one hour we have allotted for this call. With that said, I'd like to turn the call now over to Mr. Stanley Bergman.
Thank you, Susan. Good morning, everyone, and thank you for joining us. I'm very, very happy to report once again we gained market share in each of our 5 business groups during the quarter. And I'm particularly pleased to report high single to low double-digit sales in local currencies in all of our business groups. And from an earnings perspective, the year is off to a very strong start with growth in adjusted earnings per share of 9.3% for the quarter, which is above the guidance we provided during our last quarterly conference call.
In a moment, I'll provide some additional commentary on each of our businesses. But first, let me ask Steve Paladino, our Chief Financial Officer, to provide an overview on our quarterly financial results. Steven?
Okay. Thank you, Stan, and good morning, everyone. I'm also pleased to be reporting strong results for the first quarter of 2011. Our reported EPS growth for the quarter was 24.2%. However, I'd like to point out that the prior year first quarter reflects restructuring costs of $12.3 million pretax or $0.09 per diluted share. Excluding these costs in the prior year, our EPS growth was 9.3%.
I will be providing growth rates compared to the prior year excluding the restructuring costs, and I will refer to those results as adjusted results from continuing operation. Exhibit B to this morning's earnings news release reconciles GAAP and non-GAAP income and EPS from continuing operations.
So turning to our financial performance. Net sales for the quarter ended March 26, 2011, were $1.9 billion, reflecting a 10.6% increase compared with the first quarter of 2010. This consists of 9.9% growth in local currencies and a 0.7% increase related to foreign currency exchange. In local currencies, internally generated sales were up 3.8%, while acquisition growth contributed 6.1%. You could also note the details of our sales growth that are contained in Exhibit A in our earnings news release that was issued this morning.
Our operating margin for the first quarter of 2011 was 6.4% and declined by 21 basis points compared to the first quarter of 2010 on a non-GAAP basis. It's important to note that excluding the impact of recent acquisitions, which serve to reset the base operating margin, we experienced a slight operating margin expansion in the first quarter of this year versus last year.
Our effective tax rate for the quarter was 32.5%, which is in line with our guidance, and is down from 32.9% in the first quarter of 2010 on a non-GAAP basis. We expect our effective tax rate to remain in the 32% range for the balance of the year.
Net income attributable to Henry Schein for the first quarter of 2011 was $76.5 million or $0.82 per diluted share. On a non-GAAP basis, which again excludes restructuring costs in the prior year, net income and diluted EPS increased by 10.6% and 9.3%, respectively, compared to the first quarter of 2010. You can see the non-GAAP adjustments in Exhibit B of our earnings release.