Henry Schein, Inc. (HSIC)

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Henry Schein (HSIC)

Q3 2011 Earnings Call

November 01, 2011 10:00 am ET


Stanley M. Bergman - Executive Chairman and Chief Executive Officer

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

Susan Vassallo - Vice President of Corporate Communications


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

Glen J. Santangelo - Crédit Suisse AG, Research Division

Michael R. Minchak - JP Morgan Chase & Co, Research Division

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

Albert J. Rice - Susquehanna Financial Group, LLLP, Research Division



Good morning, ladies and gentlemen, and welcome to the Henry Schein Third 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, Susan Vassallo, Henry Schein's Vice President of Corporate Communications. Please go ahead, Susan.

Susan Vassallo

Thank you, operator, and my thanks to each of you for joining us to discuss Henry Schein's third quarter results. 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 the live broadcast, today, November 1, 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. [Operator Instructions]

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

Stanley M. Bergman

Thank you very much, Susan, and good morning, everyone, and thank you for joining us on this call. We are very pleased to be reporting sales growth in local currencies in each of our 5 businesses during this third quarter of 2011. And company-wide, sales growth was nearly 12% or approximately 13% when excluding sales of seasonal influenza vaccines for both periods, important to adjust for that to understand how our core business is doing.

Third quarter results were impacted by lower sales and profits from this seasonal influenza vaccine sales. During the third quarter, we distributed 9.9 million doses of seasonal influenza vaccine versus 11.2 million doses in last year's third quarter.

Now it's important to realize we have substantially sold all of our 11.6 million doses commitment for 2011 as of today -- as of this call. And as we previously announced, we reduced our commitment for influenza vaccine doses by approximately 2 million doses earlier this year. So, excluding sales of influenza vaccine from both periods, net income and diluted earnings per share did increase by double digits.

We are also introducing 2012 guidance for diluted earnings per share to be from $4.25 to $4.34 per share, which represents a growth of 8% to 10% compared to the midpoint of our 2011 EPS guidance. We would like to note that 2012 fiscal year includes 1 less week than 2011. So, I think it's important to understand the points I've just made. Steven will elaborate on these and magnify the important areas to focus on.

Overall, we're quite happy with the performance of our company. The business is doing very well in each of our business units. We are very focused. We have just completed the strategic planning process, and know exactly where we want to focus for the years 2012 to '14 so that we can continue to generate earnings in a measured and credible way and continue to show the results that we have over the past 16 years as a public company.

In a moment, I'll provide some commentary on each of our business units. But first, let Steven provide an overview of our quarterly financial results. Steven, please.

S. Paladino

Okay. Thank you, Stan, and good morning to everyone. I'm also pleased to be reporting solid sales growth for the third quarter of 2011. If we turn to our financial performance, our net sales for the quarter ended September 24, 2011, were $2.1 billion, reflecting an increase of 11.5% compared with the third quarter of 2010. This consists of 7.4% growth in local currencies and a 4.1% increase related to foreign currency exchange.

In local currencies, internally-generated sales were up 3.3% while acquisition growth contributed an additional 4.1%.

As Stanley just mentioned, in order to provide more meaningful commentary about the quarter's results, we will be discussing our results both including and excluding the impact of influenza vaccine sales and their related profits.

So excluding sales of seasonal influenza vaccines from both periods, our net sales increase was 12.9%, with 8.6% growth in local currencies including 4.3% internally-generated. You can note the details of our sales growth, which are contained on Exhibit A in our earnings news release, which was issued earlier today.

Our operating margin for the third quarter of 2011 was 6.8%, which was a decline of 47 basis points compared with the third quarter of 2010. However, excluding the impact of current year acquisitions as well as sales of influenza vaccine from both periods, our operating margin expanded by approximately 14 basis points compared with the prior year.

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