Stellar sales, tax break propel Henry Schein’s 1Q

Prognosis positive: Despite some foreign-currency fluctuations, the global healthcare business remains healthy, according to Henry Schein CEO Stanley Bergman.
By GREGORY ZELLER //

They sure grow fast at Henry Schein Inc., where a seemingly endless expansion has led to another record quarter.

Reporting Tuesday on the first quarter of its fiscal 2017, which ended April 1, the Melville-based global healthcare products and services distributor once again noted record-setting gains in quarterly sales and income, with each of its global divisions reporting shiny bottom lines.

Net sales for the quarter were recorded as $2.9 billion, a 7.7 percent increase over sales reported for 1Q FY2016, while net earnings weighed in at $140.7 million ($1.76 per diluted share), a chunky 23.7 percent spike over sales from the first quarter of last year.

In reporting his company’s latest in a string of record-shattering quarters – and affirming investor guidance that points toward a full-year EPS increase of around 18 percent – CEO Stanley Bergman noted that Henry Schein’s global Dental, Animal Health and Medical groups all gained market share during the high-flying first quarter.

“We believe that the markets we serve are generally healthy and are growing,” Bergman said in a statement to investors.

The quarterly rally began in Henry Schein’s most substantial international group, Dental, where sales for the first three months of FY2017 topped $1.4 billion, a 7.9 percent year-over-year increase. Bergman noted “the highest quarterly growth rate in the past several quarters” in North American dental-consumable merchandise and said the growth of the Dental division would have been even stronger, if not for a 0.3 percent decline primarily related to foreign-currency exchanges.

But “our (Dental) equipment backlog for the second quarter of 2017 is strong,” Bergman told investors, “which we believe indicates a resumption in year-over-year growth.”

Also overcoming a decline related to foreign-currency exchange, this taking a 2.7 percent bite out of the bottom line, was Henry Schein’s Animal Health business, which reported $812.9 million in first-quarter sales – overall, a 5.4 percent jump over sales recorded in 1Q FY2016.

And while troublesome foreign-currency exchanges also nipped at the Medical business’ numbers, trimming them by 0.2 percent, the division’s recorded sales of $598.9 million marked an overall 11.3 percent year-over-year first-quarter increase, reflecting what Bergman called “particularly strong patient traffic to physician offices,” as well as “our continued execution in serving a market that is consolidating among large group practices, including Integrated Delivery Networks.”

“We are well-positioned to help primary-care practices and ambulatory surgery centers operate efficiently so our customers can focus on patient outcomes,” the CEO added. “We believe that promoting wellness and prevention is key to the future of an improving healthcare landscape.”

Henry Schein also reported Technology and Value-Added Services sales of $106 million in the first quarter, a 4.2 percent increase over tech/value added sales recorded in 1Q FY2016, while reaping the benefits of Accounting Standards Update 2016-09, an ASU related to tax deductions associated with stock-based compensation.

Application of the ASU resulted in a reduction of the company’s effective tax rate for the first quarter to 20.7 percent – especially welcomed in the first quarter, according to Henry Schein, since a majority of the company’s stock-based compensation vests in that quarter.

The company also announced that it repurchased roughly 308,000 shares of common stock during the first quarter at an average price of $162.34 per share – an investment of about $50 million that Henry Schein called “immaterial” regarding quarterly diluted EPS.

The Melville distributor still has roughly $200 million authorized for future repurchases of common stock.


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