Henry Schein, Inc. today reported record fourth quarter financial results from continuing operations. Results from continuing operations exclude contributions from Henry Schein’s former Animal Health business, which was spun off in February 2019 to form a new publicly traded company, Covetrus.
Net sales from continuing operations for the quarter ended December 28, 2019, were $2.7 billion, an increase of 7.9% compared with the fourth quarter of 2018. The 7.9% increase included 8.9% growth in local currencies and a 1.0% decline related to foreign currency exchange. In local currencies, internally generated sales increased 5.8% and growth from acquisitions was 3.1%. Excluding sales to Covetrus under the transition services agreement entered into in connection with the Animal Health spin-off, internal sales growth in local currencies was approximately 4.9% (see Exhibit A for details of sales growth).
Net income attributable to Henry Schein, Inc. from continuing operations for the fourth quarter of 2019 was $330.6 million, or $2.25 per diluted share, compared with prior-year net income from continuing operations of $117.8 million, or $0.77 per diluted share. Fourth quarter 2019 results include a net gain on sale of equity investments of approximately $186.8 million, or $1.27 per diluted share, as well as a reduction in estimated restructuring costs of $1.1 million, or $0.01 per diluted share. Excluding these items, non-GAAP net income from continuing operations for the fourth quarter of 2019 was $143.0 million, or $0.97 per diluted share, compared with non-GAAP net income from continuing operations of $136.2 million, or $0.89 per diluted share, for the fourth quarter of 2018. Exhibit B provides a reconciliation of GAAP net income and diluted EPS from continuing operations to non-GAAP net income and diluted EPS from continuing operations.
“As our fourth quarter 2019 results attest, Henry Schein delivered an excellent conclusion to a transformative year in which we strategically positioned our business for continued success in the markets we serve,” said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. “Strong revenue growth in our Medical and Technology and Value-Added Services businesses were a particular highlight, along with sales of North America Dental Equipment and International Consumable Merchandise. We continue to execute on our strategic plan and remain optimistic about the Company’s prospects in 2020 and beyond.”
Dental sales of $1.7 billion increased 2.9%, consisting of 4.2% growth in local currencies and a 1.3% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.5% and growth from acquisitions was 1.7%.
“North America dental consumable merchandise internal sales in local currencies were essentially flat in the fourth quarter, reflecting soft end-market demand from independent dental practices. Dental equipment internal sales increased by a healthy 7.2% in local currencies, primarily driven by high-tech equipment sales,” commented Mr. Bergman.
“Internationally, dental consumable merchandise internal sales in local currencies had growth of 4.4%, driven by broad-based strength across most of our business. Dental equipment internal sales in local currencies decreased by 0.8%, as we faced a difficult prior-year comparison when internal sales growth in local currencies was 7.5%. The sales decrease was also due in part to soft macroeconomic conditions in Australia,” said Mr. Bergman.
Medical sales of $788.7 million increased 15.2%, with no impact from foreign currency exchange. Internally generated sales increased 10.2% and growth from acquisitions was 5.0%, primarily driven by the contribution from North American Rescue.
“We believe our Medical business continued to gain market share, with internal sales in local currencies up double-digits in the fourth quarter,” remarked Mr. Bergman. “Our focus on providing a wide array of solutions, services, and support to a broad spectrum of health care customers has enabled the Company to grow its presence in the Medical market and positions Henry Schein well for the future.”
Technology and Value-Added Services sales from continuing operations of $137.1 million increased 20.0%, consisting of 20.3% growth in local currencies and a 0.3% decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.4% and growth from acquisitions was 10.9%, primarily driven by the contribution from Lighthouse 360.
“North America Technology and Value-Added Services internal sales growth in local currencies was a strong 8.7% as the business benefited from service revenue associated with a product migration, as well as from solid financial services revenue. Internationally, Technology and Value-Added Services internal sales increased 13.4% in local currencies, led by strong financial services revenue,” said Mr. Bergman.
“Henry Schein One continues to advance its platform of delivering integrated technology to enhance dental practice management and allow dentists to focus on delivering quality patient care,” Mr. Bergman continued.
About Henry Schein, Inc.
A FORTUNE 500 Company and a member of the S&P 500® index, Henry Schein is headquartered in Melville, N.Y., and has operations or affiliates in 31 countries. The Company’s sales from continuing operations reached $10.0 billion in 2019, and have grown at a compound annual rate of approximately 13 percent since Henry Schein became a public company in 1995.