Henry Schein's net sales increase 7.0% to $2.7 billion in fourth quarter 2014

Henry Schein, Inc. (NASDAQ: HSIC), the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, today reported record financial results for the fourth quarter.

For the quarter ended December 27, 2014, net sales were $2.7 billion, an increase of 7.0% compared with the fourth quarter of 2013. This consisted of 9.9% growth in local currencies and a 2.9% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.9% and acquisition growth was 5.0% (see Exhibit A for details of sales growth).

Net income attributable to Henry Schein, Inc. for the fourth quarter of 2014 was $133.0 million or $1.56 per diluted share, an increase of 7.0% and 9.1%, respectively, compared with the fourth quarter of 2013.

"We closed out 2014 with strong fourth quarter financial results that once again included market share gains in each of our four business groups. The global markets we serve remain generally healthy, highlighted by continued strong patient traffic in North America, and we are particularly pleased with the solid internal sales growth in local currencies in our international businesses," said Stanley M. Bergman, Chairman of the Board and Chief Executive Officer of Henry Schein. "We also achieved EPS growth for the year of 10% and are affirming our guidance for 2015 diluted EPS. I am also pleased to mention that for the first time we exceeded the $10 billion sales mark on an annual basis."

Dental sales of $1.4 billion increased 3.9%, consisting of 7.5% growth in local currencies and a 3.6% decline related to foreign currency exchange. In local currencies, internally generated sales increased 2.3% and acquisition growth was 5.2%. The 2.3% internal growth in local currencies included 1.9% growth in North America and 2.9% growth internationally.

"In North America, internal consumable merchandise sales growth in local currencies remained strong at nearly 5%. Equipment sales declined in North America, which we believe was substantially due to the late reinstatement of tax incentives for our U.S. customers in 2014," commented Mr. Bergman. "Our International Dental growth was solid for both consumable merchandise and equipment, with internal growth bolstered by strategic acquisitions made earlier in the year."

Animal Health sales of $731.6 million increased 12.3%, consisting of 15.9% growth in local currencies and a 3.6% decline related to foreign currency exchange. In local currencies, internally generated sales increased 7.8% and acquisition growth was 8.1%. The 7.8% internal growth in local currencies included 6.9% growth in North America and 8.6% growth internationally.

"Growth in our Animal Health group featured double-digit gains in local currencies in North America and internationally, with international internal sales growth in local currencies at a multi-year high," commented Mr. Bergman. "We recently expanded our animal health equipment capabilities in North America and Europe with the addition of scil animal care. The scil animal care professionals will enhance our Animal Health equipment sales and support capabilities, representing our key supplier partners and introducing veterinarians to important diagnostic options. This will significantly expand our diagnostics product category and gain market share for our animal health diagnostics partners."

Medical sales of $461.7 million increased 9.4%, consisting of 9.9% growth in local currencies and a 0.5% decline related to foreign currency exchange. In local currencies, internally generated sales increased 9.4% and acquisition growth was 0.5%.

"Quarterly Medical sales growth accelerated compared with the third quarter and was at a multi-year high as we made continued progress with large group practices and integrated delivery networks," remarked Mr. Bergman. "During the quarter we announced a strategic agreement with Cardinal Health to provide office-based medical practices with one of the most comprehensive service and product offerings. We expect to complete the integration of this business in the second quarter and, until that transition is complete, we will record agency revenue. Our fourth quarter results included a month and a half of this agency revenue."

Technology and Value-Added Services sales of $91.3 million increased 3.3%, including 4.4% growth in local currencies and a 1.1% decline related to foreign currency exchange. In local currencies, internally generated sales increased 1.5% and acquisition growth was 2.9%.

"We are delighted to report that our internal international Technology and Value-Added Services sales in local currencies grew by double digits for the eighth consecutive quarter. We believe that equipment financing as well as software sales in North America were also negatively impacted by the late reinstatement of tax incentives in the U.S. in 2014," commented Mr. Bergman.

Stock Repurchase Plan
The Company announced that it repurchased approximately 595,000 shares of its common stock during the fourth quarter at an average price of $124.00 per share, or approximately $73.7 million. The impact of the repurchase of shares on fourth quarter diluted EPS was immaterial. At the close of the fourth quarter, Henry Schein had approximately $300 million authorized for future repurchases of its common stock, as a result of a $300 million increase to the share repurchase plan authorized by the Company's Board of Directors in early December 2014.

Full Year Results
Henry Schein reports full year results including the following highlights:

• Net sales for 2014 were $10.4 billion, an increase of 8.5% compared with 2013. This consisted of 8.6% growth in local currencies and a 0.1% decline related to foreign currency exchange. In local currencies, internally generated sales increased 4.6% and acquisition growth was 4.0%.
• 2014 was the first year the Company's annual sales exceeded the $10 billion mark.
• Net income attributable to Henry Schein, Inc. for 2014 was $466.1 million or $5.44 per diluted share, an increase of 7.5% and 9.9%, respectively, compared with adjusted net income for 2013 excluding the net impact of certain one-time items (see Exhibit B for reconciliation of GAAP net income and EPS to non-GAAP adjusted net income and EPS).
• The Company's reported diluted EPS for the year of $5.44 exceeded the top of the EPS guidance range established in November 2013 by $0.05.
• The Company achieved operating cash flow of $592.5 million and free cash flow of $510.4 million, both well in excess of net income.

2015 EPS Guidance
Henry Schein today affirms 2015 financial guidance, as follows:

• For 2015 the Company expects diluted EPS attributable to Henry Schein, Inc. to be $5.90 to $6.00, which represents growth of 8% to 10% compared with 2014.
• This 2015 guidance excludes restructuring costs of approximately $0.29 to $0.33 per diluted share related to a previously announced corporate initiative to rationalize the Company's operations and provide significant expense efficiencies.
• Guidance for 2015 diluted EPS attributable to Henry Schein, Inc. is for current continuing operations as well as completed or previously announced acquisitions, and does not include the impact of potential future acquisitions, if any.