Henry Schein takes $121M charge against earnings after exiting Melville building
Henry Schein Inc. continues to house its worldwide headquarters in this Melville building. Credit: Barry Sloan
Henry Schein Inc., Long Island's largest public company by revenue, took a one-time $121 million pre-tax charge in the fourth quarter after writing off an unprofitable business unit and exiting a lease on one of its two Melville headquarters buildings, the distributor of dental supplies announced Thursday.
Fourth-quarter net sales were $3.4 billion, a 1.2% increase over the year-ago period, despite a $194 million decline in sales of COVID-19 test kits and gloves and other personal protective equipment. That compares to a consensus revenue estimate of $3.37 billion among analysts polled by S&P Capital IQ.
The company's diluted earnings per share, excluding charges and other items, came in at $1.21, a penny below S&P's consensus estimate.
Shares of Henry Schein tumbled 6.6% Thursday to close at $82.82.
In exiting the lease at its 180,000-square-foot Baylis Road building, Henry Schein joins many companies seeking to trim real estate holdings as employees continue to work remotely even as the COVID-19 pandemic ebbs.
In an interview, chief financial officer Ronald South said that Henry Schein renewed its 15-year lease in July 2020, "early in the pandemic," and faced a "significant" cost in negotiating its withdrawal.
A February survey of 300 U.S. CEOs by recruitment software provider Greenhouse found that 49% said they would look to cut real estate expenses, making it the top target for belt-tightening, ahead of marketing and advertising (36%), wages (34%), benefits (32%) and insurance (31%).
Jeff D. Johnson, an analyst with Robert W. Baird & Co. Inc., said that "continued work-from-home strategies" have made a number of medical technology companies like Henry Schein "reassess real-estate needs in recent quarters."
The company issued financial guidance for 2023 calling for sales growth of 1% to 3% over 2022.
Diluted earnings per share, excluding certain items, are forecast to be $5.25 to $5.42, ranging from 2% below to 1% above 2022's $5.38. The guidance reflects an expected 35-cent to 40-cent per share reduction related to COVID-19 test kits and PPE products.
Fourth quarter results were "impacted by a high incidence of flu and COVID-19 cases, which caused increased rates of patient appointment cancellations and furthered staffing shortages" at dentist offices, Henry Schein chairman and CEO Stanley M. Bergman said in a statement. "However, patient flows appear to have returned to more normal levels in January."
Henry Schein estimates that 90% of U.S. dental practices and 80% of North American dental laboratories are active customers.
Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.
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