Patterson Companies Reports Third Quarter Operating Results Business Wire ST. PAUL, Minn. -- February 21, 2013 Patterson Companies, Inc. (Nasdaq: PDCO) today reported that consolidated sales totaled $915,861,000 in its fiscal third quarter, ended Jan. 26, 2013, an increase of 2.3% from $895,030,000 in the year-earlier period. Net income was $53,630,000, or $0.52 per diluted share, compared to net income of $53,108,000, or $0.50 per diluted share, in the year-ago period. All Patterson Companies’ business lines in the fiscal 2013 third quarter were affected by two fewer days in the selling period, due to the company’s fiscal calendar and the timing of holidays. This is most notable in the consumable categories with an approximate 2 percentage point negative impact, on a comparable basis to the year-ago results. Patterson Dental Sales for Patterson Dental, Patterson’s largest business, increased 3.5% from the year-earlier period to $626,494,000 in the third quarter of fiscal 2013. *Sales of consumable dental supplies, adjusted to exclude the impact of the fewer selling days in the period, were up 1.2% (down 0.9%, as reported) *Sales of dental equipment and software rose nearly 10% from the year-earlier level, driven by strong performances in technology categories, particularly digital imaging *Sales of other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, were up 2.3% from last year’s third quarter Scott P. Anderson, president and chief executive officer, commented: “We are pleased with Patterson’s third-quarter performance. Within Patterson Dental we posted solid sales levels, led by sales of CEREC^® systems and digital radiography products. Sales of the industry-leading CEREC Omnicam system – an innovative 3D CAD/CAM digital camera for dentists – had been constrained last quarter due to product availability issues. Sales in this quarter were robust, as the manufacturer, Sirona Dental Systems, Inc., fulfilled their delivery commitments. We believe there are growth opportunities from all our technology offerings as dentistry migrates to a digital platform, and we will continue to support these categories with targeted marketing initiatives, as necessary.” Patterson Veterinary Third quarter fiscal 2013 sales for the Patterson Veterinary unit increased 2.4%, adjusted to exclude the impact of the fewer selling days (up 0.4%, as reported), to $175,408,000. Also, excluding the impact from the change in a nutritional distribution agreement in the spring of 2012, sales would have grown by approximately 7 additional percentage points in the period. Effective Jan. 1, 2013, Patterson Companies renamed its Webster Veterinary Supply unit to Patterson Veterinary Supply. In a move designed to further leverage the Patterson brand, the company believes it is strengthening its visibility and position in the United States companion-pet veterinary market. Anderson continued: “Patterson Veterinary constituted approximately 20% of Patterson Companies’ total sales levels in the third quarter. Year-over-year performance was driven by gains in consumable supply sales. Despite the challenging economy, and what is typically the seasonally slowest period for this business, we continue to see positive trends in this unit. We remain committed to building our equipment and technical service strategy to capture market share as pet owners increase their veterinary care spending. We believe we can continue to reshape the market, as Patterson redefines the industry sales model.” Patterson Medical Sales for Patterson Medical, the rehabilitation supply and equipment unit, declined slightly to $113,959,000, primarily reflecting weak equipment sales during the quarter. Sales from Patterson Medical currently represent approximately 15% of total company sales. Anderson concluded: “Patterson Medical sales were essentially in-line with our internal forecasts for the third quarter. Performance has been affected by the continued uncertainty surrounding the nation’s health care system and in international markets from the continued austerity measures that have dampened demand throughout fiscal 2013. Although this situation is likely to persist in the short-term, we believe Patterson Medical is well positioned to leverage its technology and portfolio of value-added products to capture future growth opportunities in the rehabilitation market.” Year to Date Results Consolidated sales for the first nine months of fiscal 2013 totaled $2,672,279,000, an increase of nearly 3% from $2,599,327,000 in the year-earlier period. Net income was $146,710,000, or $1.41 per diluted share, compared to net income of $150,672,000, $1.34 per diluted share, in the year-ago period. During the third quarter Patterson repurchased approximately 1.4 million common shares under its 25 million share buyback authorization that expires in 2016. Approximately 7 million shares remain available for repurchase under this authorization. Patterson maintained its financial guidance for fiscal 2013 for earnings per diluted share of $2.00 to $2.06. Third Quarter Conference Call and Replay Patterson’s third quarter earnings conference call will start at 10 a.m. Eastern today. Investors can listen to a live webcast of the conference call at www.pattersoncompanies.com. The conference call will be archived on Patterson’s web site. A replay of the third quarter conference call can be heard for one week at 1-303-590-3030 and providing the conference ID: 4594665. About Patterson Companies, Inc. Patterson Companies, Inc. is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets. Dental Market As Patterson’s largest business, Patterson Dental provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists and dental laboratories throughout North America. Veterinary Market Patterson Veterinary is a leading distributor of consumable veterinary supplies, equipment and software, diagnostic products, vaccines and pharmaceuticals to companion-pet veterinary clinics. Rehabilitation Market Patterson Medical is the world’s leading distributor of rehabilitation supplies and non-wheelchair assistive patient products to the physical and occupational therapy markets. The unit’s global customer base includes hospitals, long-term care facilities, clinics and dealers. This release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are information of a non-historical nature and are subject to risks and uncertainties that are beyond the Company’s ability to control. The Company cautions shareholders and prospective investors that the following factors, among others, may cause actual results to differ materially from those indicated by the forward-looking statements: competition within the dental, veterinary, and rehabilitative and assistive living supply industries; changes in the economics of dentistry, including reduced growth in expenditures by private dental insurance plans, the effects of economic conditions and the effects of healthcare reform, which may affect future per capita expenditures for dental services and the ability and willingness of dentists to invest in high-technology products; the effects of healthcare related legislation and regulation which may affect expenditures or reimbursements for rehabilitative and assistive products; changes in the economics of the veterinary supply market, including reduced growth in per capita expenditures for veterinary services and reduced growth in the number of households owning pets; the ability of the Company to maintain satisfactory relationships with its sales force; unexpected loss of key senior management personnel; unforeseen operating risks; risks associated with the dependence on manufacturers of the Company’s products; and the ability of the Company to successfully integrate the recent acquisitions into its existing business. Forward-looking statements are qualified in their entirety by the cautionary language set forth in the Company's filings with the Securities and Exchange Commission. PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except for per share amounts) (Unaudited) Three Months Ended Nine Months Ended January 26, January 28, January 26, January 28, 2013 2012 2013 2012 Net sales $ 915,861 $ 895,030 $ 2,672,279 $ 2,599,327 Gross profit 300,293 289,534 866,592 848,793 Operating expenses 210,755 199,628 616,593 593,635 Operating income 89,538 89,906 249,999 255,158 Other expense, net (7,738 ) (8,043 ) (25,081 ) (19,393 ) Income before 81,800 81,863 224,918 235,765 taxes Income taxes 28,170 28,755 78,208 85,093 Net income $ 53,630 $ 53,108 $ 146,710 $ 150,672 Earnings per share: Basic $ 0.53 $ 0.50 $ 1.42 $ 1.35 Diluted $ 0.52 $ 0.50 $ 1.41 $ 1.34 Shares: Basic 102,130 106,504 103,624 111,539 Diluted 102,896 107,206 104,374 112,226 Dividends declared $ 0.14 $ 0.12 $ 0.42 $ 0.36 per common share Gross margin 32.8 % 32.3 % 32.4 % 32.7 % Operating expenses as a % of net 23.0 % 22.3 % 23.1 % 22.8 % sales Operating income as a % of net 9.8 % 10.0 % 9.4 % 9.8 % sales Effective tax rate 34.4 % 35.1 % 34.8 % 36.1 % PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) January 26, April 28, 2013 2012 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 472,449 $ 573,781 Receivables, net 421,506 464,869 Inventory 352,646 319,952 Prepaid expenses and other current assets 41,527 44,911 Total current assets 1,288,128 1,403,513 Property and equipment, net 191,385 195,465 Goodwill and other intangible assets 1,022,437 1,022,809 Investments and other 135,540 117,581 Total Assets $ 2,637,490 $ 2,739,368 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 220,870 $ 207,915 Other accrued liabilities 186,157 196,733 Current maturities of long-term debt 50,000 125,000 Total current liabilities 457,027 529,648 Long-term debt 725,000 725,000 Other non-current liabilities 104,730 109,518 Total liabilities 1,286,757 1,364,166 Stockholders' equity 1,350,733 1,375,202 Total Liabilities and Stockholders' Equity $ 2,637,490 $ 2,739,368 PATTERSON COMPANIES, INC. SUPPLEMENTARY FINANCIAL DATA (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended January 26, January 28, January 26, January 28, 2013 2012 2013 2012 Consolidated Net Sales Consumable and $ 551,149 $ 550,888 $ 1,725,465 $ 1,695,822 printed products Equipment and 292,726 273,573 726,687 687,249 software Other 71,986 70,569 220,127 216,256 Total $ 915,861 $ 895,030 $ 2,672,279 $ 2,599,327 Dental Supply Consumable and $ 308,700 $ 311,356 $ 934,234 $ 932,461 printed products Equipment and 254,033 231,372 615,282 567,312 software Other 63,761 62,313 193,519 189,240 Total $ 626,494 $ 605,041 $ 1,743,035 $ 1,689,013 Rehabilitation Supply Consumable and $ 80,628 $ 80,510 $ 273,446 $ 272,235 printed products Equipment and 27,301 28,783 85,635 91,542 software Other 6,030 6,053 19,290 19,591 Total $ 113,959 $ 115,346 $ 378,371 $ 383,368 Veterinary Supply Consumable and $ 161,821 $ 159,022 $ 517,785 $ 491,126 printed products Equipment and 11,392 13,418 25,770 28,395 software Other 2,195 2,203 7,318 7,425 Total $ 175,408 $ 174,643 $ 550,873 $ 526,946 Other (Expense) Income, net Interest income $ 1,151 $ 1,052 $ 3,492 $ 3,778 Interest expense (9,113 ) (8,358 ) (27,808 ) (20,880 ) Other 224 (737 ) (765 ) (2,291 ) $ (7,738 ) $ (8,043 ) $ (25,081 ) $ (19,393 ) PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Nine Months Ended January 26, January 28, 2013 2012 Operating activities: Net income $ 146,710 $ 150,672 Depreciation & amortization 33,307 30,432 Stock-based compensation 10,985 9,428 ESOP compensation 17,100 544 Change in assets and liabilities, net of (28,766 ) 37,586 acquired Net cash provided by operating activities 179,336 228,662 Investing activities: Additions to property and equipment, net of (14,259 ) (25,051 ) disposals Acquisitions and equity investments (14,650 ) (14,193 ) Net cash used in investing activities (28,909 ) (39,244 ) Financing activities: Dividends paid (43,745 ) (39,800 ) Share repurchases (140,468 ) (323,519 ) Proceeds from issuance of long-term debt - 325,000 Other financing activities (65,790 ) 7,935 Net cash used in financing activities (250,003 ) (30,384 ) Effect of exchange rate changes on cash (1,756 ) (9,607 ) Net increase (decrease) in cash and cash $ (101,332 ) $ 149,427 equivalents Contact: Patterson Companies, Inc. Ann Gugino, 651-686-1600 Vice President, Planning and Strategy or R. Stephen Armstrong, 651-686-1600 Executive Vice President & CFO
Patterson Companies Reports Third Quarter Operating Results
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