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Patterson Companies Reports Third Quarter Operating Results



  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
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