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| 8-K - FORM 8-K - PATTERSON COMPANIES, INC. | d305973d8k.htm |
Exhibit 99.1
Patterson Companies Reports Improved Third Quarter Operating Results
St. Paul, MN—February 23, 2012— Patterson Companies, Inc. (Nasdaq: PDCO) today reported that consolidated sales totaled $895,030,000 in the third quarter of fiscal 2012 ended January 28, an increase of 9% from $824,650,000 in the year-earlier period. Net income of $53,108,000 or $0.50 per diluted share included incremental expense of $0.03 per diluted share related to Patterson’s Employee Stock Ownership Plan (ESOP). Excluding this ESOP-related expense, third quarter earnings were $0.53 per diluted share. Patterson reported earnings of $55,396,000 or $0.47 per diluted share in the third quarter of fiscal 2011. As reported previously, the ESOP expense will affect fiscal 2012 earnings by an estimated $0.12 per diluted share.
Sales of Patterson Dental, Patterson’s largest business, increased 9% from the year-earlier period to $605,041,000 in this year’s third quarter.
| • | Sales of consumable dental supplies and printed office products increased over 3% in the third quarter. |
| • | Sales of dental equipment and software increased more than 21% from the year-earlier level, driven by double-digit increases in sales of CEREC dental restorative products and digital radiography products. |
| • | Sales of other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, were down 4% from last year’s third quarter. |
Third quarter sales of the Webster Veterinary unit increased nearly 17% to $174,643,000, with the August 2011 acquisition of American Veterinary Supply Corporation, a full-service veterinary distributor located on Long Island, accounting for 3% of the unit’s sales growth for this period. Sales of Patterson Medical, the rehabilitation supply and equipment unit, declined 2% to $115,346,000, primarily reflecting weak equipment sales during the quarter.
Scott P. Anderson, president and chief executive officer, commented: “We are pleased with Patterson’s third quarter results, indicating that we are performing effectively amid unsettled economic conditions. Within Patterson Dental, we posted solidly higher sales of consumable supplies as patient levels continued to strengthen during this period. Sales of dental equipment, paced by CEREC systems and digital radiography products, rebounded from the unexpectedly weak performance in last year’s third quarter. Our equipment business benefited from marketing efforts aimed at capitalizing upon the growing acceptance of new digital technologies, which are enabling dentists to strengthen their productivity, generate additional income and improve clinical outcomes. We believe ample opportunities exist for our new-technology offerings, and we will continue to focus our marketing initiatives on further boosting demand for capital equipment.”
He continued: “Webster’s strong third quarter sales growth was attained during the unit’s seasonally softest period of the year. Sales of consumable supplies, which constitute the largest component of Webster’s revenue stream, increased 15% during the quarter, while equipment sales rose 35%. Despite the challenging economy, pet owners are continuing to increase expenditures on veterinary care. Through its relatively new equipment and service business, which has strengthened Webster’s full-service platform, our companion-pet veterinary unit is increasingly well-positioned to capitalize upon positive pet ownership and spending trends. We intend to continue investing in this component of Webster’s business.”
Anderson added: “Patterson Medical’s third quarter performance, which was consistent with our internal forecasts, was affected by changes, including the impact of new regulations, affecting the nation’s health care system. We believe these unfolding developments have dampened demand for rehabilitation products and equipment during fiscal 2012. Although this situation is likely to persist until market uncertainties are clarified, we believe Patterson Medical is positioned to take maximum advantage of global demographic trends fueling the growth of the rehabilitation market.”
Patterson repurchased approximately 3.2 million common shares during the third quarter under its 25 million share buyback authorization that expires in 2016. Approximately 12.3 million shares remain available for repurchase under this authorization. The additional interest expense associated with Patterson’s previously reported third quarter long-term debt issuance reduced earnings for this period by approximately $0.01 per share.
Patterson narrowed its financial guidance for fiscal 2012 to $1.90 to $1.94 per diluted share from the previously issued $1.90 to $1.97.
ESOP Expense Reconciliation Table
Dollars in thousands, except EPS
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 28, 2012 |
January 29, 2011 |
January 28, 2012 |
January 29, 2011 |
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| Net Income |
$ | 53,108 | $ | 55,396 | $ | 150,672 | $ | 162,678 | ||||||||
| Incremental ESOP Expense |
3,468 | — | 10,372 | — | ||||||||||||
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| Adjusted Net Income (non-GAAP) |
$ | 56,576 | $ | 55,396 | $ | 161,044 | $ | 162,678 | ||||||||
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| Diluted Earnings Per Share |
$ | 0.50 | $ | 0.47 | $ | 1.34 | $ | 1.36 | ||||||||
| Incremental ESOP expense |
0.03 | 0.10 | ||||||||||||||
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| Adjusted Earnings Per Share (non-GAAP) |
$ | 0.53 | $ | 0.47 | $ | 1.44 | $ | 1.36 | ||||||||
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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
Webster Veterinary is the nation’s second largest 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.
| For additional information contact: |
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| R. Stephen Armstrong |
Richard G. Cinquina | |
| Executive Vice President & CFO |
Equity Market Partners | |
| 651/686-1600 |
904/415-1415 |
Third Quarter Conference Call and Replay
Patterson’s third quarter earnings conference call will start at 10:00 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 month at 1-303-590-3030 and providing the conference ID: 4509188.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 28, | January 29, | January 28, | January 29, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales |
$ | 895,030 | $ | 824,650 | $ | 2,599,327 | $ | 2,531,851 | ||||||||
| Gross profit |
289,534 | 280,875 | 848,793 | 840,276 | ||||||||||||
| Operating expenses |
199,628 | 188,168 | 593,635 | 568,393 | ||||||||||||
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| Operating income |
89,906 | 92,707 | 255,158 | 271,883 | ||||||||||||
| Other expense, net |
(8,043 | ) | (6,423 | ) | (19,393 | ) | (14,478 | ) | ||||||||
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| Income before taxes |
81,863 | 86,284 | 235,765 | 257,405 | ||||||||||||
| Income taxes |
28,755 | 30,888 | 85,093 | 94,727 | ||||||||||||
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| Net income |
$ | 53,108 | $ | 55,396 | $ | 150,672 | $ | 162,678 | ||||||||
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| Earnings per share: |
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| Basic |
$ | 0.50 | $ | 0.47 | $ | 1.35 | $ | 1.37 | ||||||||
| Diluted |
$ | 0.50 | $ | 0.47 | $ | 1.34 | $ | 1.36 | ||||||||
| Shares: |
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| Basic |
106,504 | 117,994 | 111,539 | 118,544 | ||||||||||||
| Diluted |
107,206 | 118,837 | 112,226 | 119,331 | ||||||||||||
| Dividends declared per common share |
$ | 0.12 | $ | 0.10 | $ | 0.36 | $ | 0.30 | ||||||||
| Gross margin |
32.3 | % | 34.1 | % | 32.7 | % | 33.2 | % | ||||||||
| Operating expenses as a % of net sales |
22.3 | % | 22.8 | % | 22.8 | % | 22.4 | % | ||||||||
| Operating income as a % of net sales |
10.0 | % | 11.2 | % | 9.8 | % | 10.7 | % | ||||||||
| Effective tax rate |
35.1 | % | 35.8 | % | 36.1 | % | 36.8 | % | ||||||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| January 28, | April 30, | |||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS |
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| Current assets: |
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| Cash and short-term investments |
$ | 538,092 | $ | 388,665 | ||||
| Receivables, net |
428,587 | 465,170 | ||||||
| Inventory |
334,775 | 336,094 | ||||||
| Prepaid expenses and other current assets |
39,048 | 40,780 | ||||||
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| Total current assets |
1,340,502 | 1,230,709 | ||||||
| Property and equipment, net |
196,598 | 189,583 | ||||||
| Goodwill and other intangible assets |
1,018,654 | 1,022,832 | ||||||
| Investments and other |
110,071 | 121,844 | ||||||
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| Total Assets |
$ | 2,665,825 | $ | 2,564,968 | ||||
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| LIABILITIES AND STOCKHOLDERS' EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 189,407 | $ | 210,033 | ||||
| Other accrued liabilities |
171,538 | 157,398 | ||||||
| Current maturities of long-term debt |
— | — | ||||||
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| Total current liabilities |
360,945 | 367,431 | ||||||
| Long-term debt |
850,000 | 525,000 | ||||||
| Other non-current liabilities |
103,793 | 111,997 | ||||||
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| Total liabilities |
1,314,738 | 1,004,428 | ||||||
| Stockholders’ equity |
1,351,087 | 1,560,540 | ||||||
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| Total Liabilities and Stockholders' Equity |
$ | 2,665,825 | $ | 2,564,968 | ||||
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PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 28, | January 29, | January 28, | January 29, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Consolidated Net Sales |
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| Consumable and printed products |
$ | 550,888 | $ | 520,011 | $ | 1,695,822 | $ | 1,653,946 | ||||||||
| Equipment and software |
273,573 | 232,594 | 687,249 | 668,372 | ||||||||||||
| Other |
70,569 | 72,045 | 216,256 | 209,533 | ||||||||||||
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| Total |
$ | 895,030 | $ | 824,650 | $ | 2,599,327 | $ | 2,531,851 | ||||||||
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| Dental Supply |
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| Consumable and printed products |
$ | 311,356 | $ | 301,688 | $ | 932,461 | $ | 932,688 | ||||||||
| Equipment and software |
231,372 | 190,567 | 567,312 | 545,123 | ||||||||||||
| Other |
62,313 | 64,793 | 189,240 | 185,125 | ||||||||||||
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| Total |
$ | 605,041 | $ | 557,048 | $ | 1,689,013 | $ | 1,662,936 | ||||||||
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| Rehabilitation Supply |
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| Consumable and printed products |
$ | 80,510 | $ | 80,170 | $ | 272,235 | $ | 261,360 | ||||||||
| Equipment and software |
28,783 | 32,103 | 91,542 | 98,731 | ||||||||||||
| Other |
6,053 | 5,603 | 19,591 | 17,885 | ||||||||||||
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| Total |
$ | 115,346 | $ | 117,876 | $ | 383,368 | $ | 377,976 | ||||||||
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| Veterinary Supply |
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| Consumable and printed products |
$ | 159,022 | $ | 138,153 | $ | 491,126 | $ | 459,898 | ||||||||
| Equipment and software |
13,418 | 9,924 | 28,395 | 24,518 | ||||||||||||
| Other |
2,203 | 1,649 | 7,425 | 6,523 | ||||||||||||
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| Total |
$ | 174,643 | $ | 149,726 | $ | 526,946 | $ | 490,939 | ||||||||
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| Other (Expense) Income, net |
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| Interest income |
$ | 1,052 | $ | 1,577 | $ | 3,778 | $ | 7,118 | ||||||||
| Interest expense |
(8,358 | ) | (6,380 | ) | (20,880 | ) | (19,499 | ) | ||||||||
| Other |
(737 | ) | (1,620 | ) | (2,291 | ) | (2,097 | ) | ||||||||
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| $ | (8,043 | ) | $ | (6,423 | ) | $ | (19,393 | ) | $ | (14,478 | ) | |||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| January 28, | January 29, | |||||||
| 2012 | 2011 | |||||||
| Operating activities: |
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| Net income |
$ | 150,671 | $ | 162,678 | ||||
| Depreciation & amortization |
30,432 | 30,835 | ||||||
| Stock-based compensation |
9,428 | 7,911 | ||||||
| ESOP compensation |
544 | 1,575 | ||||||
| Change in assets and liabilities, net of acquired |
37,587 | (11,544 | ) | |||||
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| Net cash provided by operating activities |
228,662 | 191,455 | ||||||
| Investing activities: |
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| Additions to property and equipment, net of disposals |
(25,051 | ) | (29,199 | ) | ||||
| Acquisitions and equity investments |
(14,193 | ) | (52,343 | ) | ||||
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| Net cash used in investing activities |
(39,244 | ) | (81,542 | ) | ||||
| Financing activities: |
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| Dividends paid |
(39,800 | ) | (35,543 | ) | ||||
| Share repurchases |
(323,519 | ) | (36,947 | ) | ||||
| Proceeds from issuance of long-term debt |
325,000 | — | ||||||
| Other financing activities |
7,935 | 11,574 | ||||||
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| Net cash used in financing activities |
(30,384 | ) | (60,916 | ) | ||||
| Effect of exchange rate changes on cash |
(9,607 | ) | (1,549 | ) | ||||
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| Net increase in cash and cash equivalents |
$ | 149,427 | $ | 47,448 | ||||
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