Attached files

file filename
8-K - 8-K - PATTERSON COMPANIES, INC.d606084d8k.htm

EXHIBIT 99

 

PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120

  

NEWS RELEASE

PATTERSON COMPANIES REPORTS FISCAL 2019 FIRST-QUARTER RESULTS

 

   

First-quarter reported net sales totaled $1.3 billion, up 2.5 percent.

 

   

First-quarter GAAP loss of $0.05 per diluted share.

 

   

Company books reserve for anticipated settlement of In re Dental Supplies Litigation matter.

 

   

First-quarter adjusted earnings1 of $0.26 per diluted share.

 

   

Company generated $205.5 million of cash flow from operating activities and reduced debt by $160.6 million in the quarter.

 

   

Company updates fiscal 2019 GAAP earnings range to $0.84 to $0.94 per diluted share and adjusted earnings1 range to $1.40 to $1.50 per diluted share.

St. Paul, Minn. — August 30, 2018 — Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated net sales of approximately $1.3 billion (see attached Sales Summary for further details) in its fiscal first quarter ended July 28, 2018, an increase of 2.5 percent compared to the same period last year. Internal sales, which adjust for the effects of currency translation and changes in product selling relationships, increased 2.3 percent.

Reported net loss attributable to Patterson Companies, Inc. for the first quarter of fiscal year 2019 was $4.5 million, or $0.05 per diluted share, compared to net income attributable to Patterson Companies, Inc. of $30.8 million, or $0.33 per diluted share, in last year’s fiscal first quarter. During the quarter, Patterson booked a pre-tax reserve of $28.3 million for the anticipated settlement of purported class action antitrust litigation. Adjusted net income1 attributable to Patterson Companies, Inc., which excludes deal amortization costs and a reserve for the anticipated legal settlement, totaled $24.0 million for the first quarter of fiscal 2019, or $0.26 per diluted share, compared to $41.4 million in the same quarter last year, or $0.44 per diluted share. The reported net loss and the adjusted net income attributable to Patterson Companies, Inc. were both impacted by the decrease in operating margins within the Dental segment.

Mark Walchirk, president and CEO of Patterson Companies, said, “Our results for the quarter did not meet our expectations. While our ongoing initiatives to improve the customer experience and enhance sales execution helped drive improved top line performance, these results were offset by competitive pricing pressures which negatively impacted our margins. The Animal Health business performed in line with our expectations, with solid revenue growth across both companion and production and particular strength in our private label category. Dental segment revenues benefited from year-over-year growth across all equipment categories and improving trends in consumables.

“Despite improving sales results, operating margins were below our expectations. We continue to take steps to stabilize our margins, including a thorough evaluation of our cost structure, but expect the pricing pressures to persist in the coming quarters. As a result, we are updating our fiscal 2019 earnings guidance to reflect our revised expectations for the remainder of the year.”

Patterson Animal Health

Reported net sales in our Animal Health segment for the first quarter of fiscal 2019, which comprised approximately 62 percent of the company’s total sales, were $825.2 million compared to $776.1 million in the same quarter last year. Internal sales for the segment increased 6.0 percent from the fiscal 2018 first quarter. Year-over-year internal sales by category were as follows:

 

   

Production animal increased 6.7 percent.

 

   

Companion animal rose 5.5 percent.

Patterson Dental

Reported net sales in our Dental segment for the first quarter, which represented approximately 38 percent of total company sales, were $506.1 million compared to $518.8 million in the same quarter last year. Internal sales declined 2.7 percent compared to the fiscal 2018 first quarter. Year-over-year internal sales by category were as follows:

 

   

Consumable dental supplies decreased 5.2 percent.

 

   

Equipment and software increased 5.4 percent.

 

   

Other services and products, primarily composed of technical service, parts and labor, software support services and office supplies decreased 5.6 percent.

 

LOGO

 


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

Balance Sheet and Capital Allocation

During the first quarter of fiscal 2019, Patterson Companies generated $205.5 million of cash from operating activities compared to a use of $46.0 million in the same period last year, yielding an improvement of $251.5 million year-over-year. Debt was reduced by $160.6 million in the quarter. In the first quarter of fiscal 2019, Patterson Companies paid $25.3 million in cash dividends to shareholders.

Legal Reserve

In August 2018, Patterson Companies commenced settlement discussions with the plaintiffs in the In re Dental Supplies Litigation matter. Based upon such discussions, although Patterson Companies has not yet entered into a definitive settlement agreement and any such agreement would be subject to court approval, Patterson Companies has established a pre-tax reserve for this matter of $28.3 million. The company anticipates the execution of a settlement agreement and the submission of such agreement to the court for approval.

FY2019 Guidance

Patterson Companies today updated fiscal 2019 earnings guidance, which is provided on both a GAAP and non-GAAP adjusted1 basis:

 

   

GAAP earnings are expected to be in the range of $0.84 to $0.94 per diluted share.

 

   

Non-GAAP adjusted earnings1 are expected to be in the range of $1.40 to $1.50 per diluted share.

 

   

Our non-GAAP adjusted earnings1 guidance excludes the after-tax impact of:

 

   

Deal amortization expenses of approximately $31.1 million ($0.33 per diluted share).

 

   

Legal reserve costs of $20.7 million ($0.22 per diluted share).

Our guidance is for current operations as well as completed or previously announced acquisitions and does not include the impact of potential future acquisitions or similar transactions, if any, or impairments and material restructurings beyond those previously publicly disclosed. Our guidance assumes North American and international market conditions similar to those experienced in fiscal 2018.

1Non-GAAP Financial Measures

The Reconciliation of GAAP to non-GAAP Measures table appearing behind the accompanying financial information is provided to adjust reported GAAP measures, namely operating income, income or loss before taxes, income tax expense or benefit, net income or loss, net income or loss attributable to Patterson Companies, Inc. and diluted earnings or loss per share attributable to Patterson Companies, Inc., for the impact of deal amortization, integration and business restructuring expenses and legal reserve costs along with the related tax effects of these items, the impact of the 2017 Tax Act and other discrete tax matters.

Management believes that these non-GAAP measures may provide a helpful representation of the company’s first-quarter performance and earnings guidance, and enable comparison of financial results between periods where certain items may vary independent of business performance. These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded as a replacement for corresponding, similarly captioned, GAAP measures.

In addition, the term “internal sales” used in this release represents net sales adjusted to exclude foreign currency impact and changes in product selling relationships. Foreign currency impact represents the difference in results that is attributable to fluctuations in currency exchange rates the company uses to convert results for all foreign entities where the functional currency is not the U.S. dollar. The company calculates the impact as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period’s currency exchange rates. The company believes the disclosure of net sales changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates.

First-Quarter Conference Call and Replay

Patterson Companies’ fiscal 2019 first-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 the Patterson Companies website. A replay of the fiscal 2019 first-quarter conference call can be heard for one week at 800-585-8367 and by providing the Conference ID 4196947 when prompted.

About Patterson Companies Inc.

Patterson Companies Inc. (Nasdaq: PDCO) is a value-added distributor serving the dental and animal health markets.

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

Dental Market

Patterson’s Dental segment 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.

Animal Health Market

Patterson’s Animal Health segment is a leading distributor of products, services and technologies to both the production and companion animal health markets in North America and the U.K.

This press release contains certain 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 Patterson’s ability to control. Forward-looking statements generally can be identified by words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of Patterson or the price of Patterson stock. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Such risks and uncertainties include, without limitation, operations disruptions attributable to our enterprise resource planning system implementation; our ability to attract or retain qualified sales representatives and service technicians who relate directly with our customers; the reduction, modification, cancellation or delay of purchases of innovative, high-margin equipment; material changes in our purchasing relationships with suppliers; changes in general market and economic conditions; and the other risks and important factors contained and identified in Patterson’s filings with the Securities and Exchange Commission, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, any of which could cause actual results to differ materially from the forward-looking statements. Any forward-looking statement in this press release speaks only as of the date on which it is made. Except to the extent required under the federal securities laws, Patterson does not intend to update or revise the forward-looking statements.

 

 

 

CONTACT:

 

John M. Wright, Investor Relations

COMPANY:

 

Patterson Companies Inc.

TEL:

  651.686.1364

EMAIL:

  john.wright@pattersoncompanies.com

WEB:

  pattersoncompanies.com

SOURCE:

 

Patterson Companies Inc.

# # #

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended  
     July 28,
2018
    July 29,
2017
 

Net sales

   $ 1,336,320     $ 1,304,115  

Gross profit

     283,663       299,048  

Operating expenses

     279,149       242,215  
  

 

 

   

 

 

 

Operating income

     4,514       56,833  

Other income (expense):

    

Other income, net

     1,253       1,512  

Interest expense

     (11,221     (11,203
  

 

 

   

 

 

 

Income (loss) before taxes

     (5,454     47,142  

Income tax expense (benefit)

     (945     16,295  
  

 

 

   

 

 

 

Net income (loss)

     (4,509     30,847  

Net loss attributable to noncontrolling interests

     (53     —    
  

 

 

   

 

 

 

Net income (loss) attributable to Patterson Companies, Inc.

   $ (4,456   $ 30,847  
  

 

 

   

 

 

 

Earnings (loss) per share attributable to Patterson Companies, Inc.:

    

Basic

   $ (0.05   $ 0.33  
  

 

 

   

 

 

 

Diluted

   $ (0.05   $ 0.33  
  

 

 

   

 

 

 

Weighted average shares:

    

Basic

     92,529       93,350  

Diluted

     92,529       94,019  

Dividends declared per common share

   $ 0.26     $ 0.26  

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

     July 28,
2018
     April 28,
2018
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 91,476      $ 62,984  

Receivables

     520,578        826,877  

Inventory

     845,507        779,834  

Prepaid expenses and other current assets

     183,963        103,029  
  

 

 

    

 

 

 

Total current assets

     1,641,524        1,772,724  

Property and equipment, net

     289,658        290,590  

Goodwill and other intangible assets

     1,193,093        1,205,401  

Long-term receivables, net and other

     163,483        202,949  
  

 

 

    

 

 

 

Total assets

   $ 3,287,758      $ 3,471,664  
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 588,041      $ 610,368  

Other accrued liabilities

     218,847        205,415  

Current maturities of long-term debt

     78,442        76,598  

Borrowings on revolving credit

     32,000        16,000  
  

 

 

    

 

 

 

Total current liabilities

     917,330        908,381  

Long-term debt

     743,706        922,030  

Other non-current liabilities

     179,626        179,463  
  

 

 

    

 

 

 

Total liabilities

     1,840,662        2,009,874  

Stockholders’ equity

     1,447,096        1,461,790  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 3,287,758      $ 3,471,664  
  

 

 

    

 

 

 

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Three Months Ended  
     July 28,
2018
    July 29,
2017
 

Operating activities:

    

Net income (loss)

   $ (4,509   $ 30,847  

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Depreciation and amortization

     20,857       21,104  

Non-cash employee compensation

     6,357       8,656  

Change in assets and liabilities, net of acquired

     182,756       (106,635
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     205,461       (46,028

Investing activities:

    

Additions to property and equipment

     (10,184     (6,674

Collection of deferred purchase price receivables

     15,509       12,191  

Other investing activities

     2,244       —    
  

 

 

   

 

 

 

Net cash provided by investing activities

     7,569       5,517  

Financing activities:

    

Dividends paid

     (25,289     (25,210

Repurchases of common stock

     —         (37,500

Retirement of long-term debt

     (176,633     —    

Draw on revolver

     16,000       104,000  

Other financing activities

     2,117       1,916  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (183,805     43,206  

Effect of exchange rate changes on cash

     (733     2,125  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

   $ 28,492     $ 4,820  
  

 

 

   

 

 

 

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

SALES SUMMARY

(Dollars in thousands)

(Unaudited)

 

     July 28,
2018
     July 29,
2017
     Total
Sales
Growth
    Foreign
Exchange
Impact
    Other(a)     Internal
Sales
Growth
 

Three Months Ended

              

Consolidated Net Sales

              

Consumable

   $ 1,109,397      $ 1,080,105        2.7     0.5     (0.3 )%      2.5

Equipment and software

     146,898        136,949        7.3       0.1       —         7.2  

Other

     80,025        87,061        (8.1     0.2       —         (8.3
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1,336,320      $ 1,304,115        2.5     0.5     (0.3 )%      2.3
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Dental

              

Consumable

   $ 304,239      $ 320,178        (5.0 )%      0.2     —       (5.2 )% 

Equipment and software

     134,957        127,863        5.5       0.1       —         5.4  

Other

     66,868        70,766        (5.5     0.1       —         (5.6
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 506,064      $ 518,807        (2.5 )%      0.2     —       (2.7 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Animal Health

              

Consumable

   $ 805,158      $ 759,927        6.0     0.7     (0.4 )%      5.7

Equipment and software

     11,941        9,086        31.4       —         —         31.4  

Other

     8,115        7,123        13.9       1.7       —         12.2  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 825,214      $ 776,136        6.3     0.7     (0.4 )%      6.0
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Corporate

              

Other

   $ 5,042      $ 9,172        (45.0 )%      —       —       (45.0 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 5,042      $ 9,172        (45.0 )%      —       —       (45.0 )% 
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Sales of certain products previously recognized on a gross basis were recognized on a net basis during the three months ended July 28, 2018.

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

OPERATING INCOME BY SEGMENT

(In thousands)

(Unaudited)

 

     Three Months Ended  
     July 28,
2018
    July 29,
2017
 

Operating income (loss)

    

Dental

   $ 35,873     $ 59,519  

Animal Health

     19,032       16,676  

Corporate

     (50,391     (19,362
  

 

 

   

 

 

 

Total

   $ 4,514     $ 56,833  
  

 

 

   

 

 

 

 

LOGO


PATTERSON COMPANIES | 1031 Mendota Heights Road | Saint Paul, MN 55120    NEWS RELEASE

 

PATTERSON COMPANIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in thousands, except per share amounts)

(Unaudited)

 

For the three months ended July 28, 2018

   GAAP     Deal
amortization
     Integration
and business
restructuring
expenses
     Legal
reserve
     Non-GAAP  

Operating income

   $ 4,514     $ 9,966      $ —        $ 28,263      $ 42,743  

Other expense, net

     (9,968     —          —          —          (9,968
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before taxes

     (5,454     9,966        —          28,263        32,775  

Income tax expense (benefit)

     (945     2,286        —          7,523        8,864  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

     (4,509     7,680        —          20,740        23,911  

Net loss attributable to noncontrolling interests

     (53     —          —          —          (53
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to Patterson Companies, Inc.

   $ (4,456   $ 7,680      $ —        $ 20,740      $ 23,964  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings (loss) per share attributable to Patterson Companies, Inc.*

   $ (0.05   $ 0.08      $ —        $ 0.22      $ 0.26  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Operating income as a % of sales

     0.3              3.2

Effective tax rate

     17.3              27.0

 

For the three months ended July 29, 2017

   GAAP     Deal
amortization
     Integration
and business
restructuring
expenses
     Legal
reserve
     Non-GAAP  

Operating income

   $ 56,833     $ 9,630      $ 6,906      $ —        $ 73,369  

Other expense, net

     (9,691     —          —          —          (9,691
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before taxes

     47,142       9,630        6,906        —          63,678  

Income tax expense (benefit)

     16,295       3,345        2,611        —          22,251  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

     30,847       6,285        4,295        —          41,427  

Net loss attributable to noncontrolling interests

     —         —          —          —          —    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to Patterson Companies, Inc.

   $ 30,847     $ 6,285      $ 4,295      $ —        $ 41,427  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings (loss) per share attributable to Patterson Companies, Inc.*

   $ 0.33     $ 0.07      $ 0.04      $ —        $ 0.44  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Operating income as a % of sales

     4.4              5.6

Effective tax rate

     34.6              34.9

 

*

May not sum due to rounding

 

LOGO