Patterson Companies, Inc. : Patterson Companies Reports Improved Third Quarter Operating Results
02/23/2012| 07:05am US/Eastern
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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
Net Income
$53,108
$55,396
$150,672
$162,678
Incremental ESOP Expense
3,468
-
10,372
-
Adjusted Net Income (non-GAAP)
$56,576
$55,396
$161,044
$162,678
Diluted Earnings Per Share
$0.50
$0.47
$1.34
$1.36
Incremental ESOP Expense
0.03
-
0.10
-
Adjusted Earnings Per Share (non-GAAP)
$0.53
$0.47
$1.44
$1.36
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.
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
Operating income
89,906
92,707
255,158
271,883
Other expense, net
(8,043
)
(6,423
)
(19,393
)
(14,478
)
Income before taxes
81,863
86,284
235,765
257,405
Income taxes
28,755
30,888
85,093
94,727
Net income
$
53,108
$
55,396
$
150,672
$
162,678
Earnings per share:
Basic
$
0.50
$
0.47
$
1.35
$
1.37
Diluted
$
0.50
$
0.47
$
1.34
$
1.36
Shares:
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
%
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January 28,
April 30,
2012
2011
(Unaudited)
ASSETS
Current assets:
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
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
Total Assets
$
2,665,825
$
2,564,968
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
189,407
$
210,033
Other accrued liabilities
171,538
157,398
Current maturities of long-term debt
-
-
Total current liabilities
360,945
367,431
Long-term debt
850,000
525,000
Other non-current liabilities
103,793
111,997
Total liabilities
1,314,738
1,004,428
Stockholders' equity
1,351,087
1,560,540
Total Liabilities and Stockholders' Equity
$
2,665,825
$
2,564,968
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
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
Total
$
895,030
$
824,650
$
2,599,327
$
2,531,851
Dental Supply
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
Total
$
605,041
$
557,048
$
1,689,013
$
1,662,936
Rehabilitation Supply
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
Total
$
115,346
$
117,876
$
383,368
$
377,976
Veterinary Supply
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
Total
$
174,643
$
149,726
$
526,946
$
490,939
Other (Expense) Income, net
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
)
$
(8,043
)
$
(6,423
)
$
(19,393
)
$
(14,478
)
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended
January 28,
January 29,
2012
2011
Operating activities:
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
)
Net cash provided by operating activities
228,662
191,455
Investing activities:
Additions to property and equipment, net of disposals
(25,051
)
(29,199
)
Acquisitions and equity investments
(14,193
)
(52,343
)
Net cash used in investing activities
(39,244
)
(81,542
)
Financing activities:
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
Net cash used in financing activities
(30,384
)
(60,916
)
Effect of exchange rate changes on cash
(9,607
)
(1,549
)
Net increase in cash and cash equivalents
$
149,427
$
47,448
Patterson Companies, Inc. R. Stephen Armstrong, 651-686-1600 Executive
Vice President & CFO or Equity Market Partners Richard
G. Cinquina, 904-415-1415
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