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| 8-K - FORM 8-K - PATTERSON COMPANIES, INC. | d260916d8k.htm |
Exhibit 99.1
Patterson Companies Reports Second Quarter Operating Results
St. Paul, MN—November 22, 2011— Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $856,875,000 for the second quarter of fiscal 2012 ended October 29, virtually unchanged from the year-earlier period. Net income of $48,954,000 or $0.43 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, second quarter earnings were $0.46 per diluted share. Patterson reported earnings of $53,357,000 or $0.45 per diluted share in the second quarter of fiscal 2011. As reported previously, the ESOP expense will affect fiscal 2012 earnings by an estimated $0.12 per diluted share.
Patterson Dental, Patterson’s largest business, reported second quarter sales of $550,605,000, down 2% from the comparable period of fiscal 2011.
| • | Sales of consumable dental supplies and printed office products increased 2.4% in the second quarter. |
| • | Sales of dental equipment and software increased 3.8% from the year-earlier level, after excluding CEREC® system revenue. Improved sales of basic dental equipment, software and digital radiography products were offset by the lower CEREC revenues. CEREC sales for this period reflected a difficult year-over-year comparison related to the highly successful trade-up program that ran during last year’s second quarter. |
| • | Sales of other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, increased 9% from last year’s second quarter. |
The second quarter sales of Patterson Medical, the rehabilitation supply and equipment unit, rose 1% to $133,570,000. Sales of the Webster Veterinary unit increased 7% to $172,700,000, with the August 2011 acquisition of American Veterinary Supply Corporation, a full-service veterinary distributor located on Long Island, accounting for 2.5% of the unit’s sales growth for this period. The equipment businesses of both Patterson Medical and Webster were soft during the second quarter, reflecting the impact of the weak economy on the purchasing decisions of rehabilitation practitioners and veterinarians.
Scott P. Anderson, president and chief executive officer, commented: “Sales of consumable supplies were solidly higher at our three businesses in the second quarter. We believe this indicates that patient traffic is improving moderately within our three served markets despite the weak economic environment. Reduced CEREC sales, together with general softness in the equipment businesses at our three operating units, adversely affected Patterson’s second quarter consolidated sales and earnings. We are focusing our marketing initiatives on boosting demand within our customer base for capital equipment during the remainder of our fiscal year. While customers remain cautious on spending for equipment, we believe opportunities exist in this currently challenging market as we approach the seasonal peak for equipment purchasing decisions.”
Patterson used internally-generated cash and bank lines to repurchase approximately 5.6 million common shares during the second quarter under its 25 million share, five-year buyback authorization that expires in 2016. Approximately 15.5 million shares remain available for repurchase under this authorization.
Patterson revised its previously issued financial guidance for fiscal 2012 of $1.90 to $2.00 per diluted share to $1.90 to $1.97.
ESOP Expense Reconciliation Table
Dollars in thousands—except EPS
| Three Months Ended | Six Months Ended | |||||||||||||||
| October 29, 2011 |
October 30, 2010 |
October 29, 2011 |
October 30, 2010 |
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| Net Income |
$ | 48,954 | $ | 53,357 | $ | 97,564 | $ | 107,839 | ||||||||
| Incremental ESOP expense |
3,685 | — | 6,904 | — | ||||||||||||
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| Adjusted Net Income (non-GAAP) |
$ | 52,639 | $ | 53,357 | $ | 104,468 | $ | 107,839 | ||||||||
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| Diluted Earnings Per Share |
$ | 0.43 | $ | 0.45 | $ | 0.85 | $ | 0.90 | ||||||||
| Incremental ESOP expense |
$ | 0.03 | — | $ | 0.06 | — | ||||||||||
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| Adjusted Earnings Per Share (non-GAAP) |
$ | 0.46 | $ | 0.45 | $ | 0.91 | $ | 0.90 | ||||||||
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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: | ||
| R. Stephen Armstrong Executive Vice President & CFO 651/686-1600 |
Richard G. Cinquina Equity Market Partners 904/415-1415 | |
Second Quarter Conference Call and Replay
Patterson’s second 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 second quarter conference call can be heard for one month at 1-303-590-3030 and providing the conference ID: 4488722.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| October 29, 2011 |
October 30, 2010 |
October 29, 2011 |
October 30, 2010 |
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| Net sales |
$ | 856,875 | $ | 857,414 | $ | 1,704,297 | $ | 1,707,201 | ||||||||
| Gross profit |
280,983 | 279,201 | 559,259 | 559,401 | ||||||||||||
| Operating expenses |
197,724 | 189,049 | 394,007 | 380,225 | ||||||||||||
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| Operating income |
83,259 | 90,152 | 165,252 | 179,176 | ||||||||||||
| Other expense, net |
(6,215 | ) | (4,798 | ) | (11,350 | ) | (8,055 | ) | ||||||||
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| Income before taxes |
77,044 | 85,354 | 153,902 | 171,121 | ||||||||||||
| Income taxes |
28,090 | 31,997 | 56,338 | 63,839 | ||||||||||||
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| Net income |
$ | 48,954 | $ | 53,357 | $ | 97,564 | $ | 107,282 | ||||||||
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| Earnings per share: |
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| Basic |
$ | 0.43 | $ | 0.45 | $ | 0.86 | $ | 0.90 | ||||||||
| Diluted |
$ | 0.43 | $ | 0.45 | $ | 0.85 | $ | 0.90 | ||||||||
| Shares: |
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| Basic |
112,538 | 118,616 | 114,057 | 118,819 | ||||||||||||
| Diluted |
113,186 | 119,373 | 114,737 | 119,579 | ||||||||||||
| Dividends declared per common share |
$ | 0.12 | $ | 0.10 | $ | 0.24 | $ | 0.20 | ||||||||
| Gross margin |
32.8 | % | 32.6 | % | 32.8 | % | 32.8 | % | ||||||||
| Operating expenses as a % of net sales |
23.1 | % | 22.0 | % | 23.1 | % | 22.3 | % | ||||||||
| Operating income as a % of net sales |
9.7 | % | 10.5 | % | 9.7 | % | 10.5 | % | ||||||||
| Effective tax rate |
36.5 | % | 37.5 | % | 36.6 | % | 37.3 | % | ||||||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| October 29, | April 30, | |||||||
| 2011 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS |
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| Current assets: |
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| Cash and short-term investments |
$ | 250,068 | $ | 388,665 | ||||
| Receivables, net |
416,809 | 465,170 | ||||||
| Inventory |
347,348 | 336,094 | ||||||
| Prepaid expenses and other current assets |
44,857 | 40,780 | ||||||
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| Total current assets |
1,059,082 | 1,230,709 | ||||||
| Property and equipment, net |
201,170 | 189,583 | ||||||
| Goodwill and other intangible assets |
1,019,120 | 1,022,832 | ||||||
| Investments and other |
118,391 | 121,844 | ||||||
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| Total Assets |
$ | 2,397,763 | $ | 2,564,968 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 186,019 | $ | 210,033 | ||||
| Other accrued liabilities |
157,209 | 157,398 | ||||||
| Borrowings on revolving credit |
20,000 | — | ||||||
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| Total current liabilities |
363,228 | 367,431 | ||||||
| Long-term debt |
525,000 | 525,000 | ||||||
| Other non-current liabilities |
105,390 | 111,997 | ||||||
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| Total liabilities |
993,618 | 1,004,428 | ||||||
| Stockholders’ equity |
1,404,145 | 1,560,540 | ||||||
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| Total Liabilities and Stockholders’ Equity |
$ | 2,397,763 | $ | 2,564,968 | ||||
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PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Consolidated Net Sales |
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| Consumable and printed products |
$ | 569,972 | $ | 547,332 | $ | 1,144,934 | $ | 1,133,935 | ||||||||
| Equipment and software |
214,025 | 243,557 | 413,676 | 435,778 | ||||||||||||
| Other |
72,878 | 66,525 | 145,687 | 137,488 | ||||||||||||
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| Total |
$ | 856,875 | $ | 857,414 | $ | 1,704,297 | $ | 1,707,201 | ||||||||
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| Dental Supply |
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| Consumable and printed products |
$ | 312,236 | $ | 305,008 | $ | 621,105 | $ | 631,000 | ||||||||
| Equipment and software |
174,913 | 199,985 | 335,940 | 354,556 | ||||||||||||
| Other |
63,456 | 58,217 | 126,927 | 120,332 | ||||||||||||
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| Total |
$ | 550,605 | $ | 563,210 | $ | 1,083,972 | $ | 1,105,888 | ||||||||
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| Rehabilitation Supply |
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| Consumable and printed products |
$ | 95,009 | $ | 90,265 | $ | 191,725 | $ | 181,190 | ||||||||
| Equipment and software |
31,702 | 36,252 | 62,759 | 66,628 | ||||||||||||
| Other |
6,859 | 6,109 | 13,538 | 12,282 | ||||||||||||
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| Total |
$ | 133,570 | $ | 132,626 | $ | 268,022 | $ | 260,100 | ||||||||
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| Veterinary Supply |
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| Consumable and printed products |
$ | 162,727 | $ | 152,059 | $ | 332,104 | $ | 321,745 | ||||||||
| Equipment and software |
7,410 | 7,320 | 14,977 | 14,594 | ||||||||||||
| Other |
2,563 | 2,199 | 5,222 | 4,874 | ||||||||||||
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| Total |
$ | 172,700 | $ | 161,578 | $ | 352,303 | $ | 341,213 | ||||||||
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| Other (Expense) Income, net |
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| Interest income |
$ | 897 | $ | 2,898 | $ | 2,726 | $ | 5,541 | ||||||||
| Interest expense |
(6,169 | ) | (6,229 | ) | (12,522 | ) | (13,119 | ) | ||||||||
| Other |
(943 | ) | (1,467 | ) | (1,554 | ) | (477 | ) | ||||||||
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| $ | (6,215 | ) | $ | (4,798 | ) | $ | (11,350 | ) | $ | (8,055 | ) | |||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| Six Months Ended | ||||||||
| October 29, | October 30, | |||||||
| 2011 | 2010 | |||||||
| Operating activities: |
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| Net income |
$ | 97,564 | $ | 107,282 | ||||
| Depreciation & amortization |
19,539 | 21,053 | ||||||
| Stock-based compensation |
6,301 | 5,289 | ||||||
| ESOP compensation |
367 | 1,050 | ||||||
| Finance contracts receivable |
— | (122,348 | ) | |||||
| Change in assets and liabilities, net of acquired |
(4,687 | ) | (26,769 | ) | ||||
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| Net cash provided by (used in) operating activities |
119,084 | (14,443 | ) | |||||
| Investing activities: |
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| Additions to property and equipment, net of disposals |
(22,379 | ) | (20,046 | ) | ||||
| Acquisitions and equity investments |
(8,726 | ) | (46,682 | ) | ||||
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| Net cash used in investing activities |
(31,105 | ) | (66,728 | ) | ||||
| Financing activities: |
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| Dividends paid |
(27,213 | ) | (23,734 | ) | ||||
| Share repurchases |
(218,858 | ) | (36,947 | ) | ||||
| Draw on revolver |
20,000 | — | ||||||
| Advances on finance contracts |
— | 122,348 | ||||||
| Other financing activities |
6,340 | 10,012 | ||||||
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| Net cash (used in) provided by financing activities |
(219,731 | ) | 71,679 | |||||
| Effect of exchange rate changes on cash |
(6,845 | ) | (2,355 | ) | ||||
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| Net decrease in cash and cash equivalents |
$ | (138,597 | ) | $ | (11,847 | ) | ||
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