Patterson Companies Reports Third Quarter Operating Results

Patterson Companies Reports Third Quarter Operating Results

ST. PAUL, Minn.--(BUSINESS WIRE)-- Patterson Companies, Inc. (NAS: 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 taxes

81,800

81,863

224,918

235,765

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 per common share

$

0.14

$

0.12

$

0.42

$

0.36

Gross margin

32.8

%

32.3

%

32.4

%

32.7

%

Operating expenses as a % of net sales

23.0

%

22.3

%

23.1

%

22.8

%

Operating income as a % of net sales

9.8

%

10.0

%

9.4

%

9.8

%

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 printed products

$

551,149

$

550,888

$

1,725,465

$

1,695,822

Equipment and software

292,726

273,573

726,687

687,249

Other

71,986

70,569

220,127

216,256

Total

$

915,861

$

895,030

$

2,672,279

$

2,599,327

Dental Supply

Consumable and printed products

$

308,700

$

311,356

$

934,234

$

932,461

Equipment and software

254,033

231,372

615,282

567,312

Other

63,761

62,313

193,519

189,240

Total

$

626,494

$

605,041

$

1,743,035

$

1,689,013

Rehabilitation Supply

Consumable and printed products

$

80,628

$

80,510

$

273,446

$

272,235

Equipment and software

27,301

28,783

85,635

91,542

Other

6,030

6,053

19,290

19,591

Total

$

113,959

$

115,346

$

378,371

$

383,368

Veterinary Supply

Consumable and printed products

$

161,821

$

159,022

$

517,785

$

491,126

Equipment and software

11,392

13,418

25,770

28,395

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