Patterson Companies Reports Fourth Quarter and Fiscal 2013 Operating Results

Patterson Companies Reports Fourth Quarter and Fiscal 2013 Operating Results

  • Fiscal fourth quarter consolidated sales up more than 3 percent from prior year

  • Strong dental sales driven by a nearly 14 percent increase in equipment and software

  • Company provides consolidated sales and earnings guidance for fiscal 2014

ST. PAUL, Minn.--(BUSINESS WIRE)-- Patterson Companies, Inc. (NAS: PDCO) today reported that consolidated sales totaled $964.9 million in its fiscal fourth quarter, ended Apr. 27, 2013, an increase of 3.1 percent from $936.3 million in the year-earlier period. Net income was $63.6 million, or $0.62 per diluted share, compared to net income of $62.1 million, or $0.58 per diluted share, in the year-ago period.

Patterson Dental
Sales for this segment increased 6.4 percent from the year-earlier period to $636.9 million in the fourth quarter of fiscal 2013. This is the company's largest business, accounting for approximately two-thirds of total sales. By category versus the year-ago quarter:

  • Sales of consumable dental supplies were up 2.4 percent;

  • Sales of dental equipment rose nearly 14 percent, driven by strong performances in all categories; and

  • Sales of other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, increased more than 4 percent.


Scott P. Anderson, chairman and chief executive officer, commented: "We are encouraged by Patterson Dental's fourth-quarter performance and believe it provides momentum as we enter fiscal 2014. Fourth quarter performance was led by strong double-digit growth in our equipment lines, even against strong comparables from the prior-year period. We believe there are growth opportunities from all our equipment offerings, including technology, as dentistry migrates to a digital platform. Coupled with Patterson's industry-leading after-sales support offerings, we provide a compelling value proposition for our customers. Through the Patterson Technology Center, training programs and other value-added services, we enhance the customer experience and become a critical component of the dentist's practice."

Patterson Veterinary
Fourth quarter fiscal 2013 sales for the Patterson Veterinary unit increased by approximately 2 percent, to $204.4 million, excluding the impact from the change in a nutritional distribution agreement in the spring of 2012.

Anderson continued: "Patterson Veterinary constituted approximately 21 percent of Patterson Companies' total sales in the fiscal fourth quarter, as year-over-year performance stemmed from modest gains in consumable supply sales. Net of the impact of the nutritional distribution agreement change, we saw sales growth, despite the very strong year-ago performance that was driven in part by an earlier and more severe flea, tick and heartworm season. We have spent the last year building our equipment, technology and service infrastructure, and during the quarter Patterson attained our goal of being a national technical service provider. We believe we are well-positioned for fiscal 2014 and remain committed both to building our equipment and service strategy and to taking advantage of the favorable marketplace dynamics, as pet owners increase their veterinary care spending."

Patterson Medical
Sales for Patterson Medical, the rehabilitation supply and equipment unit, declined to $123.6 million from $130.0 million, primarily reflecting weak international sales during the quarter. Sales from Patterson Medical currently represent approximately 13 percent of total company sales.

Anderson said: "While Patterson Medical sales continue to be hampered by uncertainty surrounding healthcare reform and sluggish global economic and market conditions. These current macroeconomic factors are likely to persist in the short-term, yet we are confident in the long-term value of this business due to the compelling underlying demographics and our industry-leading product offering."

Full Year Results
Consolidated sales for the fiscal 2013 full year totaled $3.6 billion, an increase of 3 percent from $3.5 billion in the prior fiscal year. Net income was $210.3 million, or $2.03 per diluted share, compared to net income of $212.8 million, or $1.92 per diluted share, in the prior fiscal year. Fiscal 2013 net income includes a $6.1 million increase in interest expense from fiscal 2012.

For the full fiscal year 2013, Patterson repurchased approximately 5.2 million common shares under its share buyback authorization. In March 2013, the company announced that its Board of Directors had authorized a new repurchase program for up to 25 million shares, which will be repurchased systematically and, as market conditions allow, through open market transactions until March 19, 2018. Approximately 24.4 million shares remain available for repurchase under this authorization.

During the quarter, the Board of Directors also approved an increase in the quarterly cash dividend of 14 percent, to $0.16 per diluted share from $0.14 per diluted share, bringing the annual dividend payment to $0.64 per diluted share for fiscal 2014.

Business Outlook
Anderson continued, "We remain cautiously optimistic as we look ahead to fiscal 2014 and believe that the year will be supported by continued stabilization of the North American economy. Also, we are announcing a major undertaking to transform our information systems. Our total investment over the next five years is estimated at $55 to $65 million. While approximately half of this investment will be capitalized and amortized, we believe that an incremental $10 million will be expensed on this effort in fiscal 2014. With that as a back drop, we are providing our fiscal 2014 earnings guidance in the range of $2.10 to $2.20 per diluted share."

"Patterson is committed to expanding our investment in information technology in order to support our strategic growth initiatives, further enhance the customer experience, and secure future productivity gains. Ultimately, we believe these investments are critical to providing Patterson with the flexibility to adjust our platform as opportunities warrant, in order to create long-term shareholder value," concluded Anderson.

The fiscal 2014 annual financial outlook includes the following expectations:

  • Stable economic conditions in North America;

  • Modest operating margin expansion, excluding information technology investments;

  • EPS impact of $0.06 from information technology investments;

  • No impact from share repurchases that may occur during the year; and

  • Cash flow generation similar to fiscal 2013 levels.

Fourth Quarter Conference Call and Replay

Patterson's fourth 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 fourth quarter conference call can be heard for one week at 1-303-590-3030 and providing the conference ID: 4618893.

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

Twelve Months Ended

April 27,

April 28,

April 27,

April 28,

2013

2012

2013

2012

Net sales

$

964,933

$

936,334

$

3,637,212

$

3,535,661

Gross profit

324,177

313,721

1,190,769

1,162,514

Operating expenses

219,721

210,870

836,314

804,505

Operating income

104,456

102,851

354,455

358,009

Other expense, net

(8,257

)

(8,804

)

(33,338

)

(28,197

)

Income before taxes

96,199

94,047

321,117

329,812

Income taxes

32,637

31,904

110,845

116,997

Net income

$

63,562

$

62,143

$

210,272

$

212,815

Earnings per share:

Basic

$

0.63

$

0.59

$

2.04

$

1.93

Diluted

$

0.62

$

0.58

$

2.03

$

1.92

Shares:

Basic

101,249

105,865

103,030

110,121

Diluted

102,134

106,708

103,807

110,846

Dividends declared per common share

$

0.16

$

0.14

$

0.58

$

0.50

Gross margin

33.6

%

33.5

%

32.7

%

32.9

%

Operating expenses as a % of net sales

22.8

%

22.5

%

23.0

%

22.8

%

Operating income as a % of net sales

10.8

%

11.0

%

9.7

%

10.1

%

Effective tax rate

33.9

%

33.9

%

34.5

%

35.5

%

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

April 27,

April 28,

2013

2012

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

505,228

$

573,781

Receivables, net

448,158

464,869

Inventory

360,563

319,952

Prepaid expenses and other current assets

42,554

44,911

Total current assets

1,356,503

1,403,513

Property and equipment, net

192,020

195,465

Goodwill and other intangible assets

1,016,064

1,022,809

Investments and other

108,026

117,581

Total Assets

$

2,672,613

$

2,739,368

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

249,795

$

207,915

Other accrued liabilities

193,891

196,733

Current maturities of long-term debt

-

125,000

Total current liabilities

443,686

529,648

Long-term debt

725,000

725,000

Other non-current liabilities

113,804

109,518

Total liabilities

1,282,490

1,364,166

Stockholders' equity

1,390,123

1,375,202

Total Liabilities and Stockholders' Equity

$

2,672,613

$

2,739,368

PATTERSON COMPANIES, INC.

SUPPLEMENTARY FINANCIAL DATA

(Dollars in thousands)

(Unaudited)

Three Months Ended

Twelve Months Ended

April 27,

April 28,

April 27,

April 28,

2013

2012

2013

2012

Consolidated Net Sales

Consumable and printed products

$

617,942

$

616,487

$

2,343,407

$

2,312,309

Equipment and software

267,080

243,352

993,767

930,601

Other

79,911

76,495

300,038

292,751

Total

$

964,933

$

936,334

$

3,637,212

$

3,535,661

Dental Supply

Consumable and printed products

$

338,988

$

331,054

$

1,273,222

$

1,263,515

Equipment and software

228,598

201,321

843,880

768,633

Other

69,349

66,487

262,868

255,727

Total

$

636,935

$

598,862

$

2,379,970

$

2,287,875