ST. PAUL, Minn.--(BUSINESS WIRE)--Patterson Companies, Inc. (Nasdaq:PDCO) today reported that consolidated sales totaled $1.1 billion (see attached Sales Summary for further details) in its fiscal third quarter ended January 24, 2015, essentially flat with the same period last year. Net income totaled $54.7 million, or $.55 per diluted share, compared to $57.9 million, or $0.57 per diluted share, in the prior year (excluding costs related to the Medical unit restructuring). Net income and EPS in the prior-year period benefited from an adjustment to non-cash, stock based compensation of $8 million, or $0.05 per diluted share.
“We continued to execute against our strategic plan in the fiscal third quarter, are on track to meet our financial objectives and are confident in the strength of our business,” said Scott Anderson, chairman and chief executive officer. “During the quarter, we witnessed several positive trends including the sales of dental consumables which provided another quarter of sequential growth. Our investments in our people, new talent and go-to-market strategies are positioning us well to capitalize on long-term opportunities.”
Patterson Dental
Sales for Patterson Dental, the company’s
largest business that accounts for approximately 58 percent of total
sales, decreased to $620.8 million, down 2.6 percent on a constant
currency basis from the year-earlier period. Also on a constant
currency basis, sales by category versus the prior-year quarter were as
follows:
- Consumable dental supplies increased 4.0 percent;
- Dental equipment and software declined 13.2 percent. We believe this reflected the industry-wide impact of a late reinstatement of tax incentives for U.S. customers; and
- Other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, improved 6.5 percent.
Commented Anderson, “Again this quarter, we saw solid growth in consumables, which we believe indicates continued increased office visits and overall demand for dental services. In equipment, our combination of strong core and technology offerings, industry leading service and support, and the trend toward digitization of the dental office will continue to make this market a strong one for us, and we believe in our ability to serve it better than anyone else.”
Patterson Veterinary
Sales for Patterson Veterinary, the
company’s second largest business, increased to $337.8 million, or up
3.5 percent on a constant currency basis. For veterinary sales by
category, again on a constant currency basis, versus the year-ago
quarter:
- Consumable sales rose 3.5 percent;
- Equipment sales increased 3.5 percent; and
- Sales of other services and products, consisting primarily of technical service, parts and labor, and software support services, were up 3.0 percent.
Anderson continued, “Patterson Veterinary, which amounts to just under one-third of our total sales, again reported growth in the fiscal third quarter, in spite of a shift in product mix from buy-sell to agency in the pharmaceutical product category. We continue to maintain the focus on enhancing our products and technologies across our geographic footprint that has led to our success in this market.”
Patterson Medical
Sales for Patterson Medical, the company’s
rehabilitation supply and equipment business, totaled $104.7 million for
the fiscal 2015 third quarter, or up 2.6 percent, excluding currency and
divestiture impacts. Consolidated sales of Patterson Medical currently
represent approximately 10 percent of total company sales.
Anderson said, “It’s clear that the new focus in Patterson Medical continues to drive improved performance in this segment. Patterson Medical’s ongoing operations delivered its third consecutive quarter of growth. We are confident that our emphasis on select rehabilitation markets gives the business a solid platform for future growth.”
Share Repurchases and Dividends
Year to date, Patterson has
repurchased approximately 1.2 million shares of its outstanding common
stock, with a value of $47.5 million, leaving approximately 21 million
shares for repurchase under the current authorization. The company also
paid $20.2 million in cash dividends to shareholders in the fiscal third
quarter and $60.3 million through the first nine months of fiscal 2015.
Year-to-Date Results
Consolidated sales for the first nine
months of fiscal 2015 totaled $3.2 billion, an increase of 8.9 percent
from $3.0 billion in the year-earlier period. Net income was $158.7
million, or $1.59 per diluted share, compared to net income of $152.5
million, or $1.50 per diluted share, in the year-earlier period; results
from the nine months of fiscal 2014 exclude $0.08 per share of costs for
the Patterson Medical restructuring.
Business Outlook
Anderson concluded, “As we move toward the
end of our fiscal year, we are encouraged by improving market conditions
and stable-to-strengthening demand across all of our businesses. We have
taken, and continue to take, the steps necessary to position Patterson
to capitalize on these improving fundamentals by driving efficiencies
and enriching our product and service offerings and our geographic
reach. We reaffirm our earnings guidance range for fiscal 2015 of
$2.20-$2.30 per diluted share.”
The following non-GAAP table is provided to adjust reported net income for the impact of the costs associated with restructuring the medical segment. Management believes that the adjusted income amounts provide a helpful representation of the company’s current quarter performance.
| (Dollars in thousands, except EPS) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| January 24, 2015 | January 25, 2014 | January 24, 2015 | January 25, 2014 | |||||||||||||
| Net Income - reported | $ | 54,676 | $ | 57,021 | $ | 158,743 | $ | 144,941 | ||||||||
| Restructuring costs | - | 916 | - | 7,566 | ||||||||||||
| Net Income - adjusted | $ | 54,676 | $ | 57,937 | $ | 158,743 | $ | 152,507 | ||||||||
| Diluted Earnings Per Share - reported | $ | 0.55 | $ | 0.56 | $ | 1.59 | $ | 1.42 | ||||||||
| Restructuring costs | - | 0.01 | - | 0.08 | ||||||||||||
| Diluted Earnings Per Share - adjusted | $ | 0.55 | $ | 0.57 | $ | 1.59 | $ | 1.50 | ||||||||
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 website. A replay of
the third quarter conference call can be heard for one week at
888-203-1112 and by providing the Conference ID 2506208, when
prompted.
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 in the
U.S. and U.K. of consumable veterinary supplies, equipment and software,
diagnostic products, vaccines and pharmaceuticals predominantly 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. Any statements made in this press release about the Company’s future financial conditions, results of operations, expectations, plans, or prospects, including the information under the heading “Business Outlook”, constitute forward-looking statements. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," “projects,” “should,” "targets" and/or similar expressions. These forward-looking statements are based on the Company’s current estimates and assumptions and, as such, involve uncertainty and risk. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by the forward-looking statements because of a number of factors, including the factors described in Item 1A of the Company’s most recent Annual Report on Form 10-K, which factors are incorporated herein by reference. Any forward-looking statement in this release speaks only as of the date in which it is made. Except to the extent required under the federal securities laws, the Company does not intend to update or revise the forward-looking statements.
| PATTERSON COMPANIES, INC. | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
| (In thousands, except for per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| January 24, | January 25, | January 24, | January 25, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Net sales | $ | 1,063,312 | $ | 1,082,679 | $ | 3,226,166 | $ | 2,961,638 | ||||||||||||
| Gross profit | 302,559 | 311,461 | 904,606 | 882,410 | ||||||||||||||||
| Operating expenses | 211,803 | 214,810 | 637,875 | 629,255 | ||||||||||||||||
| Operating income | 90,756 | 96,651 | 266,731 | 253,155 | ||||||||||||||||
| Other expense, net | (8,195 | ) | (8,710 | ) | (23,245 | ) | (25,366 | ) | ||||||||||||
| Income before taxes | 82,561 | 87,941 | 243,486 | 227,789 | ||||||||||||||||
| Income taxes | 27,885 | 30,920 | 84,743 | 82,848 | ||||||||||||||||
| Net income | $ | 54,676 | $ | 57,021 | $ | 158,743 | $ | 144,941 | ||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 0.55 | $ | 0.56 | $ | 1.60 | $ | 1.43 | ||||||||||||
| Diluted | $ | 0.55 | $ | 0.56 | $ | 1.59 | $ | 1.42 | ||||||||||||
| Shares: | ||||||||||||||||||||
| Basic | 98,842 | 101,105 | 98,991 | 101,067 | ||||||||||||||||
| Diluted | 99,540 | 101,999 | 99,699 | 101,962 | ||||||||||||||||
| Dividends declared per common share | $ | 0.20 | $ | 0.16 | $ | 0.60 | $ | 0.48 | ||||||||||||
| Gross margin - adjusted | 28.5 | % | 28.9 | % | 30.7 | % | 30.9 | % | ||||||||||||
| NVS | - | - | -2.7 | -1.0 | ||||||||||||||||
| Medical restructuring | - | -0.1 | - | -0.1 | ||||||||||||||||
| Gross margin - reported | 28.5 | % | 28.8 | % | 28.0 | % | 29.8 | % | ||||||||||||
| Operating expenses as a % of net sales - adjusted | 19.9 | % | 19.8 | % | 21.7 | % | 21.9 | % | ||||||||||||
| NVS | - | - | -2.0 | -0.9 | ||||||||||||||||
| Medical restructuring | - | - | - | 0.2 | ||||||||||||||||
| Operating expenses as a % of net sales - reported | 19.9 | % | 19.8 | % | 19.7 | % | 21.2 | % | ||||||||||||
| Operating income as a % of net sales - adjusted | 8.5 | % | 9.0 | % | 9.0 | % | 9.0 | % | ||||||||||||
| NVS | - | - | -0.7 | -0.1 | ||||||||||||||||
| Medical restructuring | - | -0.1 | - | -0.3 | ||||||||||||||||
| Operating income as a % of net sales - reported | 8.5 | % | 8.9 | % | 8.3 | % | 8.6 | % | ||||||||||||
| Effective tax rate - adjusted | 33.8 | % | 35.1 | % | 35.1 | % | 35.7 | % | ||||||||||||
| NVS | - | - | -0.3 | -0.3 | ||||||||||||||||
| Medical restructuring | - | 0.1 | - | 1.0 | ||||||||||||||||
| Effective tax rate - reported | 33.8 | % | 35.2 | % | 34.8 | % | 36.4 | % | ||||||||||||
| PATTERSON COMPANIES, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Dollars in thousands) | ||||||||
| January 24, | April 26, | |||||||
| 2015 | 2014 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and short-term investments | $ | 342,047 | $ | 305,683 | ||||
| Receivables, net | 590,260 | 607,580 | ||||||
| Inventory | 514,619 | 436,463 | ||||||
| Prepaid expenses and other current assets | 54,340 | 65,991 | ||||||
| Total current assets | 1,501,266 | 1,415,717 | ||||||
| Property and equipment, net | 225,418 | 204,939 | ||||||
| Goodwill and other intangible assets | 1,040,517 | 1,067,583 | ||||||
| Investments and other | 104,331 | 176,438 | ||||||
| Total Assets | $ | 2,871,532 | $ | 2,864,677 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 341,425 | $ | 342,056 | ||||
| Other accrued liabilities | 227,637 | 201,407 | ||||||
| Total current liabilities | 569,062 | 543,463 | ||||||
| Long-term debt | 725,000 | 725,000 | ||||||
| Other non-current liabilities | 122,782 | 124,550 | ||||||
| Total liabilities | 1,416,844 | 1,393,013 | ||||||
| Stockholders' equity | 1,454,688 | 1,471,664 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 2,871,532 | $ | 2,864,677 | ||||
| PATTERSON COMPANIES, INC. | |||||||||||||||||||||
| SALES SUMMARY | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Total | Foreign | Constant | |||||||||||||||||||
| January 24, | January 25, | Sales | Exchange | Currency | |||||||||||||||||
| 2015 | 2014 |
Growth |
Impact |
Growth |
|||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| Consolidated Net Sales | |||||||||||||||||||||
| Consumable and printed products |
1 |
$ | 725,215 | $ | 711,613 | 1.9 | % | -1.5 | % | 3.4 | % | ||||||||||
| Equipment and software |
1 |
257,651 | 294,009 | -12.4 | % | -0.7 | % | -11.7 | % | ||||||||||||
| Other | 80,446 | 77,057 | 4.4 | % | -0.9 | % | 5.3 | % | |||||||||||||
| Total | $ | 1,063,312 | $ | 1,082,679 | -1.8 | % | -1.2 | % | -0.6 | % | |||||||||||
| Dental Supply | |||||||||||||||||||||
| Consumable and printed products |
1 |
$ | 331,826 | $ | 321,421 | 3.2 | % | -0.8 | % | 4.0 | % | ||||||||||
| Equipment and software |
1 |
220,739 | 255,998 | -13.8 | % | -0.6 | % | -13.2 | % | ||||||||||||
| Other | 68,248 | 64,546 | 5.7 | % | -0.8 | % | 6.5 | % | |||||||||||||
| Total | $ | 620,813 | $ | 641,965 | -3.3 | % | -0.7 | % | -2.6 | % | |||||||||||
| Veterinary Supply | |||||||||||||||||||||
| Consumable and printed products | $ | 316,401 | $ | 312,514 | 1.2 | % | -2.3 | % | 3.5 | % | |||||||||||
| Equipment and software | 15,109 | 14,607 | 3.4 | % | -0.1 | % | 3.5 | % | |||||||||||||
| Other | 6,305 | 6,281 | 0.4 | % | -2.6 | % | 3.0 | % | |||||||||||||
| Total | $ | 337,815 | $ | 333,402 | 1.3 | % | -2.2 | % | 3.5 | % | |||||||||||
| Rehabilitation Supply | |||||||||||||||||||||
| Consumable and printed products | $ | 76,988 | $ | 77,678 | -0.9 | % | -1.5 | % | 0.6 | % | |||||||||||
| Equipment and software | 21,803 | 23,404 | -6.8 | % | -1.9 | % | -4.9 | % | |||||||||||||
| Other | 5,893 | 6,230 | -5.4 | % | -1.1 | % | -4.3 | % | |||||||||||||
| Total | $ | 104,684 | $ | 107,312 | -2.4 | % | -1.6 | % | -0.8 | % | |||||||||||
| Nine Months Ended | |||||||||||||||||||||
| Consolidated Net Sales | |||||||||||||||||||||
| Consumable and printed products |
1 |
$ | 2,312,831 | $ | 2,036,205 | 13.6 | % | -0.4 | % | 14.0 | % | ||||||||||
| Equipment and software |
1 |
665,653 | 695,721 | -4.3 | % | -0.6 | % | -3.7 | % | ||||||||||||
| Other | 247,682 | 229,712 | 7.8 | % | -0.5 | % | 8.3 | % | |||||||||||||
| Total | $ | 3,226,166 | $ | 2,961,638 | 8.9 | % | -0.4 | % | 9.3 | % | |||||||||||
| Dental Supply | |||||||||||||||||||||
| Consumable and printed products |
1 |
$ | 1,002,385 | $ | 977,446 | 2.6 | % | -0.6 | % | 3.2 | % | ||||||||||
| Equipment and software |
1 |
565,483 | 587,382 | -3.7 | % | -0.6 | % | -3.1 | % | ||||||||||||
| Other | 207,347 | 194,420 | 6.6 | % | -0.5 | % | 7.1 | % | |||||||||||||
| Total | $ | 1,775,215 | $ | 1,759,248 | 0.9 | % | -0.6 | % | 1.5 | % | |||||||||||
| Veterinary Supply | |||||||||||||||||||||
| Consumable and printed products | $ | 1,047,512 | $ | 792,638 | 32.2 | % | -0.4 | % | 32.6 | % | |||||||||||
| Equipment and software | 31,167 | 32,243 | -3.3 | % | 0.0 | % | -3.3 | % | |||||||||||||
| Other | 21,910 | 16,325 | 34.2 | % | -0.3 | % | 34.5 | % | |||||||||||||
| Total | $ | 1,100,589 | $ | 841,206 | 30.8 | % | -0.3 | % | 31.1 | % | |||||||||||
| Rehabilitation Supply | |||||||||||||||||||||
| Consumable and printed products | $ | 262,935 | $ | 266,121 | -1.2 | % | 0.3 | % | -1.5 | % | |||||||||||
| Equipment and software | 69,002 | 76,096 | -9.3 | % | -0.4 | % | -8.9 | % | |||||||||||||
| Other | 18,425 | 18,967 | -2.9 | % | 0.0 | % | -2.9 | % | |||||||||||||
| Total | $ | 350,362 | $ | 361,184 | -3.0 | % | 0.2 | % | -3.2 | % | |||||||||||
|
1 Certain products were reclassed from equipment to consumables in current and prior periods |
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| PATTERSON COMPANIES, INC. | ||||||||||||||||||||
| SUPPLEMENTARY FINANCIAL DATA | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| January 24, | January 25, | January 24, | January 25, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Operating Income | ||||||||||||||||||||
| Dental Supply | $ | 66,717 | $ | 73,513 | $ | 178,938 | $ | 181,846 | ||||||||||||
| Veterinary Supply | 11,864 | 12,003 | 40,187 | 33,175 | ||||||||||||||||
| Rehabilitation Supply | 12,175 | 11,135 | 47,606 | 38,134 | ||||||||||||||||
| $ | 90,756 | $ | 96,651 | $ | 266,731 | $ | 253,155 | |||||||||||||
| Other (Expense) Income, net | ||||||||||||||||||||
| Interest income | $ | 1,305 | $ | 1,593 | $ | 3,912 | $ | 3,892 | ||||||||||||
| Interest expense | (8,512 | ) | (9,237 | ) | (25,824 | ) | (26,581 | ) | ||||||||||||
| Other | (988 | ) | (1,066 | ) | (1,333 | ) | (2,677 | ) | ||||||||||||
| $ | (8,195 | ) | $ | (8,710 | ) | $ | (23,245 | ) | $ | (25,366 | ) | |||||||||
| PATTERSON COMPANIES, INC. | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (Dollars in thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Nine Months Ended | ||||||||||
|
January 24, |
January 25, |
|||||||||
| 2015 | 2014 | |||||||||
| Operating activities: | ||||||||||
| Net income | $ | 158,743 | $ | 144,941 | ||||||
| Depreciation & amortization | 36,897 | 36,683 | ||||||||
| Non-cash employee compensation | 20,570 | 14,840 | ||||||||
| Change in assets and liabilities, net of acquired | (58,125 | ) | (46,714 | ) | ||||||
| Net cash provided by operating activities | 158,085 | 149,750 | ||||||||
| Investing activities: | ||||||||||
| Additions to property and equipment, net | (44,520 | ) | (30,263 | ) | ||||||
| Acquisitions and equity investments, net of cash | (8,730 | ) | (140,774 | ) | ||||||
| Purchase of investments | - | (99,232 | ) | |||||||
| Proceeds from sales | 46,369 | - | ||||||||
| Other investing activities | (543 | ) | 2,110 | |||||||
| Net cash used in investing activities | (7,424 | ) | (268,159 | ) | ||||||
| Financing activities: | ||||||||||
| Dividends paid | (60,340 | ) | (65,333 | ) | ||||||
| Share repurchases | (47,539 | ) | (42,734 | ) | ||||||
| Draw on revolver | 130,000 | 135,000 | ||||||||
| Payment on revolver | (130,000 | ) | - | |||||||
| Other financing activities | 6,484 | 13,756 | ||||||||
| Net cash (used in) provided by financing activities | (101,395 | ) | 40,689 | |||||||
| Effect of exchange rate changes on cash | (24,452 | ) | (3,533 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 24,814 | $ | (81,253 | ) | |||||
