Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated net
sales of approximately $1.4 billion (see attached Sales Summary for
further details) in its fiscal second quarter ended October 27, 2018, an
increase of 1.4 percent compared to the same period last year. Internal
sales, which are adjusted for the effects of currency translation and
changes in product selling relationships, increased 1.8 percent.
Reported net income attributable to Patterson Companies, Inc. for the
second quarter of fiscal year 2019 was $28.9 million, or $0.31 per
diluted share, compared to net income attributable to Patterson
Companies, Inc. of $40.2 million, or $0.43 per diluted share, in last
year's fiscal second quarter. Adjusted net income1
attributable to Patterson Companies, Inc., which excludes deal
amortization costs and integration and business restructuring costs,
totaled $36.3 million for the second quarter of fiscal 2019, or $0.39
per diluted share, compared to $47.6 million in the same quarter last
year, or $0.51 per diluted share. The reported net income and the
adjusted net income attributable to Patterson Companies, Inc. were both
impacted by the decrease in operating margins within the Dental segment.
"Our second quarter results met our expectations and we continue to make
progress on our focused initiatives to improve performance and build a
stronger Patterson," said Mark Walchirk, president and CEO of Patterson
Companies. "While we still have much work ahead, our team has delivered
two consecutive quarters of year-over-year revenue growth, operating
margin improvement from the fiscal first quarter and continued strong
cash flow generation. As a result, we are reaffirming our fiscal 2019
Patterson Animal Health
Reported net sales in our Animal Health segment for the second quarter
of fiscal 2019, which comprised approximately 61 percent of the
company's total sales, were $855.4 million compared to $823.6 million in
the same quarter last year. Internal sales for the segment increased 4.5
percent from the fiscal 2018 second quarter.
Reported net sales in our Dental segment for the second quarter of
fiscal 2019, which represented approximately 39 percent of total company
sales, were $542.5 million compared to $553.6 million in the same
quarter last year. Internal sales declined 1.8 percent compared to the
fiscal 2018 second quarter.
Balance Sheet and Capital Allocation
For the first six months of fiscal 2019, Patterson Companies generated
$200.2 million of cash from operating activities and collected deferred
purchase price receivables of $165.6 million for a total of $365.8
million, compared to a total of $101.7 million in the same period last
year. During the first six months of fiscal 2019, debt has been reduced
by $196.3 million and cash has grown by $102.5 million.
In the second quarter of fiscal 2019, Patterson Companies paid $24.7
million in cash dividends to shareholders. On a year-to-date basis,
Patterson has returned $50.0 million in cash dividends to shareholders.
Consolidated net sales for the first six months of fiscal 2019 totaled
$2.7 billion, a 1.9 percent year-over-year increase. Reported net income
attributable to Patterson Companies, Inc. was $24.4 million, or $0.26
per diluted share, compared to $71.1 million, or $0.76 per diluted share
in last year's period. In July 2018, Patterson Companies booked a
pre-tax reserve of $28.3 million for the anticipated settlement of
purported class action antitrust litigation.
Adjusted net income1 attributable to Patterson Companies,
Inc., which excludes deal amortization costs, integration and business
restructuring costs and legal reserve costs, totaled $60.3 million, or
$0.65 per diluted share, compared to adjusted net income of $89.0
million, or $0.95 per diluted share, in the year-ago period.
Patterson Companies today reaffirmed fiscal 2019 earnings guidance,
which is provided on both a GAAP and non-GAAP adjusted1 basis:
Our guidance is for current operations as well as completed or
previously announced acquisitions and does not include the impact of
potential future acquisitions or similar transactions, if any, or
impairments and material restructurings beyond those previously publicly
disclosed. Our guidance assumes North American and international market
conditions similar to those experienced in fiscal 2018.
1Non-GAAP Financial Measures
The Reconciliation of GAAP to non-GAAP Measures table appearing behind
the accompanying financial information is provided to adjust reported
GAAP measures, namely operating income, income before taxes, income tax
expense, net income, net income attributable to Patterson Companies,
Inc. and diluted earnings per share attributable to Patterson Companies,
Inc., for the impact of deal amortization, integration and business
restructuring expenses and legal reserve costs along with the related
tax effects of these items.
Management believes that these non-GAAP measures may provide a helpful
representation of the company's second-quarter performance and earnings
guidance, and enable comparison of financial results between periods
where certain items may vary independent of business performance. These
non-GAAP financial measures are presented solely for informational and
comparative purposes and should not be regarded as a replacement for
corresponding, similarly captioned, GAAP measures.
In addition, the term "internal sales" used in this release represents
net sales adjusted to exclude foreign currency impact and changes in
product selling relationships. Foreign currency impact represents the
difference in results that is attributable to fluctuations in currency
exchange rates the company uses to convert results for all foreign
entities where the functional currency is not the U.S. dollar. The
company calculates the impact as the difference between the current
period results translated using the current period currency exchange
rates and using the comparable prior period's currency exchange rates.
The company believes the disclosure of net sales changes in constant
currency provides useful supplementary information to investors in light
of significant fluctuations in currency rates.
Second-Quarter Conference Call and Replay
Patterson Companies' fiscal 2019 second-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 the Patterson Companies website.
A replay of the fiscal 2019 second-quarter conference call can be heard
for one week at 800-585-8367 and by providing the Conference ID 5359197
About Patterson Companies Inc.
Patterson Companies Inc. (Nasdaq: PDCO) is a value-added distributor
serving the dental and animal health markets.
Patterson's Dental segment 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.
Animal Health Market
Patterson's Animal Health segment is a leading distributor of products,
services and technologies to both the production and companion animal
health markets in North America and the U.K.
This press release contains certain 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 Patterson's
ability to control. Forward-looking statements generally can be
identified by words such as "believes," "expects," "anticipates,"
"foresees," "forecasts," "estimates" or other words or phrases of
similar import. It is uncertain whether any of the events anticipated by
the forward-looking statements will transpire or occur, or if any of
them do, what impact they will have on the results of operations and
financial condition of Patterson or the price of Patterson stock. These
forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those indicated in
such forward-looking statements. Such risks and uncertainties include,
without limitation, operations disruptions attributable to our
enterprise resource planning system implementation; our ability to
attract or retain qualified sales representatives and service
technicians who relate directly with our customers; the reduction,
modification, cancellation or delay of purchases of innovative,
high-margin equipment; material changes in our purchasing relationships
with suppliers; changes in general market and economic conditions; and
the other risks and important factors contained and identified in
Patterson's filings with the Securities and Exchange Commission, such as
its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, any
of which could cause actual results to differ materially from the
forward-looking statements. Any forward-looking statement in this press
release speaks only as of the date on which it is made. Except to the
extent required under the federal securities laws, Patterson does not
intend to update or revise the forward-looking statements.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Change in assets and liabilities, net of acquired
(Dollars in thousands)
Three Months Ended
(a) Sales of certain products previously recognized on a
gross basis were recognized on a net basis during the three and six
months ended October 27, 2018.
Six Months Ended
OPERATING INCOME BY SEGMENT
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Dollars in thousands, except per share amounts)
* May not sum due to rounding
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