[August 21, 2014] |
|
Patterson Companies Reports Fiscal 2015 First Quarter Operating Results
ST. PAUL, Minn. --(Business Wire)--
Patterson Companies, Inc. (Nasdaq: PDCO) today reported that
consolidated sales totaled $1,059.5 million in its fiscal first quarter,
ended July 26, 2014, an increase of more than 20 percent from $880.1
million in the year-earlier period. Net income was $50.3 million, or
$0.50 per diluted share, compared to net income of $45.9 million, or
$0.45 per diluted share, in the year-ago period. Fiscal 2015 first
quarter results included $173.6 million of consolidated sales and an
earnings contribution of $0.02 per diluted share from the acquisition in
the United Kingdom of National Veterinary Services Limited (NVS), which
closed on August 16, 2013.
"We are pleased with the trends we saw in the fiscal first quarter and
the business generally performed within our expectations," said Scott
Anderson, chairman and chief executive officer. "With the actions we
took in fiscal 2014 to increase our efficiency, coupled with the
long-term investments we are making to build on our capabilities, we
believe we have better positioned the company for success through fiscal
2015 and for the long-term. Aided by the investments, we are focused on
improving our execution against those strategies to generate consistent
performance and maximize shareholder value."
Patterson Dental During the fiscal 2015 first quarter, the
Dental unit generated sales growth in both consumables and basic
equipment. Sales for Patterson Dental improved slightly from the year
earlier period, on a constant currency basis, to $556.0 million, while
the negative impact of currency exchange reduced reported sales to
$552.7 million. Patterson Dental comprised a little more than half of
total company sales in the period. By category, again on a constant
currency basis, versus the year-ago quarter, sales of:
-
Consumable dental supplies rose 2.5 percent;
-
Dental equipment declined 7.3 percent overall, but rose by high-single
digits excluding CEREC trade-ups in the prior year; and
-
Other services and products, consisting primarily of technical
service, parts and labor, software support services and artificial
teeth, increased 7.8 percent.
Anderson stated: "In the fiscal first quarter we saw positive trends in
sales of dental consumables. We are the proven leader in the dental
equipment market, offering best-in-class technology and basic equipment
that is wrapped with Patterson's industry-leading after-sales support
platform. We saw this continue to play out during the first quarter as
we performed well in new unit sales of the CEREC Omnicam® and basic
dental equipment. Growth in these product categories did not offset the
successful Omnicam trade-up program from the prior fiscal year. We
remain confident in the growth prospects for our dental equipment for
fiscal 2015."
Patterson Veterinary First quarter fiscal 2015 sales for the
Veterinary unit increased nearly 94 percent from the prior year period
to $386.3 million. Patterson Veterinary now constitutes more than
one-third of the company's total sales. U.S. sales, which exclude NVS,
were up nearly 7 percent from the previous year, totaling approximately
$212.7 million. For U.S. veterinary sales, versus the year-ago first
quarter:
-
Consumable sales totaled $201.5 million, up more than 7 percent from
prior year levels;
-
Equipment sales declined slightly to $7.4 million; and
-
Other services and products, consisting primarily of technical
service, parts and labor, and software support services, increased
nearly 12 percent.
Anderson said, "We saw strong growth in consumable sales, reflecting an
improved selling environment in North America, as well as the addition
of new product lines. We also continue to be very pleased with NVS, our
U.K.-based veterinary business, and its contribution to our performance.
First quarter results for that business exceeded our expectations and
were aided by a more intense flea and tick season in the U.K. We are
confident that we will continue to take advantage of the growth
opportunities that result from our expanded geographic footprint."
Patterson Medical Sales for Patterson Medical, the
rehabilitation supply and equipment business, totaled $120.6 million in
the fiscal first quarter. During fiscal 2014, the company divested
certain non-core assets in this segment. Excluding the impact from these
divestitures, year-over-year sales performance was essentially flat.
Patterson Medical represented a little more than 11 percent of total
company sales.
Commented Anderson: "Fiscal first quarter performance in our medical
business was in line with our expectations. With the divestitures behind
us and a new management team in place, we are positioned to execute on
our growth strategies. We have aligned our business around those areas
with strategic value and where we have core competency. We are confident
in our future success."
Share Repurchases and Dividends During the fiscal 2015 first
quarter, Patterson repurchased approximately 1.1 million shares of its
outstanding common stock, with a value of $43.9 million, leaving
approximately 21 million shares for repurchase under the current
authorization. The company also paid $20 million in cash dividends to
shareholders.
Business Outlook Commented Anderson: "We are maintaining our
earnings guidance range for fiscal 2015 of $2.20-$2.30 per diluted
share. We believe that the recent change announced by IDEXX
Laboratories, Inc., to move to a direct sales and distribution model in
the veterinary market effective January 1, 2015, does not materially
impact our fiscal 2015 outlook and we expect to mitigate the potential
reduction in net income from this move. Again, this year we are focused
on execution in order to capitalize on the growth opportunities that
will come from the investments we are making and the strategies we are
implementing to further enhance our product and service offering."
First Quarter Conference Call and Replay Patterson's fiscal
first quarter earnings conference call will start at 10 a.m. Eastern
today. A slide presentation reviewing the company's operational
performance for the quarter and a link to the audio webcast will be
posted at www.pattersoncompanies.com.
The conference call will be archived on Patterson's website. The
first-quarter fiscal 2015 earnings conference call replay will be
available beginning at 12 p.m. CT (1:00 p.m. ET) today, through 12:00
p.m. CT (1:00 p.m. ET) on Thursday, August 28, 2014. Interested persons
may dial 888-203-1112 and provide the Conference ID 1392199, 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. 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; potential disruptions in our
operations during our enterprise resource planning implementation; 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
|
|
|
|
July 26,
|
|
|
July 27,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
1,059,529
|
|
|
|
$
|
880,125
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
296,225
|
|
|
|
|
281,518
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
211,471
|
|
|
|
|
200,237
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
84,754
|
|
|
|
|
81,281
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
|
(7,266
|
)
|
|
|
|
(9,124
|
)
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
|
77,488
|
|
|
|
|
72,157
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
27,199
|
|
|
|
|
26,265
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
50,289
|
|
|
|
$
|
45,892
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.51
|
|
|
|
$
|
0.45
|
|
Diluted
|
|
|
$
|
0.50
|
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
Shares:
|
|
|
|
|
|
|
Basic
|
|
|
|
99,329
|
|
|
|
|
101,027
|
|
Diluted
|
|
|
|
100,182
|
|
|
|
|
101,919
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
|
$
|
0.20
|
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
Gross margin - adjusted
|
|
|
|
32.3
|
%
|
|
|
|
32.0
|
%
|
NVS
|
|
|
|
-4.3
|
|
|
|
|
-
|
|
Gross margin - reported
|
|
|
|
28.0
|
%
|
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
Operating expenses as a % of net sales - adjusted
|
|
|
|
23.2
|
%
|
|
|
|
22.8
|
%
|
NVS
|
|
|
|
-3.2
|
|
|
|
|
-
|
|
Operating expenses as a % of net sales - reported
|
|
|
|
20.0
|
%
|
|
|
|
22.8
|
%
|
|
|
|
|
|
|
|
Operating income as a % of net sales - adjusted
|
|
|
|
9.1
|
%
|
|
|
|
9.2
|
%
|
NVS
|
|
|
|
-1.1
|
|
|
|
|
-
|
|
Operating income as a % of net sales - reported
|
|
|
|
8.0
|
%
|
|
|
|
9.2
|
%
|
|
|
|
|
|
|
|
Effective tax rate - adjusted
|
|
|
|
35.6
|
%
|
|
|
|
36.4
|
%
|
NVS
|
|
|
|
-0.5
|
|
|
|
|
-
|
|
Effective tax rate - reported
|
|
|
|
35.1
|
%
|
|
|
|
36.4
|
%
|
|
|
|
|
|
|
|
|
PATTERSON COMPANIES, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 26,
|
|
|
April 26,
|
|
|
|
2014
|
|
|
2014
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and short term investments
|
|
|
$
|
302,347
|
|
|
$
|
305,683
|
Receivables, net
|
|
|
|
564,458
|
|
|
|
607,580
|
Inventory
|
|
|
|
518,857
|
|
|
|
436,463
|
Prepaid expenses and other current assets
|
|
|
|
59,524
|
|
|
|
65,991
|
Total current assets
|
|
|
|
1,445,186
|
|
|
|
1,415,717
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
214,453
|
|
|
|
204,939
|
Goodwill and other intangible assets
|
|
|
|
1,064,411
|
|
|
|
1,067,583
|
Investments and other
|
|
|
|
175,122
|
|
|
|
176,438
|
|
|
|
|
|
|
|
Total Assets
|
|
|
$
|
2,899,172
|
|
|
$
|
2,864,677
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
388,171
|
|
|
$
|
342,056
|
Other accrued liabilities
|
|
|
|
190,395
|
|
|
|
201,407
|
Total current liabilities
|
|
|
|
578,566
|
|
|
|
543,463
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
725,000
|
|
|
|
725,000
|
Other non-current liabilities
|
|
|
|
123,105
|
|
|
|
124,550
|
Total liabilities
|
|
|
|
1,426,671
|
|
|
|
1,393,013
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
1,472,501
|
|
|
|
1,471,664
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
|
$
|
2,899,172
|
|
|
$
|
2,864,677
|
|
|
|
|
|
|
|
|
PATTERSON COMPANIES, INC.
|
SUPPLEMENTARY FINANCIAL DATA
|
(Dollars in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
July 26,
|
|
|
July 27,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Consolidated Net Sales
|
|
|
|
|
|
|
|
Consumable and printed products
|
|
1
|
|
$
|
796,777
|
|
|
|
$
|
609,949
|
|
Equipment and software
|
|
1
|
|
|
179,429
|
|
|
|
|
196,143
|
|
Other
|
|
|
|
|
83,323
|
|
|
|
|
74,033
|
|
Total
|
|
|
|
$
|
1,059,529
|
|
|
|
$
|
880,125
|
|
|
|
|
|
|
|
|
|
Dental Supply
|
|
|
|
|
|
|
|
Consumable and printed products
|
|
1
|
|
$
|
334,338
|
|
|
|
$
|
328,008
|
|
Equipment and software
|
|
1
|
|
|
148,783
|
|
|
|
|
161,825
|
|
Other
|
|
|
|
|
69,533
|
|
|
|
|
64,400
|
|
Total
|
|
|
|
$
|
552,654
|
|
|
|
$
|
554,233
|
|
|
|
|
|
|
|
|
|
Veterinary Supply
|
|
|
|
|
|
|
|
Consumable and printed products
|
|
|
|
$
|
370,886
|
|
|
|
$
|
188,201
|
|
Equipment and software
|
|
|
|
|
7,611
|
|
|
|
|
8,063
|
|
Other
|
|
|
|
|
7,805
|
|
|
|
|
3,419
|
|
Total
|
|
|
|
$
|
386,302
|
|
|
|
$
|
199,683
|
|
|
|
|
|
|
|
|
|
Rehabilitation Supply
|
|
|
|
|
|
|
|
Consumable and printed products
|
|
|
|
$
|
91,553
|
|
|
|
$
|
93,740
|
|
Equipment and software
|
|
|
|
|
23,035
|
|
|
|
|
26,255
|
|
Other
|
|
|
|
|
5,985
|
|
|
|
|
6,214
|
|
Total
|
|
|
|
$
|
120,573
|
|
|
|
$
|
126,209
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
Dental Supply
|
|
|
|
$
|
53,213
|
|
|
|
$
|
55,490
|
|
Veterinary Supply
|
|
|
|
|
13,987
|
|
|
|
|
9,047
|
|
Rehabilitation Supply
|
|
|
|
|
17,554
|
|
|
|
|
16,744
|
|
|
|
|
|
$
|
84,754
|
|
|
|
$
|
81,281
|
|
|
|
|
|
|
|
|
|
Other (Expense) Income, net
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
$
|
1,561
|
|
|
|
$
|
1,161
|
|
Interest expense
|
|
|
|
|
(8,768
|
)
|
|
|
|
(8,567
|
)
|
Other
|
|
|
|
|
(59
|
)
|
|
|
|
(1,718
|
)
|
|
|
|
|
$
|
(7,266
|
)
|
|
|
$
|
(9,124
|
)
|
|
1 Certain products, primarily dental handpieces, were
reclassed from equipment to consumables in current and prior periods
PATTERSON COMPANIES, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Dollars in thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 26,
|
|
|
July 27,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
50,289
|
|
|
|
$
|
45,892
|
|
Depreciation & amortization
|
|
|
|
11,491
|
|
|
|
|
10,976
|
|
Non-cash employee compensation
|
|
|
|
6,412
|
|
|
|
|
4,462
|
|
Change in assets and liabilities, net of acquired
|
|
|
|
578
|
|
|
|
|
(40,205
|
)
|
Net cash provided by operating activities
|
|
|
|
68,770
|
|
|
|
|
21,125
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
Additions to property and equipment, net of disposals
|
|
|
|
(16,681
|
)
|
|
|
|
(5,564
|
)
|
Proceeds from sale
|
|
|
|
5,594
|
|
|
|
|
-
|
|
Purchase of investments
|
|
|
|
(359
|
)
|
|
|
|
-
|
|
Net Cash used in investing activities
|
|
|
|
(11,446
|
)
|
|
|
|
(5,564
|
)
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
Dividends paid
|
|
|
|
(20,062
|
)
|
|
|
|
(29,773
|
)
|
Share repurchases
|
|
|
|
(42,877
|
)
|
|
|
|
(22,199
|
)
|
Draw on revolver
|
|
|
|
130,000
|
|
|
|
|
135,000
|
|
Payment on revolver
|
|
|
|
(130,000
|
)
|
|
|
|
-
|
|
Retirement of long-term debt
|
|
|
|
-
|
|
|
|
|
-
|
|
Other financing activities
|
|
|
|
(811
|
)
|
|
|
|
1,732
|
|
Net cash provided by (used in) financing activities
|
|
|
|
(63,750
|
)
|
|
|
|
84,760
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
2,258
|
|
|
|
|
(2,180
|
)
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
$
|
(4,168
|
)
|
|
|
$
|
98,141
|
|
|
|
|
|
|
|
|
|
|
|
|
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