Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $814,951,000 for the second quarter of fiscal 2010 ended October 24, an increase of 7% from $759,461,000 in the year-earlier quarter. Acquisitions transacted over the past 12 months accounted for a substantial portion of the second quarter sales growth, while the impact of foreign currency adjustments was minimal. Net income of $49,343,000 or $.41 per diluted share rose 5% from $46,903,000 or $0.40 per diluted share in the second quarter of fiscal 2009.
Sales of Patterson Dental Supply, Patterson’s largest business, were $537,167,000 in the second quarter, virtually unchanged from $536,837,000 in the year-earlier period.
- Sales of consumable dental supplies and printed office products were down 2% from last year’s second quarter.
- Sales of dental equipment and software increased 3% from the year-earlier level. Within this product category, sales of CEREC® dental restorative systems rose 45%, which offset a 7% decline in sales of basic equipment, including chairs, units and lights.
- Sales of other services and products, consisting primarily of technical service parts and labor, software support services and artificial teeth, rose 4% from last year’s second quarter.
Sales of the Webster Veterinary unit increased 30% in the second quarter of fiscal 2010 to $160,654,000. Internal growth accounted for 8% of this increase, while the October 2008 acquisition of Columbus Serum Company accounted for the balance. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, increased 18% to $117,130,000. Internal sales were up 5%, with acquisitions accounting for the balance: Mobilis Healthcare Group in April 2009 and Empi Therapy Solutions, a unit of DJO Incorporated, in June 2009.
James W. Wiltz, president and chief executive officer, commented: “We are generally pleased with Patterson’s second quarter performance as our businesses held up relatively well despite the ongoing impact of the recession. Within our Patterson Dental unit, the market for consumable supplies has been affected by high unemployment levels, but our sales of these products have remained generally stable during the first half of fiscal 2010. At the same time, we believe the weak economy has been causing many dental practitioners to focus their investment dollars on equipment with rapid and high rates of return. This consideration helps explain the strong growth of CEREC dental restorative products thus far in fiscal 2010 and why sales of basic equipment have tended to lag. CEREC sales also are benefiting from the steadily growing market acceptance of this new-technology equipment. The unequalled performance of CEREC has made it the industry leader by a considerable margin in the category of CAD/CAM dental equipment. We also believe CEREC is the most viable choice for dentists purchasing this type of equipment.”
He continued: “Sales of our Webster unit were consistent with forecasted levels in the second quarter from the standpoint of both internally-generated growth and the impact of the Columbus Serum acquisition. Webster’s large consumable supply business benefited from higher volumes of veterinary care for companion-pets during this period. However, equipment sales remained soft as many veterinary practices remained cautious about purchasing equipment. Webster is continuing to remove costs from the Columbus Serum acquisition, and this process will be largely completed in the third quarter.”
Wiltz added: “Patterson Medical’s performance exceeded our expectations in the second quarter. We believe this unit gained market share in this period and that the overall rehabilitation market started firming during the quarter. The assimilation of the acquisitions is proceeding on schedule, and equally encouraging, more business from these acquired units has been retained than we initially planned.”
Patterson’s second quarter earnings also benefited from cost control measures that have been implemented in recent periods, including the company-wide salary reductions enacted in this year’s first quarter. In addition, Patterson is continuing to generate substantial operating cash flows, which are ample for supporting the various growth initiatives currently underway.
Patterson is maintaining its earnings guidance of $1.70 to $1.80 per diluted share for full-year fiscal 2010.
As previously reported, Mr. Wiltz will retire as president and chief executive officer of Patterson Companies at the end of the current fiscal year on April 24, 2010. The Board of Directors named Scott P. Anderson, currently president of the Patterson Dental Supply subsidiary, as Mr. Wiltz’s successor.
In a related move, Paul A. Guggenheim, currently southwest region manager of Patterson Dental, will become president of Patterson Dental at the end of fiscal 2010. Mr. Guggenheim joined Patterson in 2000 following Patterson Dental’s acquisition of Guggenheim Brothers Dental Supply. He has worked in the dental industry for over 25 years and is former chairman of the American Dental Trade Association (now the Dental Trade Alliance.) He also is past president of the Dental Dealers of America and former chairman of the American Dental Cooperative.
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
Webster Veterinary is the nation’s second largest 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.
Second Quarter Conference Call and Replay
Patterson’s second quarter earnings conference call will start at 10:00 a.m. Eastern today. Investors can listen to a live webcast of the conference call at www.pattersoncompanies.com. Listeners should go to this website at least 15 minutes prior to the call to download and install any necessary audio software. The conference call will be archived on Patterson’s web site. A replay of the second quarter conference call can be heard through November 26, 2009 at 1-303-590-3030 with the 4182657 Conference ID.
| PATTERSON COMPANIES, INC. | ||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||
| (In thousands, except for earnings per share) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| October 24, | October 25, | October 24, | October 25, | |||||||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||
| Net sales | $ | 814,951 | $ | 759,461 | $ | 1,604,530 | $ | 1,503,320 | ||||||||||||||||
| Gross profit | 266,537 | 253,575 | 525,221 | 505,305 | ||||||||||||||||||||
| Operating expenses | 182,051 | 170,973 | 363,945 | 343,109 | ||||||||||||||||||||
| Operating income | 84,486 | 82,602 | 161,276 | 162,196 | ||||||||||||||||||||
| Other expense, net | (3,760 | ) | (7,514 | ) | (8,118 | ) | (13,426 | ) | ||||||||||||||||
| Income before taxes | 80,726 | 75,088 | 153,158 | 148,770 | ||||||||||||||||||||
| Income taxes | 31,383 | 28,185 | 58,758 | 55,903 | ||||||||||||||||||||
| Net income | $ | 49,343 | $ | 46,903 | $ | 94,400 | $ | 92,867 | ||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||
| Basic | $ | 0.42 | $ | 0.40 | $ | 0.80 | $ | 0.79 | ||||||||||||||||
| Diluted | $ | 0.41 | $ | 0.40 | $ | 0.79 | $ | 0.78 | ||||||||||||||||
| Shares: | ||||||||||||||||||||||||
| Basic | 118,336 | 117,421 | 118,228 | 117,656 | ||||||||||||||||||||
| Diluted | 119,216 | 118,328 | 118,929 | 118,520 | ||||||||||||||||||||
| Gross margin | 32.7 | % | 33.4 | % | 32.7 | % | 33.6 | % | ||||||||||||||||
| Operating expenses as a % of net sales | 22.3 | % | 22.5 | % | 22.7 | % | 22.8 | % | ||||||||||||||||
| Operating income as a % of net sales | 10.4 | % | 10.9 | % | 10.1 | % | 10.8 | % | ||||||||||||||||
| Effective tax rate | 38.9 | % | 37.5 | % | 38.4 | % | 37.6 | % | ||||||||||||||||
| PATTERSON COMPANIES, INC. | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| (Dollars in thousands) | |||||||||||
| October 24, | April 25, | ||||||||||
| 2009 | 2009 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and short-term investments | $ | 170,151 | $ | 158,065 | |||||||
| Receivables, net | 503,162 | 476,156 | |||||||||
| Inventory | 294,646 | 269,934 | |||||||||
| Prepaid expenses and other current assets | 44,343 | 33,440 | |||||||||
| Total current assets | 1,012,302 | 937,595 | |||||||||
| Property and equipment, net | 170,561 | 166,500 | |||||||||
| Goodwill and other intangible assets | 997,121 | 968,036 | |||||||||
| Other | 74,149 | 61,489 | |||||||||
| Total Assets | $ | 2,254,133 | $ | 2,133,620 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 174,061 | $ | 180,933 | |||||||
| Other accrued liabilities | 139,578 | 131,367 | |||||||||
| Current maturities of long-term debt | - | 22,000 | |||||||||
| Total current liabilities | 313,639 | 334,300 | |||||||||
| Long-term debt | 525,000 | 525,000 | |||||||||
| Other non-current liabilities | 96,391 | 88,000 | |||||||||
| Total liabilities | 935,030 | 947,300 | |||||||||
| Stockholders' equity | 1,319,103 | 1,186,320 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,254,133 | $ | 2,133,620 | |||||||
| PATTERSON COMPANIES, INC. | |||||||||||||||||||||||||
| SUPPLEMENTARY FINANCIAL DATA | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
| October 24, | October 25, | October 24, | October 25, | ||||||||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||||||||||||
| Consolidated Net Sales | |||||||||||||||||||||||||
| Consumable and printed products | $ | 538,653 | $ | 493,731 | $ | 1,085,393 | $ | 991,914 | |||||||||||||||||
| Equipment and software | 210,001 | 200,966 | 387,655 | 382,258 | |||||||||||||||||||||
| Other | 66,297 | 64,764 | 131,482 | 129,148 | |||||||||||||||||||||
| Total | $ | 814,951 | $ | 759,461 | $ | 1,604,530 | $ | 1,503,320 | |||||||||||||||||
| Dental Supply | |||||||||||||||||||||||||
| Consumable and printed products | $ | 303,525 | $ | 309,679 | $ | 609,093 | $ | 622,272 | |||||||||||||||||
| Equipment and software | 175,059 | 170,642 | 322,746 | 321,007 | |||||||||||||||||||||
| Other | 58,583 | 56,516 | 116,319 | 113,443 | |||||||||||||||||||||
| Total | $ | 537,167 | $ | 536,837 | $ | 1,048,158 | $ | 1,056,722 | |||||||||||||||||
| Rehabilitation Supply | |||||||||||||||||||||||||
| Consumable and printed products | $ | 82,897 | $ | 68,819 | $ | 163,245 | $ | 139,192 | |||||||||||||||||
| Equipment and software | 27,985 | 24,393 | 51,425 | 49,186 | |||||||||||||||||||||
| Other | 6,248 | 5,823 | 11,867 | 11,357 | |||||||||||||||||||||
| Total | $ | 117,130 | $ | 99,035 | $ | 226,537 | $ | 199,735 | |||||||||||||||||
| Veterinary Supply | |||||||||||||||||||||||||
| Consumable and printed products | $ | 152,231 | $ | 115,233 | $ | 313,055 | $ | 230,450 | |||||||||||||||||
| Equipment and software | 6,957 | 5,931 | 13,484 | 12,065 | |||||||||||||||||||||
| Other | 1,466 | 2,425 | 3,296 | 4,348 | |||||||||||||||||||||
| Total | $ | 160,654 | $ | 123,589 | $ | 329,835 | $ | 246,863 | |||||||||||||||||
| Other (Expense) Income, net | |||||||||||||||||||||||||
| Interest income | $ | 1,909 | $ | 1,870 | $ | 4,369 | $ | 3,792 | |||||||||||||||||
| Interest expense | (6,358 | ) | (8,183 | ) | (12,977 | ) | (16,235 | ) | |||||||||||||||||
| Other | 689 | (1,201 | ) | 490 | (983 | ) | |||||||||||||||||||
| $ | (3,760 | ) | $ | (7,514 | ) | $ | (8,118 | ) | $ | (13,426 | ) | ||||||||||||||
| PATTERSON COMPANIES, INC. | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
| (Dollars in thousands) | |||||||||||||
| (Unaudited) | |||||||||||||
| Six Months Ended | |||||||||||||
| October 24, | October 25, | ||||||||||||
| 2009 | 2008 | ||||||||||||
| Operating activities: | |||||||||||||
| Net income | $ | 94,400 | $ | 92,867 | |||||||||
| Depreciation & amortization | 18,669 | 13,864 | |||||||||||
| Share-based compensation | 4,397 | 3,938 | |||||||||||
| Change in assets and liabilities, net of acquired | (62,014 | ) | (52,839 | ) | |||||||||
| Net cash provided by operating activities | 55,452 | 57,830 | |||||||||||
| Investing activities: | |||||||||||||
| Additions to property and equipment, net of disposals | (13,133 | ) | (17,495 | ) | |||||||||
| Acquisitions | (28,151 | ) | (69,877 | ) | |||||||||
| Net cash used in investing activities | (41,284 | ) | (87,372 | ) | |||||||||
| Net cash (used in) provided by financing activities | (16,125 | ) | 5,650 | ||||||||||
| Effect of exchange rate changes on cash | 14,043 | (27,629 | ) | ||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 12,086 | $ | (51,521 | ) | ||||||||
Contacts:
R. Stephen Armstrong, 651-686-1600
Executive
Vice President & CFO
or
Richard G. Cinquina, 904-415-1415
Equity
Market Partners