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Patterson Companies Reports Improved Fourth Quarter Operating Results
Consolidated fourth quarter sales were consistent with Patterson's expectations. Earnings for this period were affected by a reduced dental gross margin due primarily to under-plan sales of high-margin software.
For full-year fiscal 2007, consolidated sales increased 7% to $2,798,398,000 from $2,615,123,000 in fiscal 2006. Net income of $208,336,000 or $1.51 was up 5% from $198,423,000 or $1.43 per diluted share, in fiscal 2006. Fiscal 2007 earnings included stock compensation expense of approximately $0.05 per diluted share.
Sales of Patterson Dental, Patterson's largest business, reported comparable basis sales growth of approximately 6% to $542,573,000 in the fourth quarter or 4% when Accu-Bite's telemarketing sales are included.
- Sales of consumable dental supplies and printed office products increased approximately 6% on a comparable basis from last year's fourth quarter or 2% on an as-reported basis.
- Total sales of dental equipment increased 4% in the fourth quarter. Sales of basic dental equipment rose a stronger than anticipated 13%, which included a solid contribution from digital radiography systems. As previously forecasted, year-over-year sales of CEREC 3D(R) dental restorative systems declined as some significant product enhancements, introduced at the end of the third quarter, were transitioned into the marketplace .
- Sales of other services and products, consisting primarily of technical service parts and labor, software support services and artificial teeth increased 14% in the fourth quarter.
Sales of the Webster Veterinary unit increased 13% in the fourth quarter of fiscal 2007 to $109,687,000. Sales of Patterson Medical, Patterson's rehabilitation supply and equipment unit, increased 16% in the fourth quarter to $86,883,000 in comparison to the year-earlier level. Excluding the impact of three acquisitions related to the unit's branch office strategy and foreign currency translations, fourth quarter sales of Patterson Medical rose approximately 8%.
James W. Wiltz, president and chief executive officer, commented: "Total dental sales generally met our expectations, paced by solid sales of consumable supplies and a rebound in sales of basic dental equipment. As expected, CEREC sales declined during the process of rolling out several important new enhancements to this product line. New CEREC software results in significantly greater ease of use, while a new optional milling chamber provides for faster crown milling times. Customer interest in CEREC units equipped with these features has been encouraging, and we believe CEREC sales should strengthen in fiscal 2008."
He continued: "Patterson's veterinary business recorded another strong performance in the fourth quarter due to the continued growth of its consumables business and a 60% increase in sales of equipment and IntraVet practice management software. Webster's strategic emphasis on expanding its value-added platform, which encompasses its equipment and software initiatives, is clearly starting to pay dividends. We also are encouraged by Patterson Medical's solid sales growth, which is benefiting from the revenues generated by its branch office strategy and other growth initiatives implemented during the year." /p>
Wiltz added: "Based upon the progress posted by our three businesses in the fourth quarter, we are optimistic about Patterson's prospects for fiscal 2008. We are forecasting earnings of $0.34 to $0.36 per diluted share for the first quarter of fiscal 2008 ending July 28, 2007, and for the full year, we are forecasting earnings of $1.73 to $1.77 per diluted share." 123(R) is included as a table attached to this press release.
Impact of Compensation Expense Under SFAS No. 123(R) 123(R) is included as a table attached to this press release.
Net income and earnings per share excluding the impact of compensation expense under SFAS No. 123(R) are considered non-GAAP financial measures. The company adopted SFAS No. 123(R) on April 30, 2006 using the modified prospective method. Management believes that reporting net income and earnings per share excluding the impact of compensation expense under SFAS No. 123(R) provides useful supplemental information that may enhance investors' overall understanding of the company's current financial performance and may enhance the comparability of results against comparable periods. Net income and earnings per share excluding the impact of SFAS No. 123(R) are used by management internally to measure the company's profitability and performance, but should not be considered as an alternative to, or a substitute for, GAAP financial measures. A reconciliation of net income and earnings per share with and without the impact of SFAS No. 123(R) is included as a table attached to this press release.
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; 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.
Fourth Quarter Conference Call and Replay
Patterson's fourth 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 third quarter conference call can be heard through May 31, 2007 by dialing 1-303-590-3000 and providing the 11090468 confirmation code.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for earnings per share)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------- -----------------------
April 28, April 29, April 28, April 29,
2007 2006 2007 2006
--------- --------- ----------- -----------
Net sales $739,143 $695,177 $2,798,398 $2,615,123
Gross profit 260,563 247,002 968,872 914,429
Operating expenses 164,117 154,876 633,182 591,417
--------- --------- ----------- -----------
Operating income 96,446 92,126 335,690 323,012
Other expense, net (1,038) (1,361) (6,082) (6,039)
--------- --------- ----------- -----------
Income before taxes 95,408 90,765 329,608 316,973
Income taxes 35,484 33,946 121,272 118,548
--------- --------- ----------- -----------
Net income $59,924 $56,819 $208,336 $198,425
========= ========= =========== ===========
Earnings per share:
Basic $0.44 $0.41 $1.52 $1.44
Diluted $0.44 $0.41 $1.51 $1.43
Shares:
Basic 135,695 138,103 136,815 137,690
Diluted 136,612 139,294 137,769 139,234
PATTERSON COMPANIES, INC.
RECONCILIATION OF IMPACT OF SFAS NO. 123(R) ON EARNINGS
AND FINANCIAL RATIOS
(In thousands, except for earnings per share)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------- -------------------
April 28, April 29, April 28, April 29,
2007 2006 2007 2006
--------- --------- --------- ---------
NET INCOME:
GAAP net income $59,924 $56,819 $208,336 $198,425
SFAS No. 123(R) expense,
net of tax 1,476 - 6,253 -
--------- --------- --------- ---------
Non-GAAP net income $61,400 $56,819 $214,589 $198,425
========= ========= ========= =========
DILUTED EARNINGS PER
SHARE:
GAAP diluted earnings per
share $0.44 $0.41 $1.51 $1.43
SFAS No. 123(R) expense,
net of tax 0.01 - 0.05 -
--------- --------- --------- ---------
Non-GAAP diluted earnings
per share $0.45 $0.41 $1.56 $1.43
========= ========= ========= =========
Three Months Ended
--------------------------------------
April 28,
2007 As reported
--------------------------
Excluding SFAS April 29,
As reported No. 123(R) 2006
----------- -------------- -----------
Gross margin 35.2% 35.2% 35.6%
Operating expenses as a % of
net sales 22.2% 21.9% 22.3%
Operating income as a % of net
sales 13.0% 13.3% 13.3%
Effective tax rate 37.2% 36.9% 37.4%
Return on net sales 8.1% 8.3% 8.2%
Twelve Months Ended
--------------------------------------
April 28,
2007 As reported
--------------------------
Excluding SFAS April 29,
As reported No. 123(R) 2006
----------- -------------- -----------
Gross margin 34.6% 34.6% 35.0%
Operating expenses as a % of
net sales 22.6% 22.3% 22.6%
Operating income as a % of net
sales 12.0% 12.3% 12.4%
Effective tax rate 36.8% 36.4% 37.4%
Return on net sales 7.4% 7.7% 7.6%
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
April 28, April 29,
2007 2006
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $241,791 $224,392
Receivables, net 361,401 350,299
Inventory 250,207 244,709
Prepaid expenses and other current assets 33,091 27,974
----------- -----------
Total current assets 886,490 847,374
Property and equipment, net 131,952 141,541
Goodwill and other intangible assets 762,930 764,214
Other 158,948 158,589
----------- -----------
Total Assets $1,940,320 $1,911,718
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $182,761 $173,957
Other accrued liabilities 144,694 145,663
Current maturities of long-term debt 50,014 90,027
----------- -----------
Total current liabilities 377,469 409,647
Long-term debt 130,010 210,014
Other non-current liabilities 53,627 49,536
----------- -----------
Total liabilities 561,106 669,197
Stockholders' equity 1,379,214 1,242,521
----------- -----------
Total Liabilities and Stockholders'
Equity $1,940,320 $1,911,718
=========== ===========
PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------- -----------------------
April 28, April 29, April 28, April 29,
2007 2006 2007 2006
--------- --------- ----------- -----------
Consolidated Net Sales
Consumable and printed
products $462,329 $438,371 $1,757,472 $1,633,544
Equipment and software 218,912 205,081 821,091 789,263
Other 57,902 51,725 219,835 192,316
--------- --------- ----------- -----------
Total $739,143 $695,177 $2,798,398 $2,615,123
========= ========= =========== ===========
Dental Supply
Consumable and printed
products $301,930 $295,057 $1,154,422 $1,092,097
Equipment and software 188,828 182,394 714,343 703,252
Other 51,815 45,483 195,865 171,605
--------- --------- ----------- -----------
Total $542,573 $522,934 $2,064,630 $1,966,954
========= ========= =========== ===========
Rehabilitation Supply
Consumable and printed
products $61,328 $53,720 $241,112 $219,080
Equipment 21,473 17,308 77,252 68,618
Other 4,082 3,888 15,978 14,323
--------- --------- ----------- -----------
Total $86,883 $74,916 $334,342 $302,021
========= ========= =========== ===========
Veterinary Supply
Consumable and printed
products $99,071 $89,594 $361,938 $322,367
Equipment and software 8,611 5,379 29,496 17,393
Other 2,005 2,354 7,992 6,388
--------- --------- ----------- -----------
Total $109,687 $97,327 $399,426 $346,148
========= ========= =========== ===========
Other (Expense) Income, net
Interest income $2,135 $1,700 $8,070 $6,381
Interest expense (3,228) (3,719) (14,230) (13,375)
Other 55 658 78 955
--------- --------- ----------- -----------
$(1,038) $(1,361) $(6,082) $(6,039)
========= ========= =========== ===========
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Twelve Months Ended
-------------------
April 28, April 29,
2007 2006
--------- ---------
Operating activities:
Net income $208,336 $198,425
Depreciation & amortization 25,501 23,676
Share-based compensation 7,757 750
Change in assets and liabilities, net of
acquired 1,911 (58,893)
--------- ---------
Net cash provided by operating activities 243,505 163,958
Investing activities:
Additions to property and equipment, net of
disposals (19,507) (49,153)
Proceeds from disposals of property and
equipment 9,163 -
Acquisitions (12,665) (39,228)
Distribution agreement - (100,000)
Sale of investments, net - 13,382
--------- ---------
Net cash used in investing activities (23,009) (174,999)
Net cash (used in) provided by financing
activities (203,097) 2,884
--------- ---------
Net increase (decrease) in cash and cash
equivalents $17,399 $(8,157)
========= =========
SOURCE: Patterson Companies, Inc.
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