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Patterson Companies Reports Improved First Quarter Sales and Earnings
Comparable basis sales exclude the impact of an extra week in thefirst quarter of fiscal 2005. The extra week affected theyear-over-year sales growth by an estimated six to seven percentagepoints. Reported sales in last year's first quarter totaled$577,943,000. Net income for the first quarter of fiscal 2006 came to$42,882,000 or $0.31 per diluted share, an increase of 5% from$40,815,000 or $0.29 per diluted share in the first quarter of fiscal2005.
Patterson Dental, Patterson's largest business, reportedcomparable basis sales growth of approximately 7% to $432,056,000 inthe first quarter. Substantially all of this growth was internallygenerated.
- Sales of consumable dental supplies and printed office products increased an estimated 8% on a comparable basis in the first quarter. Patterson Dental's sales force totaled approximately 1,460 at July 30.
- Sales of dental equipment and software rose 4% on an actual basis in the first quarter, driven by sales of CEREC® 3D dental restorative systems and digital radiography equipment and related software. Although the additional week in last year's first quarter had some effect on year-over-year equipment sales growth, it is difficult to measure this impact. As a result, Patterson does not estimate the impact of an additional week on equipment sales.
- Sales of other services and products, consisting primarily of parts, technical service, software support, and insurance e-claims increased 12% on a comparable basis in the first quarter.
Sales of the Webster Veterinary unit increased approximately 9% inthe first quarter of fiscal 2006 to $85,241,000 on a comparable basis.The positive impact of the October 2004 acquisition of MilburnDistributions on Webster's first quarter sales was largely offset bythe loss of revenues related to two factors: the decision by themanufacturer of ProHeart 6® to voluntarily recall this product inlast year's third quarter and the impact of the extra week in lastyear's first quarter.
Sales of Patterson Medical, the Company's rehabilitation supplyand equipment unit, increased 9% in the first quarter of fiscal 2006to $78,550,000 on a comparable basis, which excludes the impact of theadditional week in last year's first quarter.
James W. Wiltz, president and chief executive officer, commented:"Regarding our dental business, we are encouraged by the continuedstrong sales growth of dental consumable supplies and ongoing demandfor new-technology CEREC and digital radiography equipment. However,our overall performance in this year's first quarter was affected bythe below-plan growth of basic dental equipment, including chairs,lights and units. We have experienced such quarterly fluctuations inthe past, and as we have stated in the past, sales of dental equipmentcan be uneven from quarter to quarter, reflecting the long lead timesgenerally involved with these significant capital expenditures. Webelieve the willingness of dentists to invest in dental equipmentremains strong, based on the need for new equipment that strengthensproductivity, improves clinical outcomes and provides dental officeswith a state-of-the-art appearance. Our industry-leading position inthe dental equipment market was further strengthened in the firstquarter with the extension through 2017 of our exclusive NorthAmerican distribution agreement with Sirona Dental Systems GmbH forCEREC systems. In addition, we extended our exclusive North Americandistribution agreement through 2007 with Schick Technologies, Inc.(OTCBB:SCHK) for Schick's complete line of CDR® digital dentalproducts, which are used in the majority of all digital x-rayinstallations in the U.S. and Canada."
He continued: "Our Webster Veterinary and Patterson Medical unitsposted solid first quarter results after accounting for the impact ofthe extra week in the prior year's quarter. Webster is benefiting fromits strategy of expanding its national footprint through strategicacquisitions and internal expansion. As part of this effort, Webster'sentry into the large California market through internal efforts isproceeding as planned. Webster's first quarter results also benefitedfrom sales of Rimadyl®, a companion-pet pain relief drug, through anew distribution agreement with Pfizer. Patterson Medical's firstquarter sales performance benefited from the growth of its sportsmedicine product line, which was strengthened by its acquisition ofMedco in May 2004."
Wiltz added: "We continue to see fiscal 2006 unfolding as a goodyear for Patterson. Reflecting their significant market positions,each of our businesses is positioned to continue capitalizing upongrowth opportunities. For this reason, we feel good about Patterson'sfuture."
For the second quarter of fiscal 2006 ending October 29, Pattersonis forecasting earnings of $0.35 to $0.37 per diluted share.
About Patterson Companies, Inc.
Patterson Companies, Inc. is a value-added distributor serving thedental, companion-pet veterinarian and rehabilitation supply markets.
Dental Market
As Patterson's largest business, Patterson Dental provides avirtually complete range of consumable dental products, equipment andsoftware, turnkey digital solutions and value-added services todentists and dental laboratories throughout North America.
Veterinary Market
Webster Veterinary is the nation's second largest distributor ofconsumable veterinary supplies, equipment, diagnostic products,vaccines and pharmaceuticals to companion-pet veterinary clinics.
Rehabilitation Market
Patterson Medical is the world's leading distributor ofrehabilitation supplies and non-wheelchair assistive patient productsto the physical and occupational therapy markets. The unit's globalcustomer base includes hospitals, long-term care facilities, clinicsand dealers.
This release contains forward-looking statements as defined in thePrivate Securities Litigation Reform Act of 1995. Forward-lookingstatements are information of a non-historical nature and are subjectto risks and uncertainties that are beyond the Company's ability tocontrol. The Company cautions shareholders and prospective investorsthat the following factors, among others, may cause actual results todiffer materially from those indicated by the forward-lookingstatements: competition within the dental, veterinary, andrehabilitative and assistive living supply industries; changes in theeconomics of dentistry, including reduced growth in expenditures byprivate dental insurance plans, the effects of economic conditions andthe effects of healthcare reform, which may affect future per capitaexpenditures for dental services and the ability and willingness ofdentists to invest in high-technology products; the effects ofhealthcare related legislation and regulation which may affectexpenditures or reimbursements for rehabilitative and assistiveproducts; changes in the economics of the veterinary supply market,including reduced growth in per capita expenditures for veterinaryservices and reduced growth in the number of households owning pets;the ability of the Company to maintain satisfactory relationships withits sales force; unforeseen operating risks; risks associated with thedependence on manufacturers of the Company's products; and the abilityof the Company to successfully integrate the recent acquisitions intoits existing business. Forward-looking statements are qualified intheir entirety by the cautionary language set forth in the Company'sfilings with the Securities and Exchange Commission.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for earnings per share)
(Unaudited)
Three Months Ended
---------------------------
July 30, July 31,
2005 2004
------------- -------------
Net sales $595,847 $577,943
Gross profit 207,244 203,969
Operating expenses 137,730 136,367
------------- -------------
Operating income 69,514 67,602
Other expense, net (1,012) (2,396)
------------- -------------
Income before taxes 68,502 65,206
Income taxes 25,620 24,391
------------- -------------
Net income $42,882 $40,815
============= =============
Earnings per share:
Basic $0.31 $0.30
Diluted $0.31 $0.29
Shares:
Basic 137,309 136,522
Diluted 139,117 138,608
Gross margin 34.8% 35.3%
Operating expenses as a % of net sales 23.1% 23.6%
Operating income as a % of net sales 11.7% 11.7%
Effective tax rate 37.4% 37.4%
Return on net sales 7.2% 7.1%
PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended
-------------------------
July 30, July 31,
2005 2004
------------ ------------
Consolidated Net Sales
Consumable and printed products $400,340 $389,863
Equipment and software 150,063 144,984
Other 45,444 43,096
------------ ------------
Total $595,847 $577,943
============ ============
Dental Supply
Consumable and printed products $251,730 $253,127
Equipment and software 139,512 134,085
Other 40,814 38,405
------------ ------------
Total $432,056 $425,617
============ ============
Rehabilitation Supply
Consumable and printed products $67,657 $65,529
Equipment 7,530 8,257
Other 3,363 3,459
------------ ------------
Total $78,550 $77,245
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Veterinary Supply
Consumable and printed products $80,953 $71,207
Equipment 3,021 2,642
Other 1,267 1,232
------------ ------------
Total $85,241 $75,081
============ ============
Other (Expense) Income, net
Interest income $2,096 $1,321
Interest expense (3,077) (3,758)
Other (31) 41
------------ ------------
$(1,012) $(2,396)
============ ============
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
July 30, April 30,
2005 2005
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $155,226 $245,931
Receivables, net 305,824 317,168
Inventory 225,776 206,405
Prepaid expenses and other current assets 32,182 30,533
----------- -----------
Total current assets 719,008 800,037
Property and equipment, net 109,826 97,178
Goodwill and other intangible assets 744,648 746,079
Other 145,719 42,007
----------- -----------
Total Assets $1,719,201 $1,685,301
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $147,696 $160,954
Other accrued liabilities 144,902 141,307
Current maturities of long-term debt 20,027 20,027
----------- -----------
Total current liabilities 312,625 322,288
Long-term debt 296,523 301,530
Other non-current liabilities 50,244 46,411
----------- -----------
Total liabilities 659,392 670,229
Stockholders' equity 1,059,809 1,015,072
----------- -----------
Total Liabilities and Stockholders'
Equity $1,719,201 $1,685,301
=========== ===========
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
---------------------
July 30, July 31,
2005 2004
---------- ----------
Operating activities:
Net income $42,882 $40,815
Depreciation & amortization 5,279 6,449
Stock-based compensation 200 -
Change in assets and liabilities, net of
acquired (19,196) 18,207
---------- ----------
Net cash provided by operating activities 29,165 65,471
Investing activities:
Additions to property and equipment, net (16,295) (8,100)
Acquisitions - (52,856)
Distribution agreement (100,000) -
Sale (purchase) of investments, net 3,360 (1,939)
---------- ----------
Net cash used in investing activities (112,935) (62,895)
Net cash used in financing activities (3,575) (1,438)
---------- ----------
Net (decrease) increase in cash and cash
equivalents $(87,345) $1,138
========== ==========
SOURCE: Patterson Companies, Inc.
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