- Sales from continuing operations
totaled $1.1 billion, up 24 percent on a constant currency basis,
reflecting the contribution from recently acquired Animal Health
International, Inc.
- Adjusted earnings per diluted share
from continuing operations1 totaled $0.47. This
excludes earnings per share from discontinued operations of
$0.10.
- Supported by stable-to-steadily
improving consumables sales, dental segment sales rose 7 percent on
a constant currency basis.
- Animal Health segment sales up 48
percent in constant currency, with $171.9 million from Animal
Health International.
- Company updates adjusted earnings
guidance for fiscal 2016 to $2.40 to $2.50 per share.
Patterson Companies, Inc. (Nasdaq:PDCO) today reported
consolidated sales from continuing operations of $1.1 billion (see
attached Sales Summary for further details) in its fiscal first
quarter ended August 1, 2015, up 22 percent over the same period
last year. Sales in the fiscal 2016 period reflect a contribution
from recently acquired Animal Health International, Inc. and an
extra week of results versus the prior year.
Adjusted net income from continuing operations1, which reflects
the adjustments to exclude certain non-recurring costs and
amortization of deal costs, was $46.9 million for the first quarter
of 2016, a 17 percent increase over $40.2 million in the same
quarter last year. Adjusted diluted earnings per share from
continuing operations1 was $0.47 in the 2016 first quarter, an 18
percent year-over-year increase. The company reported GAAP net
income from continuing operations of $20.3 million, or $0.20 per
diluted share, compared to $38.3 million, or $0.38 per share, in
last year’s fiscal first quarter.
“The past several months have been a particularly exciting time
for Patterson Companies as we move forward with our efforts to
transform the long-term growth profile of our business,” said Scott
Anderson, chairman and chief executive officer. “During the
quarter, we began the process of unifying Animal Health
International with our legacy veterinary operations and moved
forward with the sale of non-core Patterson Medical. Our
performance was in line with our internal plan and we remain
confident in both the market opportunities we face and our ability
to capitalize on them.”
Patterson DentalSales for Patterson Dental, which
accounts for approximately 50 percent of total sales, rose to
$575.1 million, up 2.2 percent on a constant currency basis and
excluding the extra week, from the same quarter last year. Also, on
that same basis, sales by category versus the prior-year quarter
were as follows:
- Consumable dental supplies were up 3.8
percent
- Technology sales, led by CEREC,
increased overall; however, dental equipment and software declined
1.9 percent. The extra week had little impact on equipment sales
due to factors such as the time from order to installation, which
can span several months
- Other services and products, consisting
primarily of technical service, parts and labor, software support
services and office supplies, climbed 3.5 percent
Commented Anderson, “During the quarter, we saw sustained growth
in the consumables category, which reinforces our confidence in
stable-to-steadily improving dynamics in the dental market. We are
also encouraged by the rise in CEREC sales during the quarter,
especially among new users. Further, we invested in sales training
during the period related to new core-equipment offerings and we
expect these efforts to pay off in quarters ahead. Patterson Dental
is well-positioned as we move into fiscal 2016.”
Patterson Animal HealthSales for Patterson Animal Health,
which comprises approximately 49 percent of sales, totaled $557.3
million, up 48 percent on a constant currency basis. Sales from
recently acquired Animal Health International contributed $171.9
million during the quarter. Excluding the acquisition, segment
sales were up over 3 percent on a constant currency basis, with
U.S. consumables up roughly 5 percent organically, partially offset
by a milder flea and tick season in the U.K., which resulted in a
tough comparison to last year.
Anderson continued, “Patterson Animal Health demonstrated solid
organic growth in the U.S., with stability in companion-animal
consumables. Animal Health International’s contributions to the
segment were in line with our expectations. This acquisition
doubles the size of our animal health business. It broadens our
capabilities to include the production animal market and will
strengthen our scale and market position. Finally, it provides
significant opportunities for synergies.”
Discontinued OperationsOn July 1, 2015, Patterson
Companies announced a definitive agreement to sell Patterson
Medical to Madison Dearborn Partners for gross proceeds of
approximately $715 million in cash. The sale is expected to close
in the fiscal second quarter, following the satisfaction of
regulatory requirements and other customary closing conditions.
As a result of the definitive agreement, results of Patterson
Medical are classified and reported as discontinued operations in
all periods beginning with the fiscal 2016 first quarter. During
the fiscal 2016 first quarter, sales from discontinued operations
totaled $130.8 million and earnings per share totaled $0.10, which
includes transaction-related costs.
Cash RepatriationPatterson Companies is repatriating
approximately $200 million in foreign cash from both the Patterson
Medical group and Patterson Dental Canada. Performing all of these
repatriations within the same fiscal year will allow Patterson
Companies to gain income tax efficiencies in the range of $15
million to $20 million. The full tax impact of the repatriation has
been recorded in the first quarter of fiscal 2016 and was
approximately $12 million.
DividendsIn the fiscal 2016 first quarter, the company
paid $23.1 million in cash dividends to shareholders. Currently,
the company is allowed to repurchase approximately 21 million
shares.
Business OutlookAnderson concluded, “The transformation
of Patterson Companies into a company focused on two synergistic
businesses – dental and animal health – is off to a solid start. As
we move into the new fiscal year, we are executing on the array of
growth opportunities before us and gaining efficiencies from the
acquisition of Animal Health International, all while sustaining
our commitment to industry-leading customer service. We are
updating our adjusted fiscal 2016 earnings guidance to a
continuing-operations basis. Excluding the contribution from the
discontinued Medical business, Patterson’s prior adjusted guidance
range – on a continued-operations basis – would have been $1.98 to
$2.06 per share. With the June closing of the Animal Health
International transaction, the company will include 10.5 months of
results from these operations during fiscal 2016. This increases
the adjusted earnings guidance range on a continuing operations
basis to $2.40 to $2.50 per diluted share."
The fiscal 2016 annual financial outlook and adjusted earnings
guidance:
- Assumes stable North American and
international markets – conditions similar to fiscal 2015
- Includes the impact of an extra week in
fiscal 2016 compared to the previous year
- Excludes transaction-related costs,
integration expense and deal amortization, non-recurring IT
initiative training costs and cash repatriation (See First Quarter
Reconciliation table below)
- Excludes the discontinued operations
for Medical
1First Quarter ReconciliationThe following
non-GAAP table is provided to adjust reported net income and
earnings per share for the impact of one-time costs, current and
prior deal-amortization costs and impact of repatriation of cash.
Management believes that the adjusted income amounts may provide a
helpful representation of the company’s current quarter
performance.
(Dollars in thousands, except EPS)
Three Months Ended August 1, 2015
July 26,
2014
Net Income from Continuing Operations - Reported $ 20,311 $ 38,325
Transaction-Related Costs 9,302 - Deal Amortization 4,612 1,920
Integration Expense 726 - Non-Recurring IT Training Costs 145 - Tax
Impact of Repatriation of Cash 11,800 - Net Income
from Continuing Operations - Adjusted $ 46,896 $ 40,245
Diluted Earnings Per Share from Continuing Operations - Reported $
0.20 $ 0.38 Transaction-Related Costs 0.09 - Deal Amortization 0.05
0.02 Integration Expense 0.01 - Non-Recurring IT Training Costs
0.00 - Tax Impact of Repatriation of Cash 0.12 -
Diluted Earnings Per Share from Continuing Operations - Adjusted $
0.47 $ 0.40
First Quarter Conference Call and ReplayPatterson’s first
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 Patterson’s website. A replay of the first quarter
conference call can be heard for one week at 888-203-1112 and by
providing the Conference ID 8937222, when prompted.
About Patterson Companies, Inc.Patterson Companies, Inc.
is a value-added distributor serving the dental and animal health
markets.Dental MarketPatterson 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.Animal Health MarketPatterson
Animal Health, formerly Patterson Veterinary, is a leading,
full-line distributor in North America and the U.K. of animal
health products, services and technologies to both the
production-animal and companion-pet markets.
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. Similarly, statements that describe
the pending disposition of Patterson Medical, including its
financial impact, and other statements of management's beliefs,
intentions or goals also are forward-looking statements. 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 the divested companies 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,
including but not limited to the ability of the parties to
consummate the transaction and the satisfaction of the conditions
precedent to consummation of the transaction, including the ability
to secure regulatory approvals at all or in a timely manner 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) (Unaudited)
Three Months
Ended
August 1, July 26, 2015 2014 Net
sales $ 1,142,870 $ 938,956 Gross profit 288,244 250,617
Operating expenses 226,067 184,621
Operating income from continuing operations 62,177
65,996 Other expense, net (11,473 ) (7,398 )
Income from continuing operations before taxes 50,704 58,598
Income taxes 30,393 20,273
Net income from continuing operations 20,311 38,325 Net
income from discontinued operations 9,392
11,964 Net income $ 29,703 $ 50,289
Basic earnings per share: Continuing operations $ 0.20 $ 0.39
Discontinued operations 0.10 0.12 Net
basic earnings per share $ 0.30 $ 0.51 Diluted
earnings per share: Continuing operations $ 0.20 $ 0.38
Discontinued operations 0.10 0.12 Net
diluted earnings per share $ 0.30 $ 0.50
Shares: Basic 99,436 99,329 Diluted 100,162 100,182
Dividends declared per common share $ 0.22 $ 0.20 Gross
margin - reported 25.2 % 26.7 % Operating expenses as a % of
net sales - adjusted 18.0 % 19.4 % Adjustments1 1.8
0.3 Operating expenses as a % of net sales - reported
19.8 % 19.7 % Operating income as a % of net sales -
adjusted 7.2 % 7.3 % Adjustments1 (1.8 ) (0.3 )
Operating income as a % of net sales - reported 5.4 % 7.0 %
Effective tax rate - adjusted 34.4 % 34.4 % Adjustments1
25.5 0.2 Effective tax rate - reported 59.9 %
34.6 %
1 Refer to the press release for the
definition of adjustments to reported results
PATTERSON COMPANIES, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands)
August 1,
April
25,
2015 2015 (Unaudited) ASSETS Current
assets: Cash and short-term investments $ 236,091 $ 400,632
Receivables 624,340 586,263 Inventory 716,707 408,422 Prepaid
expenses and other current assets 94,358 59,561 Current assets held
for sale 130,306 118,347 Total current assets
1,801,802 1,573,225 Property and equipment, net 258,964 204,133
Goodwill and other intangible assets 1,368,818 424,949 Investments
and other 173,314 109,605 Long-term assets held for sale
636,756 635,794 Total assets $ 4,239,654 $ 2,947,706
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 456,259 $ 323,294 Other accrued liabilities
198,353 215,075 Current liabilities held for sale 39,523
39,316 Total current liabilities 694,135 577,685 Long-term
debt 1,725,000 725,000 Other non-current liabilities 257,277 81,484
Long-term liabilities held for sale
49,189 49,414 Total liabilities 2,725,601 1,433,583
Stockholders' equity 1,514,053 1,514,123 Total
liabilities and stockholders' equity $ 4,239,654 $ 2,947,706
PATTERSON COMPANIES, INC. SALES SUMMARY
(Dollars in thousands) (Unaudited)
Total
Foreign Animal Health August 1,
July
26,
Sales
Exchange
International
Internal
2015 2014
Growth
Impact Impact Growth
Three Months
Ended
Consolidated net sales Consumable and printed products1 $
895,307 $ 695,639 28.7 % (2.7 ) % 24.6 % 6.8 % Equipment and
software 153,483 156,394 (1.9 ) (1.5 ) - (0.4 ) Other1
94,080 86,923 8.2 (1.4 ) 0.5 9.1 Total $
1,142,870 $ 938,956 21.7 % (2.4 ) % 18.3 % 5.8 %
Dental Consumable and printed products1 $ 358,052 $ 325,290
10.1 % (1.5 ) % - % 11.6 % Equipment and software 143,670 148,783
(3.4 ) (1.5 ) - (1.9 ) Other1 73,395 68,801 6.7
(1.1 ) - 7.8 Total $ 575,117 $ 542,874 5.9 %
(1.5 ) % - % 7.4 % Animal Health Consumable and
printed products1 $ 537,255 $ 370,349 45.1 % (3.7 ) % 46.3 % 2.5 %
Equipment and software 9,813 7,611 28.9 (0.2 ) - 29.1 Other1
10,229 8,340 22.6 (5.1 ) 5.6 22.1 Total $
557,297 $ 386,300 44.3 % (3.6 ) % 44.5 % 3.4 %
Corporate Other1 $ 10,456 $ 9,782 6.9 % - % - % 6.9
% Total $ 10,456 $ 9,782 6.9 % - % - % 6.9
% 1 Certain sales were reclassified from consumable
to other in current and prior periods
PATTERSON
COMPANIES, INC. SUPPLEMENTARY FINANCIAL DATA (In
thousands, except per share data) (Unaudited)
Three Months Ended August 1,
July
26,
2015 2014 Operating income (loss) Dental $
67,252 $ 62,549 Animal Health 12,972 13,987 Corporate
(18,047 ) (10,540 ) $ 62,177 $ 65,996
Other (expense) income, net Interest income $ 789 $ 1,250 Interest
expense (12,143 ) (8,768 ) Other (119 ) 120 $
(11,473 ) $ (7,398 )
Twelve Three Months
Ended Months Ended July 26, October 25,
January 24,
April
25,
April 25, 2014 2014 2015 2015
2015 Net income from continuing operations - reported
$ 38,325 $ 41,865 $ 46,434 $ 53,459 $ 180,083 Transaction-related
costs - - - 928 928 Deal amortization 1,920
1,917 1,930 1,954 7,721 Net income from
continuing operations - adjusted $ 40,245 $ 43,782 $
48,364 $ 56,341 $ 188,732 Diluted earnings per share from
continuing operations - reported $ 0.38 $ 0.42 $ 0.47 $ 0.54 $ 1.81
Transaction-related costs - - - 0.01 0.01 Deal amortization
0.02 0.02 0.02 0.02 0.08
Diluted earnings per share from continuing operations - adjusted1 $
0.40 $ 0.44 $ 0.49 $ 0.57 $ 1.89 1 May not
foot due to rounding
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) (Unaudited)
Three Months Ended August 1, July 26,
2015 2014 Operating activities: Net income $
29,703 $ 50,289 Net income from discontinued operations
9,392 11,964 Net income from continuing
operations 20,311 38,325
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 15,247 9,656 Non-cash employee
based compensation 6,965 6,412 Change in assets and liabilities,
net of acquired (34,829 ) 13,901
Net cash provided by operating activities-
continuing operations
7,694 68,294
Net cash (used in) provided by operating
activities- discontinued operations
(2,270 ) 476 Net cash provided by operating
activities 5,424 68,770 Investing activities: Additions to
property and equipment, net of disposals (17,064 ) (16,173 )
Acquisitions and equity investments (1,104,730 ) - Purchase of
investments - (359 )
Net cash used in investing activities-
continuing operations
(1,121,794 )
(16,532 )
Net cash (used in) provided by investing
activities- discontinued operations
(54 )
5,086 Net cash used in investing activities
(1,121,848 )
(11,446 ) Financing activities: Dividends paid (23,128 )
(20,062 ) Share repurchases - (42,877 ) Proceeds from issuance of
long-term debt, net 988,400 - Payment on revolver - (130,000 ) Draw
on revolver - 130,000 Other financing activities (745 )
(811 ) Net cash provided by (used in) financing activities
964,527 (63,750 ) Effect of exchange rate changes on cash
(8,923 ) 2,258 Net decrease in cash and cash
equivalents $ (160,820 ) $ (4,168 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150827005202/en/
Patterson Companies, Inc.Ann B. Gugino,
651-686-1600Executive Vice President & CFO
Patterson Companies (NASDAQ:PDCO)
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