- First-quarter reported net sales
totaled $1.3 billion.
- First-quarter GAAP earnings were
$0.33 per diluted share.
- Adjusted earnings1
totaled $0.44 per diluted share.
- Company expands digital dentistry
product portfolio with new supplier relationships.
- Company reiterates adjusted
earnings1 guidance for fiscal 2018 of $2.25 to $2.40
per diluted share.
Patterson Companies, Inc. (Nasdaq: PDCO) today reported
consolidated net sales of $1.3 billion (see attached Sales Summary
for further details) in its fiscal first quarter ended July 29,
2017, a decline of 2.1 percent compared to the same period last
year. On a constant currency basis sales declined 1.1 percent.
Reported net income for the first quarter of fiscal 2018 was
$30.8 million, or $0.33 per diluted share, compared to $38.9
million, or $0.40 per diluted share, in last year’s fiscal first
quarter. Adjusted net income1, which excludes certain non-recurring
items and deal amortization costs, totaled $41.4 million for the
first quarter of fiscal 2018, down 15.1 percent from $48.8 million
in the same quarter last year. Adjusted net income1 includes the
previously disclosed pre-tax step-up in enterprise resource
planning expenses, which for the quarter was approximately $7
million. Adjusted earnings1 per diluted share totaled $0.44 in the
2018 first quarter, down 13.7 percent year over year.
“Our performance in the 2018 first quarter reflects a period of
significant transition,” said James Wiltz, interim president and
chief executive officer. “We are nearing the major milestone of the
full rollout of our enterprise resource system to our U.S. dental
and companion animal health operations. This will allow us to shift
our focus to begin realizing the benefits of the new platform as
well as enhancing the system experience for our customers,
suppliers and field locations. As previously stated, we expect the
first half of fiscal 2018 to be challenging and we remain committed
to strengthening our sales execution and expanding our technology
product platform in our Dental business, improving margins in
Animal Health, and driving greater efficiencies across the entire
enterprise. This combination of initiatives will be essential to
our growth and development as we move through the fiscal year and
beyond.”
Patterson DentalReported net sales in our Dental segment
for the first quarter of fiscal 2018, which represented
approximately 40 percent of total company sales, were $518.8
million, down 6.5 percent from the same quarter last year. Sales
declined 6.3 percent on a constant currency basis compared to the
fiscal 2017 first quarter. On that same basis, year-over-year sales
by category were as follows:
- Consumable dental supplies decreased
3.6 percent.
- Equipment sales declined 15.1 percent,
due to the decrease in sales of CEREC and digital technology
products.
- Other services and products, primarily
composed of technical service, parts and labor, software support
services and office supplies were essentially flat compared to last
year.
“In our Dental segment, our performance in the 2018 first
quarter reflects the decision to broaden our technology equipment
portfolio and customer interest in other new digital product
offerings,” continued Wiltz. “Recently we announced new
relationships in North America with 3Shape and Align Technology
Inc. to expand our intraoral scanner product offering, expanded our
relationship with 3M Company to include the TruDefinition intraoral
scanner and Kavo Kerr to include the Dexis and i-CAT imaging
products. The broadened portfolio allows us to promote additional
product innovation and offer our superior technology infrastructure
to additional manufacturers, who view our expertise and support as
a meaningful competitive advantage. We also remain committed to our
long-standing partnership with Dentsply Sirona. Boosting our sales
talent and effectiveness and introducing new product offerings are
the immediate areas of focus. We will continue to heavily
concentrate on these areas, which are critical to increasing
revenue in this segment.”
Patterson Animal HealthReported net sales in our Animal
Health segment for the first quarter of fiscal 2018, which
comprised approximately 60 percent of the company’s total sales,
were $776.1 million, 1.8 percent higher than the same quarter last
year. Sales increased 3.4 percent on a constant currency basis from
the fiscal 2017 first quarter. On that same basis, year-over-year
sales by category were as follows:
- Companion animal sales improved 1.2
percent. After normalizing for changes in selling relationships,
companion sales rose approximately 6.0 percent.
- Production animal sales rose 6.0
percent, reflecting stronger sales across all species.
Commented Wiltz, “In our Animal Heath segment, our focus on
sales acceleration and margin recovery yielded improvement in both
areas in the fiscal 2018 first quarter. When adjusting for the
impact of currency and changes in product selling arrangements,
both our Companion and Production animal businesses experienced
healthy sales increases during the period. In our production animal
category, we are encouraged by the improving end-market
fundamentals across each category of species. We are pleased with
our share gains in the period and progress toward margin
recovery.”
Share Repurchases and DividendsIn the first quarter,
Patterson repurchased approximately 0.8 million shares of its
outstanding common stock, with a value of $37.5 million. The
company also paid $25.2 million in cash dividends to shareholders
in the first quarter of fiscal 2018.
Business OutlookWiltz concluded, “Patterson Companies
continues to move through a significant period of change. We are
pursuing a range of initiatives designed to make our organization
fundamentally stronger, specifically: restoring the strength of our
Dental sales force, leading the expansion of digital dentistry by
broadening our technology portfolio; accelerating profitable growth
in our Animal Health business; and enhancing our enterprise
resource planning system. We believe this combination of
initiatives will put Patterson Companies on the path to more
profitable growth.”
Fiscal 2018 GuidancePatterson today reiterated its fiscal
2018 earnings guidance, which is provided on both a GAAP and
non-GAAP adjusted1 basis:
- GAAP earnings are expected to be in the
range of $1.90 to $2.05 per diluted share.
- Non-GAAP adjusted earnings1 are
expected to be in the range of $2.25 to $2.40 per diluted
share.
- Our non-GAAP adjusted earnings1
guidance excludes the after-tax impact of:
- Deal amortization expense of
approximately $25.3 million ($0.27 per diluted share)
- Integration and business restructuring
expenses of approximately $5.4 million ($0.06 per diluted
share)
Our guidance is for current continuing operations as well as
completed or previously announced acquisitions and does not include
the impact of potential future acquisitions or similar
transactions, if any, or impairments and material restructurings
beyond those previously publicly disclosed. Our guidance assumes
North American and international market conditions similar to those
experienced in fiscal 2017.
1Non-GAAP Financial Measures
The Reconciliation of GAAP to non-GAAP Measures table appearing
behind the accompanying financial information is provided to adjust
reported GAAP measures, namely earnings, net income, and earnings
per diluted share, for the impact of transaction related costs,
deal amortization, and integration and business restructuring
expenses, along with the related tax effects of these items.
Management believes that these non-GAAP measures may provide a
helpful representation of the company’s first quarter, and enable
comparison of financial results between periods where certain items
may vary independent of business performance. These non-GAAP
financial measures are presented solely for informational and
comparative purposes and should not be regarded as a replacement
for corresponding, similarly captioned, GAAP measures.
In addition, the term constant currency used in this release
represents net sales adjusted to exclude foreign currency impacts.
Foreign currency impact represents the difference in results that
is attributable to fluctuations in currency exchange rates the
company uses to convert results for all foreign entities where the
functional currency is not the U.S. dollar. The company calculates
the impact as the difference between the current period results
translated using the current period currency exchange rates and
using the comparable prior period’s currency exchange rates. The
company believes the disclosure of net sales changes in constant
currency provides useful supplementary information to investors in
light of significant fluctuations in currency rates.
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 fiscal
2018 first-quarter conference call can be heard for one week at
800-585-8367 and by providing the Conference ID 68806367 when
prompted.
About Patterson Companies, Inc.Patterson Companies, Inc.
is a value-added distributor serving the dental and animal health
markets.
Dental MarketPatterson's Dental
segment 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's
Animal Health segment is a leading distributor of products,
services and technologies to both the production and companion
animal health markets in North America and the U.K.
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. 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 Patterson 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 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
July 29, July 30, 2017 2016 Net
sales $ 1,304,115 $ 1,332,436 Gross profit 299,048 317,178
Operating expenses 242,215 251,762
Operating income 56,833 65,416 Other income
(expense): Other income, net 1,512 2,364 Interest expense
(11,203 ) (10,162 ) Income before taxes 47,142 57,618
Income tax expense 16,295 18,712 Net income $
30,847 $ 38,906 Earnings per share: Basic $
0.33 $ 0.41 Diluted $ 0.33 $ 0.40
Weighted average shares: Basic 93,350 95,461 Diluted 94,019
96,090 Dividends declared per common share $ 0.26 $ 0.24
PATTERSON COMPANIES, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands)
July 29, April 29, 2017
2017 (Unaudited) ASSETS Current assets: Cash
and cash equivalents $ 99,779 $ 94,959 Receivables 841,284 884,803
Inventory 777,354 711,903 Prepaid expenses and other current assets
97,676 111,928 Total current assets 1,816,093
1,803,593 Property and equipment, net 294,819 298,452 Goodwill and
other intangible assets 1,230,718 1,238,983 Long-term receivables,
net and other 153,612 166,885 Total assets $
3,495,242 $ 3,507,913
LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 536,020 $
616,859 Other accrued liabilities 188,290 213,318 Current
maturities of long-term debt 14,754 14,754 Borrowings on revolving
credit 163,000 59,000 Total current liabilities
902,064 903,931 Long-term debt 998,457 998,272 Other non-current
liabilities 210,219 211,277 Total liabilities
2,110,740 2,113,480 Stockholders' equity 1,384,502
1,394,433 Total liabilities and stockholders' equity $ 3,495,242 $
3,507,913
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands) (Unaudited)
Three Months Ended July 29, July 30,
2017 2016 Operating activities: Net
income $ 30,847 $ 38,906 Adjustments to reconcile net income to net
cash used in operating activities: Depreciation and amortization
21,104 20,359 Non-cash employee compensation 8,656 9,184 Change in
assets and liabilities, net of acquired (106,635 )
(141,228 ) Net cash used in operating activities (46,028 ) (72,779
)
Investing activities: Additions to property and equipment
(6,674 ) (15,042 ) Collection of deferred purchase price
receivables 12,191 12,432 Other investing activities —
(3,095 ) Net cash provided by (used in) investing
activities 5,517 (5,705 )
Financing activities: Dividends
paid (25,210 ) (24,197 ) Repurchases of common stock (37,500 )
(25,000 ) Retirement of long-term debt — (4,125 ) Draw on revolver
104,000 88,000 Other financing activities 1,916
(506 ) Net cash provided by financing activities 43,206
34,172 Effect of exchange rate changes on cash 2,125
(3,163 ) Net change in cash and cash equivalents $ 4,820
$ (47,475 )
PATTERSON COMPANIES, INC.
SALES SUMMARY (Dollars in thousands)
(Unaudited)
Total Foreign July 29,
July 30, Sales Exchange Internal
2017 2016
Growth
Impact
Growth
Three Months
Ended
Consolidated net sales Consumable $ 1,080,105 $ 1,076,221
0.4 % (1.2 )% 1.6 % Equipment and software 136,949 160,946 (14.9 )
(0.2 ) (14.7 ) Other 87,061 95,269 (8.6 ) (0.5 ) (8.1
) Total $ 1,304,115 $ 1,332,436 (2.1 )% (1.0 )% (1.1 )%
Dental Consumable $ 320,178 $ 332,948 (3.8 )% (0.2 )% (3.6 )%
Equipment and software 127,863 150,882 (15.3 ) (0.2 ) (15.1 ) Other
70,766 71,185 (0.6 ) (0.1 ) (0.5 ) Total $ 518,807 $
555,015 (6.5 )% (0.2 )% (6.3 )% Animal Health Consumable $
759,927 $ 743,273 2.2 % (1.6 )% 3.8 % Equipment and software 9,086
10,064 (9.7 ) (0.1 ) (9.6 ) Other 7,123 9,294 (23.4 )
(3.8 ) (19.6 ) Total $ 776,136 $ 762,631 1.8 % (1.6 )% 3.4 %
Corporate Other $ 9,172 $ 14,790 (38.0 )% - % (38.0 )% Total $
9,172 $ 14,790 (38.0 )% - % (38.0 )%
PATTERSON
COMPANIES, INC. OPERATING INCOME BY SEGMENT (In
thousands) (Unaudited)
Three Months
Ended
July 29, July 30, 2017 2016
Operating income (loss) Dental $ 59,519 $ 60,295 Animal Health
16,676 14,829 Corporate (19,362 ) (9,708 ) Total $
56,833 $ 65,416
PATTERSON COMPANIES,
INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Dollars in thousands, except per share amounts)
(Unaudited)
For the three months ended July 29,
2017 GAAP
Transaction-related
costs
Dealamortization
Integrationand
businessrestructuringexpenses
Non-GAAP Operating income $ 56,833 $ — $ 9,630 $ 6,906 $
73,369 Other expense, net (9,691 ) — —
— (9,691 ) Income before taxes 47,142 — 9,630 6,906 63,678
Income tax expense 16,295 — 3,345
2,611 22,251 Net income $ 30,847 $ — $
6,285 $ 4,295 $ 41,427 Diluted earnings per share* $
0.33 $ — $ 0.07 $ 0.04 $ 0.44 Consolidated
operating income as a % of sales 4.4 % 5.6 % Effective tax rate
34.6 % 34.9 %
For the three months ended July 30,
2016 GAAP
Transaction-related
costs
Dealamortization
Integrationand
businessrestructuringexpenses
Non-GAAP Operating income $ 65,416 $ 347 $ 10,014 $ 4,875 $
80,652 Other expense, net (7,798 ) — —
— (7,798 ) Income before taxes 57,618 347 10,014 4,875
72,854 Income tax expense 18,712 131
3,377 1,843 24,063 Net income $ 38,906
$ 216 $ 6,637 $ 3,032 $ 48,791 Diluted earnings per
share* $ 0.40 $ — $ 0.07 $ 0.03 $ 0.51
Consolidated operating income as a % of sales 4.9 % 6.1 % Effective
tax rate 32.5 % 33.0 % * May not sum due to rounding
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170824005268/en/
Patterson Companies, Inc.Ann B. Gugino,
651-686-1600Executive Vice President & CFOorJohn M. Wright,
651-686-1364Vice President, Investor Relations
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