Patterson Companies, Inc. (Nasdaq:PDCO) today reported consolidated sales of $1.4 billion (see attached Sales Summary for further details) in its fiscal third quarter ended January 30, 2016, up 46 percent over the same period last year. Sales in this fiscal 2016 period include results from the recent Animal Health International, Inc. acquisition.
Adjusted net income from continuing operations1, which reflects adjustments to exclude certain non-recurring and deal amortization costs, was $65.1 million for the third quarter of fiscal 2016, a 35 percent gain over $48.4 million in the same quarter last year. Adjusted earnings per diluted share from continuing operations1 was $0.68 in the 2016 third quarter, a 39 percent year-over-year increase. Reported net income from continuing operations was $57.2 million, or $0.60 per diluted share, compared to $46.4 million, or $0.47 per diluted share, in last year’s fiscal third quarter.
“We are pleased with our execution in the third quarter from both a sales and operations perspective. Patterson Companies generated solid organic revenue growth and expanded operating margins in both our Dental and Animal Health businesses. We also made significant additional integration progress in our Animal Health segment,” said Scott Anderson, chairman, president and chief executive officer. “Our sales and support teams are focusing diligently on serving our customers and taking full advantage of our leadership in technology, value-added services and broadened product offerings.”
Patterson Dental
Sales for Patterson Dental, which represent
approximately 46 percent of total sales, improved to $637.7 million, up
5.9 percent on a constant currency basis from the same quarter last
year. On that same basis, year-over-year sales by category were as
follows:
- Consumable dental supplies improved 5.1 percent
- Equipment sales rose 6.8 percent, reflecting strength in both technology and core equipment
- Other services and products, primarily composed of technical service, parts and labor, software support services and office supplies, climbed 7.7 percent
Anderson said, “A highlight for us was the solid growth in the consumables category this quarter, which stemmed from increased patient utilization. We continue to see stable to steadily improving dynamics in the North American dental market and believe we are increasingly well-positioned to capitalize on this trend – given our technology leadership and support infrastructure – across the full spectrum of dental customers.”
Patterson Animal Health
Sales for Patterson Animal Health,
which comprise approximately 54 percent of the company’s total sales,
more than doubled to $749.7 million. Sales from Animal Health
International, Inc. added $406.6 million to the Animal Health segment
during the quarter. Excluding the contribution from Animal Health
International, Inc. and accounting for normalized changes in veterinary
diagnostic manufacturer relationships, segment sales improved 6.2
percent on a constant currency basis, led by an 11.3 percent increase in
the U.S.
Anderson continued, “Overall, our Animal Health business posted solid results for the quarter, driven by a particularly strong performance in the U.S. companion animal business. We remain confident in the pace of our integration progress with Animal Health International, Inc., the synergies we are gaining and the competitive position of our market-leading platform.”
Discontinued Operations
On August 28, 2015, Patterson
Companies completed the sale of Patterson Medical to Madison Dearborn
Partners for approximately $715 million. As a result of the sale,
results of Patterson Medical are classified and reported as discontinued
operations in all periods beginning with the fiscal 2016 first quarter.
Share Repurchases and Dividends
Fiscal year-to-date,
Patterson repurchased approximately 4.4 million shares of its
outstanding common stock, with a value of $200.0 million, leaving
approximately 16 million shares for repurchase under the current
authorization. The company also paid $21.6 million in cash dividends to
shareholders in the third quarter and $67.0 million in the first nine
months of fiscal 2016.
Year-to-Date Results1
Consolidated sales
for the first nine months of fiscal 2016 totaled $3.9 billion, a 37
percent year-over-year increase. Adjusted net income from continuing
operations was $167.3 million, or $1.70 per diluted share, compared to
adjusted net income from continuing operations of $132.4 million, or
$1.33 per diluted share, in the year-ago period, as outlined in the
Third Quarter and Nine-Month Reconciliation table1. Fiscal
2016 also includes the impact of an extra week.
Business Outlook
Anderson concluded, “With three quarters of
the fiscal year completed, we are narrowing our 2016 adjusted earnings
guidance range on a continuing operations basis to $2.42 to $2.48 per
diluted share. We expect to achieve this growth by concentrating on the
strong fundamentals in both of our businesses. In Dental, we intend to
capitalize on the favorable North American market conditions. In Animal
Health, as we generate synergies from the acquisition, we are focused on
driving growth across both the companion and production animal
platforms. We continue to create value for shareholders as we balance
investing in our business, paying dividends and repurchasing shares.”
The fiscal 2016 annual financial outlook and adjusted earnings guidance:
- Assumes stable North American and international markets
- Includes the impact of an extra week in fiscal 2016 compared to the previous year
- Excludes the impact of additional share repurchases for the remainder of the fiscal year
- Excludes transaction-related costs, integration expense, deal amortization, accelerated debt issuance costs, non-recurring IT initiative training costs and tax costs related to cash repatriation (See Third Quarter and Nine-Month Reconciliation table below)
- Excludes the discontinued operations for Medical
1Third Quarter and Nine-Month Reconciliation
The
following non-GAAP table is provided to adjust reported net income and
earnings per share for the impact of tax affected one-time costs,
current and prior deal-amortization costs and tax costs related to cash
repatriation. Management believes that the adjusted net income and EPS
amounts may provide a helpful representation of the company’s current
quarter performance.
(Dollars in thousands, except EPS) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
January 30, 2016 | January 24, 2015 | January 30, 2016 | January 24, 2015 | |||||||||||||
Net Income from Continuing Operations - Reported | $ | 57,190 | $ | 46,434 | $ | 120,064 | $ | 126,624 | ||||||||
Transaction-Related Costs | 28 | - | 10,007 | - | ||||||||||||
Deal Amortization | 6,921 | 1,930 | 18,507 | 5,767 | ||||||||||||
Integration Expense | 925 | - | 2,979 | - | ||||||||||||
Accelerated Debt Issuance Costs | - | - | 3,205 | - | ||||||||||||
Non-Recurring IT Training Costs | 77 | - | 252 | - | ||||||||||||
Tax Impact of Repatriation of Cash | - | - | 12,300 | - | ||||||||||||
Net Income from Continuing Operations - Adjusted | $ | 65,141 | $ | 48,364 | $ | 167,314 | $ | 132,391 | ||||||||
Diluted Earnings Per Share from Continuing Operations - Reported | $ | 0.60 | $ | 0.47 | $ | 1.22 | $ | 1.27 | ||||||||
Transaction-Related Costs | - | - | 0.10 | - | ||||||||||||
Deal Amortization | 0.07 | 0.02 | 0.19 | 0.06 | ||||||||||||
Integration Expense | 0.01 | - | 0.03 | - | ||||||||||||
Accelerated Debt Issuance Costs | - | - | 0.03 | - | ||||||||||||
Non-Recurring IT Training Costs | - | - | - | - | ||||||||||||
Tax Impact of Repatriation of Cash | - | - | 0.12 | - | ||||||||||||
Diluted Earnings Per Share from Continuing Operations - Adjusted* | $ | 0.68 | $ | 0.49 | $ | 1.70 | $ | 1.33 | ||||||||
*May not foot due to rounding | ||||||||||||||||
Third Quarter Conference Call and Replay
Patterson’s third
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 third quarter conference call can be heard for one week at
888-203-1112 and by providing the Conference ID 6564113, when prompted.
About Patterson Companies, Inc.
Patterson Companies, Inc. is
a value-added distributor serving the dental and animal health markets.
Dental Market
Patterson'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 Market
Patterson'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 | Nine Months Ended | ||||||||||||||||||||
January 30, | January 24, | January 30, | January 24, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Net sales | $ | 1,400,853 | $ | 958,628 | $ | 3,932,933 | $ | 2,875,804 | |||||||||||||
Gross profit | 339,864 | 262,442 | 959,007 | 772,346 | |||||||||||||||||
Operating expenses | 244,135 | 185,065 | 717,638 | 556,833 | |||||||||||||||||
Operating income from continuing operations | 95,729 | 77,377 | 241,369 | 215,513 | |||||||||||||||||
Other expense, net | (9,804 | ) | (7,971 | ) | (37,477 | ) | (23,136 | ) | |||||||||||||
Income from continuing operations before taxes | 85,925 | 69,406 | 203,892 | 192,377 | |||||||||||||||||
Income taxes | 28,735 | 22,972 | 83,828 | 65,753 | |||||||||||||||||
Net income from continuing operations | 57,190 | 46,434 | 120,064 | 126,624 | |||||||||||||||||
Net income (loss) from discontinued operations | (750 | ) | 8,242 | 1,500 | 32,119 | ||||||||||||||||
Net income | $ | 56,440 | $ | 54,676 | $ | 121,564 | $ | 158,743 | |||||||||||||
Basic earnings (loss) per share: | |||||||||||||||||||||
Continuing operations | $ | 0.60 | $ | 0.47 | $ | 1.23 | $ | 1.28 | |||||||||||||
Discontinued operations | (0.01 | ) | 0.08 | 0.01 | 0.32 | ||||||||||||||||
Net basic earnings per share | $ | 0.59 | $ | 0.55 | $ | 1.24 | $ | 1.60 | |||||||||||||
Diluted earnings (loss) per share: | |||||||||||||||||||||
Continuing operations | $ | 0.60 | $ | 0.47 | $ | 1.22 | $ | 1.27 | |||||||||||||
Discontinued operations | (0.01 | ) | 0.08 | 0.01 | 0.32 | ||||||||||||||||
Net diluted earnings per share | $ | 0.59 | $ | 0.55 | $ | 1.23 | $ | 1.59 | |||||||||||||
Shares: | |||||||||||||||||||||
Basic | 95,335 | 98,842 | 97,809 | 98,991 | |||||||||||||||||
Diluted | 95,930 | 99,540 | 98,488 | 99,699 | |||||||||||||||||
Dividends declared per common share | $ | 0.22 | $ | 0.20 | $ | 0.66 | $ | 0.60 | |||||||||||||
Gross margin - reported | 24.3 | % | 27.4 | % | 24.4 | % | 26.9 | % | |||||||||||||
Operating expenses as a % of net sales - adjusted | 16.6 | % | 19.0 | % | 17.1 | % | 19.1 | % | |||||||||||||
Adjustments1 | 0.9 | 0.3 | 1.2 | 0.3 | |||||||||||||||||
Operating expenses as a % of net sales - reported | 17.5 | % | 19.3 | % | 18.3 | % | 19.4 | % | |||||||||||||
Operating income as a % of net sales - adjusted | 7.7 | % | 8.4 | % | 7.3 | % | 7.8 | % | |||||||||||||
Adjustments1 | (0.9 | ) | (0.3 | ) | (1.2 | ) | (0.3 | ) | |||||||||||||
Operating income as a % of net sales - reported | 6.8 | % | 8.1 | % | 6.1 | % | 7.5 | % | |||||||||||||
Effective tax rate - adjusted | 33.8 | % | 33.0 | % | 34.7 | % | 34.0 | % | |||||||||||||
Adjustments1 | (0.4 | ) | 0.1 | 6.4 | 0.2 | ||||||||||||||||
Effective tax rate - reported | 33.4 | % | 33.1 | % | 41.1 | % | 34.2 | % | |||||||||||||
1 Refer to the press release for the definition of adjustments to reported results | |||||||||||||||||||||
PATTERSON COMPANIES, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands) | ||||||||
January 30, | April 25, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and short-term investments | $ | 97,701 | $ | 400,632 | ||||
Receivables | 698,911 | 586,263 | ||||||
Inventory | 814,413 | 408,422 | ||||||
Prepaid expenses and other current assets | 99,831 | 59,561 | ||||||
Current assets held for sale | - | 118,347 | ||||||
Total current assets | 1,710,856 | 1,573,225 | ||||||
Property and equipment, net | 278,288 | 204,133 | ||||||
Goodwill and other intangible assets | 1,337,531 | 424,949 | ||||||
Long-term receivables, net and other | 228,995 | 109,605 | ||||||
Long-term assets held for sale | - | 635,794 | ||||||
Total assets | $ | 3,555,670 | $ | 2,947,706 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 503,523 | $ | 323,294 | ||||
Other accrued liabilities | 197,575 | 215,075 | ||||||
Current maturities of long-term debt | 16,500 | - | ||||||
Borrowings on revolving credit | 198,000 | - | ||||||
Current liabilities held for sale | - | 39,316 | ||||||
Total current liabilities | 915,598 | 577,685 | ||||||
Long-term debt | 1,030,250 | 725,000 | ||||||
Other non-current liabilities | 247,275 | 81,484 | ||||||
Long-term liabilities held for sale | - | 49,414 | ||||||
Total liabilities | 2,193,123 | 1,433,583 | ||||||
Stockholders' equity | 1,362,547 | 1,514,123 | ||||||
Total liabilities and stockholders' equity | $ | 3,555,670 | $ | 2,947,706 | ||||
PATTERSON COMPANIES, INC. | |||||||||||||||||||||||
SALES SUMMARY | |||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
Total | Foreign | Animal Health | |||||||||||||||||||||
January 30, | January 24, | Sales | Exchange | International | Internal | ||||||||||||||||||
2016 | 2015 | Growth | Impact | Impact | Growth | ||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
Consolidated net sales | |||||||||||||||||||||||
Consumable1 | $ | 1,059,838 | $ | 638,541 | 66.0 | % | (1.8 | ) | % | 63.8 | % | 4.0 | % | ||||||||||
Equipment and software | 248,779 | 235,847 | 5.5 | (1.4 | ) | - | 6.9 | ||||||||||||||||
Other1 | 92,236 | 84,240 | 9.5 | (1.4 | ) | (0.9 | ) | 11.8 | |||||||||||||||
Total | $ | 1,400,853 | $ | 958,628 | 46.1 | % | (1.7 | ) | % | 42.4 | % | 5.4 | % | ||||||||||
Dental | |||||||||||||||||||||||
Consumable1 | $ | 333,835 | $ | 322,682 | 3.5 | % | (1.6 | ) | % | - | % | 5.1 | % | ||||||||||
Equipment and software | 232,334 | 220,738 | 5.3 | (1.5 | ) | - | 6.8 | ||||||||||||||||
Other1 | 71,482 | 67,235 | 6.3 | (1.4 | ) | - | 7.7 | ||||||||||||||||
Total | $ | 637,651 | $ | 610,655 | 4.4 | % | (1.5 | ) | % | - | % | 5.9 | % | ||||||||||
Animal Health | |||||||||||||||||||||||
Consumable1 | $ | 726,003 | $ | 315,859 | 129.9 | % | (2.0 | ) | % | 129.0 | % | 2.9 | % | ||||||||||
Equipment and software | 16,445 | 15,109 | 8.8 | (0.1 | ) | - | 8.9 | ||||||||||||||||
Other1 | 7,265 | 6,847 | 6.1 | (3.0 | ) | (10.8 | ) | 19.9 | |||||||||||||||
Total | $ | 749,713 | $ | 337,815 | 121.9 | % | (2.0 | ) | % | 120.4 | % | 3.5 | % | ||||||||||
Corporate | |||||||||||||||||||||||
Other1 | $ | 13,489 | $ | 10,158 | 32.8 | % | - | % | - | % | 32.8 | % | |||||||||||
Total | $ | 13,489 | $ | 10,158 | 32.8 | % | - | % | - | % | 32.8 | % | |||||||||||
Nine Months Ended | |||||||||||||||||||||||
Consolidated net sales | |||||||||||||||||||||||
Consumable1 | $ | 3,042,634 | $ | 2,020,345 | 50.6 | % | (2.2 | ) | % | 49.2 | % | 3.6 | % | ||||||||||
Equipment and software | 610,071 | 596,650 | 2.2 | (1.5 | ) | - | 3.7 | ||||||||||||||||
Other1 | 280,228 | 258,809 | 8.3 | (1.4 | ) | (0.5 | ) | 10.2 | |||||||||||||||
Total | $ | 3,932,933 | $ | 2,875,804 | 36.8 | % | (2.0 | ) | % | 34.5 | % | 4.3 | % | ||||||||||
Dental | |||||||||||||||||||||||
Consumable1 | $ | 1,024,323 | $ | 974,534 | 5.1 | % | (1.5 | ) | % | - | % | 6.6 | % | ||||||||||
Equipment and software | 572,771 | 565,483 | 1.3 | (1.6 | ) | - | 2.9 | ||||||||||||||||
Other1 | 216,996 | 206,148 | 5.3 | (1.3 | ) | - | 6.6 | ||||||||||||||||
Total | $ | 1,814,090 | $ | 1,746,165 | 3.9 | % | (1.5 | ) | % | - | % | 5.4 | % | ||||||||||
Animal Health | |||||||||||||||||||||||
Consumable1 | $ | 2,018,311 | $ | 1,045,811 | 93.0 | % | (2.9 | ) | % | 95.0 | % | 0.9 | % | ||||||||||
Equipment and software | 37,300 | 31,167 | 19.7 | (0.1 | ) | - | 19.8 | ||||||||||||||||
Other1 | 25,852 | 23,611 | 9.5 | (4.0 | ) | (5.3 | ) | 18.8 | |||||||||||||||
Total | $ | 2,081,463 | $ | 1,100,589 | 89.1 | % | (2.8 | ) | % | 90.2 | % | 1.7 | % | ||||||||||
Corporate | |||||||||||||||||||||||
Other1 | $ | 37,380 | $ | 29,050 | 28.7 | % | - | % | - | % | 28.7 | % | |||||||||||
Total | $ | 37,380 | $ | 29,050 | 28.7 | % | - | % | - | % | 28.7 | % | |||||||||||
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 | Nine Months Ended | |||||||||||||||||||
January 30, | January 24, | January 30, | January 24, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Operating income (loss) | ||||||||||||||||||||
Dental | $ | 82,108 | $ | 78,048 | $ | 223,454 | $ | 214,024 | ||||||||||||
Animal Health | 25,959 | 11,864 | 64,108 | 40,187 | ||||||||||||||||
Corporate | (12,338 | ) | (12,535 | ) | (46,193 | ) | (38,698 | ) | ||||||||||||
$ | 95,729 | $ | 77,377 | $ | 241,369 | $ | 215,513 | |||||||||||||
Other (expense) income, net | ||||||||||||||||||||
Interest income | $ | 496 | $ | 1,057 | $ | 1,914 | $ | 3,056 | ||||||||||||
Interest expense | (10,634 | ) | (8,512 | ) | (39,931 | ) | (25,824 | ) | ||||||||||||
Other | 334 | (516 | ) | 540 | (368 | ) | ||||||||||||||
$ | (9,804 | ) | $ | (7,971 | ) | $ | (37,477 | ) | $ | (23,136 | ) | |||||||||
PATTERSON COMPANIES, INC. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
January 30, | January 24, | |||||||||
2016 | 2015 | |||||||||
Operating activities: | ||||||||||
Net income | $ | 121,564 | $ | 158,743 | ||||||
Net income from discontinued operations | 1,500 | 32,119 | ||||||||
Net income from continuing operations | 120,064 | 126,624 | ||||||||
Adjustments to reconcile net income from continuing operations to net cash (used in) provided by operating activities: | ||||||||||
Depreciation & amortization | 58,817 | 31,489 | ||||||||
Non-cash employee compensation | 20,587 | 17,940 | ||||||||
Change in assets and liabilities, net of acquired | (247,015 | ) | (56,636 | ) | ||||||
Net cash (used in) provided by operating activities- continuing operations | (47,547 | ) | 119,417 | |||||||
Net cash (used in) provided by operating activities- discontinued operations | (38,985 | ) | 38,668 | |||||||
Net cash (used in) provided by operating activities | (86,532 | ) | 158,085 | |||||||
Investing activities: | ||||||||||
Additions to property and equipment, net of disposals | (56,280 | ) | (43,182 | ) | ||||||
Acquisitions and equity investments | (1,106,583 | ) | (8,730 | ) | ||||||
Proceeds from sale of securities | 48,744 | 40,775 | ||||||||
Other investing activities | - | (543 | ) | |||||||
Net cash used in investing activities- continuing operations | (1,114,119 | ) | (11,680 | ) | ||||||
Net cash provided by investing activities- discontinued operations | 714,680 | 4,256 | ||||||||
Net cash used in investing activities | (399,439 | ) | (7,424 | ) | ||||||
Financing activities: | ||||||||||
Dividends paid | (67,010 | ) | (60,340 | ) | ||||||
Share repurchases | (200,000 | ) | (47,539 | ) | ||||||
Proceeds from issuance of long-term debt, net | 988,400 | - | ||||||||
Retirement of long-term debt | (678,250 | ) | - | |||||||
Draw on revolver | 198,000 | - | ||||||||
Other financing activities | 5,523 | 6,484 | ||||||||
Net cash provided by (used in) financing activities | 246,663 | (101,395 | ) | |||||||
Effect of exchange rate changes on cash | (10,251 | ) | (24,452 | ) | ||||||
Net change in cash and cash equivalents | $ | (249,559 | ) | $ | 24,814 | |||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160225005353/en/
Contacts:
Ann B. Gugino, 651-686-1600
Executive
Vice President & CFO
or
John M. Wright, 651-686-1364
Vice
President, Investor Relations