Patterson Dental, Patterson's largest business, reported sales growth of 7% to $512,200,000 in the second quarter.
Sales of the Webster Veterinary unit increased 15% in the second quarter of fiscal 2007 to $95,362,000. Excluding the December 2005 acquisition of Intra Corp, developer and marketer of IntraVet® veterinary practice management software, Webster's sales rose 13%. Sales of Patterson Medical, Patterson's rehabilitation supply and equipment unit, increased 10% in the second quarter to $86,711,000 in comparison to the year-earlier level.
James W. Wiltz, president and chief executive officer, commented: "Our Patterson Dental unit performed at a relatively high level in this year's second quarter, with consumable dental supplies, basic dental equipment and digital radiography systems and related software posting solid year-over-year sales growth. The lone exception was our CEREC product line. Despite lower second quarter sales, CEREC continues to be a substantial contributor to our equipment business. We are striving to reinvigorate the growth of this next-generation system and believe sales momentum should gradually strengthen in future periods. We remain convinced that CEREC's advanced CAD/CAM technology represents the future of dental restorative procedures."
He continued: "Patterson's veterinary and medical businesses turned in strong performances in the second quarter, with both units recording double-digit sales growth. The strategic emphasis of Webster Veterinary on strengthening its equipment business paid further dividends in the second quarter, as sales of veterinary equipment rose more than 100% from the prior year's level. In addition, Webster recorded strong sales of its IntraVet practice management software line that was acquired in December 2005. Additional IntraVet software currently under development will position Webster to maximize the capabilities of digital radiography equipment, enabling this unit to offer a value-added technology solution similar to that of Patterson Dental. We also are encouraged by the solid sales growth of Patterson Medical, making us believe this unit is responding to the strategies implemented by the unit's new management team. Patterson's consolidated second quarter earnings also benefited from improved operating leverage, reflecting strengthened expense management throughout our organization."
Patterson is forecasting earnings of $0.43 to $0.45 per diluted share for the third quarter of fiscal 2007 ending January 27, 2007. This guidance incorporates stock compensation expense of approximately $0.01 per diluted share. The Company is reiterating its full-year fiscal 2007 earnings guidance of $1.58 to $1.61 per diluted share, or $1.54 to $1.57 after the approximate $0.04 per diluted share impact of stock compensation expense.
Impact of Compensation Expense Under SFAS No. 123(R)
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.
Second Quarter Conference Call and Replay
Patterson's second 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 second quarter conference call can be heard through November 30, 2006 by dialing 1-303-590-3000 and providing the 11076446 confirmation code.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for earnings per share)
(Unaudited)
Three Months Ended Six Months Ended
----------------------- -----------------------
October 28, October 29, October 28, October 29,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $694,273 $641,697 $1,349,761 $1,237,544
Gross profit 235,629 219,214 458,043 426,458
Operating expenses 157,608 146,388 311,485 284,118
----------- ----------- ----------- -----------
Operating income 78,021 72,826 146,558 142,340
Other expense, net (1,502) (1,387) (3,343) (2,399)
----------- ----------- ----------- -----------
Income before taxes 76,519 71,439 143,215 139,941
Income taxes 28,282 26,719 53,394 52,339
----------- ----------- ----------- -----------
Net income $48,237 $44,720 $89,821 $87,602
=========== =========== =========== ===========
Earnings per share:
Basic $0.35 $0.33 $0.65 $0.64
Diluted $0.35 $0.32 $0.65 $0.63
Shares:
Basic 137,757 137,554 137,983 137,427
Diluted 138,728 139,249 138,948 139,183
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 Six Months Ended
----------------------- -----------------------
October 28, October 29, October 28, October 29,
2006 2005 2006 2005
----------- ----------- ----------- -----------
NET INCOME:
GAAP net income $48,237 $44,720 $89,821 $87,602
SFAS No. 123(R)
expense, net of tax 1,619 - 3,289 -
----------- ----------- ----------- -----------
Non-GAAP net income $49,856 $44,720 $93,110 $87,602
=========== =========== =========== ===========
DILUTED EARNINGS PER
SHARE:
GAAP diluted earnings
per share $0.35 $0.32 $0.65 $0.63
SFAS No. 123(R)
expense, net of tax 0.01 - 0.02 -
----------- ----------- ----------- -----------
Non-GAAP diluted
earnings per share $0.36 $0.32 $0.67 $0.63
=========== =========== =========== ===========
Three Months Ended
-------------------------------------
October 28,
2006 As
--------------------------- reported
Excluding SFAS October
As reported No. 123(R) 29, 2005
------------ -------------- ---------
Gross margin 33.9% 33.9% 34.2%
Operating expenses as a % of net
sales 22.7% 22.4% 22.8%
Operating income as a % of net
sales 11.2% 11.5% 11.4%
Effective tax rate 37.0% 36.5% 37.4%
Return on net sales 6.9% 7.2% 7.0%
Six Months Ended
--------------------------------------
October 28,
2006 As
--------------------------- reported
Excluding SFAS October
As reported No. 123(R) 29, 2005
----------- --------------- ----------
Gross margin 33.9% 33.9% 34.5%
Operating expenses as a % of net
sales 23.1% 22.8% 23.0%
Operating income as a % of net
sales 10.8% 11.1% 11.5%
Effective tax rate 37.3% 36.8% 37.4%
Return on net sales 6.7% 6.9% 7.1%
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 28, April 29,
2006 2006
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $181,558 $224,392
Receivables, net 335,970 350,299
Inventory 235,733 244,709
Prepaid expenses and other current assets 25,206 27,974
----------- -----------
Total current assets 778,467 847,374
Property and equipment, net 141,267 141,541
Goodwill and other intangible assets 762,358 764,214
Other 180,148 158,589
----------- -----------
Total Assets $1,862,240 $1,911,718
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $136,515 $173,957
Other accrued liabilities 145,524 145,663
Current maturities of long-term debt 90,021 90,027
----------- -----------
Total current liabilities 372,060 409,647
Long-term debt 200,007 210,014
Other non-current liabilities 48,094 49,536
----------- -----------
Total liabilities 620,161 669,197
Stockholders' equity 1,242,079 1,242,521
----------- -----------
Total Liabilities and Stockholders'
Equity $1,862,240 $1,911,718
=========== ===========
PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
----------------------- -----------------------
October 28, October 29, October 28, October 29,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Consolidated Net Sales
Consumable and
printed products $440,394 $407,814 $874,209 $798,428
Equipment and
software 198,575 186,920 368,020 346,709
Other 55,304 46,963 107,532 92,407
----------- ----------- ----------- -----------
Total $694,273 $641,697 $1,349,761 $1,237,544
=========== =========== =========== ===========
Dental Supply
Consumable and
printed products $289,892 $271,798 $569,309 $523,528
Equipment and
software 173,252 166,200 320,250 305,712
Other 49,056 42,082 95,350 82,896
----------- ----------- ----------- -----------
Total $512,200 $480,080 $984,909 $912,136
=========== =========== =========== ===========
Rehabilitation Supply
Consumable and
printed products $63,941 $57,734 $125,727 $115,665
Equipment 18,575 17,410 35,721 34,666
Other 4,195 3,656 7,928 7,019
----------- ----------- ----------- -----------
Total $86,711 $78,800 $169,376 $157,350
=========== =========== =========== ===========
Veterinary Supply
Consumable and
printed products $86,561 $78,282 $179,173 $159,235
Equipment and
software 6,748 3,310 12,049 6,331
Other 2,053 1,225 4,254 2,492
----------- ----------- ----------- -----------
Total $95,362 $82,817 $195,476 $168,058
=========== =========== =========== ===========
Other (Expense) Income,
net
Interest income $2,120 $1,479 $4,067 $3,575
Interest expense (3,830) (3,109) (7,636) (6,186)
Other 208 243 226 212
----------- ----------- ----------- -----------
$(1,502) $(1,387) $(3,343) $(2,399)
=========== =========== =========== ===========
Note: Certain amounts previously reported have been reclassified to
conform with the current presentation.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
-----------------------
October 28, October 29,
2006 2005
----------- -----------
Operating activities:
Net income $89,821 $87,602
Depreciation & amortization 12,856 10,928
Share-based compensation 4,065 390
Change in assets and liabilities, net of
acquired (24,267) (31,016)
----------- -----------
Net cash provided by operating activities 82,475 67,904
Investing activities:
Additions to property and equipment, net (9,726) (27,166)
Acquisitions (8,665) (32,728)
Distribution agreement - (100,000)
Sale of investments, net - 9,369
----------- -----------
Net cash used in investing activities (18,391) (150,525)
Net cash used in financing activities (106,918) (1,881)
----------- -----------
Net decrease in cash and cash equivalents $(42,834) $(84,502)
=========== ===========
SOURCE:Patterson Companies, Inc.