EX-99 2 dex99.htm PRESS RELEASE Press release

Exhibit 99

 

Patterson Companies Reports Strongly Improved

Second Quarter Sales and Earnings

 

St. Paul, MN—November 24, 2004—Patterson Companies, Inc. (Nasdaq NMS: PDCO) today reported consolidated sales of $578,237,000 for the second quarter of fiscal 2005 ended October 30, an increase of 21% from $477,510,000 in the year-earlier quarter. Sales for the current quarter included contributions from four acquisitions earlier this year, in addition to the September 12, 2003 acquisition of AbilityOne Products Corp. Net income increased 22% to $42,504,000 or $0.31 per diluted share, from $34,886,000 or $0.25 per diluted share in the second quarter of fiscal 2004. AbilityOne continued having a significant positive impact on consolidated earnings. As previously forecasted, the majority of the earnings contributions from the four most recent transactions, ProVet, Medco, CAESY and the October acquisition of Milburn Distributions, Inc., is anticipated during the second half of fiscal 2005.

 

All share and per share information has been adjusted to reflect the previously announced two-for-one stock split in the form of a 100% stock dividend to shareholders of record on October 8, 2004.

 

The Patterson Dental Supply unit, Patterson’s largest business, reported sales growth of 12% to $438,918,000 in the second quarter. Substantially all of this growth was internally generated.

 

Sales of consumable dental supplies and printed office products increased more than 6% in the second quarter, led by U.S. consumables growth of nearly 7%, reflecting the effectiveness of efforts over the past year to strengthen this portion of Patterson’s business. Patterson Dental’s sales force, the largest in the industry, totaled approximately 1,410 at October 30.

 

Sales of dental equipment and software rose 21% in the second quarter, which included solid contributions from both the U.S. and Canadian dental operations.

 

Sales of other services and products, consisting primarily of parts, technical service, software support, and insurance e-claims, increased 14% in the quarter.

 

AbilityOne, the company’s rehabilitation supply unit, reported second quarter sales of $75,205,000. Excluding the May 2004 acquisition of Medco Supply Company, Inc., AbilityOne’s second quarter sales increased 9% on a pro forma basis, which gives effect to the approximately six-week period in last year’s second quarter that Patterson did not own this business.

 

Sales of the Webster Veterinary Supply unit increased 21% in the second quarter to $64,114,000. The positive impact of the ProVet (April 2004) and Milburn acquisitions was partly offset by $5 million of reduced sales related to the unexpected voluntary recall from the U.S. market in September of ProHeart 6, an injectable heartworm medication. This recall included the impact of product returns. On an annual basis, ProHeart 6 contributed sales of approximately $12 million. At this time, it is uncertain whether this recall will be permanent. After adjusting for acquisitions, the ProHeart recall and the previously-discussed conversion of a temporary pharmaceutical distribution agreement into an agency arrangement late in last year’s third quarter, Webster’s internally generated sales rose 8% in the second quarter.

 

Peter L. Frechette, chairman and chief executive officer, commented: “The second quarter was another strong period for Patterson. Within our dental business, we are encouraged by the solid sales growth of consumable supplies and by continued strong demand for both basic equipment and new-generation dental systems, including the CEREC(R)3D dental restorative system, digital radiography and related networking systems, and the patient education offerings of our CAESY Education Systems division. Based on the strong results of our equipment business, it is clear that dental practices are continuing to invest heavily in a wide range of new equipment and software that can strengthen office productivity and improve clinical outcomes. Patterson’s performance is also benefiting from our recent acquisitions, which have augmented our growth and strategically bolstered the market positions of our dental, veterinary and rehabilitation supply businesses.”

 

Frechette continued: “The positive outlook for our three businesses makes us optimistic about Patterson’s prospects as we enter the second half of fiscal 2005. For this year’s third quarter ending January 29, 2005, we are forecasting earnings of $0.36 to $0.37 per diluted share. We also are maintaining our previously-issued financial guidance of $1.34 to $1.36 for the full fiscal year.”


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 Supply 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 Supply is the nation’s second largest distributor of consumable veterinary supplies, equipment, diagnostic products, vaccines and pharmaceuticals to companion-pet veterinary clinics.

 

Rehabilitation Market

 

AbilityOne Products Corp. 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.

 

For additional information contact:

 

R. Stephen Armstrong   Richard G. Cinquina
Executive Vice President & CFO   Equity Market Partners
651/686-1600   904/261-2210 or 800/522-1744


Patterson Companies, Inc.

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for earnings per share)

(Unaudited)

 

     Three Months Ended

    Six Months Ended

 
     October 30,
2004


   

October 25,

2003


   

October 30,

2004


   

October 25,

2003


 

Net sales

   $ 578,237     $ 477,510     $ 1,156,180     $ 910,772  

Gross profit

     204,627       166,321       408,596       310,903  

Operating expenses

     134,568       110,043       270,935       209,616  
    


 


 


 


Operating income

     70,059       56,278       137,661       101,287  

Other (expense) income, net

     (2,164 )     (373 )     (4,560 )     1,720  
    


 


 


 


Income before taxes

     67,895       55,905       133,101       103,007  

Income taxes

     25,391       21,019       49,782       38,728  
    


 


 


 


Net income

   $ 42,504     $ 34,886     $ 83,319     $ 64,279  
    


 


 


 


Earnings per share:

                                

Basic

   $ 0.31     $ 0.26     $ 0.61     $ 0.47  

Diluted

   $ 0.31     $ 0.25     $ 0.60     $ 0.47  

Shares:

                                

Basic

     136,737       135,812       136,630       135,744  

Diluted

     138,795       137,698       138,702       137,280  

Gross margin

     35.4 %     34.8 %     35.3 %     34.1 %

Operating expenses as a % of net sales

     23.3 %     23.0 %     23.4 %     23.0 %

Operating income as a % of net sales

     12.1 %     11.8 %     11.9 %     11.1 %

Effective tax rate

     37.4 %     37.6 %     37.4 %     37.6 %

Return on net sales

     7.4 %     7.3 %     7.2 %     7.1 %

Note: All share and per share information has been adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend to shareholders of record on October 8, 2004, which was paid on October 22, 2004.

 

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Patterson Companies, Inc.

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PATTERSON COMPANIES, INC.

SUPPLEMENTARY FINANCIAL DATA

(In thousands)

(Unaudited)

 

     Three Months Ended

    Six Months Ended

 
    

October 30,

2004


   

October 25,

2003


   

October 30,

2004


   

October 25,

2003


 

Consolidated Net Sales

                                

Consumable and printed products

   $ 367,140     $ 304,762     $ 757,003     $ 588,792  

Equipment and software

     167,675       136,055       312,659       252,793  

Other

     43,422       36,693       86,518       69,187  
    


 


 


 


Total

   $ 578,237     $ 477,510     $ 1,156,180     $ 910,772  
    


 


 


 


Rehabilitative Supply

                                

Actual

                                

Consumable and printed products

   $ 64,335     $ 25,566     $ 129,864     $ 25,566  

Equipment

     7,443       4,393       15,700       4,393  

Other

     3,427       1,883       6,886       1,883  
    


 


 


 


Total

   $ 75,205     $ 31,842     $ 152,450     $ 31,842  
    


 


 


 


Proforma

   $ 75,205     $ 55,963 (a)   $ 152,450     $ 112,365 (a)
    


 


 


 


Veterinary Supply

                                

Consumable and printed products

   $ 59,333     $ 50,225     $ 130,540     $ 108,999  

Equipment

     2,734       1,297       5,376       2,876  

Other

     2,047       1,489       3,279       2,586  
    


 


 


 


Total

   $ 64,114     $ 53,011     $ 139,195     $ 114,461  
    


 


 


 


Other (Expense) Income, net

                                

Interest income

   $ 1,180     $ 1,365     $ 2,501     $ 3,263  

Interest expense

     (3,791 )     (1,889 )     (7,549 )     (1,921 )

Other

     447       151       488       378  
    


 


 


 


     $ (2,164 )   $ (373 )   $ (4,560 )   $ 1,720  
    


 


 


 



(a) Proforma basis, as if the acquisition of AbilityOne had occurred at the beginning of fiscal 2004, but does not give effect to the recent Medco acquisition.

 

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Patterson Companies, Inc.

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     October 30,
2004


  

April 24,

2004


     (Unaudited)     

ASSETS

             

Current assets:

             

Cash and short-term investments

   $ 286,197    $ 295,178

Receivables, net

     279,530      285,249

Inventory

     188,630      173,022

Prepaid expenses and other current assets

     29,019      24,694
    

  

Total current assets

     783,376      778,143

Property and equipment, net

     86,417      77,233

Goodwill and other intangible assets

     751,837      698,217

Other

     35,458      35,364
    

  

Total Assets

   $ 1,657,088    $ 1,588,957
    

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

             

Current liabilities:

             

Accounts payable

   $ 176,632    $ 149,528

Other accrued liabilities

     93,783      94,129

Current maturities of long-term debt

     20,031      20,031
    

  

Total current liabilities

     290,446      263,688

Long-term debt

     416,542      479,556

Other non-current liabilities

     46,946      43,955
    

  

Total liabilities

     753,934      787,199

Stockholders’ equity

     903,154      801,758
    

  

Total Liabilities and Stockholders’ Equity

   $ 1,657,088    $ 1,588,957
    

  

 

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Patterson Companies, Inc.

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

     Six Months Ended

 
    

October 30,

2004


   

October 25,

2003


 

Operating activities:

                

Net income

   $ 83,319     $ 64,279  

Depreciation & amortization

     13,234       7,316  

Change in assets and liabilities, net of acquired

     28,858       (509 )
    


 


Net cash provided by operating activities

     125,411       71,086  

Investing activities:

                

Additions to property and equipment, net

     (13,386 )     (6,861 )

Acquisitions

     (72,762 )     (581,323 )

(Purchase) sale of investments

     (12,373 )     11,269  
    


 


Net cash used in investing activities

     (98,521 )     (576,915 )

Net cash (used in) provided by financing activities

     (48,244 )     503,402  
    


 


Net decrease in cash and cash equivalents

   $ (21,354 )   $ (2,427 )