Patterson Companies (PDCO) 8-K Patterson Dental Company Reports Strong Fourth Quarter Results

EXHIBIT 99.1

Patterson Dental Company Reports Strong Fourth Quarter Results

Quarterly Earnings Up 22%, Exceeding Prior Guidance

St. Paul, MN—May 22, 2003—Patterson Dental Company (Nasdaq NMS: PDCO) today reported consolidated sales of $447,326,000 for the fourth quarter of fiscal 2003 ended April 26, an increase of 12% from $399,849,000 in the year-earlier quarter. Net income increased 22% to $33,597,000 or $0.49 per diluted share, from $27,563,000 or $0.40 per diluted share in the fourth quarter of fiscal 2002.

For full-year 2003, consolidated sales totaled $1,656,956,000, an increase of 17% from $1,415,515,000 in fiscal 2002. During the year, Patterson successfully integrated two acquisitions into its North American dental operation: Thompson Dental Company (acquired in early April 2002) and Distribution Quebec Dentaire, Inc. (acquired in July 2002). As discussed throughout the past year, the size of the Thompson acquisition caused it to account for a higher proportion of Patterson’s dental sales in fiscal 2003 in comparison to the historic contribution from acquisitions of approximately two to three percentage points of annual sales growth. However, excluding the impact of acquisitions, North American dental sales increased approximately 9% to 10% in fiscal 2003, which compares favorably with the historic internal growth rate of this operation. Sales of the Webster Veterinary Supply unit increased 20% in the fourth quarter to $53,307,000. Webster was acquired in the first quarter of fiscal 2002. Assuming this unit had been acquired at the beginning of fiscal 2002, Webster’s sales increased 10% in fiscal 2003 to $185,794,000.

Income before the cumulative effect of an accounting change for goodwill was $116,320,000 or $1.70 per diluted share in fiscal 2003, up 22% from $95,290,000 or $1.40 per diluted share in fiscal 2002. After giving effect to the accounting change, which resulted in a one-time, non-cash benefit of $0.05 per diluted share, net income came to $1.75 in fiscal 2003.

Peter L. Frechette, chairman and chief executive officer, commented: “Patterson’s fourth quarter and full-year operating results are extremely encouraging, reflecting the vitality of the dental and veterinary supply markets as well as our ability to continue gaining share in each. Strong performances posted by our dental and veterinary supply operations generated fourth quarter earnings in excess of our previously-reported financial guidance. Sales of dental equipment grew strongly during this period, paced by robust demand for such new-technology products as the CEREC^® 3 dental restorative system and digital radiography. The strong sales growth of these product lines clearly indicates that Patterson is exceptionally well-positioned to meet the expanding need among dentists for equipment that will strengthen office productivity, improve clinical outcomes and enhance the profitability of their practices. Sales of software, which plays a key role in the turnkey digital solutions that Patterson provides dental offices, also were up from the year-earlier level, reflecting the increasingly positive impact of effective sales and marketing initiatives started earlier in the year. Consumable dental supplies achieved targeted sales levels in the fourth quarter, while our Canadian dental operation posted significantly improved results.”

Frechette added: “We continue to believe that the sustainable, long-term growth rate of our dental operation is four percentage points in excess of the market’s 7% to 9% estimated rate of growth.

Encouraged by the ongoing strength of our Webster veterinary supply unit, we also believe Webster can continue to grow faster than the estimated 6% to 7% growth rate of the U.S. companion-pet veterinary supply market. We remain confident that both operations will continue to gain share in their respective markets, which makes us very optimistic about Patterson’s near and longer-term prospects.”

Fourth Quarter Financial Review

The following review of revenue categories includes the impact of dental acquisitions:

n Sales of consumable dental supplies and printed office products increased 9% in the fourth quarter. Patterson’s dental sales force totaled 1,275 at the end of the fourth quarter.

n Sales of dental equipment and software, including CEREC 3 systems and networking hardware, rose 14% in the fourth quarter.

n Sales of other services and products, consisting primarily of parts, technical service, software support and insurance e-claims, grew 16%.

n Canadian dental sales increased 33%. Excluding currency gains, sales of the Canadian dental operation were up 24% in the fourth quarter.

Fiscal 2004 Guidance

For full-year fiscal 2004, Patterson is forecasting earnings of $2.00 to $2.02 per diluted share.

Sales for the coming year are expected to be four percentage points in excess of the 7% to 9% estimated annual growth rate of the North American dental supply market. For the first quarter of fiscal 2004 ending July 26, Patterson is forecasting earnings of $0.42 to $0.44 per diluted share. The Company believes first quarter sales growth will be at the lower end of the estimated annual range, reflecting the absence of significant incremental revenues from acquisitions as it begins fiscal 2004.

About Patterson Dental Company

Patterson Dental Company is a value-added distributor serving the North American dental supply and companion-pet veterinarian supply markets.

Patterson Dental Supply

As Patterson’s largest business, Patterson Dental Supply provides a virtually complete range of consumable dental products, clinical and laboratory equipment, and value-added services to dentists, dental laboratories, institutions and other healthcare providers throughout North America. Patterson Dental Supply, which is growing significantly faster than its market, has the largest direct sales force in the industry, totaling over 1,200 sales representatives and equipment/software specialists serving the United States and Canada.

Webster Veterinary Supply

Webster is the leading distributor of veterinary supplies to companion-pet veterinary clinics in the eastern United States and the third largest nationally. One of the most respected names in the veterinary supply industry, Webster is a value-added, full-service distributor of consumable supplies, equipment, diagnostic products, vaccines and pharmaceuticals.

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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 and veterinary 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; 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; and risks associated with the dependence on manufacturers of the Company’s products. 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.

PATTERSON DENTAL COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for earnings per share)

(Unaudited)

	Quarter Ended									Twelve Months Ended
	April 26, 2003			Comparable April 27, 2002(a)			Historical April 27, 2002			April 26, 2003			Comparable April 27, 2002(a)			Historical April 27, 2002
Net sales	$	447,326		$	399,849		$	399,849		$	1,656,956		$	1,415,515		$	1,415,515
Gross profit		155,872			140,302			140,302			574,586			494,180			494,180
Operating expenses		104,722			96,224			97,098			395,638			343,537			347,000
Operating income		51,150			44,078			43,204			178,948			150,643			147,180
Other income, net		2,689			605			827			7,454			4,158			5,043
Income before income taxes and cumulative effect of accounting change		53,839			44,683			44,031			186,402			154,801			152,223
Income taxes		20,242			16,723			16,468			70,082			57,948			56,933
Income before cumulative effect accounting change		33,597			27,960			27,563			116,320			96,853			95,290
Cumulative effect of accounting change		—			—			—			3,372			—			—
Net income	$	33,597		$	27,960		$	27,563		$	119,692		$	96,853		$	95,290
Before cumulative effect of accounting change:
Earnings per share – basic	$	0.50		$	0.41		$	0.41		$	1.71		$	1.43		$	1.41
Earnings per share – diluted	$	0.49		$	0.41		$	0.40		$	1.70		$	1.42		$	1.40
After cumulative effect of accounting change:
Earnings per share – basic	$	0.50		$	0.41		$	0.41		$	1.76		$	1.43		$	1.41
Earnings per share – diluted	$	0.49		$	0.41		$	0.40		$	1.75		$	1.42		$	1.40
Shares:
Basic		67,760			67,774			67,774			67,831			67,700			67,700
Diluted		68,273			68,312			68,312			68,447			68,201			68,201
Gross margin		34.8	%		35.1	%		35.1	%		34.7	%		34.9	%		34.9	%
Operating expenses as a % of sales		23.4	%		24.1	%		24.3	%		23.9	%		24.3	%		24.5	%
Operating income as a % of sales		11.4	%		11.0	%		10.8	%		10.8	%		10.6	%		10.4	%
Effective tax rate, before cumulative effect of accounting change		37.6	%		37.4	%		37.4	%		37.6	%		37.4	%		37.4	%
Return on net sales, before cumulative effect of accounting change		7.5	%		7.0	%		6.9	%		7.0	%		6.8	%		6.7	%

(a) Comparable results exclude goodwill amortization.

PATTERSON DENTAL COMPANY

SUPPLEMENTARY FINANCIAL DATA

(In thousands)

(Unaudited)

	Quarter Ended					Twelve Months Ended
	April 26, 2003		April 27, 2002			April 26, 2003		April 27, 2002
Consolidated Net Sales
Consumable and printed products	$	279,078	$	251,848		$	1,044,447	$	908,731
Equipment and software		132,822		117,093			481,061		392,683
Other		35,426		30,908			131,448		114,101
Total	$	447,326	$	399,849		$	1,656,956	$	1,415,515
Canada	$	33,307	$	25,130		$	112,352	$	92,524
Veterinary Supply
Consumable and printed products	$	50,958	$	41,655		$	174,766	$	157,648	(a)
Equipment		1,564		1,905			7,714		6,507	(a)
Other		785		948			3,314		4,295	(a)
Total	$	53,307	$	44,508		$	185,794	$	168,450	(a)
Other Income
Amortization of deferred credits		—	$	221			—	$	885
Interest income		2,485		633			7,257		4,387
Interest expense and currency exchange gain (loss)		204		(27	)		197		(229	)
	$	2,689	$	827		$	7,454	$	5,043

(a) Proforma basis, as if the acquisition had occurred at the beginning of fiscal 2002.

PATTERSON DENTAL COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	April 26, 2003		April 27, 2002
	(Unaudited)
ASSETS
Current assets:
Cash and short-term investments	$	217,448	$	151,237
Receivables, net		248,585		222,435
Inventory		125,340		142,457
Prepaid expenses and other current assets		14,744		13,291
Total current assets		606,117		529,420
Property and equipment, net		57,254		57,140
Goodwill and other intangible assets		136,515		126,228
Other		25,537		5,588
Total Assets	$	825,423	$	718,376
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	111,543	$	133,637
Other accrued liabilities		73,926		64,370
Total current liabilities		185,469		198,007
Non-current liabilities		6,268		2,637
Total liabilities		191,737		200,644
Deferred credits		—		3,372
Stockholders' equity		633,686		514,360
Total Liabilities and Stockholders' Equity	$	825,423	$	718,376

PATTERSON DENTAL COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Twelve Months Ended
	April 26, 2003			April 27, 2002
Operating activities:
Income before cumulative effect of accounting change	$	116,320		$	95,290
Depreciation & amortization		12,480			13,398
Change in assets and liabilities, net of acquired		(43,224	)		(19,279	)
Net cash provided by operating activities		85,576			89,409
Investing activities:
Additions to property and equipment, net		(11,356	)		(11,138	)
Acquisitions		(5,326	)		(109,253	)
Sale (Purchase) of investments		2,985			(767	)
Net cash used in investing activities		(13,697	)		(121,158	)
Net cash used in financing activities		(2,683	)		(2,289	)
Net increase (decrease) in cash and cash equivalents	$	69,196		$	(34,038	)