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.
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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, 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 | ) | ||