Exhibit 99
Patterson Companies Reports Improved Third Quarter Sales and Earnings
St. Paul, MN—February 23, 2006—Patterson Companies, Inc. (Nasdaq NMS: PDCO) today reported consolidated sales of $682,402,000 for the third quarter of fiscal 2006 ended January 28, an increase of 7% from $638,005,000 in the year-earlier quarter. Excluding the impact of two acquisitions earlier in fiscal 2006, internally-generated sales rose approximately 4%. The third quarter of fiscal 2006 contained one less selling day than the year-earlier period, which reduced consolidated sales growth by an estimated one to two percentage points. Net income increased 8% to $54,004,000 or $0.39 per diluted share, from $50,137,000 or $0.36 per diluted share in the third quarter of fiscal 2005.
Patterson Dental, Patterson’s largest business, reported sales growth of 6% to $531,884,000 in the third quarter. The September 2005 acquisition of Accu-Bite, Inc., a Michigan-based dental distributor, accounted for approximately three percentage points of Patterson Dental’s third quarter sales growth.
• | Sales of consumable dental supplies and printed office products increased 12% in the third quarter. Excluding Accu-Bite, consumable sales were up 6%. Patterson Dental’s sales force grew to 1,542 at January 28, which includes the addition of Accu-Bite’s sales representatives. |
• | Sales of dental equipment and software were virtually unchanged in the third quarter. During this period, strong sales growth of digital radiography equipment and related software, including the line of CAESY patient education software, largely offset flat sales of basic equipment and modestly lower sales of CEREC 3D® dental restorative systems. This portion of Patterson Dental’s business was confronted by a difficult year-over-year comparison, since sales of basic and new-technology equipment were very strong in the third quarter of fiscal 2005, having increased 30% from the third quarter of 2004. |
• | Sales of other services and products, consisting primarily of parts, technical service, software support, insurance e-claims and equipment contracts increased 13% in the third quarter. |
Sales of the Webster Veterinary unit increased 14% in the third quarter of fiscal 2006 to $80,763,000. As expected, the December 2005 acquisition of Intra Corp, one of the nation’s leading developers of veterinary practice management software marketed under the IntraVet brand name, had a nominal impact on Webster’s third quarter sales growth. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, increased 3% in the third quarter to $69,755,000. Excluding the impact of currency translations, Patterson Medical’s sales rose approximately 5%.
James W. Wiltz, president and chief executive officer, commented: “Patterson’s improved third quarter results were paced by continued robust sales of dental consumables and another strong performance by our veterinary business. Moreover, we believe the underlying strength of our dental equipment and software business was demonstrated by its ability to virtually equal its exceptionally strong sales performance in last year’s third quarter. We have implemented programs aimed at returning dental equipment sales growth to more historic norms. Equipment sales are showing signs of strengthening at this early point in the fourth quarter, but this improvement is not occurring as quickly as anticipated.”
He continued: “Our Webster unit is continuing to benefit from the expansion of its geographic marketplace through acquisitions and internal start-ups, in addition to a pharmaceutical distribution agreement with Pfizer. We are particularly encouraged by the strong sales growth of veterinary equipment during the quarter, reflecting the growing positive impact of Webster’s emphasis on this portion of its business. Webster’s equipment initiative was reinforced by the acquisition of the IntraVet software product line, which positions our veterinary unit to optimize the
benefits of digital radiography equipment and thus offer veterinarians a compelling, value-added technology solution. Finally, the third quarter performance of Patterson Medical was consistent with our forecast. This unit’s new management team is evaluating current operations and implementing new sales and marketing programs that are expected to result in stronger growth during the coming fiscal year.”
Wiltz added: “Patterson’s performance in fiscal 2006 has fallen short of our standards, but the corrective actions that we are taking make us optimistic about our future. We believe dental equipment remains one of our strongest long-term opportunities; the momentum of our veterinary unit is continuing to grow; and the process of strengthening Patterson Medical’s performance is well underway.”
Patterson is forecasting earnings of $0.40 to $0.42 per diluted share for the fourth quarter of fiscal 2006 ending April 29, 2006. As a result, the Company reduced its full-year earnings guidance to $1.42 to $1.44 per diluted share from $1.44 to $1.46 per diluted share.
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.
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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 | 904/415-1415 |
Third Quarter Conference Call and Replay
Patterson’s third quarter earnings conference call will start at 10:00 a.m. Eastern today. Investors can listen to a live webcast of the conference call atwww.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 third quarter conference call can be heard through March 2, 2006 by dialing 1-303-590-3000 and providing the 11054185 confirmation code.
PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for earnings per share)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
January 28, 2006 | January 29, 2005 | January 28, 2006 | January 29, 2005 | |||||||||||||
Net sales | $ | 682,402 | $ | 638,005 | $ | 1,919,946 | $ | 1,794,185 | ||||||||
Gross profit | 240,969 | 227,328 | 667,427 | 635,924 | ||||||||||||
Operating expenses | 152,423 | 145,549 | 436,541 | 416,484 | ||||||||||||
Operating income | 88,546 | 81,779 | 230,886 | 219,440 | ||||||||||||
Other expense, net | (2,279 | ) | (1,681 | ) | (4,678 | ) | (6,241 | ) | ||||||||
Income before taxes | 86,267 | 80,098 | 226,208 | 213,199 | ||||||||||||
Income taxes | 32,263 | 29,961 | 84,602 | 79,743 | ||||||||||||
Net income | $ | 54,004 | $ | 50,137 | $ | 141,606 | $ | 133,456 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.39 | $ | 0.37 | $ | 1.03 | $ | 0.98 | ||||||||
Diluted | $ | 0.39 | $ | 0.36 | $ | 1.02 | $ | 0.96 | ||||||||
Shares: | ||||||||||||||||
Basic | 137,804 | 136,924 | 137,552 | 136,728 | ||||||||||||
Diluted | 139,275 | 138,960 | 139,214 | 138,788 | ||||||||||||
Gross margin | 35.3 | % | 35.6 | % | 34.8 | % | 35.4 | % | ||||||||
Operating expenses as a % of net sales | 22.3 | % | 22.8 | % | 22.7 | % | 23.2 | % | ||||||||
Operating income as a % of net sales | 13.0 | % | 12.8 | % | 12.1 | % | 12.2 | % | ||||||||
Effective tax rate | 37.4 | % | 37.4 | % | 37.4 | % | 37.4 | % | ||||||||
Return on net sales | 7.9 | % | 7.9 | % | 7.4 | % | 7.4 | % |
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January 28, 2006 | April 30, 2005 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and short-term investments | $ | 187,991 | $ | 245,931 | ||
Receivables, net | 312,954 | 317,168 | ||||
Inventory | 242,573 | 206,405 | ||||
Prepaid expenses and other current assets | 30,453 | 30,533 | ||||
Total current assets | 773,971 | 800,037 | ||||
Property and equipment, net | 125,019 | 97,178 | ||||
Goodwill and other intangible assets | 765,257 | 746,079 | ||||
Other | 156,523 | 42,007 | ||||
Total Assets | $ | 1,820,770 | $ | 1,685,301 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 145,236 | $ | 160,954 | ||
Other accrued liabilities | 140,121 | 141,307 | ||||
Current maturities of long-term debt | 20,027 | 20,027 | ||||
Total current liabilities | 305,384 | 322,288 | ||||
Long-term debt | 285,022 | 301,530 | ||||
Other non-current liabilities | 54,162 | 46,411 | ||||
Total liabilities | 644,568 | 670,229 | ||||
Stockholders’ equity | 1,176,202 | 1,015,072 | ||||
Total Liabilities and Stockholders’ Equity | $ | 1,820,770 | $ | 1,685,301 | ||
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PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
January 28, 2006 | January 29, 2005 | January 28, 2006 | January 29, 2005 | |||||||||||||
Consolidated Net Sales | ||||||||||||||||
Consumable and printed products | $ | 406,447 | $ | 365,408 | $ | 1,224,797 | $ | 1,122,411 | ||||||||
Equipment and software | 227,771 | 229,349 | 554,558 | 542,008 | ||||||||||||
Other | 48,184 | 43,248 | 140,591 | 129,766 | ||||||||||||
Total | $ | 682,402 | $ | 638,005 | $ | 1,919,946 | $ | 1,794,185 | ||||||||
Dental Supply | ||||||||||||||||
Consumable and printed products | $ | 273,512 | $ | 244,054 | $ | 797,040 | $ | 740,653 | ||||||||
Equipment and software | 215,146 | 217,521 | 520,858 | 509,104 | ||||||||||||
Other | 43,226 | 38,221 | 126,122 | 114,574 | ||||||||||||
Total | $ | 531,884 | $ | 499,796 | $ | 1,444,020 | $ | 1,364,331 | ||||||||
Rehabilitation Supply | ||||||||||||||||
Consumable and printed products | $ | 59,397 | $ | 55,960 | $ | 194,984 | $ | 185,824 | ||||||||
Equipment | 6,942 | 8,386 | 21,686 | 24,086 | ||||||||||||
Other | 3,416 | 3,162 | 10,435 | 10,048 | ||||||||||||
Total | $ | 69,755 | $ | 67,508 | $ | 227,105 | $ | 219,958 | ||||||||
Veterinary Supply | ||||||||||||||||
Consumable and printed products | $ | 73,538 | $ | 65,394 | $ | 232,773 | $ | 195,934 | ||||||||
Equipment and software | 5,683 | 3,442 | 12,014 | 8,818 | ||||||||||||
Other | 1,542 | 1,865 | 4,034 | 5,144 | ||||||||||||
Total | $ | 80,763 | $ | 70,701 | $ | 248,821 | $ | 209,896 | ||||||||
Other (Expense) Income, net | ||||||||||||||||
Interest income | $ | 1,106 | $ | 1,533 | $ | 4,681 | $ | 4,034 | ||||||||
Interest expense | (3,470 | ) | (3,303 | ) | (9,656 | ) | (10,852 | ) | ||||||||
Other | 85 | 89 | 297 | 577 | ||||||||||||
$ | (2,279 | ) | $ | (1,681 | ) | $ | (4,678 | ) | $ | (6,241 | ) | |||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended | ||||||||
January 28, 2006 | January 29, 2005 | |||||||
Operating activities: | ||||||||
Net income | $ | 141,606 | $ | 133,456 | ||||
Depreciation & amortization | 16,967 | 20,239 | ||||||
Stock-based compensation | 570 | — | ||||||
Change in assets and liabilities, net of acquired | (43,310 | ) | 37,582 | |||||
Net cash provided by operating activities | 115,833 | 191,277 | ||||||
Investing activities: | ||||||||
Additions to property and equipment, net | (36,721 | ) | (22,590 | ) | ||||
Acquisitions | (39,228 | ) | (72,855 | ) | ||||
Distribution agreement | (100,000 | ) | — | |||||
Sale (purchase) of investments, net | 11,377 | (4,207 | ) | |||||
Net cash used in investing activities | (164,572 | ) | (99,652 | ) | ||||
Net cash provided by (used in) financing activities | 2,176 | (49,442 | ) | |||||
Net (decrease) increase in cash and cash equivalents | $ | (46,563 | ) | $ | 42,183 | |||