Exhibit 99
Patterson Companies Reports Improved Third Quarter Operating Results
St. Paul, MN—February 21, 2008—Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $776,946,000 for the third quarter of fiscal 2008 ended January 26, an increase of 10% from $709,494,000 in the third quarter of fiscal 2007. This year’s third quarter encompassed one less selling day than the year-earlier period. Including this selling day in Patterson’s third quarter results would have had the effect of increasing consolidated sales by one to two percentage points. Net income came to $60,364,000 or $0.45 per diluted share, up 3% from $58,591,000 or $0.43 per diluted share in the third quarter of fiscal 2007.
Third quarter revenue and earnings growth was consistent with Patterson’s expectations. Revenues benefited from solidly higher sales of dental equipment, including basic equipment and CEREC 3D® dental restorative systems. As forecasted, earnings growth was affected by reduced gross margins, resulting largely from a shift in the quarter’s sales mix and pressure from the ongoing expansion of the medical unit’s branch office structure. In addition, Patterson’s results in last year’s third quarter included a nonrecurring $1.7 million tax benefit.
Sales of Patterson Dental, Patterson’s largest business, increased 9% to $584,942,000 in this year’s third quarter.
• | Sales of consumable dental supplies and printed office products increased 4%, or by 5% to 6% after giving effect to the reduced number of selling days in the quarter. |
• | Sales of dental equipment increased a strong 13% in the third quarter. Sales of basic dental equipment, including digital radiography systems and related software, rose 14% during this period, while sales of the CEREC 3D® dental restorative system were up 10% year-over-year. |
• | Sales of other services and products, consisting primarily of technical service parts and labor, software support services and artificial teeth, increased 21% in the third quarter. |
Sales of the Webster Veterinary unit increased 14% in the third quarter of fiscal 2008 to $107,620,000. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, rose 8% to $84,384,000, which included contributions from the branch offices that have been opened during the past year.
James W. Wiltz, president and chief executive officer, commented: “We are encouraged by Patterson’s third quarter operating results, which were driven in large part by the performance of our Patterson Dental unit. In addition to solid sales of consumable dental supplies, our dental business benefited from a strong rebound in equipment sales. We also are encouraged by the 10% year-over-year sales growth of the CEREC line. Now that the market transition to CEREC’s new software and crown milling chamber is largely behind us, we are starting to see a growing level of momentum in CEREC system sales. We believe the sales progress generated in the third quarter for both CEREC systems and basic dental equipment should continue in this year’s fourth quarter.”
He continued: “Patterson’s veterinary business remained strong during this period, even though the third quarter is the slowest period of our fiscal year for sales of such seasonal product as heartworm and flea and tick medications. We also are encouraged by the initial results of Patterson Medical’s branch office strategy, which is part of this unit’s initiative to strengthen its value-added business model. Three new branches were opened during the quarter, bringing to 12 the number of offices Patterson Medical was operating.”
During the third quarter, cash totaling $264 million was used to purchase approximately 8 million Patterson common shares. Under the expanded stock repurchase plan that was authorized on December 24, 2007, approximately 17 million shares remain available for repurchase.
Patterson is forecasting earnings of $0.50 to $0.52 per diluted share for the fourth quarter of fiscal 2008 ending April 26, which reflects the impact of shares repurchased in the third quarter. The Company also tightened its full-year 2008 guidance to $1.69 to $1.71.
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 February 28, 2008 by dialing 1-303-590-3000 and providing the 11108940 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 26, 2008 | January 27, 2007 | January 26, 2008 | January 27, 2007 | |||||||||||||
Net sales | $ | 776,946 | $ | 709,494 | $ | 2,220,341 | $ | 2,059,255 | ||||||||
Gross profit | 269,138 | 250,266 | 758,571 | 708,309 | ||||||||||||
Operating expenses | 172,024 | 157,580 | 500,637 | 469,065 | ||||||||||||
Operating income | 97,114 | 92,686 | 257,934 | 239,244 | ||||||||||||
Other income (expense), net | 402 | (1,701 | ) | 1,762 | (5,044 | ) | ||||||||||
Income before taxes | 97,516 | 90,985 | 259,696 | 234,200 | ||||||||||||
Income taxes | 37,152 | 32,394 | 98,047 | 85,788 | ||||||||||||
Net income | $ | 60,364 | $ | 58,591 | $ | 161,649 | $ | 148,412 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.45 | $ | 0.43 | $ | 1.20 | $ | 1.08 | ||||||||
Diluted | $ | 0.45 | $ | 0.43 | $ | 1.19 | $ | 1.07 | ||||||||
Shares: | ||||||||||||||||
Basic | 134,050 | 135,601 | 135,247 | 137,189 | ||||||||||||
Diluted | 134,935 | 136,567 | 136,201 | 138,154 | ||||||||||||
Gross margin | 34.6 | % | 35.3 | % | 34.2 | % | 34.4 | % | ||||||||
Operating expenses as a % of net sales | 22.1 | % | 22.2 | % | 22.5 | % | 22.8 | % | ||||||||
Operating income as a % of net sales | 12.5 | % | 13.1 | % | 11.6 | % | 11.6 | % | ||||||||
Effective tax rate | 38.1 | % | 35.6 | % | 37.8 | % | 36.6 | % | ||||||||
Return on net sales | 7.8 | % | 8.3 | % | 7.3 | % | 7.2 | % |
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January 26, | April 28, | |||||
2008 | 2007 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and short-term investments | $ | 171,228 | $ | 241,791 | ||
Receivables, net | 366,838 | 361,401 | ||||
Inventory | 288,777 | 250,207 | ||||
Prepaid expenses and other current assets | 36,681 | 33,091 | ||||
Total current assets | 863,524 | 886,490 | ||||
Property and equipment, net | 133,980 | 131,952 | ||||
Goodwill and other intangible assets | 773,147 | 762,930 | ||||
Other | 159,019 | 158,948 | ||||
Total Assets | $ | 1,929,670 | $ | 1,940,320 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 187,031 | $ | 182,761 | ||
Other accrued liabilities | 175,631 | 144,694 | ||||
Current maturities of long-term debt | 130,052 | 50,014 | ||||
Total current liabilities | 492,714 | 377,469 | ||||
Long-term debt | 60,057 | 130,010 | ||||
Other non-current liabilities | 70,415 | 53,627 | ||||
Total liabilities | 623,186 | 561,106 | ||||
Stockholders’ equity | 1,306,484 | 1,379,214 | ||||
Total Liabilities and Stockholders’ Equity | $ | 1,929,670 | $ | 1,940,320 | ||
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PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
January 26, | January 27, | January 26, | January 27, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Consolidated Net Sales | ||||||||||||||||
Consumable and printed products | $ | 449,721 | $ | 420,934 | $ | 1,393,285 | $ | 1,295,143 | ||||||||
Equipment and software | 262,200 | 234,159 | 643,089 | 602,179 | ||||||||||||
Other | 65,025 | 54,401 | 183,967 | 161,933 | ||||||||||||
Total | $ | 776,946 | $ | 709,494 | $ | 2,220,341 | $ | 2,059,255 | ||||||||
Dental Supply | ||||||||||||||||
Consumable and printed products | $ | 294,638 | $ | 283,183 | $ | 900,175 | $ | 852,492 | ||||||||
Equipment and software | 231,564 | 205,265 | 553,286 | 525,515 | ||||||||||||
Other | 58,740 | 48,700 | 165,713 | 144,050 | ||||||||||||
Total | $ | 584,942 | $ | 537,148 | $ | 1,619,174 | $ | 1,522,057 | ||||||||
Rehabilitation Supply | ||||||||||||||||
Consumable and printed products | $ | 58,481 | $ | 54,057 | $ | 194,599 | $ | 179,784 | ||||||||
Equipment and software | 21,280 | 20,058 | 66,374 | 55,779 | ||||||||||||
Other | 4,623 | 3,968 | 13,236 | 11,896 | ||||||||||||
Total | $ | 84,384 | $ | 78,083 | $ | 274,209 | $ | 247,459 | ||||||||
Veterinary Supply | ||||||||||||||||
Consumable and printed products | $ | 96,602 | $ | 83,694 | $ | 298,511 | $ | 262,867 | ||||||||
Equipment and software | 9,356 | 8,836 | 23,429 | 20,885 | ||||||||||||
Other | 1,662 | 1,733 | 5,018 | 5,987 | ||||||||||||
Total | $ | 107,620 | $ | 94,263 | $ | 326,958 | $ | 289,739 | ||||||||
Other Income (Expense), net | ||||||||||||||||
Interest income | $ | 2,813 | $ | 1,868 | $ | 7,871 | $ | 5,935 | ||||||||
Interest expense | (2,383 | ) | (3,366 | ) | (7,479 | ) | (11,002 | ) | ||||||||
Other | (28 | ) | (203 | ) | 1,370 | 23 | ||||||||||
$ | 402 | $ | (1,701 | ) | $ | 1,762 | $ | (5,044 | ) | |||||||
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PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended | ||||||||
January 26, | January 27, | |||||||
2008 | 2007 | |||||||
Operating activities: | ||||||||
Net income | $ | 161,649 | $ | 148,412 | ||||
Depreciation & amortization | 19,497 | 19,337 | ||||||
Share-based compensation | 5,954 | 5,881 | ||||||
Change in assets and liabilities, net of acquired | (18,967 | ) | (56,718 | ) | ||||
Net cash provided by operating activities | 168,133 | 116,912 | ||||||
Investing activities: | ||||||||
Additions to property and equipment, net of acquired | (16,344 | ) | (14,730 | ) | ||||
Proceeds from disposals of property and equipment | — | 9,163 | ||||||
Acquisitions | (12,967 | ) | (12,665 | ) | ||||
Net cash used in investing activities | (29,311 | ) | (18,232 | ) | ||||
Net cash used in financing activities | (215,865 | ) | (169,089 | ) | ||||
Effect of exchange rate changes on cash | 6,480 | (1,519 | ) | |||||
Net decrease in cash and cash equivalents | $ | (70,563 | ) | $ | (71,928 | ) | ||
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