Patterson Companies (PDCO) 8-K Patterson Companies Reports Fiscal 2016 Second Quarter Operating Results

Exhibit 99.1

Patterson Companies Reports Fiscal 2016 Second Quarter Operating Results

• Sales from continuing operations totaled a record $1.4 billion, up 44 percent on a constant currency basis, including the impact of recently acquired Animal Health International, Inc.

• Dental segment sales rose 3.1 percent on a constant currency basis.

• Animal Health segment sales up 109 percent on a constant currency basis, with $414.0 million in sales, attributed to the company’s recent acquisition of Animal Health International, Inc.

• Adjusted EPS from continuing operations¹ totaled $0.56, a 27 percent increase over prior year, which reflects an increase in health insurance claims of $3.2 million after-tax, or $0.03 per diluted share.

• Company reaffirms adjusted earnings guidance for fiscal 2016 of $2.40 to $2.50 per share.

St. Paul, Minn. — November 24, 2015 —Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales from continuing operations of $1.4 billion (see attached Sales Summary for further details) in its fiscal second quarter ended October 31, 2015, up 42 percent over the same period last year. Sales in this fiscal 2016 period include a full quarter of results from the recent Animal Health International, Inc. acquisition.

Adjusted net income from continuing operations¹, which reflects adjustments to exclude certain non-recurring and deal amortization costs, was $55.3 million for the second quarter of fiscal 2016, representing a 26 percent gain over $43.8 million in the same quarter last year. Adjusted diluted earnings per share from continuing operations¹ was $0.56 in the 2016 second quarter, representing a 27 percent year-over-year increase. The second quarter was affected by higher-than-anticipated healthcare claims and the impact of foreign currency. Reported net income from continuing operations was $42.6 million, or $0.43 per diluted share, compared to $41.9 million, or $0.42 per share, in last year’s fiscal second quarter.

“We are in the middle of a significant year for Patterson and continue to build momentum,” said Scott Anderson, chairman and chief executive officer. “We have transformed and repositioned our company in the markets we serve. Our Dental and Animal Health businesses have broadened product offerings and our employees are focused on exceptional customer service and support. We have positioned our company to capitalize on the compelling long-term demographic, technology and productivity trends in our markets.”

Patterson Dental

Sales for Patterson Dental, which represent approximately 43 percent of total sales, rose to $601.3 million, up 3.1 percent on a constant currency basis from the same quarter last year. On that same basis, year-over-year sales by category were as follows:

• Consumable dental supplies improved 3.3 percent

• Equipment sales, led by technology, rose 2.2 percent

• Other services and products, primarily composed of technical service, parts and labor, software support services and office supplies, climbed 4.2 percent

Commented Anderson, “Again this quarter, we saw an encouraging rise in CEREC sales, especially among new users, and steady growth in the consumables category. Results from these two areas confirm our confidence in what we see as stable-to-steadily improving dynamics in the North American dental market.”

Patterson Animal Health

Sales for Patterson Animal Health, which comprises approximately 56 percent of the company’s total sales, more than doubled to $774.5 million. Sales from Animal Health International, Inc. added $414.0 million to the Animal Health segment during the quarter. Without the contribution from Animal Health International, and accounting for normalized changes in veterinary diagnostic manufacturer relationships, segment sales improved 3.2 percent on a constant currency basis, with U.S consumables rising 4.8 percent organically.

Anderson continued, “In our Animal Health business, we continued to integrate the Animal Health International, Inc. acquisition and we are pleased with the business integration process and synergies we are gaining. Moreover, our established U.S. companion animal business performed well, growing sales over 5 percent on a constant currency basis. We are confident in the strengthened scale and market position of our new animal health platform.”

Discontinued Operations

On August 28, 2015, Patterson Companies completed the sale of Patterson Medical to Madison Dearborn Partners for approximately $715 million. As a result of the sale, results of Patterson Medical are classified and reported as discontinued operations in all periods beginning with the fiscal 2016 first quarter.

Share Repurchases and Dividends

Fiscal year to date, Patterson repurchased approximately 3.9 million shares of its outstanding common stock, with a value of $175.8 million, leaving approximately 17 million shares for repurchase under the current authorization. The company also paid $22.2 million in cash dividends to shareholders in the second quarter and $45.4 million in the first half of fiscal 2016.

Year-to-Date Results¹

Consolidated sales from continuing operations for the first six months of fiscal 2016 totaled $2.5 billion, representing a 32 percent year-over-year increase. Adjusted net income from continuing operations was $102.2 million, or $1.03 per diluted share, compared to adjusted net income from continuing operations of $84.0 million, or $0.84 per diluted share, in the year-ago period, as outlined in the Second Quarter and Six-Month Reconciliation table¹. Fiscal 2016 also includes the impact of an extra week.

Business Outlook

Anderson concluded, “We are confident in the opportunities before us and our ability to capitalize on them. The Animal Health integration is on track and we remain focused on our customers’ success. In Dental, we have substantial momentum in our technology sales, stability in consumables and new, expanded opportunities from a broader equipment portfolio. We continue to create value for shareholders as we invest in our business, pay dividends and repurchase shares. We reaffirm our fiscal 2016 adjusted earnings guidance range on a continuing operations basis of $2.40 to $2.50 per diluted share.”

The fiscal 2016 annual financial outlook and adjusted earnings guidance:

• Assumes stable North American and international markets – conditions similar to fiscal 2015

• Includes the impact of an extra week in fiscal 2016 compared to the previous year

• Excludes the impact of additional share repurchases for the remainder of the fiscal year

• Excludes transaction-related costs, integration expense, deal amortization, accelerated debt issuance costs, non-recurring IT initiative training costs and tax costs related to cash repatriation (See Second Quarter and Six-Month Reconciliation table below)

• Excludes the discontinued operations for Medical

¹ Second Quarter and Six-Month Reconciliation

The following non-GAAP table is provided to adjust reported net income and earnings per share for the impact of tax affected one-time costs, current and prior deal-amortization costs and tax costs related to cash repatriation. Management believes that the adjusted net income and EPS amounts may provide a helpful representation of the company’s current quarter performance.

(Dollars in thousands, except EPS)
	Three Months Ended				Six Months Ended
	October 31, 2015		October 25, 2014		October 31, 2015		October 25, 2014
Net Income from Continuing Operations - Reported	$	42,563	$	41,865	$	62,874	$	80,190
Transaction-Related Costs		677		—		9,979		—
Deal Amortization		6,974		1,917		11,586		3,837
Integration Expense		1,328		—		2,054		—
Accelerated Debt Issuance Costs		3,205		—		3,205		—
Non-Recurring IT Training Costs		30		—		175		—
Tax Impact of Repatriation of Cash		500		—		12,300		—
Net Income from Continuing Operations - Adjusted	$	55,277	$	43,782	$	102,173	$	84,027
Diluted Earnings Per Share from Continuing Operations - Reported	$	0.43	$	0.42	$	0.63	$	0.80
Transaction-Related Costs		0.01		—		0.10		—
Deal Amortization		0.07		0.02		0.12		0.04
Integration Expense		0.01		—		0.02		—
Accelerated Debt Issuance Costs		0.03		—		0.03		—
Non-Recurring IT Training Costs		—		—		—		—
Tax Impact of Repatriation of Cash		0.01		—		0.12		—
Diluted Earnings Per Share from Continuing Operations - Adjusted*	$	0.56	$	0.44	$	1.03	$	0.84

* Fiscal 2016 year-to-date EPS does not foot due to rounding

Second Quarter Conference Call and Replay

Patterson’s second quarter earnings conference call will start at 10 a.m. Eastern today. Investors can listen to a live webcast of the conference call at www.pattersoncompanies.com. The conference call will be archived on Patterson’s website. A replay of the second quarter conference call can be heard for one week at 888-203-1112 and by providing the Conference ID 404442, when prompted.

About Patterson Companies, Inc.

Patterson Companies, Inc. is a value-added distributor serving the dental and animal health markets.

Dental Market

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.

Animal Health Market

Patterson Animal Health, formerly Patterson Veterinary, is a leading, full-line distributor in North America and the U.K. of animal health products, services and technologies to both the production-animal and companion-pet markets.

This press release contains certain 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 Patterson’s ability to control. Forward-looking statements generally can be identified by words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of Patterson or the price of Patterson stock. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to the other risks and important factors contained and identified in Patterson’s filings with the Securities and Exchange Commission, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, any of which could cause actual results to differ materially from the forward-looking statements. Any forward-looking statement in this press release speaks only as of the date on which it is made. Except to the extent required under the federal securities laws, Patterson does not intend to update or revise the forward-looking statements.

For additional information contact:

Ann B. Gugino

Executive Vice President & CFO

651-686-1600

John Wright

Vice President, Investor Relations

651-686-1364

Source: Patterson Companies, Inc.

# # #

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	October 31, 2015			October 25, 2014			October 31, 2015			October 25, 2014
Net sales	$	1,389,210		$	978,220		$	2,532,080		$	1,917,176
Gross profit		330,899			259,287			619,143			509,904
Operating expenses		247,436			187,147			473,503			371,768
Operating income from continuing operations		83,463			72,140			145,640			138,136
Other expense, net		(16,200	)		(7,767	)		(27,673	)		(15,165	)
Income from continuing operations before taxes		67,263			64,373			117,967			122,971
Income taxes		24,700			22,508			55,093			42,781
Net income from continuing operations		42,563			41,865			62,874			80,190
Net income from discontinued operations		(7,142	)		11,913			2,250			23,877
Net income	$	35,421		$	53,778		$	65,124		$	104,067
Basic earnings per share:
Continuing operations	$	0.43		$	0.42		$	0.64		$	0.81
Discontinued operations		(0.07	)		0.12			0.02			0.24
Net basic earnings per share	$	0.36		$	0.54		$	0.66		$	1.05
Diluted earnings per share:
Continuing operations	$	0.43		$	0.42		$	0.63		$	0.80
Discontinued operations		(0.07	)		0.12			0.02			0.24
Net diluted earnings per share	$	0.36		$	0.54		$	0.65		$	1.04
Shares:
Basic		98,525			98,802			98,981			99,066
Diluted		99,185			99,376			99,674			99,779
Dividends declared per common share	$	0.22		$	0.20		$	0.44		$	0.40
Gross margin - reported		23.8	%		26.5	%		24.5	%		26.6	%
Operating expenses as a % of net sales - adjusted		16.8	%		18.9	%		17.3	%		19.1	%
Adjustments1		1.0			0.2			1.4			0.3
Operating expenses as a % of net sales - reported		17.8	%		19.1	%		18.7	%		19.4	%
Operating income as a % of net sales - adjusted		7.0	%		7.7	%		7.1	%		7.5	%
Adjustments1		(1.0	)		(0.3	)		(1.3	)		(0.3	)
Operating income as a % of net sales - reported		6.0	%		7.4	%		5.8	%		7.2	%
Effective tax rate - adjusted		35.9	%		34.8	%		35.2	%		34.6	%
Adjustments1		0.8			0.2			11.5			0.2
Effective tax rate - reported		36.7	%		35.0	%		46.7	%		34.8	%

¹  Refer to the press release for the definition of adjustments to reported results

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	October 31, 2015		April 25, 2015
	(Unaudited)
ASSETS
Current assets:
Cash and short-term investments	$	95,451	$	400,632
Receivables		734,461		586,263
Inventory		752,849		408,422
Prepaid expenses and other current assets		83,169		59,561
Current assets held for sale		—		118,347
Total current assets		1,665,930		1,573,225
Property and equipment, net		272,190		204,133
Goodwill and other intangible assets		1,354,674		424,949
Investments and other		159,044		109,605
Long-term assets held for sale		—		635,794
Total assets	$	3,451,838	$	2,947,706
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	492,469	$	323,294
Other accrued liabilities		209,896		215,075
Current maturities of long-term debt		15,991		—
Borrowings on revolving credit		80,000		—
Current liabilities held for sale		—		39,316
Total current liabilities		798,356		577,685
Long-term debt		1,034,884		725,000
Other non-current liabilities		255,341		81,484
Long-term liabilities held for sale		—		49,414
Total liabilities		2,088,581		1,433,583
Stockholders’ equity		1,363,257		1,514,123
Total liabilities and stockholders’ equity	$	3,451,838	$	2,947,706

PATTERSON COMPANIES, INC.

SALES SUMMARY

(Dollars in thousands)

(Unaudited)

	October 31, 2015		October 25, 2014		Total Sales Growth			Foreign Exchange Impact			Animal Health International Impact			Internal Growth
Three Months Ended
Consolidated net sales
Consumable1	$	1,087,489	$	686,165		58.5	%		(2.2	)%		60.7	%		—	%
Equipment and software		207,809		204,409		1.7			(1.7	)		0.3			3.1
Other1		93,912		87,646		7.1			(1.4	)		(1.0	)		9.5
Total	$	1,389,210	$	978,220		42.0	%		(2.0	)%		42.6	%		1.4	%
Dental
Consumable1	$	332,436	$	326,562		1.8	%		(1.5	)%		—	%		3.3	%
Equipment and software		196,767		195,962		0.4			(1.8	)		—			2.2
Other1		72,119		70,112		2.9			(1.3	)		—			4.2
Total	$	601,322	$	592,636		1.5	%		(1.6	)%		—	%		3.1	%
Animal Health
Consumable1	$	755,053	$	359,603		110.0	%		(2.8	)%		115.4	%		(2.6	)%
Equipment and software		11,042		8,447		30.7			(0.2	)		—			30.9
Other1		8,358		8,424		(0.8	)		(3.8	)		(11.6	)		14.6
Total	$	774,453	$	376,474		105.7	%		(2.8	)%		110.0	%		(1.5	)%
Corporate
Other1	$	13,435	$	9,110		47.5	%		—	%		—	%		47.5	%
Total	$	13,435	$	9,110		47.5	%		—	%		—	%		47.5	%
Six Months Ended
Consolidated net sales
Consumable1	$	1,982,796	$	1,381,804		43.5	%		(2.4	)%		42.7	%		3.2	%
Equipment and software		361,292		360,803		0.1			(1.6	)		0.3			1.4
Other1		187,992		174,569		7.7			(1.4	)		(0.1	)		9.2
Total	$	2,532,080	$	1,917,176		32.1	%		(2.2	)%		30.8	%		3.5	%
Dental
Consumable1	$	690,488	$	651,852		5.9	%		(1.5	)%		—	%		7.4	%
Equipment and software		340,437		344,745		(1.2	)		(1.7	)		—			0.5
Other1		145,514		138,913		4.8			(1.2	)		—			6.0
Total	$	1,176,439	$	1,135,510		3.6	%		(1.5	)%		—	%		5.1	%
Animal Health
Consumable1	$	1,292,308	$	729,952		77.0	%		(3.3	)%		80.3	%		—	%
Equipment and software		20,855		16,058		29.9			(0.2	)		—			30.1
Other1		18,587		16,764		10.9			(4.4	)		(3.0	)		18.3
Total	$	1,331,750	$	762,774		74.6	%		(3.2	)%		76.8	%		1.0	%
Corporate
Other1	$	23,891	$	18,892		26.5	%		—	%		—	%		26.5	%
Total	$	23,891	$	18,892		26.5	%		—	%		—	%		26.5	%

¹ Certain sales were reclassified from consumable to other in current and prior periods.

PATTERSON COMPANIES, INC.

SUPPLEMENTARY FINANCIAL DATA

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	October 31, 2015			October 25, 2014			October 31, 2015			October 25, 2014
Operating income (loss)
Dental	$	74,094		$	73,427		$	141,346		$	135,976
Animal Health		25,177			14,336			38,149			28,323
Corporate		(15,808	)		(15,623	)		(33,855	)		(26,163	)
	$	83,463		$	72,140		$	145,640		$	138,136
Other (expense) income, net
Interest income	$	629		$	749		$	1,418		$	1,999
Interest expense		(17,154	)		(8,544	)		(29,297	)		(17,312	)
Other		325			28			206			148
	$	(16,200	)	$	(7,767	)	$	(27,673	)	$	(15,165	)

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	October 31, 2015			October 25, 2014
Operating activities:
Net income	$	65,124		$	104,067
Net income from discontinued operations		2,250			23,877
Net income from continuing operations		62,874			80,190
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization		38,400			21,014
Non-cash employee compensation		13,541			11,940
Change in assets and liabilities, net of acquired		(128,782	)		(36,599	)
Net cash (used in) provided by operating activities- continuing operations		(13,967	)		76,545
Net cash (used in) provided by operating activities- discontinued operations		(38,985	)		21,850
Net cash (used in) provided by operating activities		(52,952	)		98,395
Investing activities:
Additions to property and equipment, net of disposals		(40,978	)		(29,190	)
Acquisitions and equity investments		(1,105,229	)		—
Proceeds from sale		48,744			40,775
Purchase of investments		—			(543	)
Net cash (used in) provided by investing activities- continuing operations		(1,097,463	)		11,042
Net cash provided by investing activities- discontinued operations		715,430			4,598
Net cash (used in) provided by investing activities		(382,033	)		15,640
Financing activities:
Dividends paid		(45,356	)		(40,174	)
Share repurchases		(160,579	)		(47,539	)
Proceeds from issuance of long-term debt, net		988,400			—
Draw on revolver		80,000			—
Retirement of long-term debt		(674,125	)		—
Other financing activities		2,894			844
Net cash provided by (used in) financing activities		191,234			(86,869	)
Effect of exchange rate changes on cash		(8,058	)		(7,202	)
Net change in cash and cash equivalents	$	(251,809	)	$	19,964