EX-99.1 2 pdco4302016-exhibit991.htm EXHIBIT 99.1 Exhibit


Patterson Companies Reports Fiscal 2016 Fourth-Quarter Operating Results

•
Fourth-quarter sales reached $1.5 billion, up 41.6 percent on a constant currency basis, including the impact of sales from Animal Health International, Inc.
•
On the same basis, full fiscal-year sales rose to $5.4 billion, up 39.5 percent.
•
Quarterly adjusted earnings from continuing operations1 totaled $0.77 per diluted share, up 35.1 percent over the prior year.
•
Company achieves full fiscal-year adjusted earnings from continuing operations1 of $2.47 per diluted share.
•
Company establishes adjusted earnings guidance for fiscal 2017 of $2.60 to $2.70 per diluted share.

St. Paul, Minn. - May 26, 2016 - Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $1.5 billion (see attached Sales Summary for further details) in its fiscal fourth quarter ended April 30, 2016, up 41 percent over the same period last year. Sales in this fiscal 2016 period include results from the acquisition of Animal Health International, Inc.

Reported net income from continuing operations was $65.6 million, or $0.68 per diluted share, compared to $53.5 million, or $0.54 per diluted share, in last year’s fiscal fourth quarter. Adjusted net income from continuing operations1, which excludes certain non-recurring and deal amortization costs, totaled $74.1 million for the fourth quarter of fiscal 2016, a 32 percent gain over $56.3 million in the same quarter last year. Adjusted earnings per diluted share from continuing operations1 was $0.77 in the 2016 fourth quarter, a 35 percent year-over-year improvement.

“Patterson Companies completed fiscal 2016 with solid bottom-line performance that reflects the additional operational discipline that we will continue to build into our businesses,” said Scott Anderson, chairman, president and chief executive officer. “In our Animal Health segment, integration initiatives remained on pace during the quarter and our realized synergies were on plan. Although we were pleased with bottom-line results within our Dental segment, we did not meet our revenue expectations and intend to capitalize on opportunities to improve segment results to better reflect the industry leadership we have built.”

Anderson continued, “Overall, in fiscal 2016, we achieved multiple milestones that will move us significantly closer to transforming into two highly focused and efficient business segments with strong growth prospects.”

Patterson Dental
Sales for Patterson Dental, which represent approximately 46 percent of total company sales, were $662.1 million, slightly down 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 rose 3.3 percent
•
Equipment sales declined 6.9 percent, primarily reflecting lower digital equipment sales, partially offset by improved CEREC sales, which reached a record level in the quarter


•
Other services and products, primarily composed of technical service, parts and labor, software support services and office supplies, climbed 3.6 percent

Anderson said, “During the fourth quarter, we delivered record CEREC sales and an increase in consumable sales that was ahead of the growth in the end markets that we serve. Sales of digital equipment, which faced a tough year-over-year comparison, underperformed our expectations. We continue to shape our approach to meet the changing needs of our markets and customers and to enhance our performance.”

Patterson Animal Health
Sales for Patterson Animal Health, which comprise approximately 54 percent of the company’s total sales, more than doubled to $780.8 million. Sales from Animal Health International, Inc. contributed $403.6 million to the segment during the quarter. Excluding the contribution from Animal Health International, Inc., sales improved 8.2 percent on a constant currency basis, largely driven by a 10.5 percent increase in the U.S. and a 5.0 percent improvement in the U.K. Changes in selling arrangement for certain products benefited consolidated Animal Health segment sales by 2 to 3 percent.

Anderson added, “The solid performance in our industry-leading Animal Health segment this quarter was again led by our U.S companion animal business, as well as a strong contribution from our U.K. operations. As forecasted, livestock end-market conditions continued to create headwinds for our production animal business during the period. However, we are pleased with our integration progress and the synergies we are achieving, and we remain focused on sales execution.”

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 for all periods presented.

Share Repurchases and Dividends
For the full fiscal year, Patterson repurchased approximately 4.4 million shares of its outstanding common stock, with a value of $200 million, leaving approximately 16 million shares for repurchase under the current authorization. Patterson did not repurchase shares during the fiscal 2016 fourth quarter. The company also paid $23.6 million in cash dividends to shareholders in the fourth quarter and $90.6 million in fiscal 2016.

Year-to-Date Results1 
Consolidated sales for fiscal 2016 totaled $5.4 billion, a 38 percent year-over-year increase. Reported net income from continuing operations was $185.7 million, or $1.90 per diluted share, compared to reported net income from continuing operations of $180.1 million, or $1.81 per diluted share, in the year-ago period. Adjusted net income from continuing operations was $241.4 million, or $2.47 per diluted share, compared to adjusted net income from continuing operations of $188.7 million, or $1.89 per diluted share, in the year-ago period, as outlined in the Fourth-Quarter and Full-Year Reconciliation table1. Fiscal 2016 also includes the impact of an extra week.

Business Outlook
Anderson concluded, “With the portfolio changes we made in fiscal 2016, we have taken the initial steps toward repositioning Patterson Companies for more sustainable and profitable growth in the future. In fiscal 2017, we will deploy our enterprise resource planning initiative, further shape our approach in the Dental segment, capture additional synergies within the Animal Health segment, intensify our focus on sales execution and seek strategic acquisitions. These are the key milestones toward achieving our larger growth goals ahead and I am confident in our ability to meet them. With this in mind, we are establishing our adjusted earnings guidance for fiscal 2017 of $2.60 to $2.70 per diluted share.”



The fiscal 2017 annual financial outlook and adjusted earnings guidance:
 
•
Assumes stable North American and international markets
•
Excludes the impact of additional share repurchases
•
Excludes new acquisitions
•
Excludes transaction-related costs, integration and business restructuring expenses and deal amortization (See Fourth-Quarter and Full-Year Reconciliation table below)
•
Includes $25 million step up in operating expense associated with the ERP implementation

1Fourth-Quarter and Full-Year Reconciliation
The following non-GAAP table is provided to adjust reported net income and diluted earnings per share for the impact of tax affected one-time costs, current and prior-year deal amortization costs and tax costs related to cash repatriation. Management believes that the adjusted net income and diluted earnings per share amounts may provide a helpful representation of the company’s current quarter performance.

(Dollars in thousands, except EPS)
 
 
 
 
 
 
 
 
Three Months Ended
 
Twelve Months Ended
 
April 30, 2016
 
April 25, 2015
 
April 30, 2016
 
April 25, 2015
Net income from continuing operations - reported
$
65,620

 
$
53,459

 
$
185,684

 
$
180,083

Transaction-related costs
353

 
928

 
10,360

 
928

Deal amortization
6,910

 
1,954

 
25,417

 
7,721

Integration expense
863

 
—

 
3,842

 
—

Accelerated debt issuance costs
—

 
—

 
3,205

 
—

Non-recurring IT training costs
349

 
—

 
601

 
—

Tax impact of repatriation of cash
—

 
—

 
12,300

 
—

Net income from continuing operations - adjusted
$
74,095

 
$
56,341

 
$
241,409

 
$
188,732

 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations - reported
$
0.68

 
$
0.54

 
$
1.90

 
$
1.81

Transaction-related costs
—

 
0.01

 
0.11

 
0.01

Deal amortization
0.07

 
0.02

 
0.26

 
0.08

Integration expense
0.01

 
—

 
0.04

 
—

Accelerated debt issuance costs
—

 
—

 
0.03

 
—

Non-recurring IT training costs
—

 
—

 
0.01

 
—

Tax impact of repatriation of cash
—

 
—

 
0.13

 
—

Diluted earnings per share from continuing operations - adjusted*
$
0.77

 
$
0.57

 
$
2.47

 
$
1.89


*May not foot due to rounding

Fourth-Quarter Conference Call and Replay
Patterson’s fourth-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 fourth-quarter conference call can be heard for one week at 888-510-1786 and by providing the Conference ID 4390254, when prompted.
About Patterson Companies, Inc.
Patterson Companies, Inc. is a value-added distributor serving the dental and animal health markets.
Dental Market
Patterson's Dental segment 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's Animal Health segment is a leading distributor of products, services and technologies to both the production and companion animal health markets in North America and the U.K.
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 M. 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
 
Twelve Months Ended
 
April 30,
2016
 
April 25,
2015
 
April 30,
2016
 
April 25,
2015
 
 
 
 
 
 
 
 
Net sales
$
1,453,770

 
$
1,035,061

 
$
5,386,703

 
$
3,910,865

 
 
 
 
 
 
 
 
Gross profit
363,741

 
288,203

 
1,322,748

 
1,060,549

 
 
 
 
 
 
 
 
Operating expenses
257,397

 
199,130

 
975,035

 
755,963

 
 
 
 
 
 
 
 
Operating income from continuing operations
106,344

 
89,073

 
347,713

 
304,586

 
 
 
 
 
 
 
 
Other expense, net
(8,543
)
 
(7,132
)
 
(46,020
)
 
(30,268
)
 
 
 
 
 
 
 
 
Income from continuing operations before taxes
97,801

 
81,941

 
301,693

 
274,318

 
 
 
 
 
 
 
 
Income taxes
32,181

 
28,482

 
116,009

 
94,235

 
 
 
 
 
 
 
 
Net income from continuing operations
65,620

 
53,459

 
185,684

 
180,083

Net income (loss) from discontinued operations
—

 
11,059

 
1,500

 
43,178

Net income
$
65,620

 
$
64,518

 
$
187,184

 
$
223,261

 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.69

 
$
0.54

 
$
1.91

 
$
1.82

Discontinued operations
—

 
0.11

 
0.02

 
0.44

            Net basic earnings per share
$
0.69

 
$
0.65

 
$
1.93

 
$
2.26

 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
 
 
 
 
 
 
 
Continuing operations
$
0.68

 
$
0.54

 
$
1.90

 
$
1.81

Discontinued operations
—

 
0.11

 
0.01

 
0.43

            Net diluted earnings per share
$
0.68

 
$
0.65

 
$
1.91

 
$
2.24

 
 
 
 
 
 
 
 
Shares:
 
 
 
 
 
 
 
   Basic
95,460

 
98,981

 
97,222

 
98,989

   Diluted
96,121

 
99,677

 
97,902

 
99,694

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.24

 
$
0.22

 
$
0.90

 
$
0.82

 
 
 
 
 
 
 
 
Gross margin - reported
25.0
 %
 
27.8
 %
 
24.6
 %
 
27.1
 %
 
 
 
 
 
 
 
 
Operating expenses as a % of net sales - adjusted
16.8
 %
 
18.8
 %
 
17.0
 %
 
19.0
 %
Adjustments1
0.9

 
0.4

 
1.1

 
0.3

Operating expenses as a % of net sales - reported
17.7
 %
 
19.2
 %
 
18.1
 %
 
19.3
 %
 
 
 
 
 
 
 
 
Operating income as a % of net sales - adjusted
8.2
 %
 
9.0
 %
 
7.6
 %
 
8.1
 %
Adjustments1
(0.9
)
 
(0.4
)
 
(1.1
)
 
(0.3
)
Operating income as a % of net sales - reported
7.3
 %
 
8.6
 %
 
6.5
 %
 
7.8
 %
 
 
 
 
 
 
 
 
Effective tax rate - adjusted
33.3
 %
 
34.7
 %
 
34.2
 %
 
34.2
 %
Adjustments1
(0.4
)
 
0.1

 
4.3

 
0.2

Effective tax rate - reported
32.9
 %
 
34.8
 %
 
38.5
 %
 
34.4
 %
 
 
 
 
 
 
 
 
1 Refer to the press release for the definition of adjustments to reported results


PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 
April 30,
2016
 
April 25,
2015
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and short-term investments
$
137,453

 
$
400,632

Receivables
796,693

 
586,263

Inventory
722,140

 
408,422

Prepaid expenses and other current assets
91,255

 
59,561

Current assets held for sale
—

 
118,347

           Total current assets
1,747,541

 
1,573,225

Property and equipment, net
293,315

 
204,133

Goodwill and other intangible assets
1,325,889

 
424,949

Long-term receivables, net and other
154,059

 
107,147

Long-term assets held for sale
—

 
635,794

           Total assets
$
3,520,804

 
$
2,945,248

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
566,253

 
$
323,294

Other accrued liabilities
226,582

 
215,075

Current maturities of long-term debt
16,500

 
—

Borrowings on revolving credit
20,000

 
—

Current liabilities held for sale
—

 
39,316

           Total current liabilities
829,335

 
577,685

Long-term debt
1,022,155

 
722,542

Other non-current liabilities
227,568

 
81,484

Long-term liabilities held for sale
—

 
49,414

           Total liabilities
2,079,058

 
1,431,125

Stockholders' equity
1,441,746

 
1,514,123

           Total liabilities and stockholders' equity
$
3,520,804

 
$
2,945,248




PATTERSON COMPANIES, INC.
SALES SUMMARY
(Dollars in thousands)
(Unaudited)
 
April 30,
2016
 
April 25,
2015
 
Total
Sales
Growth
 
Foreign
Exchange
Impact
 
Animal Health
International
Impact
 
Internal
Growth
Three Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net sales
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
1,111,287

 
$
677,236

 
64.1
 %
 
(1.4
)%
 
59.6
 %
 
5.9
 %
Equipment and software
246,930

 
268,363

 
(8.0
)
 
(0.5
)
 
—

 
(7.5
)
Other1
95,553

 
89,462

 
6.8

 
(0.6
)
 
0.2

 
7.2

Total
$
1,453,770

 
$
1,035,061

 
40.5
 %
 
(1.1
)%
 
39.0
 %
 
2.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Dental
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
354,563

 
$
344,873

 
2.8
 %
 
(0.5
)%
 
—
 %
 
3.3
 %
Equipment and software
234,222

 
252,859

 
(7.4
)
 
(0.5
)
 
—

 
(6.9
)
Other1
73,359

 
71,106

 
3.2

 
(0.4
)
 
—

 
3.6

Total
$
662,144

 
$
668,838

 
(1.0
)%
 
(0.5
)%
 
—
 %
 
(0.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
Animal Health
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
756,724

 
$
332,363

 
127.7
 %
 
(2.3
)%
 
121.4
 %
 
8.6
 %
Equipment and software
12,708

 
15,504

 
(18.0
)
 
(0.1
)
 
—

 
(17.9
)
Other1
11,354

 
8,114

 
39.9

 
(3.2
)
 
2.1

 
41.0

Total
$
780,786

 
$
355,981

 
119.3
 %
 
(2.3
)%
 
113.4
 %
 
8.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
Other1
$
10,840

 
$
10,242

 
5.8
 %
 
—
 %
 
—
 %
 
5.8
 %
Total
$
10,840

 
$
10,242

 
5.8
 %
 
—
 %
 
—
 %
 
5.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net sales
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
4,153,921

 
$
2,697,581

 
54.0
 %
 
(2.0
)%
 
51.8
 %
 
4.2
 %
Equipment and software
857,001

 
865,013

 
(0.9
)
 
(1.2
)
 
—

 
0.3

Other1
375,781

 
348,271

 
7.9

 
(1.2
)
 
(0.3
)
 
9.4

Total
$
5,386,703

 
$
3,910,865

 
37.7
 %
 
(1.8
)%
 
35.7
 %
 
3.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Dental
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
1,378,886

 
$
1,319,407

 
4.5
 %
 
(1.3
)%
 
—
 %
 
5.8
 %
Equipment and software
806,993

 
818,342

 
(1.4
)
 
(1.3
)
 
—

 
(0.1
)
Other1
290,355

 
277,254

 
4.7

 
(1.1
)
 
—

 
5.8

Total
$
2,476,234

 
$
2,415,003

 
2.5
 %
 
(1.3
)%
 
—
 %
 
3.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Animal Health
 
 
 
 
 
 
 
 
 
 
 
Consumable1
$
2,775,035

 
$
1,378,174

 
101.4
 %
 
(2.8
)%
 
101.4
 %
 
2.8
 %
Equipment and software
50,008

 
46,671

 
7.2

 
(0.1
)
 
—

 
7.3

Other1
37,206

 
31,725

 
17.3

 
(3.8
)
 
(3.4
)
 
24.5

Total
$
2,862,249

 
$
1,456,570

 
96.5
 %
 
(2.7
)%
 
95.8
 %
 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
 
 
 
 
 
 
 
Other1
$
48,220

 
$
39,292

 
22.7
 %
 
—
 %
 
—
 %
 
22.7
 %
Total
$
48,220

 
$
39,292

 
22.7
 %
 
—
 %
 
—
 %
 
22.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
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 amounts)
(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
April 30,
2016
 
April 25,
2015
 
April 30,
2016
 
April 25,
2015
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
Dental
$
88,722

 
$
86,333

 
$
312,176

 
$
300,357

Animal Health
30,210

 
16,483

 
94,318

 
56,670

Corporate
(12,588
)
 
(13,743
)
 
(58,781
)
 
(52,441
)
Total
$
106,344

 
$
89,073

 
$
347,713

 
$
304,586

 
 
 
 
 
 
 
 
Other (expense) income, net
 
 
 
 
 
 
 
Interest income
$
916

 
$
970

 
$
2,830

 
$
4,026

Interest expense
(10,134
)
 
(7,869
)
 
(50,065
)
 
(33,693
)
Other
675

 
(233
)
 
1,215

 
(601
)
Total
$
(8,543
)
 
$
(7,132
)
 
$
(46,020
)
 
$
(30,268
)



PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Twelve Months Ended
 
April 30,
2016
 
April 25,
2015
 
 
 
 
Operating activities:
 
 
 
Net income
$
187,184

 
$
223,261

Net income from discontinued operations
1,500

 
43,178

Net income from continuing operations
185,684

 
180,083

Adjustments to reconcile net income from continuing operations
        to net cash provided by operating activities:
 
 
 
      Depreciation & amortization
82,383

 
44,523

      Non-cash employee compensation
28,851

 
23,070

      Change in assets and liabilities, net of acquired
(102,045
)
 
(42,612
)
Net cash provided by operating activities- continuing operations
194,873

 
205,064

Net cash (used in) provided by operating activities- discontinued operations
(38,544
)
 
57,627

Net cash provided by operating activities
156,329

 
262,691

Investing activities:
 
 
 
   Additions to property and equipment, net of disposals
(79,354
)
 
(60,662
)
   Acquisitions and equity investments
(1,106,583
)
 
(10,515
)
   Proceeds from sale of securities
48,744

 
40,775

   Other investing activities
22,320

 
17,492

Net cash used in investing activities- continuing operations
(1,114,873
)
 
(12,910
)
Net cash provided by investing activities- discontinued operations
714,239

 
3,311

Net cash used in investing activities
(400,634
)
 
(9,599
)
Financing activities:
 
 
 
   Dividends paid
(90,597
)
 
(81,760
)
   Share repurchases
(200,000
)
 
(47,539
)
   Proceeds from issuance of long-term debt, net
988,400

 
250,000

   Retirement of long-term debt
(682,375
)
 
(250,000
)
Settlement of swap
—

 
(29,003
)
   Draw on revolver
20,000

 
—

   Other financing activities
7,441

 
7,367

Net cash provided by (used in) financing activities
42,869

 
(150,935
)
Effect of exchange rate changes on cash
(8,371
)
 
(19,805
)
Net change in cash and cash equivalents
$
(209,807
)
 
$
82,352