EX-99 2 dex99.htm PRESS RELEASE Press Release

Exhibit 99

Patterson Companies Reports Second Quarter Operating Results

St. Paul, MN—November 20, 2008—Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $759,461,000 for the second quarter of fiscal 2009 ended October 25, an increase of 2% from $741,992,000 in the year-earlier quarter. Earnings per diluted share of $0.40 were up from $0.39 in the second quarter of fiscal 2008.

Sales of Patterson Dental, Patterson’s largest business, increased to $536,837,000 in the second quarter. The impact on sales from acquisitions (Leventhal & Sons, Inc. in April 2008 and Denesca in September 2008) was largely offset by unfavorable movements in the Canadian dollar during the second quarter.

 

   

Sales of consumable dental supplies and printed office products were virtually unchanged in comparison to last year’s second quarter.

 

   

Sales of dental equipment and software rose 1% from the year-earlier period. Sales of basic dental equipment, including chairs, units and lighting, increased 7% from the second quarter of fiscal 2008.

 

   

Sales of other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, increased 2% in the second quarter.

Sales of the Webster Veterinary unit increased 14% in the second quarter of fiscal 2009 to $123,589,000. The October 2008 acquisition of Columbus Serum Company, a full-service distributor of companion-pet veterinary supplies, equipment and pharmaceuticals serving the Midwestern and mid-Atlantic markets, accounted for 10 percentage points of Webster’s second quarter sales increase. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, were $99,035,000, virtually unchanged from the year-earlier level.

Net income of $46,903,000 in this year’s second quarter includes incremental interest expense of $6.9 million ($4.3 million, net of tax) associated with the $525 million of long-term debt financing that was completed in the fourth quarter of fiscal 2008. Patterson used the proceeds of the debt issuance and cash to repurchase 19 million shares of its common stock during the second half of fiscal 2008. Net income was $53,741,000 in the second quarter of fiscal 2008.

James W. Wiltz, president and chief executive officer, commented: “Second quarter operating results of our Patterson Dental unit were below forecasted levels due, we believe, to the impact of the difficult economic environment, particularly in October, on its business. Available evidence indicates that dental patients started deferring higher level and discretionary services, which largely accounted for the soft sales of consumable supplies in the quarter. Reflecting the strengthened focus on sales of dental equipment that we initiated earlier in the year, equipment sales were relatively strong during this period. Much of this growth was generated by orders placed prior to the economic turmoil that erupted during the second quarter. We believe it is possible that the continuation of challenging economic conditions may affect the equipment purchasing decisions of dental practitioners at least over the near-term.”

He continued: “Our Webster Veterinary and Patterson Medical units were affected by the difficult economic environment to a lesser degree than Patterson Dental. Webster received a strong sales contribution from its acquisition of Columbus Serum, and the integration of this large and well- established distributor is proceeding on schedule. This acquisition is an important strategic investment, since it expands Webster’s geographic coverage, improves its economies of scale and allows Webster to accelerate deployment of its value-added model. Patterson Medical’s second quarter performance was adversely affected by the conversion to Patterson’s management information systems at the start of the quarter. Issues related to this complex systems transition have been largely resolved.

Wiltz added: “Given expectations for a continuation of weak economic conditions and the anticipated impact on Patterson’s sales growth, we are reducing our cost structure by at least an


annualized $20 to $25 million. These actions encompass a range of initiatives, including a hiring freeze except for sales personnel as well as wage freezes throughout the company. The initial impact of this expense savings will be realized in the third quarter, and the full impact will be apparent in the fourth quarter. While we feel it is prudent to challenge all levels of our expense structure during these uncertain times, we fully intend to continue investing wisely in our business. Moreover, our operating cash flows are forecasted to remain strong and provide us with ample resources for our growth initiatives and to take advantage of acquisition opportunities. Reflecting these factors, we are forecasting earnings of $0.43 to $0.45 per diluted share for the third quarter of fiscal 2009 ending January 24, 2009. We also have reduced our fiscal 2009 guidance to $1.73 to $1.77 per diluted share from our previously issued full-year guidance of $1.94 to $1.98 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; unexpected loss of key senior management personnel; 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


Second Quarter Conference Call and Replay

Patterson’s second quarter earnings conference call will start at 10:00 a.m. Eastern today. Investors can listen to a live webcast of the conference call at www.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 second quarter conference call can be heard through November 27 by dialing 1-303-590-3000 and providing the 11122337 confirmation code.


PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except for earnings per share)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     October 25,
2008
    October 27,
2007
    October 25,
2008
    October 27,
2007
 

Net sales

   $ 759,461     $ 741,992     $ 1,503,320     $ 1,443,395  

Gross profit

     253,575       252,299       505,305       489,433  

Operating expenses

     170,973       166,686       343,109       328,613  
                                

Operating income

     82,602       85,613       162,196       160,820  

Other expense, net

     (7,514 )     755       (13,426 )     1,360  
                                

Income before taxes

     75,088       86,368       148,770       162,180  

Income taxes

     28,185       32,627       55,903       60,895  
                                

Net income

   $ 46,903     $ 53,741     $ 92,867     $ 101,285  
                                

Earnings per share:

        

Basic

   $ 0.40     $ 0.40     $ 0.79     $ 0.75  

Diluted

   $ 0.40     $ 0.39     $ 0.78     $ 0.74  

Shares:

        

Basic

     117,421       135,907       117,656       135,846  

Diluted

     118,328       136,923       118,520       136,834  

Gross margin

     33.4 %     34.0 %     33.6 %     33.9 %

Operating expenses as a % of net sales

     22.5 %     22.5 %     22.8 %     22.8 %

Operating income as a % of net sales

     10.9 %     11.5 %     10.8 %     11.1 %

Effective tax rate

     37.5 %     37.8 %     37.6 %     37.5 %

 

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

     October 25,
2008
   April 26,
2008
     (Unaudited)     

ASSETS

     

Current assets:

     

Cash and short-term investments

   $ 256,643    $ 308,164

Receivables, net

     365,189      364,050

Inventory

     311,637      281,238

Prepaid expenses and other current assets

     38,366      31,589
             

Total current assets

     971,835      985,041

Property and equipment, net

     158,418      148,932

Goodwill and other intangible assets

     924,906      881,750

Other

     55,929      60,650
             

Total Assets

   $ 2,111,088    $ 2,076,373
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 188,523    $ 194,405

Other accrued liabilities

     123,666      141,652

Current maturities of long-term debt

     130,006      130,010
             

Total current liabilities

     442,195      466,067

Long-term debt

     525,333      525,024

Other non-current liabilities

     80,862      80,495
             

Total liabilities

     1,048,390      1,071,586

Stockholders’ equity

     1,062,698      1,004,787
             

Total Liabilities and Stockholders’ Equity

   $ 2,111,088    $ 2,076,373
             

 

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PATTERSON COMPANIES, INC.

SUPPLEMENTARY FINANCIAL DATA

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     October 25,
2008
    October 27,
2007
    October 25,
2008
    October 27,
2007
 

Consolidated Net Sales

        

Consumable and printed products

   $ 493,731     $ 480,646     $ 991,914     $ 945,376  

Equipment and software

     200,966       199,377       382,258       378,973  

Other

     64,764       61,969       129,148       119,046  
                                

Total

   $ 759,461     $ 741,992     $ 1,503,320     $ 1,443,395  
                                

Dental Supply

        

Consumable and printed products

   $ 309,679     $ 310,130     $ 622,272     $ 605,537  

Equipment and software

     170,642       168,989       321,007       321,722  

Other

     56,516       55,386       113,443       106,973  
                                

Total

   $ 536,837     $ 534,505     $ 1,056,722     $ 1,034,232  
                                

Rehabilitation Supply

        

Consumable and printed products

   $ 68,819     $ 69,796     $ 139,192     $ 136,118  

Equipment and software

     24,393       23,919       49,186       45,094  

Other

     5,823       4,848       11,357       8,613  
                                

Total

   $ 99,035     $ 98,563     $ 199,735     $ 189,825  
                                

Veterinary Supply

        

Consumable and printed products

   $ 115,233     $ 100,720     $ 230,450     $ 203,721  

Equipment and software

     5,931       6,469       12,065       12,157  

Other

     2,425       1,735       4,348       3,460  
                                

Total

   $ 123,589     $ 108,924     $ 246,863     $ 219,338  
                                

Other (Expense) Income, net

        

Interest income

   $ 1,870     $ 2,710     $ 3,792     $ 5,058  

Interest expense

     (8,183 )     (2,599 )     (16,235 )     (5,096 )

Other

     (1,201 )     644       (983 )     1,398  
                                
   $ (7,514 )   $ 755     $ (13,426 )   $ 1,360  
                                

Note: Certain amounts previously reported have been reclassified to conform with the current presentation.

 

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

     Six Months Ended  
     October 25,
2008
    October 27,
2007
 

Operating activities:

    

Net income

   $ 92,867     $ 101,285  

Depreciation & amortization

     13,864       12,324  

Share-based compensation

     3,938       3,978  

Change in assets and liabilities, net of acquired

     (52,839 )     (8,748 )
                

Net cash provided by operating activities

     57,830       108,839  

Investing activities:

    

Additions to property and equipment, net

     (17,495 )     (9,180 )

Acquisitions

     (69,877 )     (11,539 )
                

Net cash used in investing activities

     (87,372 )     (20,719 )

Net cash provided by financing activities

     5,650       7,111  

Effect of exchange rate changes on cash

     (27,629 )     8,120  
                

Net (decrease) increase in cash and cash equivalents

   $ (51,521 )   $ 103,351