Patterson Companies, Inc. (Nasdaq: PDCO) today reported that consolidated sales totaled $1,059.5 million in its fiscal first quarter, ended July 26, 2014, an increase of more than 20 percent from $880.1 million in the year-earlier period. Net income was $50.3 million, or $0.50 per diluted share, compared to net income of $45.9 million, or $0.45 per diluted share, in the year-ago period. Fiscal 2015 first quarter results included $173.6 million of consolidated sales and an earnings contribution of $0.02 per diluted share from the acquisition in the United Kingdom of National Veterinary Services Limited (NVS), which closed on August 16, 2013.
“We are pleased with the trends we saw in the fiscal first quarter and the business generally performed within our expectations”
“We are pleased with the trends we saw in the fiscal first quarter and the business generally performed within our expectations,” said Scott Anderson, chairman and chief executive officer. “With the actions we took in fiscal 2014 to increase our efficiency, coupled with the long-term investments we are making to build on our capabilities, we believe we have better positioned the company for success through fiscal 2015 and for the long-term. Aided by the investments, we are focused on improving our execution against those strategies to generate consistent performance and maximize shareholder value.”
During the fiscal 2015 first quarter, the Dental unit generated sales growth in both consumables and basic equipment. Sales for Patterson Dental improved slightly from the year earlier period, on a constant currency basis, to $556.0 million, while the negative impact of currency exchange reduced reported sales to $552.7 million. Patterson Dental comprised a little more than half of total company sales in the period. By category, again on a constant currency basis, versus the year-ago quarter, sales of:
- Consumable dental supplies rose 2.5 percent;
- Dental equipment declined 7.3 percent overall, but rose by high-single digits excluding CEREC trade-ups in the prior year; and
- Other services and products, consisting primarily of technical service, parts and labor, software support services and artificial teeth, increased 7.8 percent.
Anderson stated: “In the fiscal first quarter we saw positive trends in sales of dental consumables. We are the proven leader in the dental equipment market, offering best-in-class technology and basic equipment that is wrapped with Patterson’s industry-leading after-sales support platform. We saw this continue to play out during the first quarter as we performed well in new unit sales of the CEREC Omnicam® and basic dental equipment. Growth in these product categories did not offset the successful Omnicam trade-up program from the prior fiscal year. We remain confident in the growth prospects for our dental equipment for fiscal 2015.”
First quarter fiscal 2015 sales for the Veterinary unit increased nearly 94 percent from the prior year period to $386.3 million. Patterson Veterinary now constitutes more than one-third of the company’s total sales. U.S. sales, which exclude NVS, were up nearly 7 percent from the previous year, totaling approximately $212.7 million. For U.S. veterinary sales, versus the year-ago first quarter:
- Consumable sales totaled $201.5 million, up more than 7 percent from prior year levels;
- Equipment sales declined slightly to $7.4 million; and
- Other services and products, consisting primarily of technical service, parts and labor, and software support services, increased nearly 12 percent.
Anderson said, “We saw strong growth in consumable sales, reflecting an improved selling environment in North America, as well as the addition of new product lines. We also continue to be very pleased with NVS, our U.K.-based veterinary business, and its contribution to our performance. First quarter results for that business exceeded our expectations and were aided by a more intense flea and tick season in the U.K. We are confident that we will continue to take advantage of the growth opportunities that result from our expanded geographic footprint.”
Sales for Patterson Medical, the rehabilitation supply and equipment business, totaled $120.6 million in the fiscal first quarter. During fiscal 2014, the company divested certain non-core assets in this segment. Excluding the impact from these divestitures, year-over-year sales performance was essentially flat. Patterson Medical represented a little more than 11 percent of total company sales.
Commented Anderson: “Fiscal first quarter performance in our medical business was in line with our expectations. With the divestitures behind us and a new management team in place, we are positioned to execute on our growth strategies. We have aligned our business around those areas with strategic value and where we have core competency. We are confident in our future success.”
Share Repurchases and Dividends
During the fiscal 2015 first quarter, Patterson repurchased approximately 1.1 million shares of its outstanding common stock, with a value of $43.9 million, leaving approximately 21 million shares for repurchase under the current authorization. The company also paid $20 million in cash dividends to shareholders.
Commented Anderson: “We are maintaining our earnings guidance range for fiscal 2015 of $2.20-$2.30 per diluted share. We believe that the recent change announced by IDEXX Laboratories, Inc., to move to a direct sales and distribution model in the veterinary market effective January 1, 2015, does not materially impact our fiscal 2015 outlook and we expect to mitigate the potential reduction in net income from this move. Again, this year we are focused on execution in order to capitalize on the growth opportunities that will come from the investments we are making and the strategies we are implementing to further enhance our product and service offering.”
First Quarter Conference Call and Replay
Patterson’s fiscal first quarter earnings conference call will start at 10 a.m. Eastern today. A slide presentation reviewing the company’s operational performance for the quarter and a link to the audio webcast will be posted at www.pattersoncompanies.com. The conference call will be archived on Patterson’s website. The first-quarter fiscal 2015 earnings conference call replay will be available beginning at 12 p.m. CT (1:00 p.m. ET) today, through 12:00 p.m. CT (1:00 p.m. ET) on Thursday, August 28, 2014. Interested persons may dial 888-203-1112 and provide the Conference ID 1392199, when prompted.
About Patterson Companies, Inc.
Patterson Companies, Inc. is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets.
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.
Patterson Veterinary is a leading distributor in the U.S. and U.K. of consumable veterinary supplies, equipment and software, diagnostic products, vaccines and pharmaceuticals predominantly to companion-pet veterinary clinics.
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.
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; potential disruptions in our operations during our enterprise resource planning implementation; 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.