- Delivered first quarter GAAP earnings of $0.25 per diluted
share; adjusted earnings1 were $0.33 per diluted share, an increase
of 22 percent year-over-year.
- Increased adjusted operating margin1 by 40 bps
year-over-year to 3.8 percent, due to aggressive cost savings
measures, sequentially improving sales during the first quarter and
operational execution.
- Dental and Animal Health segments recovering despite ongoing
end market disruption due to COVID-19 as year-over-year sales
performance improved each fiscal month throughout the first
quarter.
Patterson Companies, Inc. (Nasdaq: PDCO) today reported
consolidated net sales of approximately $1.25 billion (see attached
Sales Summary for further details) in its fiscal first quarter
ended July 25, 2020, a decline of 6.2 percent compared to the same
period last year. Internal sales, which are adjusted for the
effects of currency translation, decreased 5.8 percent.
Reported net income attributable to Patterson Companies, Inc.
for the first quarter of fiscal 2021 was $24.4 million, or $0.25
per diluted share, compared to $30.0 million, or $0.32 per diluted
share, in the first quarter of fiscal 2020. Adjusted net income1
attributable to Patterson Companies, Inc., which excludes deal
amortization costs, integration and business restructuring
expenses, legal reserve costs and an investment gain, totaled $31.5
million for the first quarter of fiscal 2021, or $0.33 per diluted
share, compared to $25.4 million in the same quarter of fiscal
2020, or $0.27 per diluted share. The 22 percent year-over-year
increase in the period is primarily attributed to the benefit of
temporary COVID-19 related expense savings along with sequentially
improving sales during the first quarter.
“We are pleased with our team’s performance in the first quarter
as we delivered year-over-year adjusted earnings growth of 22
percent even with the ongoing challenges due to COVID-19,” said
Mark Walchirk, President and CEO of Patterson Companies. “We are
encouraged by the sequential sales trends across our Dental,
Companion Animal and Production Animal end markets, which improved
each month during the first quarter.
“The aggressive cost savings measures we took at the onset of
the pandemic, combined with improving sales trends and focused
execution, drove our strong first quarter performance. While many
of our cost saving measures remain in place, certain temporary
actions such as furloughs and salary reductions have ended. Going
forward, as the dynamics across our end markets continue to evolve,
we are prepared to take additional cost saving actions, if
necessary.
“I am incredibly proud of how our Patterson team has responded
these past six months to support our customers during this
challenging time as they continue to provide essential services in
their communities. Our ongoing dedication to helping our customers
succeed has reinforced and deepened our full-service value
proposition and positioned Patterson for continued success. While
uncertainty related to COVID-19 remains, we are encouraged by our
performance in the current environment and believe we have the
right strategy in place to drive long-term value for our
shareholders.”
Patterson Dental
Reported net sales in our Dental segment for the first quarter
of fiscal 2021, which represented approximately 35 percent of total
company sales, were $430.3 million compared to $501.1 million in
the first quarter of last year. Internal sales decreased 13.9
percent compared to the fiscal 2020 first quarter.
Patterson Animal Health
Reported net sales in our Animal Health segment for the first
quarter of fiscal 2021, which comprised approximately 65 percent of
the company’s total sales, were $812.2 million compared to $817.5
million in the first quarter of last year. Internal sales for the
segment decreased 0.2 percent from the fiscal 2020 first
quarter.
Balance Sheet and Capital
Allocation
For the first quarter of fiscal 2021, Patterson Companies used
$229.8 million of cash from operating activities and collected
deferred purchase price receivables of $139.5 million, resulting in
a use of cash of $90.3 million, compared to generating $60.5
million in the first quarter of fiscal 2020. Free cash flow1 (see
definition below and attached free cash flow table) generated
during the first quarter of fiscal 2021 is down $148.4 million
compared to the first quarter of fiscal 2020 due to an increased
level of working capital in the quarter.
During the first quarter of fiscal 2021, Patterson Companies
declared a quarterly cash dividend of $0.26 per share, which was
paid during the second quarter of fiscal 2021.
Fiscal 2021 Guidance
Due to the continued uncertainty surrounding the COVID-19
pandemic and its impact on business operations, Patterson is not
providing fiscal 2021 financial guidance at this time.
1Non-GAAP Financial Measures
The Reconciliation of GAAP to non-GAAP Measures table appearing
behind the accompanying financial information is provided to adjust
reported GAAP measures, namely operating income, income before
taxes, income tax expense, net income, net income attributable to
Patterson Companies, Inc. and diluted earnings per share
attributable to Patterson Companies, Inc., for the impact of deal
amortization, integration and business restructuring expenses,
legal reserve costs, and an investment gain, along with the related
tax effects of these items.
The term “free cash flow” used in this release is defined as net
cash used in operating activities less capital expenditures plus
collection of deferred purchase price receivables.
In addition, the term “internal sales” used in this release
represents net sales adjusted to exclude the impact of foreign
currency. Foreign currency impact represents the difference in
results that is attributable to fluctuations in currency exchange
rates the company uses to convert results for all foreign entities
where the functional currency is not the U.S. dollar. The company
calculates the impact as the difference between the current period
results translated using the current period currency exchange rates
and using the comparable prior period's currency exchange rates.
The company believes the disclosure of net sales changes in
constant currency provides useful supplementary information to
investors in light of significant fluctuations in currency
rates.
Management believes that these non-GAAP measures may provide a
helpful representation of the company's first-quarter performance
and enable comparison of financial results between periods where
certain items may vary independent of business performance. These
non-GAAP financial measures are presented solely for informational
and comparative purposes and should not be regarded as a
replacement for corresponding, similarly captioned, GAAP
measures.
First-Quarter Conference Call and Replay
Patterson Companies’ fiscal 2021 first-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
the Patterson Companies website. A replay of the fiscal 2021
first-quarter conference call can be heard for one week at
800-585-8367 and by providing the Conference ID 2290833 when
prompted.
About Patterson Companies, Inc.
Patterson Companies, Inc. (Nasdaq: PDCO) 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, and our officers and
representatives may from time to time make, certain
“forward-looking statements” within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995, including statements regarding future financial performance,
and the objectives and expectations of management. Forward-looking
statements often include words such as “believes,” “expects,”
“anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of
similar meaning, or future or conditional verbs, such as “will,”
“should,” “could” or “may.” Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
they are based only on our current beliefs, expectations and
assumptions regarding the future of our business, future plans and
strategies, projections, anticipated events and trends, the economy
and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict
and many of which are outside of our control. Our actual results
and financial condition may differ materially from those indicated
in the forward-looking statements. Therefore, you should not place
undue reliance on any of these forward-looking statements.
Any number of factors could affect our actual results and cause
such results to differ materially from those contemplated by any
forward-looking statements, including, but not limited to, the
following: the effects of the highly competitive dental and animal
health supply markets in which we compete; the COVID-19 pandemic
and measures taken in response thereto; general economic
conditions, including political and economic uncertainty; risks
from disruption to our information systems; our ability to comply
with restrictive covenants in our amended credit agreement; our
dependence on relationships with sales representatives, service
technicians and customers; our ability to realize the long-term
strategic benefits of our acquisition of Animal Health
International; potential disruption of distribution capabilities,
including service issues with third-party shippers; our ability to
provide our sales force and customers with the latest technology;
our dependence on suppliers for the manufacture and supply of the
products we sell; material changes in our purchasing relationship
with suppliers; the risk that private label sales could adversely
affect our relationships with suppliers; our dependence on positive
perceptions of Patterson’s reputation; risks inherent in acquiring
other businesses; the risk that our acquired technology or
developed technology might not be successful in maintaining or
gaining customers; litigation risks, including new or unanticipated
litigation developments and new or unanticipated regulatory
investigations; changes in consumer preferences; regulatory
restrictions; the cyclicality of the livestock market; the outbreak
of an infectious disease within the production animal or companion
animal population; pressure from animal rights groups; adverse
changes in supplier rebates; fluctuations in quarterly financial
results; volatility in the price of our stock; risks from the
expansion of customer purchasing power; increases in
over-the-counter sales of companion animal products; the risks
inherent in international operations, including currency
fluctuations; the effects of health care reform; failure to comply
with regulatory requirements and data privacy laws; cyberattacks or
other privacy or data security breaches; the risk of the products
we sell becoming obsolete or containing undetected errors;
volatility in the financial markets; our dependence on our senior
management; our dependence on leadership development and succession
planning; disruptions from our enterprise resource planning system;
risks associated with shareholder activism; the risk of being
required to record impairment charges; the risk of audit by tax
authorities; risks associated with interest rate fluctuations; and
the risk that our governing documents and Minnesota law may
discourage takeovers and business combinations. The order in which
these factors appear should not be construed to indicate their
relative importance or priority. We caution that these factors may
not be exhaustive, accordingly, any forward-looking statements
contained herein should not be relied upon as a prediction of
actual results.
You should carefully consider these and other relevant factors,
including those risk factors in Part I, Item 1A, (“Risk Factors”)
in our most recent Form 10-K, and information which may be
contained in our other filings with the U.S. Securities and
Exchange Commission, or SEC, when reviewing any forward-looking
statement. Investors should understand it is impossible to predict
or identify all such factors or risks. As such, you should not
consider the foregoing list, or the risks identified in our SEC
filings, to be a complete discussion of all potential risks or
uncertainties.
Any forward-looking statement made by us in this press release
is based only on information currently available to us and speaks
only as of the date on which it is made. We do not undertake any
obligation to release publicly any revisions to any forward-looking
statements whether written or oral, that may be made from time to
time, whether as a result of new information, future developments
or otherwise.
PATTERSON COMPANIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended
July 25, 2020
July 27, 2019
Net sales
$
1,245,837
$
1,328,651
Gross profit
253,816
290,054
Operating expenses
215,944
273,380
Operating income
37,872
16,674
Other income (expense):
Other income, net
2,034
31,917
Interest expense
(6,691
)
(8,690
)
Income before taxes
33,215
39,901
Income tax expense
9,013
10,094
Net income
24,202
29,807
Net loss attributable to noncontrolling
interests
(205
)
(235
)
Net income attributable to Patterson
Companies, Inc.
$
24,407
$
30,042
Earnings per share attributable to
Patterson Companies, Inc.:
Basic
$
0.26
$
0.32
Diluted
$
0.25
$
0.32
Weighted average shares:
Basic
95,189
93,795
Diluted
95,843
94,623
Dividends declared per common share
$
0.26
$
0.26
PATTERSON COMPANIES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
July 25, 2020
April 25, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
119,561
$
77,944
Receivables, net
372,317
416,523
Inventory
700,535
812,194
Prepaid expenses and other current
assets
267,714
236,104
Total current assets
1,460,127
1,542,765
Property and equipment, net
300,041
303,725
Operating lease right-of-use assets,
net
77,515
79,021
Goodwill and identifiable intangibles,
net
444,202
452,229
Long-term receivables, net and other
364,311
337,610
Total assets
$
2,646,196
$
2,715,350
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
549,715
$
862,093
Other accrued liabilities
261,869
182,099
Operating lease liabilities
31,200
30,706
Borrowings on revolving credit
136,000
—
Total current liabilities
978,784
1,074,898
Long-term debt
588,011
587,766
Non-current operating lease
liabilities
47,806
49,854
Other non-current liabilities
176,857
166,388
Total liabilities
1,791,458
1,878,906
Stockholders' equity
854,738
836,444
Total liabilities and stockholders'
equity
$
2,646,196
$
2,715,350
PATTERSON COMPANIES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
July 25, 2020
July 27, 2019
Operating activities:
Net income
$
24,202
$
29,807
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization
19,867
20,632
Investment gain
—
(34,334
)
Non-cash employee compensation
9,583
10,234
Deferred consideration in securitized
receivables
(139,466
)
(105,697
)
Change in assets and liabilities
(143,994
)
34,134
Net cash used in operating activities
(229,808
)
(45,224
)
Investing activities:
Additions to property and equipment
(6,439
)
(8,901
)
Collection of deferred purchase price
receivables
139,466
105,697
Other investing activities
396
—
Net cash provided by investing
activities
133,423
96,796
Financing activities:
Dividends paid
—
(25,538
)
Payments on long-term debt
—
(5,533
)
Draw on revolving credit
136,000
—
Other financing activities
(722
)
(5,085
)
Net cash provided by (used in) financing
activities
135,278
(36,156
)
Effect of exchange rate changes on
cash
2,724
(1,281
)
Net change in cash and cash
equivalents
41,617
14,135
Cash and cash equivalents at beginning of
period
77,944
95,646
Cash and cash equivalents at end of
period
$
119,561
$
109,781
PATTERSON COMPANIES,
INC.
SALES SUMMARY
(Dollars in thousands)
(Unaudited)
July 25, 2020
July 27, 20191
Total Sales
Growth
Foreign Exchange
Impact
Internal Sales
Growth
Three Months
Ended
Consolidated net sales
Consumable
$
1,044,981
$
1,095,184
(4.6
)
%
(0.4
)
%
(4.2
)
%
Equipment and software
129,377
142,533
(9.2
)
(0.2
)
(9.0
)
Value-added services and other
71,479
90,934
(21.4
)
(0.6
)
(20.8
)
Total
$
1,245,837
$
1,328,651
(6.2
)
%
(0.4
)
%
(5.8
)
%
Dental
Consumable
$
256,603
$
303,474
(15.4
)
%
(0.1
)
%
(15.3
)
%
Equipment and software
112,963
125,684
(10.1
)
(0.2
)
(9.9
)
Value-added services and other
60,729
71,978
(15.6
)
(0.7
)
(14.9
)
Total
$
430,295
$
501,136
(14.1
)
%
(0.2
)
%
(13.9
)
%
Animal Health
Consumable
$
788,378
$
791,710
(0.4
)
%
(0.5
)
%
0.1
%
Equipment and software
16,414
16,849
(2.6
)
—
(2.6
)
Value-added services and other
7,361
8,980
(18.0
)
(0.5
)
(17.5
)
Total
$
812,153
$
817,539
(0.7
)
%
(0.5
)
%
(0.2
)
%
Corporate
Value-added services and other
$
3,389
$
9,976
(66.0
)
%
—
%
(66.0
)
%
Total
$
3,389
$
9,976
(66.0
)
%
—
%
(66.0
)
%
1 Certain sales were reclassified between categories to conform
to the current period presentation.
PATTERSON COMPANIES,
INC.
OPERATING INCOME BY
SEGMENT
(In thousands)
(Unaudited)
Three Months Ended
July 25, 2020
July 27, 2019
Operating income (loss)
Dental
$
37,769
$
34,004
Animal Health
17,399
19,624
Corporate
(17,296
)
(36,954
)
Total
$
37,872
$
16,674
PATTERSON COMPANIES,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP MEASURES
(Dollars in thousands, except
per share amounts)
(Unaudited)
For the three months ended July 25,
2020
GAAP
Deal amortization
Integration and business
restructuring expenses
Legal reserve costs
Investment gain
Non-GAAP
Operating income
$
37,872
$
9,253
$
—
$
—
$
—
$
47,125
Other income (expense), net
(4,657
)
—
—
—
—
(4,657
)
Income before taxes
33,215
9,253
—
—
—
42,468
Income tax expense
9,013
2,201
—
—
—
11,214
Net income
24,202
7,052
—
—
—
31,254
Net loss attributable to noncontrolling
interests
(205
)
—
—
—
—
(205
)
Net income attributable to Patterson
Companies, Inc.
$
24,407
$
7,052
$
—
$
—
$
—
$
31,459
Diluted earnings per share attributable to
Patterson Companies, Inc.*
$
0.25
$
0.07
$
—
$
—
$
—
$
0.33
Operating income as a % of sales
3.0
%
3.8
%
Effective tax rate
27.1
%
26.4
%
For the three months ended July 27,
2019
GAAP
Deal amortization
Integration and business
restructuring expenses
Legal reserve costs
Investment gain
Non-GAAP
Operating income
$
16,674
$
9,253
$
1,955
$
17,666
$
—
$
45,548
Other income (expense), net
23,227
—
—
—
(34,334
)
(11,107
)
Income before taxes
39,901
9,253
1,955
17,666
(34,334
)
34,441
Income tax expense
10,094
2,201
494
4,416
(7,884
)
9,321
Net income
29,807
7,052
1,461
13,250
(26,450
)
25,120
Net loss attributable to noncontrolling
interests
(235
)
—
—
—
—
(235
)
Net income attributable to Patterson
Companies, Inc.
$
30,042
$
7,052
$
1,461
$
13,250
$
(26,450
)
$
25,355
Diluted earnings per share attributable to
Patterson Companies, Inc.*
$
0.32
$
0.07
$
0.02
$
0.14
$
(0.28
)
$
0.27
Operating income as a % of sales
1.3
%
3.4
%
Effective tax rate
25.3
%
27.1
%
* May not sum due to rounding
PATTERSON COMPANIES,
INC.
FREE CASH FLOW
(In thousands)
(Unaudited)
Three Months Ended
July 25, 2020
July 27, 2019
Net cash used in operating activities
$
(229,808
)
$
(45,224
)
Additions to property and equipment
(6,439
)
(8,901
)
Collection of deferred purchase price
receivables
139,466
105,697
Free cash flow
$
(96,781
)
$
51,572
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version on businesswire.com: https://www.businesswire.com/news/home/20200903005293/en/
INVESTORS: John M. Wright, Investor Relations COMPANY:
Patterson Companies Inc. TEL: 651.686.1364 EMAIL:
john.wright@pattersoncompanies.com
MEDIA: Patterson Corporate Communications COMPANY:
Patterson Companies Inc. TEL: 651.905.3349 EMAIL:
corporate.communications@pattersoncompanies.com
WEB: pattersoncompanies.com
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