PDCO Patterson Companies Inc

• 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.

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 DentalSales 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 HealthSales 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 OperationsOn 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 DividendsFor 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 Results1Consolidated 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 OutlookAnderson 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 ReconciliationThe 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, April 25, April 30, April 25, 2016 2015 2016 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 ReplayPatterson’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 MarketPatterson'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 MarketPatterson'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.

  PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)           Three Months Ended Twelve Months Ended April 30, April 25, April 30, April 25, 2016 2015 2016 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,  

  April 25,  

2016 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)                   Total Foreign Animal Health April 30, April 25, Sales Exchange International Internal 2016 2015 Growth Impact Impact 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 data) (Unaudited)                 Three Months Ended Twelve Months Ended April 30, April 25, April 30, April 25, 2016 2015 2016 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, April 25, 2016 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    

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Patterson Companies, Inc.Ann B. Gugino, 651-686-1600Executive Vice President & CFOorJohn M. Wright, 651-686-1364Vice President, Investor Relations