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Patterson Companies Reports Fiscal 2024 Second Quarter Operating Results

  • Second quarter reported net sales increased 1.6 percent year-over-year to $1.65 billion.
  • Internal sales increased 1.0 percent year-over-year, driven by dental consumables growth of 2.9 percent; excluding certain infection control products, internal sales of dental consumables increased 4.7 percent year-over-year.
  • Delivered second quarter GAAP earnings of $0.42 per diluted share and adjusted earnings of $0.50 per diluted share.
  • Returned $85.9 million to shareholders through dividends and share repurchases.
  • Revises fiscal 2024 GAAP earnings guidance to $2.04 to $2.14 per diluted share and adjusted earnings1 guidance of $2.35 to $2.45 per diluted share.

Patterson Companies, Inc. (Nasdaq: PDCO) today reported operating results for its fiscal 2024 second quarter ended October 28, 2023.

“Our team executed well against softer than anticipated demand within our end markets,” said Don Zurbay, President and CEO of Patterson Companies. “Steady patient traffic supported strong performance in our broad and resilient dental consumables portfolio that was offset by lower sales in certain high-tech dental equipment categories. Our Animal Health segment benefitted from the depth of our offering and omnichannel presence across a wide range of animal species. We delivered healthy sales growth in our production animal business while our companion animal business was impacted by moderating veterinary clinic visits.

“The macro environment challenges we faced during the second quarter do not change our core objectives or continued conviction in making strategic investments in our distribution capabilities, software offerings, and value-added services. While we have adjusted our fiscal 2024 guidance to reflect our current expectations for the near term, we remain confident in the enduring strength and resiliency of the Dental and Animal Health end markets. We continue to believe that our talented team and comprehensive value proposition make Patterson well positioned to drive enhanced growth, profitability and value creation over the long term.”

Second Quarter Fiscal 2024 Results

Consolidated net sales were $1.65 billion (see attached Sales Summary for further details), an increase of 1.6 percent compared to the same period last year. Internal sales, which are adjusted for the effects of currency translation, contributions from recent acquisitions and the net impact of an interest rate swap, increased 1.0 percent over the prior year period.

Reported net income attributable to Patterson Companies, Inc. for the second quarter of fiscal 2024 was $40.0 million, or $0.42 per diluted share, compared to $54.1 million, or $0.55 per diluted share, in the second quarter of fiscal 2023. Adjusted net income1 attributable to Patterson Companies, Inc., which excludes deal amortization, totaled $47.3 million for the second quarter of fiscal 2024, or $0.50 per diluted share, compared to $61.2 million, or $0.63 per diluted share, in the second quarter of fiscal 2023. The year-over-year decrease in reported and adjusted net income attributable to Patterson Companies, Inc. in the second quarter of fiscal 2024 was primarily due to lower sales of dental technology equipment and increased operating expenses compared to the prior year period.

Patterson Dental

Reported net sales in the Dental segment for the second quarter of fiscal 2024 were $626.4 million. Internal sales decreased 0.2 percent compared to the fiscal 2023 second quarter. Internal sales of consumables increased 2.9 percent year-over-year. Excluding the deflationary impact of certain infection control products, internal sales of consumables increased 4.7 percent year-over-year. Compared to the prior year period, internal sales of equipment decreased 6.3 percent and internal sales of value-added services increased 3.1 percent.

Patterson Animal Health

Reported net sales in the Animal Health segment for the second quarter of fiscal 2024 were $1.02 billion. Internal sales growth of 0.2 percent year-over-year was driven by growth in the production animal business, which more than offset reduced sales in the companion animal business. Within the Animal Health segment, internal sales of consumables decreased 0.6 percent, equipment increased 0.9 percent and value-added services increased 67.9 percent.

Balance Sheet and Capital Allocation

During the first six months of fiscal 2024, Patterson Companies used $485.3 million of cash from operating activities and collected deferred purchase price receivables of $489.5 million, generating $4.2 million in cash, compared to using $30.5 million in the prior year period. Free cash flow1 (see definition below and attached free cash flow table) during the first six months of fiscal 2024 improved by $28.0 million compared to the first six months of fiscal 2023 due to a decreased level of working capital during the first six months of fiscal 2024.

In the second quarter of fiscal 2024, Patterson declared a quarterly cash dividend of $0.26 per share and returned $24.9 million in cash dividends to shareholders. Also, under an existing share repurchase authorization, the company repurchased approximately $61.0 million of shares during the second quarter of fiscal 2024. Through the first six months of fiscal 2024, Patterson Companies returned $140.8 million to shareholders in the form of cash dividends and share repurchases. At of the end of the second quarter of fiscal 2024, Patterson had approximately $319 million of share repurchase authority remaining on its current share repurchase authorization.

Year-to-Date Results

Consolidated reported net sales for the first six months of fiscal 2024 totaled $3.23 billion, a 2.5 percent year-over-year increase. Internal sales for the first six months of fiscal 2024, which are adjusted for the effects of currency translation, contributions from recent acquisitions and the net impact of an interest rate swap, increased 1.6 percent year-over-year. Through the first six months of fiscal 2024, Dental segment internal sales increased 0.9 percent, including a 3.7 percent increase in consumables, a 6.0 percent decline in equipment and a 4.4 percent increase in value-added services. Through the first six months of fiscal 2024, Animal Health segment internal sales increased 2.0 percent, including 1.4 percent growth in consumables, a 1.3 percent decline in equipment and a 70.1 percent increase in value-added services.

Reported net income attributable to Patterson Companies, Inc. was $71.2 million, or $0.74 per diluted share, compared to $78.7 million, or $0.81 per diluted share in last year's period. Adjusted net income1 attributable to Patterson Companies, Inc., which excludes deal amortization, totaled $85.8 million, or $0.90 per diluted share, compared to $92.9 million, or $0.95 per diluted share, in the year-ago period.

Fiscal 2024 Guidance

Patterson Companies today revised its fiscal 2024 earnings guidance, which is provided on both a GAAP and non-GAAP adjusted1 basis:

  • GAAP earnings are expected to be in the range of $2.04 to $2.14 per diluted share.
  • Non-GAAP adjusted earnings1 are expected to be in the range of $2.35 to $2.45 per diluted share.
  • Our non-GAAP adjusted earnings1 guidance excludes the after-tax impact of:
    • Deal amortization expenses of approximately $29.3 million ($0.31 per diluted share).

Our guidance reflects the strength of our business and competitive positioning, as well as our expectations for the North American and international end markets in which we operate, which we expect to be affected by the ongoing challenges of inflationary trends and higher interest rates as well as additional slow-down in the broader economy. Beyond macroeconomic and geopolitical uncertainty, our guidance further assumes that there are no material adverse developments associated with wide-spread public health concerns.

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 net sales, gross profit, operating expenses, operating income, other income (expense), net, income before taxes, income tax expense, net income, net loss attributable to noncontrolling interests, net income attributable to Patterson Companies, Inc., and diluted earnings per share attributable to Patterson Companies, Inc. for the impact of deal amortization and an interest rate swap along with any related tax effects of these items.

  • Interest rate swap -- Our customer financing net sales include the impact of changes in interest rates on deferred purchase price receivables, as the average interest rate in our contract portfolio may not fluctuate at the same rate as interest rate markets, resulting in an increase or reduction of gain on contract sales.



    We enter into an interest rate swap to hedge a portion of the related interest rate risk. These agreements do not qualify for hedge accounting, and the gains or losses on an interest rate swap are reported in other income and expense in our condensed consolidated statements of operation and other comprehensive income.



    Beginning this quarter and for the first quarter of fiscal 2024, we present a non-GAAP adjustment to reclassify the mark-to-market adjustment on the interest rate swap from other income (expense) to net sales to align the swap impact with the impact on customer financing net sales. We believe adjusted net sales, adjusted gross profit and adjusted operating income, which include the gains and losses on the interest rate swap, provides additional comparability from period to period because they present the impact of interest rate fluctuations, net of the mark-to-market swap adjustment, within adjusted net sales. We note the net impact of interest rate fluctuations has a minimal impact on net income. Deal amortization along with the related tax effect of this item. We believe this adjustment provides comparability with other companies.

The term “free cash flow” used in this release is defined as net cash used in operating activities less capital expenditures plus the collection of deferred purchase price receivables.

In addition, the term “internal sales” used in this release represents net sales adjusted for the effects of currency translation, contributions from recent acquisitions and the net impact of an interest rate swap. 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 excluding the impact of foreign currency, an interest rate swap and recent acquisitions provides useful supplementary information to investors in light of fluctuations in these variables that are independent of our period-over-period performance.

Management believes that these non-GAAP measures may provide a helpful representation of the company’s 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.

Second Quarter Conference Call and Replay

Patterson Companies’ fiscal 2024 second quarter conference call will start at 8:30 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 2024 second quarter conference call can be heard for one week at 1-800-770-2030 and by providing the Conference ID 71954 when prompted.

About Patterson Companies Inc.

Patterson Companies Inc. (Nasdaq: PDCO) connects dental and animal health customers in North America and the U.K. to the latest products, technologies, services and innovative business solutions that enable operational and professional success. Our comprehensive portfolio, distribution network and supply chain is equaled only by our dedicated, knowledgeable people who deliver unrivalled expertise and unmatched customer service and support.

Learn more: pattersoncompanies.com

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: wide-spread public health concerns as we experienced, and may continue to experience, with the COVID-19 pandemic; our dependence on suppliers to manufacture and supply substantially all of the products we sell; potential disruption of distribution capabilities, including service issues with third-party shippers; our dependence on relationships with sales representatives and service technicians to retain customers and develop business; adverse changes in supplier rebates or other purchasing incentives; risks of selling private label products, including the risk of adversely affecting our relationships with suppliers; the risk of technological and market obsolescence for the products we sell; the risk of failing to innovate and develop new and enhanced software and e-services products; our dependence on positive perceptions of Patterson’s reputation; risks associated with illicit human use of pharmaceutical products we distribute; risks inherent in acquiring and disposing of assets or other businesses and risks inherent in integrating acquired businesses; turnover or loss of key personnel or highly skilled employees; risks associated with information systems, software products and cyber-security attacks; risks related to climate change; our ability to comply with restrictive covenants and other limits in our credit agreement; the risk that our governing documents and Minnesota law may discourage takeovers and business combinations; the effects of the highly competitive dental and animal health supply markets in which we compete; the effects of consolidation within the dental and animal health supply markets; exposure to the risks of the animal production business, including changing consumer demand, the cyclical livestock market, weather conditions, the availability of natural resources and other factors outside our control, and the risks of the companion animal business, including the possibility of disease adversely affecting the pet population; exposure to the risks of the health care industry, including changes in demand due to political, economic and regulatory influences and other factors outside our control; increases in over-the-counter sales and e-commerce options; risks from the formation or expansion of GPOs, provider networks and buying groups that may place us at a competitive disadvantage; risks of litigation and government inquiries and investigations, including the diversion of management’s attention, the cost of defending against such actions, the possibility of damage awards or settlements, fines or penalties, or equitable remedies (including but not limited to the revocation of or non-renewal of licenses) and inherent uncertainty; failure to comply with health care fraud or other laws and regulations; change and uncertainty in the health care industry; failure to comply with existing or future U.S. or foreign laws and regulations including those governing the distribution of pharmaceuticals and controlled substances; failure to comply with evolving data privacy laws and regulations; tax legislation; risks inherent in international operations, including currency fluctuations; and uncertain macro-economic conditions, including inflationary pressures.

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

 

Six Months Ended

 

 

October 28,

2023

 

October 29,

2022

 

October 28,

2023

 

October 29,

2022

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,652,772

 

 

$

1,626,204

 

 

$

3,229,517

 

 

$

3,149,469

 

Gross profit

 

 

339,026

 

 

 

328,089

 

 

 

658,081

 

 

 

640,222

 

Operating expenses

 

 

282,123

 

 

 

267,994

 

 

 

562,956

 

 

 

545,283

 

Operating income

 

 

56,903

 

 

 

60,095

 

 

 

95,125

 

 

 

94,939

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income, net

 

 

7,096

 

 

 

18,203

 

 

 

18,997

 

 

 

19,983

 

Interest expense

 

 

(10,642

)

 

 

(7,544

)

 

 

(20,154

)

 

 

(13,107

)

Income before taxes

 

 

53,357

 

 

 

70,754

 

 

 

93,968

 

 

 

101,815

 

Income tax expense

 

 

13,502

 

 

 

17,105

 

 

 

22,983

 

 

 

23,906

 

Net income

 

 

39,855

 

 

 

53,649

 

 

 

70,985

 

 

 

77,909

 

Net loss attributable to noncontrolling interests

 

 

(103

)

 

 

(424

)

 

 

(207

)

 

 

(754

)

Net income attributable to Patterson Companies, Inc.

 

$

39,958

 

 

$

54,073

 

 

$

71,192

 

 

$

78,663

 

Earnings per share attributable to Patterson Companies, Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

0.42

 

 

$

0.56

 

 

$

0.75

 

 

$

0.81

 

Diluted

 

$

0.42

 

 

$

0.55

 

 

$

0.74

 

 

$

0.81

 

Weighted average shares:

 

 

 

 

 

 

 

 

Basic

 

 

94,710

 

 

 

96,913

 

 

 

95,127

 

 

 

96,771

 

Diluted

 

 

95,156

 

 

 

97,552

 

 

 

95,722

 

 

 

97,708

 

Dividends declared per common share

 

$

0.26

 

 

$

0.26

 

 

$

0.52

 

 

$

0.52

 

 

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

October 28, 2023

 

April 29, 2023

 

 

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

113,886

 

$

159,669

Receivables, net

 

 

490,428

 

 

477,384

Inventory

 

 

858,028

 

 

795,072

Prepaid expenses and other current assets

 

 

328,334

 

 

351,011

Total current assets

 

 

1,790,676

 

 

1,783,136

Property and equipment, net

 

 

218,977

 

 

212,283

Operating lease right-of-use assets, net

 

 

101,532

 

 

92,956

Goodwill and identifiable intangibles, net

 

 

368,351

 

 

388,293

Investments

 

 

162,531

 

 

160,022

Long-term receivables, net and other

 

 

247,623

 

 

242,456

Total assets

 

$

2,889,690

 

$

2,879,146

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

688,687

 

$

724,993

Other accrued liabilities

 

 

223,723

 

 

250,949

Operating lease liabilities

 

 

30,132

 

 

28,390

Current maturities of long-term debt

 

 

36,000

 

 

36,000

Borrowings on revolving credit

 

 

170,000

 

 

45,000

Total current liabilities

 

 

1,148,542

 

 

1,085,332

Long-term debt

 

 

449,974

 

 

451,231

Non-current operating lease liabilities

 

 

74,393

 

 

67,376

Other non-current liabilities

 

 

161,692

 

 

156,672

Total liabilities

 

 

1,834,601

 

 

1,760,611

Stockholders' equity

 

 

1,055,089

 

 

1,118,535

Total liabilities and stockholders' equity

 

$

2,889,690

 

$

2,879,146

 

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

October 28,

2023

 

October 29,

2022

 

 

 

 

 

Operating activities:

 

 

 

 

Net income

 

$

70,985

 

 

$

77,909

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

 

42,836

 

 

 

41,090

 

Non-cash employee compensation

 

 

11,650

 

 

 

8,393

 

Non-cash losses (gains) and other, net

 

 

3,166

 

 

 

5,085

 

Change in assets and liabilities:

 

 

 

 

Receivables

 

 

(487,186

)

 

 

(508,811

)

Inventory

 

 

(67,416

)

 

 

(100,596

)

Accounts payable

 

 

(30,911

)

 

 

41,557

 

Accrued liabilities

 

 

(24,908

)

 

 

(47,519

)

Other changes from operating activities, net

 

 

(3,492

)

 

 

(37,269

)

Net cash used in operating activities

 

 

(485,276

)

 

 

(520,161

)

Investing activities:

 

 

 

 

Additions to property and equipment and software

 

 

(33,467

)

 

 

(26,779

)

Collection of deferred purchase price receivables

 

 

489,452

 

 

 

489,639

 

Payments related to acquisitions, net of cash acquired

 

 

(1,108

)

 

 

 

Payments related to investments

 

 

 

 

 

(15,000

)

Net cash provided by investing activities

 

 

454,877

 

 

 

447,860

 

Financing activities:

 

 

 

 

Dividends paid

 

 

(50,331

)

 

 

(50,732

)

Repurchases of common stock

 

 

(90,491

)

 

 

(15,000

)

Payments on long-term debt

 

 

(1,500

)

 

 

 

Draw on revolving credit

 

 

125,000

 

 

 

145,000

 

Other financing activities

 

 

4,141

 

 

 

(1,766

)

Net cash provided by (used in) financing activities

 

 

(13,181

)

 

 

77,502

 

Effect of exchange rate changes on cash

 

 

(2,203

)

 

 

(6,935

)

Net change in cash and cash equivalents

 

 

(45,783

)

 

 

(1,734

)

Cash and cash equivalents at beginning of period

 

 

159,669

 

 

 

142,014

 

Cash and cash equivalents at end of period

 

$

113,886

 

 

$

140,280

 

 

PATTERSON COMPANIES, INC.

SALES SUMMARY

(Dollars in thousands)

(Unaudited)

 

 

 

October 28,

2023

 

October 29,

2022

 

Total

Sales

Growth

 

Foreign

Exchange

Impact

 

Net

Interest

Rate

Swap

 

Acquisition

Impact

 

Internal

Sales

Growth

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

1,319,363

 

$

1,301,256

 

 

1.4

%

 

0.9

%

 

%

 

0.2

%

 

0.3

%

Equipment

 

 

230,293

 

 

243,896

 

 

(5.6

)

 

(0.2

)

 

 

 

 

 

(5.4

)

Value-added services and other

 

 

103,116

 

 

81,052

 

 

27.2

 

 

0.7

 

 

(12.7

)

 

6.5

 

 

32.7

 

Total

 

$

1,652,772

 

$

1,626,204

 

 

1.6

%

 

0.7

%

 

(0.6

)%

 

0.5

%

 

1.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

346,492

 

$

337,489

 

 

2.7

%

 

(0.2

)%

 

%

 

%

 

2.9

%

Equipment

 

 

200,127

 

 

214,006

 

 

(6.5

)

 

(0.2

)

 

 

 

 

 

(6.3

)

Value-added services and other

 

 

79,762

 

 

77,428

 

 

3.0

 

 

(0.1

)

 

 

 

 

 

3.1

 

Total

 

$

626,381

 

$

628,923

 

 

(0.4

)%

 

(0.2

)%

 

%

 

%

 

(0.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Animal Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

972,871

 

$

963,767

 

 

0.9

%

 

1.2

%

 

%

 

0.3

%

 

(0.6

)%

Equipment

 

 

30,166

 

 

29,890

 

 

0.9

 

 

 

 

 

 

 

 

0.9

 

Value-added services and other

 

 

21,585

 

 

9,339

 

 

131.1

 

 

6.5

 

 

 

 

56.7

 

 

67.9

 

Total

 

$

1,024,622

 

$

1,002,996

 

 

2.2

%

 

1.2

%

 

%

 

0.8

%

 

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value-added services and other

 

$

1,769

 

$

(5,715

)

 

(131.0

)%

 

%

 

180.0

%

 

%

 

(311.0

)%

Total

 

$

1,769

 

$

(5,715

)

 

(131.0

)%

 

%

 

180.0

%

 

%

 

(311.0

)%

 

PATTERSON COMPANIES, INC.

SALES SUMMARY

(Dollars in thousands)

(Unaudited)

   

 

 

October 28,

2023

 

October 29,

2022

 

Total

Sales

Growth

 

Foreign

Exchange

Impact

 

Net

Interest

Rate

Swap

 

Acquisition

Impact

 

Internal

Sales

Growth

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

2,635,088

 

$

2,563,025

 

 

2.8

%

 

0.6

%

 

%

 

0.2

%

 

2.0

%

Equipment

 

 

394,264

 

 

417,831

 

 

(5.6

)

 

(0.2

)

 

 

 

 

 

(5.4

)

Value-added services and other

 

 

200,165

 

 

168,613

 

 

18.7

 

 

0.4

 

 

(0.9

)

 

6.2

 

 

13.0

 

Total

 

$

3,229,517

 

$

3,149,469

 

 

2.5

%

 

0.4

%

 

%

 

0.5

%

 

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

698,539

 

$

675,329

 

 

3.4

%

 

(0.3

)%

 

%

 

%

 

3.7

%

Equipment

 

 

337,676

 

 

360,516

 

 

(6.3

)

 

(0.3

)

 

 

 

 

 

(6.0

)

Value-added services and other

 

 

157,466

 

 

150,995

 

 

4.3

 

 

(0.1

)

 

 

 

 

 

4.4

 

Total

 

$

1,193,681

 

$

1,186,840

 

 

0.6

%

 

(0.3

)%

 

%

 

%

 

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Animal Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

1,936,549

 

$

1,887,696

 

 

2.6

%

 

0.9

%

 

%

 

0.3

%

 

1.4

%

Equipment

 

 

56,588

 

 

57,315

 

 

(1.3

)

 

 

 

 

 

 

 

(1.3

)

Value-added services and other

 

 

42,475

 

 

18,355

 

 

131.4

 

 

4.6

 

 

 

 

56.7

 

 

70.1

 

Total

 

$

2,035,612

 

$

1,963,366

 

 

3.7

%

 

0.9

%

 

%

 

0.8

%

 

2.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value-added services and other

 

$

224

 

$

(737

)

 

(130.4

)%

 

%

 

212.3

%

 

%

 

(342.7

)%

Total

 

$

224

 

$

(737

)

 

(130.4

)%

 

%

 

212.3

%

 

%

 

(342.7

)%

 

PATTERSON COMPANIES, INC.

SALES SUMMARY

(Dollars in thousands)

(Unaudited)

   

 

 

July 29,

2023

 

July 30,

2022

 

Total

Sales

Growth

 

Foreign

Exchange

Impact

 

Net

Interest

Rate

Swap

 

Acquisition

Impact

 

Internal

Sales

G
rowth

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

1,315,725

 

 

$

1,261,769

 

4.3

%

 

0.3

%

 

%

 

0.2

%

 

3.8

%

Equipment

 

 

163,971

 

 

 

173,935

 

(5.7

)

 

(0.3

)

 

 

 

 

 

(5.4

)

Value-added services and other

 

 

97,049

 

 

 

87,561

 

10.8

 

 

0.1

 

 

10.0

 

 

5.8

 

 

(5.1

)

Total

 

$

1,576,745

 

 

$

1,523,265

 

3.5

%

 

0.2

%

 

0.6

%

 

0.5

%

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dental

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

352,047

 

 

$

337,840

 

4.2

%

 

(0.4

)%

 

%

 

%

 

4.6

%

Equipment

 

 

137,549

 

 

 

146,510

 

(6.1

)

 

(0.4

)

 

 

 

 

 

(5.7

)

Value-added services and other

 

 

77,704

 

 

 

73,567

 

5.6

 

 

(0.2

)

 

 

 

 

 

5.8

 

Total

 

$

567,300

 

 

$

557,917

 

1.7

%

 

(0.4

)%

 

%

 

%

 

2.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Animal Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumable

 

$

963,678

 

 

$

923,929

 

4.3

%

 

0.5

%

 

%

 

0.3

%

 

3.5

%

Equipment

 

 

26,422

 

 

 

27,425

 

(3.7

)

 

 

 

 

 

 

 

(3.7

)

Value-added services and other

 

 

20,890

 

 

 

9,016

 

131.7

 

 

2.7

 

 

 

 

56.7

 

 

72.3

 

Total

 

$

1,010,990

 

 

$

960,370

 

5.3

%

 

0.5

%

 

%

 

0.8

%

 

4.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Value-added services and other

 

$

(1,545

)

 

$

4,978

 

(131.0

)%

 

%

 

175.2

%

 

%

 

(306.2

)%

Total

 

$

(1,545

)

 

$

4,978

 

(131.0

)%

 

%

 

175.2

%

 

%

 

(306.2

)%

 

PATTERSON COMPANIES, INC.

OPERATING INCOME BY SEGMENT

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

October 28,

2023

 

October 29,

2022

 

October 28,

2023

 

October 29,

2022

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

Dental

 

$

55,277

 

 

$

60,950

 

 

$

93,947

 

 

$

97,845

 

Animal Health

 

 

26,346

 

 

 

28,316

 

 

 

56,039

 

 

 

50,175

 

Corporate

 

 

(24,720

)

 

 

(29,171

)

 

 

(54,861

)

 

 

(53,081

)

Total

 

$

56,903

 

 

$

60,095

 

 

$

95,125

 

 

$

94,939

 

 

PATTERSON COMPANIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in thousands, except per share amounts)

(Unaudited)

 

For the three months ended October 28, 2023

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

1,652,772

 

 

$

 

 

$

2,786

 

 

$

1,655,558

 

Gross profit

 

 

339,026

 

 

 

 

 

 

2,786

 

 

 

341,812

 

Operating expenses

 

 

282,123

 

 

 

(9,628

)

 

 

 

 

 

272,495

 

Operating income

 

 

56,903

 

 

 

9,628

 

 

 

2,786

 

 

 

69,317

 

Other income (expense), net

 

 

(3,546

)

 

 

 

 

 

(2,786

)

 

 

(6,332

)

Income before taxes

 

 

53,357

 

 

 

9,628

 

 

 

 

 

 

62,985

 

Income tax expense

 

 

13,502

 

 

 

2,305

 

 

 

 

 

 

15,807

 

Net income

 

 

39,855

 

 

 

7,323

 

 

 

 

 

 

47,178

 

Net loss attributable to noncontrolling interests

 

 

(103

)

 

 

 

 

 

 

 

 

(103

)

Net income attributable to Patterson Companies, Inc.

 

$

39,958

 

 

$

7,323

 

 

$

 

 

$

47,281

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.42

 

 

$

0.08

 

 

$

 

 

$

0.50

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.5

%

 

 

 

 

 

 

20.6

%

Operating margin

 

 

3.4

%

 

 

 

 

 

 

4.2

%

Effective tax rate

 

 

25.3

%

 

 

 

 

 

 

25.1

%

 

 

 

 

 

 

 

 

 

For the three months ended October 29, 2022

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

1,626,204

 

 

$

 

 

$

13,072

 

 

$

1,639,276

 

Gross profit

 

 

328,089

 

 

 

 

 

 

13,072

 

 

 

341,161

 

Operating expenses

 

 

267,994

 

 

 

(9,327

)

 

 

 

 

 

258,667

 

Operating income

 

 

60,095

 

 

 

9,327

 

 

 

13,072

 

 

 

82,494

 

Other income (expense), net

 

 

10,659

 

 

 

 

 

 

(13,072

)

 

 

(2,413

)

Income before taxes

 

 

70,754

 

 

 

9,327

 

 

 

 

 

 

80,081

 

Income tax expense

 

 

17,105

 

 

 

2,237

 

 

 

 

 

 

19,342

 

Net income

 

 

53,649

 

 

 

7,090

 

 

 

 

 

 

60,739

 

Net loss attributable to noncontrolling interests

 

 

(424

)

 

 

 

 

 

 

 

 

(424

)

Net income attributable to Patterson Companies, Inc.

 

$

54,073

 

 

$

7,090

 

 

$

 

 

$

61,163

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.55

 

 

$

0.07

 

 

$

 

 

$

0.63

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.2

%

 

 

 

 

 

 

20.8

%

Operating margin

 

 

3.7

%

 

 

 

 

 

 

5.0

%

Effective tax rate

 

 

24.2

%

 

 

 

 

 

 

24.2

%

 

 

 

 

 

 

 

 

 

* May not sum due to rounding

 

 

 

 

 

 

 

 

 

PATTERSON COMPANIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in thousands, except per share amounts)

(Unaudited)

 

For the six months ended October 28, 2023

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

3,229,517

 

 

$

 

 

$

9,561

 

 

$

3,239,078

 

Gross profit

 

 

658,081

 

 

 

 

 

 

9,561

 

 

 

667,642

 

Operating expenses

 

 

562,956

 

 

 

(19,254

)

 

 

 

 

 

543,702

 

Operating income

 

 

95,125

 

 

 

19,254

 

 

 

9,561

 

 

 

123,940

 

Other income (expense), net

 

 

(1,157

)

 

 

 

 

 

(9,561

)

 

 

(10,718

)

Income before taxes

 

 

93,968

 

 

 

19,254

 

 

 

 

 

 

113,222

 

Income tax expense

 

 

22,983

 

 

 

4,609

 

 

 

 

 

 

27,592

 

Net income

 

 

70,985

 

 

 

14,645

 

 

 

 

 

 

85,630

 

Net loss attributable to noncontrolling interests

 

 

(207

)

 

 

 

 

 

 

 

 

(207

)

Net income attributable to Patterson Companies, Inc.

 

$

71,192

 

 

$

14,645

 

 

$

 

 

$

85,837

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.74

 

 

$

0.15

 

 

$

 

 

$

0.90

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.4

%

 

 

 

 

 

 

20.6

%

Operating margin

 

 

2.9

%

 

 

 

 

 

 

3.8

%

Effective tax rate

 

 

24.5

%

 

 

 

 

 

 

24.4

%

 

 

 

 

 

 

 

 

 

For the six months ended October 29, 2022

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

3,149,469

 

 

$

 

 

$

11,124

 

 

$

3,160,593

 

Gross profit

 

 

640,222

 

 

 

 

 

 

11,124

 

 

 

651,346

 

Operating expenses

 

 

545,283

 

 

 

(18,678

)

 

 

 

 

 

526,605

 

Operating income

 

 

94,939

 

 

 

18,678

 

 

 

11,124

 

 

 

124,741

 

Other income (expense), net

 

 

6,876

 

 

 

 

 

 

(11,124

)

 

 

(4,248

)

Income before taxes

 

 

101,815

 

 

 

18,678

 

 

 

 

 

 

120,493

 

Income tax expense

 

 

23,906

 

 

 

4,474

 

 

 

 

 

 

28,380

 

Net income

 

 

77,909

 

 

 

14,204

 

 

 

 

 

 

92,113

 

Net loss attributable to noncontrolling interests

 

 

(754

)

 

 

 

 

 

 

 

 

(754

)

Net income attributable to Patterson Companies, Inc.

 

$

78,663

 

 

$

14,204

 

 

$

 

 

$

92,867

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.81

 

 

$

0.15

 

 

$

 

 

$

0.95

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.3

%

 

 

 

 

 

 

20.6

%

Operating margin

 

 

3.0

%

 

 

 

 

 

 

3.9

%

Effective tax rate

 

 

23.5

%

 

 

 

 

 

 

23.6

%

 

 

 

 

 

 

 

 

 

* May not sum due to rounding

 

 

 

 

 

 

 

PATTERSON COMPANIES, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

(Dollars in thousands, except per share amounts)

(Unaudited)

 

For the three months ended July 29, 2023

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

1,576,745

 

 

$

 

 

$

6,775

 

 

$

1,583,520

 

Gross profit

 

 

319,055

 

 

 

 

 

 

6,775

 

 

 

325,830

 

Operating expenses

 

 

280,833

 

 

 

(9,626

)

 

 

 

 

 

271,207

 

Operating income

 

 

38,222

 

 

 

9,626

 

 

 

6,775

 

 

 

54,623

 

Other income (expense), net

 

 

2,389

 

 

 

 

 

 

(6,775

)

 

 

(4,386

)

Income before taxes

 

 

40,611

 

 

 

9,626

 

 

 

 

 

 

50,237

 

Income tax expense

 

 

9,481

 

 

 

2,304

 

 

 

 

 

 

11,785

 

Net income

 

 

31,130

 

 

 

7,322

 

 

 

 

 

 

38,452

 

Net loss attributable to noncontrolling interests

 

 

(104

)

 

 

 

 

 

 

 

 

(104

)

Net income attributable to Patterson Companies, Inc.

 

$

31,234

 

 

$

7,322

 

 

$

 

 

$

38,556

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.32

 

 

$

0.08

 

 

$

 

 

$

0.40

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.2

%

 

 

 

 

 

 

20.6

%

Operating margin

 

 

2.4

%

 

 

 

 

 

 

3.4

%

Effective tax rate

 

 

23.3

%

 

 

 

 

 

 

23.5

%

 

 

 

 

 

 

 

 

 

For the three months ended July 30, 2022

 

GAAP

 

Deal

amortization

 

Interest rate

swap

 

Non-GAAP

Net sales

 

$

1,523,265

 

 

$

 

 

$

(1,948

)

 

$

1,521,317

 

Gross profit

 

 

312,133

 

 

 

 

 

 

(1,948

)

 

 

310,185

 

Operating expenses

 

 

277,289

 

 

 

(9,351

)

 

 

 

 

 

267,938

 

Operating income

 

 

34,844

 

 

 

9,351

 

 

 

(1,948

)

 

 

42,247

 

Other income (expense), net

 

 

(3,783

)

 

 

 

 

 

1,948

 

 

 

(1,835

)

Income before taxes

 

 

31,061

 

 

 

9,351

 

 

 

 

 

 

40,412

 

Income tax expense

 

 

6,801

 

 

 

2,237

 

 

 

 

 

 

9,038

 

Net income

 

 

24,260

 

 

 

7,114

 

 

 

 

 

 

31,374

 

Net loss attributable to noncontrolling interests

 

 

(330

)

 

 

 

 

 

 

 

 

(330

)

Net income attributable to Patterson Companies, Inc.

 

$

24,590

 

 

$

7,114

 

 

$

 

 

$

31,704

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to Patterson Companies, Inc.*

 

$

0.25

 

 

$

0.07

 

 

$

 

 

$

0.32

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

20.5

%

 

 

 

 

 

 

20.4

%

Operating margin

 

 

2.3

%

 

 

 

 

 

 

2.8

%

Effective tax rate

 

 

21.9

%

 

 

 

 

 

 

22.4

%

 

 

 

 

 

 

 

 

 

* May not sum due to rounding

 

 

 

 

 

 

 

 

 

PATTERSON COMPANIES, INC.

FREE CASH FLOW

(In thousands)

(Unaudited)

   

 

 

Six Months Ended

 

 

October 28,

2023

 

October 29,

2022

Net cash used in operating activities

 

$

(485,276

)

 

$

(520,161

)

Additions to property and equipment and software

 

 

(33,467

)

 

 

(26,779

)

Collection of deferred purchase price receivables

 

 

489,452

 

 

 

489,639

 

Free cash flow

 

$

(29,291

)

 

$

(57,301

)

 

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