Patterson Companies Inc.
) reported first quarter fiscal 2013 adjusted earnings of 48 cents
per share, missing the Zacks Consensus Estimates of 49 cents but
ahead of last year's 2 cents.
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Adjusted earnings include Employee Stock Ownership Plan ("ESOP")
related charges but exclude an incremental interest expense of $3.2
million associated with the company's debt issuance in the third
quarter of 2012.
In the reported quarter, profit dropped 2.2% year over year to
$47.5 million (or 45 cents a share).
Revenues for the first quarter rose 5% year over year to $889.2
million, beating the Zacks Consensus Estimate of $883 million. The
increase was led by the Patterson Dental and the Veterinary Supply
businesses. However, Patterson Medical showed no signs of
improvement in the reported quarter.
Revenues from the core Patterson Dental segment increased 6% year
over year to $567.4 million, driven by strong CEREC sales.
Within Patterson Dental, sales of consumable and printed products
inched up 1% to $310.2 million. Sales from the equipment and
software offerings jumped 19% to $191.9 million, boosted by higher
sales of CEREC products and basic equipment. Other services and
products grew 3% year over year to $65.3 million.
Revenues from the Webster Veterinary segment grew 6.5% to $191.1
million, led by the acquisition of the American Veterinary Supply
Corporation. However, sales were affected by a change in a
distribution agreement related to nutritional offerings.
Revenues from the Patterson Medical segment dropped 3% to $130.7
million due to lower equipment sales. The division's equipment
franchise continues to be adversely impacted by the uncertainty
related to the U.S. health care system. Despite such uncertainties,
the segment is geared to utilize the worldwide growing trend of the
Rehabilitation market. In addition, currency fluctuations
overshadowed the contributions from Surgical Synergies.
Gross margin edged down to 32.1% in the first quarter from 32.8% a
year ago. Operating margin also declined slightly to 9.3% from
Balance Sheet and Other
Patterson exited the quarter with cash and cash equivalent of
$580.8 million. Long-term debt was higher by 38.1% at $725 million.
During the quarter, Patterson repurchased roughly 1.1 million
shares under its share buyback program. About 10 million shares are
still available for repurchase before the authorization expires in
For fiscal 2013, Patterson reiterated its earnings forecast in the
range of $2.10 to $2.16 per share.
Patterson provides a wide range of consumables, equipment,
software, and value-added services to its customers. The company
competes head-to-head with
Henry Schein Inc.
) in the dental market.
Sirona Dental Systems, Inc.
) announced the expansion of its exclusive distribution agreement
with Patterson Dental. Per the agreement, Patterson will be the
exclusive U.S. distribution partner of Sirona. The alliance will
boost CEREC sales and further establish Patterson as the leading
distributor of dental products.
However, the company remains affected by tough macroeconomic issues
in North America and the international markets. We currently have a
Neutral recommendation on the stock, which carries a short-term
Zacks #3 Rank (Hold).