Patterson Companies, Inc. (PDCO)

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Patterson Companies (PDCO)

Q4 2013 Earnings Call

May 23, 2013 10:00 am ET


Jeff Lichner

Scott P. Anderson - Chairman of the Board, Chief Executive Officer and President

R. Stephen Armstrong - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer


Glen J. Santangelo - Crédit Suisse AG, Research Division

Lisa C. Gill - JP Morgan Chase & Co, Research Division

Steven Valiquette - UBS Investment Bank, Research Division

Kevin K. Ellich - Piper Jaffray Companies, Research Division

Robert M. Willoughby - BofA Merrill Lynch, Research Division

Elizabeth Anderson - ISI Group Inc., Research Division

Robert P. Jones - Goldman Sachs Group Inc., Research Division

Roberto Fatta

Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

Erin E. Wilson - BofA Merrill Lynch, Research Division



Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Patterson Companies' Fourth Quarter Fiscal 2013 Earnings Announcement Conference Call. [Operator Instructions] This conference is being recorded today, May 23, 2013. I would now like to turn the conference over to Jeff Lichner. Please go ahead, sir.

Jeff Lichner

Thank you, Douglas. Good morning, everyone, and thank you for participating in Patterson Companies' Fiscal Fourth Quarter Earnings Conference Call. With me in the room today are Scott Anderson, our Chairman and Chief Executive Officer; and Steve Armstrong, our Chief Financial Officer. After a brief review of the quarter by management, we will open up the call to your questions.

Before we begin, let me remind you that certain comments made during the course of this conference call are forward-looking in nature and subject to certain risks and uncertainties. These factors are discussed in detail in our Form 10-K and our other filings with the Securities and Exchange Commission. We urge you to review this material.

Also since Regulation FD prohibits us from providing investors with earnings guidance unless we release that information simultaneously, we've provided financial guidance for fiscal 2014 in our press release earlier this morning.

Be advised that this call is being recorded and will be available for replay starting today at 11 a.m. Central Time for a period of one week.

With that, I'd like to hand the call over to Scott Anderson. Scott?

Scott P. Anderson

Thank you, Jeff, and welcome, everyone, to our fourth quarter conference call. Let me begin by saying that we were encouraged by Patterson's performance in the fourth quarter and the second half of fiscal year 2013. Overall, in the fiscal fourth quarter, we saw more than 3% year-over-year growth in sales despite what continues to be a challenging worldwide economic environment, and that growth was fueled primarily by strong performance in Patterson Dental.

As I will review over the next few minutes, we had several key developments and accomplishments in fiscal 2013. Certainly, it was a year marked with milestones as we celebrated our 20th year as a public company, generated in excess of $3.6 billion in consolidated sales, and for the second year in a row, we're named one of Forbes Most Trustworthy Companies.

We are proud of how far we've come as a public company. When we went public, our revenues were slightly less than $280 million 20 years ago. This is truly a testament to the Patterson culture and the dedication of our employees. Also I'd like to note that in March, we announced that Pete Frechette will be stepping down as Chairman of the Board after nearly 30 years in that role. Pete will serve out his current term as a director, which ends in September.

Under Pete's guidance, Patterson achieved many milestones. Though too numerous to go through in the brief time that we have, Pete has left his mark on this great company and the markets we serve. I want to personally thank him for his friendship and guidance in my time at Patterson and his help in setting the course for our future.

So with that said, let me recap our operational performance in the fourth quarter and some of the highlights from fiscal 2013. Patterson Dental, our largest business, which accounted for 2/3 of our total revenue, reported sales of $636.9 million, which was up 6.4% from the prior year on a reported basis.

Within this unit, the key driver was over 13% growth in our equipment lines, even against the very strong comparable sales level from the year-ago period.

Within our technology categories, which are benefiting from the ongoing trend to the digitization of dentistry, sales of digital radiography products led our performance. Surrounding our technology product offering is what we believe to be an unrivaled aftersales support model that we deliver through our highly dedicated and talented Patterson associates.

Moreover, through the Patterson Technology Center, enhanced training and other value-added services, we are a critical component of the dentist practice and a valued partner for them.

Turning to consumable sales, which consist primarily of disposable dental items and office supplies, this category rose 2.4% from prior year levels. We are pleased with the solid performance we saw here in the fourth quarter and remain cautiously optimistic as we enter fiscal 2014.

The market continued to stabilize throughout the year, but we believe that a return to historic growth rates is predicated on an improved employment outlook and a continued increase in consumer confidence. During the fourth quarter, sales of basic dental equipment, including chairs, units, cabinetry and lighting also grew by double-digit levels from the previous year.

Since the economic downturn, dentists have remained cautious about expanding and remodeling their practices. We believe that there is considerable pent-up demand for investments in their basic operations and infrastructure. As the market for basic infrastructure stabilizes and begins to grow, we will be there with our industry-leading offerings to assist dentists in gaining greater efficiencies for their practices.

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