Patterson Companies Tops by a Penny

| About: Patterson Companies (PDCO)

Patterson Companies Inc. (NASDAQ:PDCO), a leading distributor of dental, companion-pet veterinarian and rehabilitation medical supplies in the U.S. and Canada, reported first-quarter fiscal 2011 (ended July 31, 2010) results with earnings per share of 45 cents beating the Zacks Consensus Estimate by a penny while surpassing the year-ago earnings of 38 cents. Net income jumped 19.6% year-over-year to $53.9 million on the back of higher sales.


Revenues climbed 7.6% year-over-year to roughly $849.8 million driven by higher sales from the core Dental Supply business and the benefit from an additional week in the quarter which will make fiscal 2011 (ending April 30, 2011) a 53-week year. However, sales trailed the Zacks Consensus Estimate of $855 million.

In terms of products category, consumable and printed products sales grew 7.3% year-over-year to $586.6 million while equipment and software sales leapt 8.2% to $192.2 million. Other revenues increased 8.9% year over year to roughly $71 million.

Segment-wise Results

By business segments, Dental Supply revenues rose 6% year-over-year to $542.7 million fueled by growth in dental supplies and printed office products (up 6.7%) and dental equipment and software (up 4.7%) sales. Dental equipment (including cone beam and panoramic imaging systems) sales spiked 13% in the quarter, reflecting the company’s ability to capture a major share in this market. Patterson is benefiting from the gradual recovery in the dental market.

Webster Veterinary Supply segment revenues grew 6% year-over-year to $179.6 million, in part, due to the impact of the extra week and higher equipment sales. Rehabilitation Supply (“Patterson Medical”) revenues cruised 17% year-over-year to $127.5 million with acquisitions and the extra week cumulatively contributed 15 basis points (bps) to the growth.


Patterson remains successful in expanding margins. Gross margin improved narrowly year-over-year to 33%. Operating margin increased to 10.5% from 9.7% a year ago, supported by top-line expansion.

Balance Sheet and Cash Flow

Patterson exited the quarter with cash and short-term investments of roughly $298.4 million, up 70% year-over-year. Log-term debt remained flat year-over-year at $525 million. Cash flow from operations was roughly $22.8 million, down 51% year-over-year.


Patterson has reiterated its EPS guidance for fiscal 2011, which is expected to range between $1.89 and $1.99. The current Zacks Consensus Estimate for fiscal 2011 is $1.95. The company’s Patterson Medical unit will continue to explore acquisitions during the year to boost market position and geographic reach.