Patterson Companies, Inc. (PDCO), a leading distributor of dental, veterinarian and rehabilitation medical supplies, reported its fourth quarter fiscal 2012 (ended April 28, 2012) adjusted earnings per share of 58 cents beating the Zacks Consensus Estimate by a penny. The year-ago earnings were 53 cents a share.
Adjusted earnings include Employee Stock Ownership Plan (“ESOP”) related charges. In the reported quarter, profits slipped 0.9% year over year to $62.1 million (or 58 cents a share).
For fiscal 2012, adjusted earnings of $1.92 per share beat the Zacks Consensus Estimate by a penny and exceeded the year-ago earnings per share of $1.89. Profits dropped 5.6% year over year to $212.8 million (or $1.92 per share) during the reported fiscal year.
Revenue
Revenues for the fourth quarter rose 6% year over year to $936.3 million, beating the Zacks Consensus Estimate of $914 million. Revenues were led by the Veterinary Supply business along with higher consumable sales, especially the Trifexcis product. Patterson Medical sales also showed signs of improvement in the reported quarter.
For the fiscal year, revenues grew 3.5% to $3,535.7 million, slightly above the Zacks Consensus Estimate of $3,510 million.
Segment Analysis
Revenues from the core Patterson Dental rose 4.5% year over year to $598.9 million, driven by healthy growth in sales of dental equipment and software and also consumable supplies.
Within Patterson Dental, sales of consumable and printed products increased 3.3% to $331.1 million in the quarter. Sales from the equipment and software offerings rose 6.2% to $201.3 million, boosted by higher sales of CEREC products.
Revenues from Webster Veterinary segment surged 12.8% to $207.5 million fueled by the American Veterinary Supply Corporation acquisition in August 2011.
Sales from Patterson Medical segment inched up 2.5% to $130 million buoyed by unexpected consumable sales in North America. However, the division’s equipment franchise continues to be adversely impacted by uncertainty related to the U.S. health care system, which is likely to persist till fiscal 2013. Despite such uncertainties, the segment is geared to utilize the worldwide growing trend of the Rehabilitation market.
Patterson Medical recently acquired Australia-based Surgical Synergies Pty Ltd for $10 million to expand its market size in Australia and New Zealand.
Margins
Gross margin dropped to 33.5% in the fourth quarter from 34.4% a year ago. Operating margin declined to 11% from 11.8%.
Balance Sheet and Other
Patterson exited the quarter with cash and short-term investments of $573.8 million, up 47.6%. Long-term debt was higher by 38.1% at $725 million. Patterson repurchased roughly 1.2 million shares under its authorization to repurchase as many as 25 million shares. About 11 million shares are still available for repurchase before the authorization expires in 2016.
In March 2012, the company hiked its quarterly dividend by 17% to 14 cents per share.
Guidance
For fiscal 2013, Patterson forecasts earnings in the range of $2.10 – $2.16 per share. ESOP-related expense will not have any effect on comparable results of fiscal 2013 and 2012.
Patterson provides a wide range of consumables, equipment and software and value-added services to its customers. The company competes head-to-head with Henry Schein Inc (HSIC) in the dental market.
We are currently Neutral on the stock, supported by a short-term Zacks #2 Rank (Buy).
HENRY SCHEIN IN (HSIC): Free Stock Analysis Report
PATTERSON COS (PDCO): Free Stock Analysis Report
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