Patterson Companies Reports Strongly Improved Third Quarter Sales and

Patterson Companies Reports Strongly Improved Third Quarter Sales and Earnings

    Business Editors

    ST. PAUL, Minn.--(BUSINESS WIRE)--Feb. 24, 2005--Patterson Companies, Inc. (Nasdaq:PDCO) today reported consolidated sales of $638,005,000 for the third quarter of fiscal 2005 ended January 29, an increase of 22% from $521,218,000 in the year-earlier quarter. Excluding four acquisitions earlier this year, internally generated sales were up approximately 15%. Net income increased 25% to $50,137,000 or $0.36 per diluted share, from $40,061,000 or $0.29 per diluted share in the third quarter of fiscal 2004.
    The Patterson Dental Supply unit, Patterson's largest business, reported sales growth of 18% to $499,796,000 in the third quarter. Substantially all of this growth was internally generated.

--	Sales of consumable dental supplies and printed office products increased 10% in the third quarter. One extra selling day in the quarter accounted for an estimated one to two percentage points of the sales growth for this period. Consumable sales also benefited from the effectiveness of efforts to strengthen this portion of Patterson's business. Patterson Dental's sales force, the largest in the industry, totaled approximately 1,420 at the end of the third quarter.
--	Sales of dental equipment and software rose 30% in the third quarter, generated by strong demand for both basic and new technology equipment in the U.S. and Canada.
--	Sales of other services and products, consisting primarily of parts, technical service, software support, and insurance e-claims, increased 8% in the third quarter.

    Sales of the Webster Veterinary Supply unit increased 64% in the third quarter to $70,701,000, which included contributions from the acquisitions of ProVet in April 2004 and Milburn Distributions, Inc. in October. As previously reported, ProHeart 6, an injectable heartworm medication, was voluntarily withdrawn from the U.S. market by its manufacturer in September 2004. On an annual basis, ProHeart 6 contributed sales of approximately $12 million. Excluding the nearly $3 million of ProHeart 6 sales in last year's third quarter and the impact of the two acquisitions earlier this year, Webster's sales increased approximately 12% in this year's third quarter. This result was particularly positive since the third quarter is Webster's seasonally lowest period of the fiscal year.
    Sales of AbilityOne Products Corp., Patterson's rehabilitation supply and equipment unit, increased 27% in the third quarter to $67,508,000. Excluding the May 2004 acquisition of Medco Supply Company, as well as the impact of the additional selling day in the quarter and currency adjustments related to its foreign operations, AbilityOne's internally generated sales increased approximately 9%.
    Peter L. Frechette, chairman and chief executive officer, commented: "We are very encouraged by Patterson's strongly improved sales and earnings in this year's third quarter. Virtually every aspect of our dental business is continuing to perform at a high level. Sales of dental consumables registered their highest growth rate in recent years, while demand remains strong for basic equipment and new-generation dental systems, including the CEREC(R)3D dental restorative system, digital radiography and related networking systems. Dental practices are investing heavily in equipment and software that strengthens office productivity and improves clinical outcomes. As the leading distributor of dental equipment by a considerable margin, Patterson Dental is extremely well positioned to capitalize upon these ongoing investment trends."
    Frechette continued: "AbilityOne's third quarter performance in comparison to the year-earlier period was affected by below-plan sales, modestly lower gross margins and certain unanticipated expenses. We believe this is a short-term situation and corrective actions are now underway. We are very encouraged by the solid performance of our Webster unit, which posted strong sales growth during the seasonally slow winter months despite the lost ProHeart revenues. Webster is pursuing a number of promising new opportunities, and we are optimistic about the prospects of our veterinary supply business."
    Patterson is forecasting earnings of $0.38 to $0.40 per diluted share for the fourth quarter of fiscal 2005 ending April 30, which is consistent with the Company's previously-issued financial guidance of $1.34 to $1.36 for the full fiscal year.

    About Patterson Companies, Inc.

    Patterson Companies, Inc. is a value-added distributor serving the dental, companion-pet veterinarian and rehabilitation supply markets.

    Dental Market

    As Patterson's largest business, Patterson Dental Supply provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists and dental laboratories throughout North America.

    Veterinary Market

    Webster Veterinary Supply is the nation's second largest distributor of consumable veterinary supplies, equipment, diagnostic products, vaccines and pharmaceuticals to companion-pet veterinary clinics.

    Rehabilitation Market

    AbilityOne Products Corp. is the world's leading distributor of rehabilitation supplies and non-wheelchair assistive patient products to the physical and occupational therapy markets. The unit's global customer base includes hospitals, long-term care facilities, clinics and dealers.

    This release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are information of a non-historical nature and are subject to risks and uncertainties that are beyond the Company's ability to control. The Company cautions shareholders and prospective investors that the following factors, among others, may cause actual results to differ materially from those indicated by the forward-looking statements: competition within the dental, veterinary, and rehabilitative and assistive living supply industries; changes in the economics of dentistry, including reduced growth in expenditures by private dental insurance plans, the effects of economic conditions and the effects of healthcare reform, which may affect future per capita expenditures for dental services and the ability and willingness of dentists to invest in high-technology products; the effects of healthcare related legislation and regulation which may affect expenditures or reimbursements for rehabilitative and assistive products; changes in the economics of the veterinary supply market, including reduced growth in per capita expenditures for veterinary services and reduced growth in the number of households owning pets; the ability of the Company to maintain satisfactory relationships with its sales force; unforeseen operating risks; risks associated with the dependence on manufacturers of the Company's products; and the ability of the Company to successfully integrate the recent acquisitions into its existing business. Forward-looking statements are qualified in their entirety by the cautionary language set forth in the Company's filings with the Securities and Exchange Commission.

    Third Quarter Conference Call and Replay

    Patterson's third quarter earnings conference call will start at 11:00 a.m. Eastern today. Investors can listen to a live webcast of the conference call at www.pattersoncompanies.com. Listeners should go to this website at least 15 minutes prior to the call to download and install any necessary audio software. A replay of the conference call can be heard through March 3, 2005 by dialing 1-303-590-3000 and providing the 11024161 pass code. The conference call also will be archived on Patterson's web site.

PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except for earnings per share) (Unaudited)

Three Months Ended Nine Months Ended ----------------------- -----------------------

January 29, January 24, January 29, January 24, 2005 2004 2005 2004 ----------- ----------- ----------- -----------

Net sales $638,005 $521,218 $1,794,185 $1,431,990

Gross profit 227,328 190,873 635,924 501,776

Operating expenses 145,549 123,882 416,484 333,498 ----------- ----------- ----------- -----------

Operating income 81,779 66,991 219,440 168,278

Other (expense) income, net (1,681) (2,790) (6,241) (1,070) ----------- ----------- ----------- -----------

Income before taxes 80,098 64,201 213,199 167,208

Income taxes 29,961 24,140 79,743 62,868 ----------- ----------- ----------- -----------

Net income $50,137 $40,061 $133,456 $104,340 =========== =========== =========== ===========

Earnings per share: Basic $0.37 $0.29 $0.98 $0.77 Diluted $0.36 $0.29 $0.96 $0.76

Shares: Basic 136,924 135,988 136,728 135,826 Diluted 138,960 138,170 138,788 137,576

Gross margin 35.6% 36.6% 35.4% 35.0%

Operating expenses as a % of net sales 22.8% 23.8% 23.2% 23.2%

Operating income as a % of net sales 12.8% 12.8% 12.2% 11.8%

Effective tax rate 37.4% 37.6% 37.4% 37.6%

Return on net sales 7.9% 7.7% 7.4% 7.3%

PATTERSON COMPANIES, INC. SUPPLEMENTARY FINANCIAL DATA (In thousands) (Unaudited)

Three Months Ended Nine Months Ended ----------------------- ----------------------- January 29, January 24, January 29, January 24, 2005 2004 2005 2004 ----------- ----------- ----------- -----------

Consolidated Net Sales Consumable and printed products $365,408 $304,977 $1,122,411 $891,133 Equipment and software 229,349 177,589 542,008 430,214 Other 43,248 38,652 129,766 110,643 ----------- ----------- ----------- ----------- Total $638,005 $521,218 $1,794,185 $1,431,990 =========== =========== =========== ===========

Rehabilitative Supply Actual Consumable and printed products $55,960 $42,725 $185,824 $68,291 Equipment 8,386 7,924 24,086 12,317 Other 3,162 2,340 10,048 4,223 ----------- ----------- ----------- ----------- Total $67,508 $52,989 $219,958 $84,831 =========== =========== =========== ===========

Proforma $219,958 $165,354 (a) =========== ===========

Veterinary Supply Consumable and printed products $65,394 $40,076 $195,934 $149,075 Equipment 3,442 2,028 8,818 4,904 Other 1,865 980 5,144 3,566 ----------- ----------- ----------- ----------- Total $70,701 $43,084 $209,896 $157,545 =========== =========== =========== ===========

Other (Expense) Income, net Interest income $1,533 $1,500 $4,034 $4,763 Interest expense (3,303) (4,317) (10,852) (6,238) Other 89 27 577 405 ----------- ----------- ----------- ----------- $(1,681) $(2,790) $(6,241) $(1,070) =========== =========== =========== ===========

(a) Proforma basis, as if the acquisition of AbilityOne had occurred at the beginning of fiscal 2004, but does not give effect to the fiscal 2005 Medco acquisition.

PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)

January 29, April 24, 2005 2004 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and short-term investments $341,568 $295,178 Receivables, net 296,021 285,249 Inventory 199,885 173,022 Prepaid expenses and other current assets 29,063 24,694 ----------- ----------- Total current assets 866,537 778,143

Property and equipment, net 91,742 77,233 Goodwill and other intangible assets 748,535 698,217 Other 41,165 35,364 ----------- -----------

Total Assets $1,747,979 $1,588,957 =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $180,073 $149,528 Other accrued liabilities 130,276 94,129 Current maturities of long-term debt 20,031 20,031 ----------- ----------- Total current liabilities 330,380 263,688

Long-term debt 411,534 479,556 Other non-current liabilities 48,881 43,955 ----------- ----------- Total liabilities 790,795 787,199

Stockholders' equity 957,184 801,758 ----------- -----------

Total Liabilities and Stockholders' Equity $1,747,979 $1,588,957 =========== ===========

PATTERSON COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)

Nine Months Ended ----------------------- January 29, January 24, 2005 2004 ----------- -----------

Operating activities: Net income $133,456 $104,340 Depreciation & amortization 20,239 13,314 Change in assets and liabilities, net of acquired 37,582 (24,303) ----------- ----------- Net cash provided by operating activities 191,277 93,351

Investing activities: Additions to property and equipment, net (22,590) (11,290) Acquisitions (72,855) (581,782) (Purchase) sale of investments (4,207) 14,731 ----------- ----------- Net cash used in investing activities (99,652) (578,341)

Net cash (used in) provided by financing activities (49,442) 504,825 ----------- -----------

Net increase in cash and cash equivalents $42,183 $19,835 =========== ===========

--30--CR/ms*

CONTACT: Patterson Companies, Inc., St. Paul R. Stephen Armstrong, 651-686-1600 or Equity Market Partners Richard G. Cinquina, 904-261-2210 or 800-522-1744

KEYWORD: MINNESOTA INDUSTRY KEYWORD: MEDICAL DEVICES CONSUMER/HOUSEHOLD MEDICAL EARNINGS CONFERENCE CALLS SOURCE: Patterson Companies, Inc.

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