Patterson Companies Reports Fiscal 2016 Third Quarter Operating Results

• Sales increased to $1.4 billion, up 47.8 percent on a constant
  currency basis, including the impact of sales from recently acquired
  Animal Health International, Inc.
• Adjusted EPS from continuing operations¹
  totaled $0.68, a 38.7 percent increase over prior year.
• Dental segment sales rose 5.9 percent on a constant currency basis.
• Animal Health segment sales increased 123.9 percent on a constant
  currency basis, with $406.6 million in sales attributed to the
  acquisition of Animal Health International, Inc.
• Company narrows adjusted earnings guidance for fiscal 2016 to $2.42
  to $2.48 per diluted share.

ST. PAUL, Minn.–(BUSINESS WIRE)–Patterson Companies, Inc. (Nasdaq:PDCO) today reported consolidated
sales of $1.4 billion (see attached Sales Summary for further details)
in its fiscal third quarter ended January 30, 2016, up 46 percent over
the same period last year. Sales in this fiscal 2016 period include
results from the recent Animal Health International, Inc. acquisition.

Adjusted net income from continuing operations¹, which
reflects adjustments to exclude certain non-recurring and deal
amortization costs, was $65.1 million for the third quarter of fiscal
2016, a 35 percent gain over $48.4 million in the same quarter last
year. Adjusted earnings per diluted share from continuing operations¹
was $0.68 in the 2016 third quarter, a 39 percent year-over-year
increase. Reported net income from continuing operations was $57.2
million, or $0.60 per diluted share, compared to $46.4 million, or $0.47
per diluted share, in last year’s fiscal third quarter.

“We are pleased with our execution in the third quarter from both a
sales and operations perspective. Patterson Companies generated solid
organic revenue growth and expanded operating margins in both our Dental
and Animal Health businesses. We also made significant additional
integration progress in our Animal Health segment,” said Scott Anderson,
chairman, president and chief executive officer. “Our sales and support
teams are focusing diligently on serving our customers and taking full
advantage of our leadership in technology, value-added services and
broadened product offerings.”

Patterson Dental
Sales for Patterson Dental, which represent
approximately 46 percent of total sales, improved to $637.7 million, up
5.9 percent on a constant currency basis from the same quarter last
year. On that same basis, year-over-year sales by category were as
follows:

• Consumable dental supplies improved 5.1 percent
• Equipment sales rose 6.8 percent, reflecting strength in both
  technology and core equipment
• Other services and products, primarily composed of technical service,
  parts and labor, software support services and office supplies,
  climbed 7.7 percent

Anderson said, “A highlight for us was the solid growth in the
consumables category this quarter, which stemmed from increased patient
utilization. We continue to see stable to steadily improving dynamics in
the North American dental market and believe we are increasingly
well-positioned to capitalize on this trend – given our technology
leadership and support infrastructure – across the full spectrum of
dental customers.”

Patterson Animal Health
Sales for Patterson Animal Health,
which comprise approximately 54 percent of the company’s total sales,
more than doubled to $749.7 million. Sales from Animal Health
International, Inc. added $406.6 million to the Animal Health segment
during the quarter. Excluding the contribution from Animal Health
International, Inc. and accounting for normalized changes in veterinary
diagnostic manufacturer relationships, segment sales improved 6.2
percent on a constant currency basis, led by an 11.3 percent increase in
the U.S.

Anderson continued, “Overall, our Animal Health business posted solid
results for the quarter, driven by a particularly strong performance in
the U.S. companion animal business. We remain confident in the pace of
our integration progress with Animal Health International, Inc., the
synergies we are gaining and the competitive position of our
market-leading platform.”

Discontinued Operations
On August 28, 2015, Patterson
Companies completed the sale of Patterson Medical to Madison Dearborn
Partners for approximately $715 million. As a result of the sale,
results of Patterson Medical are classified and reported as discontinued
operations in all periods beginning with the fiscal 2016 first quarter.

Share Repurchases and Dividends
Fiscal year-to-date,
Patterson repurchased approximately 4.4 million shares of its
outstanding common stock, with a value of $200.0 million, leaving
approximately 16 million shares for repurchase under the current
authorization. The company also paid $21.6 million in cash dividends to
shareholders in the third quarter and $67.0 million in the first nine
months of fiscal 2016.

Year-to-Date Results¹
Consolidated sales
for the first nine months of fiscal 2016 totaled $3.9 billion, a 37
percent year-over-year increase. Adjusted net income from continuing
operations was $167.3 million, or $1.70 per diluted share, compared to
adjusted net income from continuing operations of $132.4 million, or
$1.33 per diluted share, in the year-ago period, as outlined in the
Third Quarter and Nine-Month Reconciliation table¹. Fiscal
2016 also includes the impact of an extra week.

Business Outlook
Anderson concluded, “With three quarters of
the fiscal year completed, we are narrowing our 2016 adjusted earnings
guidance range on a continuing operations basis to $2.42 to $2.48 per
diluted share. We expect to achieve this growth by concentrating on the
strong fundamentals in both of our businesses. In Dental, we intend to
capitalize on the favorable North American market conditions. In Animal
Health, as we generate synergies from the acquisition, we are focused on
driving growth across both the companion and production animal
platforms. We continue to create value for shareholders as we balance
investing in our business, paying dividends and repurchasing shares.”

The fiscal 2016 annual financial outlook and adjusted earnings guidance:

• Assumes stable North American and international markets
• Includes the impact of an extra week in fiscal 2016 compared to the
  previous year
• Excludes the impact of additional share repurchases for the remainder
  of the fiscal year
• Excludes transaction-related costs, integration expense, deal
  amortization, accelerated debt issuance costs, non-recurring IT
  initiative training costs and tax costs related to cash repatriation
  (See Third Quarter and Nine-Month Reconciliation table below)
• Excludes the discontinued operations for Medical

¹Third Quarter and Nine-Month Reconciliation
The
following non-GAAP table is provided to adjust reported net income and
earnings per share for the impact of tax affected one-time costs,
current and prior deal-amortization costs and tax costs related to cash
repatriation. Management believes that the adjusted net income and EPS
amounts may provide a helpful representation of the company’s current
quarter performance.

(Dollars in thousands, except EPS)
			Three Months Ended								Nine Months Ended
			January 30, 2016				January 24, 2015				January 30, 2016				January 24, 2015
Net Income from Continuing Operations – Reported			$	57,190			$	46,434			$	120,064			$	126,624
Transaction-Related Costs				28				–				10,007				–
Deal Amortization				6,921				1,930				18,507				5,767
Integration Expense				925				–				2,979				–
Accelerated Debt Issuance Costs				–				–				3,205				–
Non-Recurring IT Training Costs				77				–				252				–
Tax Impact of Repatriation of Cash				–				–				12,300				–
Net Income from Continuing Operations – Adjusted			$	65,141			$	48,364			$	167,314			$	132,391
Diluted Earnings Per Share from Continuing Operations – Reported			$	0.60			$	0.47			$	1.22			$	1.27
Transaction-Related Costs				–				–				0.10				–
Deal Amortization				0.07				0.02				0.19				0.06
Integration Expense				0.01				–				0.03				–
Accelerated Debt Issuance Costs				–				–				0.03				–
Non-Recurring IT Training Costs				–				–				–				–
Tax Impact of Repatriation of Cash				–				–				0.12				–
Diluted Earnings Per Share from Continuing Operations – Adjusted*			$	0.68			$	0.49			$	1.70			$	1.33
*May not foot due to rounding

Third Quarter Conference Call and Replay
Patterson’s third
quarter earnings conference call will start at 10 a.m. Eastern today.
Investors can listen to a live webcast of the conference call at www.pattersoncompanies.com.
The conference call will be archived on Patterson’s website. A replay of
the third quarter conference call can be heard for one week at
888-203-1112 and by providing the Conference ID 6564113, when prompted.

About Patterson Companies, Inc.
Patterson Companies, Inc. is
a value-added distributor serving the dental and animal health markets.

Dental Market
Patterson’s Dental
segment 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.

Animal Health Market
Patterson’s
Animal Health segment is a leading distributor of products, services and
technologies to both the production and companion animal health markets
in North America and the U.K.

This press release contains certain 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 Patterson’s
ability to control. Forward-looking statements generally can be
identified by words such as “believes,” “expects,” “anticipates,”
“foresees,” “forecasts,” “estimates” or other words or phrases of
similar import. It is uncertain whether any of the events anticipated by
the forward-looking statements will transpire or occur, or if any of
them do, what impact they will have on the results of operations and
financial condition of Patterson or the price of Patterson stock. These
forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those indicated in
such forward-looking statements, including but not limited to the other
risks and important factors contained and identified in Patterson’s
filings with the Securities and Exchange Commission, such as its
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, any of
which could cause actual results to differ materially from the
forward-looking statements. Any forward-looking statement in this press
release speaks only as of the date on which it is made. Except to the
extent required under the federal securities laws, Patterson does not
intend to update or revise the forward-looking statements.

PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended										Nine Months Ended
			January 30,					January 24,					January 30,					January 24,
			2016					2015					2016					2015
Net sales			$	1,400,853				$	958,628				$	3,932,933				$	2,875,804
Gross profit				339,864					262,442					959,007					772,346
Operating expenses				244,135					185,065					717,638					556,833
Operating income from continuing operations				95,729					77,377					241,369					215,513
Other expense, net				(9,804	)				(7,971	)				(37,477	)				(23,136	)
Income from continuing operations before taxes				85,925					69,406					203,892					192,377
Income taxes				28,735					22,972					83,828					65,753
Net income from continuing operations				57,190					46,434					120,064					126,624
Net income (loss) from discontinued operations				(750	)				8,242					1,500					32,119
Net income			$	56,440				$	54,676				$	121,564				$	158,743
Basic earnings (loss) per share:
Continuing operations			$	0.60				$	0.47				$	1.23				$	1.28
Discontinued operations				(0.01	)				0.08					0.01					0.32
Net basic earnings per share			$	0.59				$	0.55				$	1.24				$	1.60
Diluted earnings (loss) per share:
Continuing operations			$	0.60				$	0.47				$	1.22				$	1.27
Discontinued operations				(0.01	)				0.08					0.01					0.32
Net diluted earnings per share			$	0.59				$	0.55				$	1.23				$	1.59
Shares:
Basic				95,335					98,842					97,809					98,991
Diluted				95,930					99,540					98,488					99,699
Dividends declared per common share			$	0.22				$	0.20				$	0.66				$	0.60
Gross margin – reported				24.3		%			27.4		%			24.4		%			26.9		%
Operating expenses as a % of net sales – adjusted				16.6		%			19.0		%			17.1		%			19.1		%
Adjustments1				0.9					0.3					1.2					0.3
Operating expenses as a % of net sales – reported				17.5		%			19.3		%			18.3		%			19.4		%
Operating income as a % of net sales – adjusted				7.7		%			8.4		%			7.3		%			7.8		%
Adjustments1				(0.9	)				(0.3	)				(1.2	)				(0.3	)
Operating income as a % of net sales – reported				6.8		%			8.1		%			6.1		%			7.5		%
Effective tax rate – adjusted				33.8		%			33.0		%			34.7		%			34.0		%
Adjustments1				(0.4	)				0.1					6.4					0.2
Effective tax rate – reported				33.4		%			33.1		%			41.1		%			34.2		%
1 Refer to the press release for the definition of adjustments to reported results

PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			January 30,				April 25,
			2016				2015
			(Unaudited)
ASSETS
Current assets:
Cash and short-term investments			$	97,701			$	400,632
Receivables				698,911				586,263
Inventory				814,413				408,422
Prepaid expenses and other current assets				99,831				59,561
Current assets held for sale				–				118,347
Total current assets				1,710,856				1,573,225
Property and equipment, net				278,288				204,133
Goodwill and other intangible assets				1,337,531				424,949
Long-term receivables, net and other				228,995				109,605
Long-term assets held for sale				–				635,794
Total assets			$	3,555,670			$	2,947,706
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	503,523			$	323,294
Other accrued liabilities				197,575				215,075
Current maturities of long-term debt				16,500				–
Borrowings on revolving credit				198,000				–
Current liabilities held for sale				–				39,316
Total current liabilities				915,598				577,685
Long-term debt				1,030,250				725,000
Other non-current liabilities				247,275				81,484
Long-term liabilities held for sale				–				49,414
Total liabilities				2,193,123				1,433,583
Stockholders’ equity				1,362,547				1,514,123
Total liabilities and stockholders’ equity			$	3,555,670			$	2,947,706

PATTERSON COMPANIES, INC.
SALES SUMMARY
(Dollars in thousands)
(Unaudited)
											Total			Foreign				Animal Health
			January 30,				January 24,				Sales			Exchange				International				Internal
			2016				2015				Growth			Impact				Impact				Growth
Three Months Ended
Consolidated net sales
Consumable1			$	1,059,838			$	638,541			66.0	%		(1.8	)	%		63.8		%		4.0	%
Equipment and software				248,779				235,847			5.5			(1.4	)			–				6.9
Other1				92,236				84,240			9.5			(1.4	)			(0.9	)			11.8
Total			$	1,400,853			$	958,628			46.1	%		(1.7	)	%		42.4		%		5.4	%
Dental
Consumable1			$	333,835			$	322,682			3.5	%		(1.6	)	%		–		%		5.1	%
Equipment and software				232,334				220,738			5.3			(1.5	)			–				6.8
Other1				71,482				67,235			6.3			(1.4	)			–				7.7
Total			$	637,651			$	610,655			4.4	%		(1.5	)	%		–		%		5.9	%
Animal Health
Consumable1			$	726,003			$	315,859			129.9	%		(2.0	)	%		129.0		%		2.9	%
Equipment and software				16,445				15,109			8.8			(0.1	)			–				8.9
Other1				7,265				6,847			6.1			(3.0	)			(10.8	)			19.9
Total			$	749,713			$	337,815			121.9	%		(2.0	)	%		120.4		%		3.5	%
Corporate
Other1			$	13,489			$	10,158			32.8	%		–		%		–		%		32.8	%
Total			$	13,489			$	10,158			32.8	%		–		%		–		%		32.8	%
Nine Months Ended
Consolidated net sales
Consumable1			$	3,042,634			$	2,020,345			50.6	%		(2.2	)	%		49.2		%		3.6	%
Equipment and software				610,071				596,650			2.2			(1.5	)			–				3.7
Other1				280,228				258,809			8.3			(1.4	)			(0.5	)			10.2
Total			$	3,932,933			$	2,875,804			36.8	%		(2.0	)	%		34.5		%		4.3	%
Dental
Consumable1			$	1,024,323			$	974,534			5.1	%		(1.5	)	%		–		%		6.6	%
Equipment and software				572,771				565,483			1.3			(1.6	)			–				2.9
Other1				216,996				206,148			5.3			(1.3	)			–				6.6
Total			$	1,814,090			$	1,746,165			3.9	%		(1.5	)	%		–		%		5.4	%
Animal Health
Consumable1			$	2,018,311			$	1,045,811			93.0	%		(2.9	)	%		95.0		%		0.9	%
Equipment and software				37,300				31,167			19.7			(0.1	)			–				19.8
Other1				25,852				23,611			9.5			(4.0	)			(5.3	)			18.8
Total			$	2,081,463			$	1,100,589			89.1	%		(2.8	)	%		90.2		%		1.7	%
Corporate
Other1			$	37,380			$	29,050			28.7	%		–		%		–		%		28.7	%
Total			$	37,380			$	29,050			28.7	%		–		%		–		%		28.7	%
1 Certain sales were reclassified from consumable to other in current and prior periods.

PATTERSON COMPANIES, INC.
SUPPLEMENTARY FINANCIAL DATA
(In thousands, except per share data)
(Unaudited)
			Three Months Ended										Nine Months Ended
			January 30,					January 24,					January 30,					January 24,
			2016					2015					2016					2015
Operating income (loss)
Dental			$	82,108				$	78,048				$	223,454				$	214,024
Animal Health				25,959					11,864					64,108					40,187
Corporate				(12,338	)				(12,535	)				(46,193	)				(38,698	)
			$	95,729				$	77,377				$	241,369				$	215,513
Other (expense) income, net
Interest income			$	496				$	1,057				$	1,914				$	3,056
Interest expense				(10,634	)				(8,512	)				(39,931	)				(25,824	)
Other				334					(516	)				540					(368	)
			$	(9,804	)			$	(7,971	)			$	(37,477	)			$	(23,136	)

PATTERSON COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
			Nine Months Ended
			January 30,					January 24,
			2016					2015
Operating activities:
Net income			$	121,564				$	158,743
Net income from discontinued operations				1,500					32,119
Net income from continuing operations				120,064					126,624
Adjustments to reconcile net income from continuing operations to net cash (used in) provided by operating activities:
Depreciation & amortization				58,817					31,489
Non-cash employee compensation				20,587					17,940
Change in assets and liabilities, net of acquired				(247,015	)				(56,636	)
Net cash (used in) provided by operating activities- continuing operations				(47,547	)				119,417
Net cash (used in) provided by operating activities- discontinued operations				(38,985	)				38,668
Net cash (used in) provided by operating activities				(86,532	)				158,085
Investing activities:
Additions to property and equipment, net of disposals				(56,280	)				(43,182	)
Acquisitions and equity investments				(1,106,583	)				(8,730	)
Proceeds from sale of securities				48,744					40,775
Other investing activities				–					(543	)
Net cash used in investing activities- continuing operations				(1,114,119	)				(11,680	)
Net cash provided by investing activities- discontinued operations				714,680					4,256
Net cash used in investing activities				(399,439	)				(7,424	)
Financing activities:
Dividends paid				(67,010	)				(60,340	)
Share repurchases				(200,000	)				(47,539	)
Proceeds from issuance of long-term debt, net				988,400					–
Retirement of long-term debt				(678,250	)				–
Draw on revolver				198,000					–
Other financing activities				5,523					6,484
Net cash provided by (used in) financing activities				246,663					(101,395	)
Effect of exchange rate changes on cash				(10,251	)				(24,452	)
Net change in cash and cash equivalents			$	(249,559	)			$	24,814

Contacts

Patterson Companies, Inc.
Ann B. Gugino, 651-686-1600
Executive
Vice President & CFO
or
John M. Wright, 651-686-1364
Vice
President, Investor Relations