Patterson Companies ($PDCO), a Minnesota-based distributor, made a big statement back in May about how it intended to reposition its business when it laid out $1.1 billion to acquire Animal Health International (AHI). The company predicted the addition would double its sales in animal health. A few months later, it offloaded its slow-growing medical-equipment unit for $715 million to private equity firm Madison Dearborn Partners, which helped reduce its debt load from the AHI deal.
Now the company is seeing the fruits of that effort. In its second fiscal quarter, announced before the market opened on November 24, Patterson's animal health unit recorded revenues of $774.5 million--more than doubling its results from the same period a year ago. Much of the gain came from a $414 million sales contribution from AHI. In the press release announcing earnings, the company said the integration was on track and that its established companion-animal business had grown sales more than 5% on a constant-currency basis.
The full business, which includes a dental unit, posted quarterly sales of $1.4 billion from continuing operations, a 44% improvement on a constant-currency basis from the year-ago period. Patterson's adjusted net income from continuing operations was $55.3 million, or $0.56 a share, up 27% year over year.
"We have transformed and repositioned our company in the markets we serve," said CEO Scott Anderson in the release. "We have positioned our company to capitalize on the compelling long-term demographic, technology and productivity trends in our markets."
Patterson distributes equipment, consumables and software-support services to veterinary clinics, and it has been recording strong growth across those categories. There have been some bumps along the way, though. Last quarter, for example, a weak flea-and-tick season in the U.K. dampened growth somewhat. And the loss of a single large customer in that quarter caused operating margins in animal health to fall.
Still, Anderson remains optimistic, so much so that the company reaffirmed its guidance for fiscal 2016 of EPS of $2.40 to $2.50 per share. The company's stock, which had traded down to $43 at the end of September but has been on an upswing of late, rose slightly in premarket trading to $48.63.
- here's the earnings release