Steve Armstrong
Executive Vice President &
Chief Financial Officer
Scott Anderson
Chairman, President &
Forward-Looking Statements
This presentation 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
may be affected by risks and uncertainties that are inherent in the
Company’s business and beyond the ability of the Company to
control. Such risks and uncertainties could cause actual results to
differ materially from those anticipated. Accordingly, these risks are
qualified in their entirety by the cautionary language contained in
the
Company’s
filings
with
the
Securities
and
Exchange
Commission.
Agenda
Business Overview
Strategies and Operations
Financials
About Patterson
Patterson Companies
Specialty, value-added distributor serving three growing markets - Dental, veterinary, & rehabilitation supply
Patterson Dental
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
Patterson Veterinary
Leading distributor of consumable veterinary supplies, equipment and software, diagnostic products, vaccines and pharmaceuticals to companion-pet veterinary clinics
Patterson Medical
World leading distributor of rehabilitation supplies and non-wheelchair assistive patient products to the physical and occupational therapy markets.
Patterson Companies
Dental
65%
Medical
14%
Veterinary
21%
Specialty Distributor Serving Three Markets
Patterson Dental
• 33% market share (est.)
• Highly developed single-source strategy
• Over 120,000 customers in North America
• Leading provider of next-generation technology
• Largest distributor of dental equipment • Industry’s largest sales force
• Branch office network spans US & Canada
Patterson Veterinary
• 21% national market share (est.) • Full-service model
– Sells widest range of consumables and
pharmaceuticals in industry
– Expanding offerings of equipment, software, technical service, and other value-added services
– Growing range of technology solutions
• Serves companion-pet practices throughout U.S.
• Growth via internal expansion and acquisitions
Patterson Medical
• 12% global market share (est.) – 3X-4X larger than nearest
competitor
– Operations in North America, U.K., France & Australia
• Only single-source of supply in industry • Owns/manufactures many leading
brands
• Largest sales force in industry and major catalog operation
Patterson’s Markets
Dental
• Projected long-term growth rate: 4 - 6%
• Growth drivers: aging population, demand for specialty services, aesthetics, technological advancements, and insurance
Companion-Pet Veterinary
• Projected long-term growth rate: 4 - 5%
• Fastest growing segment of overall vet market
• Growth drivers: growing pet ownership, families spending more on pet care, human/animal bond
Rehabilitation
• Projected long-term growth rate: 3 - 5%
• Growth drivers: aging population, active lifestyles and sports injuries, medical procedures with rehab protocols
Shared Market Characteristics
• Fragmented markets populated by large numbers of
practitioners and small practices
– Many practices lack back-office support
• Customers value relationship with skilled sales representative
• Strong demand for relatively low-cost goods
– Supplies do not account for high percentage of customer’s
operating expenses
• Market leaders with strong competitive positions
• Markets growing faster than overall economy
• Sustainable competitive advantages
Agenda
Business Overview
Strategies and Operations
Full-Service, Single-Source Model
Well-suited to needs of Patterson’s markets
Enables businesses to meet complete needs of customers
Makes value-add proposition tangible for customers
Patterson Dental
• Most highly developed value-added business model
• Meets complete needs of dental offices and labs
Patterson Veterinary
• Strong progress at adopting value-added platform
• Growing range of equipment, local technical support, equipment financing,
value-added services, client communication tools
Patterson Medical
• Advancing value-added model; strong upside potential
Value-Added Model
• Highly trained sales force; business confidant
• Most extensive inventory; very high service levels
• Specialized customer service personnel
• No questions asked return policy
• Financing
• Over 1,500 service technicians
• Office design and project management
• Electronic order entry
• Loyalty programs
• E-claims and statement processing
• Continuing professional education
• Patient education programs
Distribution Strategy
Field Sales Force
Forges close customer relationships
Offers visibility into current and future customer needs
Enables unsurpassed customer service
Patterson Dental
• Industry’s largest sales force with over 1,500 field representatives
• Specialized equipment and CEREC reps
Patterson Veterinary
• Over 240 field sales reps in 18 branches
• Specialized equine, equipment and technology representatives
Patterson Medical
• Industry’s largest sales force with over 280 representatives
• Augmented by industry’s most extensive catalog operation
Decentralized Management
Customer decisions made at branch level
Encourages entrepreneurism
P&L responsibility fosters local accountability
Patterson Dental
• 75 U.S. branches from coast to coast; 9 in Canada
Patterson Veterinary
• 18 branch offices
• Growing geographic footprint via internal expansion and
acquisitions
Patterson Medical
• 18 branch offices
• Branch initiative started in 2006 through acquisitions and internal
start-ups
Strong Focus on Technology
Improves practice productivity
Enables practitioners to generate additional revenue
New procedures/improves clinical outcomes
Patterson Dental
• CEREC
®dental restorative system; Schick digital x-ray; cone beam;
Eaglesoft practice management software; CAESY patient education
software; Dolphin imaging software
Patterson Veterinary
• ePetHealth; EquiHealth; Vetsource; Diagnostic Imaging Atlas®; IntraVet
practice management software;
Patterson Medical
Patterson Technology Center
• Provides Patterson a strong competitive advantage
• Software development and customer support for all three businesses • Manufacturer support, including warranty services
– Exclusive distributor of Sirona products (Schick, CEREC, Galileos) – Also, Air Techniques and Planmeca
• Supports Patterson branded computer hardware
Agenda
Business Overview
Strategies and Operations
5-Year Sales
2009
2010
2011
2012
2013
$2,174
$2,167
$2,236
$2,288
$2,380
$551
$644
$675
$735
$755
$369
$426
$505
$513
$502
Patterson Medical
Patterson Veterinary
Patterson Dental
$3,637
(in millions)
$3,536
$3,094
$3,237
5-Year Earnings Per Share
2009
2010
2011
2012
2013
$1.69
$1.78
Operating Expense Ratio
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
11.2%
11.0%
11.0%
10.1%
9.7%
Free Cash Flow
2009
2010
2011
2012
2013
$92
$236
$226
$292
$279
Book Value Per Share
2009
2010
2011
2012
2013
$9.72
$11.68
Cash Returned to Shareholders
2009
2010
2011
2012
2013
$-
$12
$147
$417
$223
(in millions)
4th Quarter, Fiscal 2013
• Consolidated sales: +3.1% to $936.3 million
• EPS: $0.62 vs. $0.58 in Q4 FY12
Patterson Dental
• Sales increased 6.4% from the year-earlier period
• Sales of equipment rose nearly 14% from the year-earlier level, driven by
strong performances in technology categories, particularly digital imaging
• Strong demand for next-generation CEREC system with new Omnicam
acquisition unit
Patterson Veterinary
• Internally-generated sales +1.9%
– Adjusted to exclude the impact from the change in a nutritional
distribution agreement in the spring of 2012 (approx. 4% impact)
– Attained goal of being a national technical service provider
Patterson Medical
Fiscal 2014 Outlook
• Company provided full-year earnings guidance to be in the range of $2.10 to $2.20 – Assumptions
• Stable economic conditions in North America
• Modest operating margin expansion, excluding information technology investments
• EPS impact of $0.06 from information technology investments • No impact from share repurchases that may occur during the year • Strong cash flow generation similar to fiscal 2013 levels
• Businesses have strong competitive positions in markets and aggressively pursuing opportunities
• Conservative, flexible balance sheet • Capital deployment
– Investing in business remains #1 priority – Dividends