Patterson Companies, Inc. (PDCO) reported third quarter fiscal 2010 earnings per share of 47 cents, in line with the Zacks Consensus Estimate and higher than the year-ago earnings of 45 cents.
 
Sales 

Total sales in the third quarter increased 1% year over year to roughly $820.1 million. In terms of business segments: Dental Supply revenues declined 2.1% year over year to $572.1 million. The decline was due to the weak economic scenario that has resulted in dental practitioners deferring their buying decisions on dental instruments. 

Veterinary Supply sales increased 4.5% year over year to $151.8 million. Rehabilitation Supply revenues increased 18.0% year over year to $96.2 million. Growth was primarily due to the acquisitions of Mobilis Healthcare Group in Apr 2009 and Empi Therapy Solutions in Jun 2009. 

In terms of products: Consumable and printed products sales increased 5.2% year over year to $501.1 million. Equipment and software sales declined 8.1% year over year to $249.3 million. Other category of revenues registered a growth of 9.7% year over year to $69.6 million. 

Margins 

Patterson witnessed an expansion in margins in the third quarter. Gross margin increased 50 basis points (bps) year over year to 33.7%. Operating margin increased 10 bps year over year to 11.4%. 

Balance Sheet & Cash Flow 

Patterson ended the third quarter with cash and short-term investments of roughly $267.8 million, an increase of 69.4% in the first nine months of the fiscal year. The company had an outstanding long-term debt of $525.0 million at the end of the third quarter. Cash flow from operations was $97.7 million for the quarter.
 
Outlook 

Patterson expects earnings per share in fiscal 2010 to range between $1.74 and $1.78, compared to the previous guidance of $1.70 to $1.80. 

Patterson Companies, Inc. is a distributor of dental, companion-pet veterinarian and rehabilitation supply markets in the U.S. and Canada. 

Currently, we have a ‘Neutral’ recommendation on Patterson.
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