Contributions from a Larger Sales Force and Acquisitions
Drive Double-Digit Sales Growth
ST. PAUL, Minn., Feb. 18 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) today reported significant top-line growth and market share
expansion resulting from contributions from a larger sales force, broad-based
sales increases in both sundries and equipment products, and acquisitions.
-- The company added 134 sales representatives quarter-over-quarter, a 16
percent increase, both through recruiting and acquisition.
-- Sales of consumable supplies rose 16 percent in the fiscal 1999 third
quarter, while equipment sales grew 25 percent.
-- Through the first nine months, Patterson increased its customer base by
14 percent over the comparable period last year.
"Our very successful first nine months continues a long record of
consistent performance for Patterson," said Peter Frechette, president and
chief executive officer. "In the recent quarter, we surpassed our goal of 10
- 12 percent sales growth, attributable primarily to our U.S. dental supply
company."
Management went on to point out that while equipment sales were a
significant part of the total sales increase, they were driven by a special
short-term financing offer, and as such, the company doesn't expect the
accelerated pace of equipment growth to be sustainable over the long-term.
For the third quarter ended January 23, 1999, net income rose 27 percent
to $13.7 million, or $0.41 per share, compared with $10.8 million, or $0.33
per share, in the fiscal 1998 quarter. The company's basic and diluted
earnings per share are the same in the quarter. For the quarter, operating
income was $21.5 million, up 26 percent from $17.1 million last year. Net
sales for the third quarter increased 18 percent to $230.2 million from
$195.5 million in the year-ago quarter.
The substantial sales increase coupled with the benefits of operating
leverage led to notable margin improvement in the quarter and nine month
period. Operating expenses rose 14 percent during the quarter on the
18 percent sales increase, expanding operating margin to 9.3 percent from
8.7 percent last year. Net margin for the quarter increased to 6.0 percent
from 5.5 percent in the fiscal 1998 third quarter.
For the first nine months of fiscal 1999, net income rose 23 percent to
$35.9 million, or $1.07 per diluted share, from $29.2 million, or $0.88 per
diluted share, a year earlier. Net sales were $643.6 million compared with
$567.2 million in the same period a year ago, a 13 percent improvement.
Operating income increased 22 percent on an 11 percent increase in operating
expenses, resulting in a 70 basis point expansion in operating margin.
"While our results for the quarter have surpassed expectations, we are
maintaining our growth goals. Additional sales people, recent acquisitions
and special promotions have all supported the increased revenue growth, and we
are certainly optimistic about their continued contributions. However, it is
too early to tell if this higher level of growth is sustainable over the
long-term. Therefore, we remain comfortable with our goal of 20 percent
earnings growth for fiscal 1999," said Frechette.
As announced last week, Patterson acquired Professional Business Systems,
Inc. (PBS), a manufacturer and distributor of filing systems and other
practice management systems selling both directly to healthcare providers and
wholesale to healthcare distributors. The acquisition adds $11 million to
Patterson's annual sales base and strengthens its presence in the medical
market.
Patterson Dental Company is one of the largest distributors of dental
products in North America. The company supplies more than 82,500 products to
dentists, dental laboratories, institutions, physicians and other healthcare
providers. These products include x-ray film, impression and restorative
materials, hand instruments, sterilization products, front office forms and
stationery as well as capital equipment. Patterson markets its products and
services through approximately 950 sales representatives and equipment
specialists in the United States and Canada.
This press release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties which are beyond the company's ability to
control and in many cases the company cannot predict what factors may cause
actual results to differ materially from those indicated by the forward-
looking statements. These factors may include, among others: competition
within the dental supply industry; changes in the economics of dentistry,
including reduced growth in expenditures by private dental insurance plans and
the effects of healthcare reform, which may affect future per capita
expenditures for dental services and the ability of dentists to invest in or
obtain reimbursement for the use of high-technology products; the ability of
the company to maintain satisfactory relationships with its sales force; the
effects of economic conditions; unforeseen operating risks; risks associated
with the dependence on manufacturers of the company's products; and the
availability of capital to finance planned growth. These risks are qualified
in their entirety by cautionary language set forth in the company's Form 10-K
report filed July 16, 1998, and other documents filed with Securities and
Exchange Commission.
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for earnings per share)
(Unaudited)
Quarter ended Nine months ended
January 23, January 24, January 23, January 24,
1999 1998 1999 1998
Net sales $230,176 $195,540 $643,574 $567,163
Gross profit 85,841 73,336 238,356 209,950
Operating expenses 64,343 56,242 181,939 163,834
Operating income 21,498 17,094 56,417 46,116
Other income, net 562 370 1,376 826
Income taxes 8,312 6,666 21,919 17,741
Net income $13,748 $10,798 $35,874 $29,201
Earnings per common share
-- Diluted $0.41 $0.33 $1.07 $0.88
Weighted average shares
outstanding - diluted 33,472 33,210 33,432 33,104
Gross margin 37.3% 37.5% 37.0% 37.0%
Operating expenses as a %
of sales 28.0% 28.8% 28.3% 28.9%
Operating income as a %
of sales 9.3% 8.7% 8.8% 8.1%
Effective tax rate 37.7% 38.2% 37.9% 37.8%
Return on net sales 6.0% 5.5% 5.6% 5.1%
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January 23, April 25,
1999 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $34,782 $35,619
Accounts and notes receivables, net 121,775 106,252
Inventory 97,268 81,810
Prepaid expenses and deferred taxes 4,647 3,980
Total current assets 258,472 227,661
Property and equipment, net 36,306 37,998
Intangibles and other 49,156 50,714
Total assets $343,934 $316,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $57,640 $60,652
Other accrued liabilities 26,609 29,287
Current maturities of long-term debt
and bank indebtedness 1,421 4,466
Total current liabilities 85,670 94,405
Long-term debt 1,547 2,736
Deferred taxes 2,017 2,017
Total liabilities 89,234 99,158
Deferred credits 6,248 6,912
Stockholders' equity 248,452 210,303
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $343,934 $316,373
SOURCE Patterson Dental Company
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CONTACT:
Ronald Ezerski, Executive Vice President &
CFO of Patterson Dental Company, 651-686-1600; or General
Information, Leslie Hunziker, Analyst Inquiries, Caroline Price,
or Media Inquiries, Laura Kuhlmann, all of The Financial
Relations Board, 312-266-7800
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