Third Quarter Net Income Up 25 Percent on 13 Percent Consolidated Sales
Increase
HIGHLIGHTS OF 3Q 2000:
-- Consumable sales increased 16 percent
-- Total dental sales rose 12 percent
-- Equipment sales up 5 percent, despite prior year's financing promotion
-- Operating leverage led to 70 basis-point margin improvement
-- Profitability continued in Canada on 31 percent sales gain and greater
efficiencies
-- Sales force expanded 9 percent
ST. PAUL, Minn., Feb. 24 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) achieved double-digit sales and net income growth in the fiscal
2000 third quarter and nine months ended January 29, 2000. The company's
continued strong performance resulted from a larger, more experienced sales
force, healthy demand across all product lines, greater sales and efficiencies
in Canada, and a robust market environment.
"We're very pleased with the performance trends we're generating. We
believe that the strength of our organization and the proven strategies we
continue to effectively execute, together with substantial market demand,
support our continued growth," said Peter Frechette, president and chief
executive officer. "We're experiencing the benefits of a larger sales force,
superior operating leverage, and a full-service offering that includes more
than 82,500 products, dominant brands, multiple ordering options, and personal
service. Our continued attention and dedication to our customers and
employees alike is what's driving the success of Patterson Dental."
For the third quarter, net income rose 25 percent to $17.2 million, or
$0.51 per share, compared with $13.7 million, or $0.41 per share, in the
fiscal 1999 quarter. Operating expenses as a percent of sales declined
90 basis points, leading to an increase in operating profit of 21 percent or a
70 basis-point margin improvement. Net sales for the latest three-month
period increased 13 percent to $260.2 million from $230.2 million in the
year-ago quarter. The higher sales and enhanced operating leverage drove a
60 basis-point increase in net margin.
All product categories contributed to the strong sales growth in the third
quarter. Consumable sales rose 16 percent quarter-over-quarter, aided by a
growing customer base and a 9 percent year-over-year increase in the company's
sales force to 1,034 representatives. Equipment sales were up 5 percent, a
notable increase when compared with last year's third quarter, which benefited
from a very successful equipment financing promotion. Sales of Colwell
printed office products rose 30 percent, primarily due to the acquisition of
Professional Business Systems (PBS), which was completed in February 1999.
The fiscal 2000 fourth quarter will reflect a full year of comparable PBS
sales. EagleSoft software sales were up 30 percent. U.S. dental sales
increased 11 percent and sales in Canada improved 31 percent, continuing to
benefit from an improving economy.
Results for the fiscal 2000 nine months include an additional week gained
in the fiscal first quarter. Net income for the nine-month period increased
30 percent to $46.5 million, or $1.38 per share, from $35.9 million, or
$1.07 per share, for the fiscal 1999 comparable period. Net sales were
$763.2 million, up nearly 19 percent from $643.6 million last year.
Patterson's consumable-supplies customer base increased more than 16 percent
in the latest comparable period. Operating expenses as a percent of sales
declined 70 basis points, driving a 40 basis-point expansion in operating
margin. A lower income tax rate for the first nine months of fiscal 2000
reflected the profit and utilization of tax-loss carryforwards in Canada.
Patterson continues to report a strong financial position. The company's
cash and short-term investments were $88.5 million at January 29, 2000.
Shareholders' equity advanced 17 percent to $311.5 million in the third
quarter. Total debt was less than $2 million, and the current ratio was a
healthy 3 to 1.
At the beginning of the fourth quarter, Patterson opened a new
distribution center, located in central Iowa. This facility is intended to
provide additional capacity and faster delivery to more customers in the
Midwest, and will replace a facility in Minneapolis.
"The strong economy and growing demand for dental services coupled with a
declining number of dentists per capita means dentists are busier and more
profitable than ever, which supports a healthy dental supply market. We
believe our industry currently is growing 7-9 percent annually. We expect to
exceed that growth by as much as 6 percentage points this fiscal year," said
Frechette. "Our fourth quarter is traditionally very strong across all
product lines. In particular, we anticipate that equipment sales in the
fourth quarter could increase in excess of 14 percent due to a combination of
increased demand and soft equipment sales in the fiscal 1999 fourth quarter
following the special financing promotion in the third quarter of that year.
Further, Canada continues to present additional opportunities to improve
operating leverage, enhancing its contribution to overall increased
profitability."
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 more than 1,000 sales representatives and equipment
specialists in the United States and Canada.
This release 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 are subject to risks and
uncertainties that are beyond the company's ability to control. The company
cautions shareholders and prospective investors that the following factors,
among others, may cause actual results to differ materially from those
indicated by the forward-looking statements: 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; the ability of the company and its
suppliers of products and services to upgrade their computer systems to
address year 2000 issues; and the availability of capital to finance planned
growth. Forward-looking statements are qualified in their entirety by
cautionary language set forth in the company's Annual Report on Form 10-K
filed July 19, 1999, and other documents filed with the Securities and
Exchange Commission.
For further information on Patterson Dental free of charge via fax,
dial 1-800-PRO-INFO and enter the number 207.
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for earnings per share)
(Unaudited)
Quarter Ended Nine Months Ended
Jan. 29, Jan. 23, Jan. 29, Jan. 23,
2000 1999 2000 1999
(40 Weeks) (39 Weeks)
Net sales $260,172 $230,176 $763,206 $643,574
Gross profit 96,416 85,841 280,736 238,356
Operating expense 70,445 64,343 210,313 181,939
Operating income 25,971 21,498 70,423 56,417
Other income, net 1,501 562 3,845 1,376
Income taxes 10,280 8,312 27,776 21,919
Net income $17,192 $13,748 $46,492 $35,874
Earnings per share
- basic and diluted $0.51 $0.41 $1.38 $1.07
Weighted average and
dilutive potential
shares outstanding 33,797 33,472 33,783 33,432
Gross margin 37.1% 37.3% 36.8% 37.0%
Operating expenses
as a % of sales 27.1% 28.0% 27.6% 28.3%
Operating income
as a % of sales 10.0% 9.3% 9.2% 8.8%
Effective tax rate 37.4% 37.7% 37.4% 37.9%
Return on net sales 6.6% 6.0% 6.1% 5.6%
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
January 29, April 24,
ASSETS 2000 1999
Current assets:
Cash and equivalents $81,871 $78,746
Short-term investments 6,662 --
Accounts and notes receivables, net 108,601 112,521
Inventory 110,053 91,722
Prepaid expenses and deferred taxes 5,318 3,655
Total current assets 312,505 286,644
Property and equipment, net 45,088 37,018
Long-term receivables 15,930 1,575
Other 47,198 48,013
Total assets $420,721 $373,250
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $72,985 $67,213
Accrued expenses 27,537 31,064
Current maturities of long-term debt 357 415
Total current liabilities 100,879 98,692
Long-term debt 1,362 1,682
Deferred Taxes 1,660 1,650
Total liabilities 103,901 102,024
Deferred credits 5,363 6,027
Stockholders' equity 311,457 265,199
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $420,721 $373,250
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended
Jan. 29, Jan. 23,
2000 1999
(40 Weeks) (39 Weeks)
Operating activities:
Net income $46,492 $35,874
Depreciation and amortization 6,602 5,852
Change in assets and
liabilities, net of acquired (11,482) (38,396)
Net cash (used) provided
by operating activities 41,612 3,330
Investing activities:
Additions to property
and equipment, net (12,700) (3,081)
Acquisitions, net (2,842) (344)
Purchase of investments (6,662) --
Investment in equipment contracts (14,940) --
Net cash used in investing activities (37,144) (3,425)
Net cash used by financing activities (1,343) (742)
Net (decrease) increase
in cash and cash equivalents $3,125 $(837)
SOURCE Patterson Dental Company
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CONTACT:
R. Stephen Armstrong, Executive Vice
President & CFO of Patterson Dental Company, 651-686-1600,
General, Leslie Hunziker, or Analysts, Suzy Olson, of The
Financial Relations Board, 312-266-7800
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