Increased Productivity and Strong Operating Leverage
Drive Continued Double-Digit Growth
ST. PAUL, Minn., May 20 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) exceeded its financial goals of 20 percent earnings growth and
10 percent revenue growth in fiscal 1999 by significantly expanding customer
accounts, increasing the size and productivity of its sales force, and
broadening its geographic coverage. New products and services, gaining more
experienced sales people and acquisitions supported these achievements.
"We have a long-established track record of successfully executing our
growth strategies and leveraging our highly efficient infrastructure," said
Peter Frechette, president and chief executive officer. "In fiscal 1999, we
generated important sales increases from our U.S. Dental, Colwell and
EagleSoft operations, and we saw an operating margin improvement in Canada,
where our newly centralized systems are helping to reduce costs there."
For the year ended April 24, 1999, net income rose 22 percent to
$49.9 million, or $1.49 per diluted share, from $40.8 million, or $1.23 per
diluted share, a year earlier. The company's basic and diluted earnings per
share are the same. Net sales were $878.8 million compared with
$778.2 million in the same period a year ago, a 13 percent improvement.
Operating expenses as a percent of sales decreased 70 basis points, resulting
in a 20 percent increase in operating income and a 50 basis point improvement
in operating margin. Higher sales and operating income coupled with a
slightly lower tax rate further supported net margin expansion.
Strong demand for consumable supplies and equipment continued in
fiscal 1999. Consumable sales rose 13 percent year-over-year. Equipment
sales, favorably impacted by the company's equipment financing promotion in
third quarter, increased 14 percent in fiscal 1999 compared with a 11 percent
increase in fiscal 1998. During the fourth quarter, we converted more than
$20 million of finance receivables to cash and reduced inventories by
$5.6 million, back in line with market conditions.
For the fourth quarter, net income rose 21 percent to $14.0 million,
or $0.42 per share, compared with $11.6 million, or $0.35 per share, in the
fiscal 1998 quarter. Net sales for the latest three months increased 12
percent to $235.2 million from $211.0 million in the year-ago quarter.
Operating expenses as a percent of sales declined in the quarter, leading to
operating margin expansion. Patterson's income tax rate in the fiscal 1999
fourth quarter declined due to a profit and utilization of tax-loss
carryforwards in Canada. This, coupled with higher sales and strong operating
efficiencies produced a 50 basis point improvement in net margin.
Patterson continues to report a strong financial position. The company's
cash and cash equivalents were $78.7 million at April 24, 1999, an increase of
$43.1 million from the beginning of the year. Shareholders' equity advanced
26 percent in fiscal 1999 and the company generated a 21 percent return on
average equity. Debt declined $5.1 million to $2.1 million, and the current
ratio was a healthy 2.9 to 1.
Favorable Outlook Continues
Patterson acquired three companies in fiscal 1999 -- two small dental
distributors that expand its market share in Florida and Michigan; and a
manufacturer and distributor of filing systems and other practice management
systems that sells both directly to healthcare providers and wholesale to
healthcare distributors. These acquisitions and an increased sales force
offer Patterson opportunities to expand its customer base and Colwell (its
front office product line) opportunities to strengthen its presence in the
medical market in fiscal 2000. Additionally, the dental supply business
continues to be fundamentally sound as the aging population drives increased
dental visits and demand for cosmetic procedures rises.
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 986 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 which 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 salesforce; 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 Form 10-K report filed July 16,
1998, and other documents filed with the Securities and Exchange Commission.
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for earnings per share)
(Unaudited)
Quarter ended Year ended
April 24, April 25, April 24, April 25,
1999 1998 1999 1998
Net sales $235,198 $211,006 $878,773 $778,169
Cost of sales 147,718 131,066 552,937 488,279
Gross profit 87,480 79,940 325,836 289,890
Operating expenses 66,425 61,674 248,364 225,508
Operating income 21,055 18,266 77,472 64,382
Other income and expense:
Amortization of deferred credits 220 221 885 885
Finance income, net 749 402 2,012 1,188
Interest expense (119) (127) (517) (670)
Profit (loss) on currency exchange 13 2 (141) (79)
Income before taxes 21,918 18,764 79,711 65,706
Income taxes 7,896 7,196 29,815 24,937
Net income 14,022 11,568 49,896 40,769
Earnings per share -- basic
and diluted $0.42 $0.35 $1.49 $ 1.23
Weighted average and dilutive
potential shares outstanding 33,689 33,340 33,496 33,163
Gross margin 37.2% 37.9% 37.1% 37.3%
Operating expenses as a % of sales 28.2% 29.2% 28.3% 29.0%
Operating income as a % of sales 9.0% 8.7% 8.8% 8.3%
Effective tax rate 36.0% 38.4% 37.4% 38.0%
Return on net sales 6.0% 5.5% 5.7% 5.2%
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
April 24, April 25,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents 78,746 $35,619
Accounts and notes receivables, net 112,521 106,252
Inventory 91,722 81,810
Prepaid expenses and deferred taxes 3,655 3,980
Total current assets 286,644 227,661
Property and equipment, net 37,018 37,998
Long-term receivables, net 1,575 1,597
Intangibles and other 48,013 49,117
Total assets 373,250 316,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $67,213 $60,652
Other accrued liabilities 30,898 27,278
Income taxes payable 166 2,009
Current maturities of long-term debt and
bank indebtedness 415 4,466
Total current liabilities 98,692 94,405
Long-term debt 1,682 2,736
Deferred taxes 1,650 2,017
Total liabilities 102,024 99,158
Deferred credits 6,027 6,912
Stockholders' equity 265,199 210,303
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $373,250 $316,373
SOURCE Patterson Dental Company
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CONTACT:
Ronald Ezerski, Executive Vice President &
CFO of Patterson Dental, 651-686-1600; or General Information,
Leslie Hunziker, or Analyst Inquiries, Caroline Price of The
Financial Relations Board, 312-266-7800
NOTE TO EDITORS: For further information on Patterson Dental free
of charge via fax, dial 1-800-PRO-INFO and enter the number 207.
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