Net Income Rises 42 Percent On 27 Percent Sales Gain;
Results Benefit From Sales Trend, Productivity Gains, 14-Week Period
HIGHLIGHTS OF 1Q 2000:
Sales references in parentheses exclude additional week
-- Consolidated sales increased 27 (18) percent
-- Sales force expanded 14 percent
-- Total dental sales rose 26 (17) percent
-- Equipment sales up 28 (20) percent
-- Consumable sales increased 26 (17) percent
-- Operating leverage led to 60 basis-point margin improvement
-- Profitability continued in Canada
ST. PAUL, Minn., Aug. 26 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) today reported double-digit sales and net income growth for the
fiscal 2000 first quarter, as well as operating margin improvement resulting
from continued leverage of the dental distribution system and an increase in
sales of higher-margin software products. The current quarter included
14 weeks versus a 13-week period for the first quarter of fiscal 1999.
"We were able to exceed our long-standing goals of 20 percent earnings
growth and sales expansion four percentage points higher than the industry's
7-9 percent average growth," said Peter Frechette, president and chief
executive officer. "We benefited additionally from an extra week in the
period -- 14 weeks versus 13 in the first quarter of fiscal 1999 -- but it's
notable that we exceeded our targets even if the extra week is excluded from
comparisons."
First quarter net income rose 42 percent to $14.5 million, or $0.43 per
share, compared with $10.2 million, or $0.31 per share, in the fiscal 1999
13-week quarter. Net sales for the latest period increased 27 percent to
$254.6 million from $200.1 million in the year-ago quarter. Operating margin
expanded 60 basis points in the quarter due to a decline in operating expenses
as a percent of sales and a 93 percent increase in software sales. Higher
sales, stronger operating efficiencies and a lower income tax rate related to
the profit and utilization of tax-loss carryforwards in Canada produced a
60 basis-point improvement in net margin.
Frechette noted similarly strong performance when the most recent quarter
is recast on a 13-week basis. In that comparison, U.S. and Canadian dental
operations reported a 17 percent sales increase, consumable sales grew
17 percent and equipment sales rose 20 percent on strong demand across the
product line.
"Also supporting the dental sales increase was the expansion of our dental
sales network by 121 representatives over last year," said Frechette. "New
products and an aggressive selling effort to the dental market contributed to
a modest, but improving increase in sales of Colwell products. And,
EagleSoft, our line of practice management software, generated an approximate
75 percent increase in sales on a comparable basis versus the same period last
year. We are growing every facet of our business."
Patterson continues to report a strong financial position. The company's
cash and short-term investments were $82.9 million at July 31, 1999, an
increase of 5 percent from the beginning of the year. Shareholders' equity
advanced 5 percent to $280 million in the first quarter. Total debt was less
than $2.0 million, and the current ratio was a healthy 3.1 to 1.
In other developments, the company completed the previously announced
acquisition of Barr Dental Supply, Inc., a full-service dental products
distributor with 1998 sales of $3.4 million. The acquisition increases
Patterson's geographic coverage to include southern Oregon, and continues the
company's use of strategic acquisitions to expand operations.
Healthy Industry, Larger Sales Force, Product Coverage and Operating
Leverage
"We believe the dental supply industry is now projected to be growing
7-9 percent annually, up from the 5-7 percent estimated previously, as a
result of the dentist's increased productivity gained through high-technology
products and services as well as favorable demographics and new procedures.
Patterson's larger sales force, comprehensive product coverage, expanded
service options, lean operating infrastructure, and national position in a
consolidating industry represent additional avenues for continued double-digit
growth. Our long-term goal for sales is to grow 4 percentage points faster
than the industry average. Based on the results achieved in the first
quarter, and excluding the impact of the additional week, we now believe that
for the balance of the fiscal year we could exceed our goal by as much as
2 full percentage points, growing 6 percent faster than the industry average,"
said Frechette.
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 1,020 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 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 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)
First Quarter
July 31, July 25,
1999 1998
Net sales $254,599 $200,073
Gross profit 93,530 73,591
Operating expense 71,388 57,348
Operating income 22,142 16,243
Other income, net 1,007 420
Income taxes 8,661 6,434
Net income $14,488 $10,229
Earnings per share
basic and diluted $0.43 $0.31
Weighted average and dilutive
potential shares outstanding 33,747 33,387
Gross margin 36.7% 36.8%
Operating expenses as a % of sales 28.0% 28.7%
Operating income as a % of sales 8.7% 8.1%
Effective tax rate 37.4% 38.6%
Return on net sales 5.7% 5.1%
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
July 31, April 24,
1999 1999
ASSETS
Current assets:
Cash and short-term investments $82,893 $78,746
Accounts and notes receivables, net 105,920 112,521
Inventory 101,640 91,722
Prepaid expenses and deferred taxes 4,869 3,655
Total current assets 295,322 286,644
Property and equipment, net 38,574 37,018
Long-term receivables, net 1,228 1,575
Intangibles and other 47,468 48,013
Total assets $382,592 $ 373,250
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $63,760 $67,213
Other accrued liabilities 29,851 31,064
Current maturities of long-term
debt and bank indebtedness 445 415
Total current liabilities 94,056 98,692
Long-term debt 1,523 1,682
Deferred taxes 1,650 1,650
Total liabilities 97,229 102,024
Deferred credits 5,806 6,027
Stockholders' equity 279,557 265,199
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $382,592 $ 373,250
SOURCE Patterson Dental Company
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Related links:
www.frbinc.com
CONTACT:
R. Stephen Armstrong, Executive Vice
President & CFO of Patterson Dental Company, 651-686-1600;
General Information, Leslie Hunziker or Analysts, Suzy Olson,
312-266-7800, both of The Financial Relations Board
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