Double-Digit Sales Growth and Strong Operating Efficiencies Drive Increased
Profitability
ST. PAUL, Minn., Nov. 19 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) today reported record results for the second quarter and six
months ended October 24, 1998. According to the company, strong sales of
dental supplies, equipment and practice management software contributed
favorably to the excellent second quarter performance.
"The first half of fiscal 1999 has been extremely strong for us as a
result of a larger, better trained sales force, new products and services, and
growing contributions from acquisitions made over the last 12 months. Our
outlook for the second half is equally promising. We completed the
installation of our North American systems throughout our entire Canadian
operation, and are already seeing the benefits of a single-system operation
with increased sales, in Canadian dollars, in that region. Our now
centralized North American system affords us significant opportunities to
reduce operating expenses by eliminating redundant operating and
administrative functions in Canada," said Peter L. Frechette, president and
chief executive officer.
For the second quarter, net income rose 18.2 percent to $11.9 million, or
$0.36 per share, compared with $10.1 million, or $0.30 per share, in the
fiscal 1998 quarter. The company's basic and diluted earnings per share are
the same. Operating income was $18.7 million, up 19.0 percent from
$15.7 million last year. Net sales for the second quarter increased 11.3
percent to $213.3 million from $191.6 million in the year-ago quarter.
In the second quarter, sales of consumable supplies increased 11.4 percent
from a year earlier and equipment sales rose 12.2 percent. Sales of high-tech
equipment are ramping up as advanced technologies become more accepted by
dentists. The strong performance in sales of supplies and equipment was
supported by an increase in Patterson's sales network to 929 sales
representatives from 806 a year ago.
EagleSoft, the company's practice management software provider, nearly
doubled its sales in the second quarter. Broader exposure accessing
Patterson's customer base and an 89 percent increase in the dedicated
EagleSoft sales force led the expansion.
Double-digit sales growth coupled with greater operating efficiency in
both U.S. and Canadian operations drove the operating margin improvement in
the second quarter. Gross margin increased to 37.0 percent versus 36.9
percent in the year-ago period. Operating expenses grew 9.4 percent during
the quarter while sales gained 11.3 percent, increasing operating margin to
8.8 percent from 8.2 percent last year. Net margin for the quarter increased
to 5.6 percent from 5.3 percent in the fiscal 1998 second quarter.
For the first half of fiscal 1999, net income rose 20.2 percent to
$22.1 million, or $0.66 per share, from $18.4 million, or $0.56 per share, a
year earlier. Operating income increased 20.3 percent, and net sales for the
first six months of fiscal 1999 were $413.4 million compared with
$371.6 million in the same period a year ago, an 11.2 percent improvement.
Patterson continues to report a strong financial position. The company's
cash and cash equivalents were $29.7 million at October 24, 1998.
Stockholders' equity advanced 10.4 percent in the second quarter to
$232.1 million from $210.3 million at April 25, 1998. Long-term debt remains
a nominal 1 percent of capitalization, and the current ratio was a healthy 3
to 1.
Expectations for the third quarter and year are very positive as a result
of the benefits of acquisitions, an expanded sales force, and new product
introductions. These ongoing initiatives should support the company's goal of
20 percent earnings growth for the year.
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 900 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 the
Securities and Exchange Commission.
Patterson Dental Company
Condensed Consolidated Statements Of Income
(In thousands except for earnings per share)
(Unaudited)
Quarter ended Six months ended
October 24, October 25, October 24, October 25,
1998 1997 1998 1997
Net sales $213,325 $191,635 $413,398 $371,623
Gross profit 78,924 70,748 152,515 136,614
Operating expenses 60,248 55,059 117,596 107,592
Operating income 18,676 15,689 34,919 29,022
Other income, net 394 251 814 456
Income taxes 7,173 5,877 13,607 11,075
Net income $11,897 $10,063 $22,126 $18,403
Earnings per share -
Basic and Diluted $0.36 $0.30 $0.66 $0.56
Weighted average and
dilutive potential shares
outstanding 33,437 33,173 33,412 33,050
Gross margin 37.0% 36.9% 36.9% 36.8%
Operating expenses as
a % of sales 28.2% 28.7% 28.5% 29.0%
Operating income as a
% of sales 8.8% 8.2% 8.4% 7.8%
Effective tax rate 37.6% 36.9% 38.1% 37.6%
Return on net sales 5.6% 5.3% 5.4% 5.0%
Patterson Dental Company
Condensed Consolidated Balance Sheets
(Dollars In thousands)
October 24, April 25,
1998 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $29,727 $35,619
Accounts and notes receivables, net 105,412 106,252
Inventory 98,689 81,810
Prepaid expenses and deferred taxes 4,390 3,980
Total current assets 238,218 227,661
Property and equipment, net 35,934 37,998
Intangibles and other 49,657 50,714
Total assets $323,809 $316,373
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $54,589 $60,652
Other accrued liabilities 24,854 29,287
Current maturities of long-term
debt and bank indebtedness 1,255 4,466
Total current liabilities 80,698 94,405
Long-term debt 2,550 2,736
Deferred taxes 2,017 2,017
Total liabilities 85,265 99,158
Deferred credits 6,469 6,912
Stockholders' equity 232,075 210,303
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $323,809 $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 Leslie Hunziker, General Information, Kathy Brunson, Analyst Inquiries, or Laura Kuhlmann, Media Inquiries, 312-266-7800, all of The Financial Relations Board
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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