Contributions from Acquisitions Favorably Impact Results
ST. PAUL, Minn., Nov. 20 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) today reported double-digit growth in sales and net income for
the second quarter and six months ended October 25, 1997. Substantial
contributions from the company's Colwell operations drove sales and operating
margin improvements in both periods.
"This was a very rewarding quarter for Patterson. In late August, we
acquired the operations of Canadian Dental Supply Ltd., a leading dental
products distributor. Canadian Dental's operations are concentrated in
Vancouver, Edmonton, and Toronto, Canada, which expanded our presence into the
western region of the country and substantially improved our position in the
Canadian market," said Peter L. Frechette, president and chief executive
officer. "Moreover, by acquiring Canadian Dental, we have dramatically
increased sales volume and expect to improve our bottom line as we integrate
these operations over the next six months."
Patterson also recently completed the acquisition of EagleSoft
Incorporated, a leading provider of dental practice management systems with
approximately $4.0 million in sales. EagleSoft was acquired in mid-July as a
key element in the company's strategy to leverage its position as a single
source supplier. This acquisition enables Patterson to further penetrate the
dentist's front office with a new software line for managing the dental
practice.
Second quarter net income rose 24 percent to $10.1 million, or $0.46 per
share, compared with $8.1 million, or $0.37 per share, in the fiscal 1997
quarter. Operating income was $15.7 million, up 27 percent from $12.4 million
last year. Net sales for the last three months increased 13 percent to $191.6
million from $169.0 million in the year-ago quarter. Operating results for
all periods include the historical results of Canadian Dental Supply, which
was accounted for as pooling of interests.
In the second quarter, Colwell accounted for 40 percent of the
consolidated sales gain. Colwell was acquired on October 1, 1996. Sales of
consumable dental supplies, excluding Colwell products, increased 9 percent
from a year earlier, and represented 57 percent of total sales in the second
quarter. An expanding sales force helped drive the increase. At October 25,
1997, the company had 828 sales representatives, which includes the addition
of 39 salespeople from Canadian Dental, up from 775 at October 26, 1996.
Equipment sales, which continue to benefit from the company's latest
high-technology products, the KCP 1000 and the Cerec 2, rose 6.8 percent over
last year's second quarter, and sales of other products and technologies grew
by 9 percent, profiting from the initial contribution of EagleSoft.
Margins continued to improve, reflecting the positive impact of Colwell
and a combination of higher sales volume and greater operating efficiency in
the U.S. operations. Gross margin increased to 36.9 percent versus 35.4
percent in the year-ago period, resulting in operating margin growing to 8.2
percent from 7.3 percent last year. Net margin for the quarter increased to
5.3 percent from 4.8 percent in the fiscal 1997 second quarter.
For the first half of fiscal 1998, net income rose 28 percent to $18.4
million, or $0.84 per share, from $14.4 million, or $0.66 per share, a year
earlier. Operating income increased 33.5 percent, and net sales for the first
six months of fiscal 1998 were $371.6 million compared with $318.3 million in
the same period a year ago, a 16.7 percent improvement.
Patterson Dental Company is one of the largest distributors of dental
products in North America. The company supplies more than 75,000 products to
dentists, dental laboratories, institutions, physicians and other heath care
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 800 direct sales representatives and equipment
specialists in the United States and Canada, and ships approximately 97
percent of its consumable goods within 24 hours of receipt of order.
This news release contains certain forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995, which may be
identified by the use of certain forward-looking terminology such as "may,"
"will," "expect," "anticipate," "estimate," "goal," or "continue," or
comparable terminology that involves risks and uncertainties, which may cause
the company's actual results in the future to differ materially from expected
results. These risks 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; the successful integration of Canada Dental Supply Ltd.;
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 25,
1997, 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 Six months ended
October 25, October 26, October 25, October 26,
1997 1996 1997 1996
(Restated) (Restated)
Net sales $191,635 $169,013 $371,623 $318,312
Gross profit 70,748 59,886 136,614 112,660
Operating income 15,689 12,399 29,022 21,743
Other income and expense, net 251 388 456 917
Income taxes 5,877 4,695 11,075 8,250
Net income $10,063 $8,092 $18,403 $14,410
Earnings per common and
common equivalent share $0.46 $0.37 $0.84 $0.66
Weighted average common and
common equivalent shares
outstanding 22,115 21,782 22,033 21,738
Gross margin percent 36.9% 35.4% 36.8% 35.4%
Operating expenses as
a % of sales 28.7% 28.1% 29.0% 28.6%
Operating income as a %
of sales 8.2% 7.3% 7.8% 6.8%
Effective tax rate 36.9% 36.7% 37.6% 36.4%
Net income as a % of sales 5.3% 4.8% 5.0% 4.5%
Restated to reflect results of Canadian Dental Supply Limited which was
accounted for as a pooling of interests.
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 25, April 26,
1997 1997
(Unaudited) (Restated)
ASSETS:
Current assets:
Cash and cash equivalents $21,220 $9,095
Accounts and notes receivables, net 94,175 95,132
Inventory 69,435 65,486
Prepaid expenses and deferred taxes 4,032 4,105
Total current assets 188,862 173,818
Property and equipment, net 36,128 35,563
Long-term receivables, net 1,800 2,117
Intangibles and other 43,342 43,813
Total assets $270,132 $255,311
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $47,497 $48,472
Other accrued liabilities 23,035 23,226
Current maturities of long-term debt and
bank indebtedness 3,717 5,227
Total current liabilities 74,249 76,925
Long-term debt 3,810 5,565
Deferred taxes 1,362 1,362
Total liabilities 79,421 83,852
Deferred credits 7,355 7,797
Stockholders' equity 183,356 163,662
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $270,132 $255,311
SOURCE Patterson Dental Company
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CONTACT:
Ronald Ezerski, Executive Vice President &
CFO of Patterson Dental Company, 612-686-1600; Michael Rosenbaum,
or Leslie Hunziker, General Information, or Kathy Brunson,
Analyst Inquiries, 312-266-7800, all of the Financial Relations
Board
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