HIGHLIGHTS OF 2Q 2000:
-- Consolidated sales increased 16 percent
-- Sales force expanded 10 percent
-- Total dental sales rose 15 percent
-- Equipment sales up 14 percent
-- Consumable sales increased 16 percent
-- Operating leverage led to 20 basis-point margin improvement
-- Profitability continued in Canada
ST. PAUL, Minn., Nov. 22 /PRNewswire/ -- Patterson Dental Company
(Nasdaq: PDCO) again reported double-digit sales and net income growth in the
fiscal 2000 second quarter and six months ended October 30, 1999. Continued
strong execution of its strategies to expand top-line growth through a larger
sales force, a growing product line, cross-merchandising initiatives, and
superior services are driving revenue increases well exceeding the average
industry growth, which the company estimates at 7-9 percent. Net income
growth of 24 percent for the quarter reflects an increase in revenues across
all product lines and reduced operating expenses as a percent of sales.
"We continue to achieve very consistent double-digit growth in all key
performance areas. The high levels of demand we're experiencing as a result
of our responsiveness to customers, broad product offering and multiple
ordering options, coupled with favorable industry trends, supports sustainable
growth," said Peter Frechette, president and chief executive officer. "And
with our highly effective infrastructure, we are able to convert our sales
growth into a 20 percent improvement in earnings."
Second quarter net income rose 24 percent to $14.8 million, or
$0.44 per share, compared with $11.9 million, or $0.36 per share, in the
fiscal 1999 quarter. Net sales for the latest three-month period increased
16 percent to $248.4 million from $213.3 million in the year-ago quarter.
Operating expenses as a percent of sales declined 60 basis points, leading
to an increase in operating profit of 19 percent or a 20 basis-point margin
improvement. The higher sales and enhanced operating leverage drove a
40 basis-point increase in net margin.
All product categories contributed to the strong sales growth in the
second quarter. Consumable sales rose 16 percent quarter-over-quarter, aided
by a growing customer base and a 10 percent year-over-year increase in our
sales force to 1,022 representatives. Equipment sales increased 14 percent
without the benefit of the financing promotion that was initiated during
October of last year. Sales of Colwell printed office products rose
32 percent, and EagleSoft software sales were up 38 percent as customers
upgraded their systems to be Y2K compliant. U.S. dental sales increased
15 percent. Sales in Canada improved 14 percent, benefiting from an improving
economy.
Results for the fiscal 2000 six months encompass 27 weeks of operations,
which included an additional week in the fiscal first quarter. Net income for
the six-month period increased 32 percent to $29.3 million, or
$0.87 per share, from $22.1 million, or $0.66 per share, for the fiscal 1999
26-week period. Net sales were $503.0 million, up nearly 22 percent from
$413.4 million last year. On a comparable basis, net sales increased
approximately 17 percent after giving effect to the extra selling week in
fiscal 2000. Operating expenses as a percent of sales declined 60 basis
points, driving a 40 basis-point expansion in operating margin. A lower
income tax rate for the first six 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 $90.8 million at October 30, 1999, an
increase of 15 percent from the beginning of the year. Shareholders' equity
advanced 11 percent to $295.6 million in the second quarter. Total debt was
less than $2 million, and the current ratio was a healthy 3 to 1.
At the close of the second quarter, Patterson announced the acquisition of
Kentucky Dental Supply Company, Inc., a full-service dental products
distributor with 1998 sales of $4.4 million. The acquisition provides
Patterson with an increased presence in Lexington, Ky., which strengthens its
market share in the Ohio River Valley. Patterson has existing operations in
Cincinnati, Ohio, and Louisville, Ky.
"We're very positive about the strength of the dental industry and our
ability to sustain double-digit growth rates and to build market share. For
fiscal 2000, we believe we can increase net sales 6 percentage points faster
than the average industry growth rate, which represents an acceleration of our
long-term goal of 4 percentage points above the industry average. This goal
excludes the impact of the additional week this year and acquisitions. In the
second half, we'll continue to hire and train new sales representatives,
expanding our base of business and market penetration. We also will continue
to evaluate other dental supply acquisition candidates that would support
additional top-line growth," 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 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 Six Months Ended
October 30, October 24, October 30, October 24,
1999 1998 1999 1998
(27 weeks) (26 weeks)
Net sales $248,435 $213,325 $503,034 $413,398
Gross profit 90,790 78,924 184,320 152,515
Operating expense 68,480 60,248 139,868 117,596
Operating income 22,310 18,676 44,452 34,919
Other income, net 1,337 394 2,344 814
Income taxes 8,836 7,173 17,496 13,607
Net income $14,811 $11,897 $29,300 $22,126
Earnings per share
- basic and diluted $0.44 $0.36 $0.87 $0.66
Weighted average
and dilutive
potential shares
outstanding 33,808 33,437 33,777 33,412
Gross margin 36.5% 37.0% 36.6% 36.9%
Operating expenses
as a % of sales 27.6% 28.2% 27.8% 28.4%
Operating income
as a % of sales 9.0% 8.8% 8.8% 8.4%
Effective tax rate 37.4% 37.6% 37.4% 38.1%
Return on net sales 6.0% 5.6% 5.8% 5.4%
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
October 30, April 24,
1999 1999
ASSETS
Current assets:
Cash and short-term investments $90,810 $78,746
Accounts and notes receivables, net 114,411 112,521
Inventory 106,609 91,722
Prepaid expenses and deferred taxes 7,009 3,655
Total current assets 318,839 286,644
Property and equipment, net 40,940 37,018
Intangibles, net 46,188 46,867
Other 2,998 2,721
Total assets $408,965 $373,250
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $79,657 $67,213
Other accrued liabilities 24,644 31,064
Current maturities of long-term
debt and bank indebtedness 402 415
Total current liabilities 104,703 98,692
Long-term debt 1,447 1,682
Deferred taxes 1,650 1,650
Total liabilities 107,800 102,024
Deferred credits 5,584 6,027
Stockholders' equity 295,581 265,199
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $408,965 $373,250
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
October 30, October 24,
1999 1998
(27 weeks) (26 weeks)
Operating activities:
Net income $29,300 $22,126
Depreciation & Amortization 4,497 3,866
Change in assets and liabilities,
net of acquired (12,209) (28,163)
Net cash (used) provided by operating activities 21,588 (2,171)
Investing activities:
Additions to property and equipment, net (7,301) (3,507)
Acquisitions/disposals, net (2,654) 1,907
Purchase of investments (11,252) --
Net cash used in investing activities (21,207) (1,600)
Net cash used by financing activities 431 (2,121)
Net (decrease) increase in cash and cash equivalents $812 $(5,892)
SOURCE Patterson Dental Company
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CONTACT:
R. Stephen Armstrong, Executive Vice
President & CFO, of Patterson Dental Company, 651-686-1600; or
General Information, Leslie Hunziker, or Analyst Inquiries, Suzy
Olson, both of The Financial Relations Board, 312-266-7800, for
Patterson Dental Company
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