Patterson Companies records 6% year-on-year sales growth in first-quarter

Aug 20 2009

Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $789,579,000 for the first quarter of fiscal 2010 ended July 25, an increase of 6% from $743,859,000 in the year-earlier quarter. The strong performance of technology offerings in the dental equipment business, as well as higher sales of veterinary supplies, helped offset the impact of the weak economy on other portions of Patterson’s business. Acquisitions, net of negative foreign currency adjustments, accounted for the majority of the first quarter sales growth. Net income was $45,057,000 or $0.38 per diluted share, compared to $45,964,000 or $0.39 per diluted share in the first quarter of 2009.

Sales of Patterson Dental Supply, Patterson’s largest business, were $510,991,000 in the first quarter, down 2% from $519,885,000 in the year-earlier period.

• Sales of consumable dental supplies and printed office products were down 1% from last year’s first quarter or 2% after the impact of foreign currency, net of acquisitions.
• Sales of dental equipment and software declined 2% from the year-earlier level. Sales of CEREC® dental restorative systems rose 84%, while sales of digital x-ray systems and related software gained 16%. These increases largely offset a 16% decline in sales of such basic equipment as chairs, units and lights.
• Sales of other services and products, consisting primarily of technical service parts and labor, software support services and artificial teeth, rose 1% from last year’s first quarter.

Sales of the Webster Veterinary unit increased 37% in the first quarter of fiscal 2010 to $169,181,000. Internal growth accounted for 8% of this increase, with the October 2008 acquisition of Columbus Serum Company accounting for the balance. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, increased 9% to $109,407,000, reflecting the positive impact of the April 2009 acquisition of Mobilis Healthcare Group and the purchase of Empi Therapy Supply from DJO Incorporated during the first quarter. Patterson Medical’s revenue growth was negatively affected by foreign currency adjustments, although to a lesser extent than in the prior two quarters.

James W. Wiltz, president and chief executive officer, commented: “Despite the ongoing impact of the recession on our business, we are generally satisfied with Patterson’s first quarter results. Within our Patterson Dental unit, sales of consumable supplies held up relatively well, although many patients continued to defer higher level and discretionary dental procedures. The effect of the recession was particularly evident on sales of basic dental equipment. However, dental practitioners continued investing in CEREC dental restorative products and digital radiography systems, reflecting our belief that the recession is causing many dentists to focus their investments on equipment with rapid rates of return. We believe the 84% increase in first quarter CEREC sales also was driven by the growing market acceptance of this next-generation system, which occupies the industry-leading position in its product category. In addition, sales of digital x-ray systems are continuing to benefit from the strong emphasis our sales force is placing on this technology, which is a proven and cost-effective means for boosting dental office productivity.”

He continued: “In addition to the Columbus Serum acquisition, our Webster unit benefited from increased sales of veterinary supplies due to higher levels of patient activity during the first quarter. However, many veterinary practices continued to defer equipment purchases in view of the weak economy. Patterson Medical’s performance somewhat exceeded our expectations for this period, even though sales of rehabilitation equipment to acute care hospitals and clinics remained sluggish due to the economy. The assimilation of the Mobilis acquisition, which substantially increased Patterson Medical’s presence in the U.K. rehabilitation market, is proceeding on schedule. Patterson’s first quarter earnings also benefited from cost control measures that have been implemented in recent periods.”

Wiltz concluded: “Although recessionary conditions will continue to affect our performance for at least several more quarters, we remain optimistic about our prospects. Our businesses enjoy significant competitive advantages, enabling them to capitalize upon the fundamental, long-term strength of their markets. In addition, Patterson is continuing to generate substantial operating cash flows, which are ample for supporting our various growth initiatives.”

Patterson is maintaining its earnings guidance of $1.70 to $1.80 per diluted share for full-year fiscal 2010.

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