Patterson Companies, Inc. (Nasdaq: PDCO) today reported consolidated sales of $814,951,000 for the second quarter of fiscal 2010 ended October 24, an increase of 7% from $759,461,000 in the year-earlier quarter. Acquisitions transacted over the past 12 months accounted for a substantial portion of the second quarter sales growth, while the impact of foreign currency adjustments was minimal. Net income of $49,343,000 or $.41 per diluted share rose 5% from $46,903,000 or $0.40 per diluted share in the second quarter of fiscal 2009.
Sales of Patterson Dental Supply, Patterson’s largest business, were $537,167,000 in the second quarter, virtually unchanged from $536,837,000 in the year-earlier period.
- Sales of consumable dental supplies and printed office products were down 2% from last year’s second quarter.
- Sales of dental equipment and software increased 3% from the year-earlier level. Within this product category, sales of CEREC® dental restorative systems rose 45%, which offset a 7% decline in sales of basic equipment, including 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 4% from last year’s second quarter.
Sales of the Webster Veterinary unit increased 30% in the second quarter of fiscal 2010 to $160,654,000. Internal growth accounted for 8% of this increase, while the October 2008 acquisition of Columbus Serum Company accounted for the balance. Sales of Patterson Medical, Patterson’s rehabilitation supply and equipment unit, increased 18% to $117,130,000. Internal sales were up 5%, with acquisitions accounting for the balance: Mobilis Healthcare Group in April 2009 and Empi Therapy Solutions, a unit of DJO Incorporated, in June 2009.
James W. Wiltz, president and chief executive officer, commented: “We are generally pleased with Patterson’s second quarter performance as our businesses held up relatively well despite the ongoing impact of the recession. Within our Patterson Dental unit, the market for consumable supplies has been affected by high unemployment levels, but our sales of these products have remained generally stable during the first half of fiscal 2010. At the same time, we believe the weak economy has been causing many dental practitioners to focus their investment dollars on equipment with rapid and high rates of return. This consideration helps explain the strong growth of CEREC dental restorative products thus far in fiscal 2010 and why sales of basic equipment have tended to lag. CEREC sales also are benefiting from the steadily growing market acceptance of this new-technology equipment. The unequalled performance of CEREC has made it the industry leader by a considerable margin in the category of CAD/CAM dental equipment. We also believe CEREC is the most viable choice for dentists purchasing this type of equipment.”
He continued: “Sales of our Webster unit were consistent with forecasted levels in the second quarter from the standpoint of both internally-generated growth and the impact of the Columbus Serum acquisition. Webster’s large consumable supply business benefited from higher volumes of veterinary care for companion-pets during this period. However, equipment sales remained soft as many veterinary practices remained cautious about purchasing equipment. Webster is continuing to remove costs from the Columbus Serum acquisition, and this process will be largely completed in the third quarter.”
Wiltz added: “Patterson Medical’s performance exceeded our expectations in the second quarter. We believe this unit gained market share in this period and that the overall rehabilitation market started firming during the quarter. The assimilation of the acquisitions is proceeding on schedule, and equally encouraging, more business from these acquired units has been retained than we initially planned.”
Patterson’s second quarter earnings also benefited from cost control measures that have been implemented in recent periods, including the company-wide salary reductions enacted in this year’s first quarter. In addition, Patterson is continuing to generate substantial operating cash flows, which are ample for supporting the various growth initiatives currently underway.
Patterson is maintaining its earnings guidance of $1.70 to $1.80 per diluted share for full-year fiscal 2010.
As previously reported, Mr. Wiltz will retire as president and chief executive officer of Patterson Companies at the end of the current fiscal year on April 24, 2010. The Board of Directors named Scott P. Anderson, currently president of the Patterson Dental Supply subsidiary, as Mr. Wiltz’s successor.
In a related move, Paul A. Guggenheim, currently southwest region manager of Patterson Dental, will become president of Patterson Dental at the end of fiscal 2010. Mr. Guggenheim joined Patterson in 2000 following Patterson Dental’s acquisition of Guggenheim Brothers Dental Supply. He has worked in the dental industry for over 25 years and is former chairman of the American Dental Trade Association (now the Dental Trade Alliance.) He also is past president of the Dental Dealers of America and former chairman of the American Dental Cooperative.
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