Patterson Cos 2Q Profit Up 5.2% On Takeover-Aided Sales Gain

   DOW JONES NEWSWIRES 
 

Patterson Cos.'s (PDCO) fiscal second-quarter profit rose 5.2% on sales boosts from acquisitions while the dental-equipment maker's core operations continued to hold up amid the recession.

President and Chief Executive James Wiltz, who plans to retire next spring, noted dental practitioners are trending toward buying equipment "with rapid and high rates of return." That is benefiting Patterson's dental-restorative products but hurting basic equipment.

Patterson, which controls roughly a third of the North American dental-spending market, has cut costs by freezing wages and some of its hiring to match lower demand. A big chunk of dental spending is discretionary, in particular cosmetic procedures such as teeth-whitening and work considered nonemergency, such as replacing an aging crown.

For the quarter ended Oct. 24, Patterson reported a profit of $49.3 million, or 41 cents a share, up from $46.9 million, or 40 cents a share, a year earlier. Revenue rose 7.3% to $815 million on acquisitions.

Analysts on average estimated earnings of 41 cents on revenue of $789 million, according to a poll by Thomson Reuters.

Gross margin fell to 32.7% from 33.4%.

Though Patterson has expanded into medical and animal-health products, it depends heavily on its dental unit, which sells everything from toothbrushes to X-ray machines. Dental-unit sales rose $330,000 to $537.2 million as consumable supplies and office products fell 2% and equipment and software rose 4%.

Sales at the veterinary unit jumped 30%, due mostly to acquisitions. Wiltz said equipment sales "remained soft."

At Patterson's rehabilitation businesses, revenue climbed 18%, also largely due to takeovers. But Wiltz noted the business performed better than expected amid market-share gains.

Shares of Patterson, which reiterated its fiscal-year earnings target, closed Wednesday at $26.32 and were inactive premarket. The stock is up 40% this year.

-By Kathy Shwiff and Kevin Kingsbury, Dow Jones Newswires; 212-416-2357; [e-mail]