<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period ended
October 24, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File No. 0-20572
PATTERSON DENTAL COMPANY
------------------------
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0886515
--------- ----------
(State of Incorporation) (IRS Employer Identification No.)
1031 MENDOTA HEIGHTS ROAD, ST. PAUL, MINNESOTA 55120
----------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(651) 686-1600
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- ------
Patterson Dental Company has outstanding 33,322,821 shares of common stock as of
December 4, 1998.
Page 1 of 15
<PAGE>
PATTERSON DENTAL COMPANY
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements 3-8
Condensed Consolidated Balance Sheets as of
October 24, 1998 and April 25, 1998 3
Condensed Consolidated Statements of Income
for the three months and six months ended October 24,
1998 and October 25, 1997 4
Condensed Consolidated Statements of Cash Flows for the
six months ended October 24, 1998 and October 25, 1997 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-13
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
Safe Harbor Statement Under The Private Securities Litigation
Reform Act Of 1995:
This Form 10-Q for the period ended October 24, 1998 contains certain
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995, which may be identified by the use of forward-looking
terminology such as "may", "will", "expect", "anticipate", "estimate",
"believe", "goal", or "continue", or comparable terminology that involves risks
and uncertainties and that are qualified in their entirety by cautionary
language set forth in the Company's Form 10-K report filed July 16, 1998, and
other documents filed with the Securities and Exchange Commission. See also
pages 12-13 of this Form 10-Q.
2
<PAGE>
PART I FINANCIAL INFORMATION
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
October 24, April 25,
1998 1998
----------- ---------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 29,727 $ 35,619
Receivables, net...................................... 105,412 106,252
Inventory............................................. 98,689 81,810
Prepaid expenses...................................... 3,212 2,802
Deferred taxes........................................ 1,178 1,178
-------- --------
Total current assets.............................. 238,218 227,661
Property and equipment, net.............................. 35,934 37,998
Intangibles, net......................................... 46,902 48,013
Other.................................................... 2,755 2,701
-------- --------
Total assets...................................... $323,809 $316,373
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 54,589 $ 60,652
Accrued payroll expense............................ 9,896 13,852
Other accrued expenses............................. 13,897 13,426
Income taxes payable............................... 1,061 2,009
Bank indebtedness.................................. 1,055 2,033
Current maturities of long-term debt............... 200 2,433
-------- --------
Total current liabilities................... 80,698 94,405
Long-term debt........................................... 2,550 2,736
Deferred taxes........................................... 2,017 2,017
-------- --------
Total liabilities........................... 85,265 99,158
Deferred credits......................................... 6,469 6,912
Stockholders' equity:
Preferred stock.................................... --- ---
Common stock....................................... 333 333
Additional paid-in capital......................... 64,362 63,134
Accumulated other comprehensive income............. (3,206) (1,624)
Retained earnings.................................. 184,923 162,797
Note receivable from ESOP.......................... (14,337) (14,337)
-------- --------
Total stockholders' equity.................. 232,075 210,303
-------- --------
Total liabilities and stockholders' equity.. $323,809 $316,373
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- ------------------
Oct. 24, Oct. 25, Oct. 24, Oct. 25,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................................ $213,325 $191,635 $413,398 $371,623
Cost of sales.................................... 134,401 120,887 260,883 235,009
-------- -------- -------- --------
Gross profit..................................... 78,924 70,748 152,515 136,614
Operating expenses............................... 60,248 55,059 117,596 107,592
-------- -------- -------- --------
Operating income................................. 18,676 15,689 34,919 29,022
Other income and expense:
Amortization of deferred credits............. 221 222 443 442
Finance income, net.......................... 397 263 801 452
Interest expense............................. (145) (222) (285) (417)
Profit (loss) on currency exchange........... (79) (12) (145) (21)
-------- -------- -------- --------
Income before income taxes....................... 19,070 15,940 35,733 29,478
Income taxes..................................... 7,173 5,877 13,607 11,075
-------- -------- -------- --------
Net income....................................... $ 11,897 $ 10,063 $ 22,126 $ 18,403
======== ======== ======== ========
Earnings per share - basic and diluted .......... $ 0.36 $ 0.30 $ 0.66 $ 0.56
======== ======== ======== ========
Weighted average common and dilutive potential
common shares ............................... 33,437 33,173 33,412 33,050
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
PATTERSON DENTAL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------
Oct. 24, Oct. 25,
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net income............................................. $ 22,126 $18,403
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation....................................... 2,971 2,727
Amortization of deferrals.......................... (443) (442)
Amortization of goodwill........................... 1,338 1,173
Bad debt expense................................... 492 440
Change in assets and liabilities, net of acquired.. (28,656) (4,279)
-------- -------
Net cash (used) provided by operating activities.......... (2,172) 18,022
Investing activities:
Proceeds from sale of facilities....................... 2,250 ---
Additions to property and equipment, net............... (3,507) (3,187)
Cash received from acquisitions, net................... (343) 69
Other.................................................. --- (56)
-------- -------
Net cash used in investing activities.................... (1,600) (3,174)
Financing activities:
Decrease in bank indebtedness.......................... (762) (359)
Payments and retirement of long-term debt and
obligations under capital leases..................... (2,216) (2,998)
Common stock issued, net............................... 857 634
-------- -------
Net cash used by financing activities..................... (2,121) (2,723)
Effect of exchange rate changes on cash................... 1 ---
-------- -------
Net (decrease) increase in cash and cash equivalents...... (5,892) 12,125
Cash and cash equivalents at beginning of period.......... 35,619 9,095
-------- -------
Cash and cash equivalents at end of period................ $ 29,727 $21,220
======== =======
</TABLE>
See accompanying notes.
5
<PAGE>
PATTERSON DENTAL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
October 24, 1998
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the financial position as of October 24, 1998, and the results of
operations and the cash flows for the periods ended October 24, 1998, and
October 25, 1997. Such adjustments are of a normal recurring nature. The
results of operations for the quarter and six months ended October 24, 1998, and
October 25, 1997, are not necessarily indicative of the results to be expected
for the full year. The balance sheet at April 25, 1998, is derived from the
audited balance sheet as of that date. These financial statements should be
read in conjunction with the financial statements included in the 1998 Annual
Report on Form 10-K filed on July 16, 1998. The accompanying financial
statements and Management's Discussion and Analysis give retroactive effect to
the acquisition of Canadian Dental Supply Ltd. ("CDS") and include CDS for all
periods presented. See Note 3 below.
2. The fiscal year end of the Company is the last Saturday in April. The
second quarter and six months of fiscal year 1999 and 1998 represent the 13
weeks and the twenty-six weeks ended October 24, 1998 and October 25, 1997,
respectively.
3. Effective August 26, 1997, the Company acquired Canadian Dental Supply Ltd.
("CDS") a Vancouver, British Columbia based distributor of dental supplies and
equipment. Each share of CDS's outstanding common stock was converted into the
right to receive 6.324 shares of Company common stock. The Company issued
168,648 shares of its common stock to acquire CDS. The transaction was
accounted for as a pooling of interests. The accompanying financial statements
and Management's Discussion and Analysis give retroactive effect to the
acquisition and include CDS for all periods presented.
Separate results of operations for the periods prior to the merger with CDS
are as follows:
Period from Period from
April 27, 1997 to July 27, 1997
August 26, 1997 to August 26, 1997
------------------ ------------------
Net Sales
Patterson Dental Company $231,350 $58,039
CDS 8,190 1,513
-------- -------
Total Combined $239,540 $59,552
======== =======
6
<PAGE>
Net Income
Patterson Dental Company $11,292 $3,029
CDS 31 (46)
------- ------
Total Combined $11,323 $2,983
======= ======
Other Changes in
Stockholder's Equity
Patterson Dental Company $ 1,106 $ (154)
CDS (24) (2)
------- ------
Total Combined $ 1,082 $ (156)
======= ======
4. On January 12, 1998 the Company declared a 3 for 2 stock split in the form
of a 50% stock dividend payable February 17, 1998, to shareholders of record
January 30, 1998. The accompanying financial statements and Management's
Discussion and Analysis give retroactive effect to the 3 for 2 stock split.
5. On February 2, 1998, the Company acquired Hill Dental Company, Inc.
("Hill") a Birmingham, Alabama based distributor of dental supplies and
equipment. Each share of Hill's outstanding common stock was converted into the
right to receive 9.39 shares of Company common stock subject to certain
conditions. The Company issued 100,770 shares of its common stock in connection
with the Hill acquisition. The results of the operations of Hill in the prior
year second quarter are not material to the financial statements on a pro forma
basis.
6. On July 27, 1998, the Company acquired the assets of Dentaplex, Inc. This
acquisition was accounted for as a purchase and, accordingly, the net assets and
operating results are included in the Company's financial statements from the
date of acquisition. The results of operations of Dentaplex, Inc. are not
material to the financial statements on a pro forma basis.
7. As of April 26, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income." This Statement establishes
new rules for the display of comprehensive income and its components; however,
the adoption of the Statement had no impact on the Company's net income or
stockholders' equity. Statement 130 requires the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.
Total comprehensive income for the three months and six months ended October 24,
1998 and October 25, 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- --------------------
Oct. 24, Oct. 25, Oct. 24, Oct. 25,
1998 1997 1998 1997
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net income $11,897 $10,063 $22,126 $18,403
Other comprehensive income (loss):
Foreign currency translation adjustments (637) (101) (1,582) 30
------- ------- ------- -------
Total comprehensive income $11,260 $ 9,962 $20,544 $18,433
======= ======= ======= =======
</TABLE>
7
<PAGE>
8. In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 128, "Earnings per Share." All earnings
per share amounts for all periods have been presented, and where necessary,
restated to conform to the Statement 128 requirements.
The following table sets forth the denominator for the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- ------------------
Oct. 24, Oct. 25, Oct. 24, Oct. 25,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Denominator:
Denominator for basic earnings per
share - weighted-average shares 33,323 33,067 33,307 32,956
Effect of dilutive securities:
Director Stock Option Plan 53 41 55 40
Employee Stock Purchase Plan 5 6 5 7
Capital Accumulation Plan 56 59 45 47
------ ------ ------ ------
Dilutive potential common shares 114 106 105 94
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 33,437 33,173 33,412 33,050
====== ====== ====== ======
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of net
sales represented by certain operational data.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- ------------------
Oct. 24, Oct. 25, Oct. 24, Oct. 25,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales...................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................. 63.0% 63.1% 63.1% 63.2%
----- ----- ----- -----
Gross profit................... 37.0% 36.9% 36.9% 36.8%
Operating expenses............. 28.2% 28.7% 28.5% 29.0%
----- ----- ----- -----
Operating income............... 8.8% 8.2% 8.4% 7.8%
Other income and expense, net.. 0.1% 0.1% 0.2% 0.1%
----- ----- ----- -----
Income before income taxes..... 8.9% 8.3% 8.6% 7.9%
Income taxes................... 3.3% 3.0% 3.2% 2.9%
----- ----- ----- -----
Net income..................... 5.6% 5.3% 5.4% 5.0%
===== ===== ===== =====
</TABLE>
QUARTER ENDED OCTOBER 24, 1998 COMPARED TO QUARTER ENDED OCTOBER 25, 1997.
NET SALES. Net sales increased 11.3% to $213.3 million for the
three months ended October 24, 1998 ("Current Quarter") from $191.6
million for the three months ended October 25, 1997 ("Prior Quarter").
Sales in the U.S. dental market increased 14.4% due to increased volume and
price increases in sundry and equipment products. Sales of business forms
and stationery through Colwell Systems were down 1.1% due principally to
consolidation within the medical market. Canadian sales were up 1% in
Canadian dollars but were down 8.6% in U.S. dollars due to an unfavorable
exchange rate during the Current Quarter.
GROSS PROFIT. Gross profit margin increased to 37.0% for the Current
Quarter from 36.9% for the Prior Quarter. The 10 basis point gross margin
increase was due to a combination of higher margins from U.S. dental
operations and Colwell. Gross profit increased 11.6% To $78.9 million for
the Current Quarter from $70.7 million for the Prior Quarter. The majority
of the increase in gross profit was due to increased sales volume.
9
<PAGE>
OPERATING EXPENSES. Operating expenses increased 9.4% to $60.2
million for the Current Quarter from $55.1 million for the Prior Quarter.
The increase in operating expenses was principally related to the higher
sales volume. Operating expenses as a percent of sales decreased from
28.7% to 28.2% due primarily to improved operating leverage in both the
U.S. and Canadian operation offset by higher fixed costs in relation to
sales at Colwell.
OPERATING INCOME. Operating income increased 19.0% to $18.7 million
for the Current Quarter from $15.7 million for the Prior Quarter.
Operating income as a percent of net sales increased to 8.8% from 8.2%, due
to lower operating expenses in relation to sales and improved gross
margins.
FINANCE INCOME. Finance income, net of expenses, was $0.4 million for
the Current Quarter compared to $0.3 million for the Prior Quarter. The
increase in finance income was caused by higher average short term
investments of cash.
INTEREST EXPENSE. Interest expense decreased to $0.1 million for the
Current Quarter from $0.2 million for the Prior Quarter. This decrease is
due mainly to lower borrowings.
INCOME TAXES. The effective income tax rate increased to 37.6% for
the Current Quarter from 36.9% for the Prior Quarter. The increase in rate
was caused by a loss in the Canadian operation for which no tax benefit was
recorded versus a profit in the year ago quarter when a tax loss
carryforward was utilized.
SIX MONTHS ENDED OCTOBER 24, 1998 COMPARED TO SIX MONTHS ENDED OCTOBER 25, 1997.
NET SALES. Net sales increased 11.2% to $413.4 million for the
six months ended October 24, 1998 ("Current Period") from $371.6 million
for the six months ended October 25, 1997 ("Prior Period"). Sales in the
U.S. were up 14.2% on strong equipment and to a lesser extent sundry sales.
Sales in Canada were down 8.7% in U.S. dollars but were down only 1.2% in
Canadian currency. Colwell sales were down $0.7 million or 2.4% due to
soft medial sales. EagleSoft sales increased $3.1 million versus the
Prior Period which included only four months of operating results for
EagleSoft.
GROSS PROFIT. Gross profit margin increased to 36.9% for the Current
Period from 36.8% for the Prior Period due to the increase in higher margin
sales at Eaglesoft. Gross profit increased 11.6% to $ 152.5 million for
the Current Period from $136.6 million for the Prior Period. The increase
in gross profit was due primarily to the increase in sales.
OPERATING EXPENSES. Operating expenses increased 9.3% to $117.6
million for the Current Period from $107.6 million for the Prior Period.
The majority of the increase in operating expenses was related to increased
sales. Operating expenses as a percent of sales have decreased from 29.0%
in the Prior Period to 28.5% in the Current Period. Expenses in relation
to sales declined in the U.S., Canada and EagleSoft but increased at
Colwell due primarily to increased advertising spending.
10
<PAGE>
OPERATING INCOME. Operating income increased 20.3% to $34.9 million
for the Current Period from $ 29.0 million for the Prior Period. As a
percent of net sales, operating income increased to 8.4% in the Current
Period from 7.8% reported in the Prior Period due principally to lower
operating expenses as a percent of sales.
FINANCE INCOME. Finance income, net of expenses, was $0.8 million for
the Current Period compared to $0.5 million for the Prior Period. Finance
income increased $0.3 million due primarily to higher short term investment
of cash.
INTEREST EXPENSE. Interest expense decreased to $0.3 million for the
Current Period from $0.4 million for the Prior Period. This decrease is
due primarily to lower borrowings.
INCOME TAXES. The effective income tax rate increased to 38.1% for
the Current Period from 37.6% for the Prior Period. This increase was
caused by an increase in the Canadian operating loss for which no tax
benefit was recorded.
LIQUIDITY AND CAPITAL RESOURCES
Available liquid resources at October 24, 1998 consisted of $29.7 million
cash and cash equivalents and $29 million available under bank lines.
Inventory increased $16.9 million from the beginning of the fiscal year
due to increased forward buying. Accounts receivable declined $0.8 million
and days sales outstanding decreased from 45 to 44 Days. The Company
believes that cash and cash equivalents and the remainder of its credit
lines are sufficient to meet any existing and presently anticipated needs.
In addition, because of its low debt to equity ratio, the Company believes
it has sufficient debt capacity to replace its existing revolver and
provide the necessary funds to achieve its corporate objectives.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of the wide spread use of computer
programs which were written using two digits rather than four to define the
applicable year in performing computations or decision-making functions.
The Company has completed its assessment of its major information
technology and technology reliant operating systems, including its internal
accounting, general ledger, billing, inventory and accounts payable
systems. The Company anticipates that all necessary modifications or
replacements of existing systems, including testing of these systems, will
be completed by April 30, 1999. The Company is also assessing the need for
modifications or replacements of existing hardware, particularly personal
computers, and is approximately 80% complete with this assessment phase.
The Company anticipates that remediation and testing of existing hardware
will be completed by April 30, 1999. The Company has been implementing the
necessary modifications and replacements of its operating systems in the
ordinary course of its business over the last four years and believes the
incremental costs to complete this program will not be material.
The Company is in the process of querying its significant suppliers of
products and services to determine the impact on the Company if such
suppliers fail to convert their computer systems. The Company has not yet
completed its assessment of the impact on the Company if such significant
suppliers fail to convert their systems.
11
<PAGE>
The risk to the Company if significant product vendors fail to convert
their computer systems and, as a result, are unable to ship products to the
Company in a timely manner after the year 2000 is that the Company may not
be able to offer such products to its customers and will be able to offer
only replacement products, if available. The Company generally has more
than one source of supply for almost all categories of products it sells.
The risks to the Company if significant service providers fail to timely
convert their computer systems may include, in the case of vital utility
services, the inability of a branch office or distribution center to
operate. In such an event, the Company does have the ability to shift its
distribution and branch office operations to other distribution centers and
branches within its system. The Year 2000 efforts of third parties are
ultimately beyond the company's control. Notwithstanding the Company's
efforts to substitute products or shift distribution or branch operations,
the inability of significant suppliers of products and services to complete
their Year 2000 resolution process in a timely fashion could materially
adversely affect the Company. The amount of lost revenue and impact on the
Company can not be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event all
phases of the Year 2000 program are not completed or significant suppliers
of products and services fail to complete their Year 2000 resolution
process. The Company plans to evaluate the status of completion in March
1999 and determine whether such a plan is necessary.
The Company believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the failure of
significant suppliers of products and services to the company to resolve
their own Year 2000 issues could materially adversely affect the Company.
In addition, disruptions in the economy generally as a result of Year 2000
issues could also materially adversely affect the Company.
The foregoing discussion regarding Year 2000, including the discussion of
the timing and effectiveness of the Company's Year 2000 remediation
efforts, contains forward-looking statements which are based on
management's best estimates derived using assumptions and information
considered reasonable. These forward-looking statements involve inherent
risks and uncertainties, and actual results could differ materially from
those contemplated by such statements. Factors that might cause material
differences include, but are not limited to, the company's ability to
locate and correct all relevant Year 2000 computer code and the ability of
significant suppliers of products and services to effectively address the
Year 2000 issue. Such material differences could result in business
disruption, operational problems, and similar risks.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company wishes to caution shareholders and prospective investors that
the following important factors, among others, could in the future affect
the Company's actual operating results which could differ materially from
those expressed in any forward-looking statements made by the Company. The
statements under this caption are intended to serve as cautionary
statements within the meaning of the private securities litigation reform
act of 1995. The following information is not intended to limit in any way
the characterization of other statements or information under other
captions as cautionary statements for such purpose. The order in which
such factors appear below should not be construed to indicate their
relative importance or priority.
12
<PAGE>
- Reduced growth in expenditures for dental services by private dental
insurance plans.
- Accuracy of the Company's assumptions concerning future per capita
expenditures for dental services, including assumptions as to
population growth and the demand for preventive dental services such as
periodontic, endodontic and orthodontic procedures.
- The rate of growth in demand for infection control products currently
used for prevention of the spread of communicable diseases such as
AIDS, hepatitis and herpes.
- The effects of health care reform, increasing emphasis on controlling
health care costs and legislation or regulation of health care pricing,
all of which may affect the ability of dentists to obtain reimbursement
for use of new and state-of-the-art procedures and technologies.
- The amount and growth of the Company's selling, general and
administrative expenses.
- The effects of, and changes in, U.S. and world social and economic
conditions, monetary and fiscal conditions, laws and regulations,
other activities of governments, agencies and similar organizations,
trade policies and taxes, import and other charges, inflation and
monetary fluctuations; the ability or inability of the Company to
obtain or hedge against foreign currencies, foreign exchange rates
and fluctuations in those rates.
- Ability of the Company to retain its base of customers and to increase
its market share.
- The ability of the Company to maintain satisfactory relationships with
qualified and motivated sales personnel.
- Changes in economics of dentistry affecting dental practice growth and
the demand for dental products, including the ability and willingness
of dentists to invest in high-technology diagnostic and therapeutic
products.
- The Company's ability to meet increased competition from national,
regional and full-service distributors and mail-order distributors of
dental products, while maintaining current or improved profit margins.
- Continued ability to maintain satisfactory relationships with key
vendors and the ability of the Company to create relationships with
additional manufacturers of quality, innovative products.
- The ability of the Company and its suppliers to upgrade their computer
systems to adequately address the Year 2000 issue.
13
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The Company's Annual Meeting of Shareholders was held on September
14, 1998.
c)(1) The shareholders voted for two director nominees, Peter L.
Frechette and David K. Beeken, for a three year term. 29,981,651
shares were voted for Mr. Frechette and 313,868 shares withheld
authority. 30,043,542 shares were voted for Mr. Beeken and 251,977
shares withheld authority. There were no abstentions and no broker
non-votes.
(2) The shareholders voted to ratify the appointment of Ernst & Young
LLP as independent auditors of the Company for the fiscal year
ending April 24, 1999. The vote was 30,264,806 shares for, 4,016
shares against and 26,697 abstentions. There were no broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K.
(a) Item 27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
All other items under Part II have been omitted because they are inapplicable or
the answers are negative, or, in the case of legal proceedings, were previously
reported in the annual report on Form 10-K filed July 16, 1998.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PATTERSON DENTAL COMPANY
(Registrant)
Dated: December 4, 1998.
By: /s/ Ronald E. Ezerski
-------------------------------
Ronald E. Ezerski
Executive Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-24-1999
<PERIOD-START> APR-26-1998
<PERIOD-END> OCT-24-1998
<CASH> 29,727
<SECURITIES> 0
<RECEIVABLES> 109,276
<ALLOWANCES> 3,864
<INVENTORY> 98,689
<CURRENT-ASSETS> 238,218
<PP&E> 59,699
<DEPRECIATION> 23,765
<TOTAL-ASSETS> 323,809
<CURRENT-LIABILITIES> 80,698
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0
0
<COMMON> 333
<OTHER-SE> 231,742
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<SALES> 413,398
<TOTAL-REVENUES> 413,398
<CGS> 260,883
<TOTAL-COSTS> 260,883
<OTHER-EXPENSES> 117,596
<LOSS-PROVISION> 492
<INTEREST-EXPENSE> 285
<INCOME-PRETAX> 35,733
<INCOME-TAX> 13,607
<INCOME-CONTINUING> 22,126
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,126
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
