Slow dental sales drag down Patterson profit

By MIKE BARRIS, Dow Jones News Service

Last update: November 20, 2008 - 11:11 PM

Dental equipment maker Patterson Companies Inc. posted a 13 percent drop in fiscal second-quarter net income, as sales in its key dental unit slowed amid the deteriorating economy.

The Mendota Heights company also cut its fiscal full-year outlook and gave a fiscal third-quarter earnings view that was below Wall Street's estimates. The company's shares fell 11 percent Thursday, or $2.17, to close at $17.50.

Patterson, a wholesaler of dental products, reported net income of $46.9 million, or 40 cents a share, for the quarter ended Oct. 25, compared with $53.7 million, or 39 cents a share, a year earlier. In August, Patterson forecast 45 to 47 cents a share, straddling analysts' estimates at the time.

Net sales rose 2.4 percent, to $759.5 million. On average, analysts polled by Thomson First Call had expected earnings of 46 cents a share on revenue of $801 million.

Sales in the dental unit, Patterson's largest business, inched up 0.4 percent amid flat sales of consumable dental supplies and printed office products and a 1 percent gain in dental equipment and software sales.

Patterson's veterinary business saw a 14 percent sales increase, while the rehabilitation businesses were virtually flat.

Chief Executive James Wiltz blamed the weakness in its dental unit on the difficult economy that has caused dental patients to start putting off "higher level and discretionary services, which largely accounted for the soft sales of consumable supplies in the quarter."

The company is cutting its costs by at least $20 million to $25 million a year, including a partial hiring freeze and wage freeze.

Patterson said it expects fiscal 2009 earnings of $1.73 to $1.77 a share, down from its August forecast of $1.94 to $1.98. Wall Street's latest view was $1.94 a share.

For the fiscal third quarter, it expects earnings of 43 cents to 45 cents a share. Analysts were expecting 53 cents a share.

In earlier trading Thursday, Patterson shares hit a 52-week low of $15.75.

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