PSS World Medical Inc. Reports Operating Results (10-Q)
Pss World Medical Inc. has a market cap of $1.16 billion; its shares were traded at around $19.36 with a P/E ratio of 16.7 and P/S ratio of 0.6. Pss World Medical Inc. had an annual average earning growth of 18.3% over the past 5 years.PSSI is in the portfolios of Ron Baron of Baron Funds.
Highlight of Business Operations: Income from operations increased 1.0% or $0.3 million to $32.0 million during the three months ended January 1, 2010 and increased 24.5% or $18.1 million to $92.3 million during the nine months ended January 1, 2010 when compared to the same periods in the prior year. This was the result of an increase in gross margin, due to product mix and gross margin improvement initiatives, and cost savings initiatives partially offset by an increase in incentive compensation costs.
Cash flow from operations during the three and nine months ended January 1, 2010 was approximately $14.1 million and $67.7 million, respectively. This was the result of operating income growth offset by an investment in inventory and timing of receivables and payables.
outstanding convertible debt. As a result of the adoption, interest expense increased by $1.7 million ($1.0 million net of tax) and by $5.2 million ($3.2 million net of tax) for the three and nine months ended January 1, 2010 and increased $3.4 million ($2.1 million net of tax) and $7.3 million ($4.5 million net of tax) for the three and nine months ended January 2, 2009, respectively. See Footnote 4, Debt, for additional information.
In April 2009, the Company sold its remaining investment in athenahealth, Inc. (athena), a leading provider of internet-based healthcare information technology and business services to physician practices, for $10.7 million, resulting in a gain of $3.6 million ($2.3 million net of tax) recorded in Other income, net on the Unaudited Condensed Consolidated Statements of Operations. See Footnote 3, Equity Investment, for additional information.
Based on the financial results of the nine months ended January 1, 2010, management raised its expectations for probable achievement of performance targets related to corporate incentive compensation plans. Due to the change in estimate, the Company recognized additional incentive-based compensation expense of $2.7 million and $12.8 million during the three and nine months ended January 1, 2010 and is expected to recognize an additional $2.7 million during the fourth quarter of fiscal year 2010, offset by an expected decrease in accruals for incentive compensation related to the termination, by mutual agreement, of the employment of the Companys former Chairman and Chief Executive Officer. See Footnote 7, Incentive and Stock-Based Compensation, and Footnote 14, Subsequent Events, for additional information.
During the three and nine months ended January 1, 2010, the Physician Business experienced increased sales in influenza test kits, surgical masks, medical gloves, hand sanitizer, and other products related to the H1N1/Swine flu pandemic. For the Branded and Select product lines, net sales increased as a result of the H1N1/Swine flu by approximately $20.3 million and $52.5 million, during the three and nine month periods, respectively. The Company estimates the earnings per share impact for the three and nine months ended January 1, 2010, to be $0.03 per diluted share and $0.08 per diluted share, respectively.
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