Patterson Companies Inc (PDCO) 2009 Q1 法說會逐字稿

Welcome to the Patterson Companies first quarter 2009 earnings conference call.

(OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded Thursday, August 21, 2008.

I would now like to turn the conference over to James Wiltz, President and CEO.

Please go ahead sir.

Good morning and thanks for participating in our first quarter conference call.

Joining me today is Steve Armstrong, our Executive Vice President and Chief Financial Officer.

We will be pleased to take your questions at the conclusion of our remarks.

Since regulation FD prohibits us from providing investors with any earnings guidance unless we release that information simultaneously, we have included financial guidance for the second quarter of 2009 in our press release earlier today.

Our guidance is subject to a number of risks and uncertainties that could cause Patterson's actual results to vary from our forecast.

These risks and uncertainties are discussed in detail in our annual report on 10-K and our other SEC filings.

And we urge you to review this material.

Turning now to our first quarter results.

Consolidated sales rose 6% to $743.9 million.

Earnings per share increased 11% to $0.39 from $0.35 at last year's first quarter.

As many of you know, we completed $525 million of new long-term debt financing in last year's fourth quarter, which enabled us flew over our cost of capital by about 100 basis points.

The proceeds of this debt issuance and portions of our cash reserve were used to repurchase 19 million shares of our common stock in 2008.

We are expecting accretion of additional $0.06 to $0.07 per share in 2009 as a result of these transactions.

The additional interest expense associated with this debt negatively affected our net income in the first quarter.

And it will continue to affect the comparability of our net income over the balance of 2009.

But by completing these transactions in 2008 we believe we have better positioned Patterson to increase its returns to our shareholders, while maintaining our financial flexibility to take advantage of acquisition or other investment opportunities.

Steve will provide more detail on the financial impact of these transactions during his prepared remarks.

Now I will briefly review the performance of our three businesses.

Patterson Dental results were generally consistent with our internal forecast for this period.

Sales of consumable supplies increased 6%, reflecting the continued strength of the North American dental market.

Total sales of equipment and software were down modestly in the first quarter, but sales of basic equipment were up 4% in this period.

As anticipated, first quarter sales of software and digital x-ray systems were adversely affected by the rollout of our previously announced sales and marketing initiatives, which have fundamentally changed many of the ways we do business.

Given the nature of these changes and the short-term distractions they created for our sales force, we believe this rollout also had an impact on CEREC sales.

Our recently implemented initiative consists of the following elements.

The commission structure of Patterson Dental sales force has been revamped to better align compensation that the growth objectives and strategies of the organization.

Among other things, our new compensation structure is designed to sharpen our focus on the digital market.

Responsibility for selling digital solutions and patient education products has been refocused on our territory field representatives and equipment specialists.

We have started offering our EagleSoft Practice Management Software free of charge to any dentist with a goal of winning new customers for our digital x-ray solution, and growing revenues generated by software support and e-business services, and increasing sales of other equipment and consumable supplies.

In addition, our customer loyalty program, now called Patterson Advantage, has been thoroughly redesigned to give customers a strong incentive to partner with us for meeting all their dental office needs.

Finally, the selection and training of field sales representatives has been significantly strengthened.

By further strengthening our position as a leader and innovator in the North American dental market, these initiatives are expected to generate improving results at Patterson Dental in the future.

Turning now to Webster.

Sales of Veterinary Supply unit increased 10% in that first quarter to $123.3 million.

This solid growth was driven by the continued robust performance of Webster's consumable supply business.

Later this quarter Webster will be stocking a full complement of inventory in our expanded Dinuba, California distribution center, which is already utilized by our Dental and Rehabilitation units.

As a result, Dinuba will become Patterson's second distribution center serving all three businesses, while four other facilities are currently dual use.

Patterson Medical, our rehabilitation supply and equipment unit, posted first quarter sales growth of 10% to $100.7 million.

Excluding the impact of acquisitions over the past year related to these unit's branch office strategy and foreign currency translations, first quarter sales of Patterson Medical rose a solid 6%.

Sales of rehabilitation equipment were particularly strong in the first quarter, due partly to the addition of the industry-leading equipment lines manufactured by the Chattanooga group.

Patterson Medical's performance also benefited from strong sales posted by its sports medicine business.

Our rehabilitation unit also is benefiting from ongoing efforts to further expand and strengthened its value-added platform.

Twelve branches are currently operating, and each one has cutover to Patterson Management Systems.

We expect to acquire or internally start additional branch offices in 2009, although at a slower rate been in 2008.

In addition, Patterson Medical sales force has grown to more than 200, and we will be increasing this number during the coming year.

Patterson Medical has made a significant progress in strengthening its operations and market position.

And we believe this business is increasingly well-positioned to realize its full potential in the global rehabilitation market.

Turning now to our guidance contained in this morning's release, we're forecasting earnings of $0.45 to $0.47 per diluted share for the second quarter, ending October 25, 2008.

We are also reiterating our previously issued guidance for the full year of $1.94 to $1.98 per diluted share, reaffirming our belief that 2009 should be a year of improved performance.

Thank you.

Now Steve Armstrong will review some highlights from our first quarter results.

On a consolidated basis our key operating statistics in the first quarter were unchanged from the prior year, and generally in line with our expectations.

With the strategy changes announced in the Dental segment during the quarter, which we believe are very important to improving the success of this segment, there were two immediate impacts that adversely affected our operating results.

First, since we're no longer charging for our EagleSoft Practice Management software, our revenues from this product are down 100%.

The impact of this decision reasonably reduced consolidated operating margins by over 30 basis points on a comparable basis.

Secondly, operating expenses for the Dental segment reflect the incremental expense from the initial rollout of the strategy changes.

As we move through this fiscal year we expect that the extent of the impact of these changes would progressively decline over the next three quarters.

The Veterinary segment saw improvement in both their gross margins and operating leverage, resulting in 50 basis points of operating margin expansion in the quarter.

Our Medical segment improved their gross margins, but the expense structure continues to be impacted by the branch expansion initiatives from last year and the conversion costs as this unit transitions to the Patterson systems.

By segment our first quarter operating margins or 11.5% for dental, 13.9% for medical, and 4.8% for veterinary.

As Jim mentioned, the debt that we issued in the latter part of fiscal 2008 added incremental interest expense of nearly $6.7 million or $4.2 million net of tax.

Since most of the new debt was issued at fixed rates, we would expect the same incremental impact going forward.

We will have this same incremental impact going forward; however, total interest expense will decline by $1.3 million per quarter following the paydown in November of the remaining $130 million of debt we issued in 2003 as part of the Patterson Medical acquisition.

A quick review over our balance sheet shows that our accounts receivable was reduced by approximately $15 million in comparison to the fiscal year end.

We historically produce higher levels of sales in our third and fourth fiscal quarters in comparison to the first quarter of the new fiscal year, which results in a accounts receivable pay down in most years.

In comparison to the end of fiscal 2008 inventory increased by approximately $38 million at the end of this year's first quarter.

This increase resulted from normal seasonal increases in our warehouse inventories to improve service levels, along with higher levels of CEREC and other equipment inventory.

The CEREC growth was due primarily to increasing unit levels of the XL Milling Chamber for the trade-in program that is running this summer.

Our DSOs stands at 43 days, unchanged from the prior year, while inventory turns are at 6.7 compared to 7.3 a year ago.

The inventory turns should improve as we move through the year.

We generated cash flow from operations of approximately $33 million in the first quarter compared to $53 million in the year earlier period.

The decrease is primarily due to a larger sale of finance contracts in the first quarter of last year.

Capital expenditures in the quarter reflect the expansion costs of the Dinuba distribution center, which will be completed in the second quarter, and the expansion and renovation of the general office here in Minnesota.

With that, I'm going to turn it back to Nicole, and she will poll you for your questions.

Thank you.

(OPERATOR INSTRUCTIONS).

Glen Santangelo.

It is Glen Santangelo.

Just a couple of quick questions here on the equipment side.

I am kind of curious about the interoperability between EagleSoft and the digital x-ray.

Do you think it is pretty much a foregone conclusion that if you can convince a dental office to take the EagleSoft product that it will ultimately lead to the digital x-ray sale?

Is that basically the conclusion you're drawing?

Yes, that is exactly the right way to put it.

If you look at anybody's software and anybody's digital, they both work better together when they were built to be together.

I guess the thought process is there is a little bit of a lag time that once you get more installs of EagleSoft that it will ultimately translate into some digital x-ray sales?

Digital x-ray sales, as well as increased e-business for the service contracts and for the e-claims and e-statements, and so forth.

Yes.

There was no mention of CEREC in the press release, and nothing in the comments.

Could you give us maybe an update there?

Now that E4D has been out for a couple quarters are you starting to see maybe some of that log jam that we saw in the market the past couple of years ease a little bit more or --?

I don't think we saw it in the quarter, but I think we're starting to see signs of it, because there's a lot more activity going on with seminars and doctors signing up for seminars.

It would appear that the confusion is starting to go out of the marketplace, yes.

But our CEREC sales were down slightly in that first quarter of this year.

Steve, maybe just one question on the guidance.

As I look at the full year of $1.94 to $1.98, I'm guessing embedded in that assumption is some sort of reacceleration of the equipment sale.

Could you give me a rough idea the magnitude of equipment sales you need to ultimately achieve that guidance?

Is it 5% for the full year?

Is it something less or something a little more than that?

We have never given that kind of specific information out publicly before.

We're still looking at total sales growth for the organization up in the higher single digits for the year.

That was our original forecast, and that is as far as I'm willing to take that comment.

We should just think about total sales for the Company in the 5% to 10%ish range, is that fair?

Correct.

Correct.

Derek Leckow, Barrington Research.

My question is also in the equipment side.

Just wondering about the change in the compensation structure you talked about in our press release here.

Can you tell me how that has changed specifically, Steve or Jim?

I think I will turn it over to Jim, and let him try to (multiple speakers) for you.

It is really -- first of all, I think everybody needs to keep in mind that what it was really changed to drive was to increase the number of customers that signup for our Patterson Advantage Program.

And so without giving you the full details, which I obviously not going to do, there were some components in there where the sales rep has to meet certain goals with equipment, with software, with digital.

And they must be with customers that are signed up in our Advantage program for them to maximize.

If they do what we have requested that they do, their commissions will actually increase.

If they don't, and choose to go on in the direction they had been heading, they will actually lose some commission.

So software was in the commission structure a year ago, and I guess software is being taken out now, is that right?

That's correct, but we have taken out a whole group of salespeople and shifted the income they were getting off of digital back to the equipment salespeople and the territory salespeople.

Help me out here with the outlook for the equipment sector then.

If I look at and try to remove the software piece, again we're trying to figure out what the growth rate should be, but what is the right growth to assume for equipment?

I think Steve just told you the perfect answer to that question.

What about -- what if we take out the CEREC?

Was there upward bias to the digital equipment sales if we remove CEREC from that group?

Not in the first quarter, no, because we had all the unsettling of removing the sales force responsible for selling that product.

Has the headcount changed at all in the equipment sector?

Not in the equipment sector -- well, yes it has.

We have increased in the equipment sales.

Steve has probably got that number.

Hold on.

Basically, what we did was we took the former PTR group, our Patterson Technology reps, and many of those folks were dispersed back into the territory rep group and the equipment group.

Some became CEREC specialists, some became technical advisers to provide, if you will, back room support in the technologies.

So the numbers have moved around quite a bit in that group.

But the total sales count today is about 1,550 versus almost 1,600 at the beginning of the year.

As I said, many of those folks had moved into advisory roles within the organization.

So they come out of the same (multiple speakers).

We had about 120 of those people, and probably about 40 -- we probably had about a 40 headcount reduction of those 120.

Let me shift over to the medical business.

It looks like you had a good quarter here.

Is this the right growth rate now or are we still seeing an acceleration in that domestic segment of the business?

I think we're still looking at acceleration slightly in that segment.

Larry Marsh, Lehman Brothers.

Look forward to seeing you guys here in a couple of weeks at your analyst meeting.

Just conceptually one more question on this EagleSoft decision, which is your step back in said EagleSoft platform relative to others in the market is I guess somewhat smaller.

Your digital platform has been a lot bigger.

I guess your message, and the message in the market these days, you really have to tie the two together.

Is the idea, Jim, that by giving away EagleSoft you hope that you would substantially increase your installed base in that business in the next year?

And I guess that means that you would be replacing a lot of competitors.

And what happens of the competitors say they are going to give it away as well?

That is a good question.

I'm not sure I know the answer to the last part of that.

But, yes, that is our assumption that we will increase installs.

We're the fastest-growing currently, even when we were charging for it.

We're currently number two at about 21% market share according to CRA, which just came out this week.

And the fastest-growing by far.

We just want to accelerate that because it does dramatically help the customer as it relates to digital x-ray, but there is also some additional benefit to us, as I mentioned earlier, in e-business that they do with us.

Which is an ongoing business.

It is the razor blades in the software business.

In your mind, lets say two to three years out, given your overall market penetration in the 30s, is your goal to get EagleSoft market share up in that 35% plus range?

Actually I think our goal is to get it higher than that, unless some other people come out and decide to start giving it away free.

We think we can get into the 40s.

Over the next, what, couple of years?

Yes.

Second question on CEREC.

I know you had said that that was also impacted by some of the changes in the structure.

Maybe elaborate on that, because I know last year midyear you had the upgrade?

So I think we were assuming that the comps would still be pretty easy here the first -- this quarter and next quarter.

I think Jeff asked that last quarter as well.

So what changed really to see such -- if it was down slightly year-over-year that would mean it would be -- and my number is down a lot sequentially.

How much disruption was there just in the sales force and -- or are there other things going on?

No, it was primarily disruption in the sales force.

Anytime you announce a commission change your sales forces assumes that you're taking money away from them.

So it gets them very unsettled.

It took a while for our managers to properly introduce the new programs.

We also did away with a specialty sales force, of which the CEREC is also one -- a group of CEREC specialists.

And I think they immediately made the assumption that oh, oh, we're going to be gone too.

Which was never our plan.

I think that is what we're talking about by the disruption in the sales in the first quarter.

I think I can safely say to you that everything we see right now says that that bowling ball is through the snake.

Are you commenting at all of whether there was any impact on your first cycle of that business relative to the competitor introduction here in the last months, or based in the feedback you've gotten that that really hasn't changed any of the selling dynamic?

I think actually that things are -- if I look at it today, last quarter, first quarter we were still involved with some confusion in the marketplace, because Schein was introducing.

And now that they have E4D in the market and selling it, I think the customer confusion is gone, and we don't appear to have the same difficulty that we did giving the doctors to come attend our seminars and so forth.

They are now wanting to compare the machines.

Two other quick questions.

The inventory, I know, Steve, last quarter you talked about some increase with the CEREC XL, and some of the vet business this quarter.

And there is always a sequential expansion Q1.

But it was a little bit more than I was thinking.

Is that -- to tie into your comments, that is all incremental XL Milling Chamber inventory?

No.

No.

No, it is a combination that is spread across the consumables, I will call non-CEREC inventory equipment categories, as well as CEREC.

It is a combination of all three.

Your CapEx was a lot up a lot more than I thought.

Are you still saying $25 million as your target, and why was it up so much this quarter?

We've got -- the Dinuba facility is just about done, so most of the expenditures came in in the fourth and the first quarter for that.

That is close to a $20 million project in and of itself.

Then the GO renovation cranked up in the fourth quarter and the first quarter as well.

Those projects, as the wrap up in the first half of this year, then our capital spend should diminish in the latter half of the year, unless, and I say unless, because we're thinking about potentially re-renovating another warehouse starting later in the year.

So hold off on using $25 million as the target, you think it would be a bit higher now?

I think it is still in the $25 million to $30 million range.

We can turn that on and off a little bit, depending on when we decide to start that next project.

Finally, on Vet, the news there is good.

Profit is up nicely year-over-year, as you talked about.

Let me throw out the typical question.

Over the next couple of years you still -- could you still be in a position to meaningfully expand that through acquisition?

And if not, why not?

I think we feel like we can still expand that considerably.

Robert Willoughby, Banc of America Securities.

Jim, what actually has been the competitive response to the free software program?

Have you seen anything in the market as yet or it is still too early?

No, no.

We have seen some response.

Nobody has really responded with that.

But the other national competitor that I will -- remain nameless has a rebate program that they have put in play.

It was advertised in the latest Dental Products Report Magazine.

So we have seen a response from them.

So far we have seen no response from Carestream, the practice [where it is] Kodak product.

You cited fastest growth rate out there.

There is a pickup then with the free software?

That has had an immediate impact for you?

No, the growth rate that I am citing was actually per the free software.

So we expect that to even accelerate more.

Just anything anecdotal, as you look into the current quarter obviously you have given guidance out there, but can you speak to any uptick on equipment as yet encouraging at this point, or still too early for the initiatives to have traction?

I think from the initiatives that we talked about, we feel very comfortable with what we see early on.

But it is too early to tell you what the tax incentives that were laid out there are going to do.

You typically, until we get into no November timeframe, we really don't know the impact those are going to have on our equipment business.

The dentist seems to not wake up to that fact until the last couple of months of the year.

Steve, your comment on the interest expense, did you say down sequentially going forward about $1 million?

Did you retire the $130 million that was current debt post the quarter?

(multiple speakers) After November.

$1.3 million comes out after November.

After November?

Right.

Okay.

The second half we will be down to just the interest on the new debt.

I guess, the capital structure initiatives you have done encouraging, but they would be even more encouraging if they kind of continued?

Your cash is up.

I mean, what is the resistance to just the kind of token share repurchases, just a modest level of buying every month versus every decade having a big recap of some sort?

Is there any ongoing thought there in terms of how to put the capital to work?

We have certainly had discussions about that.

We still have an authorization of 7 million shares out there, so we still got some room to work if we choose to.

I think it depends on the price point.

And we will keep looking at that.

It is not a taboo thing here.

We have always got some acquisitions in the pipeline.

We're going to make sure we've got enough money to do that with.

Just lastly, have financing terms changed at all that you're offering to dentists at this point or still the same?

We did just introduce a program, particularly on CEREC.

And we will plan to have a financing promotion at the end of year, as we do traditionally.

Jeff Johnson, Robert W.

Baird.

A couple of things here just on talking about the additional share repurchases.

What are the cash flow from operations or free cash flow expectations for the year?

In round numbers probably to $250 million to $300 million.

Are you talking operations there?

Or I would assume that is a free cash number.

A free cash number, yes.

There would be room, even if you exhaust these 7 million shares there, we can even put part of that towards additional repurchases?

Jim mentioned it, and I will be more blunt.

We have got $130 million of debt we have to pay off here in a couple of months.

We always have acquisitions in the pipeline.

We will use the $7 million as it makes sense to use it.

If we've got excess cash building, we will certainly consider going into the market and repurchasing shares.

But that is not a key strategy for us right now.

We want to build the business.

And we've got needs for the cash other than just repurchasing shares.

If I sense your tone there, to me maybe a quarter or two ago it was shifting towards maybe we don't go the fourth leg, maybe we repurchase shares.

The acquisition pipeline, are talking within the three core areas or are we back to thinking maybe a fourth leg?

Right now we're looking at the three core areas.

Steve, Leventhal impact on the quarter, was that 1 point, 1.5 point to dental consumables?

And can you quantify at all maybe the impact that Chattanooga would've had on the medical organic growth?

I can give you the first.

I won't give you the second.

The first was less than 1%.

Close to 1%?

Pretty close.

Yes.

All right, fair enough.

Then on the Chattanooga, I guess, if I don't get a growth rate there, at least conceptually -- when we started thinking about this maybe a year ago or so or it was last year at the analyst meeting, I think, when we started thinking about a potential Chattanooga deal there.

We are thinking it would maybe add upside to medical, get you up in the organic range, upper single digit.

Is it better to think about it keeping you in a healthy kind of 6% to 7% kind of more in line with the market type growth on go forward basis over the next few quarters?

Again, we have never given you specific guidance, and I don't want to get into that trap right now as far as individual equipment lines or individual categories within business units.

Our goal is to grow these businesses faster than their underlying markets, and that is guidance we're going to continue to give you.

How we break that down and how we get that, to be honest with you, you guys care a hell of a lot more about it than we do.

We don't care where it comes from, we are just looking to try to get that composite growth.

Now we have these -- obviously we have targets in categories throughout the system for the year.

But I'm not going to sit here and give you specific equipment target growth rates.

Let me just make one statement to you.

This will really help you.

We're very happy with our relationship at this point with Chattanooga.

We have been thinking this would be a good deal if it eventually happened.

So it is good to see it happen.

I agree, Jim.

Last question then, just sales rep count, Steve or Jim, any numbers you can give us there as we look for stability in the dental sales force here?

As we mentioned, we are basically sort of flat year-over-year when you consider the reclassifications we made in assignments in the field.

But the actual numbers are we are 1,550 in dental reps versus 1,599 last year, or at the beginning of the year.

Sorry if I miss that.

I didn't catch it before, if you gave that.

Thanks guys.

That's all I have.

(OPERATOR INSTRUCTIONS).

John Kreger, William Blair.

Can you give us your latest thinking on the impact the economy is having on each of the three segments?

I got in so much trouble the last time I handle that, I'm not sure I want to.

I think anytime that we have a bad economy, as we have current in my opinion, that it affects all businesses somewhat.

But as I look at our three businesses and the growth rates that we are able to achieve, I would have to tell you that I don't think our customers in any of the three segments are experiencing much of a slowdown.

I think if you talk to a large group of dentists you would find out that maybe their book -- their appointment leadtime has come down a little bit.

But they are still very busy and they are still generating income at an increasing rate.

I would have to say that I think all three of our customers are very healthy.

But I do think that there is some negative impact that comes out of a slow economy, particularly as it relates to capital equipment.

That is what I was trying to say about eight months ago, and I didn't do it well.

As a follow-up to that, as you talk to your customers and hear feedback from your salesmen, from your prospective does that impact seemed to be getting worse, better or staying the same compared to let's say six months ago?

I think it is probably better than it was six months ago.

I think most of them feel like we're at the bottom, and they realize it hasn't been disaster for them.

I think everything we see right now, let's say that capital equipment appears better than it has been for about six or eight months.

Than the final question.

Considering that the bulk of equipment purchases are generally taking place in the waning months of a calendar year, and as you think about on the one hand a tough economy, but on the other hand you have got some added tax incentives this year compared to prior years, what is your thinking about how those two offsetting factors play out over your next two quarters?

My personal opinion is that they will neutral each other.

That the tax advantage will spur enough people on to go ahead and do it.

And ones that are on the negative side of the equation will hold up.

I think it will be somewhere near a zero impact.

But I think we should look for a normal year-end in equipment purchases.

Then just one final question.

If we're doing the math right with your guidance, I think it implies if we have stable revenue growth around 30, 35 basis points of operating margin improvement.

If you agree with that math, can you give us a sense is there a particular segment that you think that will come from or will it be spread across your entire portfolio?

Steve?

It should come across the portfolio.

We're targeting each of the groups to contribute their 50 basis points to our operating margin expansion.

Now we have said earlier, and I would reiterate, that a bit of a wild-card is the impact on dental, as we have made these changes that Jim talk about earlier, and what the outcome could be for the year there.

Larry Marsh, Lehman Brothers.

Just two maybe hairsplitting things a little bit.

Just I was wondering Leventhal had about 1.5% impact on consumables.

And I know when you bought it you said it was running about $18 million in revs.

Is there some overlap, or am I thinking of that a little too aggressively?

I remember they were selling equipment too so --.

Got it.

So that's the differences.

Thank you.

Then secondly, the share repurchase, I know last quarter you said it was $18 million, and then this -- today you are seeing $19 million.

What is the difference and where did that show up?

Good question.

The $18 million was what we had in the bank at the end of the fiscal year April of 2008.

If you remember, we entered into an ASR.

That matured in late June.

And we actually picked up another 1 million shares off the ASR when it matured.

So the 1 million would show up in Q1.

Yes.

From an accounting standpoint.

Then finally, there some reclass on the balance sheet between goodwill and other.

What is that?

That is the Sirona contract.

So when that kicks in, the value of that then gets reallocated up to goodwill once it is sort of in effect?

No.

I think what you're seeing maybe is just the amortization that has already been out of there.

Okay.

I could follow-up, because it looks like is about 100 and some million difference?

Oh, I see.

So it is $100 million that just gets moved from one bucket to another?

Okay.

(multiple speakers).

Very good, that it.

Thanks.

Andrea Bici, Schroder Investment Management.

Could you provide me with what cash flow from operations and CapEx was in the quarter?

And give us a little color on the outlook for that going forward?

Cash flow from operations, if you go to the detail of the press release, you will find that in there.

It is $32.5 million.

And CapEx was a little over -- about $11.5 million.

As we said earlier, we would expect the cash flow from operations to probably approach $250 million for the year, and CapEx to be between $25 million and $30 million for the year.

There are no further questions.

I would like to turn the call back over to management for any closing remarks.

I would like to thank everybody this morning for joining us on our first quarter conference call.

We will look forward to being back to you with our second quarter.

Thank you very much.

Thank you, ladies and gentlemen.

That does conclude the Patterson Companies first quarter 2009 earnings conference call.

We thank you for your participation.

You may now disconnect.