Patterson Companies Inc (PDCO) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Patterson Companies' fourth quarter and fiscal 2012 conference call.

During today's presentation, all participant lines will be muted.

Following the presentation, the conference will be opened for questions.

(Operator Instructions)

This conference is being recorded today, May 24, 2012.

I would now like to turn the conference over to Scott Anderson, President and CEO.

Please go ahead.

Thank you, Douglas.

Good morning, and thanks for taking time to participate in our fourth quarter earnings conference call.

Joining me today is Steve Armstrong, our Executive Vice President and Chief Financial Officer, who will review some highlights of our fourth-quarter performance following my opening remarks.

Since Regulation FD prohibits us from providing investors with any earnings guidance unless we release that information simultaneously, we provided financial guidance for fiscal 2013 in our press release earlier this morning.

This 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 Form 10-K and our other SEC filings, and we urge you to review this material.

Turning now to our fourth-quarter results.

Sales totaled $936.3 million, an increase of 6% from $883.8 million in the fourth quarter of fiscal 2011.

Net income of $62.1 million or $0.58 per diluted share included incremental expense of $0.03 related to Patterson's employee stock ownership plan, or ESOP.

Excluding this ESOP-related expense, fourth-quarter earnings were $0.61 per diluted share.

We included an ESOP expense reconciliation table in this morning's release that provided full detail on this item.

Patterson's reported earnings of $62.7 million or $0.53 per diluted share in the fourth quarter of fiscal 2011.

For fiscal 2012, consolidated sales rose 4% to $3.5 billion.

The additional sales week in the first quarter of fiscal 2011, which made that a 53-week period, negatively affected fiscal-2012 sales growth by approximately 2 percentage points.

Net income in fiscal 2012 of $212.8 million or $1.92 per diluted share included $0.13 per share of ESOP-related expense.

Excluding this expense, earnings were $2.05 per diluted share for the year.

Earnings in fiscal 2011 were $225.4 million or $1.89 per diluted share.

While on the topic of our recent operating results, I also want to mention that Patterson repurchased approximately 1.2 million shares during the fourth quarter under our 25 million share buyback authorization that expires in 2016.

For the year, we acquired 12 million shares, with approximately 11 million shares remaining available for repurchase under this authorization.

In addition, Patterson's quarterly cash dividend was increased 17% to $0.14 per share in March 2012, bringing our annual dividend rate to $0.56 per share.

Including share repurchases and quarterly dividends, Patterson returned $400 million to shareholders in fiscal 2012, reflecting our commitment to generating value for our stakeholders.

Now, for the next few minutes, I will briefly review our fourth quarter operating results for each of our divisions.

Each of the three businesses performed at plan levels during this period, despite persistently soft and unsettled economic conditions, both at home and abroad.

We believe our ability to perform effectively in the current environment bodes well for Patterson's performance in a stronger economy.

Within Patterson Dental, sales of consumable supplies increased 3.5% before the impact of foreign currency exchange rates.

This marks the fourth consecutive quarter of solid consumable sales growth, an indication of the continued strengthening of the overall North American dental market.

We are also encouraged by the 6% improvement in fourth-quarter sales of dental equipment, given the fact that equipment sales were particularly robust in the year-earlier period.

In addition to mid-single-digit sales growth of basic equipment, we benefited from strong double-digit sales growth of CEREC systems, which was generated primarily by new users.

We believe this reflects the growing acceptance of CAD/CAM and other new digital technologies, which are enabling dentists to strengthen productivity, generate additional income, and improve clinical outcomes.

We estimate the CEREC systems have now penetrated only about 12% of the North American dental market, which means this product line has significant sales potential going forward.

To help spur continued demand for CEREC and other next-generation products, we will continue to focus our marketing initiatives on Patterson Dental's industry-leading line-up of technology offerings.

Fourth-quarter sales of Webster Veterinary increased 13% to $207.5 million, a record level for this unit.

The August 2011 acquisition of American Veterinary Supply Corporation, a full-service veterinary distributor located on Long Island, accounted for 2 percentage points of the unit sale growth for the period.

Webster's fourth-quarter sales growth was driven by robust demand for consumable supplies, including flea, tick, and heart worm medications as the relatively mild winter led to an early onset of these summer pests.

Despite the challenging economy, pet owners are increasing expenditures on veterinary care.

Through its full-service platform, which includes equipment and a new technical service capability, our companion pet veterinary unit is positioned to capitalize upon positive pet ownership and spending trends.

We intend to continue investing in our efforts to diversify our revenue offerings in this growing business.

Sales of Patterson Medical, our rehabilitation supply and equipment unit, increased 3%, excluding the impact of currency, to $130 million in the fourth quarter.

Patterson Medical's fourth-quarter performance was paced by above-plan sales of consumables in the North American market.

The units equipment business continued to be affected by the uncertainty around the proposed changes in the US healthcare system.

We believe this situation, which dampened equipment demand throughout the past year, will likely persist in fiscal 2013.

Patterson Medical is positioned to take maximum advantage of worldwide long-term demographic trends fueling the growth of the rehabilitation market.

Consistent with its global business strategy, Patterson Medical acquired Australian-based Surgical Synergies this past April, a $10 million distributor of physiotherapy, rehabilitation, and mobility products that strengthens our previously established position in the Australian and New Zealand rehab markets.

Finally, as we stated in this morning's release, we issued financial guidance of $2.10 to $2.16 per diluted share for fiscal 2013.

As we look ahead to fiscal 2013, we believe the market for dental consumables will grow in the 2% to 3% range, while the equipment market will grow in a 5% to 7% range.

The companion pet veterinary market is forecasted to grow in a range of 3% to 4%, while the global rehabilitation market is not expected to increase in fiscal 2013.

We believe each of our sales units will continue to grow at faster rates than their respective markets.

As we look back on fiscal 2012, I would like to highlight a few of the important investments that we made to enhance our opportunities for success in the future.

First, we completed the multi-year expansion of our domestic distribution capacity with the completion of the South Bend, Indiana facility.

This should allow us to double our business without significant additional investment in our distribution capacity.

Second, we completed and opened a new facility for the Patterson Technology Center.

This state-of-the-industry facility will provide our customers with a full complement of resources to support their ongoing investments in technologies for their practices.

Third, we developed and deployed updated customer service and order management systems throughout the domestic dental operation to better support the growth of the business, and address the changing needs of our dental customers.

Fourth, we made investments in educational programs for our sales organization that will continue into fiscal 2013, and we accelerated the build-out of our technical service capabilities in the Veterinary unit.

While these investments added incremental expense in the short term, we believe that the return to the shareholder over the long term will be substantial.

In all, we believe our markets are gradually recovering from the impact of the recession, although they have not returned to historic growth norms.

I want to emphasize that Patterson's businesses are well-positioned to capitalize upon their market opportunities, and we are looking forward to an exciting and successful fiscal 2013.

In closing, I'd like to thank the over 7,000 Patterson employees around the world for their dedication to our customers, and their fine work in our fourth quarter and throughout our fiscal year.

We, together, are optimistic about Patterson's long-term future.

Thank you.

Now, Steve Armstrong will review some additional financial highlights from our fourth-quarter results.

Thank you, Scott.

My comments will focus primarily on some of the significant aspects of our financial results in the fourth quarter, and matters affecting our guidance for fiscal 2013.

Let me begin with a few brief comments on consolidated operations.

Currency had only a 30-basis-point negative impact on our consolidated revenue growth, although our Medical unit was negatively affected by 90 basis points.

Our consolidated gross margins declined by 90 basis points in the quarter compared to the prior year, but improved sequentially, as anticipated, by 120 basis points.

The year-over-year decline was due primarily to sales mix and some increase in promotional cost.

Our operating expense ratio improved 10 basis points despite the incremental $5.6 million of ESOP expense, as we were able to gain leverage from revenue growth and expense management.

The ESOP expense increase accounted for the majority of the decline in the operating margin, with the impact of the product mix and promotional costs accounting for the remainder.

Specifically, the Dental operating margin was 11.7% for the quarter.

As a reminder, this segment absorbed the largest portion of the ESOP expense.

The Veterinary and Medical segments reported operating margins of 5.8% and 16.2%, respectively.

Interest expense was increased by approximately $3.1 million from the prior year, due to the issuance of the debt in the third quarter.

While we have absorbed this increased expense in the near term, we believe this new debt provides very competitively priced long-term capital to support the growth of the business.

Our fiscal 2012 tax expense continued to benefit from the dividends paid on the shares held by the employee stock ownership plan.

This portion of the dividend is deductible on our income tax return, and provides an increasing benefit to our overall tax rate as the dividend rate grows.

In addition, during the fourth quarter, we settled an Internal Revenue Service audit, and as a result, we were able to release approximately $1.4 million of previously provided tax reserves.

This release of reserves positively impacted our fourth quarter tax rate by 150 basis points.

As we look to fiscal 2013, we expect a tax rate of approximately 36%.

Looking now at our cash flow, we generated approximately $92 million from operations in the fourth quarter, compared to $71 million in the prior year.

This increase was a result of better working capital management, and a larger amount of finance contract sales during the period compared to the fourth quarter of last year.

Couple notes on our balance sheet.

Our DSOs stood at 45, compared to the year-ago 48 days.

Our inventory turns declined slightly to 6.7 from 6.9 last year.

You may also have noted that $125 million of our debt has moved from the long-term classification to short-term.

This portion of the debt matures in March of 2013, and we intend to retire it at that time, using proceeds from our debt issuance this past December.

Looking ahead to fiscal 2013, revenues in our Webster Veterinary unit will be adversely affected by a change in a distribution agreement with a nutritional vendor.

We formerly distributed this product for the vendor under a buy/sell arrangement in one region of the US market.

Beginning in fiscal 2013, we will represent the vendor under a national agency arrangement.

This change is expected to reduce revenues by approximately $45 million, although the effect on operating profit is expected to be minimal.

In addition, our expense structure during the coming fiscal year will reflect a comparable amount of ESOP expense as in fiscal 2012, since the change in accounting for this item has been grandfathered into our expenses.

Finally, our guidance for fiscal 2013 reflects the outstanding share count with which we ended fiscal 2012.

As Scott noted earlier, we have approximately 11 million shares remaining under our current repurchase authorization, and we expect to continue to purchase shares if the opportunity presents itself.

A final note on our view of fiscal 2013 -- we expect CapEx to approximate $25 million to $30 million, while depreciation and amortization should be about $45 million.

With that, I'll turn it back to the operator, and we'll poll you for your questions.

Douglas?

Thank you, sir.

We will now begin the question-and-answer session.

(Operator Instructions).

Our first question is from the line of John Kreger with William Blair.

Please go ahead.

Hi, guys.

Thank you.

Steve, quick question on the guidance.

What sort of assumptions did you make about the MEDtech tax?

Are you assuming that has any impact on your P&L going forward?

The MEDtech tax.

It's baked in there, John.

It's a combination.

We'll probably have to absorb some of it in the near term.

We would expect to pass most of it on.

These are fairly inelastic markets.

Although we know there's going to be some loggerheads at certain points in those markets, it's going to be more difficult to pass that tax on.

We have projects underway currently to revise our pricing arrangements and our taxing collection processes.

So I think we'll be in good shape by the beginning of 2013, but it is a nuisance item.

But I don't think it's going to have a significant impact on our operations, John.

Okay.

Great.

That's helpful.

Thank you.

If you could just expand a bit more on the CEREC results, the strong momentum.

Can you give us a sense about how much that's being driven by the full chairside system versus in-lab versus maybe scanner only sales?

Sure, John.

The majority of sales are the full chairside units in the quarter.

So continued interest in CEREC by our customer base, but it's predominantly all full chairside units.

Great.

Thanks.

And then lastly, more broadly, if you think about other key technologies in Dental, what are some of the other classes where you're seeing particular momentum at this point?

We continue to see momentum in the cone beam space.

We continue to see momentum in our software offerings, both at EagleSoft and Dolphin, as well as momentum over the year, obviously, in our Schick digital offering.

So as the customer base moves from an analog world to a digital world, which obviously makes them more efficient and we think improves clinical outcomes, our commitment to best-in-class products but also best-in-class service we feel creates definite competitive advantage for Patterson.

Great.

Thanks very much.

Thanks, John.

Our next question is from the line of Lisa Gill with JPMorgan.

Please go ahead.

Thanks and good morning.

It's actually Mike Minchak in for Lisa.

I was just wondering if you could give some incremental insight into the trends you're seeing on the dental equipment side.

How does the order book look, and are you assuming incremental growth in that segment in the guidance for fiscal '13?

Yes.

We will see incremental growth in the coming fiscal year, and we see the pipeline beginning to solidify.

I'll always put the cautionary note in there that equipment, even in strong economies, can be volatile at times.

But we feel very good, sort of to dovetail out of what I just answered on John's question about our overall equipment offering in terms of our partnerships with companies like A-dec and others, that we think this will be a good year for equipment.

Great.

And then, just a follow-up.

The balance sheet really remains really strong here.

Can you talk about the acquisition environment, which of the three businesses are you sort of seeing more opportunities in, and how do valuations look on a relative basis?

And then, is there any willingness to move outside of those three segments where you currently compete?

I would say we see opportunity in all three businesses and are very focused on those three at this time.

In terms of valuations, we always feel that we are a strong strategic fit for many companies, and we'll pay accordingly for good businesses.

Great.

Thanks for the comments.

Our next question is from the line of Larry Marsh with Barclays.

Please go ahead.

Hey, guys, good morning.

This is Elliot Feldman filling in for Larry.

Just a quick question on the Vet segment.

Obviously, another quarter of pretty strong results there.

Scott, just a broad sense of kind of what you're seeing there.

Obviously, we're seeing pretty strong numbers from all three distributors.

Just wanting a sense of overall dynamics there, a lot of share being taking taken from the smaller distributors and I know there's pricing dynamics there as well.

But just trying to get some broad factors there, as we see some pretty good results continue there.

I think it's a market with some unique underlying strengths in terms of how people take care of their pets.

We also, much like our Dental group, with the initiatives we're running at Webster, feel we've got strong competitive advantage going forward.

Definitely a benefit, as I said in my remarks, from weather in terms of flea, tick, and heartworm, but we are absolutely pleased with the performance of Webster in the quarter and the year.

Okay.

Got it.

On CEREC, I know you touched on this a little bit, but were there any special promotions in Q4 that may be different from what we'll expect to see here in the rest of the calendar year?

Just trying to get any insights you can share on maybe some additional promotional activity we might be able to anticipate for the rest of the year.

Elliot, I don't think you see anything incremental to the type of things we've done in the third and fourth quarter.

I would say we were quite pleased because we had a very strong fourth quarter a year ago in CEREC.

So to put up those type of results in this quarter, I think, just speaks volumes about the interest from the practitioners in this technology.

Got it.

Thanks, guys.

Our next question is from the line of Bob Willoughby with Bank of America Merrill Lynch.

Please go ahead.

Scott, maybe still hitting on that, I guess it looks like a very good quarter for you.

My immediate concern would be that you did pull something forward from the first quarter on an equipment standpoint.

Is there any possibility you did get a little bit of a boost from some activity, promotional activity in that fourth quarter?

And are there any specific promotions going on now that we should know about in the first quarter?

Yes, Bob, I don't think we pulled anything from the first quarter.

What we did announce is we are running a trade-up program for CEREC.

And primarily the reason we've done this is about 25% of the CEREC user base still is using the older technology.

And there's been such a positive response to the 4.0 software from our new users, as well as people that have upgraded, that we just felt with Sirona, a decision with them, that we needed to go back one last time to give customers the opportunity to get into the latest technology.

But we anticipate a strong first quarter.

Actually, I'm sorry.

That promotion started this quarter?

The trade-up promotion started in the first quarter.

Okay.

Fantastic.

And Steve, just on the guidance, you referenced share buyback, but is there number you would have us throw in our models for what you might be able to accomplish this year under the authorization?

I don't like to forecast that, Bob.

That's the difficulty with the situation.

We've got 11 million shares left.

We've got cash, obviously, to deploy whenever we want to.

But I sort of guide you to think about it, if it's a rational market and we don't see too much volatility, probably a more measured repurchase in 2013.

If the market gives us the opportunity, we'll obviously put the cash to work at a faster pace.

Okay.

So in terms of the $400 million number this past year for total return to the shareholder, we're probably going to come in a bit below that then.

Yes.

I think the -- without trying to forecast anything, we've got more opportunities for other investments in the business going into 2013 as we see it than using the cash for share repurchases.

If none of those come to fruition, then we'll turn around and put the cash to work in different ways.

Got you.

Okay.

And a CapEx number for the year, Steve?

About $25 million to $30 million is our best estimate at this point, Bob.

Perfect.

Thank you.

(Operator Instructions).

Our next question is from the line of Erin Wilson with Bank of America Merrill Lynch.

Please go ahead.

Hi.

Thanks for taking my question.

With respect to I guess the Webster business, can you quantify the impact if you ultimately switch to a generalist, non-exclusive relationship with [Idex]?

Yes, Erin, we wouldn't comment at this time because we're obviously in the midst of discussing things with Idex.

We have a very strong relationship with them.

We have great respect for their technology, and together we're evaluating our options, but would probably not comment on anything else at this time.

Okay.

And then, I guess, there were some recent launches of prescription heartworm medication at Walmart and through other channels.

Do you anticipate this to have any sort of impact on your business?

We do not see an impact in the short term.

Okay.

Great.

Thank you.

Thank you.

Our next question is from the line of Jonathan Block with SunTrust.

Please go ahead.

Thanks, guys.

Good morning.

Good morning.

Scott, maybe just some more color on dental equipment, and specifically basic.

I think if I peel back the onion a bit, the past four quarters, your basic went from sort of flat year-over-year to low-single, low-single and now a little bit more of a step-up to mid-single-digit.

Can you talk about visibility there, maybe backlog?

And then, is this something where you're finally seeing some new projects come online, or is this just a situation where some of those deferrals are finally being pulled forward?

Thanks.

Yes, Jonathan, we're definitely seeing some deferrals.

In terms of the smaller deals, I would say we have not to date seen the larger projects come back.

But anecdotally, as we talk to our equipment specialists throughout the country and our largest partners, the projects planning is beginning to pick up.

So that's one of the reasons that gives us confidence going forward.

It's also something our sales reps spend a lot of time sitting down with their customers and planning for the future.

And even though we've been through three flattish years for the dental economy, the prospects over the next decade for dentistry are so fantastic that part of our job is to make sure we help our customers prepare for that.

Great.

And then maybe just some color on your comments around market growth for Dental.

If you can remind me what you think the market grew, I guess, for you guys over the past 12 months, if you would.

And then, in your assumptions, are you making the assumption that the Dental market picks up significantly or more of a flat line from where you've been the past couple quarters?

Yes.

I'd say looking back, consumable market was probably a 1% to 2% grower in the last 12 months, and the equipment market was probably in that 2% to 4% market.

So we feel like we took some share on the consumable side and probably took a definitely larger share on the equipment side.

So I think we see strengthening, but it still is gradual strengthening and not near historic norms in terms of growth rates.

Particularly given the fact that unemployment still sits above 8% and consumer confidence, while somewhat improving, is still a bit fragile.

Understood.

Then just a last one, from a detail.

When do you guys lap on the vet side?

What quarter does that come on in fiscal year '12?

Jonathan, we've already lapped that.

It lapped on January 1. I think it goes back to what Scott talked about.

The flea and tick season has gotten off to a roaring start, which I think is helping everybody.

There's a lot of volume in flea and tick and heartworm right now.

Okay.

And very last one, then I'll jump off.

From a capital allocation standpoint, I know you guys touched on it earlier, but without showing your cards too much, where do you see some of the biggest opportunities when you look across Dental, Vet, and rehab right now?

Thanks, guys.

I see them in all three businesses.

Thank you.

Our next question is from the line of Steven Valiquette with UBS.

Please go ahead.

Thanks, guys.

Apologize for the back ground noise here.

But just a couple questions on the Medical segment.

You mentioned in the press release the -- that you still think that the uncertainty with the healthcare system will kind of weigh on the equipment in fiscal '13.

I was hoping you could maybe give some sort of quantification around that, if possible.

And then also, you talk about your position to take advantage with acquisitions, etcetera.

Are there any acquisitions in that segment that are baked into the guidance, or that would still be additional to kind of what you're looking at for this year?

Thanks.

I'll talk about the market and then flip it over to Steve for the guidance.

We see the equipment market as not degrading but being flattish this coming year.

We feel confident that in a tough competitive environment, the advantages that Patterson Medical brings to bear in terms of size, vertical integration, technical service capabilities gives us the ability to hold our own and a full expectation that Patterson Medical would grow beyond market.

Steve, you want to touch on the guidance?

Yes, I would just -- we challenge all of our operating units to grow faster than their markets.

And obviously, some element of that could be provided by acquisitions, but there's no specific acquisition targets built into our guidance.

Never has been.

Okay.

Got it.

Thanks.

Our next question is from the line of Jason Bednar with Robert W. Baird and Company.

Please go ahead.

Good morning.

Thanks for taking the questions.

I just want to start on the Medical side.

Scott or Steve, I believe in the past you talked about margin improvements for this business stemming from improved product sourcing and from the DCC acquisition.

Just wondering if you could provide an update on where we're at in the process and to what extent we should expect this improved sourcing to provide a lift to Medical margins in fiscal '13.

That definitely is one of the key strategies of our Medical unit.

They have a goal to move operating margins into the upper teens over time, and I wouldn't want to quantify what is coming out of that initiative here in the short term.

But definitely, it's one of their key initiatives, which I would say they're executing very well on.

Steve, you want to comment on just their operating margin improvement here in the fourth quarter?

Yes.

I think most of their margin improvement you saw in the fourth quarter was a combination, some pricing, but most of it was due to expense management as they've right-sized some of these acquisitions we've made over the last 30 months.

They are working very hard, as is the rest of the organization, but Medical particularly with their international scope on their sourcing.

Dave spoke not quite a year ago, promoted one of his VPs or assigned one of his VPs to totally international sourcing, and they're in the throes of that in multiple ways.

So, it's very difficult to tell you when you're going to start to see it, but as Scott said, we expect those margins to start moving up.

You saw some of it, I think, in this fourth quarter as we've sourced product differently, smarter, and we expect some of that to carry over into the other divisions as well.

Okay.

That's very helpful.

So -- and I guess then maybe switching over to CEREC.

An impressive quarter of new system sales, no doubt.

I guess, and I know you touched on this a bit, but I guess the question, why do another trade-up program or why is one necessary, especially as previous trade-up programs seemed to have been maybe a distraction in selling new CERECs?

So maybe you could talk on the puts and takes there.

I talked about it before that really the reason has been the excitement and the acceptance of the 4.0 software.

And really with Sirona taking on a customer-first approach, we felt it was important to go back one more time.

The summer months traditionally are slower months on the new user front, and we obviously have a lot of momentum coming off the fiscal year.

We grew our new users for the year in the high teens, and we were slightly down in trade-ups, because we had a very robust trade-up program out of the gate.

So we feel we can balance the two over the summer and also absolutely maintain the momentum of CEREC going forward.

Okay.

Okay.

Helpful.

And then finally, last question from me, then I'll hop back in queue here.

Just wondering about the gain of the quarter, if you can comment on February, March, April, just how you saw dental trends really play out throughout each of those months.

Was it sustained?

Did you see any strengthening, weakening?

Any month stronger than another?

I would just say, at a high level, I think the entire industry benefited in January, February, March from a mild winter, particularly in the Northeast and Midwest.

So on a macro level going forward, we see continued strengthening of the equipment market.

We see the consumable market continuing to slowly strengthen.

One of the encouraging things is just seeing the growth of sort of the basic dentistry, crown and bridge, endodontics, things like that.

There's no doubt that the winter months had a bit of a tailwind because of a mild winter.

Okay.

Thanks, guys.

Our next question is from the line of Brandon Couillard with Jefferies.

Please go ahead.

Hi, good morning.

Good morning.

Steve, looks like you made pretty good progress on the working capital front here.

What should we expect for fiscal '13, I guess particularly on the inventory front?

And if you could give us some sense of where you see operating cash flow shaking out for the year, that would be helpful.

Brandon, could you repeat that about inventory management?

Scott hasn't paid me my bonus yet for this year.

Nor will I.

Nor will he.

I don't think you're going to see significant changes.

Granted, we continue to work on our -- all levels of our working capital, trying to make it as efficient as possible.

But I would also take you back and remind you that Patterson is full service value-add.

We carry probably more inventory than some people might want to justify, just because we want that capacity to deliver to the customer immediately.

So, I don't think you're going to see any significant changes in it.

Okay.

And then on the acquisitions, can you quantify what the Surgical Synergies deal contributed in the fourth quarter?

And then, it looks like the American vet supply run rate seems to be coming in a little bit lower than the $25 million I think you pointed to earlier in the year.

Can you give us a sense of how that business is performing on a core basis and then maybe the EPS impact from that deal in the fourth quarter?

I don't think I can quantify.

Well, first of all, Surgical Synergies had a very small impact.

We completed that transaction in April, so it had very little impact.

It was only about a $10 million deal.

We had sold to that company previously, so when you look at the net revenue contribution we'll get out of it, it will be less than that $10 million of historical revenues they reported.

But with regard to ABSC, we're very pleased with that acquisition.

It's worked out well.

As with most acquisitions, you do get some fallout and shifting and it becomes -- the further away from the acquisition date you get, the more difficult it is to track the exact revenue contribution.

But Brandon, we're very happy with that transaction.

Okay.

That's helpful.

And then, just to be clear, your formal guidance does not assume any incremental buyback and assumes the shares just to remain constant.

That's what's in the formal numbers?

That is correct.

Great.

Thank you.

At this time, there are no further questions in queue.

I'd like to turn the call back over for closing remarks.

Douglas, thank you.

Thanks, everyone, for taking time, and thank you for your interest in Patterson.

We look forward to meeting with you at the conclusion of our first quarter.

Have a great summer.

Thank you.

Ladies and gentlemen, that does conclude our conference for today.

We would like to thank you for your participation, and you may now disconnect.