R. Armstrong - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer Scott Anderson - Chief Executive Officer, President and Director

Jeffrey Johnson - Robert W. Baird & Co. Incorporated Lisa Gill - JP Morgan Chase & Co Steven Valiquette - UBS Investment Bank Albert Rice - Susquehanna Financial Group, LLLP Lawrence Marsh - Barclays Capital Derek Leckow - Barrington Research Associates, Inc. Robert Jones - Goldman Sachs Group Inc. Karl Poehls John Kreger - William Blair & Company L.L.C.

Ladies and gentlemen, thank you for standing by. Welcome to the Patterson Companies Third Quarter Fiscal 2011 Earnings Conference Call. [Operator Instructions] And 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 participating on our third quarter earnings conference call. Joining me today are Steve Armstrong, our Executive Vice President and Chief Financial Officer. At the conclusion of our formal remarks, Steve and I will be pleased to take your questions. Since Regulation FD prohibits us from providing investors with any earnings guidance unless we release that information simultaneously, we’ve provided financial guidance for fiscal 2011 in our press release earlier this morning. 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 Form 10-K and our other SEC filings, and we urge you to review this material. Turning to our third quarter results. Patterson's performance was consistent with the news release that we issued on February 18, regarding our third quarter outlook. Consolidated sales of $824.7 million were up slightly from $820.1 million in last year's third quarter. Net income of $55.4 million or $0.40 (sic) [$0.47] per diluted share was essentially unchanged from $56 million or $0.47 per diluted share in the year-earlier period. We are disappointed in our third quarter performance, make no mistake about it. As we indicated in this morning's release, the cause of the third quarter sales and earnings shortfall was largely isolated to our Dental Technology Equipment business, where sales of our CEREC and various digital offerings were much softer than planned. In contrast, dental consumables sales grew 3% during this period, an indication that our underlining dental market is gradually strengthening. Earlier in the year, we made the decision to reduce promotional activities for our CEREC and digital products during the latter half of fiscal 2011. This decision was based upon our assumption that our market was regaining significant strength to sell our technology offerings without additional incentives. This assumption proved premature. As a result, our technology sales fell short of planned levels causing Patterson Dental's third quarter sales to decline 3% from the year-earlier level, and this in turn was primarily responsible for Patterson's flat consolidated sales and earnings for this period. In response, we began to modify certain marketing programs during the quarter and revised our technology marketing programs, which we believe will start rebuilding sales momentum for this equipment category in the fourth quarter. Patterson Dental sales organization is fully committed to this goal. Turning now to Patterson Medical. Sales of our rehabilitation supply and equipment unit increased 22% to $117.9 million in the third quarter. Although the rehabilitation business acquired in June of this year from DCC Healthcare accounted for the majority of this unit's third quarter sales growth, we were encouraged by the internal growth of 6% from Patterson Medical's reported for this period. Internally generated sales of equipment software were particularly strong growing 14% from the year-earlier level. Patterson Medical's overall results for this period were affected somewhat by the weakness in its U.K. sales due to budgetary constraints being imposed by the British government on its National Health Service. The impact of this situation has lessened and we believe this will continue to be the case. But despite the U.K. austerity moves, Patterson Medical sales continue to grow nicely. Expenses related to the acquired DCC units also had an impact on Patterson Medical's third quarter performance, but these expenses are expected to diminish significantly in the fourth quarter as the integration of these businesses proceed on schedule. In all, we are pleased with Patterson Medical's performance thus far in fiscal 2011, and we believe this unit is well-positioned, domestically and internationally, as an ongoing growth driver. Turning to Webster Veterinary. Sales of our veterinary unit declined 1% to $149.7 million in the third quarter. The year-over-year comparability of Webster’s sales continued to be affected by previously reported changes in the distribution arrangements for certain pharmaceuticals, which reduced Webster's third quarter sales growth by an estimated three percentage points. This changeover is expected to have no further material impact on Webster's sales going forward. Even though the third quarter marks the seasonally lowest sales period this year for Webster, we were encouraged by the unit’s equipment and software sales during this period, which increased a strong 11%. In addition, early demand for a number of new combination products in the flea/tick and heartworm category has been strong. Given these factors, we believe Webster’s performance should strengthen in this year’s fourth quarter. Regarding our financial outlook contained in this morning's release, we have revised our full year guidance to $1.86 to $1.88 per diluted share from the previously issued guidance of $1.89 to $1.99. This revision reflects both our third quarter results and the outlook for the fourth quarter. Despite the difficulties we encountered in the third quarter, we remain optimistic about Patterson's future. Our served markets are strengthening and have attractive long-term fundamentals. Looking ahead to fiscal 2012, we believe the consumable markets for our three businesses will grow by an estimated 1% to 3%. We anticipate that the equipment portions of the markets could grow in the mid- to upper-single digits. Within this context, each of our businesses is well-positioned to capitalize upon their market opportunities. Moreover, we are generating strong operating cash flows, providing us with ample resources for supporting our various growth initiatives. Thank you. Now Steve Armstrong will review some financial highlights from our third quarter results. Steve? R. Armstrong: Thank you, Scott. I'll begin with a few housekeeping notes on our sales performance. On a consolidated basis, acquisitions accounted for two percentage points of our revenue growth for the quarter, while currency exchange had a 20 basis point positive impact. Our consolidated gross margins in the third quarter improved by 40 basis points from the prior year's quarter as a result of product mix in the Dental segment and a higher relative contribution to our consolidated results from the Medical segment. With a higher percentage of sales from consumables during the quarter, the Dental segment improved its product margin by 70 basis points. Because the Medical segment has the highest gross margin of our three segments, Medical's 22% sales growth in the fourth quarter had a positive impact on our consolidated gross margin. Our ratio of consolidated operating expenses in relation to sales increased 60 basis points in the quarter. The reduced level of dental sales had an adverse impact on this segment’s expense leverage for the quarter despite actual expenses being lower than the prior period. The increased expenses of integrating the recent acquisitions from DCC Healthcare within the Medical segment caused its expense ratio to also increase in the quarter. The expense ratios of these acquisitions are higher than our historical medical operations and in addition, included in the current period were approximately $1.1 million of redundancy costs, which will not recur. We expect that the expense ratios of these acquisitions will approach our norms as we get further into the integration and we'll have much less impact on medical ratio beginning in the fourth quarter. By segment, our third quarter operating margins were 13.2% for Dental, 10.9% for Medical and 4.1% for Veterinary. In addition to the integration impact of the DCC acquisitions on the Medical segment operating margin, the impact of the British government's austerity measures on Medical's U.K. sales contributed about 20 basis points to the decline in that segment's operating margins for the quarter. During the quarter, the Veterinary segment took a non-recurring, non-cash charge of $1.4 million, arising from certain equity transactions at [ph] prior to our investment in this veterinary pharmaceuticals services company. Since we account for this investment under the equity method, this charge is reported in other income and expense section of the income statement. For the current quarter, we had favorable discrete tax items that lowered our tax rate for the quarter. In addition, we have been able to realize certain net operating loss carry forwards on our U.K. tax returns that were acquired and the purchase of the Mobilis entities in 2009. Overall, our tax rate for fiscal 2011 is estimated to be approximately 36.7%, as the dividend that we paid provide a beneficial tax treatment from the shares held by the company's employee stock ownership plan. Our DSOs stands at 44 days compared to 45 in the prior year, while inventory turns are 6.9 compared to 7.2 a year ago. The DSO excludes the impact of the finance contract that had been generated during our various financial promotions over the past year or so. We generated cash from operations of approximately $84 million in the third quarter compared to $98 million in the year-earlier period. The cash flow from operations in the third quarter of last year did benefit from a larger sale of promotional finance contracts than did the current quarter. As a reminder and as reported in our public filings, early in the third quarter, we completed a modification of our funding agreement that we used to provide financing for our customers. The previous agreement did not meet certain accounting provisions that would have allowed us to report the customer contract as sold and remove from our balance sheet when they were transferred to the funding sources. As a result, at the end of the second quarter, we reported approximately $122 million of transferred contract in the current asset and current liability on our balance sheet, and the statement of cash flow reported a transfer as a reduction of operating cash flow and an increase in financing cash flow. With the modifications in place, the $122 million of contracts have been removed from the balance sheet and the proceeds from the sale are included in operating cash flow. The $84 million of cash flow from operations in the current quarter that I just provided excludes the impact of these accounting machinations. We are estimating that capital expenditures will total approximately $35 million for the full fiscal year. The major projects for the year include a new mid-Western distribution center build out and the replacement facility for the Patterson Technology Center, which should be occupied in early fall. With that, I'll turn it back to the conference operator, who will pool you for your questions. Douglas?

[Operator Instructions] Our first question is from the line of Larry Marsh with Barclays Capital. Lawrence Marsh - Barclays Capital: So let me get you to drill down, Scott, on the promotion conversation, not a surprise, I was going to ask about that. Earlier in your tenure, you had sent a pretty strong message, I thought that said you wanted to try to communicate to the sales force, the customer, that you wanted to break the habit of deals, especially as the market strengthened. And you went into the summer with the trade-up program, which ultimately became –- was reasonably successful. And I know this fall, you dialed back promotions. So the message you're sending is, you're a little too optimistic in that. So I guess there's two questions. One is, based on the feedback we're getting from some of the shows, there is still promotional activity in the marketplace but maybe help us understand why that was so much less than in the past? And then I guess, the second question along with that is now that you're going back to more heavily promoting the product, how are you going to go back to the sales force [ph] future to dial back promotions?

Yes, Larry, good question and I think a good chronology of looking back at how we promoted this technology. And almost going back two years, I think we made the right strategic decision with the strength we had on our technology products, CEREC, [ph] a shift in digital products through the last two years. But we also wanted to wean ourselves off of some of the more aggressive promotions. And we've always also been very open, that we're always going to promote these products and there's always going to be some type of incentives. So we really plan the year to back off a little bit in the second half and felt good that we were making the right decision based on the strength of our technology performance in the second quarter and the strengthening of our consumable sales that we were starting to see, and just the anecdotal feedback we were getting from customers that attitudes were changing. We went into the quarter, we had a solid November. But really, our third quarter is all about December and year-end decisions by the dentists and really had to go with the function of three things. One, part of what we've articulated about reduced incentives, incremental incentives. Two, some confusion uncertainty by customers over personal tax issues with which tax cuts not getting resolved until mid-December. And then a cautious attitude by our customers, particularly around the higher ticket price items. And I think our industry feedback from the quarter bears out that while the calendar fourth quarter was okay for the dental industry, it was not a gang buster. So going forward to the second part of your question, we still feel there needs to be some stimulus in the market so we are looking at new ways to promote the products, to give them a little boost. But we feel and where we have confidence is the markets are strengthening and over the next 12 to 18 months, we feel we're going to get back to a more normal type of promotional schedule. But I also look at the promotions that we're able to do as part of the strength of Patterson, and in essence, I think we've grabbed significant share over the last two years because of our promotional activity. Lawrence Marsh - Barclays Capital: Right. So is the message then, Scott, that the promotions you're going to be providing are going to be a little less focused on the long extended no cash pay, no interest period? And are we going to see more of the creative promotions such as the free blocks and the training credits?

Exactly. And we did the no interest, no payment and held our balance sheet up for about a year, and we don't want to go back to those types of programs. So you're exactly correct on the type of promotions you described. Lawrence Marsh - Barclays Capital: And then second question along with that, maybe for Steve. I know you're not talking too much about fiscal '12, but sort of the idea that you're going to get mid- to high-single digit equipment growth implies a rebound in the marketplace. And is the implicit assumption associated with that, that you'll be consistent in promotional support next year to this year? Or again, do you feel like by the time next year goes around, we'll have enough strength in the market to try to dial back again?

Well, yes, and I think it's important, Larry, to look at the whole portfolio of products we sell. We do see us strengthening particularly in the chair business. Chair [ph] like cabinetry. So we think that's going to have some nice support in the next 12 months and then we'll evaluate the promotional activity around our technology products throughout the year and plan accordingly, and we're right in the midst of our planning process for the next fiscal year. But we'll leave all options open to drive sales. Lawrence Marsh - Barclays Capital: And then a follow-up, then on -- I just want to make sure I'm clear on what you're saying on Medical. Obviously at the Analyst Day, you sent a message you expect to see nice margin expansion in the business as you get leverage and building the platform that's been in place, and we've seen that. But obviously, a little bit of a caveat here with the funding issues with the U.K. I know it's not a big part of that business but as you think about broadening the footprint over the next year or so, is it more of that going to be international? And how do we think about funding issues with different markets?

I'll let Steve start in and then I'll follow up. R. Armstrong: I think from the metric perspective, Larry, the numbers should start to improve now that we're deeper in the DCC acquisition. Each acquisition we do in medical probably has a lesser impact or a shorter impact on those metrics, and we're starting to see that with DCC late in the quarter here and you should see it beginning in the fourth quarter. As far as where the footprint is going to go, I'm going to turn it back to Scott and let him talk about that aspect.

Yes, when you look at North America, we feel real good about the investments we've made over the last two, three years, and feel we're growing five to six points faster than the market. And it's really going to be an internally generated strategy in North America and also as always, opportunistic on the acquisition side. The international opportunities come fast and furious with Dave and his group. So it would really be how we manage those beliefs. We're very encouraged by the footprint we have, both in our direct business in the U.K. and France and our dealer business, and also now having bricks and mortar in Australia. So I think we've got a lot of different growth and avenues and profitable growth avenues for that business going forward. Lawrence Marsh - Barclays Capital: So it sounds like you're as bullish on margin opportunities there in the next two years than you were six months ago, notwithstanding some smaller funding issues?

Absolutely.

And our next question comes from the line of Robert Jones with Goldman Sachs. Robert Jones - Goldman Sachs Group Inc.: Just to go back to the promotional conversation. Just on the reaction to the promotional pullback, can you maybe share your thoughts on this about the perceived value proposition of these technologies? I guess in another way, what gives you confidence that this really is just more of an impact from the market backdrop?

I think at the end of the day, the decision point is made not on promotions, Robert, but made on the value of the product. And you look at how we've grown CEREC from 500 users to almost 12,000 today. That at the end of the day is the real reason why a dentist buys the technology and buys technology. But sometimes the promotions heat up the deal and gets them to a quicker decision point, and that's really what we found as effective. But at the end of the day, you're correct, the technology purchase is made because of the underlying return on investment of that -- putting that technology in the office. Robert Jones - Goldman Sachs Group Inc.: Makes sense. And then just to switch over to consumables, I believe, correct me if I'm wrong here, you're calling for about 1% to 2% growth there on dental consumables this year. It seems like based on your results and some of your peers, a little bit more strength near term, can you maybe just walk us though the thought process of what you're seeing out there in the market today that leads you to this 1% to 2% outlook?

Sure, and we said 1% to 3% for the market. We feel we're growing a little bit faster than market right now, and probably taking some share from some of our smaller competitors. Some of the good news we're seeing in the sundries business is growth in key restorative categories. So some of this pent-up demand we've talked about over the last 18 months, we feel that the dentist had an increase yield out of their chair in the calendar fourth quarter. And then the beauty of dentistry is it doesn't get better if you put it off. So that's a key area and we did see, we feel through the products we look at increased foot traffic in the dental office in the third quarter. So we think that will be a positive going forward. And as we've said, sort of two key indicators are consumer confidence and unemployment, and as those two improve, that will help strengthen the market.

Your next question comes from the line of A.J. Rice with Susquehanna Financial Group. Albert Rice - Susquehanna Financial Group, LLLP: First of all, just on the DC (sic) [DCC] Healthcare comment a relatively specific question. Steve, you sounded like you were saying that the upside to margin it wasn't realized in the quarter that you expect, but over the next two quarters or so you should see it. Can you sort of give us some framework on how much of an impact that will have on the overall margin in medical and holding everything else constant just getting to that run rate, is it enough to move the needle for the whole division?

Yes. If you look at -- we did the hypothetical, when you took out DCC from the activities in the third quarter, for instance, you'd have seen the margins in the medical business almost flat year-over-year. So it had a fairly significant drain on the margin in the current quarter, and a lot of that was due to the redundancy as well as the other incremental expenses when we were integrating those businesses. Albert Rice - Susquehanna Financial Group, LLLP: And if that business, obviously, you have called out some of the dynamics that have impacted your reported results products going direct and so forth, especially on the drug side. But can you maybe step back and just give us a little bit of a flavor for what sort of the underlying tone of the business is right now, your perspective on growth, maybe looking out over the next year and whether we'll see that with the economy rebound as you seem to be seen in the consumable side on dental?

Yes, I think we see the vet market right now very similar to the dental market, that the market has stabilized and you'll see modest growth as the economy improves in this next year. And we feel we're well-positioned to grow faster than market with the programs and initiatives Webster has underway. Albert Rice - Susquehanna Financial Group, LLLP: Do you see any kind of market share shift with the consolidation that occurred over the last year or is it pretty stable, your sense, maybe comment about that kind of opportunity as well?

I think on the companion animal side, we've seen very little share shift in the last year as the market has consolidated into three large players. There was a bankruptcy in terms of PDP that we really didn't benefit at all from, so that share probably went into another competitor. But I think we feel very comfortable in our competitive position in the vet space.

[Operator Instructions] And our next question comes from the line of Steven Valiquette with UBS. Steven Valiquette - UBS Investment Bank: A couple of questions here. I guess first on your equipment outlook for fiscal '12, just want to clarify, it wasn't quite crystal clear to me whether that was the Patterson growth or just the market growth outlook, just wanted to clarify that?

Yes, Steve, that would be market growth. Steven Valiquette - UBS Investment Bank: And then I guess, I got a question tied into some of those outlooks. I mean, you guys obviously have one less week in your fiscal year next year so when the fiscal guidance comes out, obviously that will be incorporated in there. So I guess I that’s kind of clarified by what you've just said on the prior question, so I guess that covers that. The other question I had just in general is, when you guys are looking at acquisitions outside the U.S., which obviously in some of your non-dental segments, you're active there I mean, just in terms of just getting a sense of where you stand right now and your appetite for expanding dental distribution outside of North America, are you actively looking on acquisitions or something you kind of kick around but it's not a serious part of the business plan, just trying to get a sense for that for just the dental piece?

Yes, Steve. Our focus has really been predominantly North America. We do have relationships with distributors around the world, and I prefer not to tip our hand as to our acquisition strategy. But we look at similar metrics in terms of pricing and opportunity for expansion. There are some unique opportunities that may come down the road from the fact that we have infrastructure through our medical group overseas at this time, but it's something we always evaluate but I would not say is a top priority at this time. Steven Valiquette - UBS Investment Bank: Actually, wanted to quick follow up, just on the dental equipment, so given what just happened in the current fiscal quarter, I mean do you view it as Patterson maybe has some incremental pent-up demand, you're over and above the market for the Patterson's fiscal '12 equipment view?

Yes. I think the way I look at it, particularly that this shortfall was isolated to the areas where we feel we have the biggest competitive advantage and have best-in-class products and partners. That this was not, and I think that the market data from the quarter proves it out. This was not us losing technology sales to anybody. So I would agree that this creates more opportunity for us and that is the message to our sales force, that the opportunity in the coming calendar year is tremendous.

Our next question comes from the line of David (sic) [Derek] Leckow with Barrington Research. Derek Leckow - Barrington Research Associates, Inc.: Hi, it's Derek Leckow, good morning. The pricing and volume trends within the high-tech equipment category is something I don't have a good handle on. I wonder if you could maybe describe what's been happening with pricing out there. Because obviously, you pulled back on promotions but if I look at certain products, it seems to me that prices have risen anywhere in the neighborhood of 5% to 10%. So I'm wondering if that's also perhaps a factor that's pulling back some demand here?

Yes, I wouldn't think so, Derek, and we really look at promotions as functional discounts because it creates the two price for the products for the dentist or the veterinarian or the rehab specialist. I look it as a positive, actually, that the manufacturing community sees that the market is going to strengthen and price increases are an actual part of business and helps our manufacturing partners develop money to research and development, so I would not pinpoint that as a reason for the shortfall in the quarter. Derek Leckow - Barrington Research Associates, Inc.: So pricing has been strengthening and you're seeing that as well, across the board in the technology category?

I think we're seeing a more normalized pricing environment across all our products. Derek Leckow - Barrington Research Associates, Inc.: Then secondarily, looking at the guidance here, we got about a $0.03 to $0.04 shortfall, it looks like in each of these two quarter, in Q3 and Q4. In the Q4 piece, is that related to startup activities or is that precisely driven by increased spending on these promotions or is it something else? I'm trying to gather what the exact impact is on the fourth quarter. R. Armstrong: It's probably a little both, Derek. But it's mostly going to be the cost of funding those programs, the estimated cost of the programs for the fourth quarter. Derek Leckow - Barrington Research Associates, Inc.: And are these startup related? I mean, are they going to pay off in several quarters after that or are they going to be isolated, do you think in the form of price discounting, et cetera? R. Armstrong: I think that will depend on the momentum that the division generates during the fourth quarter. As Scott said, they'll re-evaluate the effectiveness of each of those promotions, and they'll keep measuring it and trying to find the answer that keeps driving the sales momentum. Derek Leckow - Barrington Research Associates, Inc.: It's good to hear that we're not going to see the balance sheet get tied up either with those types of promotions, that was a positive thing, I think. The other question was on the basic equipments, you gave the number of growth, I believe -- I kind of dropped off the call for a second there, but what was the basic growth number again?

Our chair unit like cabinet business was up slightly over prior years, so the shortfall that gets you to the 10% was all around the technology products. Derek Leckow - Barrington Research Associates, Inc.: The basic backlog, does that give you any better visibility into what's happening with capital spending plans on the part of U.S. dentists?

Yes, I would say we're more encouraged today than we were a year ago. But there's still always some volatility and uncertainties in backlogs. Derek Leckow - Barrington Research Associates, Inc.: But the planning is still there, the activity is still there. And you're seeing relatively flat comparisons with last year, so it seems to me that the business certainly is getting stronger there in your backlog, it was bigger than it was last quarter, what can you tell us about that?

I'll just say, Derek, similar comments that I made in the last quarter was we feel and this is one of the things that's very important for our sales force to be in front of their customers is this is an incredible time for a dentist to invest in their practice and a veterinarian with the tax benefits that are out there, with the customer base that is really pulled back over the last 24 months. As we've said before, cost of capital is low. Real estate negotiations are in the favor of our customers at this point. So it's our job to really inspire our customers going forward in this next year.

Our next question comes in line of Lisa Gill with JPMorgan. Lisa Gill - JP Morgan Chase & Co: Just a couple of quick follow-up questions. First on the consumable side, can you maybe talk about the competitive environment right now? I know you talked about the trend in the market being kind of 1% to 3% but obviously, the quarter was better. Have things dropped off in the most recent quarter? Are you seeing -- are you able to take market share from some of the smaller players, just want to kind of understand the competitive landscape right now?

Yes, I think Lisa, the other thing I didn't mention about our consumables strength is we feel our sales force hiring and training initiatives that we put in place a couple of years ago are starting to bear fruit. So we feel like we're in a very strong position to grab share and grow faster than market, and I think we have competitive advantage to do so. So all indicators would lead to that we should see incremental improvement quarter-to-quarter going forward in consumables albeit gradual. Lisa Gill - JP Morgan Chase & Co: And are you seeing that the dentist volumes are starting to increase as well? Unemployment trends has gotten a little bit better and employment trends aren't great, but they do look a little bit better than we've seen over the last few months.

Yes, I would say that -- our belief is the strength in the last quarter really was not tied to unemployment but tied to the dentist doing more dentistry in key restorative categories. So crown and bridge and really getting a higher yield from the hygiene chair over into their restorative chair. So I believe the growth was more dentistry being done, not so much more patients yet coming through the door. Lisa Gill - JP Morgan Chase & Co: And then just another follow-up question for Steve. On factors impacting your margin performance, can you just talk about the gross profit in the quarter, up to slightly year-over-year, is that a factor of mix or is there something else that we should be thinking about when we think about gross profit going forward? R. Armstrong: No, I think it’s a combination of things but the two things I called out earlier were the two primary drivers, and that was the mix in the Dental business as the consumables revenues strengthen relative to the other revenue categories you're going to see margins get a bit better. And then you've also got the – I’ll call it the mathematical impact of stronger medical performance, which has the highest margin of the three divisions and so their growth drives more consolidated results then the next quarter.

Our next question comes from the line of John Kreger with William Blair. John Kreger - William Blair & Company L.L.C.: A follow-up question on the dental equipment trends that you've seen recently. Do you think '12 will be a typical calendar year and that any recovery that you see would probably come late in the calendar year, or do you think this might be different given that we didn't see the real boost in year-end buying in late 2010?

Yes, I would see, John, incremental strengths throughout the year. I think you'll still see the same percentage of equipment going into certain parts of the calendar. But overall, I believe we will see strength in the market throughout the year. John Kreger - William Blair & Company L.L.C.: Great. And Scott, just so we understand, if you look across your portfolio of equipment, what's really the portion that you've given extra promotional support over the last couple of years? Is it just the high-tech component?

Most of it’s been incremental, has been the high-tech, John. In the more traditional parts of equipment, we've learned from past promotions that if you put too much promotional fire, you really pull sales forward and we look at technology different in the fact that we're changing offices from film to digital. We're taking some into a new modality like CEREC and CAD/CAM. So really adding new users to a market that's not saturated. So when we look at incremental promotions, we try to put them into markets that aren't saturated yet. John Kreger - William Blair & Company L.L.C.: And then finally, realizing that you haven't given official fiscal '12 guidance yet. But as you look across your businesses, it seems like you're starting to see some improved market growth. Are you feeling like we're getting back to a point where you can have the more typical margin leverage in your business or should we be thinking about '12 more like '11 with more modest margin improvement? R. Armstrong: I think it's a little bit early to answer that question yet. It's a little of both probably, but we'll give you the better look in another 90 days, John.

[Operator Instructions] Our next question is from the line of Jeff Johnson with Robert W. Baird. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Steve, I guess as I'm looking at that fourth quarter guidance and going back to Derek's question, if the promotional activity picks up some of the equipment performance, we see some recovery there but EPS guidance is still down year-over-year in the fourth quarter. Is it fair then to think of maybe a 20 to 30 basis points company-wide operating margin compression in the fourth quarter, is that how we get to your guidance? R. Armstrong: Hang on a second. Let me -- you got me into basis points here, I better look... Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Or even just bigger picture, you think operating margin on a year-over-year basis goes down in the fourth quarter given the heavier promotional activity? R. Armstrong: Yes, I mean you've got a combination of things going on, Jeff. You've got the realization that if the promotions aren’t effective, maybe the revenues don't go up. It's going to cost you. You may have some margin erosion at the gross profit or the product level and there's going to be some cost in getting these products out. So yes, if you look year-over-year, you're probably going to see and the expectation would be to get what we want in the fourth quarter or what we're expecting, it's probably going to cause us to see some margin erosion. If we're extremely successful and Scott gets out the bull whip and the [ph] will last accordingly, it could result in a very good fourth quarter. But at this point, based on the tea leaves we have to say -- we have to be a bit more cautious. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: That makes sense, Steve. I guess that's the main question I had there. But on dental, one other clarifying question, I think you had mentioned earlier that there was a 50 basis point tailwind from currency on the dental consumables number and that was the Canada impact there. Was there any acquisition component in dental this quarter at all? R. Armstrong: No. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: So the 3% number was a 2.5% constant currency number and that's kind of your organic consumables number as well? R. Armstrong: Correct.

Yes. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: And then as I step back and just look at the CEREC business, last question here for me. You had two and a half months of promotional activities really in place in November, December and then I think you started a month again in late January. It seems like you're indicating maybe that business was down year-over-year. Was that a new user down year-over-year? I think, Steve, you had mentioned at one point that sequentially CEREC new users were up in the quarter but what do they do on a year-over-year basis?

On a year-over-year, they were down in the quarter. They were up sequentially from the second quarter but down year-over-year, Jeff. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Scott, I guess as I think about that CEREC business, you've obviously got the 12,000 users. Now, if you take out major upgrade programs, AC, MCSL from years ago, things like that. What do you need new users to grow on an annual basis? You've got some recurring revenue that comes on the consumable side or on the block side, plus the programs each year, the upkeep programs and all that on CEREC. Do you need new users to grow each year to keep your CEREC revenues growing or do you have enough recurring revenues in that business that you don't need that new user base growing each year?

Well, I think we really look at growing those new users each year. And I think as a reminder, the CAD/CAM, CEREC [ph] I think, is still in the maybe third inning of the baseball game, and we have great belief and great excitement over what can happen in this next decade as Sirona continues to evolve their product as the market leader. And so many factors point towards this next generation of dentists practicing dentistry in a different way. So our focus in terms of growing the CEREC business, number one priority is to grow new users. Upgrades are great and we love them but strategically, that new user is very important to us.

Our next question comes from the line of Karl Poehls with Fiduciary Management.

Scott, in the past we've talked about the concept of under promising and over delivering and it had been the opposite I think in the '08, '09 fiscal years, and then we saw a good result last fiscal year but now again, we have a tough equipment quarter. And I think if we look back to a year ago, there was a fair amount of optimism projected for dental equipment in fiscal '11, and could you maybe just talk about if there's any lessons learned here in dealing with this issue? It may seem like a minor issue but I think it's a psychology thing and if you get into the habit of under promising and over delivering, I think that would actually help the stock perform better, so any comments there?

Yes, thanks, Karl. Obviously as I said before, we are not pleased with the third quarter performance around technology but at the same time, and this is very important to manage both investor expectations and the expectations of our customers and our employees as we look at the technology side of our dental businesses as one of our greatest opportunities. So this time, we didn't live up to our expectations but I will tell you that our shareholders will be served better long term by high expectations in that part of our business.

And there are no further questions in the queue at this time. I'd like to turn the call back over to management for closing remarks.

Thanks, Douglas. We appreciate your questions and your time today on the call and look forward to updating you on the company's progress at the end of our fourth quarter. Thank you.

Ladies and gentlemen, that does conclude our conference for today. If you'd like to listen to a replay of today's conference, please dial (303) 590-3030 and enter the access code 4411978. We'd like to thank you for your participation. And you may now disconnect.