Patterson Companies, Inc.

Patterson Companies, Inc.

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Medical - Distribution

Patterson Companies, Inc. (PDCO) Q3 2008 Earnings Call Transcript

Published at 2008-02-25 10:00:00
Executives
James W. Wiltz – President, Chief Executive Officer & Director R. Stephen Armstrong – Chief Financial Officer, Executive Vice President & Treasurer
Analysts
Natalie Freidman –William Blair Steven Postal – Lehman Brothers Jeff Johnson - Robert W. Baird
Operator
Good morning ladies and gentlemen and thank you for standing by. Welcome to the Patterson Companies third quarter 2008 earnings call. At this time all participants’ lines are muted. Following the formal presentation instructions will be given for the question and answer session. (Operators Instructions) As a reminder this conference is being recorded today Thursday February 21, 2008. I would now like to turn the conference over to James Wiltz President and CEO. Please go ahead sir. James W. Wiltz: Good morning and thanks for participating in our third 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 with providing investors with any earnings guidance unless we release that information simultaneously, we have included financial guidance for this years fourth quarter 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 on our annual report on form 10K and other SEC filings and we urge you to review this material. Turning now to our third quarter results consolidated sales rose 10% to $777 million. This year’s third quarter had one less selling day than the year earlier period. Including this selling day in our third results would have increased consolidated sales growth by one to two percentage points. Third quarter net income increased to $60.4 million or $0.45 per diluted share from $58.6 million or $0.43 per diluted share then last year’s third quarter. Both sales and earnings growth for this period were consistent with our expectations. As we stated in this mornings release our third quarter sales growth was driven in large part by the solid performance of our dental unit. Sales of consumable dental supplies increased 4% or by 5 to 6% after giving effect to the reduced number of selling days in the quarter. Consumable growth at this level reflects the healthy state of the North America dental market. In addition, third quarter sales of dental equipment were somewhat ahead of our expectations. Sales of basis equipment rose a strong 14%. Equally encourage sales of CEREC 3D dental restorative systems were up 10% on a year-over-year basis making the strongest sales growth of this product line in some time. Now that the market transition to CEREC new software and crown milling chamber is largely behind us sales momentum is growing for the CEREC system. The new software and milling unit have taken CEREC performance to a new level and we believe this fact is drawing considerable attention in the marketplace. We believe the sales progress generated in the third quarter for CEREC systems as well as for basic dental equipment should continue in this year’s fourth quarter. Turning now to Webster, sales of our veterinary supply unit increased 14% in the third quarter to $107.6 million. Considering our third quarter March Webster seasonally slowest period for such seasonal products as heartworm and flea and tick medications, sales growth at this level is very encouraging. Webster’s consumable supply business continued to perform well during this period growing 15% year-over-year. In addition, Webster is continuing to expand its equipment and intra vet practice management software business. Our previously announced strategic decision to provide more choices for our customers in several key product categories include vaccines, flea and tick and heartworm is working as planned. As a result of this initiative we now support our offerings from Novartis, Bayer, Ford, Dodge, Animal Health, Eli Lilly, [Sharing] or [back] and others. The impact of this action had a modest negative impact on Webster’s third quarter gross margin and operating margin metrics. But by providing more options to our customer Webster has strengthened its overall position in the vendor and marketplace. Addison Medical our rehabilitation supply and equipment unit posted third quarter sales growth of 8% to $84.8 million. This performance included contributions from the branch offices that have been opened over the past year as part of Patterson’s medical initiative to expand and strengthen its value added business model. During the third quarter branches were opened in the Pittsburg and Cincinnati markets through dealer acquisitions while an office in Atlanta was started internally. Patterson Medical is now operating 12 branches nationwide. I would like to comment briefly on the status of our share buyback program. During the third quarter we returned $264 million to our shareholders by purchasing approximately 8 million Patterson shares. Under the expanded stock repurchase plan that was authorized on December 24, 2007 approximately 17 million shares remain available for repurchase. We will continue to explore strategic acquisition opportunities as the first priority for our cash. But we will expect to use the share repurchase authorization when acquisitions are not sufficient to consume our free cash. Turning now to the financial guidance contained in this morning’s release. We are forecasting earnings of $0.50 to $0.52 per diluted share for the fourth quarter of 2008 ending April 26, which reflects the impact of shares repurchased in the third quarter. We also tightened our full year 2008 guidance to $1.69 to $1.71 per diluted share. In closing, I would like to say that we’re making good progress with the various programs and initiatives that have been implemented over the past year which makes us optimistic about Patterson’s prospects. Thank you and now Steve Armstrong will review some highlights from our third quarter results. R. Stephen Armstrong: I want to use my time to discuss some of the changes we saw in our operating statement metrics during the third quarter, despite revenue and earnings performance that was in line with our expectations. Let me start with our gross margins which account for the bulk of the reduction in our operating margin for the quarter. Consolidated gross margins were down 70 basis points led by the dental segment 60 basis point decrease compared to the year ago quarter. This resulted primarily from a shift in product mix to greater equipment sales versus higher margin consumables and software as a percentage of total sales. Other factors impacting the dental gross margin in the quarter included our year end equipment financing promotion which did not run in the prior year and a price reduction in local currency in Canada to compensate for the strengthening Canadian dollar. The gross margin of our veterinarian segment declined by 80 basis points but gross profit dollars increased by over $2 million in the quarter due to increased sales volumes. As Jim mentioned earlier the change in product mix within the flea and tick and heartworm categories with more fully distributed products versus agency arrangements and lower rebates resulted in the dilution of the gross margin. It also it needs to be remembered that the veterinary segment generates lower gross margins than our other businesses and since veterinary is our fastest growing segment the overall result is the [inaudible] effect on our consolidated gross margins. Gross margins at Patterson Medical were flat for the quarter. Consolidated operating expense ration declined by 10 basis points reflecting the veterinary segments 100 basis point improvement in its operating leverage during the quarter. Expense leverage at the dental segment did not improve in the quarter primarily due to the achievement of performance levels under certain incentive compensation programs earlier this year as compared to the prior year. To a lesser extent the timing of certain marketing related expenses between years also negatively impacted the dental expense leverage during the quarter. At the medical segment the continuing infrastructure investments in full branch operations and information systems are negatively impacting the operating and expense ratio. This impact is expected to dissipate somewhat as we move through the fourth quarter but the system conversion will not be completed until the beginning of fiscal 2009. For the quarter the consolidated operating margin decreased by 60 basis points, as the dental segment gross margin declined accounting for the majority of the change I discussed previously. Dental operating margin was 13.7% for the quarter. Veterinary and medical segments reported operating margins of 5.3% and 13.3% respectively. Our tax rate in the quarter was slightly higher in comparison to earlier quarters as we had to adjust our estimated effective annual rate to compensate for the reduced non-taxable interest income resulting from the use of cash to purchase shares. Last year’s rate included a benefit of $1.7 million due to the release of tax reserves after reaching an agreement on the audit of several prior year’s tax returns. Overall, we would expect our operating metrics in the fourth quarter to return to more normalized levels and this would include our tax rate. Looking now to our cash flow we generated approximately $60 million from operations in the quarter compared to $34 million in the prior year. The prior year amount was reduced by approximately $21 million of low interest contract from a CEREC promotion that had not been sold to our funding source by the end of the quarter. Our cap ex is expected to be higher in the fourth quarter due to the continuation of the renovations of our California distribution center and our corporate office. We will close on the purchase of our previously leased distribution center in Kentwood, Washington. The total amount of cap ex for the fiscal year is estimated at $30 million. As Jim mentioned, we purchased almost 8 million shares of company stock during the quarter which accounts for the bulk of the financing activity in the statement of cash flow. With regard to the share purchases I’d like to clarify that our earnings per share guidance for the fourth quarter removes the full 8 million shares purchased during the third quarter in the determination of the outstanding shares in the EPS calculation. Our tightened annual guidance reflects only a weighted portion or about 30% of the third quarter purchases in determining the number of outstanding shares. Turning now to our balance sheet, our inventory levels increased form the second quarter as we took advantage of some year end buying opportunities in dental while the veterinary unit added stocking levels for new products. Our DSO stood at 43 versus 49 in the prior year. And with that I’ll turn it back to the conference operator who will poll you for your questions.
Operator
Thank you sir. We will now begin the question an answer session. (Operators Instructions) Our first question comes from John Kreger with William Blair. Please go ahead. Analyst for John Kreger –William Blair & Company, LLC: Just a question about the dental consumables business. Even after we adjust for the one less selling day the dental consumables growth was still a slow down from the last two quarters and I was just hoping you could talk about what you think you know attributed to the slightly lower growth rate? R. Stephen Armstrong: You know the selling days in the consumable business is like a retail business and selling days can have an impact. What happened because of the way the holidays fell while we technically only lost one day you could say we probably maybe lost two days because both the Christmas and New Years Eve falling on Monday this year and we didn’t see as much activity because of those two days. But the combnation of techinically losing one day plus the timing or the day that the Eves fell this year versus last year when they were both on Sundays. Analyst for John Kreger –William Blair & Company, LLC: Okay that’s good. Then, can you just give us an update on the sales rep total? And also if you have seen any improvement in the productivity of your sales reps? R. Stephen Armstrong: The sales rep count within the dental business I think is the number we typically give is about 1566 at the end of the quarter. Webster had about 175 at the end of the quarter.
Operator
Thank you our next question comes from Lisa Gill with J.P. Morgan. Please go ahead. Lisa Gill – J.P. Morgan: Steve I think that a few weeks back at our healthcare conference you had talked about the economic impact on equipment sales and this quarter obviously equipment sales coming much better. Can you just talk about what’s changed over the last couple of weeks in your opinion? And then secondly, as we look at the margins how much of the dental margin was due to any kind of promotions on the equipment side as well as just equipment generally being less profitable than consumable? James W. Wiltz: You know first of all what really has changed, nothing has changed. I think if you will recall the last two or three calls we’ve talked about our execution in the equipment business and the unsettling in the field because of the management changes taken place. Lisa, I think in my opinion we’ve got those things behind us now and the pipeline is starting to fill back up in our equipment prospecting and we’ve reaped the rewards of that in the last part of this third quarter. Lisa Gill – J.P. Morgan: And so you have pretty good visibility as far as the sales go into the foruth quarter as well Jim? James W. Wiltz: Well we do as best we can. I think we’ve talked before about our system not being the best as it relates to forecasting on the equipment side which is one of the projects we have under way but we feel very confident about the fourth quarter being strong. Lisa Gill – J.P. Morgan: And so as far as the you know economic or any kind of recession having any kind of impact on these individual dental practices not as much as perhaps maybe you saw even last quarter? Is that the right way to look at it? James W. Wiltz: Well Lisa I don’t think any body understood my comments on the last call and I’m sorry I ever made them. I don’t think that what’s going on in the economy has had any impact on the patient business or the revenue in the dental office. My comment was strictly pointed at the fact that whenever there’s so much negative press out there I think just human nature whether you’re a dentist or otherwise about ready to make a large purchase for a small business you think twice about doing that. Now, having said that, I think that it’s been going on long enough now that the dentist over time they quit paying attention because their practices continue to thrive and so they jump back into the marketplace. But that’s only a minor part of what was going on with our equipment business. Lisa Gill – J.P. Morgan: Okay and then just one last question I think that Steve had made the comment that operating metrics should be more normalized in the fourth quarter. As we think about and I’m not asking you to give 2009 guidance but as we think about things going forward would it still be your target to have margins improve by roughly 50 basis points year-over-year? Is that still a long term guidance for Patterson? James W. Wiltz: Yes it is Lisa.
Operator
Our next question is from Stephen Postal with Lehman Brothers. Please go ahead. Stephen Postal – Lehman Brothers: I just wanted to ask a question on CEREC, there’s been some discussion that there’s improved demand for the CEREC MC3 can you talk about having a kind of dual product strategy, what you’re seeing in terms of demand for both the upgrade version and the older version and just the general environments surrounding that category? James W. Wiltz: Stephen I think we talked about it a little bit on the last call that we were getting much activity on the smaller milling chamber and I think that what we saw happen in this third quarter we had ran a promotion during the period of time where there was a $5,000 price reduction on that lower end unit and I think what we found out was that there is some demand out in the marketplace which we had not anticipated so we were quite pleased with the number of those units that we were able to sell in the third quarter as well as the new MCXL chambers. Stephen Postal – Lehman Brothers: Okay in terms of some other key equipment that’s been discussed the 3D cone beam, what are you seeing there? Is the competitor environment there and the number of products hurting demand, lengthening sales cycles or something changed there? James W. Wiltz: I don’t think anything has changed there very much Stephen. think we’re still fidning that theres a high level of price resistance to all of the machines. Stephen Postal – Lehman Brothers: Okay and Steve a question on the SG&A I would have thought with one less selling day that you know perhaps that SG&A line wouldn’t have been as impacted. Can you help me out there? R. Stephen Armstrong: I don’t think I can offer anything more than what I said in my prepared comments. It was mostly due to the timing of some dental expenditures particularly in the incentive comp and the marketing areas. I don’t have any other great pearls of wisdom to offer to you Stephen. Stephen Postal – Lehman Brothers: But Steve with one less selling day shouldn’t that theoretically shouldn’t that impact SG&A as well as revenue? R. Stephen Armstrong: No because you pay your people 52 weeks out of the year so actually it hurts you more than it helps you Stephen. You’ve lost that revenue but your expense structure doesn’t really change that much. Stephen Postal – Lehman Brothers: But aren’t your sales reps paid on commission? R. Stephen Armstrong: We you have the variable aspect of it sure but that only [inaudible]. James W. Wiltz: That’s only a small part of it, it’s only 8%. Stephen Postal – Lehman Brothers: Okay I just final question on the medical business you mentioned this investment in systems how much do you think that impacted the operating margin? And I just want to clarify your remarks you’re saying you wouldn’t expect more normalized margin in medical until fiscal 2009? James W. Wiltz: Correct starting in May of this year. You know the investment that we’re making in the medical system really don’t affect our margin at all. These are all planned cap ex expenses at corporate changing their platform out from their old platform at ability to at the current platform that the dental and vet business run on. R. Stephen Armstrong: The issue there Stephen is that you’ve got people tied up, you’ve got contractors coming in. It all flows through but the other part of that that you can’t get out is as you continue to add these branches there’s inefficiency because you’re really running multiple platforms and you can’t, if you will tuck them in quite as well as you can when you have one platform running the business. James W. Wiltz: The other problem we have Stephen is we consolidate their inventories into our distribution so we have problem with managing the freight and the pricing again because they aren’t up on that platform yet. So that’s why we’re quite anxious to get that going. Stephen Postal – Lehman Brothers: Okay and Jim you mentioned I believe you said you now have 12 branched there are there plans to continue that more branches over the next year? James W. Wiltz: We’ll we certainly are going to stop what’s currently planned and I don’t know the exact number of that this morning, Stephen off the top of my head is two or three I think. We’re probably going to slow down for a while now and see how well the model really is working. We are seeing some slight difference in the businesses we purchase versus the ones that we’re starting up Greenfield.
Operator
Than you our next question comes from Robert Willoughby with Bank of America Securities. Please go ahead. Robert Willoughby – Banc of America Securities: Jim or Steve maybe on the medical business there did you break out the margin for that business in the quarter I know it was off with the expansion but what was it? And can you maybe comment on the ultimate target for that business from a margin perspective with decentralized infrastructure here, I guess I couldn’t assume that it gets back to its former profitability can I? James W. Wiltz: Well first of all Bob I think it was 13.3. We do expect to make some gains now whether we can get it clear back to where it was originally, I doubt it because product mix is affecting that and the bigger the business gets the more capital goes into the process and then the medical business those are lower margin items than they are in detail. Robert Willoughby – Banc of America Securities: But Ability One was a 20% margin business at one point, do you get halfway back there or any sense at all? James W. Wiltz: I think that’s probably a decent guess Bob, halfway back. Robert Willoughby – Banc of America Securities: Okay and on the M&A front you know obviously nothing in the quarter. You know looking forward is it just general discuss for evaluation out there or is there just really nothing that you feel it’s the model? What really is the thought process there? James W. Wiltz: We’re continuing to look, we’re having discussion all the time Bob in the M&A area. I think we stated last call that we really haven’t looked outside of our core businesses and still haven’t done that. Robert Willoughby – Banc of America Securities: So opportunities but just pricing seems agreggous still? James W. Wiltz: Well particularly in the vet world pricing is, because of some of the public well MWI because of their multiples and pricing gets pretty high in that arena. Medical I think is simply a matter of how quickly or how slowly we want to go with that and dental it’s a matter of being able to execute when the opportunity comes. Robert Willoughby – Banc of America Securities: Okay and just Steven plans for the short term debt of $130 million, will you turn that out or is that likely to disappear? R. Stephen Armstrong: It probably will disapear Bob but its due in November that’s the last of the Ability One acquisition debt and our plans today are to take it out in November.
Operator
(Operators Instructions) Our next question comes from Jeff Johnson with Robert W. Baird. Please go ahead. Jeff Johnson - Robert W. Baird & Co.: Couple of question here if I could, sustainability of dental equipment beyond the fiscal fourth quarter I guess is where I’d like to start obviously you’re comments sound good for the fourth quarter. You’ve got the new Decades Plus Chair from A-dek that seems to be doing well, CEREC momentum may be returning a little bit but as we look maybe into 09 and again, not asking for 09 guidance but the momentum that has returned this quarter do you think that is sustainable as well? James W. Wiltz: Jeff I’ll answer it this way the metrics in the marketplace haven’t changed as all as it relates to the equipment business and as I’ve tried to explain many times I think it’s simply a matter of whether we’re executing properly or not. At this point in time I feel very good with all the programs and systems we have in place and I might note that the management restructure and we’re very optimist about the equipment business. Jeff Johnson - Robert W. Baird & Co.: Alright great and then on CEREC just a couple of little I guess detail questions here, amortization in the quarter I know you’re kind of doing a matching as opposed to a straight line so any insight there as to what that amortization expense was, how much that maybe weighed on gross margin in the dental side? And then, where are we on the upgrade side? Any plans for a new upgrade program and how far are we through the current program? R. Stephen Armstrong: Let me hit the quantitative part of that and I’ll turn it back to Jim. Amortization in the quarter was about $1.2 million Jeff, $1.3. It had some impact on the margins but we already baked that into the guidance we provided, so I think we’re managing it well. CEREC was a bit diluted to the margins in the quarter only from the standpoint that by the time you put all the pieces together between the amortization, some pricing changes in Canada and then sort of mix of the equipment versus consumables it did pull down the margins a little bit but it was pretty much what we expected for the quarter nothing out of the ordinary. James W. Wiltz: As it relates to how far we are through delivery on the upgrades I’m not sure I have the proper answer for you Jeff I’d just assume I not event try this morning. Steve says we have about a quarter of it left Jeff. Jeff Johnson - Robert W. Baird & Co.: I’m sorry a quarter as in 25% Steve? Or a quarter as in maybe one more quarter? R. Stephen Armstrong: About 25% left. James W. Wiltz: And as it relates to an upcoming new trade in offer that seems to have come from some analyst’s report that was written I’m not sure where they got that information but it didn’t come out of here. We have no plans currently. Jeff Johnson - Robert W. Baird & Co.: Alright. No plans currently okay great. And then Steve going back to the $1.2 million amortization that’s about half of what it would be straight lining it. Is that any indication where CEREC new system sales are? Maybe below expected even though it sounds like the numbers good, I’m just having trouble reconciling maybe why amortization was at the $1.2, $1.3 million level. R. Stephen Armstrong: Well you’re right I mean if you took it straight line you’d obviously have a different path and a different curve for the amortization. We never intended to take it straight line. If your going to hold us to straight line you’re probably going to see difference until probably somewhere about third to halfway into that contract because the contract calls for escalating volumes and that’s the way we plan to recognize the amortization. Jeff Johnson - Robert W. Baird & Co.: No that’s fair. That’s a good point. And then last couple here on vet equipment second quarter here in a row where we’ve been up mid-single digits on the equipment side. Is that kind of the normalized growth we should be thinking here in the near to intermediate term? And then also on dental consumables, comfortable that the economy is not having an impact at this point and forgetting about selling days and what have you we should be kind of in that 5 to 6% range near to intermediate term as well? James W. Wiltz: We think that’s the consumable growth today right now. We think that number is solid going forward. Jeff Johnson - Robert W. Baird & Co.: Good and the vet equipment side? James W. Wiltz: The vet equipment side that will continue to accelerate Jeff. Do you have a current number Steve? I don’t have a current number. R. Stephen Armstrong: I think it was up about 5% in the quarter. But Jeff what’s happening there as we expanded you got the burst but as you continue to expand it you have to watch the you know there metrics there being very careful on their metrics and that’s going to slow us down periodically as they sort of grandfather in some of the bursts and then - but there’s nothing fundamentally changing there. We still expect that to grow very nicely over the next several years as we continue to build out that platform. James W. Wiltz: The other thing Jeff you have to keep in mind, that’s a gradual process of adding the people and the resources to drive that business. Jeff Johnson - Robert W. Baird & Co.: Okay great and I think to be fair it was the highest revenue quarter you had in vet equipment ever if I’m look at my model correctly so it was a good quarter just asking on the growth.
Operator
Thank you and our next question comes from David Gill with Morgan Stanley. Please go ahead. David Gill – Morgan Stanley: Just a couple of questions on the financing side of things, has there been any change I know I’ve asked this before and you said no but any change recently in the eavailability of financing from your banks or the willingness of dentists to finance equipment? R. Stephen Armstrong: No. We’ve had no problems either from our funding sources or from the dentist. As the rates came down here we did lower our field rates again during the quarter and we saw financing rates percentages of equipment financed very similar to what we’ve seen in the past so I don’t see any changes there David. David Gill – Morgan Stanley: And in the past when rates have gone up or down you’ve tended to realize either a modest tailwind or a modest headwind from the changes. Can you quantify that for us this quarter and how it would look going forward? R. Stephen Armstrong: Yes there was some impact in the quarter. The thing I would tell you is that some of that if you just did from a macro perspective it was mitigated because we have derivatives setting against some of those low rate contracts from prior years that go in the opposite directions. So it was not nearly as beneificial as you might think it might would be just look at the macro aspect of that portfolio.
Operator
Thank you our next question comes from Chris Sassouni with Eagle Asset Management. Please go ahead. Chris Sassouni – Eagle Asset Management: I was just curious in the past when we’ve gotten capital equipment tax credits as we now have with the economic stimulus package and I guess this one is boosting it from $125,000 to $250. Have you seen you know at the margin in interest in dentist to purchase equipment when there going to get that kind of write off? James W. Wiltz: You know it’s really to early to see any of that yet. Typically we see that the last calendar quarter of the year when their accountant starts talking to them about how to minimize taxes. The other comment I might make about that is $125,000 where it currently is really covers an awful lot of the playing field that we play in price wise for products. So I’m not sure how much the impact the increased $125,000 is going to have, it certainly isn’t going to hinder it’s going to help but not as much as it might in some larger businesses.
Operator
Thank you our next question comes from John Wood with Banc of America Securities. Please go ahead. John Wood – Banc of America Securities: Steve can you give us an idea of the monthly CEREC sales trajectory currently? R. Stephen Armstrong: No, but only because I won’t John. That’s something we’ve never given out. John Wood – Banc of America Securities: Was there a buy in ahead of the price increase on the new unit? I mean did you see an up tick in orders related to that price increase at the end of January? James W. Wiltz: No. From the customers point of view? No I don’t think so. R. Stephen Armstrong: Performance is pretty consistent John. John Wood – Banc of America Securities: Okay and on the MC the smaller compact milling unit is the $83,000 is that the new level for that unit going forward? Or, is it going to revert back to - I mean the $5,000 benefit goes away? James W. Wiltz: Yes that was a special price during the promortional period. John Wood – Banc of America Securities: And that’s over at this point? James W. Wiltz: Correct. John Wood – Banc of America Securities: Okay and then did you build any CEREC inventory in the quarter? James W. Wiltz: This quarter no. R. Stephen Armstrong: No we actually brought the inventory down John. Are you asking for us or are you asking for Serona?
Operator
(Operators Instructions) We do have a follow-up question from Jeff Johnson with Robert W. Baird. Please go ahead. Jeff Johnson – Robert W. Baird & Co.: Sorry guys I thought I took myself back out of the queue, Chris asked the questions on the tax breaks. But I guess to further that question, are you planning any kinds of promotions or any kinds of at least marketing materials out in the field over the next few months to at least get the tax breaks in front of dentist and try to stimulate some demand that way? James W. Wiltz: Yes we are Jeff, as a matter of fact I think the marketing propaganda is already done and is either on its way to the customers or will be shortly. I know it’s been sent to our field people.
Operator
Thank you there are no further questions at this time. I’ll go ahead and turn it over to management for any closing remarks. James W. Wiltz: Thank you very much. We appreciate everybody participating in our third quarter call and we look forward to being back with you on our year end call. Thank you.
Operator
Ladies and gentlemen this does conclude the Patterson Companies third quarter 2008 earnings call. If you would like to listen to a replay of today’s conference you can dial 303-590-3000 and enter passcode 11108940. Thank you for using ATT. You may now disconnect.