James W. Wiltz - President and Chief Executive Officer R. Stephen Armstrong - Executive Vice President, Treasurer and Chief Financial Officer

Derek Leckow - Barrington Research Robert Willoughby - Banc of America-Merrill lynch Jeff Johnson - Robert W. Baird John Kreger - William Blair & Co. Christopher Arndt - Select Equity Group

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Patterson Third Quarter 2009 Earnings Conference Call. At this time, all participants' lines are muted and following the formal presentation, instructions will be given for the question-and-answer session (Operator Instructions). As a reminder this conference is being recorded today, Thursday, February 19, 2009. I would now like to turn the conference over to Mr. James Wiltz, President and CEO. Please go ahead, sir. James W. Wiltz: Thank you, Fred. 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 your questions at the conclusion of our remarks today. Since Regulation FD prohibits us from providing investors with any earnings guidance, unless we release that information simultaneously, we have included financial guidance for the fourth quarter of 2009 in our press release earlier today. Our guidance is subject to a number of risks and uncertainties that could cause Patterson's actual results to vary from our forecast. These risks and uncertainties are discussed in detail in our Annual Report on Form 10-K, and our other SEC filings and we urge you to review this material. As expected the current economic environment affected all three of our businesses during the period. But we are pleased to report that results were in line with our guidance. Our third quarter consolidated sales rose 4% to 811 million. Earnings per diluted share $0.45 per share unchanged from last year's third quarter. As many of you know the additional interest expense associated with the 525 million of long-term debt financing that we completed in the last year's fourth quarter served to reduce our net income year-over-year in this year's first, second and third quarters. The impact will continue to affect the year-over-year comparability of our net income but to a lesser extent in the fourth quarter. Now, we'll briefly review the performance of our three businesses. The third quarter results for our Patterson Dental unit where unchanged from a year ago. Dental sales benefited positively from two acquisitions, Leventhal in the U.S. and Denesca in Canada that combined added approximately 1% point of growth. Consumable sales where flat in relation to last year excluding the impact of a 2 percentage point negative in currency translation adjustment. While available evidence indicates that dental patient visits are down from last year, we are pleased to report flat consumable sales. Dental equipment sales performed better than expected in both basic equipment and CEREC products indicating that our customers are continuing to invest in their practices and upgrade to new technologies. CEREC is benefited from the increased interest in CAD/CAM technology that has gained momentum over the last 24 months. This trend was brought on by introduction of several new products and more focused marketing efforts. As you recall early in calendar year 2007, Sirona introduced enhanced software to move robust milling chamber for its CEREC products. In January of this year Sirona introduced a new digital impression unit call CEREC AC that uses a proprietary Bluecam technology, giving practitioners increased speed, precision and ease of use. In addition the practitioner now has the ability to create precise digital impressions that can be use to create restoration tearsite (ph) or can be transmitted to dental labs via the internet. This capability provides a lower cost alternative for the dentist. In this way CAD/CAM technology can be made available to a larger number of practitioners and has the potential to generate increased demand for CEREC systems. We are encouraged by the increased enthusiasm for the expanded CEREC line along with the attractive pricing structure that it offers. During the quarter Patterson Dental acquired Dolphin Imaging and Dolphin Management; the world's leading provider of 3D imaging software for high-end practitioners, such as orthodontists and oral maxillofacial surgeons. Dolphin products provides the tools necessary to maximize the benefits of cone beam technology, digital photography and other radiography systems. Early in 2008, the dental unit initiated a number of changes to its operating model, including providing our proprietary practice management software to customers at no charge. Revising our commission structure and announcing a major revamping of our customer loyalty program. In January of this year, we rolled out the new loyalty program Patterson Advantage to our customers. We believe that this new program will further differentiate Patterson as the premier distributor in the market. In summary, we believe the heightened level of interest in CAD/CAM technology, the changes that have been made to Patterson's customer loyalty program and the acquisition of Dolphin positions our dental business for growth and market share expansion. Webster Veterinary reported a 35% increase in third quarter sales, reflecting the acquisition of Columbus Serum. Excluding the impact of Columbus Serum veterinary sales were essentially flat. Webster is in the process of integrating this acquisition which greatly expanded their market position in the upper mid-west and the mid-Atlantic regions. And has improved Webster's competitive division and economies in scale. The integration of this large and well established distributor is proceeding on schedule. In addition to the acquisition of Columbus Serum, Webster made an investment in Odyssey Veterinary Software. An early stage developer and marketer of software that enables veterinarians to more fully explain and illustrate a pet's diagnoses and treatment; it is also a teaching tool for veterinary schools. The investment further developed Webster's value added proposition. Medical reported a 2% sales increase as measured in local currency; that was offset by a negative five percentage point currency translation adjustment. Medical is continuing to make investments in operating systems that will give them the opportunity to accelerate growth and gain economies of scale. All three of our businesses, while not recession proof appear to be more resilient during weak economic conditions in many other businesses and I believe this is what you are seeing with our current results; this is why we have remained solidly profitable amidst today's challenging conditions. Before turning to our fourth quarter financial guidance, I would like to provide an update to the expense reduction initiatives announced earlier in the year. You may recall that we announced companywide actions that included a range of initiatives, including a higher increase except in the area of sales representatives; a wage freeze and reductions and restrictions on travel. The steps that began late in the third quarter are expected to become more apparent in the fourth quarter. While these expense reductions are essential during these uncertain times, we are continuing to make strategic investments in our business supported by the forecasted continuation of our strong operating cash flows. Strategic acquisitions are one such investment that we intend to continue pursuing. Turning now to guidance contained in this morning's release, we are forecasting earnings of $0.49 to $0.51 per diluted share for the fourth quarter ending April 25, 2009. This places our 2009 guidance in the range of $1.72 to a $1.74 per diluted share. In closing, I want to say that we are taking the actions required for operating effectively in today's challenging economic environment. Thank you. Now Steve Armstrong will review some highlights from our third quarter results, Steve. R. Stephen Armstrong: Thank you Jim. I want to address primarily three topics with my comments. Currency, gross margins and the CEREC financing promotion that began on second quarter. As Jim noted in his remarks, foreign exchange had a negative impact on the sales of both our Dental and Medical units. As the dollar strengthened fairly dramatically against the Canadian and British and European currencies. For example, the Canadian dollar lost approximately 20% of its value against the U.S. dollar from last year's third quarter. This had a negative impact on the Dental sales performance of two percentage points. Patterson Medical had to absorb not only the impact from the Canadian dollar but also the pound, sterling and the euro resulting in an unfavorable impact of five percentage points on their sales performance. While less than 10% of our consolidated revenues are from foreign operations, the foreign exchange rate fluctuations were fairly dramatic in this quarter and it is likely that they could have a similar affect in the fourth quarter. Now more color on our gross margins, which were down a 140 basis points in account for the bulk of the reduction in our operating margins for the quarter. Let me start with the Dental unit. As Jim discussed, the Dental unit began earlier this year to provide its practice management software to dentists free of charge. And this change negatively impacted their margins by about 30 basis points in the quarter. Even though, we publicly announced this program in first quarter of fiscal 2009, our fourth quarter results from last year already reflected the impact of the decision, since we committed to offer the same conditions to those customers who had recently purchased the software. Since our result for the fourth quarter had given effect to this software marketing change, it will not affect comparability going forward. We are encouraged by the success we're seeing with this program in our EagleSoft practice management software. Two other factors affecting Dental margins include the mix change between consumables and equipment on a comparative basis and the financing promotion on the CEREC that was running in the quarter. I'll discuss this latter item further in a few minutes when I discuss cash flow. The other major factor impacting our consolidated margins in the quarter is the relative impact the Veterinary unit is having on consolidated results. As we have discussed in the past, since this segment has the lower gross margins of the three operating units, as it becomes relatively larger part of our overall operations, it tends to mathematically dilute the consolidated gross margins. This resulted in approximately 50 basis points of decline in the consolidated gross margins for the quarter. Turning to operating margins by segment; the Dental margin was 12.6% for the quarter, the Veterinary and Medical segments reported operating margins of 4.2% and 14.3% respectively. Looking at our cash flow; we generated approximately $50 million from operations in the quarter compared to 60 million in the prior year. During our second quarter, we made the decision to invest in our financing promotion to support the other marketing efforts directed at the CEREC products. And the promotion continued to run through the third quarter. Since we could not immediately sell the finance contracts from the promotion to our funding sources, our operating cash flow was reduced and our account receivable increased with the near term. Considering the market place, we considered the investment in our company -- our customers through this program, a much better use of our cash than putting it in a bank. I would remind you that customers must still meet our rigid financing standards to qualify for the loans under the promotions. Wrapping up, our DSO stood at 41 versus 43 in the prior quarter, excluding the CEREC contracts just discussed. As a final note, the American Recovery and Reinvestment Act did extend to Section 179 and 168 provisions at the 2008 levels, which should provide incentive for dentists to continue to invest in capital equipment. With that, I'll turn it back to the conference operator who will poll you for your questions. Greg?

Thank you very much. Ladies and gentlemen, at this time we will begin the question and answer session (Operator Instructions). At this time, our first question does come from the line of Derek Leckow with Barrington Research. Please go ahead at this time. Derek Leckow - Barrington Research: Good morning Jim. Good morning Steve.

Good morning Derek. Derek Leckow - Barrington Research: Just want to say congratulations on a good quarter. And also want to talk about the internal growth rates of each of the business units excluding the currency. Could you help me calculate that?

We can try. Derek Leckow - Barrington Research: Okay.

If you look at the Dental business, hang on just a second -- the internal rate for Dental was about 1% ex-currency. Derek Leckow - Barrington Research: Okay.

And ex-acquisition. Veterinary was essentially flat, down about a half a percentage point. Derek Leckow - Barrington Research: Alright.

And Medical was up just a little over 1%. Derek Leckow - Barrington Research: Okay good. So--

Ex-acquisition, ex-currency. Derek Leckow - Barrington Research: And are you guys -- when you are talking about your budgeting for next year, are you kind of assuming that this level of internal growth remains sustainable or are we going to see, especially with the strong equipment sales that are going on now, are we going to see a trend that helps get that up a little bit higher. What are your thoughts on that? R. Stephen Armstrong: Well, Derek I think it's fairly difficult for anybody to see out too far in this economy but, based on where we looked from October and where we look at it from today in all three of those businesses, I do think going forward its going to be a bit more challenging in the core equipment, but we feel like its going to be offset somewhat by the strong demand and it appears to remain for CEREC and cone bean and digital and software products. Derek Leckow - Barrington Research: Okay. So-- R. Stephen Armstrong: Technology products are going to be very strong. I think we're going to have some tougher battle with what I would call the core equipment, and I think we saw signs of that in the fourth calendar quarter from the DDA report for instance. Derek Leckow - Barrington Research: How much was the core equipment down in the quarter? R. Stephen Armstrong: We were actually at -- core equipment for the quarter.

5% R. Stephen Armstrong: 5% Derek. Derek Leckow - Barrington Research: Okay, so then the 40% -- we saw 40% increase in new placements of the Sirona unit, is that right? R. Stephen Armstrong: Correct.

Correct. Derek Leckow - Barrington Research: I am trying to gauge that because you said 6% total growth there. So what was the negative?

We had a lot of trading activity going on in CEREC in the third quarter of last year Derek. Derek Leckow - Barrington Research: Okay.

So, what we are trying to paint a picture of this, how many new dentists inclusions (ph) we have versus number of people that we're just trading out last year. Derek Leckow - Barrington Research: I see, okay. And then as we look at the Patterson Advantage program, you had some experience with that now. Is that having a positive impact yet or will we see that comparison improve you think, going forward or are more doctors are -- planning for that?

No. I can give you this color Derek, there are we had an all time record month of January and sign ups for the program. Obviously, it's going to take a bit of time before we see what it does to the consumer business. But the early signs are very-very encouraging just from the appeared number of people that we've had who signed up for the program. Derek Leckow - Barrington Research: Okay. Good, that's good news. Thanks a lot. Let me stop there.

Thanks Derek. R. Stephen Armstrong: Thanks Derek.

And our next question comes from the line of Robert Willoughby with Banc of America-Merrill lynch. Please go ahead. Robert Willoughby - Banc of America-Merrill lynch: Hey Jim or Steve; can you speak to the veterinary opportunity here, where does that margin go now with the more national infrastructure in place of a broader bank. Can we see it goes somewhere above and beyond where it was trending prior to the acquisition there? R. Stephen Armstrong: I think the answer is that yes, Bob. I am not sure how much we can quantify for you at this point. But we do see several opportunities for leverage from the additional volume that we acquired with Columbus Serum. Robert Willoughby - Banc of America-Merrill lynch: And anecdotally can you kind of -- what are the steps you need to take there to achieve and kind of a timeframe when we'd see that? R. Stephen Armstrong: There is a couple of pieces of the business that don't really -- or one piece of the business it doesn't really fit well with our core business, which is a large animal piece. That needs to be dealt with, and the rest of the issues revolve around distribution of product that consolidate warehouses. Robert Willoughby - Banc of America-Merrill lynch: And how big is that large animal piece?

We estimated it Bob at this point somewhere around 25 to 35 million. It's a lot of mixed practices and so we're going to have to sort it out. As we've said before we want to do what's right by the customer. But, going forward our distribution system does not support large animal business and so we have to deal with it accordingly. Robert Willoughby - Banc of America-Merrill lynch: Okay. And just any plans for the remaining short-term debt that's on the balance sheet, what's the timeframe at which you'd hope to get rid of that? R. Stephen Armstrong: I think that somewhat depends on what kind of activity we see in the fourth quarter Bob. We've got a number of things pending out there, these contracts that I mentioned they're going to be with us probably at least through most of the summer and into the fall. So they'll eat up a little bit of the cash. And so we have opportunities to move some currency around between jurisdictions to take down that short-term debt and we typically do and then just to reposition at the end of the quarter. But I would think if the business continues to run the way it's been running, we'll take most of that debt out probably by the end of the year. Robert Willoughby - Banc of America-Merrill lynch: Okay. End of the calendar year? R. Stephen Armstrong: End of our -- end of our fiscal year.

Fiscal year. Robert Willoughby - Banc of America-Merrill lynch: Oh fiscal year, okay. And just anecdotally can you comment whatsoever on share for the Dental practice management software. I mean how has that your -- how has that picked up here with your program?

Picked up quite dramatically. We're not going to really share numbers with you but I can give you our percentage increase, year-to-date I think it's 27% and for the quarter new installs were up 40%. Robert Willoughby - Banc of America-Merrill lynch: Okay. And those are replacements of existing systems? R. Stephen Armstrong: Those were conversions from other software programs to ours or new users for the first time. Robert Willoughby - Banc of America-Merrill lynch: Okay. Thank you. R. Stephen Armstrong: Thanks Bob.

And our next question comes from the line of Jeff Johnson with Robert Baird. Please go ahead at this time. Jeff Johnson - Robert W. Baird: Thank you. Good morning guys. R. Stephen Armstrong: Good morning Jeff.

Good morning Jeff. Jeff Johnson - Robert W. Baird: Wondering if we could focus on the vet business here just for a second, the -- what was the number here this quarter, I'm sorry I have to go back to the notes. But whatever the number was, is some of the weakness here the synergies between Columbus Serum and your current up business or is it just end user market slowdown? Why are we getting organic growth flat to where it's been here in the last quarter to kind of slower than we've been used to?

Jeff, I'd go back to my comments in October. We saw exactly the same thing hit the vet world that hit the Dental world and the Medical world. Consumable product just went flat to negative in October and that's, it's pretty much remained that way through our third quarter. Jeff Johnson - Robert W. Baird: So Jim it seems more end user market focus not so much some of the synergies between the acquisition and current business that needs to be worked through?

No. I think the only color I can give you Jeff that I -- the feedback that I've gotten that people are still taking their dogs and cats to the vet when they are sick. But they are not doing wellness, that -- they used to do in great numbers. They are not taking the dogs and cats in to have a physical exam done on, for instance just to make sure they are healthy. They are going when they are sick now. So the visits are down some to veterinary hospital. Jeff Johnson - Robert W. Baird: Understood. And going back to the Dental side, then I guess, Steve do we think of Dental op margins being down, just through the next quarter or two, on the financing promotions or should we think of further financing promotions maybe with AC or anything else that would inhibit any kind of pickup back in those margins as beyond the next quarter or two? R. Stephen Armstrong: Well, as Jim said, it's very difficult to look out very far with great clarity but I am optimistic you probably are going to see something in the way of margins to flatten slightly up in the Dental space. Jeff Johnson - Robert W. Baird: And that would be Steve after we turn the fiscal calendar? R. Stephen Armstrong: No. It could -- I mean I think it's even in the fourth quarter there's the opportunity to do that. But it's all we've hedged Jeff, from the standpoint of what the hell the economy is going to do over the next 90 days. Jeff Johnson - Robert W. Baird: Sure. And I am sure mix is going to play a big role there? R. Stephen Armstrong: But the opportunity is to continue expanding. As Jim said, we've got some expense control that will kick-in a little bit stronger in the fourth quarter if we see the performance out of the various lines of business. Its, we could see some expansion in the Dental space. Jeff Johnson - Robert W. Baird: Okay. And then on the rehab side, we saw the hip and knee market actually slow may be 200 basis points in the calendar fourth quarter. Is that part of the impact here? Is it still some of the IT issues or the MIS issues, I think you guys talked about last quarter. I guess, how do we think about the gating over the next few quarters of organic growth in that segment?

Well, there again I think, we think the market slowed down. We've got some color directly from therapists that say that a patient is still covered in maybe the doctor sent him in for five visits and they're only coming three times. So there is some drop off in patient visits in the Medical business as well that's driving some of that. We're affected very little by the amounts of knees and hips that put in Jeff. We've got that manufacturing facility in France that BPM (ph) machines but that's really the only piece that's involved much with hip and knee replacement. Jeff Johnson - Robert W. Baird: Even the PT business in that, not driven by hips and knees?

They don't use many products for those. Jeff Johnson - Robert W. Baird: Yes, no that's fair. I hadn't thought of it that way. That's a valid point. And -- so I guess Jim take home here if we sum all this together, it kind of low to flattish to maybe up a little bit organic growth going forward is a good way to think about things for the next few quarters anyway as far as visibility goes, but no big fall off the cliff by any means?

I don't think we will see fall off. I think right now we'll far as we can see out there Jeff it will be flat to slightly up in our Medical business. Jeff Johnson - Robert W. Baird: Yeah, and I was talking even on the consolidated and company wide -- you feel it's similar, Jim?

Yes. Jeff Johnson - Robert W. Baird: Okay, great. Thanks guys.

And our next question comes from the line of Marek Sijutzki with Harris Private Bank (ph). Please go ahead at this time.

Good morning everybody. Can you here me okay?

Clearly. R. Stephen Armstrong: Yes.

Very good. Hi, so, first thing in Dental I wanted to find out if you could give me what the digital penetration is industry wide right now? And then related to that, will you see any portion of the stimulus bill that's devoted to HCIT falling your way? And then may be just quickly comment on acquisition prices and prioritize the use of your free cash flows and then -- I know that a lot, but lastly then in -- just rehab biz if you're seeing any volume weakness due to the, anything that the schools -- cutting budgets at schools so to the extent that they have less money to spend though -- spending less obviously on your products. So, that's it.

Okay. I'll try to get the pieces Marek (ph) and you may have come back and tell me what I missed.

That's fine.

We do think there's going to be some slowdown in Medical business, once again I'll remind everybody it's a fairly small piece of our Medical business as it relates to the public school system. But we think that the divisional colleges and the professional teams, which is the majority of our sales and that Medical division will remain. We don't see that -- their funding seems to be fine. I am sorry... R. Stephen Armstrong: Digital penetration.

Digital penetration. I'll give you my best guess Marek (ph) and I think that there is -- there are many numbers that are floating around out there. I would peg it between 25 and 30% that truly are digit at their offices in the digital world.

And exposure from the stimulus bill, or any benefit from the stimulus bill? R. Stephen Armstrong: Probably the only one that's directly effected was the one I mentioned in my prepared comments Marek (ph) and that is the 179 and 168 provisions were extended at the 2008 levels, which means that the small business buyer can essentially write-off $250,000 of investment in the first year, and then get the bonus depreciation up to $800,000 of investment before those limits start to.

And as far as the digitalization of electronic records and...?

They are really aimed at the MDs and the hospitals with that program. The Dental world is far ahead of where the Medical world is, America and have the paperless office.

Okay. And then acquisition prices and the priorities of free cash flows?

Well we think that it's going to be an acquisition rich period of time. We already have a several new conversations going on that we're very optimistic about and that's where we're going to target the cash flow right now.

Okay. Well thank you very much.

Thank you. R. Stephen Armstrong: Fred are you there?

(Operator Instructions) And our next question comes from the line of John Kreger with William Blair. Please go ahead. John Kreger - William Blair & Co.: Hi thanks very much. Not sure where you stand with your budging process for next fiscal year, but can you give us a sense about what you are thinking for fiscal 2010 if you are far enough for long (ph). And then a couple of questions about your Dental equipment business. Can you talk about how the year-end, the calendar year-end process went. Did you see more or less seasonality than normal with this calendar year-end that we just went through. And then lastly Steve, I know you mentioned that you are holding more receivables in your Dental equipment than normal; but could you quantify that for us and did I hear you say that you think you will probably hold it, until the summer or fall was that right? R. Stephen Armstrong: Correct on the holding period. Let me, start with that one and I'll let Jim come back on the year-end activity. I can't quantify it for you John, because I'd be essentially giving you a lot of information about CEREC volume because that's what the promotion was around. I would tell you that if you look at the cash flows, the company cash flow statements that we put in the press release -- company's press release or look at the balance sheet and look at the receivable change, a good percentage of that had to do with those contracts. John Kreger - William Blair & Co.: Okay. R. Stephen Armstrong: That's about as much specificities I want to give you. I would also tell you that we didn't -- that the percentage of CEREC as a raw percentage of dental equipment didn't change dramatically in the quarter. So it's been fairly consistent as part of the portion of the total equipment business.

Let me John, let me put a little color around the core equipment business, at the risk of confusing people here, but let me give you some numbers, and I'm going to be talking about the fourth calendar quarter of 2008 with these numbers. John Kreger - William Blair & Co.: Okay.

Because the outside of Patterson data available is for that period of time. The DTA, the Dental Trade Associations large equipment survey has the industry down in the quarter for core equipment business 2.9% and during that same period of time Patterson was up 10%. So we obviously were beating the game a little bit with our customers and feel like we have a little stronger fourth quarter growth in the core equipment part segment of our business. So, yes I think it was -- we did see a very strong calendar quarter in core equipment business at Patterson. John Kreger - William Blair & Co.: How was January held up Jim? I think in a few months ago, you suggested that you were a little worried about how January might hold up?

Well, I think we are seeing some definite softening in that. Of course the bill was just signed as we did -- extended the tax incentives, so that's yet to see. But I am concerned about core equipment in our fourth quarter, in our fourth FY quarter. I feel very optimistic about as I said in the technology products. But we're going to have to work on some solid programs in the fourth quarter with core equipments that's showing in that, because we're up -- frankly we're up against very strong comparable too from last year. John Kreger - William Blair & Co.: Thank you. And then you, do you have any initial thinking on fiscal 2010?

That will go right back to Steve. R. Stephen Armstrong: I knew he was going to do that to me. Actually, I can bail out on you John, because we're right in the middle of the process. I don't have anything pulled together yet. So we're going to reserve that until next quarter and give you some -- hopefully better insights into what's going on for the rest of '09 and early part of calendar '010. John Kreger - William Blair & Co.: Great. Thanks very much.

And our next question comes from the line Larry Marsh with Barclays Capital. Please go ahead.

Good morning. Good morning, this is Adam Trussard (ph) calling in for Larry. Guys, I was wondering if you could possibly maybe characterize kind of what the benefit was of Section 179 in the quarter or just directionally kind of -- relative to your expectations kind of what it was?

Well I think I'd just refer you back to what I just -- last question I just answered. The industry was down but we were up 10% at Patterson. So we think that's very positive impact. So we think we did a good job. But getting it out there early enough that our it was in front of our customers from August on through the end of the calendar year and I think our people did a real good job of keeping that in the forefront.

I guess speaking on equipments, I guess with one of your financing partners now out of the market, does that kind of cause any disruption for you guys or really not a big deal?

Who are you are speaking of?

GE. R. Stephen Armstrong: The change from GE to Medco (ph) brought that business -- I guess they closed down back in December. It really doesn't do anything for our field of organization other than change a couple of relationships. Back in the fall we approached Medco (ph) about coming in and supporting our business. We'd used Medco (ph) over the years, they're a class organization. We like the way they handle customers. And so we were really running with Medco (ph) and GE simultaneously as a preferred partner from probably September, October forward. And so there really is -- there is no -- there is plenty of volume coming out of the Wells Fargo organization. So I don't think it's going to really have any impact at all per say.

Okay, thanks. And then just I guess Steve on the cash flow for next quarter, I guess are we are you expecting that to swing back kind of after weak cash flow this quarter or just how should we think of that? R. Stephen Armstrong: Well, we've got a couple of additional promotions. I don't know that they're going to run quite as heavily as they did in the third quarter. But, I don't know that it will swing all the way back. I think those promotions, if they're successful and we sure believe they're going to be successful will probably eat up most of the operating cash flow for the quarter.

And then lastly, I guess you updated sales rep numbers for the quarter? R. Stephen Armstrong: Bear with me just a second.

Sure R. Stephen Armstrong: You just -- in the Dental business only?

Yes. R. Stephen Armstrong: Okay. Total for the dental business 1502 -- 1,502. And territory reps, 1209. And remember if you are comparing to a year ago that we took out about 120 those sales reps during the year.

The technology reps.

Great. Thanks a lot guys. R. Stephen Armstrong: Thank you.

And our next question comes from the line of Lisa Gill with J.P. Morgan. Please go ahead.

Thanks and good morning. It's actually Mike (ph) checking in for Lisa. Can you just give us any color on the sequential progression of the revenue growth in the Dental consumables business. You'd previously indicated that October was down, it picked up a bit in November and remained negative through the end of the third quarter. Did you see a continuation of that up trend that you saw in November fall through in December, January and February thus far and, we are just trying to get a sense of what the trajectory looks like there?

We do, we do. October was the real disaster month and then things start stabilizing in November and December. We're seeing those same things as we've turned the calendar over to 2009 as well. They seem to be fairly stabilized where they are right now.

Great and then, just a clarification on your commentary on the dental equipment. So you are saying that you'd expect a deceleration in the growth rate relative to what you saw in the third quarter on the dental equipment side, given the seasonal strength you saw due to the tax incentives?

Particularly in the core equipment category.

Okay.

I am not predicting that for the technology categories for CEREC and for cone beam and for digital x-ray. But I do think we're going to see some slack off in the fourth quarter in the core equipment business.

Okay and then...

And that -- it depends on how good a job we do.

Okay. And then just as a follow-up on the dental equipment, did you provide a growth rate for digital x-ray business in the third quarter, since it just been a number that's kind of bounced around a little bit over the past few quarters? R. Stephen Armstrong: I don't believe we did.

Yeah we did. R. Stephen Armstrong: It was down I believe around 10% Mike (ph).

Okay. R. Stephen Armstrong: Give or take.

Okay. Thanks for the comments. R. Stephen Armstrong: You're welcome.

Our next question comes from the line of Derek Leckow with Barrington Research. Please go ahead. Derek Leckow - Barrington Research: Just -- it's Barrington Research. Just one other question on the acquisition comment you made, you said it's an acquisition rich period of time. I guess does that mean of conversations have increased or are you seeing valuations in more of the target parameters that you've used in the past come into play here, is that what you meant? R. Stephen Armstrong: I think we see three things coming into play; yes, we've got more conversations going on today; yes, the valuations are more in line where we like them to be based on the deterioration of some of these businesses and there, they're finding that difficult to find capital and a lot of these people are operating on the banks money. Derek Leckow - Barrington Research: And do you guys have specific targets on acquisition return investment capital or any other parameters you want to share with us?

Well we've always had a target of 15% internal rate of return on the acquisition rate work that we do. Derek Leckow - Barrington Research: Okay. Great thank you very much. R. Stephen Armstrong: That hasn't changed any. Derek Leckow - Barrington Research: Okay. Thanks a lot I appreciate it. R. Stephen Armstrong: Yes you're welcome Derek.

(Operator Instructions). And our next question comes from the line of Chris Arndt with Select Equity Group. Please go ahead. Christopher Arndt - Select Equity Group: Yeah I was wondering if you all could comment on the effect that the promotional programs had on CEREC. In other words how many of your customers opted for I think its fairly aggressive financing program for CEREC and how many took a more normal program or payment schedule. And then what your outlook is in that regard if the promotional program is coming to a close or how that's changed going forward?

Go ahead Steve, do you have the number of the... R. Stephen Armstrong: I don't have a specific number Chris. I would tell you is that probably the significant majority of the customers who are buying share equity, taking advantage of the financing if they qualify it. There where actually two aspects to it, they could take a reduced interest rate, so what I'm saying they took advantage of it, not atypical we finance most of the CERECs going out the door. The impact of that sort of like sort of like what comes first the chicken or the egg. Did it have an impact, yeah it probably had an impact. But I think there was so much momentum in the product Chris throughout the summer -- actually beginning back in late 2007 and running through 2008 the momentum just continued to build in that product. And with the manufacturing coming out with even more enhanced products in early January, I think CEREC is selling itself. I think CAD/CAM is taking big strides forward just -- coming from the bean counter in the organization. Obviously the financing helps, but was it the only thing that was driving transactions, absolutely not. Christopher Arndt - Select Equity Group: Yeah. So, your outlook for or what you've seen thus far in the current quarter and your outlook for CEREC is -- remains pretty solid or healthy?

We're seeing very strong growth. Yes. Christopher Arndt - Select Equity Group: Okay. Thanks a lot. R. Stephen Armstrong: Okay Chris thanks.

The next question comes from line of Jeff Johnson with Robert W. Baird Please go ahead at this time. Jeff Johnson - Robert W. Baird: Hey guys just a couple of clarifications here if I could. Jim on the acquisition front. Could you qualitatively just, maybe describe are most of these expected to be in Dental, in your other two segments. Are you still thinking about a fourth leg, if you could find one; how do we think about just conceptually that issue?

Well right now, we are totally concentrating within our three businesses. So it would have to be something totally out of the blue Jeff, before a fourth leg. Medical is going -- as always is going to be the most targets because the most players out there that are -- fall under the criteria that I talked about. I do think there will be dental opportunity or two, maybe it can be sizable one and I think we may have one or two good opportunities in the vet business yet, in this calendar year. Jeff Johnson - Robert W. Baird: Okay, great. So if there were to be an impactful acquisition probably, think more on Dental and maybe Vet side?

I think well I think we've got some impactful stuff on the Medical side. R. Stephen Armstrong: They're all important, Jeff come on? Jeff Johnson - Robert W. Baird: Sure. I got you. And just couple of other clarifiers here, on the practice management software comments you made Jim about the growth rates there. How would you qualify those, where they're coming from? Are they coming from some of your bigger competitors, from some of the smaller competitors, new people to practice management software that haven't had it before? Is there anyway to desegregate that?

The vast majority of that -- I am sorry I can't give you the exacting number is coming from big competitors of ours. Jeff Johnson - Robert W. Baird: Okay, great. And then you made a comment Jim, I think it was you or Steve that digital x-ray down 10%, I thought you trailed often and said year-to-date. Was that down 10% year-to-date or and if it was could we have a fiscal third quarter number?

That was the fiscal third quarter number. Jeff Johnson - Robert W. Baird: It was fiscal third, and then so could we have a year-to-date number?

I think it's about the same. Jeff Johnson - Robert W. Baird: Yeah, okay I thought it would be. Okay, thanks guys. R. Stephen Armstrong: You're welcome.

You're welcome.

And our next question comes from the line of Anne Borough (ph) with Gilder Gagnon. Please go ahead.

Hi. I wanted to see if you could give us an update on your ability to sell the receivables since the quarter closed and how much financing you think you could potentially take on to your balance sheet? R. Stephen Armstrong: How much can we take -- well, there's been no change in the ability to move receivables into our funding sources. They're still taking paper. So that's not an issue.

But I thought you said the reason that receivables were up so much was because you were unable to sell them during the quarter? R. Stephen Armstrong: No. It had nothing to do with the funding sources. The terms of the contract, and then what's required before we can sell them to the various funding agencies. So, the nature of the promotion, because it's -- a portion of it was no interest no payment. Until we get the first payment from the customer, we only have certain capacity to sell a no interest no payment contract, there what we call a skip into the funding sources.

And how long is that no interest, no payment? R. Stephen Armstrong: In the CEREC promotion it was 12 months.

Okay. So, then that continue to sit there for the next 12 months and then -- and grow? R. Stephen Armstrong: There will be some additions to it. Yes, correct and it will sit there for not quite -- I told you 12 months because we're already into the current effect period but yes, you're correct.

Okay. So, then how much more do you think of that type of financing you're willing to put out there? R. Stephen Armstrong: I don't know that we really put a limit on it.

Okay. R. Stephen Armstrong: We look at it quarter-to-quarter as the discussion comes up with business unit and what they are trying to accomplish. As I said during my prepared remarks, we felt that the investment in our customer was a better alternative than sticking into the bank and earning practically nothing on it. And until we have some of Jim's acquisition opportunities at the gate, well there's no really no pressing need to get to liquidity. We've got plenty of revolver capacity if we need to do that. We've got almost $230 million of capacity under the revolver. So we've got plenty of ammo.

And it's almost going to be a monthly looksie to see what we've got coming up on the acquisition game versus how much cash we have available and how much we want to apply to those kind of contracts versus use it for acquisition work.

Okay. And then, could you breakout your equipment sales as a portion that's core and a portion that's tech? R. Stephen Armstrong: We..

I don't know if... R. Stephen Armstrong: What's your definition of tech? That, you've got to tell us that first, then we can maybe try to break it out?

You are the one giving the definition of tech. You are pretty concerned about core growth but you are pretty optimistic about tech. So what percentage of your equipment sales would you say are related to tech equipment that you are optimistic about? R. Stephen Armstrong: Well, the two lines that we typically talk about are digital and CEREC. And Digital Intraoral specifically. And we've told people in the past that those two categories represent about 30% of the equivalent business combined.

Okay. Thank you so much. R. Stephen Armstrong: You're welcome.

And gentlemen, at this time there are no further questions. Please continue with any closing comments you may have.

Okay. Thank you, Frank. We'd like to thank everybody for taking their time to participate with us today in our third quarter conference call and we look forward to seeing you at the end of next quarter. Thank you.

Thank you. Ladies and gentlemen, this does conclude the Patterson Company's Third Quarter 2009 Earnings Conference Call. If you would like to listen to a replay of this conference call, you may do so by dialing 303-590-3000. You will need to enter the access code of 111-265-73. We thank you for your participation. You may now disconnect your lines at this time.