Patterson Companies Earnings Call Insights: Med Tech Tax, Dental Equipment Trends

On Thursday, Patterson Companies, Inc. (NASDAQ:PDCO) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Med Tech Tax

John Kreger – William Blair & Company: Steve, quick question on the guidance. What sort of assumptions did you make about the Med Tech Tax and are you assuming that has any impact on your P&L going forward?

R. Stephen Armstrong – EVP, CFO and Treasurer: The Med Tech Tax, it’s baked in there John. It’s a combination. We’ll probably have to absorb some of it in the near-term. We would expect to pass most of it on – these are fairly inelastic markets, although we know there is going to be some loggerheads at certain points in those markets. It’s going to be more difficult to pass that tax on. We have projects underway currently to revise our pricing arrangements and our taxing collection processes so I think we will be in good shape by the beginning of 2013. But it is a nuisance item but I don’t think it’s going to have a significant impact on our operations, John.

John Kreger – William Blair & Company: If you could just expand a bit more on the CEREC results, the strong momentum. Can you give us a sense about how much that’s being driven by the full chair side system versus in-lab versus maybe scanner only sales?

Scott P. Anderson – President and CEO: Sure, John. The majority of the sales are the full chair side units in the quarter. So, continued interest in CEREC by our customer base but its predominantly all full chair side units.

John Kreger – William Blair & Company: Lastly more broadly about other key technologies in dental what were some of the other classes where you are seeing particular momentum at this point?

Scott P. Anderson – President and CEO: We continue to see momentum in the cone beam space. We continue to see momentum in our software offerings both at Eaglesoft and Dolphin as well as momentum over the year obviously in our digital offering. So as the customer base moves from an analog world to digital world, which obviously makes them more efficient we think improves clinical outcomes, our commitment to best-in-class products, but also best-in-class service. We feel creates definite competitive advantage for Patterson.

Dental Equipment Trends

Michael Minchak – JPMorgan: Its actually Mike Minchak in for Lisa. I was just wondering if you could give some incremental insight into the trends we are seeing on the dental equipment side. How does the order book look, are you assuming incremental growth in that segment, and the guidance for fiscal ’13?

Scott P. Anderson – President and CEO: We will see incremental growth in the coming fiscal year, and we see the pipeline beginning to solidify, I’ll always put the cautionary note in there that equipment even in strong economies can be volatile at times, but we feel very good, sort of to dovetail out of what I just answered on John’s question about our overall equipment offering in terms of our partnerships with companies like (indiscernible) and others and we think this will be a good year for equipment.

Michael Minchak – JPMorgan: Just to follow-up, the balance sheet really remains fairly strong here, can you talk about the acquisition environment which are the three businesses, are you sort of seeing more opportunities and how do evaluations look on a relative basis, and then is there any willingness to move outside of those three segments where you currently compete?

Scott P. Anderson – President and CEO: I would say we see opportunity in all three businesses and are very focused on those three at this time. In terms of evaluations, we always feel that we are strong strategic fit for many companies and we’ll pay accordingly for good businesses.