Sirona Contract Impact
Kevin Ellich – Piper Jaffray: First of, I was just wondering how the $0.45 EPS compares to your internal plan? Following up on that is, how do you see the earnings ramping throughout the remainder of the year, should it follow the same progression as we saw last year?
A Closer Look: Patterson Companies Inc. Earnings Cheat Sheet>>
R. Stephen Armstrong – EVP, CFO and Treasurer: Kevin, this is Steve. The first part of your question with regard to how we did it came against our plans? We were right on our internal plan. As far as ramping, it would be similar to what you have seen the prior year, where the bulk of our earnings come in the third and the fourth quarter, but we would anticipate that second quarter should see some improvement over the first quarter relative performance in the prior year as well.
Kevin Ellich – Piper Jaffray: How much of an impact did the new Sirona contract had this quarter? Did you see any disruption with any of the other manufacturers?
Scott P. Anderson – President and CEO: No, I don’t think we saw any impact in terms of the sales volume, we continue to have strong sales with our partners that compete with Sirona. If anything, I think it will be a big net positive moving forward, as our field is very excited about the opportunity to sell some great products in a very integrated fashion, but I wouldn’t say anything in the first quarter that was out of normal from prior quarters.
Kevin Ellich – Piper Jaffray: Following on that, with the new Omnicam and a lot of excitement and interest by the dentists, how do you think that is going to play out in the coming quarters, will you see much disruption as the sale force has to go out and educate all the dentists that weren’t at the conference last weekend, and is there enough product on the market, where you guys are going to sales growth through in the next couple of quarters?
Scott P. Anderson – President and CEO: Two things, first, we obviously had a very successful trade-up in the first quarter and part of our strategy was Sirona and I think I talked about it last quarter was to get as many customers on the new software platform with the BlueCAM, the 4.0 software, because that is the same platform that eventually customers if they choose to move the Omnicam will move to. So in terms of training our sales force, I would say our sales force is completely up to speed because at the end of the day, the software is a really key part of this. Part two is we had all of our CEREC specials in Las Vegas last week. So they are fully trained on the Omnicam and obviously extremely excited to get out and talk to customers. From sort of a forecasting going forward, we’ve been working closely with Sirona on forecasts and supply chain issues. We anticipate that the next quarter will be a quarter of building inventory and getting dental units up, we’ll concentrate on new users for the majority of the fiscal year and then as their supply chain grows, we believe it will and it can, we will start to work into that backlog we already have of customers who currently own CEREC and who want to upgrade, so obviously very exciting news. I think the powder-free camera is a big leap forward in technology and with the Omnicam and with the BlueCAM we feel we’ve got the two best CAD/CAM products in the world to sell to our customers.
Kevin Ellich – Piper Jaffray: Scott, in your prepared remarks, did you say CEREC penetration in North America was 10%?
Scott P. Anderson – President and CEO: Yeah, it’s roughly over 10%, we’re between 14,000 and 15,000 new users. I’ve always been a little cautious on market share, because it’s a little bit how you define the market, but I think what we were trying to say is there’s a very long runway on the CAD/CAM opportunity.
Kevin Ellich – Piper Jaffray: So, is that the difference between – I think last quarter you said the penetration was 12%. So, if it just matter of how you’re thinking about the market size?
Scott P. Anderson – President and CEO: Yeah, you really won’t see over 10%. It’s hard to Kevin give you a specific number, but it’s obviously in that 10% to 15% range, but more importantly, as I said 80% plus of customers do not have the product and there is high interest for it.
Kevin Ellich – Piper Jaffray: Then just lastly, with the IDEXX announcement with MWI going non-exclusive, just wondering what your thoughts are in that arrangement and if they are successful, would you want a similar deal that they got?
Scott P. Anderson – President and CEO: I think it’s similar if you look traditionally at how we partner on the Dental side with the leading manufacturers and bringing great products to customers. We have great respect for the technology IDEXX has on the diagnostic side and are very excited and it was our preference as we publicly stated before to continue to grow our partnership with IDEXX.
Michael Cherny – ISI Group: I just wanted to dig a bit more into the margin progression. Obviously, incredibly strong quarter on the equipment side with CEREC kicking in. You noted that it had a negative mix issue. Is there any way to quantify regards to simply the trade-ups, any of the mix issues and then going on the other line items, just a little more clarity on some of the Veterinary related headwinds with regards to gross margins?
R. Stephen Armstrong – EVP, CFO and Treasurer: I don’t want to get into a lot of detail as far as gross margin breakdown. We’ve never historically done that. I think we won’t do it for competitive purposes, but I can tell you that the two major items I talked about in my comments that affected the margin in the quarter were the trade-up program. We sold a lot of trade-ups during the quarter, and they carry a much lower margin than our average product. As Scott also mentioned, consumables were a little bit softer that we had anticipated and so our mix between consumables and total equipment change that had an impact on the margin. Then the strength of the Veterinary business and the mix of their product also impacted the gross margin. So, those three factors pretty much accounted for what we saw in gross margin. Obviously, as we go forward you are going to see a mitigation of the seasonal aspect of the parasiticide on the Vet business, you are also going to see with the new camera now out, you are going to see more new sales or new user sales of CEREC, which will carry better margins, so that should have less dampening effect and probably the item that we think about the most is the consumable growth and how do we get that market moving in a stronger direction upward, and that can have a big impact on overall margins as well.
Michael Cherny – ISI Group: Just quickly turning to rehab market a bit, obviously, it seems there the macro pressure continued to impact the strong market share business. In terms of incremental data points or inflection points you are looking for, what are the key signs, now that have worked through the Supreme Court decision, is that potential driver you need to reaccelerate growth in that business or is it just matter of time and working through some of the macroeconomic uncertainty there, I guess what are you looking for in terms of your end markets to get a better sense of a return to growth in that business?
Scott P. Anderson – President and CEO: I think the positive part, Michael, is the core business of consumables in the core rehab market is growing in the low single digits but we see growth there, really the two areas of weakness are the equipment side where you still have a lot of caution on buyers in terms of sort of figuring out the rules of the road going forward before they make capital expenditures and we’ve talked about it in the past but the U.K. market with the austerity moves and some of the changes with (indiscernible) continues to be a challenged market. So the rehab story really boils down to right now the equipment piece in the U.K. but as we talked about before many times in past calls, this is a business and a space that has great underlying growth dynamics in terms of the aging population and we’ll work through this temporary softness and feel we’ve got a very strong competitive position and an exciting story ahead of us.