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Patterson Companies' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Turning to our second quarter results. Consolidated sales of $856.9 million were virtually unchanged from the year-earlier period. Net income of $49 million, or $0.43 per diluted share, included incremental expense of $0.03 per diluted share related to Patterson's Employee Stock Ownership Plan, or ESOP. Excluding this ESOP-related expense, second quarter earnings were $0.46 per diluted share, and as we've reported previously, the incremental ESOP expense will affect our fiscal 2012 earnings by an estimated $0.12 per share. We reported earnings of $53.4 million, or $0.45 per diluted share, in the second quarter of fiscal 2011.

As we indicated in this morning's release, our second quarter sales and earnings were adversely affected by reduced sales of CEREC products and to a lesser degree, by the soft equipment sales posted by our rehabilitation and veterinary businesses.

This situation masked the good performance of the ongoing consumables business at our 3 units, which we believe indicates the fundamental stability of our markets and that patient traffic is continuing to increase at a modest rate.

Now for the next few minutes, I will provide some operational highlights of our 3 businesses. Sales of Patterson Dental, our largest business, declined 2% from last year's second quarter to $550.6 million. Sales of dental consumable supplies rose 2.4%, a 70 basis point improvement from our first quarter after adjusting for the extra week impact of that quarter. Demand for routine dental work appears to be continuing on a consistent basis, if not improving slightly.

Sales of dental equipment and software increased 3.8% from the year-earlier level after excluding CEREC revenues. Improved sales of basic dental equipment, software and digital radiography products were offset by the lower CEREC revenues. Our CEREC results reflect a difficult year-over-year sales comparison related to the highly successful trade-up program that ran during last year's second quarter.

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