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

Stocks in this article: PDCO

We are continuing to focus Patterson Dental's marketing initiatives on boosting demand for capital equipment as we approach that seasonal peak for equipment purchasing decisions. These initiatives include our annual calendar year-end equipment and financing program and a new marketing program dedicated to CEREC products.

Although economic headwinds will likely continue affecting our equipment business, we see attractive growth opportunities led by new technology equipment since improvements in dental office productivity will remain a pressing need for quite some time.

Second quarter sales of Patterson Medical, our rehabilitation supply and equipment unit, rose 1% to $133.6 million. Sales of consumable supplies increased a very healthy 5%, but equipment sales, which constitute approximately 25% of Patterson Medical's revenue stream, fell by 12.6%. We believe 2 factors are affecting this unit's equipment business. First, we continue to believe that regulatory uncertainty related to the nation's new healthcare legislation as adversely affecting Patterson Medical's sales to domestic dealers. And second, what I previously said about the impact of the economy on dental equipment sales is also at play in our rehabilitation business. Despite these short-term factors, we believe Patterson Medical is well positioned domestically and internationally as a long-term growth driver of our overall performance.

Sales of Webster Veterinary unit increased 7% from the year-earlier period to $172.7 million. The previously announced August 2011 acquisition of American Veterinary Supply Corporation, a full-service veterinary distributor located on Long Island, that serves approximately 2,000 companion pet veterinary practices and clinics, accounted for 2.5 (sic) [2.6] percentage points of Webster's sales growth for this period.

This tuck-in acquisition was fully integrated into Webster's operations by the end of the second quarter. Webster's second quarter growth was driven primarily by a 7% increase in consumable sales, while sales of equipment and software were virtually unchanged from the year-earlier period. We plan to continue investing in Webster's relatively new equipment and service business since it further strengthens the unit's full-service platform.

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