PDCO
#Thanks, <UNK>.
Sure, so you are right.
We saw some margin contraction in the current quarter on an adjusted basis of about 30 basis points, and I would say that is simply a function of the extra week and that margins were actually in line with our expectations for the quarter.
So we do continue to expect operating margins to be between 13% and 13.5% for the year.
As you know with our model, our margins do increase as the year goes on in line with increasing volumes and then we have some rebate activity in the back half of the year.
So what I would encourage you to do is if you look at last year's margins by quarter and then you take that 35 basis point increase that we're looking for and spread it evenly throughout the back half of the year, that should get you close.
I will let <UNK> start, and then I'll give some color.
So May was in line with our trailing 12 months.
We did start to see some softening in June, but again as <UNK> pointed out, this is when we implemented the sales force transition.
So it is a little hard to decipher exactly how much of that softening is internally imposed versus externally driven.
July was similar to June, maybe a little softer, but August seems to be rebounding a bit.
<UNK>, I would point back to my previous comments about quite a few indicators that would lead us to be more confident that this was just a little bit of summer softness.
But it's going to be very critical, as I said, as you get into September, October, which really becomes the busier season for the dental practice.
We are also very encouraged by our obviously equipment performance, and not only the current performance in the first quarter but also our pipeline.
So we definitely do not want to over react to just some softness in the summer.
Because over the last 25 years I have been in the business, we have seen this in the past.
Thanks, <UNK>.
Thanks, <UNK>, and thanks for the question.
The inventories are up, but I would say this is really a continuation of really managing the technology and equipment supply chain and something we've worked through many times.
I would say if I would point to anything, I would point back to our softer third quarter last year.
And the one thing about technology products is you really want to make sure you are in a position to be able to fulfill demand, because selling cycles are shorter.
So while we feel we are in a very good position going into the selling season, we are bullish about the opportunity ahead.
But this is really more a function I think going back to the third quarter of last year.
That being said, I would say we are very well positioned right now obviously in terms of inventory to meet the demand of what we think we will see in our second and third quarter.
<UNK>, I'll start in and then I will have <UNK> finish.
We held a joint national sales meeting with both our production and animal health teams.
I got to spend some time with our dairy folks, and obviously they ---+ it's an awesome team that has worked through many different cycles.
And I think they feel like we are coming out of the cycle, and we will be able to put the market plan together to benefit from improving markets.
But I would say the general mood of that whole team was pretty upbeat as they looked into the future.
And pretty much what I like about the team we have is they have so much experience, they have been through these cycles, and pretty much this market is playing out as we had planned about six months ago.
And obviously, you never can plan perfectly predicting the future but we're pretty confident in our position right now, and I will let <UNK> finish out the question.
Yes, so you are right, <UNK>.
We definitely think swine is on the upswing, and we are taking some good market share there.
Beef is improving.
Milk prices, while they are better, are still a bit soft when you look at the historical averages.
So that would probably still be our most challenged market.
With that said, when you combine it all together, our outlook at this point is that the combined market should grow at about 2% and then of course our goal would be to continue to grow faster than that.
Yes, that's correct.
Yes, no, so if you're looking at the reported number, you are right.
There is a line item in our reconciliation between reported and adjusted called restructuring.
And that's mostly for the Dental piece, and that would be in the Dental margins.
So it was reported in the Dental segment.
If you look ---+ I think the easiest way to think about it is if you go to our slide presentation, we have a segment on Dental that shows the adjusted margins and that would have the severance taken out.
Thank you.
Yes, thanks, <UNK>.
I think it's really an evolution of the market.
It's different customers, different customer sizes, and I think this is one area where Patterson has always been a leader.
Just from personal experience, if I go back to my days as a salesperson in San Francisco 20 years ago, we were installing electronic-commerce systems before the Internet.
We have been a leader over well over 80% of our consumables come electronically.
That being said, when you think of all the technology our sales force has in front of us right now and the productivity opportunities and how customers want to interact with us both face-to-face but also digitally, it just leads to a model that we feel is going to evolve.
Really this at the end of the day is about putting more opportunity in front of our best salespeople, and really being easy to do business with for a wide variety of customers.
So we are pretty excited about how the market evolution will really play into the Patterson competitive strengths of great sales expertise, great customer service expertise, and a technical service team with vast coverage in North America.
So it's really a continued evolution of a strategy that we've really played out over 20 years.
No.
I think it's really about Patterson and our customers, and I think this is important.
Let me give you a little context because I think it's is important.
Number one, we have a history of constantly evaluating the best way to leverage Patterson and our sales force in the most effective way for the customer.
And two, I think it's very important to remind everyone, no company in North America has a wider sales and technical service coverage than Patterson.
We have a history of doing this.
So as a reminder, nearly eight years ago, we took a hard look at our technology sales force and we felt there was a more efficient way to sell digital technology products that made us easier to do business with.
We wanted to create more opportunity for our best salespeople.
So we eliminated that sales role and we moved the selling responsibilities to our established team.
In doing so, we dramatically accelerated our digital x-ray sales and Eaglesoft placements as ---+ if you look at what we have done over the last eight years.
So bottom line is we created a better customer experience.
The moves we made in June had a really similar underlying strategy.
So we feel we can leverage technology with our sales force, and we have an opportunity to become more productive and we know we are leaders in e-commerce.
So this is really about the customer and leading a market, not reacting to a market.
But I want to be really clear and don't want to have anyone misinterpret that our sales force and our service coverage today is our competitive advantage, and it is incredibly important to our ongoing strategy.
Bottom line, we are just putting our best people in front of more opportunities to drive the market and drive customer success.
Thanks, <UNK>.
Thanks, Don, and thanks, everyone, for joining us today.
Again, we are optimistic as we move into FY17, and we look forward to updating you on our next quarterly call.
