Question-and-Answer Session
Operator
(Operator Instructions). Our first question is from Phil Nalbone of RBC Capital. Your question please.
Phillip Nalbone - RBC Capital Markets
Yes. Good morning. Let's start with the gross margin in the third quarter. Can you give us some sense or any for how much of a variance was created by the higher than expected contribution from overseas distributors?
Ernie Whiton
Yes, it was close to a point.
Phillip Nalbone - RBC Capital Markets
Okay. And what gives you a sense of conviction about an improved mix in the fourth quarter?
Ernie Whiton
Well, we had any. I would characterize as a extraordinary high mix of distributor business this quarter that's not something I expect to repeat as we look forward in the Q4, and we are looking at the business we are tracking that's what I see. So, I see less of a mix of that and I see the margins going back up to the 54%-55% range.
Phillip Nalbone - RBC Capital Markets
Okay. Let's turn to the fiscal '09 guidance your first swipe at a top line forecast that I hear you correctly you are targeting at 10% growth rate overall?
Ernie Whiton
Yes.
Phillip Nalbone - RBC Capital Markets
Okay. It strikes me as a bit conservative in light of current trend in the business and given the fact that it's barely above an industry rate of growth and your company with lots of nice differentiation in the product mix and a new product cycle. So, is the conservativism and effort to just account for the uncertainties in the macroeconomic environment or is it something else? And then how does Physio factor into your thinking about your fiscal '09 performance?
Ernie Whiton
Okay. So, two points. Number one, great observation Phil, two points. Number one, as I pointed out remember California is in there and we put in what we consider to be very conservative guidance on the U.S. military. So, when you are looking at the growth rate, I know Physio look and see 35% this year why 10% next year. If you back out California and the military you get back into the mid teens which seems pretty conservative to us based upon where we have been, but we are attempting to deliberately filled in some conservatism reflecting all that headlines that we all read about everyday and all that the things that Rick and I discussed in our earlier comments.
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