SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 0-16211
DENTSPLY International Inc.
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(Exact name of registrant as specified in its charter)
Delaware 39-1434669
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
570 West College Avenue, P. O. Box 872, York, PA 17405-0872
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(Address of principal executive offices) (Zip Code)
(717) 845-7511
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
( X ) Yes ( ) No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: At August 5, 2000 the
Company had 51,715,953 shares of Common Stock outstanding, with a par value
of $.01 per share.
Page 1 of 20
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Exhibit Index at Page 19
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1
DENTSPLY INTERNATIONAL INC.
FORM 10-Q
For Quarter Ended June 30, 2000
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INDEX
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Page No.
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PART I - FINANCIAL INFORMATION (unaudited)
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets............ 3
Consolidated Condensed Statements of Income...... 4
Consolidated Condensed Statements of Cash Flows.. 5
Consolidated Condensed Statement of
Stockholders' Equity........................... 6
Notes to Unaudited Consolidated Condensed
Financial Statements........................... 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 11
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk................................ 15
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings........................... 16
Item 4 - Submission of matters to a vote of Security.
Holders .......................................... 16
Item 6 - Exhibits and Reports on Form 8-K............ 17
Signatures........................................... 18
2
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
June 30, December 31,
2000 1999
ASSETS
Current Assets: (in thousands)
Cash and cash equivalents $ 6,892 $ 7,276
Accounts and notes receivable-trade, net 131,482 127,911
Inventories 139,217 135,480
Prepaid expenses and other current assets 41,379 44,001
Total Current Assets 318,970 314,668
Property, plant and equipment, net 177,911 180,536
Other noncurrent assets, net 15,412 14,963
Identifiable intangible assets, net 76,452 80,374
Costs in excess of fair value of net
assets acquired, net 262,262 269,047
Total Assets $ 851,007 $ 859,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 38,956 $ 40,467
Accrued liabilities 82,882 80,922
Income taxes payable 38,186 34,676
Notes payable and current portion
of long-term debt 20,569 20,155
Total Current Liabilities 180,593 176,220
Long-term debt 121,234 145,312
Deferred income taxes 20,013 20,240
Other liabilities 45,896 46,445
Total Liabilities 367,736 388,217
Minority interests in consolidated subsidiaries 2,423 2,499
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $.01 par value; .25 million
shares authorized; no shares issued
Common stock, $.01 par value; 100 million
shares authorized; 54.3 million shares
issued at June 30, 2000 and December 31, 1999 543 543
Capital in excess of par value 151,388 151,509
Retained earnings 442,740 402,408
Accumulated other comprehensive income (loss) (48,294) (43,209)
Employee stock ownership plan reserve (5,698) (6,458)
Treasury stock, at cost, 2.5 million shares
at June 30, 2000 and 1.5 million shares
at December 31, 1999 (59,831) (35,921)
Total Stockholder's Equity 480,848 468,872
Total Liaibilities and Stockholders' Equity $ 851,007 $ 859,588
<FN>
See accompanying notes to unaudited consolidated condensed financial statements
</FN>
3
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands, except per share data)
Net sales $223,290 $209,125 $435,820 $405,713
Cost of products sold 104,814 99,709 206,827 194,669
Gross profit 118,476 109,416 228,993 211,044
Selling, general and admin. expenses 78,745 73,020 152,522 140,340
Operating income 39,731 36,396 76,471 70,704
Interest expense 2,679 4,295 5,679 8,867
Interest income (452) (376) (841) (498)
Other (income) expense, net 169 (355) 192 (909)
Income before income taxes 37,335 32,832 71,441 63,244
Provision for income taxes 12,708 11,642 24,622 22,526
Net income $ 24,627 $ 21,190 $ 46,819 $ 40,718
Earnings per common share:
Basic $ .47 $ .40 $ .90 $ .77
Diluted .47 .40 .89 .77
Cash dividends declared per common share $ .06250 $ .05625 $ .12500 $ .11250
Weighted average common shares outstanding:
Basic 51,912 52,758 52,113 52,663
Diluted 52,378 52,947 52,459 52,854
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
4
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
2000 1999
(in thousands)
Cash flows from operating activities:
Net income $ 46,819 $ 40,718
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 11,932 9,883
Amortization 9,709 8,474
Other, net (4,762) (18,156)
Net cash provided by operating activities 63,698 40,919
Cash flows from investing activities:
Acquisition of businesses, net of cash acqui 1,274 3,446
Additional consideration for prior purchased
business - (5,000)
Property, plant and equipment additions (13,510) (13,989)
Other, net (865) 19
Net cash used in investing activities (13,101) (15,524)
Cash flows from financing activities:
Long-term debt repayment (102,868) (45,058)
Proceeds from long-term debt 79,194 11,894
Increase in bank overdrafts and other
short-term borrowings 1,088 15,450
Cash paid for treasury stock (26,500) -
Cash dividends paid (6,541) (5,912)
Other, net 3,229 4,561
Net cash used in financing activities (52,398) (19,065)
Effect of exchange rate changes on cash
and cash equivalents 1,417 (4,184)
Net increase (decrease) in cash and cash equivale (384) 2,146
Cash and cash equivalents at beginning of period 7,276 8,690
Cash and cash equivalents at end of period $ 6,892 $ 10,836
Supplemental disclosures of cash flow information:
Interest paid $ 4,006 $ 7,270
Income taxes paid 16,950 16,532
Non-cash investing and financing transactions:
Issuance of treasury stock in connection with t - 3,353
acquisition of certain assets
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
5
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Accumulated
Capital in Other Total
Common Excess of Retained Comprehensive ESOP Treasury Stockholders'
(in thousands) Stock Par Value Earnings Income (Loss) Reserve Stock Equity
Balance at December 31, 1999 $ 543 $ 151,509 $ 402,408 $ (43,209) $(6,458) $ (35,921) $ 468,872
Comprehensive Income:
Net income - - 46,819 - - - 46,819
Other comprehensive income
Foreign currency translation
adjustments - - - (5,085) - - (5,085)
Comprehensive Income 41,734
Exercise of stock options and
warrants - (311 - - - 2,590 2,279
Tax benefit related to stock
options & warrants exercised - 190 - - - - 190
Repurchase of 1.03 million shares
of common stock - - - - - (26,500) (26,500)
Cash dividends declared, $.125
per share - - (6,487) - - - (6,487)
Net change in ESOP reserve - - - - 760 - 760
Balance at June 30, 2000 $ 543 $ 151,388 $ 442,740 $ (48,294) $(5,698) $ (59,831) $ 480,848
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
6
DENTSPLY INTERNATIONAL INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
The accompanying unaudited interim consolidated condensed financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) which in the opinion of management are necessary for a fair
presentation of financial position, results of operations and cash flows for
the interim periods. These interim financial statements conform to the
requirements for interim financial statements and consequently do not
include all the disclosures normally required by generally accepted
accounting principles. Disclosures included in the Company's most recent
10-K filed March 30, 2000 are updated where appropriate.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated condensed financial statements include the accounts of
DENTSPLY International Inc. (the "Company") and its subsidiaries.
Inventories
Inventories are stated at the lower of cost or market. At June 30,
2000 and December 31, 1999, the cost of $13.3 million or 10% and $15.5
million or 11%, respectively, of inventories was determined by the last-in,
first-out (LIFO) method. The cost of other inventories was determined by
the first-in, first-out (FIFO) or average cost method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Except for leasehold improvements, depreciation for financial
reporting purposes is computed by the straight-line method over the
following estimated useful lives: buildings - generally 40 years; and
machinery and equipment - 4 to 15 years. The cost of leasehold improvements
is amortized over the shorter of the estimated useful life or the term of
the lease. For income tax purposes, depreciation is computed using various
methods.
Derivative Financial Instruments
The Company's only involvement with derivative financial instruments is
forward contracts to hedge certain assets and liabilities denominated in
foreign currencies and swap agreements which convert current floating
interest debt to fixed rates.
7
NOTE 2 - EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted
earnings per common share:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
(in thousands, except per share data)
Basic EPS Computation:
Numerator (Net Income) $24,627 $21,190 $46,819 $40,718
Denominator
Common shares outstanding 51,912 52,758 52,113 52,663
Basic EPS $0.47 $0.40 $0.90 $0.77
Diluted EPS Computation:
Numerator (Net Income) $24,627 $21,190 $46,819 $40,718
Denominator
Common shares outstanding 51,912 52,758 52,113 52,663
Incremental shares from
assumed exercise of dilutive
options and warrants 466 189 346 191
Total shares 52,378 52,947 52,459 52,854
Diluted EPS $0.47 $0.40 $0.89 $0.77
NOTE 3 - INVENTORIES
Inventories consist of the following:
June 30, December 31,
2000 1999
(in thousands)
Finished goods $ 82,917 $ 77,786
Work-in-process 24,852 25,519
Raw materials and supplies 31,448 32,175
$139,217 $135,480
Pre-tax income was $.2 million lower in the six months ended June 30,
2000 and $.3 million lower for the same period in 1999 as a result of using
the LIFO method compared to the first-in, first-out (FIFO) method.
8
If the FIFO method had been used to determine the cost of the LIFO
inventories, the amounts at which net inventories are stated would be lower
than reported at June 30, 2000 and December 31, 1999 by $.1 million and $.3
million, respectively.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
June 30, December 31,
2000 1999
Assets, at cost: (in thousands)
Land $ 14,621 $ 15,405
Buildings and improvements 85,386 86,148
Machinery and equipment 164,738 155,735
Construction in progress 10,136 9,836
274,881 267,124
Less: Accumulated depreciation 96,970 86,588
$177,911 $180,536
NOTE 5 - RESTRUCTURING AND OTHER COSTS
In 1998, the Company recorded restructuring charges related to the closure
of its German tooth manufacturing facility and the discontinuance of its New
Image division's intra-oral camera business. The activity related to these
restructurings was disclosed in the Company's most recent Form 10-K filed
March 30, 2000 (Note 15). There was no material activity related to these
restructurings during the period ended June 30, 2000.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
DENTSPLY and its subsidiaries are from time to time parties to lawsuits
arising out of their respective operations. The Company believes that
pending litigation to which DENTSPLY is a party will not have a material
adverse effect upon its consolidated financial position or results of
operations.
9
In June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte Division with respect to the
distribution of artificial teeth and related products. On January 5, 1999
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and transferred to the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The class action
filed on behalf of the dentists has been dismissed by the plaintiffs. The
private party suits seek damages in an unspecified amount. The Company has
filed a motion for summary judgment in the Department of Justice case. It
is the Company's position that the conduct and activities of the Trubyte
Division do not violate the antitrust laws.
10
DENTSPLY INTERNATIONAL INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements made by the Company, including without limitation,
statements containing the words "plans", "anticipates", "believes",
"expects", or words of similar import constitute forward-looking statements
which are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements involve risks and uncertainties which may
materially affect the Company's business and prospects, and should be read
in conjunction with the risk factors set forth in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
RESULTS OF OPERATIONS
Quarter Ended June 30, 2000 Compared to Quarter Ended June 30, 1999
For the quarter ended June 30, 2000, net sales increased $14.2 million, or
6.8%, to $223.3 million, up from $209.1 million in the same period of 1999.
Base business (internal sales growth exclusive of acquisition/divestitures
and the impact of currency translation) sales grew 9.5%. The impact of
currency translation had a significant negative effect of 2.6% on the second
quarter results compared to the comparable period in 1999 due to the
strengthening of the U.S. dollar against the major European currencies while
divestitures in 1999 had a negative 0.1% impact on net sales growth.
Sales in the United States for the second quarter grew 9.8%. Base business
growth in all equipment and consumable product categories was strong.
European base business sales, including the Commonwealth of Independent
States, increased 4.5%. This, however, was offset by the impact of currency
translation, which had a negative 8.4% effect on the quarter. Sales in
Germany of consumables and ultrasonic equipment rebounded compared to the
prior year quarter but were partially offset by weak sales of x-ray
equipment throughout Europe in anticipation of the launch of new models in
the third quarter of 2000.
Asian (excluding Japanese) and Latin American sales increased 10.2% as the
12.6% increase in base business sales was offset slightly by the impact of
currency translation, which had a negative 2.4% effect on the quarter.
Asia's base business grew 22.1% as the Asian economy continued to stabilize.
Base business in Latin America grew 8.1% offset by a decline of 3.7% due to
currency translation.
11
Sales in the rest of the world (including Japan) grew 17.3%: 19.0% from base
business primarily in Canada, Middle East/Africa and Australia; less 0.1%
from divestiture; and less 1.6% from the impact of currency translation.
The increase in Canadian base business sales was 26.2% and included
significant growth in endodontic products.
Gross profit grew $9.1 million or 8.3% in the second quarter due to higher
sales and gross margin rate improvement caused by favorable product mix and
manufacturing improvements along with restructuring benefits. The 2000
second quarter gross profit percentage was 53.1% compared to 52.3% for the
second quarter of 1999.
Selling, general and administrative (SG&A) expenses increased $5.7 million,
or 7.8%. As a percentage of sales, expenses increased from 34.9% in the
second quarter of 1999 to 35.3% for the same period of 2000. These expenses
have increased primarily due to additional sales and marketing expenses,
research and development activities and increased legal expenses. Legal
expenses are expected to continue to run at a higher level than 1999
throughout the year and selling expenses will run higher in the second half
as new sales representatives are brought on board.
Net interest expense decreased $1.7 million in the second quarter of 2000
due to lower debt in 2000 and savings resulting from lower rate Swiss debt.
Other (income) expense was unfavorable to 1999 by $0.5 million due mainly to
an increase in currency transaction losses of $0.4 million.
Income before income taxes increased $4.5 million, or 13.7% to $37.3 million
from $32.8 million in the second quarter of 1999. The effective tax rate
for operations was lowered to 34.0% in the second quarter of 2000 compared
to 35.5% in the second quarter of 1999 reflecting savings from federal,
state and foreign tax planning activities. Net income increased $3.4
million, or 16.2%, from the second quarter of 1999 due to higher sales,
higher gross profit as a percentage of net sales, lower net interest
expense, and a lower provision for income tax. Basic and diluted earnings
per common share increased from $.40 in 1999 to $.47 in 2000, or 17.5%.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
For the first half of 2000, net sales increased $30.1 million, or 7.4%, to
$435.8 million, up from $405.7 million in the same period of 1999. The
impact of currency translation had a significant negative effect of 2.8% on
the first half sales compared to the comparable period in 1999 due to the
strengthening of the U.S. dollar against the major European currencies
while divestitures in 1999 had a negative 0.4% impact on net sales growth.
Base business growth was 10.6% for the first six months.
12
Sales in the United States grew 11.1%, with strong growth in ultrasonic and
x-ray equipment, and throughout the consumables categories.
European base business sales, including the Commonwealth of Independent
States, increased 4.9%. This, however, was offset by the impact of
currency translation, which had a negative 9.3% effect on the first six
months of 2000.
Asian (excluding Japanese) and Latin American sales increased 18.2% as the
20.4% increase in base business sales was offset slightly by the impact of
currency translation, which had a negative 2.2% effect on the first six
months. Asia's base business grew 42.8% as the Asian economy continued to
stabilize. Prior year Asian sales were impacted by returns from over
extended dealers in India. The Asian base business sales increase was 26.4%
without India. Base business in Latin America grew 11.7%, including some
large intermittent government and dental school sales, offset by a decline
of 3.3% due to currency translation.
Sales in the rest of the world grew 12.2%: 12.5% from base business
primarily in Canada, Middle East/Africa and Australia; less 0.2% from
divestiture; and less 0.1% from the impact of currency translation.
Gross profit grew $17.9 million or 8.5% in the first half of 2000 due to
higher sales and a gross margin rate improvement. The 2000 first half
gross profit percentage was 52.5% compared to 52.0% for the first half of
1999.
SG&A expenses increased $12.2 million, or 8.7%. As a percentage of sales,
expenses increased from 34.6% in the first half of 1999 to 35.0% for the
same period of 2000. The first half of 2000 included an increase of $3.5
million in legal expenses, primarily for litigation with the Justice
Department, defense of endodontic patents and litigation related to the
disposable air/water syringe tips.
Net interest expense decreased $3.5 million in the first half of 2000 due
to lower debt in 2000 and savings resulting from lower rate Swiss debt.
Other (income) expense was unfavorable to 1999 by $1.1 million.
The effective tax rate for operations was lowered to 34.5% in the first
half of 2000 compared to 35.6% in the first half of 1999 reflecting savings
from federal, state and foreign tax planning activities.
Net income increased $6.1 million, or 15.0%, from the first half of 1999
due to higher sales, higher gross profit percentage, lower interest
expense, and a lower income tax rate; partially offset by the increase in
operating expenses and the unfavorable fluctuation in other (income)
expense. Basic earnings per common share increased from $.77 in 1999 to
$.90 in 2000, or 16.9%. Diluted earnings per common share increased from
$.77 in 1999 to $.89 in 2000, or 15.6%
13
LIQUIDITY AND CAPITAL RESOURCES
In December 1999, the Board of Directors authorized a stock buyback program
for 2000 to purchase up to 1.0 million shares of common stock on the open
market or in negotiated transactions. In March 2000, the Board of Directors
made an amendment to this program which increased the number of shares to
4.0 million. During the first six months of 2000, the Company repurchased
1.0 million shares of its common stock for $26.5 million. The timing and
amounts of any additional purchases will depend upon many factors, including
market conditions and the Company's business and financial condition.
The Company's current ratio was 1.8 with working capital of $138.4 million
at June 30, 2000. This compares with a current ratio of 1.8 and working
capital of $138.4 million at December 31, 1999.
The company's long-term debt decreased $24.1 million from December 31, 1999
to $121.2 million. The resulting long-term debt to total capitalization at
June 30, 2000 was 20.1% compared to 23.7% at December 31, 1999. At the
beginning of the first quarter, the Company converted approximately $60
million under its revolving credit agreement to Swiss francs. This enabled
the Company to not only reduce its interest expense by 2.5% to 3.5% but also
allowed the Company to naturally hedge its Swiss franc exposure on its
investments in Switzerland. The Company expects on an ongoing basis, to be
able to finance cash requirements, including capital expenditures, stock
repurchases, debt service, and possible future acquisitions, from the funds
generated from operations and amounts available under the existing Bank
Revolving Loan and Commercial Paper facilities.
For the six months ended June 30, 2000, cash flows from operating activities
were $63.7 million compared to $40.9 million for the six months ended June
30, 1999. The 1999 cash flows from operating activities included $11.7
million of negative cash flows associated with the two restructurings
recorded in 1998. The increase of $22.8 million results primarily from
increased earnings, decreases in deferred income taxes and prepaid expenses
and other current assets and increases in accrued liabilities offset by
increases in inventories.
Investing activities for the six months ended June 30, 2000 include capital
expenditures of $13.5 million.
Certain assets of Tulsa Dental Products LLC were purchased in January 1996
for $75.1 million plus $5.0 million in May 1999 related to contingent
consideration (earn-out) provisions in the purchase agreement based on
performance of the acquired business. The agreement provides for an
additional earn-out payment based on the future operating performance of the
Tulsa Dental business for one of the two-year periods ending December 31,
2000, December 31, 2001 or December 31, 2002, as selected by the seller.
Based on current performance, this earn-out is estimated to be approximately
$70-80 million.
14
NEW STANDARDS
Statement of Financial Accounting Standards No. 133 ("FASB 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued
by the Financial Accounting Standards Board (FASB) in June 1998. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement was originally
required to be adopted effective January 1, 2000; however, in June 1999 FASB
issued Statement No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133",
which delays the effective date to January 1, 2001. In June 2000 FASB
issued Statement No. 138 "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - An amendment of FAS 133". This statement amends
certain areas of FASB 133 that have caused implementation difficulties for
some companies getting ready for its application. This amendment is also
effective on January 1, 2001. The Company has put together a team, which is
currently evaluating the numerous provisions of these standards and how they
will impact the Company's results of operations, financial position and cash
flows. The Company has not yet determined the full effect of adopting these
new statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, which addresses principles of revenue
recognition. The Company is currently evaluating the impact SAB No. 101 will
have on its financial statements and revenue recognition policies and
procedures, if any.
EURO CURRENCY CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "participating countries") established fixed conversion rates
between their legacy currencies and the newly established Euro currency.
The legacy currencies will remain legal tender in the participating
countries between January 1, 1999 and January 1, 2002 (the "transition
period"). Starting January 1, 2002 the European Central Bank will issue
Euro-denominated bills and coins for use in cash transactions. On or before
July 1, 2002, the legacy currencies of participating countries will no
longer be legal tender for any transactions.
The Company's various operating units which are affected by the Euro
conversion intend to keep their books in their respective legacy currency
through a portion of the three year transition period. At this time, the
Company does not expect the reasonable foreseeable consequences of the Euro
conversion to have material adverse effects on the Company's business,
operations or financial condition.
IMPACT OF INFLATION
The Company has generally offset the impact of inflation on wages and the
cost of purchased materials by reducing operating costs and increasing
selling prices to the extent permitted by market conditions.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
There have been no significant material changes to the market risks as
disclosed in the Company's Annual Report on Form 10-K filed for the year
ending December 31, 1999.
15
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
DENTSPLY and its subsidiaries are from time to time parties to lawsuits
arising out of their respective operations. The Company believes that
pending litigation to which DENTSPLY is a party will not have a material
adverse effect upon its consolidated financial position or results of
operations.
In June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte Division with respect to the
distribution of artificial teeth and related products. On January 5, 1999
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and transferred to the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The class action
filed on behalf of the dentists has been dismissed by the plaintiffs. The
private party suits seek damages in an unspecified amount. The Company has
filed a motion for summary judgment in the Department of Justice case. It
is the Company's position that the conduct and activities of the Trubyte
Division do not violate the antitrust laws.
Item 4 - Submission of Matters to a Vote of Security Holders
(a) On May 24, 2000, the Company held its 2000 Annual Meeting of
Stockholders.
(b) Not applicable.
(c) The following matters were voted upon at the Annual Meeting, with
the results indicated:
1. Election of Class II Directors:
Votes Broker
Nominee Votes For Withheld Non-Votes
------- ---------- -------- ----------
Cynthia P. Danaher 40,971,357 601,764 N/A
Leslie A. Jones 40,921,181 651,940 N/A
Edgar H. Schollmaier 41,042,860 530,261 N/A
2. Proposal to ratify the appointment of PricewaterhouseCoopers
LLP, independent accountants, to audit the books and
accounts of the Company for the year ending December 31, 2000:
Votes For: 40,661,458 Votes Against: 868,816
Abstentions: 42,847 Broker Non-Votes: N/A
(d) Not applicable.
16
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed herewith:
---------
Number Description
------ -----------
27 Financial Data Schedule (pursuant to Item 601(c)(1)(iv)
of Regulation S-K, this exhibit shall not be deemed
filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended)
(b) Reports on Form 8-K
-------------------
On February 16, 2000 the Company filed a Form 8-K, under item 4,
reporting that it had changed its Certifying Accountants effective
for the 2000 fiscal year and other information required by
Regulation S-K Item 304. On March 1, 2000, Amendment 1 to this
Form 8-K was filed on Form 8-K/A, under items 4 and 7. This
amendment related to the inclusion of a letter from the former
accountants stating whether they agree or disagree with the
statements made by the Company under item 4. On April 6, 2000,
Amendment 2 to this Form 8-K was filed on Form 8-K/A, under items 4
and 7. The purpose of this amendment was to provide an update of
the information required by Regulation S-K Item 304 through March
30, 2000, the date the former accountants' final audit report was
filed with the SEC, within the Company's annual report on Form 10-K.
17
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENTSPLY INTERNATIONAL INC.
August 14, 2000 /s/ John C. Miles II
- ----------------- ----------------------------------
Date John C. Miles II
Chairman and
Chief Executive Officer
August 14, 2000 /s/ William R. Jellison
- ----------------- ----------------------------------
Date William R. Jellison
Senior Vice President and
Chief Financial Officer
18
EXHIBIT INDEX
-------------
Number Description Sequential Page No.
------ ----------- -------------------
27 Financial Data Schedule 20
(pursuant to Item 601(c)(1)(iv) of
Regulation S-K, this exhibit shall
not be deemed filed for purposes
of Section 18 of the Securities
Exchange Act of 1934, as amended)
19