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 March 31, 2005
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.
_____________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 39-1434669
_____________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
221 West Philadelphia Street, York, PA 17405-0872
_____________________________________________________________________
(Address of principal executive offices) (Zip Code)
(717) 845-7511
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
( 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 May 5, 2005 the Company
had 80,375,285 shares of Common Stock outstanding, with a par value of $.01
per share.
Page 1 of 32
DENTSPLY INTERNATIONAL INC.
FORM 10-Q
For Quarter Ended March 31, 2005
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
Consolidated Condensed Statements of Income 3
Consolidated Condensed Balance Sheets 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Unaudited Interim Consolidated Condensed
Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk 29
Item 4 - Controls and Procedures 29
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 30
Item 2 - Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities 31
Item 6 - Exhibits and Reports on Form 8-K 31
Signatures 32
2
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
Three Months Ended
March 31,
2005 2004
(in thousands, except per share amounts)
Net sales $ 406,975 $ 414,359
Cost of products sold 198,034 210,467
Gross profit 208,941 203,892
Selling, general and administrative expenses 138,548 133,062
Restructuring and other costs (Note 9) 268 724
Operating income 70,125 70,106
Other income and expenses:
Interest expense 6,327 5,947
Interest income (2,310) (674)
Other (income) expense, net (4,242) 223
Income before income taxes 70,350 64,610
Provision for income taxes 21,301 18,842
Income from continuing operations 49,049 45,768
Income from discontinued operations,
(Including gain on sale in the three months ended
March 31, 2004 of $43,031) (Note 6) -- 43,064
Net income $ 49,049 $ 88,832
Earnings per common share - basic (Note 3)
Continuing operations $ 0.61 $ 0.57
Discontinued operations -- 0.54
Total earnings per common share - basic $ 0.61 $ 1.11
Earnings per common share - diluted (Note 3)
Continuing operations $ 0.60 $ 0.56
Discontinued operations -- 0.53
Total earnings per common share - diluted $ 0.60 $ 1.09
Cash dividends declared per common share $ 0.06000 $ 0.05250
Weighted average common shares outstanding (Note 3):
Basic 80,703 79,922
Diluted 82,289 81,501
<FN>
See accompanying notes to unaudited interim consolidated condensed financial statements.
</FN>
3
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
March 31, December 31,
2005 2004
(in thousands)
Assets
Current Assets:
Cash and cash equivalents $ 436,702 $ 506,369
Accounts and notes receivable-trade, net 251,259 238,873
Inventories, net (Notes 1 and 7) 224,091 213,709
Prepaid expenses and other current assets 113,640 97,458
Total Current Assets 1,025,692 1,056,409
Property, plant and equipment, net 396,790 407,527
Identifiable intangible assets, net 246,202 258,084
Goodwill, net 977,496 996,262
Other noncurrent assets 50,237 79,863
Total Assets $ 2,696,417 $ 2,798,145
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 105,005 $ 91,576
Accrued liabilities 153,129 179,765
Income taxes payable 65,546 60,387
Notes payable and current portion
of long-term debt 69,738 72,879
Total Current Liabilities 393,418 404,607
Long-term debt 700,900 779,940
Deferred income taxes 56,338 58,196
Other noncurrent liabilities 111,356 110,829
Total Liabilities 1,262,012 1,353,572
Minority interests in consolidated subsidiaries 587 600
Commitments and contingencies (Note 11)
Stockholders' Equity:
Preferred stock, $.01 par value; .25 million
shares authorized; no shares issued -- --
Common stock, $.01 par value; 200 million shares authorized;
81.4 million shares issued at March 31, 2005 and December 31, 2004 814 814
Capital in excess of par value 184,403 189,277
Retained earnings 1,170,479 1,126,262
Accumulated other comprehensive income (Note 2) 122,280 164,100
Treasury stock, at cost, 0.8 million shares at March 31, 2005
and December 31, 2004 (44,158) (36,480)
Total Stockholders' Equity 1,433,818 1,443,973
Total Liabilities and Stockholders' Equity $ 2,696,417 $ 2,798,145
<FN>
See accompanying notes to unaudited interim consolidated condensed financial statements.
</FN>
4
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
2005 2004
(in thousands)
Cash flows from operating activities:
Income from continuing operations $ 49,049 $ 45,768
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 11,100 10,883
Amortization 2,332 2,140
Restructuring and other costs 268 724
Cash flows from discontinued operating activities -- (2,665)
Other, net (37,781) (9,509)
Net cash provided by operating activities 24,968 47,341
Cash flows from investing activities:
Capital expenditures (8,548) (11,162)
Acquisitions of businesses, net of cash acquired (5,854) (16,000)
Expenditures for identifiable intangible assets (96) --
Proceeds from sale of Gendex -- 102,500
Cash flows used in discontinued operations' investing activities -- (357)
Other, net 2,896 (1,599)
Net cash (used in) provided by investing activities (11,602) 73,382
Cash flows from financing activities:
Payments on long-term borrowings (47,370) (574)
Net change in short-term borrowings 1,717 305
Cash paid for treasury stock (31,109) (11,944)
Cash dividends paid (4,839) (4,159)
Proceeds from exercise of stock options 12,920 21,915
Other, net 3,416 --
Net cash (used in) provided by financing activities (65,265) 5,543
Effect of exchange rate changes on cash and cash equivalents (17,768) (2,311)
Net (decrease) increase in cash and cash equivalents (69,667) 123,955
Cash and cash equivalents at beginning of period 506,369 163,755
Cash and cash equivalents at end of period $ 436,702 $ 287,710
<FN>
See accompanying notes to unaudited interim consolidated condensed financial statements.
</FN>
5
DENTSPLY INTERNATIONAL INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2005
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
statement 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 Form 10-K filed
March 16, 2005 are updated where appropriate.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. Intercompany accounts and transactions
are eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost or market. At March 31, 2005,
the cost of $12.0 million or 5% and at December 31, 2004, the cost of $10.8
million or 5% of inventories were 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 methods.
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 higher
than reported by $1.7 million at March 31, 2005 and by $1.4 million at
December 31, 2004.
Identifiable Finite-lived Intangible Assets
Identifiable finite-lived intangible assets, which primarily consist of
patents, trademarks and licensing agreements, are amortized on a
straight-line basis over their estimated useful lives. These assets are
reviewed for impairment whenever events or circumstances provide evidence
that suggest that the carrying amount of the asset may not be recoverable.
The Company closely monitors intangible assets related to new technology for
indicators of impairment as these assets have more risk of becoming impaired.
Impairment is based upon an evaluation of the identifiable undiscounted cash
flows. If impaired, the resulting charge reflects the excess of the asset's
carrying cost over its fair value.
Goodwill and Indefinite-Lived Intangible Assets
The Company follows Statement of Financial Accounting Standards No. 142
("SFAS 142"), "Goodwill and Other Intangible Assets" which requires that an
annual impairment approach be applied to goodwill and indefinite-lived
intangible assets. The Company performs annual impairment tests based upon a
fair value approach rather than an evaluation of the undiscounted cash flows.
If impairment is identified under SFAS 142, the resulting charge is
determined by recalculating goodwill through a hypothetical purchase price
allocation of the fair value and reducing the current carrying value to the
extent it exceeds the recalculated goodwill. If impairment is identified on
indefinite-lived intangibles, the resulting charge reflects the excess of the
asset's carrying cost over its fair value. The Company's goodwill decreased
by $18.8 million during the three months ended March 31, 2005 to $977.5
million, which was due primarily to the effects of foreign currency
translation.
6
The Company performs the required impairment tests annually in the second
quarter. This impairment assessment includes an evaluation of approximately
20 reporting units. In addition to minimum annual impairment tests, SFAS 142
also requires that impairment assessments be made more frequently if events
or changes in circumstances indicate that the goodwill or indefinite-lived
intangible assets might be impaired. As the Company learns of such changes in
circumstances through periodic analysis of actual results or through the
annual development of operating unit business plans in the fourth quarter of
each year, for example, impairment assessments are performed as necessary.
Derivative Financial Instruments
The Company records all derivative instruments on the balance sheet at
their fair value and changes in fair value are recorded each period in
current earnings or comprehensive income in accordance with Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities".
The Company employs derivative financial instruments to hedge certain
anticipated transactions, firm commitments, or assets and liabilities
denominated in foreign currencies. Additionally, the Company utilizes
interest rate swaps to convert floating rate debt to fixed rate, fixed rate
debt to floating rate, cross currency basis swaps to convert debt denominated
in one currency to another currency, and commodity swaps to fix its variable
raw materials costs.
Revenue Recognition
Revenue, net of related discounts and allowances, is recognized in
accordance with shipping terms and as title and risk of loss pass to
customers. Net sales include shipping and handling costs collected from
customers in connection with the sale.
Certain of the Company's customers are offered cash rebates based on
targeted sales increases. In accounting for these rebate programs, the
Company records an accrual as a reduction of net sales for the estimated
rebate as sales take place throughout the year in accordance with EITF 01-09,
" Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)".
The Company establishes a provision recorded against revenue for product
returns in instances when incorrect products or quantities are inadvertently
shipped. In addition, the Company establishes provisions for costs or losses
that are expected with regard to returns for which revenue has been
recognized for event-driven circumstances relating to product quality issues,
complaints and / or other product specific issues.
7
Stock Compensation
The Company has stock-based employee compensation plans and applies the
intrinsic value method in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for these plans. Under this method, no
compensation expense is recognized for fixed stock option plans, provided
that the exercise price is greater than or equal to the price of the stock at
the date of grant. The following table illustrates the effect on net income
and earnings per share if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", to stock-based employee
compensation (see also discussion of SFAS 123R in New Accounting
Pronouncements).
Three Months Ended
March 31,
2005 2004
(in thousands, except
per share amounts)
Net income, as reported $ 49,049 $ 88,832
Deduct: Stock-based employee compensation
expense determined under fair value
method, net of related tax (2,773) (3,251)
Pro forma net income $ 46,276 $ 85,581
Basic earnings per common share
As reported $ 0.61 $ 1.11
Pro forma under fair value based method $ 0.57 $ 1.07
Diluted earnings per common share
As reported $ 0.60 $ 1.09
Pro forma under fair value based method $ 0.56 $ 1.05
NOTE 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, are as follows:
Three Months Ended
March 31,
2005 2004
(in thousands)
Net income $ 49,049 $ 88,832
Other comprehensive income:
Foreign currency translation adjustments (47,900) (10,981)
Unrealized gain on available-for-sale securities 14 23
Net gain (loss) on derivative financial
instruments 6,066 (2,942)
Total comprehensive income $ 7,229 $ 74,932
During the quarters ended March 31, 2005 and 2004, foreign currency
translation adjustments included translation losses of $58.8 million and
$14.9 million, respectively, offset by gains of $10.9 million and $3.9
million, respectively, on the Company's loans designated as hedges of net
investments.
8
The balances included in accumulated other comprehensive income in the
consolidated balance sheets are as follows:
March 31, December 31,
2005 2004
(in thousands)
Foreign currency translation adjustments $ 131,516 $ 179,416
Net loss on derivative financial
instruments (6,573) (12,639)
Unrealized gain on available-for-sale securities 356 342
Minimum pension liability (3,019) (3,019)
$ 122,280 $ 164,100
The cumulative foreign currency translation adjustments included
translation gains of $239.1 million and $297.9 million as of March 31, 2005
and December 31, 2004, respectively, offset by losses of $107.6 million and
$118.5 million, respectively, on loans designated as hedges of net
investments.
NOTE 3 - EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted
earnings per common share:
Three Months Ended
March 31,
2005 2004
(in thousands, except
per share amounts)
Basic Earnings Per Common Share Computation
Income from continuing operations $49,049 $45,768
Income from discontinued operations -- 43,064
Net income $49,049 $88,832
Common shares outstanding 80,703 79,922
Earnings per common share from continuing operations $ 0.61 $ 0.57
Earnings per common share from discontinued operations -- 0.54
Total earnings per common share - basic $ 0.61 $ 1.11
Diluted Earnings Per Common Share Computation
Income from continuing operations $49,049 $45,768
Income from discontinued operations -- 43,064
Net income $49,049 $88,832
Common shares outstanding 80,703 79,922
Incremental shares from assumed exercise
of dilutive options 1,586 1,579
Total shares 82,289 81,501
Earnings per common share from continuing operations $ 0.60 $ 0.56
Earnings per common share from discontinued operations -- 0.53
Total earnings per common share - diluted $ 0.60 $ 1.09
9
Options to purchase 1.4 million shares of common stock that were
outstanding during the quarter ended March 31, 2004 were not included in the
computation of diluted earnings per share since the options' exercise prices
were greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.
NOTE 4 - BUSINESS ACQUISITIONS
Effective January 2005, the Company acquired all the outstanding capital
stock of GAC SA from the Gebroulaz Foundation for consideration of
approximately 5.0 million Euro (approximately $6.7 million). The purchase
agreement provides for an additional earn-out payment based upon the
operating performance of the business during the three-year period ending
December 31, 2007. If these financial operating targets are met, this
earn-out would be between 4% and 8% of the cumulative sales for the three
years ended December 31, 2007. GAC SA was primarily a distributor of
orthodontic products with subsidiaries in Switzerland, France, Germany and
Norway. The results of operations of GAC SA are included in the accompanying
financial statements since the effective date of the transaction. The
purchase price has been allocated on the basis of preliminary estimates of
the fair values of assets acquired and liabilities assumed. The Company
purchased GAC SA primarily to further strengthen its orthodontic business
through the acquired company's presence in the orthodontic market in Europe.
NOTE 5 - SEGMENT INFORMATION
The Company follows Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131 establishes standards for disclosing information
about reportable segments in financial statements. The Company has numerous
operating businesses covering a wide range of products and geographic
regions, primarily serving the professional dental market. Professional
dental products represented approximately 98% of sales for the periods ended
March 31, 2005 and 2004.
The operating businesses are combined into operating groups which have
overlapping product offerings, geographical presence, customer bases,
distribution channels, and regulatory oversight. These operating groups are
considered the Company's reportable segments under SFAS 131 as the Company's
chief operating decision-maker regularly reviews financial results at the
operating group level and uses this information to manage the Company's
operations. The accounting policies of the segments are consistent with those
described for the consolidated financial statements in the summary of
significant accounting policies (see Note 1). The Company measures segment
income for reporting purposes as net operating profit before restructuring,
interest and taxes. A description of the services provided within each of the
Company's four reportable segments is provided below.
In January 2005, the Company reorganized its operating group structure
consolidating into four operating groups from the five groups under the prior
management structure. The segment information below reflects this revised
structure for all periods shown.
A description of the activities provided within each of the Company's four
reportable segments follows:
U.S. Consumable Business/Canada
This business group includes responsibility for the design, manufacturing,
sales, and distribution for certain small equipment, chairside consumable
products and dental anesthetics in the U.S. and the sales and distribution of
all such Company products in Canada.
Dental Consumables - Europe, CIS, Middle East, Africa/European Dental
Laboratory Business
This business group includes responsibility for the design and manufacture
of dental laboratory products in Germany and the Netherlands and the sales
and distribution of these products in Europe, Eastern Europe, Middle East,
Africa and the CIS. In addition, the group has responsibility for the
design, manufacturing, sales, and distribution for certain small equipment
and chairside consumable products and certain specialty products in Europe,
Middle East, Africa and the CIS.
10
Australia/Latin America/Endodontics/Non-dental
This business group includes responsibility for the design, manufacture,
and/or sales and distribution of dental anesthetics, chairside consumable and
laboratory products in Brazil. It also has responsibility for the sales and
distribution of all Company dental products sold in Australia and Latin
America. This business group also includes the responsibility for the design
and manufacturing for endodontic products in the U.S., Switzerland and
Germany and is responsible for sales and distribution of all Company
endodontic products in the U.S., Canada, Switzerland, Benelux, Scandinavia,
and Eastern Europe, and certain endodontic products in Germany. This
business group is also responsible for the Company's non-dental business.
U.S. Dental Laboratory Business/Implants/Orthodontics/Japan/Asia
This business group includes the responsibility for the design,
manufacture, sales and distribution for laboratory products in the U.S. and
the sales and distribution of U.S. manufactured laboratory products in
certain international markets; the design, manufacture, world-wide sales and
distribution of the Company's dental implant and bone generation products;
and the world-wide sales and distribution of the Company's orthodontic
products. The business is responsible for sales and distribution of all
Company products throughout Asia and Japan.
Significant interdependencies exist among the Company's operations in
certain geographic areas. Inter-group sales are at prices intended to provide
a reasonable profit to the manufacturing unit after recovery of all
manufacturing costs and to provide a reasonable profit for purchasing
locations after coverage of marketing and general and administrative costs.
Generally, the Company evaluates performance of the operating groups based
on the groups' operating income and net third party sales excluding precious
metal content.
The following tables set forth information about the Company's operating
groups for the quarters ended March 31, 2005 and 2004:
Third Party Net Sales
Three Months Ended
March 31,
2005 2004
(in thousands)
U.S. Consumable Business / Canada $ 79,795 $ 73,362
Dental Consumables - Europe, CIS, Middle
East, Africa/European Dental Laboratory
Business 120,399 148,987
Australia/Latin America/Endodontics/
Non-Dental 87,559 81,387
U.S. Dental Laboratory Business/Implants/
Orthodontics/Japan/Asia 120,148 112,131
All Other (a) (926) (1,508)
Total $ 406,975 $ 414,359
(a) Includes: operating expenses of two distribution warehouses not managed
by named segments, Corporate and inter-segment eliminations.
11
Third Party Net Sales, excluding precious metal content
Three Months Ended
March 31,
2005 2004
(in thousands)
U.S. Consumable Business / Canada $ 79,566 73,362
Dental Consumables - Europe, CIS, Middle
East, Africa/European Dental Laboratory
Business 96,205 107,676
Australia/Latin America/Endodontics/
Non-Dental 87,167 81,080
U.S. Dental Laboratory Business/Implants/
Orthodontics/Japan/Asia 107,324 97,979
All Other (a) (926) (1,508)
Total excluding Precious Metal Content 369,336 358,589
Precious Metal Content 37,639 55,770
Total including Precious Metal Content $ 406,975 $ 414,359
Intersegment Net Sales
Three Months Ended
March 31,
2005 2004
(in thousands)
U.S. Consumable Business / Canada $ 70,570 $ 77,493
Dental Consumables - Europe, CIS, Middle
East, Africa/European Dental Laboratory
Business 42,383 43,450
Australia/Latin America/Endodontics/
Non-Dental 16,967 13,201
U.S. Dental Laboratory Business/Implants/
Orthodontics/Japan/Asia 9,541 8,103
All Other (a) 42,111 41,968
Eliminations (181,572) (184,215)
Total $ -- $ --
(a) Includes: operating expenses of two distribution warehouses not managed
by named segments, Corporate and inter-segment eliminations.
12
Segment Operating Income
Three Months Ended
March 31,
2005 2004
(in thousands)
U.S. Consumable Business / Canada $ 19,538 $ 20,640
Dental Consumables - Europe, CIS, Middle
East, Africa/European Dental Laboratory
Business 9,938 19,220
Australia/Latin America/Endodontics/
Non-Dental 39,079 34,523
U.S. Dental Laboratory Business/Implants/
Orthodontics/Japan/Asia 17,265 13,982
All Other (a) (15,427) (17,535)
Segment Operating Income 70,393 70,830
Reconciling Items:
Restructuring and other costs 268 724
Interest Expense 6,327 5,947
Interest Income (2,310) (674)
Other (income) expense, net (4,242) 223
Income before income taxes $ 70,350 $ 64,610
Assets
March 31, December 31,
2005 2004
(in thousands)
U.S. Consumable Business / Canada $ 981,196 $ 982,086
Dental Consumables - Europe, CIS, Middle
East, Africa/European Dental Laboratory
Business 656,412 713,592
Australia/Latin America/Endodontics/
Non-Dental 586,929 582,828
U.S. Dental Laboratory Business/Implants/
Orthodontics/Japan/Asia 406,604 390,140
All Other (a) 65,276 129,499
Total $2,696,417 $2,798,145
(a) Includes: operating expenses of two distribution warehouses not managed
by named segments, Corporate and inter-segment eliminations.
13
NOTE 6 - DISCONTINUED OPERATIONS
On February 27, 2004, the Company sold the assets and related liabilities
of the Gendex business to Danaher Corporation for $102.5 million cash, plus
the assumption of certain pension liabilities. Although the sales agreement
contained a provision for a post-closing adjustment to the purchase price
based on changes in certain balance sheet accounts, no such adjustments were
necessary. This transaction resulted in a pre-tax gain of $72.9 million
($43.0 million after-tax). Gendex is a manufacturer of dental x-ray
equipment and accessories and intraoral cameras. The sale of Gendex narrows
the Company's product lines to focus primarily on dental consumables.
In addition, during the first quarter of the year 2004, the Company
discontinued the operations of the Company's dental needle business.
The Gendex business and the dental needle business are distinguishable as
separate components of the Company in accordance with Statement of Financial
Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or
Disposal of Long-Lived Assets". As a result, the statements of operations and
related financial statement disclosures for all prior years have been
restated to present the Gendex business and needle business as discontinued
operations separate from continuing operations.
Discontinued operations net revenue and income before income taxes for the
periods presented were as follows:
Three Months Ended
March 31,
2005 2004
(in thousands)
Net sales $ - $16,911
Gain on sale of Gendex - 72,943
Income before income taxes (including gain on
sale in the three months ended March 31, 2004) - 73,109
NOTE 7 - INVENTORIES
Inventories consist of the following:
March 31, December 31,
2005 2004
(in thousands)
Finished goods $138,185 $130,150
Work-in-process 44,869 42,427
Raw materials and supplies 41,037 41,132
$224,091 $213,709
14
NOTE 8 - BENEFIT PLANS
The components of the net periodic benefit cost for the Company's benefit
plans are as follows:
Other Postretirement
Pension Benefits Benefits
------------------- --------------------
Three Months Ended Three Months Ended
March 31, March 31,
2005 2004 2005 2004
(in thousands)
Service cost $ 1,495 $ 638 $ 102 $ 67
Interest cost 1,563 934 540 171
Expected return on plan assets (941) (128) -- --
Net amortization and deferral 278 117 (339) (55)
Net periodic benefit cost $ 2,395 $ 1,561 $ 303 $ 183
Information related to the funding of the Company's benefit plans for 2005
is as follows:
Other
Pension Postretirement
Benefits Benefits
(in thousands)
Actual, March 31, 2005 $1,778 $ 303
Projected for the remainder of the year 5,368 872
Total for year $7,146 $1,175
15
NOTE 9 - RESTRUCTURING AND OTHER COSTS AND CHARGES
During the third and fourth quarters of 2004, the Company recorded
restructuring and other costs of $5.7 million. These costs were primarily
related to the creation of a European Shared Services Center in Yverdon,
Switzerland, which resulted in the identification of redundant personnel in
the Company's European accounting functions. In addition, these costs related
to the consolidation of certain sales/customer service and distribution
facilities in Europe and Japan. The primary objective of these restructuring
initiatives is to improve operational efficiencies and to reduce costs within
the related businesses. Included in this charge were severance costs of $4.8
million and lease/contract termination costs of $0.9 million. In addition,
during the quarter ended March 31, 2005, the Company recorded charges of $0.2
million for additional severance costs incurred during the period related to
these plans. The plans include the elimination of approximately 120
administrative and manufacturing positions primarily in Germany. Certain of
these positions need to be replaced at the Shared Services Center and
therefore the net reduction in positions is expected to be approximately 70.
These plans are expected to be complete by the first quarter of 2006. As of
March 31, 2005, approximately 30 of these positions have been eliminated. The
major components of these charges and the remaining outstanding balances at
March 31, 2005 are as follows:
Amounts Amounts Balance
2004 Applied 2005 Applied March 31,
Provisions 2004 Provisions 2005 2005
(in thousands)
Severance $ 4,877 $ (583) $ 174 $ (799) $ 3,669
Lease/contract
terminations 881 -- -- (120) 761
$ 5,758 $ (583) $ 174 $ (919) $ 4,430
During the fourth quarter of 2003, the Company recorded restructuring and
other costs of $4.5 million. These costs were primarily related to impairment
charges recorded to certain investments in emerging technologies. The
products related to these technologies were abandoned and therefore these
assets were no longer viewed as being recoverable. In addition, certain costs
were associated with the restructuring or consolidation of the Company's
operations, primarily its U.S. laboratory businesses and the closure of its
European central warehouse in Nijmegan, The Netherlands. Included in this
charge were severance costs of $0.9 million, lease/contract termination costs
of $0.6 million and intangible and other asset impairment charges of $3.0
million. During 2004, the Company recorded charges of $1.4 million ($0.7
million during the quarter ended March 31, 2004) for additional severance,
lease termination and other restructuring costs incurred during the period
related to these plans. In addition, during the first quarter of 2005, the
Company incurred $0.1 million of costs related to these plans. These
restructuring plans resulted in the elimination of approximately 70
administrative and manufacturing positions primarily in the United States.
Certain of these positions needed to be replaced at the consolidated site and
therefore the net reduction in positions is expected to be approximately 25.
These plans were substantially complete as of March 31, 2005. The major
components of these charges and the remaining outstanding balances at March
31, 2005 are as follows:
Amounts Amounts Amounts Balance
2003 Applied 2004 Applied 2005 Applied March 31,
Provisions 2003 Provisions 2004 Provisions 2005 2005
(in thousands)
Severance $ 908 $ (49) $ 451 $(1,083) $ 20 $ (100) $ 147
Lease/contract
terminations 562 (410) 13 (165) -- -- --
Other restructuring
costs 27 (27) 922 (852) 74 (93) 51
Intangible and other asset
impairment charges 3,000 (3,000) -- -- -- -- --
$ 4,497 $(3,486) $ 1,386 $(2,100) $ 94 $ (193) $ 198
16
NOTE 10 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company's activities expose it to a variety of market risks which
primarily include the risks related to the effects of changes in foreign
currency exchange rates, interest rates and commodity prices. These financial
exposures are monitored and managed by the Company as part of its overall
risk-management program. The objective of this risk management program is to
reduce the potentially adverse effects that these market risks may have on
the Company's operating results.
Certain of the Company's inventory purchases are denominated in foreign
currencies which exposes the Company to market risk associated with exchange
rate movements. The Company's policy generally is to hedge major foreign
currency transaction exposures through foreign exchange forward contracts.
These contracts are entered into with major financial institutions thereby
minimizing the risk of credit loss. In addition, the Company's investments
in foreign subsidiaries are denominated in foreign currencies, which creates
exposures to changes in exchange rates. The Company uses debt denominated in
the applicable foreign currency as a means of hedging a portion of this risk.
With the Company's significant level of long-term debt, changes in the
interest rate environment can have a major impact on the Company's earnings,
depending upon its interest rate exposure. As a result, the Company manages
its interest rate exposure with the use of interest rate swaps, when
appropriate, based upon market conditions.
The manufacturing of some of the Company's products requires the use of
commodities which are subject to market fluctuations. In order to limit the
unanticipated earnings changes from such market fluctuations, the Company
selectively enters into commodity price swaps for certain materials used in
the production of its products. Additionally, the Company uses
non-derivative methods, such as the precious metal consignment agreement to
effectively hedge commodity risks.
Cash Flow Hedges
The Company uses interest rate swaps to convert a portion of its variable
rate debt to fixed rate debt. As of March 31, 2005, the Company has two
groups of significant variable rate to fixed rate interest rate swaps. One
of the groups of swaps was entered into in January 2000 and February 2001,
has a notional amount totaling 180 million Swiss francs, and effectively
converts the underlying variable interest rates on the debt to a fixed rate
of 3.3% for a period of approximately four years. The other significant
group of swaps entered into in February 2002, has notional amounts totaling
12.6 billion Japanese yen, and effectively converts the underlying variable
interest rates to an average fixed rate of 1.6% for a term of ten years. As
part of entering into the Japanese yen swaps in February 2002, the Company
entered into reverse swap agreements with the same terms to offset 115
million of the 180 million of Swiss franc swaps. Additionally, in the third
quarter of 2003, the Company exchanged the remaining portion of the Swiss
franc swaps, 65 million Swiss francs, for a forward-starting variable to
fixed interest rate swap at a fixed rate of 4.2% for a term of seven years
starting in March 2005.
The Company selectively enters into commodity price swaps to effectively
fix certain variable raw material costs. At March 31, 2005, the Company had
swaps in place to purchase 1,350 troy ounces of platinum bullion for use in
the production of its impression material products. The average fixed rate of
this agreement is $846.50 per troy ounce. In addition the Company had swaps
in place to purchase 186,300 troy ounces of silver bullion for use in the
production of its amalgam products at an average fixed rate of $6.50 per troy
ounce. The Company generally hedges up to 80% of its projected annual
platinum and silver needs related to these products.
The Company enters into forward exchange contracts to hedge the foreign
currency exposure of its anticipated purchases of certain inventory from
Japan. In addition, exchange contracts are used by certain of the Company's
subsidiaries to hedge intercompany inventory purchases which are denominated
in non-local currencies. The forward contracts that are used in these
programs mature in twelve months or less and typically hedge up to 80% of the
specific transactions.
17
Fair Value Hedges
The Company uses interest rate swaps to convert a portion of its fixed rate
debt to variable rate debt. In December 2001, the Company issued 350 million
in Eurobonds at a fixed rate of 5.75% maturing in December 2006 to partially
finance the Degussa Dental acquisition. Coincident with the issuance of the
Eurobonds, the Company entered into two integrated transactions: (a) an
interest rate swap agreement with notional amounts totaling Euro 350 million
which converted the 5.75% fixed rate Euro-denominated financing to a variable
rate (based on the London Interbank Borrowing Rate) Euro-denominated
financing; and (b) a cross-currency basis swap which converted this variable
rate Euro-denominated financing to variable rate U.S. dollar-denominated
financing.
The Euro 350 million interest rate swap agreement was designated as a fair
value hedge of the Euro 350 million in fixed rate debt pursuant to SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). In accordance with SFAS No. 133, the interest rate swap and underlying
Eurobond have been marked-to-market via the income statement with no net
impact to the income statement. As of March 31, 2005 and December 31, 2004,
the accumulated fair value of the interest rate swap was $12.7 million and
$14.7 million, respectively, and was recorded in Prepaid Expenses and Other
Current Assets and Other Noncurrent Assets. The notional amount of the
underlying Eurobond was increased by a corresponding amount at March 31, 2005
and December 31, 2004.
From inception through the first quarter of 2003, the cross-currency
element of the integrated transaction was not designated as a hedge and
changes in the fair value of the cross-currency element of the integrated
transaction were marked-to-market in the income statement, completely
offsetting the impact of the change in exchange rates on the Eurobonds that
were also recorded in the income statement. In the first quarter of 2003, the
Company amended the cross-currency element of the integrated transaction to
realize the $ 51.8 million of accumulated value of the cross-currency swap.
The amendment eliminated the final payment (at a fixed rate of $.90) of $315
million by the Company in exchange for the final payment of Euro 350 million
by the counterparty in return for the counterparty paying the Company LIBOR
plus 4.29% for the remaining term of the agreement or approximately $14.0
million on an annual basis. Other cash flows associated with the
cross-currency element of the integrated transaction, included the Company's
obligation to pay on $315 million LIBOR plus approximately 1.34% and the
counterparty's obligation to pay on Euro 350 million LIBOR plus approximately
1.47%, remained unchanged by the amendment. Additionally, the cross-currency
element of the integrated transaction continues to be marked-to-market. As of
March 31, 2005 and December 31, 2004, the accumulated fair value of the
cross-currency element of the integrated transaction was $23.4 million and
$33.0 million, respectively, and was recorded in Prepaid Expenses and Other
Current Assets and Other Noncurrent Assets.
No gain or loss was recognized upon the amendment of the cross currency
element of the integrated transaction, as the interest rate of LIBOR plus
4.29% was established to ensure that the fair value of the cash flow streams
before and after amendment were equivalent. As a result of the amendment, the
Company became economically exposed to the impact of exchange rates on the
final principal payment on the Euro 350 million Eurobonds and designated the
Euro 350 million Eurobonds as a hedge of net investment, on the date of the
amendment and thus the impact of translation changes related to the final
principal payment are recorded in accumulated other comprehensive income.
Hedges of Net Investments in Foreign Operations
The Company has numerous investments in foreign subsidiaries. The net
assets of these subsidiaries are exposed to volatility in currency exchange
rates. Currently, the Company uses non-derivative financial instruments,
including foreign currency denominated debt held at the parent company level
and long-term intercompany loans, for which settlement is not planned or
anticipated in the foreseeable future and derivative financial instruments to
hedge some of this exposure. Translation gains and losses related to the net
assets of the foreign subsidiaries are offset by gains and losses in the
non-derivative and derivative financial instruments designated as hedges of
net investments.
18
At March 31, 2005 and December 31, 2004, the Company had Euro-denominated,
Swiss franc-denominated, and Japanese yen-denominated debt (at the parent
company level) to hedge the currency exposure related to a designated portion
of the net assets of its European, Swiss, and Japanese subsidiaries. At March
31, 2005 and December 31, 2004, the accumulated translation gains on
investments in foreign subsidiaries, primarily denominated in Euros, Swiss
francs and Japanese yen, net of these debt hedges, were $131.5 million and
$179.4 million, respectively, which was included in Accumulated Other
Comprehensive income.
Other
The aggregate net fair value of the Company's derivative instruments at
March 31, 2005 and December 31, 2004 was $25.4 million and $36.0 million,
respectively.
In accordance with SFAS 52, "Foreign Currency Translation", the Company
utilizes long-term intercompany loans, for which settlement is not planned or
anticipated in the foreseeable future, to eliminate foreign currency
transaction exposures of certain foreign subsidiaries. Net gains or losses
related to these long-term intercompany loans are included in "Accumulated
other comprehensive income ".
NOTE 11- COMMITMENTS AND CONTINGENCIES
DENTSPLY and its subsidiaries are from time to time parties to lawsuits
arising out of their respective operations. The Company believes it is
unlikely that pending litigation to which DENTSPLY is a party will 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. The trial in the government's case
was held in April and May 2002. On August 14, 2003, the Judge entered a
decision that the Company's tooth distribution practices do not violate the
antitrust laws. The Department of Justice appealed this decision to the U.S.
Third Circuit Court of Appeals. A panel of three Judges of the Third Circuit
Court issued its decision on February 22, 2005 and reversed the decision of
the District Court. The effect of this decision, if it withstands any appeal
challenge by the Company, will be the issuance of an injunction requiring
DENTSPLY to discontinue its policy of not allowing its tooth dealers to take
on new competitive teeth lines. This decision relates only to the
distribution of artificial teeth sold in the U.S. The Company has filed a
petition with the Third Circuit requesting a rehearing of this decision by
the full Third Circuit Court. While the Company believes its tooth
distribution practices do not violate the antitrust laws, we are confident
that we can continue to develop this business regardless of the final legal
outcome.
Subsequent to the filing of the Department of Justice Complaint in 1999,
several private party class actions were filed based on allegations similar
to those in the Department of Justice case, on behalf of laboratories, and
denture patients in seventeen states who purchased Trubyte teeth or products
containing Trubyte teeth. These cases were transferred to the U.S. District
Court in Wilmington, Delaware. The private party suits seek damages in an
unspecified amount. The Court has granted the Company's Motion on the lack
of standing of the laboratory and patient class actions to pursue damage
claims. The Plaintiffs in the laboratory case have appealed this decision to
the Third Circuit and the Court held oral argument in April 2005. Also,
private party class actions on behalf of indirect purchasers were filed in
California and Florida state courts. The California and Florida cases have
been dismissed by the Plaintiffs following the decision by the Federal
District Court Judge issued in August 2003.
19
On March 27, 2002, a Complaint was filed in Alameda County, California
(which was transferred to Los Angeles County) by Bruce Glover, D.D.S.
alleging, inter alia, breach of express and implied warranties, fraud, unfair
trade practices and negligent misrepresentation in the Company's manufacture
and sale of Advance(R) cement. The Complaint seeks damages in an unspecified
amount for costs incurred in repairing dental work in which the Advance(R)
product allegedly failed. The Judge has entered an Order granting class
certification, as an Opt-in class (this means that after Notice of the class
action is sent to possible class members, a party will have to determine they
meet the class definition and take affirmative action in order to join the
class) on the claims of breach of warranty and fraud. In general, the Class
is defined as California dentists who purchased and used Advance(R) cement and
were required, because of failures of the cement, to repair or reperform
dental procedures. The Notice of the class action was sent on February 23,
2005 to dentists licensed to practice in California during the relevant
period. The Advance(R) cement product was sold from 1994 through 2000 and
total sales in the United States during that period were approximately $5.2
million. The Company's primary level insurance carrier has confirmed coverage
for the breach of warranty claims in this matter.
On July 13, 2004, the Company was served with a Complaint filed by 3M
Innovative Properties Company in the U.S. District Court for the Western
District of Wisconsin, alleging that the Company's Aquasil(R) Ultra silicone
impression material, introduced in late 2002, infringes a 3M patent. This
case was settled in the first quarter of 2005, within the range of expense
for which the Company had previously recorded accruals, and DENTSPLY obtained
a paid up license under the 3M patent.
20
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 discussed herein and within the Company's
Annual Report on Form 10-K for the year ended December 31, 2004.
OVERVIEW
Dentsply International Inc. is the world's largest manufacturer of
professional dental products. The Company is headquartered in the United
States, and operates in more than 120 other countries, principally through
its foreign subsidiaries. While the United States and Europe are the
Company's largest markets, the Company serves all of the major professional
dental markets worldwide.
The Company monitors numerous benchmarks in evaluating its business,
including: (1) internal growth in the United States, Europe and all other
regions; (2) the development, introduction and contribution of innovative new
products; (3) growth through acquisition; and (4) continued focus on
controlling costs and enhancing efficiency. We define "internal growth" as
the increase in our net sales from period to period, excluding precious metal
content, the impact of changes in currency exchange rates, and the net sales,
for a period of twelve months following the transaction date, of businesses
that we have acquired or divested.
Management believes that an average overall internal growth rate of 4-6% is
a long-term sustainable rate for the Company. During the first quarter of
2005, the Company's overall internal growth was negative 1.6% compared to
4.0% for the full year 2004. Our internal growth rates in the United States
(43% of sales) and Europe (38% of sales), the largest dental markets in the
world, were 6.7% and negative 12.1%, respectively during the first three
months of compared to 3.4% and 4.1%, respectively for the full year 2004. As
discussed further within the Results of Continuing Operations, the lower
sales in Europe were primarily due to issues related to a new dental
reimbursement program effective in 2005 in Germany, the Company's most
significant market in this region. Our internal growth rate in all other
regions during the first quarter of 2005, which represents approximately 19%
of our sales, was 2.5%, compared to 5.2% for the full year 2004. Among the
other regions, the Asian region, has historically been one of our highest
growth markets and management believes it represents a long-term growth
opportunity for the industry and the Company. Also within the other region is
the Japanese market, which represents the third largest dental market in the
world behind the United States and Europe. Although Japan's dental market
growth has been weak in the past few years, as it closely parallels its
economic growth, the Company also views this market as an important long-term
growth opportunity, both in terms of a recovery in the Japanese economy and
the opportunity to increase our market share. There can be no assurance that
the Company's assumptions concerning the growth rates in its markets or the
dental market generally will be correct and if such rates are less than
expected, the Company's projected growth rates and results of operations may
be adversely effected.
Product innovation is a key component of the Company's overall growth
strategy. Historically, the company has introduced in excess of twenty new
products each year. During 2004, approximately 25 new products were
introduced around the world and the Company expects approximately 20 new
products to be introduced in 2005. Of specific note, in late 2004, the
Company introduced Oraqix(R), its new non-injectible anesthetic gel for use
in scaling and root planing procedures and BioPure MTAD, a new irrigant used
in root canal procedures. In addition, in the first quarter of 2005, the
Company introduced Calamus, a unique obturation delivery system used in root
canal procedures and Xeno IV, the Company's first single component self
etching adhesive.
21
New advances in technology are anticipated to have a significant influence
on future products in dentistry. In anticipation of this, the Company has
pursued several new research and development initiatives to support this
development. Specifically, in 2004 the Company entered into a five-year
agreement with the Georgia Institute of Technology's Research Institute to
pursue potential new advances in dentistry. In addition, in 2004, we
completed an agreement with Doxa AB to develop and commercialize products
within the dental field based upon Doxa's bioactive ceramic technology. These
agreements are consistent with the Company's strategy of being the leading
innovator in the industry. In addition, the Company licenses and purchases
technologies developed by other third parties. Specifically, in 2004, the
Company purchased the rights to a unique compound called SATIF from
Sanofi-Aventis. The Company believes that this technology will provide
enhancements to future products with such benefits as greater protection
against enamel caries, the ability to desensitize exposed dentin and the
ability to retard, or to inhibit the formation of staining on the enamel.
Although the professional dental market in which the Company operates has
experienced consolidation, it is still a fragmented industry. The Company
continues to focus on opportunities to expand the Company's product offerings
through acquisition. Management believes that there will continue to be
adequate opportunities to participate as a consolidator in the industry for
the foreseeable future. In the first quarter of 2005 the Company purchased
GAC SA, its European distributor of orthodontic products. The acquired
company operates within France, Germany, Switzerland and Norway. The Company
expects this integration to increase full year 2005 sales by approximately
$16 million (see also Note 4 to the Consolidated Condensed Financial
Statements).
The Company also remains focused on reducing costs and improving
competitiveness. Management expects to continue to consolidate operations or
functions and reduce the cost of those operations and functions while
improving service levels. In addition, the Company remains focused on
enhancing efficiency through expanded use of technology and process
improvement initiatives. The Company believes that the benefits from these
opportunities will improve the cost structure and offset areas of rising
costs such as energy, benefits, regulatory oversight and compliance and
financial reporting in the United States.
The Company has constructed a major dental anesthetic filling plant outside
Chicago which was completed in 2004. This plant recently received the
approval and validation of the manufacturing practices by the Medicines and
Healthcare products Regulatory Agency ("MHRA"), the agency responsible for
drug products approvals in the United Kingdom, and accepted by Ireland,
Australia and New Zealand. As a result, the Plant began shipping products to
the United Kingdom and Australia , and we anticipate releasing this product to
the market by the end of May upon completion of our remaining validation and
in-country testing activities. The Company has contract manufacturer
relationships to provide supply and inventory to meet the anticipated needs
of the remaining markets until approved product can be supplied from the new
plant; however, there is no assurance of the timeliness of approvals to
prevent an interruption of the supply of inventory. The Company made the
submission for facility approval to the Food and Drug Administration ("FDA")
in March 2005, and is awaiting a date for the FDA PAI (Pre-Approval
Inspection).
RESULTS OF CONTINUING OPERATIONS, QUARTER ENDED MARCH 31, 2005 COMPARED TO
QUARTER ENDED MARCH 31, 2004
Net Sales
The discussions below summarize the Company's sales growth, excluding
precious metals, from internal growth and net acquisition growth and
highlights the impact of foreign currency translation. These disclosures of
net sales growth provide the reader with sales results on a comparable basis
between periods.
As the presentation of net sales excluding precious metal content could be
considered a measure not calculated in accordance with generally accepted
accounting principles (a non-GAAP measure), the Company provides the
following reconciliation of net sales to net sales excluding precious metal
content. Our definitions and calculations of net sales excluding precious
metal content and other operating measures derived using net sales excluding
precious metal content may not necessarily be the same as those used by other
companies.
22
Three Months Ended
March 31,
2005 2004
(in millions)
Net Sales $ 407.0 $ 414.4
Precious Metal Content of Sales (37.7) (55.8)
Net Sales Excluding Precious Metal Content $ 369.3 $ 358.6
Management believes that the presentation of net sales excluding precious
metal content provides useful information to investors because a significant
portion of DENTSPLY's net sales is comprised of sales of precious metals
generated through sales of the Company's precious metal alloy products, which
are used by third parties to construct crown and bridge materials. Due to the
fluctuations of precious metal prices and because the precious metal content
of the Company's sales is largely a pass-through to customers and has minimal
effect on earnings, DENTSPLY reports sales both with and without precious
metal content to show the Company's performance independent of precious metal
price volatility and to enhance comparability of performance between periods.
The Company uses its cost of precious metal purchased as a proxy for the
precious metal content of sales, as the precious metal content of sales is
not separately tracked and invoiced to customers. The Company believes that
it is reasonable to use the cost of precious metal content purchased in this
manner since precious metal alloy sale prices are adjusted when the prices of
underlying precious metals change.
Net sales for the quarter ended March 31, 2005 decreased $7.4 million, or
1.8%, from the same period in 2004 to $407.0 million. Net sales, excluding
precious metal content, increased $10.7 million, or 3.0%, to $369.3 million.
Sales growth excluding precious metal content was comprised of negative 1.6%
of internal growth and 3.3% of foreign currency translation and 1.3% related
to acquisitions. The negative 1.6% internal growth was comprised of 6.7% in
the United States, negative 12.1% in Europe and 2.5% for all other regions
combined.
The internal sales growth, excluding precious metal content, in the United
States was driven by strong growth in specialty dental (endodontic, implant
and orthodontic products), and dental consumable product categories, offset
somewhat by lower sales in the dental laboratory product category. In Europe,
the negative internal growth was driven by the lower sales in the dental
laboratory category. The decrease in the laboratory category was primarily
related to reimbursement issues in the German dental market caused by the
slow implementation of a new dental reimbursement program for prosthetic
procedures which became effective in 2005. The Company believes that the
prosthetic area of the German dental market will improve as the dentists,
laboratories, insurance companies and patients become more familiar with the
new reimbursement program and the backlog of requested procedures is reduced.
Although we expect that this part of the German market will continue to
improve throughout the year, we anticipate that the market in Germany will be
approximately 90% of the 2004 levels, which will negatively impact the
European internal growth for 2005. The internal growth of 2.5% in all other
regions was largely the result of strong growth in the Asian and Latin
American regions, offset by lower sales in the Middle East and Japan.
Gross Profit
Gross profit was $208.9 million for the first three months of 2005 compared
to $203.9 million in 2004, an increase of $5.0 million, or 2.5%. Gross
profit, measured against sales including precious metal content, represented
51.3% of net sales in 2005 compared to 49.2% in 2004. The gross profit for
the first quarter of 2005, measured against sales excluding precious metal
content, represented 56.6% of net sales compared to 56.9% in 2004. This
margin decline from 2005 to 2004 was due to shifts in the product and
geographic mix caused by the decrease in the laboratory product sales in
Europe as discussed above. Without the impacts of the decline in the German
laboratory market, margin rates would have improved within the 2005 period.
23
Operating Expenses
Selling, general and administrative ("SG&A") expense increased $5.5
million, or 4.1%, to $138.5 million during the three months ended March 31,
2005 from $133.0 million in 2004. The 4.1% increase in expenses reflects
increases for the translation impact from a weaker U.S. dollar of
approximately $4.3 million. SG&A expenses, measured against sales including
precious metal content, increased to 34.0% in 2005 compared to 32.1% in 2004.
SG&A expenses, as measured against sales excluding precious metal content,
increased to 37.5% in 2005 compared to 37.1% in 2004. The higher expense
level in 2005 primarily resulted from non-capitalized costs relating to the
new anesthetic plant in Chicago and costs related to the Sarbanes-Oxley
compliance, in addition to the lower sales level.
During the quarter ended March 31, 2005, the Company recorded restructuring
and other costs of $0.3 million. These costs were primarily for additional
costs incurred during the period related to the consolidation of certain
sales/customer service facilities in Europe and the formation of a European
Shared Services Center in Yverdon, Switzerland. The primary objective of
these restructuring initiatives is to improve operational efficiencies and to
reduce costs within the related businesses. These plans are expected to be
fully complete by the first quarter of 2006. The Company also incurred
additional charges related to the consolidation of its U.S. laboratory
businesses, which was initiated in the fourth quarter of 2003. The Company
made the decision to consolidate the United States laboratory businesses in
order to improve operational efficiencies, to broaden customer penetration
and to strengthen customer service. This plan was substantially complete as
of March 31, 2005 (See also Note 9 to the Consolidated Condensed Financial
Statements).
The Company anticipates the remaining costs to complete these restructuring
initiatives will be approximately $1.2 million which will be expensed during
the remainder of 2005 as the related costs are incurred. These plans are
projected to result in future annual expense reductions of $4 to $6 million
when fully implemented in 2006.
Other Income and Expenses
Net interest expense and other (income) expenses was $0.2 million of income
during the three months ended March 31, 2005 compared to $5.5 million of
expense in 2004. The 2005 period included $4.0 million of net interest
expense, $4.8 million of currency transaction gains and $0.6 million of other
nonoperating costs. The 2004 period included $5.3 million of net interest
expense, $0.2 million of currency transaction gains and $0.4 million of other
nonoperating costs. The increase in currency transaction gains during 2005
was primarily the result of a transaction involving the transfer of
intangible assets between legal entities with different functional
currencies. Exchange transaction gains or losses occur from movement of
foreign currency rates between the date of the transaction and the date of
final financial settlement. The decrease in net interest expense was
primarily due to increased interest income generated from the Company's
higher cash levels.
Income Taxes/Earnings
The Company's effective tax rate for the period ended March 31, 2005
increased to 30.3% from 29.2% for the same period in 2004. The effective
rates for the 2005 and 2004 periods are reflective of tax benefits of $0.3
million and $1.2 million, respectively, primarily from the reversal of
previously accrued taxes from the settlement of prior years' domestic and
foreign tax audits and benefits of additional R&D credits.
Income from continuing operations increased $3.2 million, or 7.2%, to $49.0
million in 2005 from $45.8 million in 2004. Fully diluted earnings per share
from continuing operations were $0.60 in 2005, an increase of 7.1% from $0.56
in 2004.
24
Discontinued Operations
In February 2004, the Company sold its Gendex equipment business to Danaher
Corporation. Also in the first quarter of 2004, the Company discontinued
production of dental needles. Accordingly, the Gendex equipment and needle
businesses have been reported as discontinued operations for all periods
presented.
Income from discontinued operations was $43.1 million and $0.53 per diluted
share for the three months ended March 31, 2004, which was almost entirely
related to the gain realized on the sale of Gendex business.
Operating Segment Results
In January 2005, the Company reorganized its operating group structure
consolidating into four operating groups from the five groups under the prior
management structure. These four operating groups are managed by four Senior
Vice Presidents and represent our operating segments. Each of these
operating groups covered a wide range of product categories and geographic
regions. The product categories and geographic regions often overlap across
the groups. Further information regarding the details of each group is
presented in Note 5 of the Consolidated Financial Statements. The management
of each group is evaluated for performance and incentive compensation
purposes on net third party sales, excluding precious metal content and
segment operating income.
U.S. Consumable Business/Canada
Net sales for this group were $79.6 million during the quarter ended March
31, 2005, an 8.5% increase compared to $73.4 million in 2004. Internal
growth was 7.5% and currency translation added 1.0% to sales in 2005. The
chairside consumable products and dental anesthetics business, lead by the
Oraqix product, were the strongest portions of this group driving the 7.5%
internal growth.
Operating profit decreased $1.1 million during the three months ended March
31, 2005 to $19.5 million compared to $20.6 million in 2004. The
decrease was primarily related to non-capitalizable costs associated with the
new pharmaceutical plant in Chicago, partially offset by strong margins on
improved sales in the chairside consumable products business. In addition,
operating profit benefited slightly from currency translation.
Dental Consumables--Europe, CIS, Middle East, Africa/European Dental
Laboratory Business
Net sales for this group were $96.2 million during the quarter ended March
31, 2005, a 10.7% decrease compared to $107.7 million in 2004. Internal
growth was negative 16.8% with currency translation adding 6.1%. Changes in
German reimbursement programs related to prosthetic procedures, as discussed
earlier, resulted in slower sales in Germany during the 2005 quarter which
was the primary driver of the negative 16.8% internal sales growth. Although
the Company believes that the German dental market will improve as the
dentists, laboratories, insurance companies and patients become more familiar
with the new reimbursement program, we expect that the market in Germany will
be approximately 90% of the 2004 levels, which will negatively impact the
group's internal growth for 2005.
Operating profit decreased $9.3 million during the three months ended March
31, 2005 to $9.9 million from $19.2 million in 2004. The reduction in
operating profit was driven primarily by lower sales, particularly in the
German businesses. In addition, operating profit benefited from currency
translation.
Australia/Latin America/Endodontics/Non-dental
Net sales for this group increased $6.1 million during the quarter ended
March 31, 2005, or 7.5%, to $87.2 million from $81.1 million in 2004.
Internal growth was 4.9% with currency translation adding 2.6%. Strong
growth was shown throughout the Latin American businesses as well as the
non-dental business, along with continued growth in the endodontic business,
offset slightly by weakness in the Australian business.
25
Operating profit was $39.1 million during the first quarter of 2005, a $4.6
million increase from $34.5 million in 2004. The increase was primarily
related to the continued strength of the endodontic business and continued
growth of the Latin American businesses. The non-dental business also
improved this group's operating profit offset somewhat by the Australian
market. In addition, operating profit benefited from currency translation.
U.S. Dental Laboratory Business/Implants/Orthodontics/Japan/Asia
Net sales for this group was $107.3 million during the three months ended
March 31, 2005, a 9.5% increase compared to $98.0 million in 2004. Internal
growth was 2.4%, currency translation added 2.3% to sales in 2004, and 4.8%
was added through acquisitions. Significant growth in the orthodontic and
Asian businesses was supported by solid growth in the implant business,
offset by weakness in the U.S. laboratory and Japanese markets.
Operating profit increased $3.3 million during the three months ended March
31, 2005 to $17.3 million from $14.0 million in 2004. The increase in
operating profits was driven primarily by the sales growth in the
orthodontics and Asian businesses and margin improvements in the U.S. Dental
Laboratory business, partially offset by weakness in the Japanese business.
In addition, operating profit benefited from currency translation.
CRITICAL ACCOUNTING POLICIES
There have been no material changes to the Company's disclosure in its 2004
Annual Report on Form 10-K filed March 16, 2005.
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended March 31, 2005
Cash flows from operating activities during the three months ended March
31, 2005 was $25.0 million compared to $47.3 million during 2004. The
decrease of $22.3 million results primarily from unfavorable working capital
changes, the payment of a patent settlement and decreased tax benefits
related to a lower level of stock option exercise activity versus the prior
year, offset somewhat by higher earnings.
Investing activities during the first quarter of 2005 include capital
expenditures of $8.5 million. The Company expects that capital expenditures
will range from $55 million to $60 million for the full year of 2005.
Acquisition-related activity for the period ended March 31, 2005 was $6.0
million which was primarily related to the acquisition of GAC SA (see Note 4
to the Consolidated Condensed Financial Statements).
In December 2004 the Board of Directors approved a stock repurchase program
under which the Company may repurchase shares of stock in an amount to
maintain up to 3,000,000 shares of treasury stock. As a result of this
program, the Company repurchased 522,000 shares at an average cost per share
of $56.38 and a total cost of $29.4 million in the first quarter of 2005.
During 2005, the Company also settled on 30,000 shares that were purchased in
2004 at a cost of $1.7 million. As of March 31, 2005, the Company held
800,000 shares of treasury stock. The Company also received proceeds of $12.9
million as a result of the exercise of 508,000 stock options during the three
months ended March 31, 2005.
The Company's long-term borrowings decreased by a net of $83.9 million
during the period ended March 31, 2005. This net change included debt
payments of $47.4 million with the remaining decrease being primarily related
to exchange rate fluctuations on debt denominated in foreign currencies and
changes in the value of interest rate swaps. During the period ended March
31, 2005, the Company's ratio of long-term debt to total capitalization
decreased to 32.8% compared to 35.1% at December 31, 2004.
26
Under its multi-currency revolving credit agreement, the Company is able to
borrow up to $250 million through May 2006 ("the five-year facility") and
$125 million through May 2005 ("the 364 day facility"). This revolving credit
agreement is unsecured and contains certain affirmative and negative
covenants relating to its operations and financial condition. The most
restrictive of these covenants pertain to asset dispositions, maintenance of
certain levels of net worth, and prescribed ratios of indebtedness to total
capital and operating income plus depreciation and amortization to interest
expense. At March 31, 2005, the Company was in compliance with these
covenants. The Company also has available an aggregate $250 million under two
commercial paper facilities; a $250 million U.S. facility and a $250 million
U.S. dollar equivalent European facility ("Euro CP facility"). Under the Euro
CP facility, borrowings can be denominated in Swiss francs, Japanese yen,
Euros, British pounds and U.S. dollars. The multi-currency revolving credit
facility serves as a back-up to these commercial paper facilities. The total
available credit under the commercial paper facilities and the multi-currency
facility in the aggregate is $125 million and no debt was outstanding under
the commercial paper facilities at March 31, 2005.
The Company also has access to $55.0 million in uncommitted short-term
financing under lines of credit from various financial institutions. The
lines of credit have no major restrictions and are provided under demand
notes between the Company and the lending institutions.
At March 31, 2005, the Company had unused lines of credit related to the
revolving credit agreement and the uncommitted short-term lines of credit of
$294 million.
During May 2005, the Company replaced the five-year and the 364 day
facilities discussed above with one $500 million multi-currency revolving
credit agreement which expires in May 2010. Similar to the prior revolving
credit agreement, this facility is unsecured and contains certain
affirmative and negative covenants relating to its operations and financial
condition. The most restrictive of these covenants pertain to asset
dispositions and prescribed ratios of indebtedness to total capital and
operating income plus depreciation and amortization to interest expense.
At March 31, 2005, the Company held $61.3 million of precious metals on
consignment from several financial institutions. These consignment
agreements allow the Company to acquire the precious metal at approximately
the same time and for the same price as alloys are sold to the Company's
customers. In the event that the financial institutions would discontinue
offering these consignment arrangements, and if the Company could not obtain
other comparable arrangements, the Company may be required to obtain third
party financing to fund an ownership position in the required precious metal
inventory levels.
The Company's cash balance was $436.7 million at March 31, 2005. The
Company has accumulated cash to this level rather than reduce debt due to
pre-payment penalties that would be incurred in retiring debt and the related
interest rate swap agreements in addition to the low cost of this debt, net
of earnings on the cash. The Company anticipates that cash will continue to
build throughout 2005, subject to any uses of cash for acquisitions, stock
purchases and potential debt prepayment.
There have been no material changes to the Company's scheduled contractual
cash obligations disclosed in its 2004 Annual Report on Form 10-K filed March
16, 2005. The Company expects on an ongoing basis, to be able to finance cash
requirements, including capital expenditures, stock repurchases, debt
service, operating leases and potential future acquisitions, from the funds
generated from operations and amounts available under its existing credit
facilities.
27
NEW ACCOUNTING PRONOUNCEMENTS
In January 2004, the Financial Accounting Standards Board ("FASB") released
FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003." SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", requires a company to consider
current changes in applicable laws when measuring its postretirement benefit
costs and accumulated postretirement benefit obligation. However, because of
uncertainties of the effect of the provisions of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the "Act") on plan sponsors
and certain accounting issues raised by the Act, FSP 106-1 allows plan
sponsors to elect a one-time deferral of the accounting for the Act. The
Company elected the deferral provided by FSP 106-1 to analyze the impact of
the Act on prescription drug coverage provided to a limited number of
retirees from one of its business units. In May 2004, FASB released FSP 106-2
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003." This FSP provides final
guidance on the accounting for the effects of the Act for employers that
sponsor postretirement health care plans that provide prescription drug
benefits. The FSP also requires those employers to provide certain
disclosures regarding the effect of the federal subsidy provided by the Act.
FSP 106-2 superceded FSP 106-1 when it became effective on July 1, 2004. The
Company has not yet determined whether the benefits provided under its
postretirement benefit plans are actuarially equivalent to Medicare Part D
under The Act, and as a result, the Company's benefit obligations or its net
periodic service cost do not reflect any amount associated with the subsidy.
The Company does not expect this act will have a material impact on the
Company's postretirement benefits liabilities or on its financial statements.
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123R ("SFAS 123R"), "Share-Based Payment". This standard
eliminates the guidance of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and amends FASB
Statement No. 123, "Accounting for Stock Based Compensation" ("FAS 123"). The
standard requires that all public companies report share-based compensation
expense at the grant date fair value of the related share-based awards and no
longer permits companies to account for options under the intrinsic value
approach of APB 25. SFAS 123R, as amended by the SEC, is effective for annual
periods beginning after June 15, 2005. As the Company has accounted for stock
option grants under the APB 25 in the past, this statement is expected to
have a material impact on the Company's financial statements once effective
($0.14 to $0.16 per diluted share on an annualized basis). The Company is
currently assessing its compensation programs, its option valuation
techniques and assumptions, and the possible transition alternatives in order
to determine the full impact of adopting this standard.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No 151, "Inventory Costs - An Amendment of ARB No. 43, Chapter 4".
This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing", to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). Under ARB
No. 43, in certain circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs that were considered
to be unusually abnormal were required to be treated as period charges.
Under FASB No. 151, these charges are required to be treated as period
charges regardless of whether they meet the criterion of unusually abnormal.
Additionally, FASB No. 151 requires that allocation of fixed production
overhead to the cost of conversion be based on the normal capacity of the
production facilities. FASB No. 151 is effective for all fiscal years
beginning after June 15, 2005. The Company does not expect the application
of this standard to have a material impact on the Company's financial
statements.
In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 153, "Exchanges of Nonmonetary Assets an amendment of APB
Opinion No. 29". This statement amends Opinion 29 to eliminate the
exceptions that allowed for other than fair value measurement when similar
productive assets were exchanged, and replaced the exceptions with a general
exception for exchanges of nonmonetary assets that do not have commercial
substance. FASB Statement No 153 is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The
Company does not expect the application of this statement to have a material
impact on the Company's financial statements.
On October 22, 2004, the American Jobs Creation Act of 2004 (the "AJCA") was
signed into law. The AJCA enacted a provision that provides the Company
with the opportunity to repatriate up to $500 million of reinvested earnings
and to claim a deduction equal to 85% of the repatriated amount. The
Company did not elect the benefit of this provision in 2004. The Company
has not determined whether, and to what extent, an election will be made in
2005.
28
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, 2004.
Item 4 - Controls and Procedures
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures as of the end of the period covered by this report
were effective to provide reasonable assurance that the information required
to be disclosed by the Company in reports filed under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
There have been no changes in the Company's internal control over
financial reporting that occurred during the quarter ended March 31, 2005
that have materially affected, or are likely to materially affect, our
internal control over financial reporting. However, the Company is currently
centralizing its transaction accounting processing in Europe into our
European Shared Services Center and has brought in one location during the
first quarter of 2005 and expects the remaining European locations to be
complete by the first quarter of 2006.
29
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 it is
unlikely that pending litigation to which DENTSPLY is a party will 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. The trial in the government's case
was held in April and May 2002. On August 14, 2003, the Judge entered a
decision that the Company's tooth distribution practices do not violate the
antitrust laws. The Department of Justice appealed this decision to the U.S.
Third Circuit Court of Appeals. A panel of three Judges of the Third Circuit
Court issued its decision on February 22, 2005 and reversed the decision of
the District Court. The effect of this decision, if it withstands any appeal
challenge by the Company, will be the issuance of an injunction requiring
DENTSPLY to discontinue its policy of not allowing its tooth dealers to take
on new competitive teeth lines. This decision relates only to the
distribution of artificial teeth sold in the U.S. The Company has filed a
petition with the Third Circuit requesting a rehearing of this decision by
the full Third Circuit Court. While the Company believes its tooth
distribution practices do not violate the antitrust laws, we are confident
that we can continue to develop this business regardless of the final legal
outcome.
Subsequent to the filing of the Department of Justice Complaint in 1999,
several private party class actions were filed based on allegations similar
to those in the Department of Justice case, on behalf of laboratories, and
denture patients in seventeen states who purchased Trubyte teeth or products
containing Trubyte teeth. These cases were transferred to the U.S. District
Court in Wilmington, Delaware. The private party suits seek damages in an
unspecified amount. The Court has granted the Company's Motion on the lack
of standing of the laboratory and patient class actions to pursue damage
claims. The Plaintiffs in the laboratory case have appealed this decision to
the Third Circuit and the Court held oral argument in April 2005. Also,
private party class actions on behalf of indirect purchasers were filed in
California and Florida state courts. The California and Florida cases have
been dismissed by the Plaintiffs following the decision by the Federal
District Court Judge issued in August 2003.
On March 27, 2002, a Complaint was filed in Alameda County, California
(which was transferred to Los Angeles County) by Bruce Glover, D.D.S.
alleging, inter alia, breach of express and implied warranties, fraud, unfair
trade practices and negligent misrepresentation in the Company's manufacture
and sale of Advance(R) cement. The Complaint seeks damages in an unspecified
amount for costs incurred in repairing dental work in which the Advance(R)
product allegedly failed. The Judge has entered an Order granting class
certification, as an Opt-in class (this means that after Notice of the class
action is sent to possible class members, a party will have to determine they
meet the class definition and take affirmative action in order to join the
class) on the claims of breach of warranty and fraud. In general, the Class
is defined as California dentists who purchased and used Advance(R) cement and
were required, because of failures of the cement, to repair or reperform
dental procedures. The Notice of the class action was sent on February 23,
2005 to dentists licensed to practice in California during the relevant
period. The Advance(R) cement product was sold from 1994 through 2000 and
total sales in the United States during that period were approximately $5.2
million. The Company's primary level insurance carrier has confirmed coverage
for the breach of warranty claims in this matter.
On July 13, 2004, the Company was served with a Complaint filed by 3M
Innovative Properties Company in the U.S. District Court for the Western
District of Wisconsin, alleging that the Company's Aquasil(R) Ultra silicone
impression material, introduced in late 2002, infringes a 3M patent. This
case was settled in the first quarter of 2005, within the range of expense
for which the Company had previously recorded accruals, and DENTSPLY obtained
a paid up license under the 3M patent.
30
Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities
In December 2004 the Board of Directors approved a stock repurchase program
under which the Company may repurchase shares of stock in an amount to
maintain up to 3,000,000 shares of treasury stock. During the quarter ended
March 31, 2005, the Company had the following activity with respect to this
repurchase program:
Number Of
Shares That
May be Purchased
Total Number Total Cost Average Price Under The Share
Of Shares Of Shares Paid Per Repurchase
Period Purchased Purchased Share Program
(in thousands, except per share amounts)
January 1-31, 2005 29.5 $ 1,629 $ 55.22 2,480.0
February 1-28, 2005 400.4 22,747 56.81 2,347.0
March 1-31, 2005 91.8 5,038 54.88 2,200.0
521.7 $ 29,415 $ 56.38
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
31 Section 302 Certification Statements.
32 Section 906 Certification Statement.
(b) Reports on Form 8-K
On January 11, 2005, the Company filed a Form 8-K, under item 5.02,
disclosing the appointment of William R. Jellison to the position of
Senior Vice President and Chief Financial Officer.
On January 27, 2005, the Company filed a Form 8-K, under item 2.02,
furnishing the press release issued on January 26, 2005 regarding its
fourth quarter 2004 sales and earnings.
On February 1, 2005, the Company filed a Form 8-K, under item 2.02,
furnishing a transcript of its January 27, 2005, conference call
regarding the Company's discussion of its fourth quarter 2004 sales and
earnings.
31
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.
May 10, 2005 /s/ Gerald K. Kunkle, Jr.
Date Gerald K. Kunkle, Jr.
Vice Chairman and
Chief Executive Officer
May 10, 2005 /s/ William R. Jellison
Date William R. Jellison
Senior Vice President and
Chief Financial Officer
32