UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December
31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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.)
570 West College Avenue, York, Pennsylvania 17405-0872
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (717) 845-
7511
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
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pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 3, 1997, the aggregate market value of voting common stock held
by non-affiliates of the registrant, based upon the last reported sale price for
the registrant's Common Stock on the Nasdaq National Market on such date, as
reported in The Wall Street Journal, was $1,359,360,923 (calculated by excluding
shares owned beneficially by directors and executive officers as a group from
total outstanding shares solely for the purpose of this response).
The number of shares of the registrant's Common Stock outstanding as of the
close of business on March 3, 1997 was 26,932,042.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of DENTSPLY
International Inc. to be used in connection with the 1997 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part III
of this Annual Report on Form 10-K to the extent provided herein. Except as
specifically incorporated by reference herein, the Proxy Statement is not to be
deemed filed as part of this Annual Report on Form 10-K.
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PART I
Item 1. Business
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General
DENTSPLY International Inc. ("DENTSPLY" or the "Company"), a Delaware
corporation, designs, develops, manufactures and markets products in two
principal categories: dental consumable and laboratory products, and dental
equipment. Dental consumable and laboratory products include artificial teeth,
endodontic instruments and materials, impression materials, restorative
materials, crown and bridge materials, prophylaxis paste, dental sealants and
dental anesthetics. Dental equipment includes dental x-ray systems, intraoral
cameras, computer imaging systems and related software, handpieces, cutting
instruments, and ultrasonic scalers and polishers.
In August 1996, the Company acquired a 51 percent interest in CeraMed
Dental LLC ("CeraMed") and the right to acquire the remaining 49 percent at a
later date. CeraMed is the leading United States manufacturer and distributor of
bone grafting materials and Hydroxylapatite plasma-feed coating materials to
dental markets.
In January 1997, DENTSPLY purchased the assets of DW Industries, Inc., the
leading manufacturer of disposable air- water syringe tips.
Also in January 1997, the Company purchased 100 percent of the outstanding
capital stock of Laboratoire SPAD, S.A. ("SPAD"), a leading French manufacturer
and distributor of dental anesthetics and other dental products. SPAD gives
DENTSPLY entry to the dental anesthetic market in addition to expanding
DENTSPLY's existing business in France.
In addition, in January 1997, DENTSPLY commenced a tender offer for all of
the outstanding shares of New Image Industries, Inc. ("New Image"). On March 7,
1997, pursuant to the tender offer, DENTSPLY purchased shares representing
approximately 90 percent of the outstanding shares of New Image. The remaining
shares will be acquired in a merger. New Image is a leader in the design,
development, manufacturing and distribution of intraoral cameras, computer
imaging systems and related software.
Market Overview
Professional Dental Products
General. The worldwide professional dental industry
encompasses the diagnosis, treatment and prevention of disease
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and ailments of the teeth, gums and supporting bone. DENTSPLY believes that
demand in a given geographic market for dental procedures and products varies
according to the stage of social, economic and technical development that the
market has attained. Geographic markets for DENTSPLY's dental products can be
categorized into the three stages of development described below.
The United States, Canada, Western Europe, the United Kingdom, Japan, and
Australia are highly developed markets that demand the most advanced dental
procedures and products and have the highest level of expenditure on dental
care. In these markets, the focus of dental care is increasingly upon preventive
care and specialized dentistry. In addition to basic procedures such as the
excavation and filling of cavities and tooth extraction and denture replacement,
dental professionals perform an increasing volume of preventive and cosmetic
procedures, including periodontia (the treatment of the structure supporting the
teeth), endodontia (the revitalization of teeth that would otherwise require
extraction), orthodontia (the movement and realignment of teeth for improved
function and aesthetics), gnathology (the treatment of temporomandibular joint
(TMJ) dysfunction and occlusive modification), implantology (the insertion of
prosthetic devices to provide support for partial or full dentures) and cosmetic
dentistry. These markets require varied and complex dental products, such as
advanced cleaning and scaling equipment and related solutions, light-cured
bonding and restorative compounds, precision-molded and customized crowns,
bridges, bone grafting materials, implants and other prosthodontic devices,
materials and instruments used in endodontic procedures, and aesthetically
accurate stains and tints. These markets also utilize sophisticated diagnostic
and imaging equipment, and demand high levels of attention to protection against
infection and patient cross-contamination.
In certain countries in Central America, South America and the Pacific Rim,
dental care is often limited to the excavation and filling of cavities and other
restorative techniques, reflecting more modest per capita expenditures for
dental care. These markets demand diverse products such as high and low speed
handpieces, restorative compounds, finishing devices and custom restorative
devices.
In the People's Republic of China, India, Eastern Europe, the Commonwealth
of Independent States, and other developing countries, dental ailments are
treated primarily through tooth extraction and denture replacement. These
procedures require basic surgical instruments, artificial teeth for dentures and
bridgework, and anchoring devices such as posts.
The Company offers products and equipment for use in markets at each of
these stages of development. The Company believes that as each of these markets
develops, demand for more technically
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advanced products will increase. The Company also believes that its recognized
brand names, high quality and innovative products, technical support services
and strong international distribution capabilities position it well to take
advantage of continued growth in all of the markets that it serves.
United States. The market for professional dental products in the United
States has experienced significant growth in recent years. Statistics published
by the U.S. Department of Health and Human Services indicate that annual United
States spending on dental products and services increased from $31.6 billion to
$45.8 billion from 1990 to 1995, or 7.7% per annum.
The Company believes that the United States market will continue to be
influenced by favorable demographic trends, increasing coverage of dental care
by private insurance and government programs, and an intensifying focus on
preventive dental care. The percentage of the United States population over age
65 is expected to nearly double by the year 2030, to 22%, and this segment of
the population commands a relatively high level of discretionary income. The
Company believes that as the number of older, more affluent Americans increases,
the demand for restorative and cosmetic dental procedures will increase as these
individuals seek to retain their natural teeth and improve their appearance.
The Company also believes that the United States market will increasingly
demand products which reduce the risks of infection and patient
cross-contamination. This growing demand reflects increasing government
regulation, professional practice guidelines and public attention focused on
preventing the transmission in the dental office of infectious diseases such as
hepatitis-B and the virus that causes acquired immune deficiency syndrome. The
Company offers products to address the growing market for infection control
products, such as sterilizable dental handpieces and cutting instruments,
single-use prophylaxis pastes, disposable prophy angles and air-water syringe
tips, and infection control barriers, and intends to continue to develop and
acquire products to address this market.
DENTSPLY expects insurance coverage of dental care to play an important
role in the United States market. According to the National Center for Health
Statistics, approximately 40% of the United States population is covered by some
form of dental insurance, up from 35% in 1980. While insurance coverage has been
increasing, the Health Care Finance Review indicates that, in 1995,
approximately 50% of dental expenditures were paid for directly by the consumer.
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Products
DENTSPLY's two principal dental product lines are consumable and laboratory
products, and equipment. These products are produced by the Company in the
United States and internationally and are distributed throughout the world under
some of the most well-established brand names and tradenames in the industry,
including ASH(R), CAULK(R), CAVITRON(R), CERAMCO(R), DENTSPLY(R), DETREY(R),
GENDEX(R), MIDWEST(R), R&R(R), RINN(R), TRUBYTE(R), MAILLEFER(R), PROFILE(R),
THERMAFIL(R), ACUCAM(R) and SANI-TIP(R). Sales of the Company's professional
dental products from continuing operations accounted for approximately 95%, 95%
and 96% of DENTSPLY's consolidated sales for 1996, 1995 and 1994, respectively.
Consumable and Laboratory Products. Consumable and laboratory products
consist of dental sundries used in dental offices in the treatment of patients
and in dental laboratories in the preparation of dental appliances, such as
crowns and bridges. The Company manufactures approximately 1,200 different
consumable and laboratory products marketed under more than 70 brand names.
Consumable and laboratory products include:
Resin-Based and Porcelain Artificial Teeth: Artificial teeth replace
natural teeth lost through deterioration, disease or injury. The Company's
artificial teeth are marketed under the TRUBYTE(R) and PORTRAIT(R) IPN(R)
trade names, among others, and are produced by the Company in York,
Pennsylvania, Brazil and Germany in some 15,000 combinations of shapes,
sizes and shades.
Impression Materials: Impression materials are used to make molds of
teeth for fitting crowns, bridges and dentures. DENTSPLY's JELTRATE(R),
BLUEPRINT(TM), REPROSIL(R) and AQUASIL LV Smart Wetting Impression Material
are designed to increase the rate of successful impressions without retakes
and to set quickly to minimize patient discomfort.
Restorative Materials: Restorative materials are used in sealing,
lining and filling excavated tooth cavities and repairing broken or damaged
teeth, and include amalgams, bonding agents, light-cured composites and
glass ionomer filling materials for more aesthetic restorations. The
Company's DYRACT(R) product is a revolutionary, patented, single component
restorative material featuring simplicity in delivery combined with
excellence in restorative results. The Company's PRISMA(R) AP.H(R),
PRISMA(R) TP.H(R) and TP.H(R) SPECTRUM(TM) universal composite materials
permit restorations to be performed on either the anterior or posterior
teeth using the same material, and are rapidly replacing older,
single-purpose composite materials. The Company's ADVANCE(TM) Hybrid
Ionomer Cement is a resin modified, fluoride- releasing glass ionomer
cement with superior adhesion to
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metal for crown and bridge work while helping to prevent secondary caries
and extending the life of a restoration. PRIME & BOND(TM) 2.1 is the latest
generation of a single bottle, multi-purpose dental adhesive and bonding
agent which combines the functions of a primer and an adhesive in a
simple-to-use single component formula. PRIME & BOND(TM) 2.1's proprietary
resin formulation enhances the long-term marginal integrity of
stress-bearing restorations at both dentin and enamel margins. DENTSPLY
also markets the DISPERSALLOY(R), UNISON(R) and MEGALLOY(TM) lines of
restorative amalgams; DELTON(R) and DELTON(R) PLUS (with fluoride release)
brand dental sealants; and ADAPTIC(R) self-cured composite.
Crown and Bridge Porcelains and Ceramics: These porcelain and ceramic
products are used by dental laboratories in making crowns, bridges, inlays
and onlays for restorative dental procedures, where aesthetics are
particularly important, and to provide functional biting and chewing
surfaces that appear and feel natural. The Company produces specialty crown
and bridge porcelain materials and fully automatic programmable porcelain
furnaces, as well as castable ceramic materials, used by dental
laboratories. Product offerings include the CERAMCO(R) line, and in Europe,
the DETREY(R) CARAT(TM) line of specialty crown and bridge porcelain
products for use as fixed prosthetics. FINESSE(TM) Porcelain, recently
introduced by Ceramco, features superb shade matching and permits the
dental laboratory to fire restorations with extraordinary aesthetics.
FINESSE(TM) Porcelain restorations also allow dentists to adjust and
repolish at chairside without reglazing.
Endodontic Instruments and Materials: These products are used in root
canal treatment of severely damaged or decayed teeth. With the recent
acquisition of Maillefer Instruments S.A. ("Maillefer") and Tulsa Dental
Products L.L.C. ("Tulsa"), the Company has an extensive endodontic product
offering including broaches, files, and other endodontic materials and
instruments. The SUREFLEX(TM) NICKEL TITANIUM FILE features superior
flexibility and shape memory which allows the instrument to follow the path
of the root canal. The Company's PROFILE(R) SERIES 29(R) line of endodontic
files offer a standard 29 percent increase between the tip diameters of
each size instrument for a smooth, progressive enlargement from one file to
the next. PROFILE(R) .04 TAPERS(R) feature non-standard tapers constructed
from super-flexible nickel titanium for use in a controlled, slow-speed,
high- torque rotary dental handpiece. The latest endodontic technology was
incorporated into the newly developed THERMASYSTEM(R) PLUS. This new
product provides a three-dimensional root canal fill in a fraction of the
time it takes for traditional lateral condensation procedures.
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Protective Supplies: These products are designed to ameliorate
possible sources of patient cross-contamination of infectious disease, and
include RITE-ANGLE(R) and NUPRO(R) Disposable Prophy Angles (disposable
mechanical devices used by dentists and hygienists to clean and polish
teeth), hand cleansers, disposable barriers, enzymatic cleansers, needle
stick prevention devices and disposable air-water syringe tips. The
SANI-TIP(R) Disposable Air/Water Syringe Tip features a central water
channel encircled by six separate air channels. This innovative design,
when coupled with a SANI-TIP(R) adaptor, produces precise separation or
atomization of air and water while its clear cellulose- based plastic does
not obstruct the practioner's vision and allows office staff to determine
if a tip was previously used.
Tooth Whitener: DENTSPLY also offers a tooth whitening system. The
NUPRO(R) GOLD Tooth Whitening System is a complete, professionally
administered program. Patients receive a tooth whitening system in a
convenient, easy-to-use take home kit. Clinical studies for this innovative
product showed that teeth averaged eight shares whiter which far exceeds
the American Dental Association recommendation which states that whiteners
must change teeth by a least two shades.
Other Consumable and Laboratory Products: Other products produced by
the Company for use in dental offices and laboratories include NUPRO(R)
prophylaxis paste that is used in cleaning and polishing teeth, the
VERTEX(R) disposable articulator used in dental laboratories to simulate
the dynamic movement of teeth against one another, and MICROBASE(TM), a
methyl methacrylate free, high-pressure injection system for denture resin
which eliminates potential problems for those sensitive to residual
leaching of monomer and features a quicker, microwave cure cycle resulting
in excellent fitting dentures.
Dental Equipment. DENTSPLY's dental equipment product lines
include high and low speed handpieces, intraoral lighting systems,
dental cutting instruments, ultrasonic scalers and polishers,
and x-ray systems and related support equipment and accessories.
Handpieces: Under the MIDWEST(R) brand name, DENTSPLY manufactures and
distributes a line of high-speed and low-speed air-driven handpieces and
intraoral lighting systems and distributes carbide and specialty burs.
High- speed handpieces are the primary instruments utilized by dentists for
restorative, prosthodontic and aesthetic procedures. Low-speed handpieces
may also be used in these procedures and in procedures which require more
control and
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higher torque, such as removal of soft decay, tooth cleaning and polishing,
and chairside adjustment of dentures. Handpiece intraoral lighting systems
supply light to the fiber optic bundles in the handpieces through tubes
that also provide air and water to the handpiece. Midwest's recently
introduced RDH(TM) Hygienist Handpiece is a more comfortable, ergonomically
sound and lightweight handpiece for the dental hygienist. Its one piece
"twist and click" connection avoids cumbersome sterilization protocols and
provides faster handpiece changes.
Dental Cutting Instruments: The Company distributes MIDWEST(R) carbide
and specialty burs. Regular carbide burs are the most commonly used dental
cutting instruments in the North American market. Carbide burs mounted in
handpieces are used as milling tools. While these burs are primarily used
for cavity excavation, the variety of available shapes allows for
alternative uses such as limited trimming and finishing techniques.
Specialty burs are designed to cut and remove metal alloy dental
restorations, to produce smooth surfaces on composite materials, amalgams,
gold, enamel and dentin, and for gross reduction of tooth anatomy in
preparation for fitting crowns and normal cavity excavations.
Ultrasonic Scalers and Polishers: DENTSPLY manufactures and
distributes the CAVITRON(R) ultrasonic scaler (which uses ultrasonic waves
to remove hardened tooth calculus which results from the interaction of
plaque, saliva and food particles), the PROPHY-JET(R) 30 Air Polishing
Prophylaxis Unit (which cleans, polishes and buffs the tooth surface after
scaling is completed) and the CAVITRON(R) JET (which combines both
ultrasonic scaling and air polishing prophylaxis in one multi-function
unit). The Company also produces the CAVITRON(R) MED (which delivers
medicaments directly to pockets below the gum surface in periodontic
treatments). DENTSPLY manufactures a variety of inserts for use with its
ultrasonic prophylaxis units. The FOCUSED SPRAY(TM) INSERT brings water
directly to the instrument tip and focuses water where it is most needed.
The SLIMLINE(TM) Ultrasonic Insert is 40 percent thinner than standard
ultrasonic inserts and allows subgingival ultrasonic instrumentation at
depths up to 7 mm. The new FSI(TM) SLIMLINE(TM) combines the best features
of the FOCUSED SPRAY(TM) INSERT and the SLIMLINE(TM) Ultrasonic Insert.
Dental X-Ray Systems: The Company offers a full line of dental x-ray
equipment for intraoral, panoramic and cephalometric procedures, all
marketed under the GENDEX(R) brand name. Intraoral films provide a view of
a particular area of tooth and jaw structure. Panoramic x-rays utilize a
moving x-ray tube and provide an image of the entire oral
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cavity, an image that is particularly valuable to oral surgeons and
orthodontists. Cephalometric systems permit precise, repeatable positioning
of the patient's skull so that images taken at different times can be
compared.
The Company markets VISUALIX(R), a real time, digital video x-ray
system. Through its solid state, intraoral x-ray sensor and associated
computer, the VISUALIX(R) system allows the dentist to produce radiographic
images without using film. X-rays generated by a standard system strike the
sensor. The image is then displayed on a computer screen, where it can be
enlarged, enhanced and manipulated. The image may also be stored for future
retrieval. The extremely sensitive sensor provides excellent image quality
with a significantly lower x-ray dosage compared to film.
X-Ray Support Equipment: Under the RINN(R) brand name, DENTSPLY
manufactures and distributes x-ray film mounts, film holders and related
equipment and accessories. X-ray film mounts are used as organizing,
storage and retrieval holders for dental x-ray films. Film holders are film
positioning devices used in taking dental x-ray films which ensure the
alignment of the x-ray beam to the intraoral film. Equipment and
accessories include film viewers, film duplicators, chair-side darkrooms,
patient aprons, developing chemicals and x-ray collimating devices.
The GXP(TM) Processor, which develops intraoral, panoramic, and
cephalometric x-ray film, features a closed chemical recirculation system
so that potentially environmentally hazardous solutions may be disposed of
properly. Film enters and exits in the front of the processor, thereby
allowing placement of the unit flush against a wall to conserve space.
DENTSPLY also supplies specialty chemical binders, refractory particles,
investment mold materials and related products to the precision investment
casting industry, which produces metal parts of complex geometry and "near net"
shapes requiring little or no subsequent machining or finishing.
Marketing, Sales and Distribution
The market for DENTSPLY's dental products is primarily comprised of
dentists, dental hygienists, dental assistants, dental laboratories and dental
schools. DENTSPLY focuses its marketing efforts on both the dental professionals
who are the end users of its products and the dealers who distribute certain of
those products. DENTSPLY employs highly trained, product- specific sales and
technical staffs to provide comprehensive marketing and service tailored to the
particular sales and technical support requirements of its customers. DENTSPLY's
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marketing efforts seek to capitalize on the strength of the Company's brand
names and international infrastructure to expand sales of new and existing
products throughout the world, including emerging dental markets in the Pacific
Rim, Central and South America and Eastern Europe.
DENTSPLY's product-specific sales force is divided into domestic and
foreign field selling organizations, each of which is responsible for
maintaining contact with both dealers and dental professionals. The dental sales
force includes approximately 300 domestic representatives, approximately 400
international representatives and approximately 40 telemarketers who support the
domestic representatives. This sales force is further divided into product-based
teams. Each specialized sales force tailors its sales strategy to the particular
sales and technical support requirements of its customers. Sales personnel
attend over 100 dental trade shows each year where the Company's products are
exhibited to dental professionals and dealers. Sales personnel also routinely
participate with dealers to disseminate product information and conduct product
demonstrations, seminars, study groups and lectures for dental professionals. In
addition, DENTSPLY invests significant amounts in advertising in national and
international dental publications.
DENTSPLY distributes its dental products primarily through approximately
350 domestic and over 800 foreign dealers and importers. While the overwhelming
majority of DENTSPLY's products are distributed through dental dealers, certain
highly technical products such as the Company's CERAMCO(R) line of crown and
bridge porcelain products and Tulsa's endodontic instruments and materials are
sold directly to the dental laboratory or dentist.
DENTSPLY also maintains eight educational facilities. The Company's
facilities in York, Pennsylvania; Burlington, New Jersey; Dreieich, Germany; and
Weybridge, England are used for training, product demonstrations and seminars
and to promote interest in and understanding of the use of DENTSPLY's dental
laboratory products. The DENTSPLY Educational Center in York provides
personalized training in both fixed and removable prosthodontic specialties.
Additional teaching facilities are maintained in Milford, Delaware; Konstanz,
Germany; Hong Kong, and Mexico for training dental professionals in the use of
consumable dental products. The Company also offers many seminars throughout the
world in such areas as endodontics, crown and bridge porcelain and ceramics,
restoratives and dental implant systems.
Product Development
During 1996, 1995 and 1994, approximately $14.7 million, $12.3 million and
$10.9 million, respectively, was invested by
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the Company in connection with the development of new products and in the
improvement of existing products. DENTSPLY employs approximately 170 scientists,
engineers and technicians dedicated to product development. The Company believes
that its product development programs are critical in meeting market demands and
achieving future growth. The Company also sponsors independent clinical research
projects aimed at developing, adapting and testing new technologies for use in
DENTSPLY products. From time to time, the Company contracts with independent
consultants and engineers to augment efforts to develop new products.
Manufacturing and Technical Expertise
DENTSPLY believes that its manufacturing capabilities are critical to its
success. The Company continues to automate its global manufacturing operations
in order to remain a low cost producer.
The manufacture of the Company's products requires substantial and varied
technical expertise. Complex materials technology and processes are necessary to
manufacture the Company's products.
The manufacture of artificial teeth and dental composites involves
expertise in polymer chemistry. A polymer is a compound of high molecular weight
derived through the combination of many smaller molecules or by the condensation
of many smaller molecules through the elimination of water or alcohol. DENTSPLY
manufactures certain lines of artificial teeth by a process that disperses the
polymeric molecules found within cross-linked polymers, thereby improving the
tooth's resistance to blushing, whitening, crazing and disintegration. Another
line of artificial teeth utilizes an ultra-high viscosity polypropylene that
significantly increases wear resistance.
Visible light-cured composites utilize a single paste that immediately
polymerizes when exposed to a light source. DENTSPLY's PRISMA(R) TP.H(R)
light-cured composites contain non- radiopaque fillers of approximately .02-.08
microns in size. The small size of this filler increases the bonding power of
the composite. It also permits the material to be polished in order to more
accurately replicate the color of a natural tooth. Basic, self-cured
(self-hardened) composites are formed by combining two pastes that trigger
polymerization when reacted.
The Company manufactures extremely high quality endodontic instruments
using production equipment designed and manufactured in-house. In general, the
equipment used is not available on the external market.
Dental handpiece manufacturing technology requires precision machining of
component parts to extremely tight tolerances in
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order to accommodate the operating speed of the air-driven turbine, which
exceeds 350,000 r.p.m. in high speed handpieces, and the wide range of
applications for which the unit is used. These tolerances require dimensional
machining to as little as 15 millionths of an inch to produce the delicate
balance necessary for a quiet, smooth-running turbine with minimal vibration.
The Company utilizes "computer numerically controlled" (CNC) machines and
computer-assisted design software in its handpiece manufacturing processes.
Production of the Company's x-ray products involves a variety of
manufacturing disciplines. For example, the manufacture of x-ray tubes requires
expertise in high-temperature metallurgy, sophisticated glass blowing
techniques, and the ability to evacuate molecular impurities from the x-ray tube
through degasification. The Company also designs and fabricates printed circuit
boards, assembles electrical harnesses, fabricates sheet metal, and engages in
precision machining, painting and high-tension coil winding in connection with
the manufacturing of its x-ray products.
Foreign Operations
The Company conducts its business in over 100 foreign countries,
principally through its foreign subsidiaries which operate 35 foreign facilities
(including 13 manufacturing operations). DENTSPLY has a long-established
presence in Canada and in the European market, particularly in Germany,
Switzerland and England. The Company also has a significant market presence in
Central and South America, Australia, Hong Kong, Thailand, India, Philippines
and Japan. DENTSPLY has established joint ventures and marketing activities in
the People's Republic of China and the Commonwealth of Independent States. In
1996, a wholly-owned subsidiary, including a manufacturing facility, was
established in the People's Republic of China. Manufacturing operations in India
also commenced in 1996.
For 1996, 1995 and 1994, the Company's sales outside the United States,
including export sales, accounted for approximately 49%, 48% and 45%,
respectively, of consolidated net sales from continuing operations. For
information about the Company's continuing operations in different geographic
areas for 1996, 1995 and 1994, see Note 4 of the Notes to the Company's
Consolidated Financial Statements. As a result of the Company's significant
international presence, DENTSPLY is subject to fluctuations in exchange rates of
various foreign currencies and other risks associated with foreign trade. The
Company actively manages its currency risk exposures. Fluctuations in exchange
rates have not had a material adverse impact upon the Company's financial
position.
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Competition
The Company conducts its operations, both domestic and foreign, under
highly competitive market conditions. Competition in the dental materials and
equipment industries is based primarily upon product performance, quality,
safety and ease of use, as well as price, customer service, innovation and
acceptance by professionals and technicians. DENTSPLY believes that its
principal strengths include its well-established brand names, its reputation for
high-quality and innovative products, its leadership in product development and
manufacturing, and its commitment to customer service and technical support.
The size and number of the Company's competitors vary by product line and
from region to region. There are many companies which produce some, but not all,
of the same types of products as those produced by the Company. Certain of
DENTSPLY's competitors may have greater resources than does the Company in
certain of its product offerings.
Regulation
The Company's products are subject to regulation by, among other
governmental entities, the United States Food and Drug Administration (the
"FDA"). In general, if a dental "device" is subject to FDA regulation,
compliance with the FDA's requirements constitutes compliance with corresponding
state requirements. In order to ensure that dental products distributed for
human use in the United States are safe and effective, the FDA regulates the
introduction, manufacture, advertising, labeling, packaging, marketing and
distribution of, and record-keeping for, such products.
Dental devices of the types sold by the Company are generally classified by
the FDA into a category that renders them subject only to general controls that
apply to all medical devices, including regulations regarding alteration,
misbranding, notification, record-keeping and good manufacturing practices. The
Company believes that it is in compliance with FDA regulations applicable to its
products and manufacturing operations.
All dental amalgam filling materials, including those manufactured and sold
by the Company, contain mercury. Various groups have alleged that dental amalgam
containing mercury is harmful to human health and have actively lobbied state
and federal lawmakers and regulators to pass laws or adopt regulatory changes
restricting the use, or requiring a warning against alleged potential risks, of
dental amalgams. The FDA's Dental Devices Classification Panel, the National
Institutes of Health and the United States Public Health Service have each
indicated that no direct hazard to humans from exposure to dental amalgams
14
has been demonstrated to them. If the FDA were to reclassify dental mercury and
amalgam filling materials as classes of products requiring FDA premarket
approval, there can be no assurance that the required approval would be obtained
or that the FDA would permit the continued sale of amalgam filling materials
pending its determination.
The introduction and sale of dental products of the types produced by the
Company are also subject to government regulation in the various foreign
countries in which they are produced or sold. Some of these regulatory
requirements are more stringent than those applicable in the United States.
DENTSPLY believes that it is in substantial compliance with the foreign
regulatory requirements that are applicable to its products and manufacturing
operations.
Sources and Supply of Raw Materials
All of the raw materials used by the Company in the manufacture of its
products are purchased from various suppliers and are available from numerous
sources. No single supplier accounts for a significant percentage of DENTSPLY's
raw material requirements.
Trademarks and Patents
The Company's trademark properties are important and contribute to the
Company's marketing position. To safeguard these properties, the Company
maintains trademark registrations in the United States and in significant
international markets for its products, and carefully monitors trademark use
worldwide. DENTSPLY also owns and maintains several hundred foreign and domestic
patents. Although the protection afforded to the Company by these patents is
advantageous to its business, the Company does not consider that its business is
materially dependent on its patents.
Employees
As of March 15, 1997, the Company and its subsidiaries had approximately
5,100 employees, of whom approximately 2,800 were engaged in manufacturing
operations, approximately 1,600 were engaged in sales and distribution,
approximately 530 were engaged in finance and administration, and approximately
170 were engaged in research and product development activities. Hourly workers
at the Company's Ransom & Randolph facility in Maumee, Ohio are represented by
Local No. 12 of the International Union, United Automobile, Aerospace and
Agriculture Implement Workers of America under a collective bargaining agreement
that expires on January 31, 2000; and hourly workers at the Company's Midwest
Dental Products facility in Des Plaines, Illinois are represented by Tool & Die
Makers Local 113 of the International Association
15
of Machinists and Aerospace Workers under a collective bargaining agreement that
expires on May 31, 1997. The Company believes that its relationship with its
employees is good.
Item 2. Properties
- -------------------
As of March 15, 1997, DENTSPLY maintains manufacturing facilities at the
following locations:
Leased
Location Function or Owned
- -------- -------- --------
York, Pennsylvania Manufacture and distribution of Owned
artificial teeth and other dental
laboratory products; export of
dental products; corporate
headquarters
York, Pennsylvania Manufacture and distribution of Leased
dental equipment and preventive
dental products
Des Plaines, Illinois Manufacture and assembly of dental Leased
handpieces and components and
dental x-ray equipment
Milford, Delaware Manufacture and distribution of Owned
consumable dental products
Las Piedras, Manufacture of crown and bridge Owned
Puerto Rico materials
Elgin, Illinois Manufacture of dental x-ray film Owned
holders, film mounts and
accessories
Maumee, Ohio Manufacture and distribution of Owned
investment casting products
Lakewood, Colorado Manufacture and distribution of Leased
bone grafting materials and
Hydroxylapatite plasma-feed
coating materials
Commerce, California Manufacture and distribution of Leased
investment casting products
Carlsbad, California Manufacture and distribution of Leased
intraoral cameras and computer
imaging systems
16
Johnson City, Manufacture and distribution of Leased
Tennessee endodontic instruments and materials
Las Vegas, Nevada Manufacture and distribution of Leased
disposable air-water syringe tips
Petropolis, Brazil Manufacture and distribution of Owned
artificial teeth and consumable
dental products
Dreieich, Germany Manufacture and distribution of Owned
artificial teeth and other dental
laboratory products
Konstanz, Germany Manufacture and distribution of Owned
consumable dental products;
distribution of dental equipment
Milan, Italy Manufacture and distribution of Leased
dental x-ray equipment
Mexico City, Mexico Manufacture and distribution of Owned
dental products
Plymouth, England Manufacture and distribution of Leased
dental hand instruments
Blackpool,England Manufacture and distribution of Leased
dental materials
Ballaigues, Manufacture and distribution of Owned
Switzerland endodontic instruments
Ballaigues, Manufacture and distribution of Owned
Switzerland plastic components and packaging
material
Le Creux, Manufacture and distribution of Owned
Switzerland endodontic instruments
Moscow, Russia Manufacture and distributon of Leased
consumable dental products
New Delhi, India Manufacture and distribution of Leased
dental products
Tianjin, China Manufacture and distribution of Leased
dental laboratory products
In addition, the Company maintains sales and distribution offices at
certain of its foreign and domestic manufacturing facilities, as well as at
three other United States locations and at 16 international locations in 12
foreign countries. Of the 19
17
United States and international sites used exclusively for sales and
distribution, one is owned by the Company and the remaining 18 are leased. The
Company also maintains sales offices in various countries throughout the world.
DENTSPLY believes that its properties and facilities are well maintained
and are generally suitable and adequate for the purposes for which they are
used.
Item 3. 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 May 1994, Core-Vent Corporation and Dr. Gerald Niznick filed an equity
action against DENTSPLY in Common Pleas Court in York County, Pennsylvania,
arising out of the terms of an April 1991 Exclusive Distribution Agreement
("Agreement"). The action sought to enjoin DENTSPLY from publishing certain
marketing materials for dental implant products. DENTSPLY countersued alleging
that the Agreement, or in the alternative an amendment to the Agreement, should
be terminated because of the misconduct of Dr. Niznick. The case was referred to
arbitration pursuant to the terms of the Agreement and both parties amended
their pleadings to allege monetary damages. On March 19, 1997, the arbitrator
ruled in favor of DENTSPLY; as a result, the Agreement has been terminated.
In May 1996, DENTSPLY and its subsidiary, Tulsa Dental Products Inc.
("Tulsa") filed a complaint against Tycom Corporation et al "(Defendants")
alleging patent infringement by Tycom of certain patents owned by Tulsa covering
endodontic instruments. Tycom filed an answer and counterclaim denying patent
infringement and alleging that DENTSPLY and Tulsa (i) engaged in conduct which
violates Section 2 of the Sherman Antitrust Act; (ii) tortiously interfered with
Defendants' business relations; and (iii) were guilty of unfair competition.
This suit is in the discovery stage. DENTSPLY and Tulsa are vigorously
contesting the Defendants counterclaims in this suit and believe these claims to
be without merit.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
18
Executive Officers of the Registrant
The following table sets forth certain information regarding the executive
officers of the Company as of March 15, 1997.
Name Age Position
---- --- --------
Leslie A. Jones 57 Chairman of the Board
John C. Miles II 55 Vice Chairman of the Board and
Chief Executive Officer
Gerald K. Kunkle Jr. 50 President and Chief Operating
Officer
W. William Weston 49 Senior Vice President, European
Group
Michael R. Crane 56 Senior Vice President, North
American Group
Edward D. Yates 53 Senior Vice President and Chief
Financial Officer
Thomas L. Whiting 54 Senior Vice President, Pacific Rim,
Latin America, Gendex, Tulsa
Dental and New Image Industries
J. Patrick Clark 55 Vice President, Secretary and
General Counsel
Leslie A. Jones was appointed Chairman of the Board in May
1996. Mr. Jones has served as a director since the June 11, 1993
merger (the "Merger") of Dentsply International Inc. ("Old
Dentsply") and GENDEX Corporation ("Gendex"), of which the Company
is the surviving corporation. Prior to the Merger he served as a
director of Old Dentsply. Mr. Jones has been Chairman and a
director of OBOS Inc., a manufacturer of communication devices,
since August 1993. From 1992 until August 1993 he was a private
investor. From January 1991 to January 1992, he was a Senior
Vice President and Special Assistant to the President of Old
Dentsply.
John C. Miles II was named Vice Chairman of the Board effective January 1,
1997. He was named Chief Executive Officer of the Company upon the resignation
of Burton C. Borgelt from that position on January 1, 1996. Prior to that he was
President and Chief Operating Officer and a director of the Company since the
Merger and of Old Dentsply commencing in January 1990.
Gerald K. Kunkle Jr. was named President and Chief Operating Officer
effective January 1, 1997. Prior thereto, Mr. Kunkle served as President of
Johnson and Johnson's Vistakon Division, a manufacturer and marketer of contact
lenses, from January 1994 and, from early 1992 until January 1994, was President
of Johnson and Johnson Orthopaedics, Inc., a manufacturer of orthopaedic
implants, fracture management products and trauma devices.
19
Michael R. Crane was named Senior Vice President, North American Group
effective January 1, 1996. Prior to that he was Senior Vice President, Europe,
Mideast, Africa and Commonwealth of Independent States of the Company effective
in early 1995. Prior thereto he served as Senior Vice President, International
Operations of the Company since the Merger, and in a similar capacity with Old
Dentsply commencing in November 1989. Prior to that time, he served as Vice
President Sales/Marketing for Whaledent International, a division of IPCO
Corporation.
W. William Weston was named Senior Vice President, European Group of the
Company effective January 1, 1996. Prior to that Mr. Weston served as the Vice
President and General Manager of DENTSPLY's DeDent Operations in Europe from
October 1, 1990 to January 1, 1996. Prior to that time he was Pharmaceutical
Director for Pfizer in Germany.
Edward D. Yates has been Senior Vice President and Chief Financial Officer
of the Company since the Merger and prior thereto served in a similar capacity
with Old Dentsply commencing in March 1991. From January 1990 until March 1991,
he served as Old Dentsply's Controller. Prior to that time, he was the Treasurer
of Old Dentsply. Mr. Yates is a Certified Public Accountant.
Thomas L. Whiting was named Senior Vice President, Pacific Rim, Latin
America and Gendex of the Company in July 1994, to be effective in early 1995;
his responsibilities and title were expanded to encompass Tulsa and New Image
upon the Company's acquisitions of those businesses. Prior to this appointment,
Mr. Whiting was Vice President and General Manager of the Company's L.D. Caulk
Division since the Merger, and prior thereto served in the same capacity with
Old Dentsply since joining Old Dentsply in 1987. Prior to that time, Mr. Whiting
held management positions with Deseret Medical and the Parker-Davis Company.
J. Patrick Clark has been Vice President, Secretary and General Counsel of
the Company since the Merger and prior thereto served as General Counsel and
Secretary of Old Dentsply since 1986.
20
PART II
Item 5. Market for Registrant's Common Equity and Related
- ----------------------------------------------------------
Stockholder Matters
- -------------------
The information set forth under the caption "Supplemental Stock
Information" in Part IV of this Annual Report on Form 10-K is incorporated
herein by reference in response to this Item 5.
Item 6. Selected Financial Data
- --------------------------------
The information set forth under the caption "Selected Financial Data" in
Part IV of this Annual Report on Form 10-K is incorporated herein by reference
in response to this Item 6.
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
- -----------------------------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part IV of this
Annual Report on Form 10-K is incorporated herein by reference in response to
this Item 7.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The information set forth under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of
Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to
Consolidated Financial Statements," "Management's Financial Responsibility" and
"Independent Auditors' Report" of KPMG Peat Marwick LLP in Part IV of this
Annual Report on Form 10-K is incorporated herein by reference in response to
this Item 8.
Item 9. Changes in and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
- -----------------------------------
Not applicable.
21
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K and the information set
forth under the captions "Election of Directors," "Section 16(a) Beneficial
Ownership Reporting Compliance" and "Other Matters" in the Proxy Statement is
incorporated herein by reference in response to this Item 10.
Item 11. Executive Compensation
- --------------------------------
The information set forth under the caption "Executive Compensation" in the
Proxy Statement is incorporated herein by reference in response to this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------------------------------------------------------------
Management
- ----------
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information set forth under the subcaption "Executive
Compensation--Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement is incorporated herein by
reference to this Item 13.
22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ----------------------------------------------------------------
Form 8-K
- --------
Sequential
(a) Documents filed as part of this Report Page No.
-------------------------------------- ----------
1. Supplemental Stock Information 31
2. Selected Financial Data 32
3. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 34
4. Financial Statements and Supplementary
Data
--------------------------------------
The following consolidated financial
statements of the Company are filed as
part of this Annual Report on Form 10-K:
Management's Financial Responsibility 39
Independent Auditors' Report of
KPMG Peat Marwick LLP 40
Consolidated Statements of Income
for the years ended December 31,
1996, 1995 and 1994 41
Consolidated Balance Sheets as of
December 31, 1996 and 1995 42
Consolidated Statements of
Stockholders' Equity for the years
ended December 31, 1996, 1995 and
1994 43
Consolidated Statements of Cash
Flows for the years ended
December 31, 1996, 1995 and 1994 45
Notes to Consolidated Financial
Statements 49
23
Sequential
5. Financial Statement Schedules Page No.
----------------------------- ----------
The following financial statement
schedule is filed as part of this
Annual Report on Form 10-K:
Schedule II - Valuation and qualifying 69
accounts
Financial statement schedules not
listed above have been omitted because
they are inapplicable, are not re-
quired under applicable provisions of
Regulation S-X, or the information
that would otherwise be included in such
schedules is contained in the registrant's
consolidated financial statements or
accompanying notes.
24
6. Exhibits. The Exhibits listed below are filed or
incorporated by reference as part of this Annual
Report on Form 10-K.
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation (1)
3.2 By-Laws, as amended (1)
4.1 (a) Competitive Advance, Revolving
Credit and Guaranty Agreement, dated as of
November 15, 1993, among the Company, the
guarantors named therein, the banks named therein,
and Chemical Bank, as agent (Note: All attachments
have been omitted. Copies of such attachments will
be furnished supplementally to the Securities and
Exchange Commission upon request.) (10)
(b) First Amendment, dated as of
December 23, 1994, to Competitive
Advance, Revolving Credit and
Guaranty Agreement (11)
10.1 (a) 1987 Employee Stock Option Plan
(4)*
(b) Amendment No. 1 to the Company's
1987 Employee Stock Option Plan
(5)*
10.2 (a) Letter Agreement dated June 29, 1990 by and
between Cravey, Green & Wahlen Incorporated and
the Company (3)*
(b) Stock Purchase Warrant dated August 28, 1990
issued to Cravey, Green & Wahlen Incorporated by
the Company (2)*
(c) Stock Purchase Warrant Plan adopted
February 25, 1993 (6)
10.3 1992 Stock Option Plan adopted May
26, 1992 (7)*
10.4 (a) Employee Stock Ownership Plan as amended
effective as of December 1, 1982, restated as of
January 1, 1991 (11)*
(b) Second Amendment to the DENTSPLY
Employee Stock Ownership Plan
10.5 (a) Retainer Agreement dated December
29, 1992 between the Company and
State Street Bank and Trust Company
("State Street") (8)
25
(b) Trust Agreement between the Company
and State Street Bank and Trust
Company dated as of August 11, 1993
(10)
(c) Amendment to Trust Agreement
between the Company and State
Street Bank and Trust Company
effective August 11, 1993 (10)
10.6 DENTSPLY Stock Option Conversion
Plan approved June 23, 1993 (8)*
10.7 Employment Agreement dated January
1, 1996 between the Company and
Burton C. Borgelt (14)*
10.8 (a) Employment Agreement dated as of
December 31, 1987 between the
Company and John C. Miles II (8)*
(b) Amendment to Employment Agreement
between the Company and John C.
Miles II dated February 16, 1996,
effective January 1, 1996 (14)*
10.9 Employment Agreement dated as of
December 31, 1987, as amended as of
February 8, 1990, between the
Company and Leslie A. Jones (8)*
10.10 Employment Agreement dated as of
December 10, 1992 between the
Company and Michael R. Crane (8)*
10.11 Employment Agreement dated as of
December 10, 1992 between the
Company and Edward D. Yates (8)*
10.12 Employment Agreement dated as of
December 10, 1992 between the
Company and J. Patrick Clark (8)*
10.13 Employment Agreement dated January
1, 1996 between the Company and W.
William Weston (14)*
10.14 Employment Agreement dated January
1, 1996 between the Company and
Thomas L. Whiting (14)*
10.15 Employment Agreement dated October
11, 1996 between the Company and
Gerald K. Kunkle Jr. *
10.16 (a) Exclusive Distribution Agreement
dated April 19, 1991, between
Core-Vent Corporation ("Core-
Vent"), Dr. Gerald Niznick and the
Company (8)
(b) First Amendment to Exclusive
Distribution Agreement dated April
30, 1991 (8)
(c) Second Amendment to Exclusive
Distribution Agreement dated April
26
21, 1993 (Note: Exhibits 2.3.1B
(Notice of New Products), 2.3.1A
(Price List) and 16 (Mutual
Release) have been omitted. Copies
of such exhibits will be furnished
to the Securities and Exchange
Commission supplementally upon
request.) (8)
10.17 1993 Stock Option Plan (1)*
10.18 Revolving Credit Agreement among
DENTSPLY International Inc., each of the
guarantors named therein, and ABN AMRO Bank N.V.,
dated as of September 9, 1994 (11)
10.19 Multi-Currency Term Loan Agreement
among Dentsply Ltd., the banks
named therein, and ABN AMRO Bank
N.V., dated as of May 12, 1995
(Note: All attachments have been
omitted. Copies of such attach-
ments will be furnished
supplementally to the Securities
and Exchange Commission upon
request.)(14)
10.20 (a) DENTSPLY International Inc. 401(k)
Savings Plan Summary Plan
Description, as amended effective
January 1, 1994 (11)*
(b) Fourth Amendment to the DENTSPLY
International 401(k) Savings Plan *
10.21 Midwest Dental Products Corporation
Pension Plan as amended and re-
stated effective January 1, 1989
(11)*
10.22 Revised Ransom & Randolph Pension Plan, as amended
effective as of September 1, 1985, restated as of
January 1, 1989 (11)*
10.23 DENTSPLY International Inc.
Directors' Deferred Compensation
Plan effective January 1, 1997 *
10.24 Letter Agreement, dated October 13,
1994, between Dentsply Limited and
DePuy International Limited (11)
10.25 Sales-Purchase Agreement, dated May
30, 1995, between certain stock-
holders of Maillefer Instruments,
S.A., Dentsply Ltd., and DENTSPLY
International Inc. as guarantor
(12)
10.26 Asset Purchase and Sale Agreement,
dated January 10, 1996, between
27
Tulsa Dental Products, L.L.C. and
DENTSPLY International Inc. (13)
10.27 Stock Purchase Agreement dated
January 13, 1997 between Groupe
Monot, S.A. and Dentsply DeTrey
GmbH for the purchase of
Laboratoire SPAD, S.A. Attached to
the Agreement is a Table of
Contents of the Schedules and
Exhibits to the Agreement, any of
which will be provided upon request
of the Commission.
11 Computation of earnings per share
21.1 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
- -------------------
* Management contract or compensatory plan.
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(2) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1991, File No. 0-16211.
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-2 (No. 33-43079).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-18 (No. 33-
15355C).
(5) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1992, File No. 0-16211.
(6) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-61780).
(7) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
(8) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated August 28, 1990,
File No. 0-16211.
28
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-16211.
(11) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
December 31, 1994, File No. 0-16211.
(12) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated June 30, 1995,
File No. 0-16211.
(13) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(14) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
Loan Documents
The Company and certain of its subsidiaries have entered into various loan
and credit agreements and issued various promissory notes and guaranties of such
notes, listed below, the aggregate principal amount of which is less than 10% of
its assets on a consolidated basis. The Company has not filed copies of such
documents but undertakes to provide copies thereof to the Securities and
Exchange Commission supplementally upon request.
(1) Master Grid Note dated November 4, 1996 executed in favor of The Chase
Manhattan Bank in connection with a line of credit up to $20,000,000
between the Company and The Chase Manhattan Bank.
(2) Agreement dated November 4, 1996 between National Westminster Bank PLC and
Dentsply Limited for (pound)2,500,000.
(3) Promissory Note dated May 1, 1992 in the principal amount of $3,000,000 of
the Company in favor of CoreStates Bank.
(4) Credit Agreement dated August 15, 1996 between Dentsply
Canada Limited ("DCL") and Mellon Bank Canada.
(5) Promissory Note dated December 1, 1995 in connection with a line of credit
up to $20,000,000 between the Company and Mellon Bank.
(6) Form of "comfort letters" to various foreign commercial lending
institutions having a lending relationship with one or more of the
Company's international subsidiaries.
29
(7) Unsecured Note dated July 8, 1993 between the Company and Harris Trust and
Savings Bank in the principal amount of $1,750,000.
(b) Reports on Form 8-K
-------------------
The Company did not file any Reports on Form 8-K during the
quarter ended December 31, 1996.
* * * * * *
30
Supplemental Stock Information
- ------------------------------
The Common Stock of the Company is traded on the NASDAQ National Market
under the symbol "XRAY". The following table sets forth low and high sale prices
of the Company's common stock for the periods indicated as reported on the
NASDAQ National Market:
Market Range of Common Stock Cash
---------------------------- Dividend
1996 High Low Declared
- ---- -------- -------- --------
First Quarter $40-3/4 $37-1/2 $.0825
Second Quarter 44-3/4 40 .0825
Third Quarter 44-1/2 37-1/4 .0825
Fourth Quarter 49 41-3/4 .0925
1995
- ----
First Quarter $36-1/4 $31 $.075
Second Quarter 36-7/8 34-1/4 .075
Third Quarter 40-1/4 32-3/4 .075
Fourth Quarter 40-1/4 33-7/8 .0825
1994
- ----
First Quarter $47 $36 $ ---
Second Quarter 39-1/2 34 ---
Third Quarter 37-3/4 31-1/4 .075
Fourth Quarter 35-3/4 28-1/4 .075
The Company estimates there are approximately 11,350 holders of common
stock, including 516 holders of record.
31
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year Ended December 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Statement of Income Data: (in thousands, except per share amounts)
Net sales $ 656,557 $ 572,028 $ 524,758 $ 503,820 $ 476,335
Cost of products sold 331,887 291,176 267,034 257,707 246,126
------------ ------------ ------------ ------------ ------------
Gross profit 324,670 280,852 257,724 246,113 230,209
Selling, general and administrative expenses 205,206 180,117 160,324 172,147 148,264
------------ ------------ ------------ ------------ ------------
Operating income from continuing operations
before discretionary ESOP contributions 119,464 100,735 97,400 73,966 81,945
Discretionary ESOP contributions --- --- --- 4,361 6,568
Interest expense 11,095 9,144 7,999 20,752 22,099
Interest income (1,024) (1,265) (1,527) (370) (628)
Other (income) expense, net (1,567) 2,839 (734) (2,119) (1,797)
------------ ------------ ------------ ------------ ------------
Income from continuing operations
before income taxes 110,960 90,017 91,662 51,342 55,703
Provision for income taxes 43,738 36,054 37,518 26,197 24,416
------------ ------------ ------------ ------------ ------------
Income from continuing operations 67,222 53,963 54,144 25,145 31,287
------------ ------------ ------------ ------------ ------------
Discontinued operations:
Income from the operation of discontinued
Medical business (net of income taxes of
$.6 million in 1994; $1.6 million in
1993; and $1.7 million in 1992) --- --- 1,311 2,925 2,988
Gain on disposal of Medical business,
including provision of $.5 million for
operating losses during phase-out period
(net of income taxes of $5.5 million) --- --- 6,543 --- ---
------------ ------------ ------------ ------------ ------------
Income from discontinued operations --- --- 7,854 2,925 2,988
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 67,222 53,963(1) 61,998 28,070(1) 34,275
Extraordinary loss related to early
extinguishment of debt (net of
income tax benefit of $6.3 million) --- --- --- 14,018 ---
------------ ------------ ------------ ------------ ------------
Net income $ 67,222 $ 53,963(1) $ 61,998 $ 14,052(1) $ 34,275
============ ============ ============ ============ ============
<FN>
</FN>
32
Year Ended December 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
Earnings per Common Share: (in thousands, except per share amounts)
Income from continuing operations $ 2.50 $ 2.00 $ 1.95 $ 1.02 $ 1.29
Income from the operation of
discontinued Medical business --- --- .05 .12 .13
Gain on disposal of Medical business --- --- .23 --- ---
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 2.50 2.00 2.23 1.14 1.42
Extraordinary item --- --- --- (.57) ---
------------ ------------ ------------ ------------ ------------
Net income $ 2.50 $ 2.00 $ 2.23 $ .57 $ 1.42
============ ============ ============ ============ ============
Dividends per Common Share $ .34 $ .3075 $ .15 $ --- $ ---
Weighted average common shares outstanding 26,920 27,012 27,776 24,598 24,220
Balance Sheet Data (at end of period):
Working capital $ 113,547 $ 122,706(2) $ 92,206(2) $ 82,779(2) $ 38,185(2)
Total assets 667,662 582,383(2) 466,930(2) 466,787(2) 450,641(2)
Total long-term debt 75,109 68,675 12,789 95,356 192,082
Stockholders' equity 365,590 315,922 299,337 236,397 100,285
Other Data:
Depreciation and amortization 28,108 21,488 18,133(3) 17,951(3) 15,333(3)
Capital expenditures (3) 20,801 17,421 12,504 9,212 14,626
<FN>
(1) Includes certain unusual or non-recurring charges of approximately $3.1 million (approximately $1.8 million after tax) in
1995 and $21.8 million (approximately $16.5 million after tax) in 1993. The effect of these unusual or
non-recurring charges on operating income from continuing operations before discretionary ESOP contributions was approximately
$17.9 million during the year ended December 31, 1993.
(2) Excludes net assets of discontinued operations.
(3) Excludes discontinued operations.
</FN>
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Any statements released by the Company that are forward looking 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 affect the Company's business and
prospects, including economic, competitive, governmental, technological and
other factors discussed in the Company's filings with the Securities and
Exchange Commission.
On October 13, 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business which includes the
Eureka X-Ray Tube Corp. ("Eureka"), GENDEX Medical and CMW business units.
Accordingly, the Company's financial statements have been restated to reflect
the accounting treatment for discontinued operations.
Results of Operations, 1996 Compared to 1995
- --------------------------------------------
Net sales increased $84.6 million, or 14.8% from $572.0 million in 1995 to
$656.6 million in 1996. About one half of this increase was due to the inclusion
of a full year of the operations of Maillefer Instruments S.A. ("Maillefer") in
1996 versus a partial year in 1995, when Maillefer was acquired, and the 1996
acquisitions of the dental operations of Tulsa Dental Products LLC ("Tulsa") and
CeraMed Dental, LLC ("CeraMed"). The remainder was due to strong growth in the
Pacific Rim and Latin America and modest growth in both the United States and
Europe.
Gross profit increased $43.8 million, or 15.6% due primarily to higher net
sales. Gross profit as a percentage of net sales was 49.5% in 1996 compared to
49.1% in 1995. The improvement in the gross margin percentage was due to a
combination of high margin products from acquisitions, cost reductions, and
increased margin obtained from replacing distributors with DENTSPLY affiliates
in certain foreign locations. Improvements in the gross profit percentage were
partially offset by the adverse impact of acquisition accounting for Maillefer,
Tulsa, and CeraMed.
Selling, general and administrative expenses increased $25.1 million, or
13.9%. As a percentage of net sales, expenses decreased from 31.5% in 1995 to
31.3% in 1996. This decrease was primarily due to lower spending levels compared
to sales in Europe, Pacific Rim, and Latin America. The percentage to net sales
improvement was partially offset by expenses associated with upgrading
management information systems in the United States and Europe, continued
emphasis on end user pull through marketing strategy, and research and
development.
The $2.2 million increase in net interest expense was primarily due to
acquisition debt, partially offset by cash generated from operations. Other
income was $1.6 million in 1996, compared to other
34
expense of $2.8 million in 1995. Other income in 1996 was primarily due to a
legal settlement of $1.2 million in the Company's favor in the first quarter,
while the Company took a one-time charge of $3.1 million the second quarter of
1995 to cover the costs of closing down its Executive Offices in Illinois and
consolidating its executive operations in York, Pennsylvania.
Income from continuing operations before income taxes increased $21.0
million, or 23.3% from $90.0 million in 1995 to $111.0 million in 1996. Without
the one-time charge of $3.1 million in 1995 to cover the costs of closing the
Company's executive offices in Illinois, income from continuing operations
before income taxes increased $17.9 million, or 19.2%.
Net income increased $13.2 million to $67.2 million in 1996 from $54.0
million in 1995, an increase of 24.6%. Without the one-time after-tax charge of
$1.8 million in 1995 to cover the costs of closing the Company's executive
offices in Illinois, net income increased $11.4 million, or 20.4%.
Earnings per common share from continuing operations of $2.50 for 1996
increased $.50, or 25.0% from $2.00 in 1995. Without the one-time after-tax
charge of $1.8 million in 1995 to cover the costs of closing the Company's
executive offices in Illinois, earnings per common share increased $.43, or
20.8% over 1995.
The sale of the GENDEX Medical business, the last remaining unit of the
discontinued medical segment, occurred in the first quarter of 1996. Net sales
of this business were $2.7 million in 1996.
Results of Operations, 1995 Compared to 1994
- --------------------------------------------
Net sales increased $47.2 million, or 9.0% from $524.8 million in 1994 to
$572.0 million in 1995. The increase was primarily in Europe, with a significant
portion of the increase coming from the acquisition of Maillefer. The sales
increase in the United States was adversely impacted by discontinuing certain
dealer incentives in the third quarter of 1995 which previously had the effect
of encouraging dealers to place large stocking orders.
Gross profit increased $23.1 million, or 9.0% due primarily to higher net
sales. Gross profit as a percentage of net sales was 49.1%, equal to 1994.
Improvements in the gross profit percentage in 1995 were offset by the adverse
impact of acquisition accounting for Maillefer.
Selling, general and administrative expenses increased $19.8 million, or
12.3%. As a percentage of net sales, expenses increased from 30.6% in 1994 to
31.5% in 1995. This increase was mainly due to incremental expenses incurred in
1995 to establish and operate new offices in the Pacific Rim, expenses
associated with the implementation of management information systems in Europe,
and severance payments due to cost cutting and realignment in the United States
and Europe.
35
The $1.4 million increase in net interest expense was primarily due to
acquisition debt and the repurchase of common shares under the share repurchase
program. Other expense of $2.8 million in 1995 compares to $.7 million of other
income in 1994 due the one-time charge of $3.1 million to cover the costs of
closing the Company's executive offices in Illinois and consolidating its
executive offices in York, Pennsylvania.
Income from continuing operations before income taxes decreased $1.7
million, from $91.7 million in 1994 to $90.0 million in 1995. Without the
one-time charge of $3.1 million to cover the costs of closing the Company's
executive offices in Illinois, income from continuing operations before income
taxes increased $1.4 million, or 1.5%.
Income from continuing operations was $54.0 million in 1995 compared to
$54.1 million in 1994. Without the one-time after-tax charge of $1.8 million to
cover the costs of closing the Company's executive offices in Illinois, income
from continuing operations was $55.8 million, an increase of 3.1% over 1994.
During 1995, the Company repurchased 1.3 million common shares under its
share repurchase program. These repurchases are reflected in the reduction of
weighted average common shares outstanding from 27.8 million common shares in
1994 to 27.0 million common shares in 1995.
Earnings per common share from continuing operations of $2.00 for 1995
increased $.05, or 2.6% from $1.95 in 1994. Without the one-time after-tax
charge of $1.8 million to cover the costs of closing the Company's executive
offices in Illinois, earnings per common share from continuing operations were
$2.07, a 6.2% increase over 1994.
The net assets of CMW and Eureka were sold during November and December
1994. Net sales for the GENDEX Medical business, the last remaining unit of the
discontinued medical segment, were $18.9 million in 1995.
Foreign Currency
- ----------------
Since approximately 45% of the Company's revenues have been generated in
currencies other than the U.S. dollar, the value of the U.S. dollar in relation
to those currencies affects the results of operations of the Company. The impact
of currency fluctuations in any given period can be favorable or unfavorable.
The impact of foreign currency fluctuations of European currencies on operating
income is offset to a significant extent by sales in the U.S. of products
sourced from plants and third party suppliers located overseas, principally in
Germany and Switzerland. The Company carefully considers the impact of currency
fluctuations in its business decisions.
36
Liquidity and Capital Resources
- -------------------------------
In January 1996, the Company acquired the dental manufacturing and
distribution operations of Tulsa in a cash transaction for $75.1 million and an
earn-out based on the operating performance of the business. The transaction was
funded from the Company's $175.0 million Bank Revolving Loan Facility and
short-term bank borrowing.
Under its Bank Revolving Loan Facility, the Company is able to borrow up to
$175.0 million on an unsecured basis through December 23, 1999. The Revolving
Credit Agreement contains various financial and other covenants. Under its Bank
Multicurrency Revolving Credit Facility, the Company is able to borrow up to
$25.0 million for foreign working capital purposes on an unsecured basis through
December 23, 1999. In addition, the Company had unused lines of credit for
short-term financing of $63.5 million at December 31, 1996.
Investment activities for 1996 included capital expenditures of $20.8
million.
During 1996, the Company repurchased .1 million shares of its common stock
for $3.8 million, in accordance with the share repurchase program authorized by
the Board of Directors in December 1995. This authorization to repurchase shares
expired on December 31, 1996. In December 1996, the Board of Directors
authorized the repurchase of up to 2.7 million additional shares of common stock
on the open market or in negotiated transactions. The timing and amounts of any
additional purchases will depend upon many factors, including market conditions
and the Company's business and financial condition.
At December 31, 1996, the Company's current ratio was 1.8 with working
capital of $113.5 million. This compares with a current ratio of 2.0 and working
capital of $122.7 million at December 31, 1995, excluding the net assets of
discontinued operations. The decrease is due primarily to increased short-term
borrowings in 1996.
The Company expects to be able to finance its cash requirements, including
capital expenditures, stock repurchases, debt service and the acquisition of DW
Industries, Inc., Laboratoire SPAD, S.A. and New Image Industries, Inc. from
funds generated from operations and amounts available under its Bank Revolving
Loan Facility.
Cash flows from operating activities increased to $83.2 million in 1996
from $67.5 million in 1995 primarily due to higher net income.
Impairment of Assets
- --------------------
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121"). Under provisions of the Statement,
impairment losses would be recognized if the expected future cash flows were
less than the assets' carrying
37
value. There was no effect on the financial statements from the
adoption of SFAS 121.
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.
38
Management's Financial Responsibility
The management of DENTSPLY International Inc. is responsible for the contents of
the consolidated financial statements. The consolidated financial statements
were prepared in conformity with generally accepted accounting principles
applied on a consistent basis and were based in part on reasonable estimates,
giving due consideration to materiality. Financial information appearing
elsewhere in this Annual Report is consistent with that in the consolidated
financial statements.
The Company maintains a system of internal accounting controls which, in the
opinion of management, provides reasonable assurance as to the integrity and
reliability of the financial records and the protection of assets. The internal
accounting control system is supported by written policies and procedures and
its effectiveness is monitored. Management operates the Company in compliance
with its written Code of Business Conduct.
The Audit Committee of the Board of Directors is composed entirely of outside
directors who meet periodically with management and our independent auditors,
KPMG Peat Marwick LLP. The Audit Committee reviews the financial controls and
reporting practices and generally monitors the accounting affairs of the
Company. Also, the Audit Committee recommends to the stockholders the
appointment of the independent auditors.
John C. Miles II Edward D. Yates
Vice Chairman and Senior Vice President and
Chief Executive Officer Chief Financial Officer
39
Independent Auditors' Report
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the consolidated financial statements of DENTSPLY International
Inc. and subsidiaries as listed in the accompanying index on page 23. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index on page 24. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DENTSPLY
International Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
January 22, 1997
40
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1996 1995 1994
--------------------------------
(in thousands, except per share amounts)
Net sales $656,557 $572,028 $524,758
Cost of products sold 331,887 291,176 267,034
-------- -------- --------
Gross profit 324,670 280,852 257,724
Selling, general and administrative
expenses 205,206 180,117 160,324
-------- -------- --------
Operating income from continuing operations 119,464 100,735 97,400
Other costs and expenses:
Interest expense 11,095 9,144 7,999
Interest income (1,024) (1,265) (1,527)
Other (income) expense, net (1,567) 2,839 (734)
-------- -------- --------
Income from continuing operations
before income taxes 110,960 90,017 91,662
Provision for income taxes 43,738 36,054 37,518
-------- -------- --------
Income from continuing operations 67,222 53,963 54,144
-------- -------- --------
Discontinued operations:
Income from the operation of
discontinued Medical business (net of
income taxes of $.6 million) --- --- 1,311
Gain on disposal of Medical business,
including provision of $.5 million
for operating losses during phase-out
period (net of income taxes of
$5.5 million) --- --- 6,543
-------- -------- --------
Income from discontinued operations --- --- 7,854
-------- -------- --------
Net income $ 67,222 $ 53,963 $ 61,998
======== ======== ========
Earnings per common share:
Income from continuing operations $ 2.50 $ 2.00 $ 1.95
Income from the operation of
discontinued Medical business -- -- .05
Gain on disposal of Medical business -- -- .23
-------- -------- --------
Net income $ 2.50 $ 2.00 $ 2.23
======== ======== ========
Dividends per common share $ .34 $ .3075 $ .15
Weighted average common shares outstanding 26,920 27,012 27,776
The accompanying Notes are an integral part of these Financial Statements.
41
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
1996 1995
Assets -------------------
Current assets: (in thousands)
Cash and cash equivalents $ 5,619 $ 3,974
Accounts and notes receivable - trade, net 101,977 93,315
Inventories 125,398 125,704
Prepaid expenses and other current assets 23,752 16,906
Net assets of discontinued operations --- 5,870
-------- --------
Total Current Assets 256,746 245,769
Property, plant and equipment, net 141,458 140,101
Other noncurrent assets, net 13,259 13,974
Identifiable intangible assets, net 59,787 39,282
Costs in excess of fair value of net assets
acquired, net 196,412 149,127
-------- --------
Total Assets $667,662 $588,253
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 26,711 $ 7,616
Accounts payable 33,720 31,785
Accrued liabilities 52,504 46,571
Income taxes payable 30,264 31,221
-------- --------
Total Current Liabilities 143,199 117,193
Long-term debt 75,109 68,675
Other liabilities 49,467 47,104
Deferred income taxes 30,000 35,927
-------- --------
Total Liabilities 297,775 268,899
-------- --------
Minority interests in consolidated subsidiaries 4,297 3,432
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; .25 million
shares authorized; no shares issued --- ---
Common stock, $.01 par value; 100 million shares
authorized; 27.1 million shares issued at
December 31, 1996 and 1995 271 271
Capital in excess of par value 150,031 149,999
Retained earnings 237,300 179,231
Cumulative translation adjustment (4,278) 3,234
Employee stock ownership plan reserve (11,016) (12,536)
Treasury stock, at cost, .2 million and .1 million
shares at December 31, 1996 and 1995, respectively (6,718) (4,277)
-------- --------
Total Stockholders' Equity 365,590 315,922
-------- --------
Total Liabilities and Stockholders' Equity $667,662 $588,253
======== ========
The accompanying Notes are an integral part of these Financial Statements.
42
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital in Cumulative Employee Stock Total
Common Excess of Retained Translation Ownership Treasury Stockholders'
Stock Par Value Earnings Adjustment Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -------------
(in thousands)
Balance at December 31, 1993 $ 277 $179,402 $ 75,702 $(3,238) $(15,723) $ (23) $236,397
Exercise of stock options 1 749 --- --- --- --- 750
Tax benefit related to stock
options exercised --- 1,858 --- --- --- --- 1,858
Repurchase of .1 million shares
of common stock --- --- --- --- --- (2,679) (2,679)
Cash dividends declared, $.15 per
common share --- --- (4,169) --- --- --- (4,169)
Compensatory stock options granted --- 78 --- --- --- --- 78
Translation adjustment --- --- --- 3,436 --- --- 3,436
Net change in ESOP reserve --- --- --- --- 1,668 --- 1,668
Net income --- --- 61,998 --- --- --- 61,998
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1994 278 182,087 133,531 198 (14,055) (2,702) 299,337
Exercise of stock options and
warrants 2 (4,850) --- --- --- 9,100 4,252
Tax benefit related to stock
options and warrants exercised --- 4,781 --- --- --- --- 4,781
Repurchase of 1.3 million
shares of common stock --- --- --- --- --- (42,703) (42,703)
Cash dividends declared, $.3075
per common share --- --- (8,263) --- --- --- (8,263)
Cancellation of .9 million
shares of treasury stock (9) (32,019) --- --- --- 32,028 ---
Translation adjustment --- --- --- 3,036 --- --- 3,036
Net change in ESOP reserve --- --- --- --- 1,519 --- 1,519
Net income --- --- 53,963 --- --- --- 53,963
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1995 271 149,999 179,231 3,234 (12,536) (4,277) 315,922
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
43
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital in Cumulative Employee Stock Total
Common Excess of Retained Translation Ownership Treasury Stockholders'
Stock Par Value Earnings Adjustment Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -------------
(in thousands)
Balance at December 31, 1995 271 149,999 179,231 3,234 (12,536) (4,277) 315,922
Exercise of stock options and
warrants - (146) - - - 1,384 1,238
Tax benefit related to stock
options and warrants exercised - 218 - - - - 218
Compensatory stock options
lapsed - (40) - - - - (40)
Repurchase of .1 million
shares of common stock - - - - - (3,825) (3,825)
Cash dividends declared, $.34
per common share - - (9,153) - - - (9,153)
Translation adjustment - - - (7,512) - - (7,512)
Net change in ESOP reserve - - - - 1,520 - 1,520
Net income - - 67,222 - - - 67,222
------- -------- -------- ------- -------- -------- --------
Balance at December 31, 1996 $ 271 $150,031 $237,300 $(4,278) $(11,016) $ (6,718) $365,590
======= ======== ======== ======= ======== ======== ========
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
44
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
Cash flows from operating activities: (in thousands)
Net income $ 67,222 $ 53,963 $ 61,998
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on disposal of Medical business, before income taxes --- --- (12,061)
Depreciation 14,799 12,130 10,153
Amortization 13,309 9,358 9,874
Deferred income taxes associated with continuing operations (3,008) (1,211) 9,404
Deferred income taxes associated with discontinued
operations --- (481) (5,181)
Other non-cash transactions 289 668 (27)
Loss on disposal of property, plant and equipment 367 1,027 23
Changes in operating assets and liabilities, net of effects
from acquisitions and divestitures of businesses and
effects of exchange:
Accounts and notes receivable-trade, net (6,777) (1,893) (13,308)
Inventories 256 (8,233) (7,020)
Prepaid expenses and other current assets (4,574) (775) 4,555
Other noncurrent assets, net 497 225 (580)
Accounts payable 472 2,372 (4,514)
Accrued liabilities 945 (51) 638
Income taxes payable 1,467 (2,971) 8,971
Other liabilities (2,075) 3,388 882
-------- -------- --------
Net cash provided by operating activities 83,189 67,516 63,807
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
45
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
Cash flows from investing activities: (in thousands)
Proceeds from disposal of Medical business 7,500 3,260 44,244
Proceeds from sale of property, plant and equipment, net 351 2,443 192
Capital expenditures (20,804) (17,633) (13,766)
Expenditures for identifiable intangible assets (3,000) (60) (20)
Acquisitions of businesses, net of cash acquired (82,181) (73,407) ---
Other direct costs of acquisition and divestiture activities (259) (512) (561)
Other, net (355) --- (81)
-------- -------- --------
Net cash provided by (used in) investing activities (98,748) (85,909) 30,008
-------- -------- --------
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
46
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
Cash flows from financing activities: (in thousands)
Proceeds from sale of common stock, including tax benefit
of stock options exercised 1,456 9,034 2,608
Cash paid for treasury stock (3,825) (42,703) (2,679)
Dividends paid (8,893) (8,123) (2,085)
Increase (decrease) in bank overdrafts (2,357) 1,580 (1,738)
Proceeds from long-term borrowings, net of deferred
financing costs 87,499 123,635 89,272
Payments on long-term borrowings (67,490) (70,915) (195,568)
Increase (decrease) in short-term borrowings 11,382 (28) 5,456
Decrease in employee stock ownership plan reserve 1,520 1,519 1,668
-------- -------- --------
Net cash provided by (used in) financing activities 19,292 13,999 (103,066)
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents (2,088) 1,090 (1,455)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,645 (3,304) (10,706)
Cash and cash equivalents at beginning of period 3,974 7,278 17,984
-------- -------- --------
Cash and cash equivalents at end of period $ 5,619 $ 3,974 $ 7,278
======== ======== ========
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
47
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1996 1995 1994
-------- -------- --------
Supplemental disclosures of cash flow information: (in thousands)
Interest paid $ 7,484 $ 6,243 $ 6,766
Income taxes paid 43,879 35,573 26,136
In January 1996, the Company purchased certain net assets of Tulsa Dental
Products LLC ("Tulsa") for $75.1 million. In March 1995, the Company
purchased all of the capital stock of KV33 Corporation ("KV33") for $11.5
million. In June 1995, the Company purchased approximately 96% of the
capital stock of Maillefer Instruments, S.A. ("Maillefer") for $65.8
million. In August 1995, the Company purchased the assets of Dunvale
Corporation ("Dunvale") for $1.8 million. In conjunction with the
acquisitions, liabilities were assumed as follows:
Tulsa KV33 Maillefer Dunvale
------- -------- --------- -------
(in thousands)
Fair value of assets acquired $78,662 $ 14,329 $ 97,188 $ 1,982
Cash paid for assets or capital stock (75,114) (11,450) (65,798) (1,839)
------- -------- --------- -------
Liabilities assumed $ 3,548 $ 2,879 $ 31,390 $ 143
======= ======== ========= =======
<FN>
The accompanying Notes are an integral part of these Financial Statements.
</FN>
48
DENTSPLY International Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Description of Business
- -----------------------
DENTSPLY (the "Company") designs, develops, manufactures and markets a
broad range of products for the dental market. The Company believes that it is
the world's leading manufacturer and distributor of artificial teeth, endodontic
instruments and materials, impression materials, prophylaxis paste, dental
sealants, ultrasonic scalers, and crown and bridge materials; the leading United
States manufacturer and distributor of dental x-ray equipment, dental
handpieces, dental x-ray film holders, film mounts and bone substitute/ grafting
materials; and a leading United States distributor of dental cutting instruments
and dental implants. The Company distributes its dental products in over 100
countries under some of the most well-established brand names in the industry.
DENTSPLY is committed to the development of innovative, high quality,
cost-effective new products for the dental market.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. Intercompany accounts and transactions are
eliminated. Minority interests in net income of consolidated subsidiaries is not
material and is included in other (income) expense, net.
During 1994, the Company adopted a formal plan to dispose of its Medical
segment. Accordingly, the results of discontinued operations and the gain on
disposal thereof have been reported separately from the continuing operations of
the Company (See Note 3 - Discontinued Operations). Certain items in the prior
years have been reclassified to conform to the 1996 presentation.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
49
Accounts and Notes Receivable-Trade
- -----------------------------------
The Company sells dental equipment and supplies primarily through a
worldwide network of distributors, although certain product lines are sold
directly to the end user. Revenue is recognized when products are shipped. For
customers on credit terms, the Company performs ongoing credit evaluation of
those customers' financial condition and generally does not require collateral
from them. Accounts and notes receivable-trade are stated net of an allowance
for doubtful accounts of $2.5 million and $2.3 million at December 31, 1996 and
1995, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost or market. At December 31, 1996
and 1995, the cost of $10.0 million, or 8% and $10.6 million, or 8%,
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.
Identifiable Intangible Assets
- ------------------------------
Identifiable intangible assets include patents, trademarks, non-compete
covenants, licensing agreements, distributor networks and product manufacturing
rights which are amortized on a straight-line basis over their estimated useful
lives, ranging from 5 to 40 years. Identifiable intangible assets are stated net
of accumulated amortization of $28.9 million and $22.5 million at December 31,
1996 and 1995, respectively. Identifiable intangible assets are reviewed for
impairment whenever events or circumstances provide evidence that suggest that
the carrying amount of the asset may not be recoverable. Impairment is
determined by using identifiable undiscounted cash flows.
Costs in Excess of Fair Value of Net Assets Acquired
- ----------------------------------------------------
The excess of costs of acquired companies and product lines over the fair
value of net assets acquired (goodwill) is being amortized on a straight-line
basis over 25 to 40 years. Costs in excess of the fair value of net assets
acquired are stated net of accumulated amortization of $26.1 million and $20.0
million at December 31, 1996 and 1995, respectively. Costs in excess of fair
value of net assets acquired are reviewed for impairment whenever events or
circumstances provide evidence that suggest that the carrying amount of the
asset may not be recoverable. Impairment is determined by using identifiable
undiscounted cash flows.
50
Fair Value of Financial Instruments
- -----------------------------------
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The fair
values of financial instruments approximate their recorded values.
Derivatives
- -----------
The Company's only involvement with derivative financial instruments is
forward contracts to hedge assets and liabilities denominated in foreign
currencies.
Foreign Exchange Risk Management
- --------------------------------
The Company routinely enters into forward foreign exchange contracts to
selectively hedge assets and liabilities denominated in foreign currencies.
Market value gains and losses are recognized in income currently and the
resulting gains or losses offset foreign exchange gains or losses recognized on
the foreign currency assets and liabilities hedged. Determination of hedge
activity is based upon market conditions, the magnitude of the foreign currency
assets and liabilities and perceived risks. As of December 31, 1996, the company
had contracts outstanding for the purchase of 21.4 million Swiss francs or
approximately $16.2 million. As of December 31, 1995, the Company had contracts
outstanding for the purchase of 5.1 million Swiss francs or approximately $4.4
million. These foreign exchange contracts generally have maturities of less than
six months and counterparties to the transactions are typically large
international financial institutions.
Foreign Currency Translation
- ----------------------------
The functional currency for foreign operations, except for those in highly
inflationary economies, has been determined to be the local currency.
Assets and liabilities of foreign subsidiaries are translated at exchange
rates on the balance sheet date; revenue and expenses are translated at the
average year-to-date rates of exchange. The effects of these translation
adjustments are reported in a separate component of stockholders' equity.
Exchange gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved and translation
adjustments in countries with highly inflationary economies are included in
income.
Exchange losses of $.3 million in 1996 and $.5 million in 1994 and gains of
$.2 million in 1995 are included in other (income) expense, net.
Research and Development Costs
- ------------------------------
Research and development costs are charged to expense as incurred and are
included in selling, general and administrative expenses. Research and
development costs amounted to approximately $14.7 million, $12.3 million and
$10.9 million for 1996, 1995 and 1994, respectively.
51
Stock Based Compensation
- ------------------------
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 presents companies with the alternative of
retaining the current accounting for stock based compensation under APB Opinion
No. 25 ("APB 25") or adopting a new accounting method based on the estimated
fair value of equity instruments granted during the year. The Company applies
APB 25 in accounting for its stock options (see Note 10 - Stockholders' Equity).
Earnings per Common Share
- -------------------------
Earnings per common share are based on the weighted average number of
common shares outstanding. Common stock equivalents (options and warrants) had
no material effect on the earnings per common share computation. All shares held
by the DENTSPLY Employee Stock Ownership Plan are considered outstanding and are
included in the earnings per common share computation.
NOTE 2 - BUSINESS ACQUISITIONS
- ------------------------------
In August 1996, the Company paid $5 million for a 51% interest in CeraMed
Dental, LLC ("CeraMed") and the right to acquire the remaining 49% interest at a
later date. CeraMed, located in Lakewood, Colorado, is the leading US
manufacturer and distributor of bone grafting materials and HA plasma-feed
coating materials to dental markets. The acquisition was accounted for under the
purchase method of accounting and the results of CeraMed's operations have been
included in the accompanying financial statements since the date of acquisition.
The aggregate purchase price of $5 million plus direct acquisition costs has
been allocated on the basis of preliminary estimates of the fair values of
assets acquired. The excess ($.9 million) of acquisition cost over net assets
acquired is being amortized over 25 years. Pro forma information has been
omitted due to immateriality.
In January 1996, the Company purchased certain assets of Tulsa Dental
Products L.L.C. ("Tulsa") in a cash transaction valued at $75.1 million and an
earn-out based on the operating performance of the business. Based in Tulsa,
Oklahoma, Tulsa is a manufacturer and distributor of endodontic instruments and
materials. The acquisition was accounted for under the purchase method of
accounting and the results of Tulsa's operations have been included in the
accompanying financial statements since the date of acquisition. The aggregate
purchase price of $75.1 million plus direct acquisition costs has been allocated
on the basis of preliminary estimates of the fair values of assets acquired and
liabilities assumed. The excess ($53.7 million) of acquisition cost over net
assets acquired is being amortized over 25 years.
The following unaudited pro forma consolidated results of operations assume
that the acquisition of Tulsa occurred on January 1, 1995:
Year Ended December 31,
-----------------------
1996 1995
-------- --------
(in thousands, except per share amounts)
Net sales $656,557 $591,670
Net income 67,503 51,714
Earnings per common share 2.51 1.91
52
The pro forma information does not purport to be indicative of the results
that actually would have been obtained had the operations been combined during
the periods presented.
In August 1995, the Company purchased the assets of Dunvale Corporation
("Dunvale") in a cash transaction valued at $1.8 million. The acquisition was
accounted for under the purchase method of accounting and the results of
Dunvale's operations have been included in the accompanying financial statements
since the date of acquisition. The excess ($1.5 million) of acquisition cost
over the fair value of net assets acquired is being amortized over 25 years.
In June 1995, the Company purchased approximately 96% of the outstanding
capital stock of Maillefer Instruments S.A. ("Maillefer") in a cash transaction
valued at approximately $65.8 million. An additional 3.9% of Maillefer stock was
purchased in June 1996 for cash of approximately $2.3 million. Based in
Switzerland, Maillefer is a manufacturer and distributor of principally
endodontic instruments. The acquisition was accounted for under the purchase
method of accounting and the results of Maillefer's operations have been
included in the accompanying financial statements since the date of acquisition.
The aggregate purchase price of $65.8 million plus direct acquisition costs has
been allocated on the basis of the fair values of assets acquired and
liabilities assumed. Since the fair value of net assets acquired exceeded the
purchase price by approximately $16.7 million, the values otherwise assignable
to noncurrent assets acquired have been reduced by a proportionate part of the
excess.
In March 1995, the Company purchased all of the outstanding capital stock
of KV33 Corporation ("KV33") in a cash transaction valued at $11.5 million. The
acquisition was accounted for under the purchase method of accounting and the
results of KV33's operations have been included in the accompanying financial
statements since the date of acquisition. The excess ($10.2 million) of
acquisition cost over the fair value of net assets acquired is being amortized
over 25 years.
In January 1997, the Company purchased the assets of DW Industries, Inc. in
a cash transaction valued at approximately $17 million and an earn-out based on
the sales growth of the business, and purchased 100% of the outstanding capital
stock of Laboratoire SPAD, S.A. ("SPAD") for FF198 million in a cash transaction
valued at approximately $35 million. Headquartered in Las Vegas, Nevada, DW
Industries is the leading manufacturer of disposable air-water syringe tips for
use in clinical dental office procedures. SPAD, a division of GROUPE MONOT,
S.A., is a leading French manufacturer and distributor of dental anesthetic and
other dental products.
In January 1997, the Company commenced a tender offer for all outstanding
shares of New Image Industries, Inc. ("New Image") for $2.00 per share. Total
funds required to purchase all outstanding New Image Shares and pay related
costs and expenses will be approximately $12 million. In connection with the
transaction, DENTSPLY will loan New Image up to $3 million, of which $2.5
million was outstanding on December 31, 1996, to be used as working capital. New
Image, which designs, develops, manufactures and distributes intraoral cameras
and computer imaging systems and related software exclusively to the dental
market, is located in Carlsbad, California.
53
NOTE 3 - DISCONTINUED OPERATIONS
- --------------------------------
In October 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business. The medical
operations included the Eureka X-Ray Tube Corp. ("Eureka"), GENDEX Medical and
CMW business units which manufacture medical x-ray tubes, medical x-ray systems
and orthopedic bone cement, respectively. The net assets of CMW were sold in
November 1994 and substantially all of the net assets of Eureka were sold in two
transactions in November and December 1994, for a total of $44.5 million.
Substantially all of the remaining assets comprising the medical business were
sold in the first quarter of 1996 for $7.5 million.
Sales from these operations were $2.7 million, $18.9 million, and $48.6
million for 1996, 1995 and 1994, respectively. Certain expenses have been
allocated to discontinued operations, including interest expense, which was
allocated based on the ratio of net assets discontinued to the total net assets
of the consolidated entity.
NOTE 4 - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
- ----------------------------------------------------
The Company's continuing operations are conducted primarily in one industry
segment as a designer, manufacturer and distributor of dental equipment and
supplies.
The Company's operations are structured to achieve consolidated objectives.
As a result, significant interdependencies exist among the Company's operations
in different geographic areas. Intercompany sales of manufacturing materials
between areas are at prices which, in general, provide a reasonable profit after
coverage of all manufacturing costs. Intercompany sales of finished goods are at
prices intended to provide a reasonable profit for purchasing locations after
coverage of marketing and general and administrative costs.
Operating income (loss) from continuing operations consists of net sales
less related costs, direct operating expenses and intercompany royalties
allocated from Corporate for use of patents and trademarks owned by the Company.
Assets by geographic area are those used in the operations in the geographic
area.
54
The following table sets forth information about the Company's continuing
operations in different geographic areas for 1996, 1995, and 1994:
United Adjustments/
States Europe Other Corporate Eliminations Total
-------- -------- -------- --------- ------------ --------
1996 (in thousands)
- ----
Net sales:
Customers $364,221 $198,601 $ 93,735 $ --- $ --- $656,557
Intercompany 52,755 27,028 4,832 --- (84,615) ---
-------- -------- -------- -------- -------- --------
Total net sales 416,976 225,629 98,567 --- (84,615) 656,557
Operating income (loss)
from continuing operations 91,617 33,685 3,669 (8,975) (532) 119,464
Assets 411,655 259,826 48,079 218,314 (270,212) 667,662
1995
- ----
Net sales:
Customers $322,929 $174,139 $ 74,960 $ --- $ --- $572,028
Intercompany 46,613 13,680 4,822 --- (65,115) ---
-------- -------- -------- -------- -------- --------
Total net sales 369,542 187,819 79,782 --- (65,115) 572,028
Operating income (loss)
from continuing operations 84,914 26,015 434 (9,302) (1,326) 100,735
Assets 319,429 258,723 43,631 128,823 (168,223) 582,383
<FN>
</FN>
55
United Adjustments/
States Europe Other Corporate Eliminations Total
-------- -------- -------- --------- ------------ --------
1994 (in thousands)
- ----
Net sales:
Customers $317,492 $136,505 $ 70,761 $ --- $ --- $524,758
Intercompany 41,653 7,085 4,130 --- (52,868) ---
-------- -------- -------- -------- -------- --------
Total net sales 359,145 143,590 74,891 --- (52,868) 524,758
Operating income (loss)
from continuing operations 88,204 15,200 3,133 (9,948) 811 97,400
Assets 287,364 162,365 39,400 110,802 (133,001) 466,930
<FN>
Third party export sales from the United States are less than ten percent
of consolidated net sales. In 1996 and 1995, no customer accounted for 10% or
more of consolidated net sales. One customer accounted for approximately 11% of
consolidated net sales in 1994.
</FN>
56
NOTE 5 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31,
--------------------
1996 1995
-------- --------
(in thousands)
Finished goods $ 73,650 $ 70,677
Work-in-process 23,936 26,440
Raw materials and supplies 27,812 28,587
-------- --------
$125,398 $125,704
======== ========
Pre-tax income was $.3 million, $.2 million, and $1.2 million lower in
1996, 1995,and 1994, respectively as a result of using the LIFO method as
compared to using the FIFO method. If the FIFO method had been used to determine
the cost of LIFO inventories, the amounts at which net inventories are stated
would be lower than reported at December 31, 1996 and 1995 by $1.7 million and
$2.0 million, respectively.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
December 31,
--------------------
1996 1995
-------- --------
Assets, at cost: (in thousands)
Land $ 17,222 $ 17,395
Buildings and improvements 68,185 67,903
Machinery and equipment 103,887 88,417
Construction in progress 8,505 9,039
-------- --------
197,799 182,754
Less: Accumulated depreciation 56,341 42,653
-------- --------
$141,458 $140,101
======== ========
NOTE 7 - ACCRUED LIABILITIES
- ----------------------------
Accrued liabilities consist of the following:
December 31,
--------------------
1996 1995
-------- --------
Payroll, commissions, bonuses (in thousands)
and other cash compensation $ 10,739 $ 10,441
Employee benefits 6,710 6,947
Other 35,055 29,183
-------- --------
$ 52,504 $ 46,571
======== ========
57
NOTE 8 - FINANCING ARRANGEMENTS
- -------------------------------
Short-Term Borrowings
- ---------------------
Short-term bank borrowings amounted to $26.3 million and $7.6 million at
December 31, 1996 and 1995, respectively. Unused lines of credit for short-term
financing at December 31, 1996 and 1995 were $63.5 million and $63.0 million,
respectively. Substantially all unused lines of credit have no major
restrictions and are renewable annually. Interest is charged on borrowings under
these lines of credit at various rates, generally under prime or equivalent
money rates.
Long-Term Borrowings
- --------------------
December 31,
--------------------
1996 1995
-------- --------
$175.0 million bank revolving loan facility (in thousands)
maturing December 23, 1999 $ 10,000 $ ---
$60.0 million bank term loan maturing December 23, 1999, Swiss Francs 45.9
million and Pounds Sterling 12.5 million outstanding at December 31, 1996,
bearing interest at a weighted average of 2.5% for Swiss Franc borrowings and
6.6% for
Pounds Sterling borrowings 55,636 59,172
$25.0 million bank multicurrency revolving credit facility maturing December 23,
1999, various currencies outstanding at December 31, 1996, bearing interest at
a weighted average of 7.9% 8,577 9,496
Other borrowings, various currencies and rates 1,318 7
-------- --------
75,531 68,675
Less: Current portion (included in notes
payable and current portion of
long-term debt) 422 ---
-------- --------
$ 75,109 $ 68,675
======== ========
Long-term debt of $74.2 million matures in December 1999.
The bank revolving credit agreement contains certain affirmative and
negative covenants as to the operations and financial condition of the Company,
the most restrictive of which 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. The Company pays a facility fee of .10 percent annually on the entire
amount of the commitment. Interest rates on amounts borrowed under the facility
will depend on the maturity of the borrowing, the interest rate option selected,
and, in the event of a LIBOR borrowing, the ratio of interest expense to
operating income.
58
The bank term loan and the bank multicurrency revolving credit facility
contain affirmative and negative covenants as to the operations and financial
condition of the Company, which are substantially equivalent to those in the
bank revolving credit agreement. The Company pays a facility fee of .10 percent
annually on the entire amount of the bank multicurrency revolving credit
facility commitment.
NOTE 9 - OTHER LIABILITIES
- --------------------------
Other liabilities consist of the following:
December 31,
--------------------
1996 1995
-------- --------
(in thousands)
Pension $ 30,870 $ 30,635
Medical and other postretirement benefits 10,299 10,729
Other 8,298 5,740
-------- --------
$ 49,467 $ 47,104
======== ========
NOTE 10 - STOCKHOLDERS' EQUITY
- ------------------------------
In December 1996, 1995, and 1994 the Board of Directors authorized the
repurchase of up to 2.7 million, 2.8 million, and 2.8 million shares,
respectively, of common stock on the open market or in negotiated transactions.
Each of these authorizations to repurchase shares expires on December 31 of the
following year. The Company repurchased .1 million shares for $3.8 million, 1.3
million shares for $42.7 million and .1 million shares for $2.7 million in 1996,
1995 and 1994, respectively.
In January 1994, the Company granted options to purchase 15,000 shares of
common stock to the former Chairman of the Board at an exercise price of $44.50,
which was equal to the market price on the date of grant. The options were
immediately exercisable and expire ten years from date of grant.
The Company issued 180,000 stock purchase warrants in August 1990 in
connection with an acquisition to the principals of an investment banking firm,
one of whom is a former director of the Company. The warrants are exercisable at
any time through August 28, 2000, at an exercise price of $6.125 per share
(market price at date issued). During 1996, 6,000 of the warrants were exercised
and 34,000 remain outstanding at December 31, 1996.
The Company has four stock option plans (1987 Plan, 1992 Plan, 1993 Stock
Option Conversion Plan and 1993 Plan). Under the 1987 and 1992 Plans, a
committee appointed by the Board of Directors granted to key employees and
directors of the Company options to purchase shares of common stock at an
exercise price determined by such committee, but not less than the fair market
value of the common stock on the date of grant. Options expire ten years and one
month or ten years and one day after date of grant under the 1987 Plan and 1992
Plan, respectively.
All outstanding options under the 1993 Stock Option Conversion Plan expired
on or were exercised prior to April 9, 1996. No further options can be granted
under this plan.
59
The 1993 Plan enables the Company to grant "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, to key employees of the Company, and stock options which do not
constitute ISOs ("NSOs") to key employees and non-employee directors of the
Company. Each non-employee director receives automatic and non-discretionary
NSOs to purchase 3,000 shares of common stock on the date he or she becomes a
non-employee director and an additional 3,000 shares on the third anniversary of
the date the non-employee director was last granted an option. Grants of options
to key employees are solely discretionary. ISOs and NSOs generally expire ten
years from date of grant and become exercisable over a period of three years
after the date of grant at the rate of one-third per year, except that they
become immediately exercisable upon death, disability or retirement. The
committee may shorten or lengthen the exercise schedule for any or all options
granted to key employees. The exercise price of ISOs and NSOs is generally equal
to the fair market value on the date of grant. ISOs granted to an individual who
possesses more than 10% of the combined voting power of all classes of stock of
the Company have an exercise price of 110% of fair market value and expire five
years from the date of grant. The number of shares available for options under
the 1993 Plan is adjusted annually to equal 5% of the outstanding common shares
of the Company on each January 1. All options granted to date under the 1993
Plan have been NSOs.
Options granted under any of the four Plans may be exercised only while the
grantee is employed by the Company or is a member of the Board of Directors or
within defined periods after termination.
The following is a summary of the status of the Plans as of December 31,
1996, 1995, and 1994 and changes during the years ending on those dates:
----Outstanding---- ----Exercisable----
Weighted Weighted Available
Average Average for
Exercise Exercise Grant
Shares Price Shares Price Shares
------- -------- ------- -------- ---------
December 31, 1993 467,350 $13.93 413,350 $10.68 1,290,000
Authorized --- --- 388,299
Granted 387,385 44.19 --- (387,385)
Became exercisable --- 18,885 ---
Exercised (146,493) 5.47 (146,493) ---
Expired/Canceled (33,600) 44.50 --- 33,600
------- ------- ---------
December 31, 1994 674,642 31.62 285,742 14.84 1,324,514
Authorized --- --- 2,975
Granted 447,300 36.68 --- (447,300)
Became exercisable --- 132,834 ---
Exercised (188,881) 10.36 (188,881) ---
Expired/Canceled (67,000) 43.99 (33,132) 67,000
------- ------- ---------
December 31, 1995 866,061 37.91 196,563 33.47 947,189
Authorized --- --- (40,306)
Granted 181,800 45.31 --- (181,800)
Became exercisable --- 262,665 ---
Exercised (35,939) 33.41 (35,939) ---
Expired/Canceled (52,928) 40.75 (20,365) 51,167
------- ------- ---------
December 31, 1996 958,994 39.32 402,924 37.27 776,250
======= ======= =========
60
The following table summarizes information about stock options outstanding
under the Plans at December 31, 1996:
-------Options Outstanding-------- -Options Exercisable-
Weighted
Number Average Number
Outstanding Remaining Weighted Exercisable Weighted
At Contractual Average At Average
Range of December 31 Life Exercise December 31 Exercise
Exercise Prices 1996 (in years) Price 1996 Price
- -------------------- ----------- ----------- -------- ----------- --------
$ 5.25 to $ 5.81 23,000 6.4 $ 5.59 23,000 $ 5.59
19.13 to 19.13 30,000 5.0 19.13 30,000 19.13
31.00 to 34.75 65,432 8.8 34.18 22,302 33.81
35.00 to 37.00 76,897 8.8 35.21 24,242 35.39
37.75 to 39.75 324,832 8.7 37.99 124,557 38.11
42.00 to 44.50 313,533 7.4 44.23 178,823 44.50
46.75 to 46.75 125,300 9.9 46.75 --- ---
------- -------
5.25 to 46.75 958,994 8.3 39.32 402,924 37.27
======= =======
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $17.30 and $13.62, respectively, on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: 1996-expected dividend yield 0.8%, risk-free interest rate 6.4%,
expected volatility 26%, and an expected life of 6.5 years; and 1995-expected
dividend yield 0.8%, risk-free interest rate 5.9%, expected volatility 26%, and
an expected life of 6.5 years.
The Company applies APB 25 in accounting for the Plans and, accordingly, no
compensation cost has been recognized for stock options in the financial
statements. Had the Company determined compensation cost based on the fair value
of stock options at the grant date under SFAS 123, the Company's net income
would have been reduced as indicated below:
1996 1995
-------- --------
(in thousands, except per share amounts)
Net income As reported $ 67,222 $ 53,963
Pro forma under SFAS 123 66,109 53,774
Earnings per
common share As reported 2.50 2.00
Pro forma under SFAS 123 2.46 1.99
Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period of
3 years and compensation cost for options granted prior to January 1, 1995 is
not considered.
61
NOTE 11 - INCOME TAXES
- ----------------------
The components of income from continuing operations before income taxes are
as follows:
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(in thousands)
United States $ 77,619 $ 66,403 $ 74,479
Foreign 33,341 23,614 17,183
-------- -------- --------
$110,960 $ 90,017 $ 91,662
======== ======== ========
The components of the provision for income taxes are as follows:
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Current: (in thousands)
U.S. federal $ 26,715 $ 21,526 $ 17,774
U.S. state 4,401 4,112 3,403
Foreign 15,630 11,627 6,937
-------- -------- --------
Total 46,746 37,265 28,114
-------- -------- --------
Deferred:
U.S. federal (886) (994) 6,863
U.S. state (139) (170) 1,584
Foreign (1,983) (47) 957
-------- -------- --------
Total (3,008) (1,211) 9,404
-------- -------- --------
$ 43,738 $ 36,054 $ 37,518
======== ======== ========
The provision for income taxes is reconciled to income from continuing
operations before income taxes as follows:
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Effect of:
State income taxes, net of
federal benefit 2.3 3.0 3.5
Nondeductible amortization
of goodwill 1.2 1.5 1.0
Foreign losses with no tax
benefit .9 1.4 1.2
Other --- (.8) .2
-------- -------- --------
39.4% 40.1% 40.9%
======== ======== ========
62
The tax effect of temporary differences giving rise to deferred tax assets
and liabilities are as follows:
December 31, 1996 December 31, 1995
----------------------- -----------------------
Current Noncurrent Current Noncurrent
Asset Asset Asset Asset
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
(in thousands)
Employee benefit accruals $ 879 $ 5,056 $ 972 $ 4,968
Product warranty accruals 1,166 --- 929 ---
Facility relocation accruals 2,084 702 648 433
Insurance premium accruals 2,090 --- 1,884 ---
Differences in financial
reporting and tax basis
for:
Inventory (2,010) --- (3,845) ---
Property, plant and
equipment --- (26,249) --- (28,852)
Identifiable intangible assets --- (9,855) --- (9,943)
Accrued costs associated with
discontinued operations --- --- 4,611 ---
Other 2,344 541 1,047 (1,520)
Foreign tax credit
carryforwards --- 413 --- 1,070
Tax loss carryforwards in
foreign jurisdictions --- 5,987 --- 4,882
Valuation allowance for
foreign tax credit and
tax loss carryforwards --- (6,400) --- (5,952)
-------- -------- -------- --------
$ 6,553 $(29,805) $ 6,246 $(34,914)
======== ======== ======== ========
Current and non-current deferred tax assets and liabilities are included in
the following balance sheet captions:
December 31,
--------------------
1996 1995
-------- --------
(in thousands)
Prepaid expenses and other current assets $ 8,571 $ 6,379
Net assets of discontinued operations --- 4,611
Income taxes payable (2,018) (4,744)
Other noncurrent assets, net 195 1,013
Deferred income taxes (30,000) (35,927)
The provision for income taxes was reduced due to utilization of tax loss
carryforwards by $151,000 in 1996, $0 in 1995, and $47,000 in 1994. Certain
foreign subsidiaries of the Company have tax loss carryforwards of $14.9 million
at December 31, 1996, of which $11.2 million expire through 2001 and $3.7
million may be carried forward indefinitely. The tax benefit of these tax loss
carryforwards has been offset by a valuation allowance.
At December 31, 1996, the Company had foreign tax credits available for
carryforward of $.4 million, which expire in 1997. The tax benefit of these tax
credit carryforwards has been offset by a valuation allowance.
63
Income taxes have not been provided on $33.0 million of undistributed
earnings of foreign subsidiaries, which will continue to be reinvested. If
remitted as dividends, these earnings could become subject to additional tax. It
is not practicable to estimate the amount of additional tax that might be
payable; however, the Company believes that U.S. foreign tax credits would
largely eliminate any U.S. tax payable.
NOTE 12 - BENEFIT PLANS
- -----------------------
Substantially all of the employees of the Company and its subsidiaries are
covered by government or Company-sponsored pension plans. Total pension costs
for Company-sponsored defined benefit, defined contribution and employee stock
ownership plans amounted to $7.8 million in 1996, $7.5 million in 1995 and $6.0
million for 1994. The Company maintains an Employee Stock Ownership Plan (the
"ESOP") covering substantially all the U.S. non-union employees of DENTSPLY.
Contributions to the ESOP for 1996, 1995 and 1994 were $2.0 million, $1.7
million and $1.9 million, respectively. In addition, interest expense incurred
on ESOP loans and participant notes approximated $.2 million for 1995 and $.5
million for 1994. Interest for 1996 was paid directly from income of the ESOP
Trust.
The Company makes annual contributions to the ESOP of not less than the
amounts required to service ESOP debt. In connection with the refinancing of
ESOP debt in March 1994, the Company will also make additional cash
contributions of at least $3.4 million over the next seven years. Dividends
received by the ESOP on allocated shares are passed through to Plan
participants. Most ESOP shares were initially pledged as collateral for its
debt. As the debt is repaid, shares are released from collateral and allocated
to active employees, based on the proportion of debt service paid in the year.
At December 31, 1996, the ESOP held 4.7 million shares, of which 3.9 million
shares were allocated to Plan participants and .8 million shares were
unallocated and pledged as collateral for ESOP debt. Unallocated shares held by
the ESOP were acquired prior to December 31, 1992 and are accounted for in
accordance with Statement of Position 76-3.
The Employee Stock Ownership Plan reserve consists of a loan receivable
from the ESOP bearing interest at 3.06%, payable in equal quarterly installments
through March 31, 2004.
The Company maintains pension plans for its employees in Germany and
Switzerland. These plans provide benefits based upon age, years of service and
remuneration. The German plans are unfunded book reserve plans. The pension
provision for the German and Swiss plans included the following components:
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(in thousands)
Service cost $ 2,464 $ 1,935 $ 1,021
Interest cost on projected benefit
obligations 3,171 2,839 2,009
Net investment return on plan assets (1,296) (251) ---
Net amortization and deferral (412) 296 87
-------- -------- --------
$ 3,927 $ 4,819 $ 3,117
======== ======== ========
64
The funded status and amounts recognized in the consolidated balance sheets
for these retirement plans were as follows:
December 31, 1996 December 31, 1995
------------------------ ------------------------
Assets Accumulated Assets Accumulated
Exceeded Benefits Exceeded Benefits
Accumulated Exceeded Accumulated Exceeded
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
Actuarial present value of: (in thousands)
Vested benefit
obligations $ 18,551 $ 24,204 $ 18,936 $ 25,660
======== ======== ======== ========
Accumulated benefit
obligations $ 18,551 $ 26,123 $ 18,936 $ 27,756
======== ======== ======== ========
Actuarial present value
of projected benefit
obligations $ 19,213 $ 28,579 $ 20,443 $ 32,382
Plan assets at fair value 25,557 --- 25,526 ---
-------- -------- -------- --------
Plan assets less (greater)
than projected benefit
obligations (6,344) 28,579 (5,083) 32,382
Unrecognized obligation --- (1,640) --- (1,870)
Unrecognized net gain 3,675 4,616 630 905
-------- -------- -------- --------
(Prepaid pension expense)
pension liability $ (2,669) $ 31,555 $ (4,453) $ 31,417
======== ======== ======== ========
The projected benefit obligations for these plans were determined using
discount rates of 7.5 percent as of December 31, 1996 and 1995 in Germany and
4.5 percent as of December 31, 1996 and 1995 in Switzerland. The assumed
long-term rate of return on Swiss plan assets for 1996 was 5.0 percent. The
weighted average rate of increase used for future compensation levels was 5.0
percent for 1996, 1995 and 1994 in Germany and 3.0 percent for 1996 and 1995 in
Switzerland.
The Company sponsors an unfunded defined benefit postretirement medical
plan that covers certain U.S. based non-union employees. This postretirement
healthcare plan is contributory, with retiree contributions adjusted annually to
limit the Company's contribution to $21 per month per retiree for most
participants who retired after June 1, 1985. The Company also sponsors unfunded
non-contributory postretirement medical plans for a limited number of union
employees and their spouses and retirees of a discontinued operation.
65
The following table sets forth the combined status of the plans:
December 31,
--------------------
1996 1995
-------- --------
Accumulated postretirement benefit (in thousands)
obligation:
Retirees $ 8,270 $ 8,317
Fully eligible active plan
participants 464 468
Other active plan participants 1,496 1,498
-------- --------
Accumulated postretirement benefit
obligation at end of period 10,230 10,283
Unrecognized gain 69 446
-------- --------
Net postretirement benefit
liability $ 10,299 $ 10,729
======== ========
Year Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Net periodic postretirement benefit (in thousands)
cost for the period included the
following components:
Service cost - benefits attributed
to service during the period $ 188 $ 188 $ 178
Interest cost on accumulated
postretirement benefit obligation 764 804 679
-------- -------- --------
Net periodic postretirement
benefit cost $ 952 $ 992 $ 857
======== ======== ========
For measurement purposes, the annual rate of increase in the per capita
cost of covered healthcare benefits assumed for 1996 and thereafter was 10% in
1996, 1995, and 1994. The healthcare cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed healthcare cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation at December 31, 1996
by $.8 million and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost by $.1 million for the year then ended.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% for 1996 and 1995.
66
NOTE 13 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company leases automobiles and certain office, warehouse, machinery and
equipment and manufacturing facilities under noncancellable operating leases.
These leases generally require the Company to pay insurance, property taxes and
other expenses related to the leased property. Total rental expense for all
operating leases was $9.2 million for 1996, $8.8 million for 1995 and $8.1
million for 1994.
Rental commitments, principally for real estate (exclusive of taxes,
insurance and maintenance), automobiles and office equipment amount to: $7.4
million for 1997, $5.5 million for 1998, $4.7 million for 1999, $2.8 million for
2000, $1.9 million for 2001, and $9.8 million thereafter (net of sublease
rentals of $1.1 million in 1997, $.9 million in 1998, $.1 million in 1999, $.1
million in 2000, $.1 million in 2001, and $.6 million thereafter).
At December 31, 1996, the Company had a contractual commitment to purchase
implant, prosthetic and laboratory products from Core-Vent Corporation. This
commitment is estimated at $158.1 million at December 31, 1996, for years
through 2003 as follows:
(in thousands)
1997 $ 22,729
1998 22,320
1999 23,660
2000 25,080
2001 26,584
Later years 37,753
--------
$158,126
========
Purchases under the contract were $18.2 million in 1996, $19.4 million in
1995, and $19.1 million in 1994.
The Company has certain noncancellable purchase commitments for dental
burs, x-ray units, x-ray parts, curing lights and supplies amounting to $4.3
million in 1997, $1.2 million in 1998 and $.4 million thereafter.
The Company has employment agreements with its executive officers and
certain other management employees. These agreements generally provide for
salary continuation for a specified number of months under certain
circumstances. If all of the employees under contract were to be terminated by
the Company without cause (as defined) the Company's liability would be
approximately $7.7 million at December 31, 1996.
The Company is from time to time a party to lawsuits arising out of its
operations. The Company believes that pending litigation to which it is a party
will not have a material adverse effect upon its consolidated financial position
or results of operations.
67
NOTE 14 - UNUSUAL OR NON-RECURRING ITEMS
- ----------------------------------------
During 1995, the Company recorded certain unusual or non-recurring charges
which impacted the comparison with other periods. These unusual or non-recurring
charges, on an after tax basis, consisted of $1.4 million of costs associated
with consolidation of all executive functions in York, Pennsylvania and a loss
of $.4 million on the sale of the corporate aircraft. The impact of these
expenses on earnings per common share was $.07 in 1995.
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- -----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
1996 (in thousands, except per share amounts)
- ----
Net sales $155,910 $165,029 $155,327 $180,291
Gross profit 76,928 81,640 74,472 91,630
Operating income 26,901 31,228 24,699 36,636
Net income 14,987 17,770 13,873 20,592
Earnings per common share .56 .66 .52 .77
Dividends per common share .0825 .0825 .0825 .0925
1995
- ----
Net sales $133,105 $139,878 $137,330 $161,715
Gross profit 66,435 70,163 62,919 81,335
Operating income 22,911 26,912 17,342 33,570
Net income 12,972 13,237 9,479 18,275
Earnings per common share .48 .49 .35 .68
Dividends per common share .075 .075 .075 .0825
68
Schedule II DENTSPLY INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS(a)
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Additions
--------------------------
Charged
Balance at (Credited) Charged to Write-offs Balance
Beginning To Costs Other Net of Translation at End
Description of Period And Expenses Accounts Recoveries Adjustment of Period
- ----------- ---------- ------------ ----------- ---------- ----------- ----------
(in thousands)
Allowance for doubtful accounts:
For Year Ended December 31,
1994 $1,742 $ 163 $ - $ (287) $ 59 $ 1,677
1995 1,677 515 209 (b) (213) 66 2,254
1996 2,254 498 20 (d) (224) (73) 2,475
Allowance for trade discounts:
For Year Ended December 31,
1994 315 2,662 - (2,466) (5) 506
1995 506 2,446 - (2,220) 5 737
1996 737 2,693 (2,920) (3) 507
Inventory valuation reserves:
For Year Ended December 31,
1994 5,374 1,886 2 (1,765) 125 5,622
1995 5,622 908 15,608 (c) (1,869) 459 20,728
1996 20,728 (569) 167 (d) (1,380) (2,128) 16,818
- ------------------
<FN>
(a) Excludes discontinued operations.
(b) Includes Maillefer acquisition $209.
(c) Includes Maillefer acquisition $15,531.
(d) Tulsa acquisition.
</FN>
69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By:/s/ John C. Miles II
-----------------------
John C. Miles II
Vice Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Leslie A. Jones Chairman of the Board March 27, 1997
- ------------------------- and a Director
Leslie A. Jones
/s/ John C. Miles II Vice Chairman of the March 27, 1997
- ------------------------- Board and Chief Executive
John C. Miles II Officer and a Director
(Principal Executive Officer)
/s/ Edward D. Yates Senior Vice President March 27, 1997
- ------------------------- and Chief Financial
Edward D. Yates Officer (Principal
Financial and Accounting
Officer)
/s/ Burton C. Borgelt Director March 27, 1997
- -------------------------
Burton C. Borgelt
/s/ Douglas K. Chapman Director March 27, 1997
- -------------------------
Douglas K. Chapman
/s/ Michael J. Coleman Director March 27, 1997
- -------------------------
Michael J. Coleman
/s/ Arthur A. Dugoni Director March 27, 1997
- -------------------------
Arthur A. Dugoni, D.D.S., M.S.D.
70
/s/ C. Frederick Fetterolf Director March 27, 1997
- --------------------------
C. Frederick Fetterolf
/s/ Edgar H. Schollmaier Director March 27, 1997
- -------------------------
Edgar H. Schollmaier
/s/ W. Keith Smith Director March 27, 1997
- -------------------------
W. Keith Smith
71
EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
3.1 Certificate of Incorporation (1)
3.2 By-Laws, as amended (1)
4.1 (a) Competitive Advance, Revolving (10)
Credit and Guaranty Agreement, dated
as of November 15, 1993, among the
Company, the guarantors named therein,
the banks named therein, and Chemical
Bank, as agent (Note: All attachments
have been omitted. Copies of such
attachments will be furnished
supplementally to the Securities and
Exchange Commission upon request.)
(b) First Amendment, dated as of (11)
December 23, 1994, to Competitive
Advance, Revolving Credit and
Guaranty Agreement
10.1 (a) 1987 Employee Stock Option Plan (4)
(b) Amendment No. 1 to the Company's (5)
1987 Employee Stock Option Plan
10.2 (a) Letter Agreement dated June 29, (3)
1990 by and between Cravey, Green &
Wahlen Incorporated and the Company
(b) Stock Purchase Warrant dated August (2)
28, 1990 issued to Cravey, Green &
Wahlen Incorporated by the Company
(c) Stock Purchase Warrant Plan adopted (6)
February 25, 1993
10.3 1992 Stock Option Plan adopted May (7)
26, 1992
10.4 (a) Employee Stock Ownership Plan as (11)
amended effective as of December 1,
1982, restated as of January 1,
1991
(b) Second Amendment to the DENTSPLY 76
Employee Stock Ownership Plan
10.5 (a) Retainer Agreement dated December (8)
29, 1992 between the Company and
State Street Bank and Trust Company
("State Street")
(b) Trust Agreement between the Company (10)
and State Street Bank and Trust
Company dated as of August 11, 1993
(c) Amendment to Trust Agreement (10)
between the Company and State
Street Bank and Trust Company
effective August 11, 1993
10.6 DENTSPLY Stock Option Conversion (8)
Plan approved June 23, 1993
10.7 Employment Agreement dated January (14)
1, 1996 between the Company and
72
Burton C. Borgelt
10.8 (a) Employment Agreement dated as of (8)
December 31, 1987 between the
Company and John C. Miles II
(b) Amendment to Employment Agreement (14)
between the Company and John C.
Miles II dated February 16, 1996,
effective January 1, 1996
10.9 Employment Agreement dated as of (8)
December 31, 1987, as amended as of
February 8, 1990, between the
Company and Leslie A. Jones
10.10 Employment Agreement dated as of (8)
December 10, 1992 between the
Company and Michael R. Crane
10.11 Employment Agreement dated as of (8)
December 10, 1992 between the
Company and Edward D. Yates
10.12 Employment Agreement dated as of (8)
December 10, 1992 between the
Company and J. Patrick Clark
10.13 Employment Agreement dated January (14)
1, 1996 between the Company and W.
William Weston
10.14 Employment Agreement dated January (14)
1, 1996 between the Company and
Thomas L. Whiting
10.15 Employment Agreement dated October 77
11, 1996 between the Company and
Gerald K. Kunkle Jr.
10.16 (a) Exclusive Distribution Agreement (8)
dated April 19, 1991, between
Core-Vent Corporation ("Core-
Vent"), Dr. Gerald Niznick and the
Company
(b) First Amendment to Exclusive (8)
Distribution Agreement dated April
30, 1991
(c) Second Amendment to Exclusive (8)
Distribution Agreement dated April
21, 1993 (Note: Exhibits 2.3.1B
(Notice of New Products), 2.3.1A
(Price List) and 16 (Mutual
Release) have been omitted. Copies
of such exhibits will be furnished
to the Securities and Exchange
Commission supplementally upon
request.)
10.17 1993 Stock Option Plan (1)
10.18 Revolving Credit Agreement among (11)
DENTSPLY International Inc., each of
the guarantors named therein, and
ABN AMRO Bank N.V., dated as of
September 9, 1994
10.19 Multi-Currency Term Loan Agreement (14)
among Dentsply Ltd., the banks
named therein, and ABN AMRO Bank
73
N.V., dated as of May 12, 1995 (Note:
All attachments have been omitted. Copies
of such attachments will be furnished
supplementally to the Securities and
Exchange Commission upon request.)
10.20 (a) DENTSPLY International Inc. 401(k) (11)
Savings Plan Summary Plan
Description, as amended effective
January 1, 1994
(b) Fourth Amendment to the DENTSPLY 84
International 401(k) Savings Plan
10.21 Midwest Dental Products Corporation (11)
Pension Plan as amended and re-
stated effective January 1, 1989
10.22 Revised Ransom & Randolph Pension (11)
Plan, as amended effective as of
September 1, 1985, restated as of
January 1, 1989
10.23 DENTSPLY International Inc. 86
Directors' Deferred Compensation
Plan effective January 1, 1997
10.24 Letter Agreement, dated October 13, (11)
1994, between Dentsply Limited and
DePuy International Limited
10.25 Sales-Purchase Agreement, dated May (12)
30, 1995, between certain stock-
holders of Maillefer Instruments,
S.A., Dentsply Ltd., and DENTSPLY
International Inc. as guarantor
10.26 Asset Purchase and Sale Agreement, (13)
dated January 10, 1996, between
Tulsa Dental Products, L.L.C. and
DENTSPLY International Inc.
10.27 Stock Purchase Agreement dated 89
January 13, 1997 between Groupe
Monot, S.A. and Dentsply DeTrey
GmbH for the purchase of
Laboratoire SPAD, S.A.
11 Computation of earnings per share 120
21.1 Subsidiaries of the Company 121
23.1 Consent of KPMG Peat Marwick LLP 123
27 Financial Data Schedule 124
- --------------
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(2) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1991, File No. 0-16211.
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-2 (No. 33-43079).
74
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-18 (No. 33-
15355C).
(5) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1992, File No. 0-16211.
(6) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-61780).
(7) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
(8) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated August 28, 1990,
File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-16211.
(11) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
December 31, 1994, File No. 0-16211.
(12) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated June 30, 1995,
File No. 0-16211.
(13) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(14) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
75