DENTSPLY SIRONA Inc. (“Dentsply Sirona”) (NASDAQ:XRAY), The Dental
Solutions CompanyTM, today announced its financial results for the
three months ended March 31, 2017.
First Quarter 2017 Financial
Results
Reported net sales of $900.5 million increased
16.6% compared to $772.6 million in the first quarter of
2016. For the three month period ended March 31, 2017, sales
of the combined businesses1 declined 2.2% on a
constant currency basis and internal growth2 was
negative 4.7% which was unfavorably impacted by approximately $40
million, or approximately 430 basis points, as a result of
quarter-over-quarter changes in net equipment inventory levels at
certain distributors in North America and Europe related to the
transition in distribution strategy in North America.
On a geographic basis, U.S. reported net sales
of $313.5 million increased 12.1% compared to $279.7 in the first
quarter of 2016. During the three month period ended March 31,
2017, U.S. reported net sales, excluding precious metals, of $312.1
million increased 12.1% compared to $278.4 million in the first
quarter of 2016. Sales of the combined U.S.
businesses1 declined 10.0% on a constant currency
basis with internal growth2 down 11.3% which was
unfavorably impacted by approximately $30 million, or approximately
850 basis points, or $30 million, as a result of changes in net
equipment inventory levels at a certain distributor in connection
with the transition of our distribution strategy in North America
for the quarter ended March 31, 2016 as compared to the quarter
ended March 31, 2017.
1“Sales of our combined businesses” combines the historical
consolidated revenues of DENTSPLY and Sirona, giving effect to the
merger as if it had been consummated on January 1, 2015.Non-GAAP
adjusted EPS,net sales excluding precious metals, constant currency
growth and internal growth and results are non-GAAP financial
measures that exclude certain items. Please refer to the
disclosure at the end of the release.2 For a reconciliation of
constant currency growth to internal revenue growth please see
supplemental tables 1-3 at the end of the release.Non-GAAP adjusted
EPS, constant currency growth and internal growth and results are
non-GAAP financial measures that exclude certain items.
Please refer to the disclosure at the end of the release.
Reported net sales in Europe increased 19.8% to
$372.7 million compared to $311.2 million in the first quarter of
2016. Reported net sales in Europe, excluding precious
metals, increased 21.4% to $364.1 million compared to $299.9
million in the first quarter of 2016. Sales of the combined
European businesses1 grew 5.3% on a constant
currency basis with internal growth2 of 2.2% which
was unfavorably impacted by approximately $5 million, or
approximately 140 basis points, as a result of changes in net
equipment inventory at a certain global distributor in connection
with the transition of our distribution strategy in North America
quarter ended March 31, 2016 as compared to the quarter ended March
31, 2017.
Reported net sales in Rest of World increased 17.9% to $214.3
million compared to $181.7 million in the first quarter of
2016. Reported net sales in Rest of World, excluding precious
metals, increased 21.0% to $213.2 million compared to $176.2
million in the first quarter of 2016. Sales of the combined
businesses1 declined 2.4% on a constant currency
basis and internal growth declined 5.2% which was unfavorably
impacted by approximately $5 million, or approximately 220 basis
points, as a result of changes in net equipment inventory levels at
a distributor in Canada in connection with the transition of our
distribution strategy in North America quarter ended March 31, 2016
as compared to the quarter ended March 31, 2017.
Reported net sales for Dental and Healthcare Consumables,
increased by 4.6% to $511.2 million in the first quarter of
2017. Reported net sales for Dental and Healthcare
Consumables, excluding precious metals, increased by 6.2% to $500.2
million in the first quarter of 2017. Sales of the combined
businesses1 for Dental and Healthcare Consumables
grew 2.8% on a constant currency basis with internal
growth2 of 2.4% during the three month period
ended March 31, 2017.
Reported net sales for Technologies, increased
by 37.2% to $389.3 million. Reported net sales for Technologies,
excluding precious metals, increased by 37.2% to $389.2 million in
the first quarter of 2017. For the three month period ended March
31, 2017, sales of the combined businesses1 for
Technologies declined 8.1% on a constant currency basis and
declined 12.7% on an internal basis2 which was
unfavorably impacted by approximately $40 million, or approximately
890 basis points, as a result of quarter-over-quarter net changes
in equipment inventory levels at certain distributors in North
America and Europe related to the transition in distribution
strategy in North America.
Net income attributable to Dentsply Sirona for the first quarter
of 2017 was $59.8 million, or $0.26 per diluted share, compared to
$125.0 million, or $0.70 per diluted share in the first quarter of
2016. On an adjusted basis, excluding certain items, net
earnings per diluted share were $0.49 compared to $0.69 in the
first quarter of 2016. A reconciliation of the non-GAAP
measures to earnings per share calculated on a US-GAAP basis is
provided in the attached table.
New U.S. Equipment Distribution AgreementsThis
morning, the Company announced a new distribution agreement with
Patterson Companies, continuing the strong partnership we have
enjoyed with Patterson for many years. Together, we have
established the CEREC line in the US as the standard for single
visit dentistry. Additionally, the company announced a new
three-year agreement with Henry Schein Inc., effective September 1,
2017 to distribute the Company’s full line of dental equipment in
the U.S., in addition to the current products already distributed.
This expands market focus on our equipment and technology line,
including the CEREC, Schick, extraoral imaging and other Sirona
branded products.
Jeffrey T. Slovin, Dentsply Sirona’s Chief
Executive Officer commented: “As expected, our first quarter
results were impacted by the transition of our North American
distribution strategy and a seasonal slowdown ahead of the
International Dental Show in March. I am pleased to announce
the expansion of our U.S. distribution with Henry Schein and a new
agreement with Patterson Companies. By leveraging the
strength of both these partners, we expect to increase adoption of
our products and facilitate more revenue synergy activities.”
Mr. Slovin continued: “The International
Dental Show in March was a tremendous success as we introduced a
record number of new solutions and demonstrated why Dentsply Sirona
is the innovator in the industry and the only Dental Solutions
Company. The positive reaction to our new products and the
market’s clear evolution towards end-to-end integrated solutions
affirm our expectation for a very strong back half of the fiscal
year.”
Guidance for 2017^
Management reiterated its EPS guidance for 2017 in the range of
$2.80 to $2.90 per diluted share.
Conference Call/Webcast
Information
Dentsply Sirona’s management team will host an
investor conference call and live webcast today at 8:30 am
ET. A presentation related to the call will be available on
www.dentsplysirona.com in the Investors section.
Investors can access the webcast via a link on
Dentsply Sirona’s web site at www.dentsplysirona.com. For
those planning to participate on the call, please dial 877-419-6591
for domestic calls, or (719) 325-4819 for international
calls. The Conference ID # is 9219996. A replay of the
conference call will be available online on the Dentsply Sirona web
site, and a dial-in replay will be available for one week following
the call at (888) 203-1112 (for domestic calls) or (719) 457-0820
(for international calls), replay passcode # 9219996.
About Dentsply Sirona:
Dentsply Sirona is the world’s largest manufacturer of
professional dental products and technologies, with over a century
of innovation and service to the dental industry and patients
worldwide. Dentsply Sirona develops, manufactures, and
markets a comprehensive solutions offering including dental and
oral health products as well as other consumable medical devices
under a strong portfolio of world class brands. As The Dental
Solutions Company, Dentsply Sirona’s products provide innovative,
high-quality and effective solutions to advance patient care and
deliver better, safer and faster dentistry. Dentsply Sirona’s
global headquarters is located in York, Pennsylvania, and the
international headquarters is based in Salzburg, Austria. The
company’s shares are listed in the United States on NASDAQ under
the symbol XRAY. Visit www.dentsplysirona.com for more
information about Dentsply Sirona and its products.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements can be identified by the use of
forward-looking terminology, including "may," "believe," "will,"
"expect," "anticipate," "estimate," "plan," "intend," "project,"
"forecast," or other similar words. Statements contained in this
press release are based on information presently available to the
Company and assumptions that the Company believe to be reasonable.
The Company is not assuming any duty to update this information if
those facts change or if the assumptions are no longer believed to
be reasonable. Investors are cautioned that all such statements
involve risks and uncertainties, and important factors could cause
actual events or results to differ materially from those indicated
by such forward-looking statements. These risk factors include,
without limitation; risks that the new businesses will not be
integrated successfully; risks that the combined companies will not
realize the estimated cost savings, synergies and growth, or that
such benefits may take longer to realize than expected; risks
relating to unanticipated costs of integration, including operating
costs, customer loss or business disruption being greater than
expected; unanticipated changes relating to competitive factors in
the industries in which the Company operates; the ability to hire
and retain key personnel; reliance on and integration of
information technology systems; international, national or local
economic, social or political conditions that could adversely
affect the Company or its customers; risks associated with
assumptions made in connection with critical accounting estimates
and legal proceedings; the ability to attract new customers and
retain existing customers in the manner anticipated; the continued
strength of dental and medical device markets; the timing, success
and market reception for our new and existing products; uncertainty
regarding governmental actions with respect to dental and medical
products; outcome of litigation and/or governmental enforcement
actions; volatility in the capital markets or changes in our credit
ratings; continued support of our products by influential dental
and medical professionals; our ability to successfully integrate
acquisitions; risks associated with foreign currency exchange
rates; risks associated with our competitors' introduction of
generic or private label products; our ability to accurately
predict dealer and customer inventory levels; our ability to
successfully realize the benefits of any cost reduction or
restructuring efforts; our ability to obtain a supply of certain
finished goods and raw materials from third parties; changes in the
general economic environment that could affect the business; and
the potential of international unrest, economic downturn or effects
of currencies, tax assessments, tax adjustments, anticipated tax
rates, raw material costs or availability, benefit or retirement
plan costs, or other regulatory compliance costs. The foregoing
list of factors is not exhaustive.
Non-US GAAP Financial
Measures
In addition to the results reported in accordance with US GAAP,
the Company provides adjusted net income attributable to Dentsply
Sirona and adjusted earnings per diluted common share (“adjusted
EPS”). The Company discloses adjusted net income attributable
to Dentsply Sirona to allow investors to evaluate the performance
of the Company’s operations exclusive of certain items that impact
the comparability of results from period to period and may not be
indicative of past or future performance of the normal operations
of the Company and certain large non-cash charges related to
purchased intangible assets. The Company believes that this
information is helpful in understanding underlying operating trends
and cash flow generation.
The principal measurements used by the Company in evaluating its
business are: (1) constant currency sales growth by segment
and geographic region; (2) internal sales growth by segment and
geographic region; and (3) adjusted operating income and
margins of each reportable segment, which excludes the impacts of
purchase accounting, corporate expenses, and certain other
items to enhance the comparability of results period to
period. These principal measurements are not calculated in
accordance with accounting principles generally accepted in
the United States; therefore, these items represent non-US
GAAP measures. These non-US GAAP measures may differ from
other companies and should not be considered in isolation
from, or as a substitute for, measures of financial performance
prepared in accordance with US GAAP.
The Company defines “constant currency sales growth” as the
increase or decrease in net sales from period to period excluding
precious metal content and the impact of changes in foreign
currency exchange rates. This impact is calculated by comparing
current-period revenues to prior-period revenues, with both periods
converted at the U.S. dollar to local currency average foreign
exchange rate for each month of the prior period, for the
currencies in which the Company does business.
The Company defines “internal sales growth” as constant currency
sales growth excluding the impacts of net acquisitions and
divestitures, merger accounting impacts and discontinued
products.
Management also believes that the presentation of net sales,
excluding precious metal content, provides useful information to
investors because a portion of Dentsply Sirona’s net sales is
comprised of sales of precious metals generated through sales of
the Company’s precious metal dental alloy products, which are used
by third parties to construct crown and bridge materials. Due to
the fluctuations of precious metal prices and because the cost of
the precious metal content of the Company’s sales is largely passed
through to customers and has minimal effect on earnings, Dentsply
Sirona reports net sales both with and without precious metal
content to show the Company’s performance independent of precious
metal price volatility and to enhance comparability of performance
between periods. The Company uses its cost of precious metal
purchased as a proxy for the precious metal content of sales, as
the precious metal content of sales is not separately tracked and
invoiced to customers. The Company believes that it is reasonable
to use the cost of precious metal content purchased in this manner
since precious metal dental alloy sale prices are typically
adjusted when the prices of underlying precious metals change.
Adjusted net income and adjusted EPS are important internal
measures for the Company. Senior management receives a
monthly analysis of operating results that includes adjusted net
income and adjusted EPS and the performance of the Company is
measured on this basis along with other performance metrics.
The adjusted net income attributable to Dentsply Sirona consists
of net income attributable to Dentsply Sirona adjusted to exclude
the net of tax impact of the following:
(1) Business combination related costs and fair value
adjustments. These adjustments include costs related to
integrating and consummating mergers and recently acquired
businesses, as well as costs, gains and losses related to the
disposal of businesses or product lines. In addition, this
category includes the roll off to the consolidated statement of
operations of fair value adjustments related to business
combinations, except for amortization expense noted below.
These items are irregular in timing and as such may not be
indicative of past and future performance of the Company and are
therefore excluded to allow investors to better understand
underlying operating trends.
(2) Restructuring program related costs and other costs.
These adjustments include costs related to the implementation of
restructuring initiatives as well as certain other costs.
These costs can include, but are not limited to, severance costs,
facility closure costs, lease and contract terminations costs,
related professional service costs, duplicate facility and labor
costs associated with specific restructuring initiatives, as well
as, legal settlements and impairments of assets. These items are
irregular in timing, amount and impact to the Company’s financial
performance. As such, these items may not be indicative of
past and future performance of the Company and are therefore
excluded for the purpose of understanding underlying operating
trends.
(3) Amortization of purchased intangible assets. This
adjustment excludes the periodic amortization expense related to
purchased intangible assets. Amortization expense has been
excluded from adjusted net income attributed to Dentsply Sirona to
allow investors to evaluate and understand operating trends
excluding these large non-cash charges.
(4) Credit risk and fair value adjustments. These
adjustments include both the cost and income impacts of adjustments
in certain assets and liabilities including the Company’s pension
obligations, that are recorded through net income which are due
solely to the changes in fair value and credit risk. These
items can be variable and driven more by market conditions than the
Company’s operating performance. As such, these items may not
be indicative of past and future performance of the Company and
therefore are excluded for comparability purposes.
(5) Certain fair value adjustments related to an unconsolidated
affiliated company. This adjustment represents the fair value
adjustment of the unconsolidated affiliated company’s convertible
debt instrument held by the Company. The affiliate is
accounted for under the equity method of accounting. The fair
value adjustment is driven by open market pricing of the
affiliate’s equity instruments, which has a high degree of
variability and may not be indicative of the operating performance
of the affiliate or the Company.
(6) Income tax related adjustments. These adjustments
include both income tax expenses and income tax benefits that are
representative of income tax adjustments mostly related to prior
periods, as well as the final settlement of income tax audits, and
discrete tax items resulting from the implementation of
restructuring initiatives. These adjustments are irregular in
timing and amount and may significantly impact the Company’s
operating performance. As such, these items may not be
indicative of past and future performance of the Company and
therefore are excluded for comparability purposes.
Adjusted earnings per diluted common share is calculated by
dividing adjusted net income attributable to Dentsply Sirona by
diluted weighted-average common shares outstanding. Adjusted
net income attributable to Dentsply Sirona and adjusted earnings
per diluted common share are considered measures not calculated in
accordance with US GAAP, and therefore are non-US GAAP
measures. These non-US GAAP measures may differ from other
companies. Income tax related adjustments may include the
impact to adjust the interim effective income tax rate to the
expected annual effective tax rate. The non-US GAAP financial
information should not be considered in isolation from, or as a
substitute for, measures of financial performance prepared in
accordance with US GAAP.
^Our guidance is presented on a non-GAAP basis, as it does not
include the impact of prospective acquisitions, acquisitions
announced but not yet closed and other non-GAAP items, including
restructuring costs, many of which are difficult to predict.
Therefore, we cannot provide a full reconciliation of these
measures. The Company is unable at this time to address the
probable significance of all of the unavailable information.
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In millions, except per share amounts and
percentages) |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Net sales |
$ |
900.5 |
|
|
$ |
772.6 |
|
Net sales, excluding
precious metal content |
889.4 |
|
|
754.5 |
|
|
|
|
|
Cost of products
sold |
408.5 |
|
|
353.7 |
|
|
|
|
|
Gross profit |
492.0 |
|
|
418.9 |
|
% of Net
sales |
54.6 |
% |
|
54.2 |
% |
% of Net sales,
excluding precious metal content |
55.3 |
% |
|
55.5 |
% |
|
|
|
|
Selling, general and
administrative expenses |
404.7 |
|
|
342.1 |
|
|
|
|
|
Restructuring and other
costs |
3.1 |
|
|
4.1 |
|
|
|
|
|
Operating income |
84.2 |
|
|
72.7 |
|
% of Net
sales |
9.4 |
% |
|
9.4 |
% |
% of Net sales,
excluding precious metal content |
9.5 |
% |
|
9.6 |
% |
|
|
|
|
Net interest and other
expense |
7.6 |
|
|
5.3 |
|
|
|
|
|
Income before income
taxes |
76.6 |
|
|
67.4 |
|
|
|
|
|
Provision (benefit) for
income taxes |
16.9 |
|
|
(57.9 |
) |
|
|
|
|
Net income |
59.7 |
|
|
125.3 |
|
% of Net
sales |
6.6 |
% |
|
16.2 |
% |
% of Net sales,
excluding precious metal content |
6.7 |
% |
|
16.6 |
% |
|
|
|
|
Less: Net (loss) income
attributable to noncontrolling interests |
(0.1 |
) |
|
0.3 |
|
|
|
|
|
Net income attributable
to Dentsply Sirona |
$ |
59.8 |
|
|
$ |
125.0 |
|
|
|
|
|
% of Net
sales |
6.6 |
% |
|
16.2 |
% |
% of Net sales,
excluding precious metal content |
6.7 |
% |
|
16.6 |
% |
|
|
|
|
Earnings per common
share attributable to Dentsply Sirona: |
|
|
|
Basic |
$ |
0.26 |
|
|
$ |
0.72 |
|
Diluted |
$ |
0.26 |
|
|
$ |
0.70 |
|
|
|
|
|
Cash dividends declared
per common share |
$ |
0.0875 |
|
|
$ |
0.0775 |
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
Basic |
230.1 |
|
|
174.8 |
|
Diluted |
234.0 |
|
|
178.4 |
|
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In millions) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
$ |
363.3 |
|
|
$ |
383.9 |
|
Accounts and
notes receivable-trade, net |
|
|
598.6 |
|
|
636.0 |
|
Inventories,
net |
|
|
565.1 |
|
|
517.1 |
|
Prepaid expenses
and other current assets, net |
|
|
193.6 |
|
|
173.5 |
|
Total Current Assets |
|
|
1,720.6 |
|
|
1,710.5 |
|
|
|
|
|
|
|
Property, plant and
equipment, net |
|
|
807.1 |
|
|
799.8 |
|
Identifiable intangible
assets, net |
|
|
2,955.1 |
|
|
2,957.6 |
|
Goodwill, net |
|
|
5,958.2 |
|
|
5,952.0 |
|
Other noncurrent
assets, net |
|
|
153.0 |
|
|
107.7 |
|
|
|
|
|
|
|
Total
Assets |
|
|
$ |
11,594.0 |
|
|
$ |
11,527.6 |
|
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
$ |
747.5 |
|
|
$ |
767.6 |
|
Long-term debt |
|
|
1,528.1 |
|
|
1,511.1 |
|
Deferred income
taxes |
|
|
753.2 |
|
|
723.5 |
|
Other noncurrent
liabilities |
|
|
401.6 |
|
|
399.5 |
|
Total Liabilities |
|
|
3,430.4 |
|
|
3,401.7 |
|
|
|
|
|
|
|
Total Dentsply Sirona
Equity |
|
|
8,152.2 |
|
|
8,114.3 |
|
Noncontrolling
interests |
|
|
11.4 |
|
|
11.6 |
|
Total Equity |
|
|
8,163.6 |
|
|
8,125.9 |
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
|
$ |
11,594.0 |
|
|
$ |
11,527.6 |
|
|
|
|
|
|
|
DENTSPLY SIRONA INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWS(In millions)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
59.7 |
|
|
$ |
125.3 |
|
|
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation |
30.9 |
|
|
23.5 |
|
Amortization |
45.2 |
|
|
21.8 |
|
Amortization of deferred financing costs |
0.7 |
|
|
1.1 |
|
Deferred
income taxes |
9.8 |
|
|
(80.4 |
) |
Stock
based compensation expense |
10.8 |
|
|
4.8 |
|
Restructuring and other costs - non-cash |
0.6 |
|
|
2.6 |
|
Excess
tax benefits from stock based compensation |
— |
|
|
(8.4 |
) |
Other
non-cash income |
(14.4 |
) |
|
(3.4 |
) |
Loss on
disposal of property, plant and equipment |
0.3 |
|
|
— |
|
Changes
in operating assets and liabilities, net of acquisitions: |
|
|
|
Accounts
and notes receivable-trade, net |
46.2 |
|
|
(67.1 |
) |
Inventories, net |
(38.3 |
) |
|
8.6 |
|
Prepaid
expenses and other current assets, net |
(9.2 |
) |
|
(16.9 |
) |
Other
noncurrent assets, net |
(14.4 |
) |
|
(2.4 |
) |
Accounts
payable |
23.4 |
|
|
1.2 |
|
Accrued
liabilities |
(36.0 |
) |
|
(15.5 |
) |
Income
taxes |
(31.4 |
) |
|
(1.1 |
) |
Other
noncurrent liabilities |
(1.4 |
) |
|
7.0 |
|
|
|
|
|
Net cash
provided by operating activities |
82.5 |
|
|
0.7 |
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Capital
expenditures |
(31.1 |
) |
|
(20.8 |
) |
Cash assumed in Sirona
merger |
— |
|
|
522.3 |
|
Cash and deposits paid
for acquisitions of businesses, net of cash acquired |
(9.1 |
) |
|
(0.4 |
) |
Cash received from sale
of business or product line |
— |
|
|
2.4 |
|
Cash received on
derivatives contracts |
2.4 |
|
|
5.7 |
|
Cash paid on
derivatives contracts |
— |
|
|
(3.5 |
) |
Expenditures for
identifiable intangible assets |
(4.8 |
) |
|
— |
|
Purchase of short-term
investments |
(0.1 |
) |
|
— |
|
Purchase of
Company-owned life insurance policies |
— |
|
|
(1.7 |
) |
Proceeds from sale of
property, plant and equipment, net |
1.6 |
|
|
0.4 |
|
|
|
|
|
Net cash (used
in) provided by investing activities |
(41.1 |
) |
|
504.4 |
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Increase (decrease) in
short-term borrowings |
1.3 |
|
|
(2.1 |
) |
Cash paid for treasury
stock |
(77.9 |
) |
|
(428.8 |
) |
Cash dividends
paid |
(18.0 |
) |
|
(10.1 |
) |
Proceeds from long-term
borrowings |
3.0 |
|
|
79.9 |
|
Repayments on long-term
borrowings |
(5.4 |
) |
|
(127.5 |
) |
Proceeds from exercised
stock options |
29.4 |
|
|
7.4 |
|
Excess tax benefits
from stock based compensation |
— |
|
|
8.4 |
|
|
|
|
|
Net cash used
in financing activities |
(67.6 |
) |
|
(472.8 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
5.6 |
|
|
6.2 |
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
(20.6 |
) |
|
38.5 |
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
383.9 |
|
|
284.6 |
|
|
|
|
|
Cash and cash
equivalents at end of period |
$ |
363.3 |
|
|
$ |
323.1 |
|
|
|
|
|
Schedule of non-cash
investing activities |
|
|
|
Merger financed
by common stock |
$ |
— |
|
|
$ |
6,256.2 |
|
DENTSPLY SIRONA INC. AND
SUBSIDIARIES(In millions)(unaudited) |
|
|
|
|
Segment
Operating Income |
|
|
|
|
|
|
|
The
following tables set forth information about the Company’s segments
adjusted operating income: |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2017 |
|
2016 |
|
|
|
|
Dental and Healthcare
Consumables |
$ |
136.5 |
|
|
$ |
130.8 |
|
Technologies |
54.0 |
|
|
53.8 |
|
Segment Adjusted Operating IncomeBefore
Income Taxes and Interest |
190.5 |
|
|
184.6 |
|
|
|
|
|
Reconciling items
(income) expense: |
|
|
|
All Other (a) |
56.5 |
|
|
85.2 |
|
Restructuring and other
costs |
3.1 |
|
|
4.1 |
|
Interest expense |
9.3 |
|
|
9.2 |
|
Interest income |
(0.7 |
) |
|
(0.5 |
) |
Other expense (income),
net |
(1.0 |
) |
|
(3.4 |
) |
Amortization of
intangible assets |
45.3 |
|
|
21.8 |
|
Depreciation resulting
from the fair value step-up of property, plant and equipment from
business combinations |
1.4 |
|
|
0.8 |
|
Income Before Income Taxes |
$ |
76.6 |
|
|
$ |
67.4 |
|
(a) Includes the results of unassigned Corporate headquarter
costs, inter-segment eliminations and one distribution warehouse
not managed by named segments.
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
|
(In millions, except percentages) |
|
(unaudited) |
|
|
|
|
|
|
|
Operating
Income Summary: |
|
|
|
|
|
The
following tables present the reconciliation of reported US GAAP
operating income in total and on a percentage of net sales,
excluding precious metal content, to the non-US GAAP financial
measures. |
|
|
|
|
Three Months
Ended March 31, 2017 |
|
|
|
Operating Income (Loss) |
|
|
|
|
Operating Income |
$ |
84.2 |
|
Percentage of Net
Sales, Excluding Precious Metal Content |
9.5 |
% |
Amortization of Purchased Intangible Assets |
45.3 |
|
Business
Combination Related Costs and Fair Value Adjustments |
10.6 |
|
Restructuring Program Related Costs and Other Costs |
5.2 |
|
Credit
Risk and Fair Value Adjustments |
2.6 |
|
Adjusted Non-US
GAAP Operating Income |
$ |
147.9 |
|
Percentage of
Net Sales, Excluding Precious Metal Content |
16.6 |
% |
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, 2016 |
|
|
|
Operating Income (Loss) |
|
|
|
|
Operating Income |
$ |
72.7 |
|
Percentage of Net
Sales, Excluding Precious Metal Content |
9.6 |
% |
Business
Combination Related Costs and Fair Value Adjustments |
68.8 |
|
Amortization of Purchased Intangible Assets |
21.8 |
|
Restructuring Program Related Costs and Other Costs |
4.9 |
|
Credit
Risk and Fair Value Adjustments |
1.3 |
|
Adjusted Non-US
GAAP Operating Income |
$ |
169.5 |
|
Percentage of
Net Sales, Excluding Precious Metal Content |
22.2 |
% |
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
(In millions, except per share amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
Earnings
Summary: |
|
|
|
|
|
|
|
The
following tables present the reconciliation of reported US GAAP net
income attributable to Dentsply Sirona and on a per diluted common
share basis to the non-US GAAP financial measures. |
|
|
|
|
Three Months
Ended March 31, 2017 |
|
|
|
|
Net |
|
Per Diluted |
|
Income |
|
Common Share |
|
|
|
|
Net Income Attributable
to Dentsply Sirona |
$ |
59.8 |
|
|
$ |
0.26 |
|
Pre-tax
Non-US GAAP Adjustments: |
|
|
|
Amortization of Purchased Intangible Assets |
45.3 |
|
|
|
Business
Combination Related Costs and Fair Value Adjustments |
10.8 |
|
|
|
Restructuring Program Related Costs and Other Costs |
5.4 |
|
|
|
Credit
Risk and Fair Value Adjustments |
2.5 |
|
|
|
Tax
Impact of the Pre-tax Non-US GAAP Adjustments (a) |
(12.8 |
) |
|
|
Subtotal
Non-US GAAP Adjustments |
51.2 |
|
|
0.22 |
|
Income
Tax Related Adjustments |
2.7 |
|
|
0.01 |
|
Adjusted Non-US
GAAP Net Income Attributable to Dentsply Sirona |
$ |
113.7 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, 2016 |
|
|
|
|
Net |
|
Per Diluted |
|
Income |
|
Common Share |
|
|
|
|
Net Income Attributable
to Dentsply Sirona |
$ |
125.0 |
|
|
$ |
0.70 |
|
Pre-tax
Non-US GAAP Adjustments: |
|
|
|
Business
Combination Related Costs and Fair Value Adjustments |
69.2 |
|
|
|
Amortization of Purchased Intangible Assets |
21.8 |
|
|
|
Credit
Risk and Fair Value Adjustments |
0.9 |
|
|
|
Tax
Impact of the Pre-tax Non-US GAAP Adjustments (a) |
(22.7 |
) |
|
|
Subtotal
Non-US GAAP Adjustments |
69.2 |
|
|
0.39 |
|
Income
Tax Related Adjustments |
(71.8 |
) |
|
(0.40 |
) |
Adjusted Non-US
GAAP Net Income Attributable to Dentsply Sirona |
$ |
122.4 |
|
|
$ |
0.69 |
|
(a) The tax amount was calculated using the applicable statutory
tax rate in the tax jurisdiction where the non-US GAAP adjustments
were generated.
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
(In millions, except percentages) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Tax
Rate Summary: |
|
|
|
|
|
|
|
|
|
|
|
The
following tables present the reconciliation of reported US GAAP
effective tax rate as a percentage of income before income taxes to
the non-US GAAP financial measure. |
|
|
|
|
|
|
Three Months
Ended March 31, 2017 |
|
|
|
|
|
|
Pre-tax Income |
|
Income Tax Benefit (Expense) |
|
Percentage of Pre-Tax Income |
|
|
|
|
|
|
As Reported - US GAAP
Operating Results |
$ |
76.6 |
|
|
$ |
(16.9 |
) |
|
22.1 |
% |
Amortization of Purchased Intangible Assets |
45.3 |
|
|
(13.4 |
) |
|
|
Business
Combination Related Costs and Fair Value Adjustments |
10.8 |
|
|
(2.9 |
) |
|
|
Restructuring Program Related Costs and Other Costs |
5.4 |
|
|
4.2 |
|
|
|
Credit
Risk and Fair Value Adjustments |
2.5 |
|
|
(0.7 |
) |
|
|
Income
Tax Related Adjustments |
— |
|
|
2.7 |
|
|
|
As Adjusted -
Non-US GAAP Operating Results |
$ |
140.6 |
|
|
$ |
(27.0 |
) |
|
19.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31, 2016 |
|
|
|
|
|
|
Pre-tax Income |
|
Income Tax Benefit (Expense) |
|
Percentage of Pre-Tax Income |
|
|
|
|
|
|
As Reported - US GAAP
Operating Results |
$ |
67.4 |
|
|
$ |
57.9 |
|
|
(85.9 |
%) |
Business
Combination Related Costs and Fair Value Adjustments |
69.2 |
|
|
(14.9 |
) |
|
|
Amortization of Purchased Intangible Assets |
21.8 |
|
|
(6.3 |
) |
|
|
Credit
Risk and Fair Value Adjustments |
0.9 |
|
|
(0.2 |
) |
|
|
Restructuring Program Related Costs and Other Costs |
— |
|
|
(1.3 |
) |
|
|
Income
Tax Related Adjustments |
— |
|
|
(71.8 |
) |
|
|
As Adjusted -
Non-US GAAP Operating Results |
$ |
159.3 |
|
|
$ |
(36.6 |
) |
|
23.0 |
% |
DENTSPLY SIRONA INC. AND
SUBSIDIARIES(In millions, except
percentages)(unaudited) |
|
For the
three months ended March 31, 2017, sales of our Combined
Businesses declined 2.2% on a constant currency basis. This
includes a benefit of 2.5% from acquisitions, which results in
negative internal sales growth of 4.7%. Net sales, excluding
precious metal content, were negatively impacted by approximately
1.3% due to the strengthening of the U.S. dollar over the prior
year period. A reconciliation of reported net sales to net
sales, excluding precious metal content, of the combined business
is as follows: |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
(in
millions, except percentages) |
|
2017 |
|
2016 |
|
Variance % |
|
|
|
|
|
|
|
Net
sales |
|
$ |
900.5 |
|
|
$ |
772.6 |
|
|
16.6 |
% |
Less: precious metal
content of sales |
|
11.1 |
|
|
18.1 |
|
|
(38.7 |
%) |
Net sales, excluding
precious metal content |
|
889.4 |
|
|
754.5 |
|
|
17.9 |
% |
Sirona net sales
(a) |
|
— |
|
|
160.7 |
|
|
NM |
|
Merger
related adjustments (b) |
|
1.5 |
|
|
8.8 |
|
|
NM |
|
Elimination of intercompany net sales |
|
— |
|
|
(0.4 |
) |
|
NM |
|
Non-US GAAP Combined
Business, net sales,excluding precious metal content |
|
$ |
890.9 |
|
|
$ |
923.6 |
|
|
(3.5 |
%) |
Foreign Exchange
Impact |
|
|
|
|
|
(1.3 |
%) |
Constant Currency
Growth |
|
|
|
|
|
(2.2 |
%) |
Acquisitions |
|
|
|
|
|
2.5 |
% |
Internal Sales
Growth |
|
|
|
|
|
(4.7 |
%) |
|
|
|
|
|
|
|
|
(a) Represents Sirona sales for January and
February 2016.(b) Represents an adjustment to reflect deferred
subscription and warranty revenue that was eliminated under
business combination accounting standards to make the 2017 and 2016
non-U.S. GAAP combined business results comparable.NM - Not
meaningful
In the US, for the three month period ended
March 31, 2017, sales of our Combined Businesses declined
10.0% on a constant currency basis. This includes a benefit
of 1.3% from acquisitions, which results in a negative internal
sales growth rate of 11.3%. In connection with the transition
of our distribution strategy in North America, net sales, excluding
precious metal content, was unfavorably impacted by approximately
$30 million as a result of changes in net equipment inventory
levels at a certain distributor in the United States for the
quarter ended March 31, 2016 as compared to the quarter ended March
31, 2017.
In Europe, for the three month period ended
March 31, 2017, sales of our Combined Businesses grew 5.3% on
a constant currency basis. This includes a benefit of 3.1%
from acquisitions, which results in internal growth of 2.2%.
Net sales, excluding precious metal content, were negatively
impacted by approximately 3.6% due to the strengthening of the U.S.
dollar over the prior year period. In connection with the
transition of our distribution strategy in North America, net
sales, excluding precious metal content, was unfavorably impacted
by approximately $5 million as a result of changes in net
equipment inventory levels at a certain global distributor for the
quarter ended March 31, 2016 as compared to the quarter ended March
31, 2017. Excluding this impact, internal sales growth in
this region was primarily driven by higher demand in the Dental and
Healthcare Consumables segment.
In Rest of World, for the three month period
ended March 31, 2017, sales of our Combined Businesses
declined 2.4% on a constant currency basis. This includes a
benefit of 2.8% from acquisitions, which results in a negative
internal sales growth rate of 5.2%. Net sales, excluding
precious metal content, were positively impacted by approximately
50 basis points due to the weakening of the U.S. dollar over the
prior year period. The negative growth was driven by lower
demand in the Technologies segment. In connection with the
transition of our distribution strategy in North America net sales,
excluding precious metal content, was unfavorably impacted by
approximately $5 million as a result of changes in net
equipment inventory levels at a distributor in Canada for the
quarter ended March 31, 2016 as compared to the quarter ended March
31, 2017.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
2017 |
|
Q1 2017 Growth |
|
Three Months Ended March 31,
2016 |
(in millions, except
percentages) |
|
US |
Europe |
ROW |
Total |
|
US |
Europe |
ROW |
Total |
|
US |
Europe |
ROW |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
313.5 |
|
$ |
372.7 |
|
$ |
214.3 |
|
$ |
900.5 |
|
|
12.1 |
% |
19.8 |
% |
17.9 |
% |
16.6 |
% |
|
$ |
279.7 |
|
$ |
311.2 |
|
$ |
181.7 |
|
$ |
772.6 |
|
Less: precious metal
content of sales |
|
1.4 |
|
8.6 |
|
1.1 |
|
11.1 |
|
|
|
|
|
|
|
1.3 |
|
11.3 |
|
5.5 |
|
18.1 |
|
Net sales, excluding
precious metal content |
|
312.1 |
|
364.1 |
|
213.2 |
|
889.4 |
|
|
12.1 |
% |
21.4 |
% |
21.0 |
% |
17.9 |
% |
|
278.4 |
|
299.9 |
|
176.2 |
|
754.5 |
|
Sirona net sales
(a) |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
60.5 |
|
59.4 |
|
40.8 |
|
160.7 |
|
Merger
related adjustments (b) |
|
1.5 |
|
— |
|
— |
|
1.5 |
|
|
|
|
|
|
|
8.8 |
|
— |
|
— |
|
8.8 |
|
Elimination of intercompany net sales |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
(0.1 |
) |
(0.3 |
) |
— |
|
(0.4 |
) |
Non-US GAAP Combined
Business, net sales, excluding precious metal content |
|
$ |
313.6 |
|
$ |
364.1 |
|
$ |
213.2 |
|
$ |
890.9 |
|
|
(10.0 |
%) |
1.7 |
% |
(1.9 |
%) |
(3.5 |
%) |
|
$ |
347.6 |
|
$ |
359.0 |
|
$ |
217.0 |
|
$ |
923.6 |
|
Foreign
Exchange Impact |
|
|
|
|
|
|
|
(3.6 |
%) |
0.5 |
% |
(1.3 |
%) |
|
|
|
|
|
Constant Currency
Growth |
|
|
|
|
|
|
(10.0 |
%) |
5.3 |
% |
(2.4 |
%) |
(2.2 |
%) |
|
|
|
|
|
Acquisitions |
|
|
|
|
|
|
1.3 |
% |
3.1 |
% |
2.8 |
% |
2.5 |
% |
|
|
|
|
|
Internal Sales
Growth |
|
|
|
|
|
|
(11.3 |
%) |
2.2 |
% |
(5.2 |
%) |
(4.7 |
%) |
|
|
|
|
|
(a) Represents Sirona sales for January and
February 2016.(b) Represents an adjustment to reflect deferred
subscription and warranty revenue that was eliminated under
business combination accounting standards to make the 2017 and 2016
non-U.S. GAAP combined business results comparable.
For Dental and Healthcare Consumables, for the
three month period ended March 31, 2017, sales of the Combined
Businesses grew 2.8% on a constant currency basis. This
includes a benefit of approximately 40 basis points from
acquisitions, which results in internal growth of 2.4%. Net
sales, excluding precious metal content, were negatively impacted
by approximately 1.3% due to the strengthening of the U.S. dollar
over the prior year period.
For Technologies, for the three month period
ended March 31, 2017, sales of our Combined Businesses
declined 8.1% on a constant currency basis. This includes a
benefit of 4.6% from acquisitions, which results in a negative
internal sales growth rate of 12.7%. Net sales, excluding
precious metal content, were negatively impacted by approximately
1.3% due to the strengthening of the U.S. dollar over the prior
year period. Net sales, excluding precious metal content, was
unfavorably impacted by approximately $40 million as a result of
quarter-over-quarter net changes in equipment inventory levels
at certain distributors in North America and Europe related to the
transition in distribution strategy in North America.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017 |
|
Q1 2017 Growth |
|
Three Months Ended March 31, 2016 |
(in millions, except
percentages) |
|
Consumables |
Technologies |
Total |
|
Consumables |
Technologies |
Total |
|
Consumables |
Technologies |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
511.2 |
|
$ |
389.3 |
|
$ |
900.5 |
|
|
4.6 |
% |
37.2 |
% |
16.6 |
% |
|
$ |
488.8 |
|
$ |
283.8 |
|
$ |
772.6 |
|
Less: precious metal
content of sales |
|
11.0 |
|
0.1 |
|
11.1 |
|
|
|
|
|
|
17.9 |
|
0.2 |
|
18.1 |
|
Net sales, excluding
precious metal content |
|
500.2 |
|
389.2 |
|
889.4 |
|
|
6.2 |
% |
37.2 |
% |
17.9 |
% |
|
470.9 |
|
283.6 |
|
754.5 |
|
Sirona net sales
(a) |
|
— |
|
— |
|
— |
|
|
|
|
|
|
15.7 |
|
145.0 |
|
160.7 |
|
Merger
related adjustments (b) |
|
— |
|
1.5 |
|
1.5 |
|
|
|
|
|
|
— |
|
8.8 |
|
8.8 |
|
Elimination of intercompany net sales |
|
— |
|
— |
|
— |
|
|
|
|
|
|
(0.4 |
) |
— |
|
(0.4 |
) |
Non-US GAAP Combined
Business, net sales, excluding precious metal content |
|
$ |
500.2 |
|
$ |
390.7 |
|
$ |
890.9 |
|
|
1.5 |
% |
(9.4 |
)% |
(3.5 |
)% |
|
$ |
486.2 |
|
$ |
437.4 |
|
$ |
923.6 |
|
Foreign
Exchange Impact |
|
|
|
|
|
(1.3 |
%) |
(1.3 |
%) |
(1.3 |
%) |
|
|
|
|
Constant Currency
Growth |
|
|
|
|
|
2.8 |
% |
(8.1 |
%) |
(2.2 |
%) |
|
|
|
|
Acquisitions |
|
|
|
|
|
0.4 |
% |
4.6 |
% |
2.5 |
% |
|
|
|
|
Internal Sales
Growth |
|
|
|
|
|
2.4 |
% |
(12.7 |
%) |
(4.7 |
%) |
|
|
|
|
(a) Represents Sirona sales for January and
February 2016.(b) Represents an adjustment to reflect deferred
subscription and warranty revenue that was eliminated under
business combination accounting standards to make the 2017 and 2016
non-U.S. GAAP combined business results comparable.
Contact Information:
Joshua Zable, IRC
VP, Corporate Communications and Investor Relations
+1-718-482-2184
joshua.zable@dentsplysirona.com
Derek Leckow, IRC
VP, Investor Relations
+1-717-849-7863
derek.leckow@dentsplysirona.com
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