DENTSPLY International Inc. (
Q3 2011 Earnings Call
October 27, 2011 8:30 am ET
Derek Leckow – Vice President, Investor Relations
Bret W. Wise – Chairman and Chief Executive Officer
Christopher T. Clark – President and Chief Operating Officer
William R. Jellison – Chief Financial Officer and Senior Vice President
John Kreger – William Blair & Company, LLC.
Jeff Johnson – Robert W. Baird
Jonathan Block – Suntrust Robinson Humphrey
Verdell Walker – Goldman Sachs
Steve Busha – Morgan Stanley
Scott Green – Bank of America/Merrill Lynch
Brandon Couillard – Jefferies & Co.
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Good day and welcome to the DENTSPLY International Third Quarter 2011 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Derek Leckow, Vice President of Investor Relations. Please go ahead, sir.
Thank you very much Ellisa, and many thanks to each of you for joining us today to discuss DENTSPLY International’s third quarter 2011 results. Joining us on the call from our location in Europe is Bret Wise, Chairman and CEO; and I’m here in New York with Chris Clark, our President and COO; and Bill Jellison, our Senior Vice President and CFO. Each of us will have some prepared remarks and then, we’ll be glad to answer any questions that you may have. I’d hope you all had a chance to review our press release and supplemental materials, which we issued earlier this morning. A copy of the press release and these materials are available for downloading on our website www.dentsply.com in the Investor Relations area.
Before we get started, it is important to note this call may include forward-looking statements involving risks and uncertainties. These should be considered in conjunction with the risk factors and uncertainties that are described in our SEC filings. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. And a recording of this call in its entirety will be available on our website.
As you can see in the release, our results for this quarter reflect the Astra Tech acquisition and included a number of non-recurring items and a substantial increase in non-cash amortization of acquired intangibles. In an effort to provide clarity, from the distortion of some of these items, our comments on this call focuses on results including certain adjustments which are noted on the non-GAAP reconciliation tables contained in the release. You’ll note that our forward-looking earnings guidance also reflects results excluding all the related amortization charges. This information is also highlighted in the supplemental material we’ve provided on our website.
With that, I’d like now turn the call over to Chairman and CEO, Bret Wise. Bret?
Bret W. Wise
Thank you, Derek and good morning everyone. Thank you for joining us on our call this morning. This morning we are very pleased to announce record sales for our third quarter of 2011. As noted in the release and as Derek mentioned, our results in this period of course are heavily influenced by the Astra Tech acquisition, including a number of non-recurring items and also the impact of the product outage in our orthodontics business. Accordingly throughout the call, we’ll provide you with insights into what our results would have been without the guidance.
We’ll also update you on how we see the global dental market developing at this point then provide with some updates on both the Astra Tech integration and a status of our orthodontics recovery plans.
First, from a revenue perspective, we recorded revenue, which was a record revenue for our third quarter of $619.8 million as reported in $563.8 million ex-precious metals. Total sales growth [XPM] increased 14% has the strongest growth rate that we’ve seen since second quarter of 2008. Our constant currency growth was a positive 9.6% in the quarter including a negative internal growth of 1.1%. However, as you know, that’s heavily influenced by the product supply outage in our orthodontics business. And our acquisition growth in the period was 10.7% reflecting the Astra Tech acquisition for one month as well as five other smaller transactions that we completed in the last year. (Inaudible) growth rate of course are inclusive of our Japanese and our orthodontics business, both of which are heavily impacted by the natural disaster that occurred in Japan at March. If you look at the internal growth excluding the sales in the Japanese market and orthodontics the internal growth rate was positive 3.6% for the quarter and constant currency growth was over 15% for the quarter.
Our internal growth benefitted from mid single digit growth in both the tier side consumable category and also our specialty products and of course that exclude the orthodontics products and that was offset by a slight negative internal growth number from the prosthetics group.
Our currency translation was also positive in the quarter; it added 4.4% of sales. Total growth through nine months is 9.5% including constant currency growth of 5.0%. Internal growth through nine months is a positive 0.9% and a plus 0.39% excluding orthodontics and our sales industry in Japan.
For geographic internal growth, I want to give it you both as reported for the quarter and then also separately without orthodontics and the effects from the market in Japan. So as reported, internal growth was a negative 2.3% for the US, negative 3.8% for Europe, and a positive 5.3% for the rest of the world. Again, that’s heavily impacted by the supply outage in orthodontics. So excluding orthodontics and our sales in Japan, internal growth for the quarter was a positive 3.2% in the US, a positive 0.3% in Europe, and a positive 10.8% for rest of the world. And in Derek’s opening remarks he commented that there is some supplemental information available at our website, which includes the internal growth both with and without the orthodontics and Japanese effect.
Looking at these results again, ex-ortho and Japan there are couple of I think, obvious implications. First, the US market has clearly improved at least from our perspective it has. We saw a good growth year-over-year in consumables and specialty again, excluding orthodontics of course, and lab was also positive.