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» DENTSPLY International's CEO Discusses Q1 2011 Results - Earnings Call Transcript
Before we get started, it's important to note that 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. A recording of this call in its entirety will be available on our website.As you can see in the release, our results this quarter include a number of non-recurring items and other non-GAAP adjustments. In an effort to provide you clarity from the distortion of some of these items, our comments on this call will focus on results including certain adjustments which are noted on the non-GAAP reconciliation tables contained in the release. You'll note that our earnings guidance is also on an adjusted basis. With that, I'd now like to turn the call over to Chairman and CEO, Bret Wise. Bret? Bret Wise Thank you, Derek. Good morning, everyone. Thank you for joining us on our call this morning. We're very pleased to report record sales and adjusted earnings for the first quarter 2012 this morning. Overall, I think its fair to say that the global dental markets are stable and growing. Certainly, the markets are strong in U.S. benefitting from a now expanding economy, some job growth and pent-up demand for dental procedures. In Europe the markets continue about at the pace that we saw in the fourth quarter last year. Slow growth in the north and recessionary conditions in the south, but, overall, I'd say the European dental markets continue to show some modest growth. With this backdrop we're pleased to report what we view as a pretty strong results for Q1. Let me give you a few highlights to start, then Chris is going to cover the Astra Tech integration and speak to our opportunity in emerging markets. And, then, finally, Bill will provide some more details on the financial performance.
So, as noted in the release, sales as reported were $716 million, that's up 25.6% and, excluding precious metal content, sales were up 26.3%. Both were records for the first quarter driven primarily by our 2011 acquisitions, most notably Astra Tech, but reflecting continued improvement in internal growth, building off what was a strong finish we had in fourth quarter 2011.At a high level internal growth continues to be driven by a wave of new products we launched in 2011 and some additional momentum we're picking up now from 2012 launches, as well. Our growth, excluding precious metals, for the quarter breaks down as follows: Total growth, as I mentioned, was 26.3% as comprised of internal growth of 1.1%, acquisition growth of 27.2% to result in constant currency growth of 28.3% and a negative currency translation of 2.0%. Internal growth at 1.1% was, again, negatively impacted by the natural disaster last March in Japan, specifically, causing supply outage in orthodontics. Excluding Japan and orthodontics, internal growth for the quarter was 4.5%. That’s the best we’ve seen since pre-recession and its coming up against a reasonably strong 3.8% internal growth in last year’s base line. Geographic internal growth, and I’ll give you this first in total and then without orthodontics in Japan. So, first, in total, internal growth XPM, including ortho and Japan, was a positive 3.5% in the U.S., again, that despite the headwinds we faced in orthodontics. There’s a negative 1.1% in Europe and a positive 1.3% for rest of world. Now, again, those same statistics without ortho and Japan, which is probably a better measurement for us at this point, internal growth XPM was a positive 7.4% in the U.S. That’s a continuation, essentially, of what we reported in the fourth quarter last year. Internal growth in Europe, ex-ortho, was a positive 2.2% and that’s slightly below what we had in the fourth quarter, but we think still well above what the market is growing in Europe. And, rest of world, ex-ortho and Japan, was a positive 4.4%.
On geographic growth, again, this is ex-ortho and Japan, in the U.S. we saw very strong results, essentially, across all business categories. So, ex-ortho, all categories, including specialty consumables and lab, reported mid to high single-digit growth and in some categories double-digit growth.New products launched, both last year and early this year, continue to drive very high customer acceptance and are driving growth well above market. Likewise in Europe our internal growth of 2.2% is likely well above the market and, again, is driven by new innovation. While we’re very pleased with this performance relative to the market, I think it’s fair to say we remain cautious on the European economy and the European market given the uncertainty in that region. In rest of world we were up 4.4%, which is an improvement from what we had in the fourth quarter, but we see some upsides from here moving forward. As far as product categories are concerned, our internal growth, ex-ortho and Japan, was mid single digits, this is global now, and specialty and consumables in low single digits in prosthetics. The trends were generally the same we saw in the fourth quarter except for prosthetics, which is now showing positive growth even with the drag of the alloy market which is converting away from precious metals. And, as you know, we have a large market share in that market. Read the rest of this transcript for free on seekingalpha.com