DENTSPLY SIRONA Inc. (“Dentsply Sirona”) (NASDAQ:XRAY), The Dental
Solutions Company™, today announced its financial results for the
three months ended June 30, 2017.
Second Quarter 2017 Financial Results
Reported net sales for the three month period
ended June 30, 2017 were $992.7 million, a decline of 2.9% compared
to $1,022.0 million in the second quarter of 2016. For the
three month period ended June 30, 2017, net sales, excluding
precious metals, declined 1.0% on a constant currency basis and
internal growth1 was negative 3.6% as compared to the second
quarter of 2016, which based on the Company’s estimate was
unfavorably impacted by approximately $19 million2 ($14 million in
the United States, $2 million in Europe and $3 million in Rest of
World), or 190 basis points, as a result of quarter-over-quarter
changes in net equipment inventory levels at certain distributors
in North America and Europe that the Company believes is related to
the transition in distribution strategy in North America3.
Another major driver of the decline in sales during the
second quarter of 2017 were lower equipment sales to end-users,
primarily in the United States, which in the company’s assessment
was mainly a result of transition challenges at our exclusive
distributor. These sales decreases were partially offset by an
increase in sales of Dental and Healthcare Consumable products
which grew low single digits.
1Non-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.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.2Based on the Company’s estimate, inventory held
at these distributors decreased by approximately $17 million during
the current three month period compared to an increase of
approximately $2 million in the same three month period in 2016.3On
May 9, 2017, the Company announced that effective September 1, 2017
it would be moving from exclusive distribution of its equipment
business in North America to an expanded distribution model.
On a geographic basis, reported net sales in the
United States were $331.6 million in the second quarter of 2017, a
9.7% decrease compared to $367.2 million in the second quarter of
2016. During the second quarter of 2017, reported net sales in the
United States, excluding precious metals, were $330.1 million, a
9.8% decrease compared to $365.9 in the second quarter of
2016. As compared to the second quarter of 2016, sales during
the second quarter of 2017 in the United States declined 9.6% on a
constant currency basis with internal growth1 down 11.1% which
based on the Company’s estimate was unfavorably impacted by
approximately $14 million, or 380 basis points, as a result of
changes in net equipment inventory levels at two distributors in
the United States that the Company believes is related to the
transition in distribution strategy. Additionally, net sales during
the second quarter of 2017, excluding precious metals, were
negatively impacted by lower equipment sales to end-users, in the
Company’s assessment, as a result of transition challenges at the
Company’s exclusive distributor.
Reported net sales in Europe during the second
quarter of 2017 increased 2.5% to $402.2 million compared to $392.4
million in the second quarter of 2016. Reported net sales in
Europe, excluding precious metals, increased 3.3% during the second
quarter of 2017 to $395.0 million as compared to $382.2 million in
the second quarter of 2016. During the second quarter of
2017, sales in Europe grew 5.7% on a constant currency basis with
internal growth1 of 2.3% as compared to the second quarter of
2016.
Reported net sales in Rest of World decreased
1.3% during the second quarter of 2017 to $258.9 million as
compared to $262.4 million in the second quarter of 2016.
Reported net sales in Rest of World, excluding precious metals,
increased 0.5% during the second quarter of 2017 to $257.9 million
as compared to $256.6 million in the second quarter of 2016.
During the second quarter of 2017, Rest of World sales increased
1.3% on a constant currency basis with internal growth1 down 1.8%
as compared to the second quarter of 2016.
Reported net sales for Dental and Healthcare
Consumables, increased by 1.9% to $554.1 million in the second
quarter of 2017 as compared to the same period in 2016.
Reported net sales for Dental and Healthcare Consumables, excluding
precious metals, increased by 3.4% to $544.4 million in the second
quarter of 2017 as compared to the same period in 2016.
During the second quarter of 2017, sales for Dental and Healthcare
Consumables grew 3.0% on a constant currency basis with internal
growth1 of 2.0% as compared to the second quarter of 2016.
Reported net sales for Technologies declined by
8.3% to $438.6 million during the second quarter of 2017 as
compared to the same period in 2016. Reported net sales for
Technologies, excluding precious metals, declined by 8.2% during
the second quarter of 2017 to $438.6 million as compared to the
second quarter of 2016. For the three month period ended June 30,
2017 as compared to the three month period ended June 30, 2017,
sales of Technologies declined 5.6% on a constant currency basis
and declined 10.0% on an internal growth basis1, which based on the
Company’s estimate was unfavorably impacted by approximately $19
million, or 400 basis points, as a result of quarter-over-quarter
changes in net equipment inventory levels at certain distributors
in North America and Europe, that the Company believes is
related to the transition in distribution strategy in North
America. Additionally, during the second quarter of 2017 net
sales, excluding precious metals, were negatively impacted by lower
equipment sales to end-users, primarily in the U.S., which in the
company’s assessment was mainly a result of transition challenges
at our exclusive distributor.
Net loss attributable to Dentsply Sirona for the
second quarter of 2017 was $1,050.0 million, or a loss of $4.58 per
share, compared to income of $105.4 million, or $0.44 per diluted
share in the second quarter of 2016. Second quarter
results reflect the impact of a non-cash goodwill impairment charge
of $1,092.9 million and a non-cash indefinite-lived intangible
asset impairment charge of $79.8 million. The Company does
not expect the impairment charge to have any impact on its future
business operations, nor any effects on its liquidity, cash flows
from operating activities, or compliance with the financial
covenants set forth in its debt instruments.
On an adjusted basis, excluding certain items,
net earnings per diluted share in the second quarter of 2017 were
$0.65 compared to $0.76 in the second 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.
Jeffrey T. Slovin, Dentsply Sirona’s Chief
Executive Officer commented: “Our results were impacted by a number
of factors, the largest of which are headwinds associated with
Patterson reducing its inventory in North America and the
transition of North American distribution. Year to date,
operational execution has not met our expectations. Our lower
outlook reflects the underperformance in the first half of the year
and some of those challenges persisting in the back half of the
year.”
Mr. Slovin continued: “In September, we should
begin to benefit from the expanded distribution of our equipment in
North America which should drive growth in the back half of this
year and beyond. As we work through the distribution
transition and integration initiatives, we are strengthening our
foundation for the future. We believe that this should
translate into more consistent growth and strong double digit
earnings growth in the back half of the year creating momentum
exiting the year going into 2018.”
Guidance for 2017^
Management is updating its adjusted EPS guidance for 2017 to the
range of $2.65 to $2.75 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 877-780-3381
for domestic calls, or +719-325-2464 for international calls.
The Conference ID # is 7611682. 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 # 7611682.
^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.
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 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 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.
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In millions, except per share amounts and
percentages) |
(unaudited) |
|
|
|
Three Months Ended June 30, |
|
2017 |
|
2016 |
Net sales |
$ |
992.7 |
|
|
$ |
1,022.0 |
|
Net sales, excluding
precious metal content |
983.0 |
|
|
1,004.7 |
|
|
|
|
|
Cost of products
sold |
448.5 |
|
|
495.1 |
|
|
|
|
|
Gross profit |
544.2 |
|
|
526.9 |
|
% of Net
sales |
54.8 |
% |
|
51.6 |
% |
% of Net
sales, excluding precious metal content |
55.4 |
% |
|
52.4 |
% |
|
|
|
|
Selling, general and
administrative expenses |
417.6 |
|
|
402.1 |
|
|
|
|
|
Goodwill
impairment |
1,092.9 |
|
|
— |
|
|
|
|
|
Restructuring and other
costs |
81.7 |
|
|
3.6 |
|
|
|
|
|
Operating (loss)
income |
(1,048.0 |
) |
|
121.2 |
|
% of Net
sales |
(105.6 |
)% |
|
11.9 |
% |
% of Net
sales, excluding precious metal content |
(106.6 |
)% |
|
12.1 |
% |
|
|
|
|
Net interest and other
expense |
16.8 |
|
|
(2.6 |
) |
|
|
|
|
(Loss) income before
income taxes |
(1,064.8 |
) |
|
123.8 |
|
|
|
|
|
(Benefit) provision for
income taxes |
(14.5 |
) |
|
17.9 |
|
|
|
|
|
Net (loss) income |
(1,050.3 |
) |
|
105.9 |
|
% of Net
sales |
(105.8 |
)% |
|
10.4 |
% |
% of Net
sales, excluding precious metal content |
(106.8 |
)% |
|
10.5 |
% |
|
|
|
|
Less: Net (loss) income
attributable to noncontrolling interests |
(0.3 |
) |
|
0.5 |
|
|
|
|
|
Net (loss) income
attributable to Dentsply Sirona |
$ |
(1,050.0 |
) |
|
$ |
105.4 |
|
|
|
|
|
% of Net
sales |
(105.8 |
)% |
|
10.3 |
% |
% of Net
sales, excluding precious metal content |
(106.8 |
)% |
|
10.5 |
% |
|
|
|
|
Net (loss) income per
common share attributable to Dentsply Sirona: |
|
|
|
Basic |
$ |
(4.58 |
) |
|
$ |
0.45 |
|
Diluted |
$ |
(4.58 |
) |
|
$ |
0.44 |
|
|
|
|
|
Dividends declared per
common share |
$ |
0.0875 |
|
|
$ |
0.0775 |
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
Basic |
229.4 |
|
|
233.7 |
|
Diluted |
229.4 |
|
|
237.4 |
|
|
|
|
|
|
|
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In millions) |
(unaudited) |
|
|
|
June 30, 2017 |
|
December 31, 2016 |
Assets |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
268.4 |
|
|
$ |
383.9 |
|
Accounts
and notes receivable-trade, net |
664.2 |
|
|
636.0 |
|
Inventories, net |
596.8 |
|
|
517.1 |
|
Prepaid
expenses and other current assets, net |
236.3 |
|
|
206.5 |
|
Total
Current Assets |
1,765.7 |
|
|
1,743.5 |
|
|
|
|
|
Property, plant and
equipment, net |
841.0 |
|
|
799.8 |
|
Identifiable intangible
assets, net |
3,059.4 |
|
|
2,957.6 |
|
Goodwill, net |
5,023.6 |
|
|
5,952.0 |
|
Other noncurrent
assets, net |
160.3 |
|
|
102.9 |
|
|
|
|
|
Total
Assets |
$ |
10,850.0 |
|
|
$ |
11,555.8 |
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
|
|
|
Current
liabilities |
$ |
753.7 |
|
|
$ |
767.6 |
|
Long-term debt |
1,587.3 |
|
|
1,511.1 |
|
Deferred income
taxes |
802.4 |
|
|
751.7 |
|
Other noncurrent
liabilities |
432.4 |
|
|
399.5 |
|
Total
Liabilities |
3,575.8 |
|
|
3,429.9 |
|
|
|
|
|
Total Dentsply Sirona
Equity |
7,262.5 |
|
|
8,114.3 |
|
Noncontrolling
interests |
11.7 |
|
|
11.6 |
|
Total
Equity |
7,274.2 |
|
|
8,125.9 |
|
|
|
|
|
Total
Liabilities and Equity |
$ |
10,850.0 |
|
|
$ |
11,555.8 |
|
|
|
|
|
DENTSPLY SIRONA INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In millions) |
(unaudited) |
|
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net (loss) income |
$ |
(990.6 |
) |
|
$ |
231.2 |
|
|
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation |
62.1 |
|
|
55.1 |
|
Amortization |
91.8 |
|
|
65.6 |
|
Amortization of deferred financing costs |
1.3 |
|
|
2.1 |
|
Goodwill
impairment |
1,092.9 |
|
|
— |
|
Indefinite lived intangible asset impairment |
79.8 |
|
|
— |
|
Deferred
income taxes |
(34.2 |
) |
|
(70.5 |
) |
Stock
based compensation expense |
21.9 |
|
|
17.4 |
|
Restructuring and other costs - non-cash |
1.0 |
|
|
3.3 |
|
Excess
tax benefits from stock based compensation |
— |
|
|
(8.8 |
) |
Other
non-cash income |
5.5 |
|
|
(31.5 |
) |
Loss on
disposal of property, plant and equipment |
0.4 |
|
|
0.5 |
|
Changes
in operating assets and liabilities, net of acquisitions: |
|
|
|
Accounts
and notes receivable-trade, net |
1.9 |
|
|
(82.8 |
) |
Inventories, net |
(49.6 |
) |
|
44.7 |
|
Prepaid
expenses and other current assets, net |
(59.3 |
) |
|
(8.5 |
) |
Other
noncurrent assets, net |
1.2 |
|
|
1.6 |
|
Accounts
payable |
9.5 |
|
|
13.9 |
|
Accrued
liabilities |
(19.2 |
) |
|
(11.1 |
) |
Income
taxes |
(15.4 |
) |
|
(41.5 |
) |
Other
noncurrent liabilities |
7.7 |
|
|
7.4 |
|
|
|
|
|
Net cash
provided by operating activities |
208.7 |
|
|
188.1 |
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Capital
expenditures |
(64.8 |
) |
|
(47.8 |
) |
Cash assumed in Sirona
merger |
— |
|
|
522.3 |
|
Cash and deposits paid
for acquisitions of businesses and equity investments, net of cash
acquired |
(125.2 |
) |
|
(0.4 |
) |
Cash received from sale
of business or product line |
— |
|
|
2.4 |
|
Cash received on
derivatives contracts |
5.3 |
|
|
10.7 |
|
Cash paid on
derivatives contracts |
— |
|
|
(3.6 |
) |
Expenditures for
identifiable intangible assets |
(5.9 |
) |
|
— |
|
Purchase of short-term
investments |
(2.3 |
) |
|
— |
|
Purchase of
Company-owned life insurance policies |
(0.9 |
) |
|
(1.7 |
) |
Proceeds from sale of
property, plant and equipment, net |
1.9 |
|
|
4.4 |
|
|
|
|
|
Net cash (used
in) provided by investing activities |
(191.9 |
) |
|
486.3 |
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Increase (decrease) in
short-term borrowings |
1.4 |
|
|
(3.6 |
) |
Cash paid for treasury
stock |
(151.5 |
) |
|
(600.0 |
) |
Cash dividends
paid |
(38.1 |
) |
|
(28.6 |
) |
Proceeds from long-term
borrowings |
2.9 |
|
|
79.9 |
|
Repayments on long-term
borrowings |
(6.6 |
) |
|
(127.5 |
) |
Proceeds from exercised
stock options |
45.4 |
|
|
20.4 |
|
Excess tax benefits
from stock based compensation |
— |
|
|
8.8 |
|
|
|
|
|
Net cash used
in financing activities |
(146.5 |
) |
|
(650.6 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
14.2 |
|
|
3.2 |
|
|
|
|
|
Net (decrease) increase
in cash and cash equivalents |
(115.5 |
) |
|
27.0 |
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
383.9 |
|
|
284.6 |
|
|
|
|
|
Cash and cash
equivalents at end of period |
$ |
268.4 |
|
|
$ |
311.6 |
|
|
|
|
|
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 June 30, |
|
2017 |
|
2016 |
|
|
|
|
Dental and Healthcare
Consumables |
$ |
162.2 |
|
|
$ |
151.7 |
|
Technologies |
65.0 |
|
|
112.1 |
|
Segment Adjusted Operating
Income Before Income Taxes and
Interest |
227.2 |
|
|
263.8 |
|
|
|
|
|
Reconciling items
(income) expense: |
|
|
|
All Other (a) |
52.7 |
|
|
93.8 |
|
Goodwill
impairment |
1,092.9 |
|
|
— |
|
Restructuring and other
costs |
81.7 |
|
|
3.6 |
|
Interest expense |
9.6 |
|
|
9.3 |
|
Interest income |
(0.6 |
) |
|
(0.4 |
) |
Other expense (income),
net |
7.8 |
|
|
(11.5 |
) |
Amortization of
intangible assets |
46.6 |
|
|
43.8 |
|
Depreciation resulting
from the fair value step-up of property, plant and equipment from
business combinations |
1.3 |
|
|
1.4 |
|
(Loss) Income Before Income Taxes |
$ |
(1,064.8 |
) |
|
$ |
123.8 |
|
|
|
|
|
|
|
|
|
(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 (loss) income in total and on a percentage of net sales,
excluding precious metal content, to the non-US GAAP financial
measures. |
|
Three Months Ended June 30, 2017 |
|
Operating(Loss) Income |
|
|
Operating Loss |
$ |
(1,048.0 |
) |
Percentage of Net
Sales, Excluding Precious Metal Content |
|
(106.6 |
%) |
Restructuring Program Related Costs and Other Costs |
1,176.7 |
|
Amortization of Purchased Intangible Assets |
46.5 |
|
Business
Combination Related Costs and Fair Value Adjustments |
19.1 |
|
Credit
Risk and Fair Value Adjustments |
0.8 |
|
Adjusted Non-US
GAAP Operating Income |
$ |
195.1 |
|
Percentage of
Net Sales, Excluding Precious Metal Content |
|
19.8 |
% |
|
|
|
|
|
|
Three Months Ended June 30, 2016 |
|
OperatingIncome |
|
|
Operating Income |
$ |
121.2 |
|
Percentage of Net
Sales, Excluding Precious Metal Content |
|
12.1 |
% |
Business
Combination Related Costs and Fair Value Adjustments |
62.0 |
|
Amortization of Purchased Intangible Assets |
43.6 |
|
Restructuring Program Related Costs and Other Costs |
4.3 |
|
Credit
Risk and Fair Value Adjustments |
1.3 |
|
Adjusted Non-US
GAAP Operating Income |
$ |
232.4 |
|
Percentage of
Net Sales, Excluding Precious Metal Content |
|
23.1 |
% |
|
|
|
|
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
(loss) income attributable to Dentsply Sirona and on a per diluted
common share basis to the non-US GAAP financial measures. |
|
|
|
|
Three Months
Ended June 30, 2017 |
|
|
|
|
Net (Loss) |
|
Per Diluted |
|
Income |
|
Common Share |
|
|
|
|
Net Loss Attributable
to Dentsply Sirona |
$ |
(1,050.0 |
) |
|
$ |
(4.58 |
) |
Pre-tax
Non-US GAAP Adjustments: |
|
|
|
Restructuring Program Related Costs and Other Costs |
1,177.6 |
|
|
|
Amortization of Purchased Intangible Assets |
46.5 |
|
|
|
Business
Combination Related Costs and Fair Value Adjustments |
19.3 |
|
|
|
Credit
Risk and Fair Value Adjustments |
0.8 |
|
|
|
Tax
Impact of the Pre-tax Non-US GAAP Adjustments (a) |
(44.4 |
) |
|
|
Subtotal
Non-US GAAP Adjustments |
1,199.8 |
|
|
5.14 |
|
Adjustment for calculating non-US GAAP net income per diluted
common share (b) |
|
|
0.08 |
|
Income
Tax Related Adjustments |
0.9 |
|
|
0.01 |
|
Adjusted Non-US
GAAP Net Income Attributable to Dentsply Sirona |
$ |
150.7 |
|
|
$ |
0.65 |
|
|
|
|
|
(a) The tax
amount was calculated using the applicable statutory tax rate in
the tax jurisdiction where the non-US GAAP adjustments were
generated. |
(b) The
Company had a net loss for the three months ended June 30, 2017,
but had net income on a non-US GAAP basis. The shares used in
calculating diluted non-US GAAP net income per share includes the
dilutive effect of common stock. |
Shares used in
calculating diluted GAAP net loss per share |
|
|
229.4 |
|
Shares used in
calculating diluted non-US GAAP net income per share |
|
|
233.3 |
|
|
|
|
|
|
|
|
|
Three Months
Ended June 30, 2016 |
|
|
|
|
Net |
|
Per Diluted |
|
Income |
|
Common Share |
|
|
|
|
Net Income Attributable
to Dentsply Sirona |
$ |
105.4 |
|
|
$ |
0.44 |
|
Pre-tax
Non-US GAAP Adjustments: |
|
|
|
Business
Combination Related Costs and Fair Value Adjustments |
62.0 |
|
|
|
Amortization of Purchased Intangible Assets |
43.6 |
|
|
|
Restructuring program related costs and other costs |
4.3 |
|
|
|
Credit
Risk and Fair Value Adjustments |
2.0 |
|
|
|
Tax
Impact of the Pre-tax Non-US GAAP Adjustments (a) |
(30.2 |
) |
|
|
Subtotal
Non-US GAAP Adjustments |
81.7 |
|
|
0.35 |
|
Income
Tax Related Adjustments |
(6.2 |
) |
|
(0.03 |
) |
Adjusted Non-US
GAAP Net Income Attributable to Dentsply Sirona |
$ |
180.9 |
|
|
$ |
0.76 |
|
|
|
|
|
(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 (loss) income before income
taxes to the non-US GAAP financial measure. |
|
|
|
|
|
|
Three Months
Ended June 30, 2017 |
|
|
|
|
|
|
Pre-tax (Loss)Income |
|
Income TaxBenefit(Expense) |
|
Percentage ofPre-TaxIncome |
|
|
|
|
|
|
As Reported - US GAAP
Operating Results |
$ |
(1,064.8 |
) |
|
$ |
14.5 |
|
|
1.4 |
% |
Restructuring Program Related Costs and Other Costs |
1,177.6 |
|
|
(24.6 |
) |
|
|
Amortization of Purchased Intangible Assets |
46.5 |
|
|
(13.5 |
) |
|
|
Business
Combination Related Costs and Fair Value Adjustments |
19.3 |
|
|
(6.0 |
) |
|
|
Credit
Risk and Fair Value Adjustments |
0.8 |
|
|
(0.3 |
) |
|
|
Income
Tax Related Adjustments |
— |
|
|
0.9 |
|
|
|
As Adjusted -
Non-US GAAP Operating Results |
$ |
179.4 |
|
|
$ |
(29.0 |
) |
|
16.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended June 30, 2016 |
|
|
|
|
|
|
Pre-taxIncome |
|
Income TaxBenefit(Expense) |
|
Percentage ofPre-TaxIncome |
|
|
|
|
|
|
As Reported - US GAAP
Operating Results |
$ |
123.8 |
|
|
$ |
(17.9 |
) |
|
14.5 |
% |
Business
Combination Related Costs and Fair Value Adjustments |
62.0 |
|
|
(15.6 |
) |
|
|
Amortization of Purchased Intangible Assets |
43.6 |
|
|
(12.6 |
) |
|
|
Credit
Risk and Fair Value Adjustments |
2.0 |
|
|
(0.7 |
) |
|
|
Restructuring Program Related Costs and Other Costs |
4.3 |
|
|
(1.3 |
) |
|
|
Income
Tax Related Adjustments |
— |
|
|
(6.2 |
) |
|
|
As Adjusted -
Non-US GAAP Operating Results |
$ |
235.7 |
|
|
$ |
(54.3 |
) |
|
23.0 |
% |
DENTSPLY SIRONA INC. AND
SUBSIDIARIES(In millions, except
percentages)(unaudited)
For the three months ended June 30, 2017,
net sales, excluding precious metal content, declined 1.0% on a
constant currency basis. This includes a benefit of 2.6% from
acquisitions, which results in negative internal sales growth of
3.6%. Net sales, excluding precious metal content, were
negatively impacted by approximately 1.2% due to the strengthening
of the U.S. dollar over the prior year period. Based on the
Company’s assessment, the negative internal sales growth was
primarily a result of the current quarter over prior year quarter
net changes in equipment inventory levels as well as the
impact of lower equipment sales to end-users, partially offset by
increased sales in Dental and Healthcare Consumables. A
reconciliation of reported net sales to net sales, excluding
precious metal content, is as follows:
|
|
Three Months Ended June 30, |
|
|
(in
millions, except percentages) |
|
2017 |
|
2016 |
|
Variance % |
|
|
|
|
|
|
|
Net
sales |
|
$ |
992.7 |
|
|
$ |
1,022.0 |
|
|
(2.9 |
%) |
Less: precious metal
content of sales |
|
9.7 |
|
|
17.3 |
|
|
(43.9 |
%) |
Net sales, excluding
precious metal content |
|
983.0 |
|
|
1,004.7 |
|
|
(2.2 |
%) |
Merger
related adjustments (a) |
|
1.5 |
|
|
1.6 |
|
|
(6.3 |
%) |
Non-US GAAP Combined
Business, net sales, excluding precious metal content |
|
$ |
984.5 |
|
|
$ |
1,006.3 |
|
|
(2.2 |
%) |
Foreign Exchange
Impact |
|
|
|
|
|
(1.2 |
%) |
Constant Currency
Growth |
|
|
|
|
|
(1.0 |
%) |
Acquisitions |
|
|
|
|
|
2.6 |
% |
Internal Sales
Growth |
|
|
|
|
|
(3.6 |
%) |
|
(a)
Represents an adjustment to reflect deferred subscription and
warranty revenue that was eliminated under business combination
accounting standards. |
In the United States, for the three month period
ended June 30, 2017, sales declined 9.6% on a constant
currency basis. This includes a benefit of 1.5% from
acquisitions, which results in a negative internal sales growth
rate of 11.1%. The negative internal sales growth was
unfavorably impacted, based on the Company’s estimate, by
approximately $14 million as a result of net changes in
equipment inventory levels in the current quarter as compared to
the prior year quarter at two distributors in the United States
related to the transition in distribution strategy.
Additionally, based on the Company's assessment, net sales,
excluding precious metal content, were negatively impacted by lower
equipment sales to end-users as a result of transition challenges
at the Company’s exclusive distributor.
In Europe, for the three month period ended
June 30, 2017, sales increased 5.7% on a constant currency
basis. This includes a benefit of 3.4% from acquisitions,
which results in internal growth of 2.3%. Net sales,
excluding precious metal content, were negatively impacted by
approximately 2.4% due to the strengthening of the U.S. dollar over
the prior year period. Growth was driven by the
Technologies segment. The increase in internal sales growth
was unfavorably impacted, based on the Company’s estimate, by
approximately $2 million as a result of net changes in
equipment inventory levels in the current quarter as compared to
the prior year quarter at a certain distributor in Europe that the
Company believes is related to the transition in distribution
strategy.
In Rest of World, for the three month period
ended June 30, 2017, sales increased 1.3% on a constant
currency basis. This includes a benefit of 3.1% from
acquisitions, which results in a negative internal sales growth
rate of 1.8%. Net sales, excluding precious metal content,
were negatively impacted by approximately 80 basis points due to
the strengthening of the U.S. dollar over the prior year
period. The negative internal growth rate was driven by sales
declines in the Technologies segment and was unfavorably impacted,
based on the Company’s estimate, by approximately $3 million as a
result of net changes in equipment inventory levels in the
current quarter as compared to the prior year quarter at a certain
distributor in Canada that the Company believes is related to the
transition in distribution strategy.
|
|
Three Months Ended June 30, 2017 |
|
Q2 2017 Growth |
(in millions, except
percentages) |
|
US |
Europe |
ROW |
Total |
|
US |
Europe |
ROW |
Total |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
331.6 |
|
$ |
402.2 |
|
$ |
258.9 |
|
$ |
992.7 |
|
|
(9.7 |
%) |
2.5 |
% |
(1.3 |
%) |
(2.9 |
%) |
Less: precious metal
content of sales |
|
1.5 |
|
7.2 |
|
1.0 |
|
9.7 |
|
|
|
|
|
|
Net sales, excluding
precious metal content |
|
330.1 |
|
395.0 |
|
257.9 |
|
983.0 |
|
|
(9.8 |
%) |
3.3 |
% |
0.5 |
% |
(2.2 |
%) |
Merger
related adjustments (a) |
|
1.5 |
|
— |
|
— |
|
1.5 |
|
|
|
|
|
|
Non-US GAAP Combined
Business, net sales, excluding precious metal content |
|
$ |
331.6 |
|
$ |
395.0 |
|
$ |
257.9 |
|
$ |
984.5 |
|
|
(9.6 |
%) |
3.3 |
% |
0.5 |
% |
(2.2 |
%) |
Foreign
Exchange Impact |
|
|
|
|
|
|
— |
% |
(2.4 |
%) |
(0.8 |
%) |
(1.2 |
%) |
Constant Currency
Growth |
|
|
|
|
|
|
(9.6 |
%) |
5.7 |
% |
1.3 |
% |
(1.0 |
%) |
Acquisitions |
|
|
|
|
|
|
1.5 |
% |
3.4 |
% |
3.1 |
% |
2.6 |
% |
Internal Sales
Growth |
|
|
|
|
|
|
(11.1 |
%) |
2.3 |
% |
(1.8 |
%) |
(3.6 |
%) |
|
(a)
Represents an adjustment to reflect deferred subscription and
warranty revenue that was eliminated under business combination
accounting standards. |
For Dental and Healthcare Consumables, for the
three month period ended June 30, 2017, sales grew
approximately 3.0% on a constant currency basis. This
includes a benefit of approximately 1.0% from acquisitions, which
results in internal growth of approximately 2.0%. Net sales,
excluding precious metal content, were negatively impacted by
approximately 1.0% due to the strengthening of the U.S. dollar over
the prior year period. The increase in net sales, excluding
precious metal content, was driven by increased sales in all
regions led by Rest of World.
For Technologies, for the three month period
ended June 30, 2017, sales declined 5.6% on a constant
currency basis. This includes a benefit of approximately 4.4%
from acquisitions, which results in a negative internal sales
growth rate of approximately 10.0%. 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. The negative internal sales growth was
unfavorably impacted, based on the Company’s estimate, by
approximately $19 million as a result of net changes in
equipment inventory levels in the current quarter as compared to
the prior year quarter at certain distributors in North America and
Europe, that the Company believes is related to the transition in
distribution strategy. Additionally, in the Company’s
assessment, net sales, excluding precious metal content, were
negatively impacted by lower equipment sales to end-users,
primarily in the United States, as a result of transition
challenges at our exclusive distributor.
|
|
Three Months Ended June 30, 2017 |
|
Q2 2017 Growth |
(in millions, except
percentages) |
|
Consumables |
Technologies |
Total |
|
Consumables |
Technologies |
Total |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
554.1 |
|
$ |
438.6 |
|
$ |
992.7 |
|
|
1.9 |
% |
(8.3 |
%) |
(2.9 |
%) |
Less: precious metal
content of sales |
|
9.7 |
|
— |
|
9.7 |
|
|
|
|
|
Net sales, excluding
precious metal content |
|
544.4 |
|
438.6 |
|
983.0 |
|
|
3.4 |
% |
(8.2 |
%) |
(2.2 |
%) |
Merger
related adjustments (a) |
|
— |
|
1.5 |
|
1.5 |
|
|
|
|
|
Non-US GAAP Combined
Business, net sales, excluding precious metal content |
|
$ |
544.4 |
|
$ |
440.1 |
|
$ |
984.5 |
|
|
2.0 |
% |
(6.9 |
%) |
(2.2 |
%) |
Foreign
Exchange Impact |
|
|
|
|
|
(1.0 |
%) |
(1.3 |
%) |
(1.2 |
%) |
Constant Currency
Growth |
|
|
|
|
|
3.0 |
% |
(5.6 |
%) |
(1.0 |
%) |
Acquisitions |
|
|
|
|
|
1.0 |
% |
4.4 |
% |
2.6 |
% |
Internal Sales
Growth |
|
|
|
|
|
2.0 |
% |
(10.0 |
%) |
(3.6 |
%) |
|
(a)
Represents an adjustment to reflect deferred subscription and
warranty revenue that was eliminated under business combination
accounting standards. |
Contact Information:
Joshua Zable, IRC
VP, Corporate Communications and Investor Relations
+1-718-482-2184
joshua.zable@dentsplysirona.com
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