Dentsply Sirona Provides Business Update
Company Provides Select Preliminary Second Quarter 2022 Results
Company Provides Update on Previously Announced Investigation
Company Provides Nasdaq Compliance Update
As previously disclosed, the Audit and Finance Committee of the Company’s Board of Directors (the “Audit Committee”) is conducting an internal investigation regarding certain financial reporting matters. The investigation is ongoing and therefore the Company expects that it will not be in a position to file its Quarterly Report on Form 10-Q for the period ended
Select Preliminary Second Quarter 2022 Results
The Company’s operational performance improved sequentially in the quarter with net sales and adjusted EPS expected to be above preliminary first quarter 2022 results. While net sales declined year-over-year due to the unfavorable impact of foreign exchange, the business delivered organic sales growth driven by solid European regional performance and demand in strategic areas of the business, most notably, CAD/CAM, Equipment & Instruments, and Restorative and Preventive Consumables.
As anticipated, in the second quarter, the Company saw normalizing dealer inventory levels in the
As a result,
The second quarter gross margin and adjusted EPS were favorably impacted by the timing of certain expenses which will be reflected in the third and fourth quarters.
For the full year 2022 outlook, the Company’s assumptions outlined on
Consistent with the Company’s commitment to return cash to shareholders,
The Audit Committee continues to work diligently with independent counsel and advisors to complete its previously announced investigation as soon as possible. However, the Company cannot predict the duration or outcome of the investigation. Due to the pendency of the investigation, the Company has not yet filed its First Quarter 10-Q and does not believe it will file its Second Quarter 10-Q on a timely basis. In the course of the investigation, the Company has also evaluated certain other accounting practices. As a result of this review, the Company anticipates certain adjustments will be made to the previously announced preliminary first quarter financial results, and the Company is currently evaluating whether fiscal year 2021 reported financial results also require adjustments.
The Company will work to finalize its financial statements and review of internal controls and procedures, including the evaluation of any deficiencies in internal controls over financial reporting, as soon as practicable.
As previously disclosed, the Company has voluntarily contacted the
Nasdaq Compliance Update
Notice Regarding Preliminary Results
The Select Preliminary Second Quarter 2022 Results included above in this press release are based upon preliminary financial results. These preliminary financial results are based upon information available to management as of the date of this press release. The Company’s actual results may differ from these results due to final adjustments and developments that may arise or information that may become available between now and the time the Company’s financial results for the three months period ended June 30, 2022, are finalized, and included in the Company’s Second Quarter 10-
About Dentsply Sirona
All statements in this press release that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” These statements represent current expectations and beliefs, including statements regarding the Audit Committee’s ongoing internal investigation and the preliminary financial information for the second quarter ending
Non-GAAP Financial Measures
The Company has provided certain measures in this press release that are not calculated in accordance with US GAAP and therefore represent Non-GAAP measures. These Non-GAAP measures may differ from those used by 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. These Non-GAAP measures are used by the Company to measure its performance and may differ from those used by other companies.
Management believes that these Non-GAAP measures are helpful as they provide another measure of the results of operations, and are frequently used by investors and analysts to evaluate the Company’s performance exclusive of certain items that impact the comparability of results from period to period, and which may not be indicative of past or future performance of the Company.
The Company defines "organic sales" as the reported net sales adjusted for: (1) net sales from acquired businesses recorded prior to the first anniversary of the acquisition, (2) net sales attributable to disposed businesses or discontinued product lines in both the current and prior year periods, and (3) the impact of foreign currency changes, which is calculated by translating current period net sales using the comparable prior period's currency exchange rates.
Adjusted Operating Income (Loss) and Margin
Adjusted operating income (loss) is computed by excluding the following items from operating income:
(1) Business combination related costs and fair value adjustments. These adjustments include costs related to consummating and integrating acquired businesses, as well as net gains and losses related to the disposed businesses. In addition, this category includes the post-acquisition roll-off of fair value adjustments recorded related to business combinations, except for amortization expense of purchased intangible assets noted below. Although the Company is regularly engaged in activities to find and act on opportunities for strategic growth and enhancement of product offerings, the costs associated with these activities may vary significantly between periods based on the timing, size and complexity of acquisitions and as such may not be indicative of past and future performance of the Company.
(2) Restructuring program related costs and other costs. These adjustments include costs related to the implementation of restructuring initiatives, including but not limited to, severance costs, facility closure costs, lease and contract termination costs, and related professional service costs associated with specific restructuring initiatives. Other costs include legal settlements, asset impairments, executive separation costs, and changes in accounting principle recorded within the period. The Company is continually seeking to take actions that could enhance its efficiency, consequently restructuring charges may recur but are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets, and as such may not be indicative of past and future performance of the Company.
(3) Amortization of purchased intangible assets. This adjustment excludes the periodic amortization expense related to purchased intangible assets, which are recorded at fair value in purchase accounting. Although these costs contribute to revenue generation and will recur in future periods, their amounts are significantly impacted by the timing and size of acquisitions, and as such may not be indicative of the future performance of the Company.
(4) Fair value and credit risk adjustments. These adjustments include the non-cash mark-to-market changes in fair value associated with pension assets and obligations and equity-method investments. Although these adjustments are recurring in nature, they are subject to significant fluctuations from period to period due to changes in the underlying assumptions and market conditions. The non-service component of pension expense is a recurring item, however it is subject to significant fluctuations from period to period due to changes in actuarial assumptions, interest rates, plan changes, settlements, curtailments, and other changes in facts and circumstances. As such, these items may not be indicative of past and future performance of the Company.
Adjusted operating margin is calculated by dividing adjusted operating income by net sales.
Adjusted Net Income (Loss)
Adjusted net income (loss) consists of the reported net income (loss) in accordance with US GAAP, adjusted to exclude the items identified above, the related income tax impacts, and discrete income tax adjustments such as: final settlement of income tax audits, discrete tax items resulting from the implementation of restructuring initiatives and the vesting and exercise of employee share-based compensation, any difference between the interim and annual effective tax rate, and adjustments relating to prior periods.
These adjustments are irregular in timing, and the variability in amounts may not be indicative of past and future performance of the Company and therefore are excluded for comparability purposes.
Adjusted Earnings (Loss) Per Diluted Share
Adjusted earnings (loss) (EPS) per diluted share is computed by dividing adjusted net income (losses) attributable to
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A reconciliation of preliminary GAAP diluted EPS to Adjusted EPS for the three months ended
|Net income attributable to
|Amortization of purchased intangible assets
|Restructuring program related costs and other costs
|Fair value and credit risk adjustments
|Income tax related adjustments
|Adjusted net income
Source: DENTSPLY SIRONA Inc.