FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report January 27, 2005
(Date of earliest event reported)
DENTSPLY INTERNATIONAL INC
(Exact name of Company as specified in charter)
Delaware 0-16211 39-1434669
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
221 West Philadelphia Street, York, Pennsylvania 17405
(Address of principal executive offices) (Zip Code)
(717) 845-7511
(Company's telephone number including area code)
Item 2.02. - Results of Operations and Financial Condition.
The following information is furnished pursuant to Item 2.02,
"Results of Operations and Financial Condition."
On January 27, 2005, the Company conducted a conference call to
discuss the sales and earnings release for the fourth quarter of
2004 that was issued on January 26, 2005 and to answer any
questions raised by the call's audience. The transcript of this
conference call is attached hereto as Exhibit 99.1 and is hereby
incorporated by reference.
Item 9.01. - Financial Statements and Exhibits
(a) Financial Statements - Not applicable.
(b) Exhibits:
99.1 Transcript of the Company's conference call which it
conducted on January 27, 2005 related to the fourth
quarter 2004 sales and earnings release issued January 26,
2005 as referenced in Item 2.02.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DENTSPLY INTERNATIONAL INC
(Company)
/s/William R. Jellison
William R. Jellison
Senior Vice President and
Chief Financial Officer
Date: February 1, 2005
DENTSPLY INTERNATIONAL, INCORPORATED
Moderator: Gary Kunkle
January 27, 2005
7:30 am CT
Operator: Good morning. My name is (Latoya) and I will be your
conference facilitator today. At this time I would
like to welcome everyone to Dentsply's Fourth Quarter
2004 Earnings conference call.
All lines have been placed on mute to prevent any
background noise. After the speakers remarks there
will be a question and answer period. If you would
like to ask a question during this time simply press
star then the number 1 on your telephone key pad. If
you would like to withdraw your question press the
pound key.
Thank you. At this time I would like to turn the
conference over to Gary Kunkle, Vice Chairman and
Chief Executive Officer. You may begin sir.
Gary Kunkle: Thank you (Latoya). Good morning and thank you all
for joining the Dentsply International Fourth Quarter
2004 conference call. My name is Gary Kunkle and I
am the Vice Chairman and Chief Executive Officer.
Also with me today are Tom Whiting, our President and
Chief Operating Officer; Bill Jellison, Senior Vice
President and Chief Financial Officer; and Bret Wise,
Executive Vice President, who is joining us for this
quarter as we transition the CFO responsibilities
from Bret to Bill.
I'll begin today's call with some comments regarding
our fourth quarter and the full year results. Also
some additional comments to update you on the many
activities that are taking place in our business.
And then I'll conclude with some remarks regarding
our outlook for 2005.
Bill will then go through a more detailed review of
the P&L and the balance sheet. And finally we'll all
be pleased to answer any questions that you may have.
Before we begin it's important to note that this
conference call may include forward-looking
statements involving risks and uncertainties. These
should be considered in conjunction with the risk
factors and uncertainties described in the company's
most recent annual report on Form 10-K and its
subsequent to periodic reports on Form 10-Q filed
with the Securities and Exchange Commission.
This conference, in its entirety, will be part of an
8-K filing and will be available on our website. We
released our announcement for fourth quarter results
after the market closed yesterday and I'm very
pleased to report excellent earnings for both the
quarter and the full year.
Our reported sales for the fourth quarter were $465.5
million. This represented an increase of 8.5%
compared to the fourth quarter of 2003. If you
exclude the precious metal content the increase was
9% for the quarter.
The 9% gain for the quarter broke out as follows.
Base business was 4.3% and exchange was 4.7%. There
was no impact from acquisitions.
The geographic base business -- again ex-precious
metals -- was as follows. The United States grew
5.2%, Europe 3.2%, Asia 5%, Latin America 2.4%, and
the balance of the world grew at 4.5%.
Looking at the United States, as I had mentioned
earlier, the internal growth for the United States
was 5.2%. We're very pleased to see this improvement
following a low third quarter.
The fourth quarter performance in the United States
was led by very strong double digit growth in both
orthodontics and implants. Consumables that are sold
to the dental offices were also strong with a growth
of 6%. And this was offset by a lower growth in lab
and a negative growth in anesthetics.
Moving to Europe, Europe finished the fourth quarter
with an internal growth of 3.2% which was really
higher than we anticipated. As you may recall from
the third quarter conference call each state in
Germany establishes a budget for dental reimbursement
for the year. If that budget is exhausted during the
calendar year, the reimbursement to the dentist drops
by 50% to 60% for any submission that's made during
the balance of the budgeted period. While this is
not historically been a problem, several states began
running over budget in the third quarter and thus,
began reducing dental reimbursement to dentists in
their respective states. Such a reduction obviously
encourages dentists to postpone certain procedures
until the budget is reinstated and they can receive
the full reimbursement. In this particular case that
would be 2005. While this problem wasn't prevalent
in all states it was the case in many of the major
states. And of course, with Germany representing 50%
to 55% of our European business it has a significant
influence on our overall European results.
We also announced in the third quarter call that
Germany has finalized its dental reimbursement for
2005. Effective January 1 of this year, fixed
reimbursement for prosthetic work will replace the
percentage pay formula. And in making this change a
patient will now be able to apply the reimbursement
towards any prosthetic procedure. And that includes
all ceramic bridges and implants areas that did not
receive any reimbursements under the percentage
reimbursement scheme.
Later this year, on July 1, prosthetic work will be
reimbursed under a separate insurance program. This
program will be funded by a mandatory salary
deduction of .4% of salary and will be designated for
prosthetic work only. Also, while each state will
continue to forecast their reimbursement expenditures
for planning purposes, there will be no budget that
functions as it did in 2004 and earlier. In other
words there will be no time in which the
reimbursement will drop as a result of reaching
certain spending levels. We certainly view this
change as very positive by providing reimbursement
for several of our products that were not covered
under the prior plan such as Cercon based products
and dental implants.
With that as a background the higher than anticipated
growth during the fourth quarter was driven by
patients who needed prosthetic work and who really
didn't clearly understand the 2005 changes, thus they
were demanding it be done in 2004 prior to the
implementation of the new program.
Consequently under this kind of pressure from
patients, the government agencies reluctantly began
approving such requests, late in November of last
year, even if the particular state was over budget.
Thus this resulted in a higher than expected growth.
A few other points you should keep in mind as you
look at the first half of 2005 in Europe; first of
all while we are certainly encouraged by the 2005
changes in reimbursement and what it may mean for our
business, the fact of the matter is people and
organizations are really ill-prepared for this
immediate implementation. Dentists and laboratories
are not properly educated on how to complete the
procedure approval forms. There's inadequate
software to process the claims under the new program
and on and on. These are just start-up costs caused
by the shortness between the announcement of this
program and its implementation.
And these are just start up issues and don't reduce
the amount of procedures over time, but they will
definitely postpone them. So while it's expected
that there will be issues regarding the
implementation of the new reimbursement plan that
will affect the first quarter, we expect that they
will be resolved in the first half of the year and
any negative impact in the first quarter will be
equally offset with the positive benefits in the
second quarter.
Also as many of you I'm sure know the international
dental society meeting is held every other year in
Germany. This is the largest dental meeting in the
world and has a considerable impact on which quarter
-- the first or the second -- that sales are made
during the first half of the year in Europe. Of
course, then in the off-year, like last year 2004,
you have the opposite effect on growth which is
really due to the unusual comparisons created by the
show the prior year.
An example of this was 2004, where there was no show
and our growth for the first half of the year was
5.2% but the growth broke down as follows. The first
quarter was 10.4% and the second quarter was 2.5%.
Again just to reiterate that none of these issues
should impact the first half of the year in Europe,
but will only potentially cause the first quarter to
experience lower growth with the second quarter being
more robust.
Moving to Asia, Asia continues to experience positive
growth of 11.7% for the full year. It was 5% for the
fourth quarter. This quarter was really somewhat
less primarily due to comparisons as the fourth
quarter 2003 was the first quarter that year with
positive results following the impact of the SARS
crises.
Growth for the year was led by strong performances in
China, Taiwan, Korea, and India. Latin America
continues to have a volatile economy, but we did
experience a positive growth for the quarter of
2.4%. This was generated by strong performances in
Brazil and also Argentina offset by a lower
performance in Mexico.
As I had stated before, the balance of the world grew
4.5% and this was led by strong performances in both
Australia and Canada.
A couple of other points of interest, our new
pharmaceutical plant in Chicago is at this point
completed and is prepared to provide commercial
products to the U.K., Ireland, Australia, and New
Zealand. The MHRA, which is really the regulatory
authority for those countries, inspected the facility
in November of 2004 and we are currently awaiting
their approval. We really anticipated shipping to
these countries beginning in late 2004. Since this
now will obviously take place in 2005, most of the
start up costs will now be incurred in 2005 due to
the short delay. These startup costs are reflected
in our outlook for 2005, which I'll review with you
in my closing remarks. We also anticipate formal
submission for the U.S. and Canada this quarter.
We're very pleased with the progress in bringing this
facility up to this point and we look forward to
receiving the appropriate approvals to commercialize
it.
As we've previously announced, Oraqix, our new
non-injectible anesthetic for scaling and root
planing was launched in November of 2004. Orders
since that time have exceeded $1 million with the
majority of the shipments for those orders coming in
January of this year. We are already receiving
reorders from the early users and have been getting
very positive feedback.
Oraqix was introduced in Sweden in December. It has
received product approval in Denmark, Iceland, and
Germany, and is awaiting labeling approval in those
countries. We're also anticipating approval soon in
the U.K. and France and fully expect that all of the
European countries named will be commercialized and
will commence their introduction of Oraqix by June of
this year. We continue to be very excited about this
product and its potential success.
Some comments on other new products - in addition to
launching Oraqix in the fourth quarter, we launched
several new products, but there is one other product,
with exceptional growth potential, I would like to
discuss. That is BioPure. It's an irrigant that is
used to disinfect the tooth canal as well as remove
the smear layer that's created in a root canal
procedure. We expect that there's going to be
significant interest in this product and we're really
looking forward to seeing its growth as acceptance is
broadened to new users.
This year, we expect to launch over 20 new products.
Several line extensions will be introduced in the
first quarter. But, in addition to those, there will
be two very new and exciting products for
orthodontics. Of course, at this point, since we
haven't launched them, I don't want to give
competition too much advance notice. So we'll talk
more specifically about these products on the next
call, following their market introduction.
We also announced that we have acquired the rights to
a unique compound called SATIF that we acquired from
Sanofi-Aventis. While this is a technology that has
potential applications for several products in
dentistry, at this time it's not a product. But, we
do believe it can provide enhancements to future
products with such benefits as greater protection
against enamel carries, the ability to desensitize
exposed dentin, the ability to retard, or to inhibit
the formation of staining on the enamel. And that's
just to name a few.
We're very excited about this technology and we look
forward to telling you more as these products are
commercialized.
We continue to be very active in pursuing specific
acquisition targets. As we have mentioned previously
these targets are focused on share expansion,
geographic expansion, and technology.
Acquisition remains a key part of the our growth
strategy and as we look forward to informing you as
these activities materialize into something more
formal. We have had success in acquiring
technologies and we'll continue pursuing acquisitions
that will expand our share in our markets.
Just some comments about the outlook for the full
year of 2005. As we have said before the dental
market worldwide excluding large equipment grows
between 4% and 5% per year or an average of 4.5%. We
expect our growth in 2005 to be between 5% and 6%.
That excludes currency and, of course, acquisitions.
We also expect our earnings to grow between 10% and
12%.
Given that we're comfortable with a range of $2.59 to
$2.63 per diluted share. This range doesn't include
any change required in 2005 for the expensing of
stock options.
So in conclusion, we're very pleased with our results
in 2004 and we're very excited about the prospects of
another successful year in 2005. And that concludes
my remarks so I will now turn the call over to Bill
Jellison.
Bill Jellison: Thanks Gary. Good morning everyone. As Gary
mentioned net sales for the fourth quarter of 2004
grew by 8.5% in total and 9% excluding precious
metals. Net sales for the full year were $1.69
billion an increase of 8.1% over last year. While
sales ex-pm were $1.48 billion, an increase 8.6% for
the year. The sales increase for both the quarter
and the year included a 4.7% increase from foreign
exchange translation. The 2004 mix of sales by
geography included the U.S. at 43.1% of sales ex-pm,
compared to 45.2% in the prior year. Europe
represented 38.1% of sales this year compared to
36.3% in the prior year, and the rest of the world
was 18.8% and 18.5% last year.
Gross margins for the fourth quarter were 57.3%.
That's ex-precious metals and it's up 130 basis
points compared to 56% in the fourth quarter of
2003. Full year gross margins were 57.1% an increase
of 60 basis points over 2003.
The rate increase for the year was primarily the
result of a favorable product and geographic mix
along with ongoing operational improvements coming
from lean manufacturing initiatives. These
initiatives are expected to continue to generate an
increasing level of improvements over the next few
years.
SG&A was $148.7 million or 36.7% of sales ex-precious
metals this quarter versus 35.1% in the prior year
fourth quarter. The higher expense level in the
fourth quarter primarily resulted from
non-capitalized costs relating to the anesthetic
plant in Chicago, additional costs related to our
Sarbanes-Oxley compliance, increased launch expenses
for both Oraqix and BioPure MTAD, and litigation
settlement reserves.
Total year SG&A of $544.3 million in 2004 included an
increase from foreign exchange translation of
approximately 4% and only increased slightly as a
percent of sales to 36.7% compared to 36.6% last
year. Expenses were tightly controlled during the
year to help offset the above mentioned items. The
higher costs of Sarbanes-Oxley compliance and costs
associated with the ramp-up of our new anesthetic
plant will continue into 2005.
In the current quarter we have a restructuring charge
of $4 million primarily related to the creation of
our European Shared Services Center in Yverdon,
Switzerland, and consolidation of some sales and
customer service areas in Europe and Japan.
Operational margins for the quarter were 17% compared
to 17.2% in 2003's fourth quarter. Operating margins
based on sales excluding precious metals were 19.6%
compared to 19.9% last year in the same period.
Full year operating margins based on sales ex-pm or
19.9% compared to 19.6% last year and excluding the
restructurings operating margins ex-pm were 20.4% in
2004 and 19.9% in 2003.
Net interest and other expenses in the quarter were
$4.7 million which is up $3 million compared to last
year's fourth quarter. Net interest expense improved
by $1.9 million in the quarter and remember that a
gain of $5.8 million from the sale of PracticeWorks
occurred in the fourth quarter of 2003.
Net interest and other expenses for the full year
were $21 million compared to $16.8 million in '03.
Net interest expense was lower by $4.6 million in
2004. Foreign exchange loss was about $1.5 million
higher in 2004. And a gain associated with the sale
of PracticeWorks of $7.4 million occurred in 2003.
Looking at the tax rate the rate for the quarter was
7.5% compared to 32.6% in the fourth quarter of
2003. The full year tax rate in 2004 was 23.3%
compared to 32.4% in 2003. The 2004 tax rate of
23.3% includes two main components. The first is the
current year operational rate which was 30.4% in 2004
but a reasonable estimate for 2005's operational rate
is probably still between 31% and 32%.
The other component of the rate primarily related to
adjustments in the company's tax contingencies from
settling audits of prior year domestic and foreign
tax returns and adjustments associated with prior
periods of $19.5 million. As you know the accounting
treatment for tax contingency items results in the
reporting of the change in the period of resolution,
thus, these changes can skew the reported rate in any
one period.
Income from continuing operations in the fourth
quarter of 2004 was $69 million or 83 cents per
diluted share. That's a 38.3% increase over the
fourth quarter of 2003.
Total income from continuing operations in 2004 was
$2.56 per diluted share and that's up 21.3% compared
to $2.11 for 2003.
Income from continuing operations in 2004 included a
24 cent per diluted share positive impact from
resolutions of tax audits and adjustments associated
with prior period tax matters and a 6 cent per
diluted share negative impact from the restructurings.
For your modeling purposes, here's a non-GAAP
assessment of items we believe should be reflected in
2004's earnings from continuing operations to reflect
a better baseline for comparison.
One, the previously noted 24 cent favorable tax
impacts. Two, the negative 6 cent impact from
restructuring mentioned above. And also a favorable
impact of about 3 cents per share from a lower tax
rate. For example, of the 30.4% tax rate that was
used in 2004 compared to a more expected rate moving
forward of about 31% to 32%, which we believe is more
sustainable. These adjustments in 2004 would have
resulted in a $2.35 per diluted share from operations
- that's a diluted share from operations.
Now let's look at cash flow and few balance sheet
items. The cash flow continued to be very strong
throughout the year, with operating cash flows for
2004 of approximately $307 million compared to $258
million in 2003, an increase of 19%. Capital
expenditures for the year were $56 million yielding
free cash flow of about $251 million for the year.
Depreciation and amortization were $49 million last
year and inventory days were 92 at 2004 year end,
which is one day lower than last year and on target
with our objectives for the year.
Our receivables stood at 47 days at the end of 2004
which is below our targeted objective of really the
low 50s.
The balance sheet continued to strengthen during the
quarter and at year end we had $506.4 million in cash
and short term investments compared to $164 million
at the end of 2003.
Long term debt was $781.5 million at the end of 2004
and that compared to $751.4 million at the end of
2003.
Dentsply repurchased approximately 814,960 shares at
an average price of $48.34 in 2004 and we have
purchased an additional 25,450 shares at $55.19 so
far in 2005.
Based on the company's current authorization which is
to maintain up to 3 million shares of Treasury stock,
we still have approximately 2.2 million shares
available for repurchase.
Finally, as Gary noted, we are comfortable with the
diluted earnings per share range for next year of
$2.59 to $2.63. However, again, this guidance for
2005 does not include the effect of any potential
future decision to repatriate foreign earnings for
purposes consistent with the American Jobs Creation
Act of 2004 or the effect of new accounting rules
requiring the expensing of stock options.
That concludes our prepared remarks and we'd be glad
to take any questions you have at this time.
(Latoya) you can open it up for questions.
Operator: Thank you. At this time I would like to remind
everyone in order to ask a question please press star
then the number 1 on your telephone key pad. We'll
pause for just a moment to compile the Q&A roster.
Your first question comes from (Derek Leckow) of
Barrington Research.
(Derek Leckow): Thank you. Good morning. And congratulations on
another great quarter and great year.
Gary Kunkle: Thank you (Derek).
(Derek Leckow): Question on the R&D expense, where do you see that
going next year as a percentage of sales? And with
the large amount of cash you have available do you
see opportunities to expand with external R&D in
terms of some of the comments you made about your
strategic priorities in your acquisition program?
Gary Kunkle: We increased our R&D about I think it was 10% to 11%
over the current year. Of course as you know this
year we increased it 20%. And the increase is both
to fund existing projects that we have started and to
continue investments outside of dentistry as we have
this year with things like the Doxa, like the Satif
that are non-dental products that have a dental
application. I should say non-dental technologies
that have a dental application.
Does that answer your question (Derrick)?
(Derek Leckow): Well, I just wanted to know where you are going
next year in terms of the increase. Do you see a 20%
increase again next year in the budget?
Gary Kunkle: In 2006?
(Derek Leckow): In 2005.
Gary Kunkle: Oh no. I'm sorry. It went up I think 10% to 11%. I
can't remember exactly over 2004 (Derek).
(Derek Leckow): Yeah that's right. Okay.
Gary Kunkle: We have routinely increased the R&D while our SG&A
has not gone up in double digit we have routinely
increased R&D every year in double digit. I mean, we
think it's critical since our key platform for growth
is innovation.
(Derek Leckow): Right. As you complete the anesthetic plant and
the expenses associated with that would you see some
additional dollars flowing into R&D perhaps as you
reduce the expenses there?
Gary Kunkle: Probably not this year.
(Derek Leckow): Not this year. Okay. And then taking a look at
the positive feedback you've been receiving from
Oraqix I think that's a very good sign. And I think
- this is pretty early in the adoption period but I
wonder how large you think that market is for that
product.
Gary Kunkle: Well we said all along that we thought this could be
a $40 or $50 million product. And the question is
how quickly you're going to get there. And it is too
early (Derrick) but our initial thought is you're
going to see a surge. We need to get it in the hands
of some key opinion leaders. And they're going to
try it.
And then we - this really is a kind of product that's
driven by podium power. We need to get the opinion
leaders to speak at key meetings. And then I think
you'll see another surge.
I think, you know, this year if we - I don't think I
expect anything in the double digit or millions. But
we're happy with the start. And I can probably offer
you more about the potential after we've had more
experience with it.
(Derek Leckow): Okay. Then finally if I could just ask the
question about your plans regarding your stock
options. I mean if you were to expense them today do
you have an estimate as to what the impact might be
on EPS?
Gary Kunkle: It's about 14 cents isn't it?
Bill Jellison: Yes, we said it's about 14 to 16 cents on an
annualized basis (Derrick).
(Derek Leckow): Okay. Thanks very much. Appreciate it guys.
Gary Kunkle: Yes.
Operator: Your next question comes from (Suey Wong) of Robert
Baird.
(Suey Wong): Thank you. Gary can you talk more about the European
business? Could you split out how you did in Germany
versus the rest of Europe?
Gary Kunkle: I don't think I have that (Suey). We just have
Europe in total.
(Suey Wong): Gary was Germany up year over year in the fourth
quarter?
Gary Kunkle: I don't have it split up by country (Suey). We've
only split it out by region.
(Suey Wong): Okay. But it sounds like the improvement in Europe a
lot of that was driven by Germany if I'm
understanding correctly.
Gary Kunkle: Well, I mean, Germany represents 50% to 55% of the
entire Europe business for us so it has a huge
influence on us.
(Suey Wong): Okay. Let me jump over to Oraqix here. I want to
make sure I heard you right. In the fourth quarter
did you say that Oraqix sales were around a million
or less?
Gary Kunkle: No I said since its launch which was about
mid-November to to date we have taken orders for
approximately a million dollars. Most of those
shipments however have taken place this year not in
2004.
(Suey Wong): Okay. So there wasn't much in Q4 that contributed to
the internal growth acceleration?
Gary Kunkle: No.
(Suey Wong): Okay. Good. Then just one last question actually
for Bill. Bill you mentioned something about
litigation settlement in the SG&A. Can you provide
some detail there?
Bill Jellison: Yes, as you know, we've got a number of different
things that impact us from both legal costs as well
as settlement issues that run, you know, throughout
different years.
We are not saying that from a trend perspective we'd
expect, you know, next year to be really any
different from that perspective. We're comfortable
with kind of the rates that are out there on the SG&A
levels and really for the overall expense levels that
exist.
And in fact as Gary mentioned earlier while we're
expecting the R&D side to be increasing we would
still expect overall operating expenses as a percent
of sales to still come down next year.
(Suey Wong): Okay. Thank you.
Operator: If you would like to ask a question please press star
1 on your telephone key pad. Your next question
comes from (Frank Pinkerton) of Bank of America
Securities.
(Frank Pinkerton): Hi. Thanks guys. Want to make sure I heard
you correctly -- estimated tax rate for 2005 was 31%?
Bill Jellison: Yes 31% to 32%. That's right.
(Frank Pinkerton): And kind of second housekeeping question for
'05, what are you expecting on the capital
expenditure side on 2005?
Bill Jellison: I think this year we ended up at $56 million.
We'd expect somewhere in the $55 to $60 million range
should be reasonable for next year.
(Frank Pinkerton): And I guess final question I know one of the
uses of cash has been the ongoing strategy to
end-license products and other things. Can we expect
any contributions in the 2005 time frame from any of
those products or is that something where we're
looking a little further out 2006 and beyond?
Gary Kunkle: Yeah those will be - we'll be very fortunate if
they're even 2006. But they certainly will not be in
2005 (Frank).
(Frank Pinkerton): Can you just I guess on that front give an
update, you know, where you stand - maybe some of the
products that you've done for example that have been
in the pipeline longer like a Georgia Institute of
Technology, how those are progressing and if we can
think about milestones or significant points,
filings, or other things coming up in the future?
Gary Kunkle: Yeah as you know those weren't necessarily products
that were in the Georgia Tech portfolio as much as
they were technologies. And we have started
initially with two programs. We have now expanded it
to three and we're evaluating a fourth.
And they go to different stages. Certainly the first
is proof of principle and then we will look at it and
see if it's a marketable entity.
But quite frankly (Frank), you know, these are very
early stage developments and I don't think you should
expect - you certainly won't expect anything this
year. And if we got anything in 2006 from Georgia
Tech it would be a little faster than I would've
expected.
(Frank Pinkerton): Thank you.
Operator: Your next question comes from (Dax Vlassis) of Gates
Capital Management.
(Dax Vlassis): Yes I was wondering. Did you have a reclass of
your current liabilities?
Bill Jellison: Can you be more specific on what you're looking at
there?
(Dax Vlassis): Well I have - I just don't understand - can you
give me the components of current liabilities for the
$406 million?
Bill Jellison: The $406 that are right on the balance sheet there
includes $71 million of bank and other. That'd be
the short term of the bank end. You know, if you
compare that against last year it was about $22
million.
On the payables side it's $86 million and that's
equivalent to last year. On the accrued liability
side it's $185 million versus about $173 million last
year. And estimated income tax is about $63 million
with about $67 million last year.
And then keep in mind that there were also some
liabilities for discontinued ops set up in that
section of about $20 million last year.
(Dax Vlassis): Okay. It was the bank and other portion of it.
And then I was just wondering what is - did you give
an internal growth rate for the full year excluding
precious metals and foreign exchange and acquisition?
Gary Kunkle: Yes that was expected to be in the 5% to 6% range.
(Dax Vlassis): And that's for the full year 2004?
Gary Kunkle: I think it's - wait I can give you that.
Bill Jellison: Yeah for 2004 there was only the negative FX
impact - or the positive FX impact that I mentioned
earlier from the growth which was 4.7%. And that
compares to the total sales increase for the year
that we talked about as well too which was - we
talked about the 8.1% in total with 8.6% ex-precious
metals.
Gary Kunkle: For the year the internal growth was 4%.
(Dax Vlassis): Four percent. Okay. So was there - if you're
growing at the low end of the average growth rate and
you're in some faster growth markets did you lose
market share at all or...
Gary Kunkle: Well the big impact was the third quarter which the
growth was considerably low and if you recall that
was when the German reimbursement - the budgets had
run out and dentists were postponing procedures.
And Germany represents over half of our European
business and Europe represents over 40% of our total
market. So it had a huge impact.
U.S. was somewhat impacted because of the reduction
in business in the Southeast due to the hurricanes
which represents about 18% of our U.S. market. But,
you know, both of those events are past and they were
one-time events and we don't anticipate that kind of
thing in the future.
(Dax Vlassis): Okay. Thank you very much.
Operator: Your next question comes from (Greg Halter) of Great
Lakes Review.
(Greg Halter): Good morning gentlemen.
Gary Kunkle: Hi (Greg).
Bill Jellison: Hi (Greg).
(Greg Halter): Regarding the derivatives you have hedging your
debt -- swaps and so forth -- could you provide the
current balance of those?
Bill Jellison: No I actually don't have that in front of me
(Greg) but we always try to take advantage of really
where our assets are based. And I think that we'll
continue to do that to help make sure that we can
continue to minimize any of the interest rates that
we're ultimately paying on our outstanding balances.
(Greg Halter): Okay. And it may be early enough. Do you have a
figure on your net pension expense for 2005 and what
you may expect for - sorry for '04 and what you may
expect for '05?
Bill Jellison: No I do not have the pension expense. You're
talking about for the entire company?
(Greg Halter): Right.
Bill Jellison: I can circle back you and give you some - at least
an expectation of kind of where this year was.
(Greg Halter): Okay. And listening on another call - I think it
was (Sybron) talking about their internal growth of
6.7 trimmed by things like brackets and that and so
forth. Just wondered what your take is on that with
your base growth of 4.3 versus what they're showing.
Gary Kunkle: Well I think there's two things that - actually there
are three things that are different (Greg). First of
all you have a different geographic mix and a
different product mix.
So - and the third thing is you have to go back and
see the base from which the growth is built. If my
recollection is correct that's off a base of 1.5%
growth. That's an estimate on my part.
(Greg Halter): Okay. Thank you.
Operator: You have a follow up question from (Dax Vlassis).
(Dax Vlassis): Yeah I just meant to ask a last question. I think
the total debt was something like $853 million. Can
you just give a breakdown of that please? Revolver
and I guess you had some private placement notes from
Prudential and some euro bonds?
Bill Jellison: Yeah we've got a number of different items
associated with that. Hang on. Let me see if I've
at least got that handy.
Yeah we've got - right now what's out there we've got
about just under $500 million on the euro bond side.
We've got some Prudential notes of just over $200
million. The revolver usage currently is about $122
and then some other minor notes of about $25.
(Dax Vlassis): Okay. Great. Thanks a lot.
Operator: Your next follow up question comes from (Derek
Leckow).
(Derek Leckow): Thanks. Just a follow up on your comment on the
two exciting new orthodontic products that you
mentioned that you said you don't want to make any
specific comments, but wonder if you care to make any
general remarks about those products - what
categories we're talking about?
Gary Kunkle: Well I really can't. There's absolutely no benefit
in doing that.
(Derek Leckow): All right. Well I thought I'd try. Thanks.
Gary Kunkle: Okay.
Operator: At this time there are no further questions.
Gary Kunkle: Well thank you all for joining the call. We really
do appreciate it. And we appreciate your interest in
our company.
Operator: This now concludes Dentsply's Fourth Quarter 2004
Earning conference call. You may now disconnect.
END