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 April 26, 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 8.01. - Other Events.
The following information is furnished pursuant to Item 8.01,
"Other Events."
On April 26, 2005, the Company conducted a conference call to
discuss the sales and earnings release for the first quarter of
2005 that was issued on April 25, 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. During this conference call, the
Company discussed the approximate proportion of its sales in
Europe that are related to the laboratory product category. As
stated in the conference call, 30% plus of the Company's European
sales are in the laboratory category, including precious metal
content. To expand upon this discussion, the proportion of sales
within Germany related to the laboratory product category is
approximately 65% to 75% of total sales in Germany and
approximately 50% to 55% of total sales in Germany, excluding
precious metal content.
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 April 26, 2005 related to the first quarter
2005 sales and earnings release issued April 25, 2005 as
referenced in Item 8.01.
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: April 29, 2005
DENTSPLY INTERNATIONAL, INCORPORATED
Moderator: Gary Kunkle
April 26, 2005
7:30 am CT
Operator: Good morning. My name is (Kelly) and I will be your conference
facilitator today. At this time I would like to welcome everyone
to the Dentsply International First Quarter Earning's Release
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. I would like to turn the call over to Mr. Gary Kunkle,
Vice Chairman and Chief Executive Officer. Sir you may begin.
Gary Kunkle: Thank you (Kelly) and good morning. And thank you all for joining
the Dentsply First Quarter 2005 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. And Bill Jellison, Senior Vice President and
Chief Financial Officer.
I will begin today's call with some overview comments regarding
our first quarter results and our overall business. And before
turning the call over to Bill I will conclude with some remarks
regarding our outlook for the balance of the year.
Bill will then go through a more detailed review of the P&L and
balance sheet. And finally we'll all be pleased to answer any
questions that you may have.
Before we get started 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 10K and its subsequent periodic
reports on form 10Q filed with the Securities and Exchange
Commission.
This conference in its entirety will be part of an 8K filing and
will be available on our web site.
By now each of you should have received a copy of our first
quarter earnings announcement that we released yesterday after
the market closed. Our reported sales during the first quarter
were 407 million. This represented a decrease of 1.8% compared to
the first quarter of 2004.
If you exclude the precious metal content sales increased 3% for
the quarter. The 3% sales gain for the quarter broke out as
follows. Base business was minus 1.6%. Foreign exchange was plus
3.3%. And acquisition was plus 1.3%. The geographic base business
growth -- and this is ex-precious metals -- was as follows.
The United States was plus 7%. Europe was minus 13%. And the
balance of the world was +3%. And this was with really strong
growth in Asia -- 15% -- and Latin America with 8%. And this was
offset by negative growth in the Middle East and Japan.
Now clearly the negative growth in Europe was the contributing
factor to the low quarterly performance. And this was driven by
the reimbursement issues in the German dental market. As you may
recall from our fourth quarter conference call in 2004 we
explained that Germany had announced a new dental reimbursement
for 2005.
It stated that effective January 1, 2005 fixed reimbursement for
prosthetic work will replace the percentage pay formula. In
making this change a patient will now be able to apply the
reimbursement towards any prosthetic procedure. This included all
ceramic bridges and implants -- areas that did not receive any
reimbursement under the percentage reimbursement (scheme).
While we were encouraged then -- and we remain encouraged now --
by what the reimbursement changes can mean for our business in
the long term, at that time, we expressed our concern during the
fourth quarter conference call over the lack of preparedness of
the German dentists, the labs, and the insurance companies to
initiate this change on such short notice.
As a result of these concerns we stated that we expected the
first quarter growth to be low. But that the second quarter and
the balance of the year should show considerable improvements.
The impact of slow implementation on the new reimbursement
program has been far greater than we anticipated or -- in fact --
greater than anyone else projected.
There have been estimates from the President of the German Dental
Technician Association, from a number of industry leaders and
others that prosthetic work -- in other words the dental lab
business -- has decreased over 50% during the first quarter. Some
have estimated it as high as 60%.
Most of this has attributed to the slow implementation of the
reimbursement program with some attributed to the reduction in
reimbursement benefits for certain high-end procedures.
It's estimated that over 50% of the 64,000 dental technicians in
Germany are working less than full time, either working part time
or on mandatory holiday with 10% having been dismissed.
Expectations are that those working part time and those that are
on holiday will return to work during the year as the demand
increases.
We've already seen improvement in the prosthetic segment of the
German dental market as the backlog of requested procedures moves
into the dental offices. And we expect it will continue to
improve during the year.
We also believe, however, that it's unlikely the market will
recover enough to offset the entire deficit created during the
first quarter. Best estimates are that by the end of 2005 the
prosthetic market will be approximately 90% of the previous year
volume for the full year and return to positive growth in 2006.
On a more positive note the International Dental Show -- which is
held every other year in Germany -- was very well-attended in
spite of the current market conditions. We considered it a great
success for Dentsply. With respect to the prosthetic market we
did introduce a new software for Cercon -- which is our all
ceramic technology for crowns and bridges that will optimize the
use of our current Cercon blocks.
With this benefit -- and along with the fact that all ceramics
are now part of the reimbursement -- labs can now not only
produce Cercon cost competitively with precious metal
alternatives as they did before but they can now be cost
competitive with non-precious metal alternatives.
This was of particular interest to labs given the current
environment. The Cercon production is significantly less labor
intense than its precious and non-precious metal alternatives.
This will allow a lab to increase their production of Cercon
without a corresponding increase in labor. Of course this is a
great benefit given the current cut-back in labor in dental labs.
Looking at the United States we are very pleased to see the
improvement in our first quarter internal growth in the US to
approximately 7% -- which is really the strongest growth we've
seen in the US since 2002. This was led by double digit growth in
orthodontics and implants -- areas that continue to have
consistently high growth for us. We also experienced solid high
single digit growth in our chair-side consumables - those
products sold to dental offices.
Asia had a strong quarter with internal growth of 15%. This
strong growth occurred -- in most categories -- reflecting the
return to our pre-SARS growth expectations.
Latin America experienced solid growth of 8% internally. This
region -- like Asia -- showed strong growth across most
categories. It was led geographically by high growth in Brazil
and Mexico.
In the first quarter we bough GAC SA -- which is our European
distributor of our orthodontic products. They service France,
Germany, Switzerland and Norway. This vertical integration
improved our first quarter sales by over $4 million. And it's
expected to add about $16 million for the full year.
It'll be neutral to modestly accretive in 2005. We expect it to
add four to five cents in 2006. And of course we also expect that
with this ownership we will be in a better position to improve
our effectiveness through this organization.
We remain very active in the market pursuing other acquisition
targets. And while I can't be specific, we continue to be
encouraged by what we see. And -- with few exceptions -- (fair)
valuations.
Just some other items of interest. With respect to our anesthetic
pharmaceutical plant in Chicago, we are pleased to announce that
we received approval from MHRA -- which is the regulatory
authority for the UK, Australia, and New Zealand. And we've
recently begun shipping to those countries.
We've also received facilities approval for Canada and expect to
receive product approval this quarter. We've also made our
submission for facility approval to the FDA, and are awaiting a
date for the inspection. While it's always difficult to
anticipate an approval date we're expecting approval before the
year end.
Just some comments on new products that were recently released.
We continue to be very pleased with the market acceptance of
Oraqix -- our new non-injectable dental anesthetic for scaling
and root planing. And while we don't disclose sales volume for
specific products I can tell you that both the sale of the
initial starter kits and the reorders from previous purchasers
are above our forecast.
It was also very favorably received at the IDS in Germany where
it was previewed. And we expect to receive approvals across
Europe throughout the balance of the year.
BioPure continues to receive a high degree of interest from
dentists doing endodontic procedures. It is our new irrigant that
is used to disinfect the canal as well as remove the smear layer
that is created in a root canal procedure. As a result, its use
dramatically reduces the probability of complications or failure
resulting from bacterial contamination.
Calamus was introduced in the first quarter. This is a unique,
very user friendly obturation delivery system used in root canal
procedures. The filling material that is to be put into the canal
during the procedure is in a cartridge that's designed for single
patient use.
It makes it more convenient, disposable, and provides for quick
easy clean up following the procedure. It is yet another
innovative product added to our very broad and successful
portfolio of products for endodontics.
Xeno IV is our first single component self etching adhesive. It
comes in one bottle with one brush applicator requiring no
mixing. It's extremely user friendly. And of course it provides
the superior bond strength of our other adhesive products. Xeno
IV was introduced in the first quarter.
SmartLite PS is another addition to our SmartLite LED curing
light product line. It is very user-friendly with a simple pen
design and size that offers high powered LED curing and a
convenient style light with a quick ten second cure. And it is
cordless.
And finally already previewed in the market and being shown at
the upcoming American Association of Orthodontics in May is
Interactive Mystique. This is the world's first low friction
translucent ceramic bracket. It has a clear interactive clip that
we call Neo-Clip -- which can be rapidly placed and removed from
Mystique -- which is our new ceramic bracket.
It engages the wire similarly to self-ligation -- which is known
for its benefits of reduced appointment time and improved oral
hygiene.
We will begin shipping this by the end of the quarter immediately
following the AAO meeting in May. So this is just some highlights
of some of the products released during the first quarter and
scheduled to release shortly.
We continue to be very excited about the pipeline of new products
that we have. And look forward to telling you more about them as
they approach our introduction.
Before I turn the call over the Bill I would like to make some
closing remarks. While we can't change the impact the German
reimbursement has on their dental market we can change what we do
to respond to it. Our marketing efforts will be focused on market
share gains with such products as Cercon that, as I said before,
has a unique opportunity for growth during this period of
transition in Germany.
It is unlikely, however, that we'll be able to completely offset
the entire impact of the first quarter and deliver on our initial
internal growth targets of 5 to 6% for the full year. However we
do expect the growth to improve throughout the year as the German
market stabilizes and to be above 5% growth for the balance of
this year.
Also we have plans in place to adjust our cost structure, to
address the lower demand for prosthetics in Germany. With these
changes we remain comfortable with our original guidance of $2.59
to $2.63 earnings per share for 2005.
That concludes my remarks. I will now turn the call over to Bill
Jellison to take you through the P&L and balance sheet.
Bill Jellison: Thanks Gary. Good morning everyone. As Gary mentioned net
sales for the first quarter of 2005 decreased by 1.8% in total
and increased by 3% excluding precious metals. The sales increase
-- ex-precious metals -- for the quarter included a 3.3% increase
from FX translation.
The geographic mix of sales -- ex-pm -- in the first quarter of
2005 included the US at 43.2% -- compared to 41.7% in the first
quarter of last year. Europe represented 37.8% this year compared
to 40% in the same period last year. And the rest of the world
was 19.1% of sales compared to 18.3% in the same period last year.
Most of the geographic changes occurred as sales grew outside of
Germany. The negative sales impact from delays and dental claim
processing tied to the German dental reform implementation not
only impacted sales growth for the company but also negatively
impacted margins while slightly benefiting the corporation's tax
rate.
Gross margins for the first quarter were 56.6% -- that's
ex-precious metals -- compared to 56.8% in the first quarter of
2004. Margin rates were negatively impacted in the quarter as a
result of lower volume and product mix. Rates are expected to
increase as we move through the year and benefit from improved
leverage, product mix, and manufacturing initiatives.
SG&A was 138.4 million -- or 37.5% of sales ex-precious -- metals
this quarter versus 37.1% in the prior year's first quarter. The
higher expense level in the first quarter primarily resulted from
non-capitalized costs relating to the new anesthetic plant in
Chicago, costs related to our Sarbanes-Oxley compliance, the
acquisition of GAC SA in Europe, and foreign exchange movements.
Expenses are expected to be lower as a percent of sales for the
entire year than in 2004.
Operational margins for the quarter were 17.3% compared to 16.9%
in the 2004 first quarter. Operating margins based on sales --
excluding precious metals -- were 19%. And compared to 19.6% last
year in the same period.
We still expect that operating margins for the entire year will
improve from last year as a result of both improved product mix
and the operational leverage.
Net interest and other income in the quarter was .2 million --
which is an improvement of 5.7 million compared to last year's
first quarter. Net interest expense improved by 1.3 million in
the quarter. And other income improved by 4.3 million primarily
as a result of foreign exchange transaction gains occurring in
the period.
The corporate tax rate in the quarter was 30.3% compared to 29.2%
in the first quarter of 2004. The first quarter's current period
operational tax rate was 30.8%.
Income from continuing operations in the first quarter of 2005
was 49 million or 60 cents per diluted share. That's a 7.1%
increase over the first quarter of 2004. Income from continuing
operations in the first quarter of last year included a 1 cent
per diluted share negative impact from restructuring.
Let's now look at cash flow and a few balance sheet items. Cash
flow was lower in the first quarter than the same period last
year as receivables increased off a low point at year end and a
patent settlement payment was made. Operating cash flow in the
first quarter of 2005 were approximately $25 million compared to
$47 million in the same period of 2004.
Capital expenditures were 9 million -- yielding a free cash flow
of about 16 million for the first quarter excluding $5 million of
dividends. Depreciation and amortization for the first quarter of
2005 was $13 million. Inventory days were 97 at the end of the
first quarter of 2005 compared to 92 days at year-end.
Inventory days should improve as sales begin to strengthen
through the year. Receivable days stood at 56 days at the end of
the first quarter compared to the record low level of 47 days
achieved at year end. We do expect some slight improvement here
as well moving into the year as our target for (AR) days is in
the low 50s.
At the end of the first quarter of 2005 we had $437 million in
cash and short term investments compared to $506 million at the
end of 2004. Long term debt was $771 million at the end of the
first quarter compared to 780 million at the end of 2004.
In addition we had $70 million of short term debt and a
derivative asset value of $25 million at the end of the quarter.
Dentsply repurchased $29 million of stock -- or approximately
522,000 shares at an average price of $56.38 in the first quarter
of 2005.
Based on the company's current authorization to maintain up to 3
million shares of treasury stock we still have approximately 2.2
million shares available for repurchase. And we expect to
continue to be in the market repurchasing shares during the
second quarter.
Finally -- as Gary noted -- we remain comfortable with a diluted
EPS range of $2.59 to $2.63 for 2005. This guidance does not
include the affect of any potential future decision to repatriate
foreign earnings for purposes consistent with the American Jobs
Creation Act of 2004.
That concludes our prepared remarks. And we'd be glad to answer
any questions that you may have at this time.
Gary Kunkle: (Kelly)?
Operator: 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).
(Derek Leckow): Good morning.
Gary Kunkle: Hi (Derek).
(Derek Leckow): Had a question here on the guidance. It looks like you're
maintaining the guidance. As I make changes to my model here in
the latter three quarters of the year the biggest assumption that
jumps out is the tax rate. Also you mentioned that you felt the
gross profit margin would improve. Does that mean that you'll be
above last year in gross profit in the following three quarters?
Bill Jellison: Yes. We believe that that is a true statement.
(Derek Leckow): Okay. And as we look at the German market you did say you saw
some rebound already here in the second quarter. But you're not
anticipating making up for the deficit in the first quarter. As
we - perhaps it might be helpful to talk about the German revenue
contribution in total. And then also give us the breakdown
between lab and general dental in Germany.
Gary Kunkle: I can give you an estimate Derek. It's difficult to be too
definitive because we have dealers in Germany that sell outside
of Germany to other countries in Europe.
(Derek Leckow): Oh okay.
Gary Kunkle: But our estimate is that our German volume represents about 50%
of our entire European volume. And I believe Europe's about 38%
of our total.
(Derek Leckow): Okay.
Gary Kunkle: We are number 1 in the lab business in Europe. And a lot of it is
driven by our high share in Germany. And our lab business --
including the precious metals -- in Europe probably makes up plus
30 plus percent of our volume. Maybe slightly higher than that.
(Derek Leckow): Okay. And that's really where you saw the most dramatic drop.
Gary Kunkle: Yes. If you look at the, you know, while the reimbursement
affected dentistry its biggest effect was on lab. Our non-lab --
or chair side -- businesses in Germany were positive and low
single digits -- which is, you know, the market is about 3.5% in
total. And while they're impacted they were still positive.
(Derek Leckow): Okay. And then just a question on the anesthetic business. It
sounds like you're shipping already out of the Chicago plant. And
you said that you thought the FDA approval might come before the
end of the year. Does that mean you're looking at about fourth
quarter to begin shipments from that plant in the US?
Gary Kunkle: It'll be the first quarter (Derek).
(Derek Leckow): First quarter of '05. Okay. Or '06 rather.
Gary Kunkle: Yeah well one of the things that we obviously have to do not
knowing the release date is go ahead and build inventory from our
current supplier.
(Derek Leckow): Okay.
Gary Kunkle: Before we start shipping we'll have to burnoff the inventory.
(Derek Leckow): Does that reflect (the year) on the inventory balance that
you're seeing? The increase?
Gary Kunkle: Yes.
(Derek Leckow): Okay. That's it for me right now. Thanks a lot.
Operator: Your next question comes from (Frank Pinkerton).
(Frank Pinkerton): Hey good morning. Can you run through what was the cost
of the acquisition for GAC in Europe?
Gary Kunkle: While we agreed not to disclose the entire part of the cost,
basically it is $5 million upfront with an earn-out for the
balance of the next three years. Excuse me -- 5 million euro.
(Frank Pinkerton): Five mil - I'm sorry. Five million euro. Okay. Secondly,
can you just update us on some of, you know, what I'll call your
technology initiatives with Georgia Tech? And then also I guess
the (SATIF) product that you've licensed from Sanofi?
Gary Kunkle: Yes. Both the (SATIF) and (DOXA) -- which were two technologies
that we did acquire. Both of those are now in the hands of our
operating units in R&D and product development. I would basically
say they're beyond the proof of principle stage.
With respect to the three projects that are active in Georgia
Tech actually all of them are still in proof of principle. And
those are probably much longer term (Frank).
(Frank Pinkerton): Okay. From a standpoint of -- I guess -- the German
market is this something that's going to require, you know,
broader sales effort? Broader marketing effort? Or is it really a
sense where you have everything there and you just need the
market to turn around?
Gary Kunkle: Well I'd say it's both. I mean we're not going to wait for the
market. We're instituting as many programs as we can to gain
share during this period. And we think we can do that. You know,
the one opportunity that I cited was Cercon -- I think -- is very
big.
Cercon is recognized as very technologically innovative. But
people have not moved to it because they just - it's easier not
to change. And here is a huge incentive and a huge opportunity
for them to move to this new technology.
(Frank Pinkerton): Okay great. Thank you.
Operator: Your next question comes from (Suey Wong).
(Suey Wong): Thank you. Gary I'd like to drill down a little bit more on
Germany here. I want to make sure that I heard you right. Did you
say that the German lab market - you estimate -- was down 50%?
Gary Kunkle: The estimates are between 50% and 60%. That's correct.
(Suey Wong): Okay. And you talked before about the confusion reimbursement
such. Could you just review the key factors there for people that
might not be as new to the - or might not know the Dentsply story
as well.
Gary Kunkle: Probably the biggest piece isn't confusion as much as it was
delay. They announced the change in the late fourth quarter. And
really weren't administratively prepared to put it in place in
the first quarter.
The request for a procedure has to go through channels -- if it's
a laboratory product it has to be approved by the lab, by the
dentist, and then by the regulatory authority. And then it goes
back - normally it would go back to the dentist. Today now it
goes back to the patient -- which is a further complication.
And so just by virtue of the fact they weren't administratively
prepared, there was an immediate backlog in that no one could get
a procedure done until it went through the system.
So for the first four to six weeks you were seeing virtually
nothing done. So I would say that was the biggest piece.
Certainly there's confusion on the part of the patient as to
what's reimbursed and at what rate, as they're discovering as
they go through the process of applying for reimbursements.
I think it will settle out, Suey. It's just going to take time.
As I said earlier in the call we're already seeing a pick up, as
many of these requested procedures are now being approved, and
are being brought back to the dental office. And hopefully, you
know, we'll see this shake out - we'd like to see it during
second quarter. But probably more realistically as you move
through the third quarter.
(Suey Wong): Do you think that your strong fourth quarter in Germany stole
away from the first quarter?
Gary Kunkle: No I don't.
(Suey Wong): Okay. It seems like your problems in Germany reflect the industry
here. Because (Stroman) has reported, (Danaher) has reported. And
both those companies have talked about the issues in Germany. So
it sounds like it's not company specific.
Gary Kunkle: Absolutely. I think one thing you need to make note of though
Suey, is, it is more prominent in the lab than it is the balance
of dentistry, so companies that are heavily lab-focused are being
impacted more. And certainly Straumann would be one of those.
(Suey Wong): Good. Bill could you go over the net interest and (other line)?
(It varies) quite a bit from our projections here. I want to make
sure I understand that.
Bill Jellison: Sure. From a net interest expense perspective included in that
line we've got about $4 million of interest expense in this
period versus $5.2, $5.3 last year. So that's about a 1.2 million
improvement off of the 2004 levels. There's also included in that
line other categories, one of which is exchange, gain, or loss on
transactions that are taking place. And we had a $4.8 million
gain on an exchange transaction within the period versus only a
$200,000 gain last year. So that was a net improvement of about
$4.5 million within the quarter.
From a transaction perspective - obviously we're impacted at
different stages based on transactions and translations. In this
period because of transferring intangible assets on the pharma
business, we actually picked up a gain on the transaction off of
that of about -- as I mentioned -- about $4.7 million. So that's
about a $4.5 million swing.
We think that that's primarily associated with the quarter. And
we aren't expecting that type of a level moving forward in each
of the quarters coming up through this year.
(Suey Wong): Sounds like the exchange gain explains basically the difference
in my model. Lastly here, could you talk about your acquisition
pipeline? I know you guys have been talking about making
acquisitions for a while now.
Is it a case that the acquisition prices are being bid up to
levels that you're not comfortable with paying? And if (given
that) your competitors are very active in the market and you have
newer companies -- like (Danaher) and also (Kodak) -- that are
either building presences in dental or expanding their presences?
Gary Kunkle: We don't see that at all. And, you know, to the best of our
knowledge when you're talking about companies like (Danaher)
we're targeting different companies. Most of their businesses
have been - most of their acquisitions have been large equipment.
Of which we have strategically decided we're not going to be in.
Because you know they bought (Gendex) from us. With few
exceptions we think valuations are fine. It's more of an issue of
timing. Many of these companies are private. So the decisions go
beyond just valuation. It includes family matters. And we think
it's just a matter of time when they come to that decision.
And we think they recognize that we are probably -- at least
among -- the best buyers for them. And bring them the best value.
(Suey Wong): Okay. One more question if I may. The US was as strong as it's
been in three years. Could you talk about the key drivers of
performance there? What's different now than in the past?
Gary Kunkle: Well as I mentioned we had very strong performance in
orthodontics and implants. And in our orthodontics business has
been strong all along. It's just been the recent years that we
put a strong emphasis behind the implants. And I think you're
seeing that in the most recent quarters by the growth that
they've experienced.
We also had very strong growth in -- what I call -- our
chair-side consumables. And, you know, we've had strong effort to
improve in that area. We've had a tremendous focus on improving
our sales effectiveness. And I think you're seeing the benefit of
it in this quarter.
(Suey Wong): Thanks Gary.
Operator: Your next question comes from (Greg Halter).
(Greg Halter): Hi guys.
Bill Jellison: Hi (Greg).
Gary Kunkle: Yeah hi (Greg).
(Greg Halter) Bill. I think you had mentioned that your long term debt was
771 million? Or was that total debt?
Bill Jellison: That's long term debt.
(Greg Halter): Okay. On your balance sheet you show 700.9 million. Is there
something else in there that we're not seeing?
Operator: At this time there are no further questions.
Gary Kunkle: (Kelly) there's a question right now. (Kelly)?
Operator: Yes sir. He has been removed from queue. Please press star 1
again.
Bill Jellison: Yeah. That's - the debt that was mentioned there that's 700 of
long term debt plus the 70 of the short term portion of debt.
(Greg Halter): So total debt is $771 million.
Bill Jellison: $771 million in total. That's correct.
(Greg Halter): Okay. And your maturities this year look like what?
Bill Jellison: We actually had some debt pay down in the first quarter on one
of our private placements. So that was really what the debt
reduction was tied into. That was 43 million.
And, you know, moving forward we'll also have pay downs moving
into next year on the euro bonds as well. And then we're in the
process at this point of renewing our entire revolving credit
agreement -- which we believe should get wrapped up sometime
within the second quarter.
(Greg Halter): And looking at the cash flow obviously you mentioned down in
the quarter. What do you foresee for the full year '05?
Bill Jellison: We don't specifically talk about the overall in cash flow. But
obviously, you know, we've given our earnings expectations. On
the working capital side, we mentioned at the beginning of the
period that we're still expecting to have a few day improvement
on the inventory end. The receivable side ended -- obviously --
on the low side at year-end.
So, you know, getting back to that level -- I think -- is
probably a little bit - or further below an overall expectation.
We'd expect that our receivable day should be right around kind
of the 50, low 50 range on average. And we think that that's a
good level.
Could it be down below the 50 range or slightly above? I think,
you know, either one of those could take place depending on where
our sales come at the end of the period.
And then as I've mentioned we also had the litigation payment
that occurred in the first quarter that impacted our overall
growth. But for the remaining parts of the year we feel very
positive about how we should move forward.
(Greg Halter): Okay. And I think in the past you had talked about capital
spending. This year being between $55 and $60 million. Has that
varied at all?
Bill Jellison: That has not. We've obviously in the first quarter at only
about 9 million is lower than kind of an overall run rate for the
entire year. But we still expect that our cap-ex will be
somewhere in that range.
(Greg Halter): And is the Chicago plant done? Or is there more spending
related to that?
Gary Kunkle: The Chicago plant is completed. The only spending would be
related in future years for additional capacity and equipment.
But the facility is complete.
(Greg Halter): Okay. And on that $55 to $60 million can you break that down
between maybe new expansions and maintenance and so forth?
Bill Jellison: I think what we said in general before was that, you know,
most of the maintenance related items make up probably about -
roughly about 30% of the total cap-ex that we have. The remaining
portion is typically for added capacity and or additional
facility requirements.
(Greg Halter): All right. Thank you.
Operator: (Don) your line is open.
(Don Geer): (Don Geer). (Cold Stream Capital). Could you go back to your
repatriation comments? What are the issues you're struggling with
as to whether or not to repatriate? And what is the total size
that you could do?
Bill Jellison: I think that there's a couple different points there. One, I
believe that, you know we definitely want to be bringing cash
back into the States. Whether it's under the repatriation act or
not - a different question.
And I think that there's different strategies that we've actually
kicked off a global (tax) revenue process on to take a look at
really what our options are. Because we generate a lot of cash in
a lot of different countries around the world. Especially chunks
within Europe.
We also obviously are well balanced on our geographic footprint.
And we would expect to have acquisitions both in the US and in
Europe. And we want to make sure that we're best assessing what
are needs are going to be in the next few years directly
associated with that.
So there's really two pieces. The (tax) strategy on what's the
best way to bring it back. And it may actually be a different way
other than just through the repatriation act. Or do a second
piece is actually to look at where we believe those outflows are
going to occur on some of the acquisitions moving forward.
But we think that, you know, amount could range, you know,
anywhere from - anywhere from 0 to, you know, $500 to $600
million in aggregate. Because we could potentially utilize the
act to even bring back more cash from those locations knowing
that we generate so much cash internationally as well.
(Don Geer): Thank you.
Operator: At this time there's no further questions.
Gary Kunkle: Okay. Well first of all we appreciate you joining the call this
morning. And thank you for your interest in our company. Thank
you (Kelly).
Operator: Thank you. This concludes today's conference call. You may now
disconnect.
END