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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
_______________________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 0-16211
DENTSPLY International Inc.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 39-1434669
_________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
570 West College Avenue, P. O. Box 872, York, PA 17405-0872
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(717) 845-7511
______________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
( X ) Yes ( ) No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: At
November 10, 1995 the Company had 26,950,669 shares of Common
Stock outstanding, with a par value of $.01 per share.
Page 1 of 21
----
Exhibit Index at Page 19
----
DENTSPLY INTERNATIONAL INC.
FORM 10-Q
For Quarter Ended September 30, 1995
------------------------
INDEX
-----
Page No.
--------
PART I - FINANCIAL INFORMATION (unaudited)
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets............ 3
Consolidated Condensed Statements of Income...... 4
Consolidated Condensed Statements of Cash Flows.. 5
Consolidated Condensed Statement of
Stockholders' Equity........................... 7
Notes to Unaudited Consolidated Condensed
Financial Statements........................... 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.... 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................ 17
Item 6 - Exhibits and Reports on Form 8-K............. 17
Signatures........................................... 18
2
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(audited) (unaudited)
December 31, September 30,
1994 1995
ASSETS ------------ ------------
Current assets: (in thousands)
Cash and cash equivalents $ 7,278 $ 4,241
Accounts and notes receivable-trade, net 78,771 89,519
Inventories 88,899 129,649
Prepaid expenses and other current assets 14,120 16,290
Net assets of discontinued operations 7,632 4,915
--------- ---------
Total Current Assets 196,700 244,614
Property, plant and equipment, net 91,140 137,214
Other noncurrent assets, net 10,214 12,867
Identifiable intangible assets, net 35,532 34,822
Cost in excess of fair value of net
assets acquired, net 140,976 150,313
--------- ---------
Total Assets $ 474,562 $ 579,830
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Accounts payable and accrued liabilities $ 60,135 $ 71,488
Income taxes payable 27,577 15,642
Notes payable and current portion
of long-term debt 9,150 12,912
--------- ---------
Total Current Liabilities 96,862 100,042
Long-term debt 12,789 90,104
Deferred income taxes 24,720 41,932
Other liabilities 40,854 44,666
--------- ---------
Total Liabilities 175,225 276,744
--------- ---------
Minority interests in consolidated subsidiary - 3,938
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value; 250,000
shares authorized; no shares issued - -
Common stock, $.01 par value; 100,000,000
shares authorized; 27,845,288 and 27,079,669
shares issued at December 31, 1994 and
September 30, 1995, respectively 278 271
Capital in excess of par value 182,087 150,028
Retained earnings 133,531 163,179
Cumulative translation adjustment 198 2,870
Employee stock ownership plan reserve (14,055) (12,857)
Treasury stock, at cost, 87,500 and
130,000 shares at December 31, 1994
and September 30, 1995, respectively (2,702) (4,343)
--------- ---------
Total Stockholders' Equity 299,337 299,148
--------- ---------
Total Liabilities and Stockholders' Equity $ 474,562 $ 579,830
========= =========
See accompanying notes to unaudited consolidated condensed financial
statements. 3
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1994 1995 1994 1995
-------- -------- -------- --------
(in thousands, except per share data)
Net sales $129,930 $137,330 $384,745 $410,313
Cost of products sold 64,315 74,411 193,927 210,796
-------- -------- -------- --------
Gross profit 65,615 62,919 190,818 199,517
Selling, general and
administrative expenses 41,032 45,577 119,757 132,352
-------- -------- -------- --------
Operating income from
continuing operations 24,583 17,342 71,061 67,165
Interest expense 2,068 2,564 6,133 6,565
Interest income (271) (316) (598) (899)
Other (income) expense,
net 167 (699) (759) 2,222
-------- -------- -------- --------
Income from continuing
operations before income
taxes 22,619 15,793 66,285 59,277
Provision for income taxes 8,838 6,314 27,351 23,589
-------- -------- -------- --------
Income from continuing
operations 13,781 9,479 38,934 35,688
Income from the operation
of discontinued Medical
business (less applicable
income taxes) 75 - 1,311 -
-------- -------- -------- --------
Net income $ 13,856 $ 9,479 $ 40,245 $ 35,688
======== ======== ======== ========
Earnings per common share:
From continuing operations $.50 $.35 $1.40 $1.32
From discontinued operations - - .05 -
---- ---- ----- -----
$.50 $.35 $1.45 $1.32
==== ==== ===== =====
Dividends per common share $.075 $.075 $.075 $.225
Weighted average common
shares outstanding 27,805 27,001 27,763 27,033
See accompanying notes to unaudited consolidated condensed financial
statements.
4
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
-------------------
1994 1995
-------- --------
(in thousands)
Cash flows from operating activities:
Net income $ 40,245 $ 35,688
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,971 16,487
(Increase) decrease in accounts and notes
receivable-trade, net (15,326) 1,516
Increase in inventories (10,384) (8,581)
(Increase) decrease in prepaid expenses
and other current assets 8,236 (397)
Increase (decrease) in income taxes payable 4,203 (11,967)
Other, net 3,934 2,059
-------- --------
Net cash provided by operating activities 45,879 34,805
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired - (74,204)
Property, plant and equipment additions (9,963) (11,835)
Proceeds from disposal of Medical business - 3,260
Proceeds from sale of property, plant, and
equipment 124 2,294
Other, net (89) (11)
-------- --------
Net cash used in investing activities (9,928) (80,496)
-------- --------
Cash flows from financing activities:
Debt repayment (156,705) (41,552)
Proceeds from long-term debt 89,317 125,717
Cash paid for treasury stock - (42,703)
Increase (decrease) in bank overdrafts and
other short term debt 13,366 (3,894)
Other, net 3,302 4,034
-------- --------
Net cash provided by (used in) financing activities (50,720) 41,602
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (908) 1,052
-------- --------
Net decrease in cash and cash equivalents (15,677) (3,037)
Cash and cash equivalents at beginning of period 17,984 7,278
-------- --------
Cash and cash equivalents at end of period $ 2,307 $ 4,241
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 5,573 $ 4,337
Income taxes paid 14,476 28,954
See accompanying notes to unaudited consolidated condensed financial
statements.
5
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Supplemental disclosures of noncash transactions (in thousands):
The Company purchased all of the capital stock of KV33 Corporation for
$11.5 million. In conjunction with the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired $ 14,329
Cash paid for capital stock (11,450)
--------
Liabilities assumed $ 2,879
========
The Company purchased approximately 96% of the capital stock of Maillefer
Instruments, S.A. for $65.8 million. In conjunction with the acquisition,
liabilities were assumed as follows:
Estimated fair value of assets acquired $ 94,983
Cash paid for capital stock (65,798)
--------
Liabilities assumed $ 29,185
========
The Company purchased the assets of Dunvale Corporation for $1.8 million.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 2,030
Cash paid for assets (1,839)
--------
Liabilities assumed $ 191
========
See accompanying notes to unaudited consolidated condensed financial
statements.
6
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
Capital in Cumulative Total
Common Excess of Retained Translation Treasury Stockholders'
Stock Par Value Earnings Adjustment ESOP Reserve Stock Equity
(in thousands) ------ ----------- -------- ----------- ------------ --------- ------------
Balance at December 31, 1994 $ 278 $182,087 $133,531 $ 198 $(14,055) $ (2,702) $299,337
Exercise of stock options and
warrants 2 (4,794) --- --- --- 9,034 4,242
Tax benefit related to stock
options and warrants exercised --- 4,754 --- --- --- --- 4,754
Repurchase of 1,255,000 shares
of common stock --- --- --- --- --- (42,703) (42,703)
Cash dividends declared, $.225
per share --- --- (6,040) --- --- --- (6,040)
Cancellation of 935,000 shares
of treasury stock (9) (32,019) --- --- --- 32,028 ---
Translation adjustment --- --- --- 2,672 --- --- 2,672
Net change in ESOP reserve --- --- --- --- 1,198 --- 1,198
Net income --- --- 35,688 --- --- --- 35,688
------ -------- -------- ------- -------- -------- --------
Balance at September 30, 1995 $ 271 $150,028 $163,179 $ 2,870 $(12,857) $ (4,343) $299,148
====== ======== ======== ======= ======== ======== ========
See accompanying notes to unaudited consolidated condensed financial statements.
7
DENTSPLY INTERNATIONAL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------
SEPTEMBER 30, 1995
------------------
The accompanying interim consolidated condensed financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
which in the opinion of management are necessary for a fair presentation of
financial position, results of operations and cash flows for the interim
periods. These interim financial statements conform with the requirements
for interim financial statements and consequently do not include all the
disclosures normally required by generally accepted accounting principles.
Disclosures are updated where appropriate.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated condensed financial statements include the accounts
of DENTSPLY International Inc. (the "Company") and its subsidiaries. For
the nine months ended September 30, 1994, the financial statements for
Gendex Dental Systems S.r.l. and Gendex Dental Systeme GmbH are included on
a current basis as compared to a two month lag in 1993. Accordingly, the
consolidated condensed statements of income and cash flows for the nine
months ended September 30, 1994 include eleven months of operations for
Gendex Dental Systems S.r.l. and Gendex Dental Systeme GmbH. The effects
of this change in reporting were insignificant to the consolidated
financial position and operations of the Company. Minority interests in
net income of consolidated subsidiary is not material and is included in
other (income) expense, net.
Inventories
- -----------
Inventories are stated at the lower of cost or market. At December
31, 1994 and September 30, 1995, the cost of $10.2 million or 11% and $9.4
million or 7.3%, respectively, of inventories was determined by the last-
in, first-out (LIFO) method. The cost of other inventories was determined
by the first-in, first-out or average cost method.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost, net of accumulated
depreciation. Except for leasehold improvements, depreciation for
financial reporting purposes is computed by the straight-line method over
the following estimated useful lives: buildings - generally 40 years; and
machinery and equipment - 8 to 15 years. The cost of leasehold
improvements is amortized over the shorter of the estimated useful life or
the term of the lease. For income tax purposes, depreciation is computed
using various methods.
8
Earnings per Share
- ------------------
Earnings per share are based on the weighted average number of common
shares outstanding. Common stock equivalents (options and warrants) had no
material effect on the earnings per share computation. All shares held by
the DENTSPLY Employee Stock Ownership Plan are considered outstanding and
are included in the earnings per share computation.
NOTE 2 - BUSINESS ACQUISITIONS
- ------------------------------
In March 1995, the Company purchased all of the outstanding capital
stock of KV33 Corporation ("KV33") in a cash transaction value at $11.5
million. The acquisition was accounted for under the purchase method of
accounting and the results of KV33's operations have been included in the
accompanying financial statements since the date of acquisition. The
excess ($10.2 million) of acquisition cost over net assets acquired is
being amortized over 25 years. Pro forma information has been omitted due
to immateriality.
In June 1995, the Company purchased approximately 96% of the
outstanding Capital Stock of Maillefer Instruments S.A. ("Maillefer") from
Maillefer stockholders for SFR11,000 per share in a cash transaction valued
at approximately $65.8 million. Based in Switzerland, Maillefer
Instruments is a manufacturer and distributor of principally endodontic
instruments.
The acquisition was accounted for under the purchase method of
accounting and the results of Maillefer's operations have been included in
the accompanying financial statements since the date of acquisition. The
aggregate purchase price of $65.8 million plus direct acquisition costs has
been allocated on the basis of preliminary estimates of the fair values of
assets acquired and liabilities assumed. Since the estimated fair value of
net assets acquired exceeded the purchase price by approximately $19.5
million, the values otherwise assignable to noncurrent assets acquired have
been reduced by a proportionate part of the excess.
The following unaudited pro forma consolidated results of operations
assume that the acquisition of Maillefer occurred on January 1, 1994 (in
thousands, except per share amounts):
Nine Months Ended September 30,
1994 1995
-------- --------
Net sales $409,205 $427,676
Income from continuing operations 39,844 38,280
Earnings per share from continuing
operations 1.44 1.42
The pro forma information does not purport to be indicative of the
results that actually would have been obtained had the operations been
combined during the periods presented.
9
The difference of $.10 per share between actual and pro forma results
in 1995 is primarily due to the inclusion in the pro forma results of five
additional months of Maillefer operations and various timing differences
between actual and pro forma income statement recognition of the effects of
purchase price accounting.
In September 1995, the Company announced the signing of a Letter of
Intent to purchase the dental manufacturing and distribution operations of
Tulsa Dental Instruments LLC for $75 million in cash and an earn-out
provision based on the operating performance of the acquired business. The
transaction is subject to due diligence, the execution of a definitive
agreement, regulatory approvals and the satisfaction of customary closing
conditions. The transaction is expected to close in 1996.
NOTE 3 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31, September 30,
1994 1995
------------ ------------
(in thousands)
Finished goods $ 46,765 $ 73,112
Work-in-process 19,238 29,438
Raw materials and supplies 22,896 27,099
-------- --------
$ 88,899 $129,649
======== ========
Pre-tax income was $.5 million lower in the nine months ended
September 30, 1994 and 1995, as a result of using the LIFO method compared
to the first-in, first-out (FIFO) method. If the FIFO method had been used
to determine the cost of the LIFO inventories, the amounts at which net
inventory is stated would be lower than reported at December 31, 1994 and
September 30, 1995 by $2.2 million and $1.7 million, respectively.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
December 31, September 30,
1994 1995
------------ ------------
Assets, at cost: (in thousands)
Land $ 16,130 $ 17,581
Buildings and improvements 41,420 66,961
Machinery and equipment 61,103 87,088
Construction in progress 5,244 6,220
-------- --------
123,897 177,850
Less: Accumulated depreciation 32,757 40,636
-------- --------
$ 91,140 $137,214
======== ========
10
NOTE 5 - SPECIAL CHARGES
- ------------------------
During the nine months ended September 30, 1995, the Company recorded,
in other income, special charges which materially impacted the comparison
with prior periods. These special charges, on a pre-tax basis, included
the following (in thousands):
Costs associated with consolidation of all executive
functions in York, Pennsylvania $2,460
Loss on sale of corporate aircraft 626
------
$3,086
======
The impact of these expenses on earnings per share was $.07 per share
in the nine months ended September 30, 1995.
NOTE 6 - DISCONTINUED OPERATIONS
- --------------------------------
On October 13, 1994, the Company announced its strategic decision to
discontinue the operations comprising its medical business. The medical
operations include Eureka X-Ray Tube Corp. (Eureka), GENDEX Medical and CMW
business units which manufacture medical x-ray tubes, medical x-ray systems
and orthopedic bone cement, respectively. The net assets of CMW and
substantially all of the net assets of Eureka were sold in the fourth
quarter of 1994.
Sales from these operations were $12.2 million and $4.9 million for
the three months ended September 30, 1994 and 1995, respectively. Income
before applicable income taxes for the three months ended September 30,
1994 and 1995 was $.1 million and $-0-, respectively. Sales for the nine
months ended September 30, 1994 and 1995 were $38.9 million and $14.9
million, respectively. Income before applicable income taxes for the nine
months ended September 30, 1994 and 1995 was $1.9 million and $-0-,
respectively. The sale of the remaining operations comprising the medical
business is expected to be completed in 1996.
The components of net assets of discontinued operations included in
the Consolidated Condensed Balance Sheets are as follows:
December 31, September 30,
1994 1995
------------ ------------
(in thousands)
Accounts and notes receivable-trade, net $ 4,650 $ 2,683
Inventories 6,312 6,922
Deferred income taxes 4,130 4,130
Prepaid expenses and other current assets 1,848 360
Property, plant and equipment, net 3,899 2,760
Other noncurrent assets, net 1,298 2,476
Cost in excess of fair value of net assets
acquired, net 3,448 3,373
Accounts payable and accrued liabilities (11,272) (11,241)
Other liabilities (6,681) (6,548)
-------- --------
$ 7,632 $ 4,915
======== ========
11
NOTE 7 - NOTES PAYABLE AND LONG-TERM DEBT
- -----------------------------------------
The increases from December 31, 1994 in Notes payable and current
portion of long-term debt ($3.8 million) and Long-term debt ($77.3 million)
were primarily due to utilization of the Company's credit facilities for
the following transactions:
- During the nine months ended September 30, 1995, the Company
repurchased 1.3 million shares of its common stock for $42.7 million,
in accordance with the share repurchase program authorized by the
Board of Directors in December 1994. The repurchased shares included
.8 million shares from the McDonough family interests pursuant to an
agreement entered into on February 8, 1995, in connection with John J.
McDonough's resignation as Chief Executive Officer of the Company.
- In March, 1995, the Company paid $11.5 million to acquire the
outstanding capital stock of KV33 Corporation.
- In June, 1995, the Company paid $65.8 million to acquire approximately
96% of the outstanding capital stock of Maillefer Instruments, S.A.
12
DENTSPLY INTERNATIONAL INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Quarter Ended September 30, 1995 Compared to Quarter Ended September 30,
1994
In the quarter ended September 30, 1995, net sales increased $7.4 million,
or 5.7%, to $137.3 million from $129.9 million in the same period in 1994.
Sales in the United States decreased due to discontinuing certain dealer
incentives which previously had the effect of encouraging dealers to place
stocking orders during the third quarter. Sales increased in Europe and
other international markets. Maillefer Instruments S.A. (Maillefer)
accounted for a significant portion of the sales increase in Europe.
Gross profit decreased $2.7 million, or 4.1%, to $62.9 million from $65.6
million in the third quarter of 1994. As a percentage of net sales, gross
profit decreased from 50.5% in the quarter ended September 30, 1994 to
45.8% in the same period of 1995. In 1994, the dealer incentives favorably
impacted sales mix towards higher margin products and the resulting higher
sales volume improved overhead absorption, thereby increasing the gross
margin percentage. In addition, the gross margin percentage in 1995 was
impacted by lower margins on the sale of Maillefer products due to purchase
accounting.
Selling, general and administrative expenses for the third quarter of 1995
increased $4.5 million, or 11.1%. As a percentage of net sales, expenses
increased from 31.6% in the quarter ended September 30, 1994 to 33.2% for
the same period in 1995. The main reason for the percentage increase is
that the higher United States sales level in 1994 attributed to dealer
incentives was achieved with minimal additional selling, general and
administrative costs. In addition, the Company incurred severance costs in
1995 relating to cost reduction programs in North America and Europe.
The Company recognized other income of $.7 million in the third quarter of
1995 compared to other expense of $.2 million in the third quarter of 1994.
Exchange gains due to the strengthening of the U.S. dollar were the main
reason for the other income.
Income from continuing operations before income taxes of $15.8 million for
the three months ended September 30, 1995 decreased $6.8 million, or 30.2%,
from $22.6 million in 1994.
The Company's effective tax rate on income from continuing operations
before income taxes was 40.0% for the three months ended September 30,
1995, compared to 39.1% for the three months ended September 30, 1994.
Earnings per share from continuing operations of $.35 for the three months
ended September 30, 1995 decreased $.15, or 30.0% from $.50 for the three
months ended September 30, 1994.
Net sales from the discontinued medical business for the quarter ended
September 30, 1995 were $4.9 million, a decrease of $7.3 million from the
same period of 1994, as a result of the divestiture during the fourth
quarter of 1994 of two of the three business units identified as
discontinued operations.
13
Nine Months Ended September 30, 1995 Compared to Nine Months Ended
September 30, 1994
During the first nine months of 1995, net sales increased by $25.6 million,
or 6.6%, to $410.3 million from $384.7 million in the same period of 1994.
Sales in the United States decreased due to discontinuing certain dealer
incentives which previously encouraged dealers to place stocking orders in
the third quarter of the year. Excluding the impact these incentives had
on sales in 1994, sales would have increased in the United States in 1995.
After adjusting for the impact of Maillefer and the weaker U.S. dollar,
sales in Europe also increased. The amount of the increase in net sales
for the first nine months of 1995 attributable to a weaker U.S. dollar was
significantly offset by the additional two months of sales reported in the
first quarter of 1994 due to the elimination of a reporting lag at two
foreign locations.
Gross profit increased $8.7 million, or 4.6%, to $199.5 million from $190.8
million in the first nine months of 1994 as a result of higher net sales.
As a percentage of net sales, gross profit decreased from 49.6% in the nine
months ended September 30, 1994 to 48.6% in the same period of 1995. In
1994, the dealer incentives favorably impacted sales mix towards higher
margin products and the resulting higher sales volume improved overhead
absorption, thereby increasing the gross margin percentage. In addition,
the gross margin percentage in 1995 was impacted by lower margins on the
sale of Maillefer products due to purchase accounting.
Selling, general and administrative expenses for the first nine months of
1995 increased $12.6 million, or 10.5%. As a percentage of net sales,
expenses increased from 31.1% in the nine months ended September 30, 1994
to 32.3% for the same period of 1995. The main reason for the percentage
increase is that the higher United States sales level in 1994 attributed to
dealer incentives was achieved with minimal additional selling, general and
administrative costs. In addition, 1995 was impacted by higher than normal
expenditures for new product promotions and the implementation of
management information systems in Europe.
The Company incurred other expenses of $2.2 million for the first nine
months of 1995, compared to other income of $.8 million in the same period
of 1994. The Company took a one-time charge of $3.1 million in the second
quarter of 1995 to cover the costs of closing down its Executive Offices in
Illinois and consolidating its executive operations in York, Pennsylvania.
This charge on an after tax basis was $1.8 million, or $.07 per share.
Income from continuing operations before income taxes of $59.3 million for
the nine months ended September 30, 1995 decreased $7.0 million, or 10.6%,
from $66.3 million in 1994. Without the one-time charge for closing down
the Executive Offices in Illinois and consolidation of executive operations
in York, Pennsylvania, income from continuing operations before income
taxes for the first nine months of 1995 was $62.4 million, a decrease of
$3.9 million, or 5.9%, over the same period of 1994.
The Company's effective tax rate on income from continuing operations
before income taxes decreased from 41.3% in the nine months ended
September 30, 1994 to 39.8% for the nine months ended September 30, 1995
due primarily to lower foreign losses without tax benefit in 1995.
Earnings per share from continuing operations of $1.32 for the nine months
ended September 30, 1995 decreased $.08, or 5.7%, from $1.40 for the nine
months ended September 30, 1994. Without the one-time charge in the second
14
quarter to cover the costs of closing down the Executive Offices in
Illinois and consolidating executive operations in York, Pennsylvania,
earnings per share were $1.39, a decrease of $.01 over the year earlier
period.
Net sales from the discontinued medical business for the nine months ended
September 30, 1995 were $14.9 million, a decrease of $23.9 million from
the same period in 1994 as a result of the divestiture during the fourth
quarter of 1994 of two of the three business units identified as
discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
In March 1995, the Company paid $11.5 million to acquire the outstanding
capital stock of KV33 Corporation ("KV33"), based in Tucson, Arizona. KV33
designs, develops, manufactures, and markets disposable articulators for
the dental laboratory market, and is the leading manufacturer and
distributor of disposable articulators in the United States. Articulators
are used by dental laboratory technicians to replicate human jaw movement
when performing restorative procedures such as crown and bridge
restorations. KV33 plastic articulators are a cost-effective, disposable
alternative to conventional multi-use metal articulators which require
routine disinfecting.
In June 1995, the Company acquired approximately 96% of the outstanding
Capital Stock of Maillefer Instruments S.A. ("Maillefer") in a cash
transaction for $65.8 million. Maillefer is the world's leading
manufacturer and distributor of endodontic instruments. Based in
Ballaigues, Switzerland, Maillefer's product offerings include endodontic
broaches, files, burs, pins and post systems, surgical twist drills, and a
variety of other instruments and accessory products. Maillefer products
have achieved a world class reputation for high quality through continuous
new, innovative research and development and state-of-the-art manufacturing
processes.
The Company obtained the funds for the aforementioned acquisitions from a
new $60.0 million term loan (which has the same maturity date, interest
rate structure, and covenants as the Company's existing $175.0 million Bank
Revolving Loan Facility), short-term bank borrowings, and cash on hand.
Investing activities for the nine months ended September 30, 1995 include
capital expenditures of $11.8 million.
During 1995 the Company repurchased 1.26 million shares of its common stock
for $42.7 million, in accordance with the share repurchase program
authorized by the Board of Directors in December 1994. The repurchased
shares included .8 million shares from the McDonough family interests
pursuant to an agreement entered into on February 8, 1995 in connection
with John J. McDonough's resignation as Chief Executive Officer of the
Company.
Excluding the net assets of discontinued operations, at September 30, 1995,
the Company's current ratio was 2.4 with working capital of $139.7 million.
This compares with a current ratio of 2.0 and working capital of $92.2
million at December 31, 1994. The increase was primarily due to the
acquisition of Maillefer.
15
The Company expects to be able to finance cash requirements, including
capital expenditures, stock repurchases, and debt service and the
anticipated acquisition of the dental manufacturing and distribution
operation of Tulsa Dental Instruments LLC, from funds generated from
operations and amounts available under the existing Revolving Credit
Agreement.
For the nine months ended September 30, 1995, cash flows from operating
activities were $34.8 million compared to $45.9 million for the nine months
ended September 30, 1994. The decrease is due mainly to higher income tax
payments. In 1995, income tax payments included taxes on the gain from the
disposal of the medical business. Income tax payments for 1994 were
reduced by the deduction of the prepayment penalty on the repayment of the
senior debt in January 1994.
IMPACT OF INFLATION
The Company has generally offset the impact of inflation on wages and the
cost of purchased materials by reducing operating costs and increasing
selling prices to the extent permitted by market conditions.
16
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
The Company and its subsidiaries are from time to time parties to
lawsuits arising out of their respective operations. The Company believes
that pending litigation to which it is a party will not have a material
adverse effect upon its consolidated financial position or results of
operations.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed herewith:
---------
Number Description
------ -----------
11 Statement regarding computation
of earnings per share.
27 Financial Data Schedule
(pursuant to Item 601(c)(1)(iv) of
Regulation S-K, this exhibit shall
not be deemed filed for purposes
of Section 18 of the Securities
Exchange Act of 1934, as amended)
(b) Reports on Form 8-K
-------------------
On July 17, 1995 the Company filed a Form 8-K (Items 2 and 7)
reporting the acquisition of Maillefer Instruments, S.A.
Amendment No. 1 to this Form 8-K was filed on Form 8-K/A on
September 15, 1995. Financial statements filed with Form 8-K/A
were as follows:
(1) Financial statements of Maillefer Instruments, S.A. for the
year ended December 31, 1994
(a) Balance Sheet
(b) Income Statement
(c) Notes to the Financial Statements
(d) Generally Accepted Accounting Principles (GAAP)
Reconciliation
(2) Pro Forma Financial Information
(a) Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1995
(b) Pro Forma Condensed Consolidated Statements of Income
for the three months ended March 31, 1995 and for the
year ended December 31, 1994.
(c) Notes to Unaudited Pro Forma Condensed Consolidated
Financial Information
17
Signatures
__________
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENTSPLY INTERNATIONAL INC.
November 14, 1995 /s/ Burton C. Borgelt
____________________ ___________________________________
Date Burton C. Borgelt
Chairman and
Chief Executive Officer
November 14, 1995 /s/ Edward D. Yates
____________________ ___________________________________
Date Edward D. Yates
Senior Vice President and
Chief Financial Officer
18
EXHIBIT INDEX
-------------
Number Description Sequential Page No.
------ ----------- -------------------
11 Statement regarding computation
of earnings per share. 20
27 Financial Data Schedule 21
(pursuant to Item 601(c)(1)(iv) of
Regulation S-K, this exhibit shall
not be deemed filed for purposes
of Section 18 of the Securities
Exchange Act of 1934, as amended)
19
DENTSPLY INTERNATIONAL INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
Earnings per common share:
- --------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1994 1995 1994 1995
-------- -------- -------- --------
(in thousands, except per share data)
Weighted average common
shares outstanding 27,805 27,001 27,763 27,033
Income from continuing
operations $ 13,781 $ 9,479 $ 38,934 $ 35,688
Income from discontinued
medical segment 75 - 1,311 -
-------- -------- -------- --------
Net income $ 13,856 $ 9,479 $ 40,245 $ 35,688
======== ======== ======== ========
Earnings per common share:
From continuing operations $.50 $.35 $1.40 $1.32
From discontinued operations -- -- .05 --
---- ---- ----- ----
Net income $.50 $.35 $1.45 $1.32
==== ==== ===== =====
20