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DENTSPLY International (XRAY)
Q4 2012 Earnings Call
February 20, 2013 8:30 am ET
Derek W. Leckow - Vice President of Investor Relations
Bret W. Wise - Chairman, Chief Executive Officer and Member of Executive Committee
Christopher T. Clark - President and Chief Operating Officer
William R. Jellison - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Steve Beuchaw - Morgan Stanley, Research Division
John Kreger - William Blair & Company L.L.C., Research Division
Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division
Robert P. Jones - Goldman Sachs Group Inc., Research Division
Glen J. Santangelo - Crédit Suisse AG, Research Division
Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division
Yi-Dan Wang - Deutsche Bank AG, Research Division
Previous Statements by XRAY
» DENTSPLY International's CEO Discusses Q3 2012 Results - Earnings Call Transcript
» DENTSPLY International's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» DENTSPLY International's CEO Discusses 1Q 2012 Results - Earnings Call Transcript
Derek W. Leckow
Thank you very much, Mark. Thank you, all, for joining us this morning to discuss DENTSPLY International's fourth quarter and fiscal 2012 results. Joining us on the call today are Bret Wise, Chairman and CEO; Chris Clark, President and COO; and Bill Jellison, Senior Vice President and CFO. We'll have some prepared remarks, and then we'll be glad to answer any questions you may have.
I hope you all had a chance to review the press release, which we issued earlier this morning. A copy of the press release is also available for download on our website, www.dentsply.com. We've also provided a set of supplemental slides to accompany this call, also available for download under the Investor Relations section.
Before we get started, it's important to note that this call may include forward-looking statements, including risks and uncertainties. These should be considered in conjunction with the risk factors and uncertainties that are described in our SEC filings. The company undertakes no obligation to update or revise any forward-looking statements reflecting events or circumstances that may arise after the date of this call. A recording of this call in its entirety will be available on our website.
As you can see in the release, our results this quarter included a number of nonrecurring items and other non-GAAP adjustments. Our comments on this call will focus on results, including certain adjustments that provide operational insight, excluding these items. These items are noted on the non-GAAP reconciliation tables contained in the release. We'll also note that our earnings guidance is also presented on an adjusted basis.
With that, I'd like -- now like to turn the call over to Bret Wise. Bret?
Bret W. Wise
Thank you, Derek, and good morning, everyone. Thank you for joining us on our year-end call this morning. Today, we're very pleased to report record sales and earnings for both the fourth quarter and also the full year 2012. Before we dive into the results, I think it's important to take a look back at what the goals and initiatives were we had coming into the year and how we did against those.
So as you recall, on the same call last year, we had several important goals that we needed to achieve in 2013. Most notably, those were to continue to grow organically above the market, to have a successful midyear relaunch of our orthodontics product line, to reach our goals in the integration of Astra Tech, while continuing to grow above market in the premium implants segment, and to have strong cash flow generation for debt reduction during the year. In addition, we had forecasted that our operating margins would lag in the first half of the year but would turn positive in the back half of the year.
All told, I think we did very well against these objectives in 2012. For the full year, internal growth was 4.0%, which we believe is at least a full point above the market. A strong execution on new products launched in both 2011 and 2012 contributed to this, as well as the strategic investments that we've made in sales and marketing resources. In orthodontics, we did relaunch the line midyear and we recaptured what we estimate to be about 1/3 of the market share that we had lost following the natural disaster in Japan. Our orthodontics boosted our internal rate -- growth rate by 150 to 160 basis points in both the third and fourth quarters, while for the full year, it was basically neutral to the overall results.
On Astra Tech, by the end of the first quarter 2013, we will have essentially completed phase 1 of the Astra Tech integration, which is the most disruptive part of the integration, by merging the 2 divisions and their sales forces in approximately 20 countries. We knew that this would create risk and it would be disruptive to our customers and our employees, and we would have the rest out of the field for training, et cetera, during this period of time. However, the execution so far has been very good, in my view, and we continue to perform above the market despite this disruption.
On our capital structure, we did complete one very small acquisition late in the fourth quarter and completed some share repurchases earlier in the year. However, the lion's share of our cash flow in 2012 went towards improving the balance sheet. We made good progress on this throughout the year, including the fourth quarter where we had very strong cash flow generation, in fact, a record quarterly operating cash flow generation for the company. At this point, we're already closing in on our longer-term leverage ratio targets, and I expect we'll bring these down further in 2013, but we now also have more flexibility for acquisitions and returning cash to shareholders.