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DENTSPLY International Inc. (XRAY)
Q1 2010 Earnings Call
April 29, 2010 8:30 am ET
Bret Wise – Chairman and CEO
Chris Clark – President and COO
Bill Jellison – SVP and CFO
John Kreger - William Blair
Tao Levy - Deutsche Bank
Jeff Johnson – Robert W. Baird & Co.
Adam Picard (ph) - Barclays Capital
Derek Leckow – Barrington Research
Brian Delaney - EnTrust
Scott Green – Bank of America
Previous Statements by XRAY
» DENTSPLY International Inc. Q4 2009 Earnings Call Transcript
» DENTSPLY International Inc. Q3 2009 Earnings Call Transcript
» DENTSPLY International Inc. Q2 2009 Earnings Call Transcript
Thank you, Christian. Good morning, everyone, and thank you for joining us on our first quarter call. This is Bret Wise, Chairman and CEO, and also with us today are Chris Clark, our President and COO, and Bill Jellison, our Senior Vice President and CFO. Each of us will have some prepared remarks this morning and then following our prepared remarks we'll be glad to answer any questions you may have.
Before we get started it's important to note that this call will include some forward looking statements and those are subject to risks and uncertainties that are described in our SEC filings, including our most recent annual report on Form 10-K, as well as our quarterly reports, press releases, and other filings.
The company undertakes no obligation to update or revise the forward looking statements, to reflect events or circumstance that may arise after the date of this call. And as usual, a recording of this conference call in its entirety will be available on our website.
This morning we announced our results for the first quarter 2010 and we're pleased to report a continued acceleration in growth, following what we believe was a bottoming of the dental markets mid last year. As we expected and commented on in our year-end call, we expect 2010 to start slow, probably with a gradual recovery that varies widely by geographic region. This frankly in fact is what we have seen, and although there are promising signs in certain geographies for product categories, it is apparent that we are still in the early stages of recovery of many of the dental markets.
It's important to keep in mind that the dental market is usually a bit of a trailing indicator both going into and also coming out of recessions as our market tends to lag the overall economy just a bit.
For the first quarter of 2010 our overall growth was 7.7% aided by internal growth and also benefiting from a weaker dollar on a year over year basis. Sales without precious metal increased 6.8% and that was driven by internal growth of 2.5%, acquisition growth of 0.2%, and giving a constant currency growth of 2.7% and was also aided by currency which added 4.1% in the first quarter.
The internal growth by geography was 0.9% growth in the US, 2.4% growth in Europe, and 6.0% growth in the rest of the world category. On a product category basis we continue to see some acceleration in the chairside consumables which grew mid single digits. The specialty products as a category continued low single digit growth and that is consistent really with what we saw throughout 2009, and the lab category contracted low single digits.
The continued improvement in the chairside consumables I think is encouraging as we would expect those products that are used every day in the operatory really to be the first to recover and begin to grow. This is an area of course where we had a favorable comparison last year, particularly outside the US with some dealer destocking in the base, however, despite that we view the growth this quarter as encouraging and reflective of early signs of more normal growth returning to this market, although slowly.
In the specialties I would say there's not a robust recovery at this point, however, as we stated before these are in some ways the most discretionary and most expensive procedures. It's also important to realize that we had internal growth in this category in each quarter last year so for us we're not going up against an easy base period at this point. Despite that, it's comforting to see that these products are continuing to grow, albeit slowly at this point.
And although the prosthetics remain negative in the quarter, the degree of such was much less than we had seen in prior quarters, so perhaps this is an area that is also turning the corner or getting close to turning the corner at this point.
Overall I would say that there's some reasonably good signs on many fronts in the dental market both on a geographic basis and a product category basis. From an earnings perspective we saw gross margins improve sequentially by 200 basis points compared to the fourth quarter 2009. You might recall from our year-end call that we had expected to see some sequential improvement in our margins and although we also commented that there would likely be some year over year declines remaining in the first quarter, and that was due to both a tough comparison coming out of the first quarter last year, some adverse currency impacts that will be affecting us this year, also lower plant absorption as we had much tighter controlled inventories in the first quarter of 2010 versus what happened in 2009.,