DENTSPLY International Inc. (XRAY)
Q2 2010 Earnings Conference Call
July 29, 2010 08:30 am ET
Bret Wise - CEO
Bill Jellison - CFO
Chris Clark - COO
Glen Santangelo - Credit Suisse
Jeff Johnson - Robert Baird
Derek Leckow - Barrington Research
Ravi Fadah - William Blair
Elliot Feldman - Barclays Capital
Scott Green - Bank of America
Previous Statements by XRAY
» DENTSPLY International Q1 2010 Earnings Call Transcript
» DENTSPLY International Inc. Q4 2009 Earnings Call Transcript
» DENTSPLY International Inc. Q3 2009 Earnings Call Transcript
Okay thank you Ben and good morning everyone. Thank you for joining us on our second quarter earnings call. This is Bret Wise, Chairman and Chief Executive Officer and also with us today are Chris Clark our President, Chief Operating Officer, and Bill Jellison our Senior Vice President & Chief Financial Officer. I’d like to begin today’s call with some overview comments on our results for the quarter, and also our view of the state of the global dental market. And I’ll then have Bill Jellison provide more details on the financial results. And following our comments, of course we’ll be all glad to answer any questions 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. And 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 our periodic reports on Form 10Q, our press releases and other filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances 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 second quarter of 2010 and are pleased to report a continuation of the sequential improvement that we saw emerging, beginning in the third quarter last year, continuing with positive internal growth in the fourth quarter 2009, and now a slight acceleration of growth as we move through the first half of 2010. Overall our sales improved 2.2% in the quarter, and without precious metal content improved 1.5%. This growth was driven by 2.5% internal growth, consistent with what we saw in the first quarter, and acquisition growth of 0.3% giving us a constant currency growth of 2.8%. This allowed us to overcome a negative comparison from currency of a minus 1.3% and that was driven largely by the rapid devaluation of the euro against the dollar during the quarter.
The 2.5% internal growth reflects potentially flat growth in the US, down 0.1%, 4.4% growth in Europe and 3.7% growth for the rest of world. US growth reflects a continuation of the low single digit growth we’ve experienced in the specialties in the aggregate, and that’s really consistent with what we saw in the first quarter, offset by slightly weaker sales in the lab products which we were down low single digits in the quarter. Our overall assessment of the US market really has not shown any meaningful improvement over what we saw in the first quarter. However, that should not be a surprise as we look the economic data and the fact that we are really experiencing a jobless recovery in the US. And of course we will know more about the overall market when the distributors report in the next few weeks.
European growth remains strong at 4.4% in part by easier comparisons from the prior year, particularly in the CIS region, but also strong growth this quarter in our consumables, and in essentially all of our specialty categories. The remainder of the world had internal growth of 3.7% and that was driven mostly by strong performance in Asia, Latin America and Canada. A worldwide performance by product category was low single digit growth in consumables, lab was negative low single digits and the specialty category was positive mid-single digits.
There is always much interest in our dental implant business which had internal growth in the 3% to 4% range, led by double-digit growth in the US and low single digit growth in Europe. We believe we continue to take share in global implant market driven by two very strong implant product platforms, and also the investments we have made in sales, marketing and R&D over the past several years.
Our earnings on a non-GAAP basis came in at $0.50 per share; it’s a 2% improvement on stronger operating margins of 20.3% again on a non-GAAP basis which was a 20 basis point improvement over the prior year quarter. These are the strongest operating margins we have delivered since 2008 prior to the recession. Our earnings would have been much stronger on a currency neutral basis, however the rapid decline in the euro in particular, and strength of the yen combined to hurt earnings by a couple pennies a share in the second quarter.
In addition, we continue to have very strong cash from the quarter, with operating cash flows year-to-date of $150 million, that’s up 30% from the prior year. Year-to-day we have completed four small acquisitions, two of which were in July and today we repurchased 5.4 million shares under our share authorization which was expanded in March. Our balance sheet remains in really in very good shape, we are producing very strong cash flows and improving results and we feel good about our prospects.