Dentsply International, Inc. (XRAY)
Q3 2010 Earnings Call
October 28, 2010 8:30 am ET
Bret Wise - Chairman & CEO
Chris Clark - President & COO
Bill Jellison - SVP & CFO
Brandon Couillard - Jefferies
Jeff Johnson - Robert W. Baird
Scott Green - Banc of America/Merrill Lynch
Previous Statements by XRAY
» DENTSPLY International Inc. Q2 2010 Earnings Call Transcript
» DENTSPLY International Q1 2010 Earnings Call Transcript
» DENTSPLY International Inc. Q4 2009 Earnings Call Transcript
Each of us will have some prepared statements to make this morning and then of course after our remarks we will be 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. These should be considered in conjunction with our disclosures of the risk factors and uncertainties in our 10-K and our quarterly and periodic reports 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 and its entirety will be available on our website.
This morning we are pleased to announce our results for the third quarter of 2010 with revenues up 2% on a reported basis and positive 0.1% on a non-GAAP basis and that's excluding precious metal content.
We continue to see the dental consumable market is stable overall with improvements occurring in international markets and the U.S. market needed by weak or non-existed job growth at this point.
As mentioned our sales ex-precious metals were essentially flat up 0.1%. This was driven by 2.0% internal growth, 0.4% acquisition growth to yield constant currency growth of 2.4 and this was essentially offset by negative currency translation of 2.3% to arrive at that overall growth number of 0.1% ex-precious metal.
On a regional basis internal growth was down 0.8% in the U.S., was positive 4.5% in Europe and was positive 2.7% for the rest of world. Our U.S. growth was aided by continued positive growth in our specialty categories dental implants in particular and through chairside consumables, but was hurt by lower small equipment sales, also a very tough comp from last year when we are running heavy end-user promotions on certain of our small equipment products.
In the U.S. we are essentially flat on internal growth for the first nine months of the year and our overall assessment in the U.S. market has not shown any meaningful improvement over what we saw in first half of the year.
However, I think that should not be a surprise to anyone at this point as we look at the economic data and the job list recovery resulting in slow growth or no growth, perhaps of offices at this point.
European growth running strong at 4.5%, that's helped in part by an easier comparison from the prior year particularly in the CIS region, but also from stronger and all of our specialty categories and in chairside consumables while lab products continue to represent a headwind on our European growth in the quarter.
Year-to-date internal growth in Europe is 3.7%; the reminder of the world had internal growth of 2.7 for the quarter and is 4.0% year-to-date. And we see generally positive development in most of the regions that we have in that category.
As usual we did amount for implemented price increases on October 1 in most of our consumable products, given very low interest rates on cash holdings, we believe there are may have been a bit more purchasing ahead of the price increases this year which we would expect to wash up the fourth quarter.
From our perspective this makes sense as liquidity is certainly better than it was a year ago at this time and the dealers can easily make an extra one to two percentage points in 30 to 60 days by increasing their inventory ahead of the price increases. And that can be significant to the yield for their business models.
Our earnings non-GAAP came in at $0.45, it was $0.44 on a GAAP basis, $0.45 on a non-GAAP basis and that was a 2.3% improvement over the prior year quarter again on a non-GAAP basis. This is basically consistent with the trend we've experienced in the first half of the year, although, we are now coming up against slightly tougher comps both in the third quarter and again in the fourth quarter.
Earnings continue to be hurt by currency translation and transaction effects. Despite that we saw higher gross margins in the quarter that were essentially offset by higher SG&A spending as the investments we've gained to implement beginning this year are now fully in place. And the prior year base spending was very low in both the third and fourth quarters of last year.
We would expect this trend to continue for the fourth quarter with improving gross margins and with higher spending in event of product releases in 2011; and also as compared to what was a very low base for SG&A expense in the fourth quarter of last year.