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Dentsply International, Inc. (XRAY)
Q4 2010 Earnings Conference Call
February 9, 2011 8:30 a.m. ET
Bret Wise – Chairman & CEO
Chris Clark – President & COO
Bill Jellison – SVP & CFO
Glenn Santon Joe [ph] – Credit Suisse
Derek Leckow – Barrington Research
Brandon Couillard – Jefferies
Larry Marsh – Barclays Capital
Scott Green – Banc of America/Merrill Lynch
Jeff Johnson – Robert W. Baird
Robbie [ph] – William Blair
Greg Halter - Great Lakes Review
Previous Statements by XRAY
» Dentsply International, Inc. CEO Discusses Q3 2010 Results - Earnings Call Transcript
» DENTSPLY International Inc. Q2 2010 Earnings Call Transcript
» DENTSPLY International Q1 2010 Earnings Call Transcript
Thank you, Clay and good morning everyone. Thank you for joining us on our year end conference 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. On today's call, each of us will have some prepared statements and following those remarks, we'll be glad to answer any questions you may have.
Before we get started, it's important to note that this call may include forward-looking statements involving 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 to reflect events or circumstances that may arise after the date of this call. And a recording of this call in its entirety will be available on our Web site.
This morning, we are pleased to announce record performance for the fourth quarter and the full year 2010. For the fourth quarter, sales XPM were up 0.3% with constant currency growth of 2.5% and negative currency headwinds of 2.2%. The constant currency growth was comprised of 1.7% internal growth and 0.8% growth from acquisitions.
I think it's important to note when you look at the internal growth for the quarter, that in the third quarter conference call we commented that we thought the price increase pre-buy ahead of our October 1 price increase has probably move half a point out of the fourth quarter and into the third quarter. And on this call, we can confirm it was probably half a point or maybe just above that.
This quarter caps the full year of 2010 where we had sales growth, XPM of 2.1% with constant currency growth of 2.6% and currency a negative of 0.5%. The constant currency growth for the full year was comprised of internal growth of 2.1% and acquisition growth of 0.5%.
Based on the market data we have available to us today, these results put us at maybe the high end of what we believe the global dental consumable market grew in 2010. We'd say the feel of the market is better today than when we entered 2010 and is showing signs of gradually accelerating. However, the market has not yet returned to the historical growth pattern that we saw before the recession.
The fourth quarter geographic and internal growth XPM was plus 0.6% in the U.S., plus 1.0% in Europe and plus 4.5% for the rest of the world. In the quarter, there was a notable improvement in the U.S. We've also benefited from positive internal growth in consumables and specialties and our non-dental segment, while lab was slightly negative.
For the full year internal growth was plus 0.1% or just barely positive in the U.S., plus 2.9% in Europe and plus 4.1% for the rest of the world. Internal growth for the full year kind of mirrored the pattern that I just described for the fourth quarter with positive internal growth in consumables, specialties and non-dental and a slight decline in prosthetics.
Earnings for the fourth quarter were helped by gross margins that improved 70 basis points versus the prior year. That's measured on a sales XPM basis, while SG&A was higher as a percent of sales this quarter, performance was actually better than it may appear from this raw comparison as it was one of our best quarters over the past 10 to 12 quarters. However, we were coming up against a very low SG&A comparison from the last quarter of last year where expenses were very low. In fact that was one of the lowest ratios that we had had on record in the past decade.
We signaled this throughout the year starting on our call in February 2010 that the comparison in the backhalf of the year on SG&A would be difficult and in fact, that's what we see emerging here. Probably a more meaningful comparison might be expenses sequentially which were 100 basis points lower than the third quarter of 2010 and 60 basis points lower than the full year average for 2010.
Overall, on a non-GAAP EPS basis we reported a record of $0.51 a share for the fourth quarter. That's a 6.3% improvement over the prior year, which was also a record. For the full year, non-GAAP EPS was $1.90. Again, that's also a record and that compares to $1.84 in 2010, a 3.3% improvement.
During 2010, we completed seven business development transactions composed of primarily traditional acquisitions but also investments in new technologies and minority investments. And at last quarter of the year, we completed two transactions, including a minority investment in DIO in South Korea, which is a low cost in plant producer focused primarily on the emerging markets.