DENTSPLY International Inc. (XRAY)
Q1 2011 Earnings Call
April 28, 2011 8:30 am ET
Derek Leckow – VP, IR
Bret Wise – Chairman and CEO
Chris Clark – President and COO
Bill Jellison – SVP and CFO
Robert Jones – Goldman Sachs
John Kreger – William Blair
Brandon Couillard – Jefferies
Jeff Johnson – Robert Baird
Elliot Feldman – Barclays Capital
Scott Green – Bank of America/Merrill Lynch
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Thank you very much, Kelly. And good morning, everyone. Thank you for joining us for DENTSPLY’s first quarter 2011 earnings conference call. Also with us today are Bret Wise, Chairman and CEO; Chris Clark, our President and COO; and Bill Jellison, our Senior Vice President and CFO. I hope you all had a chance to review our press release, which we issued earlier this morning. A copy of the press release is available on our www.dentsply.com.
Before we get started, it is 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 website.
I would now like to turn the call over to DENTSPLY’s Chairman and CEO, Bret Wise. Bret?
Thank you, Derek. And good morning, everyone. Thank you for joining us on our call. Before we get started, I’d like to officially welcome Derek to our team as Vice President of Investor Relations. Many of you know Derek who is many years following dental companies, including DENTSPLY on the sell side, and we are very pleased to have him join us. He has significant experience in our markets and I think will be a significant addition to our team.
Moving to the results, this morning we are very pleased to announce record results for our first quarter 2011. As noted in our release, we delivered improved sales growth rates and much improved earnings performance. In fact, this is the best growth that we’ve seen since before the recession began in 2008.
From a revenue perspective, we recorded total sales ex-precious metal of 6%, and that was driven by constant currency growth of 4.6%. The 4.6% was comprised of internal growth of 3.8% and 0.8% growth from acquisitions. In addition, we also benefited from currency this quarter. This is a welcome relief as the euro and other currencies gained strength against the dollar during the quarter, and that added 1.4% to our sales growth ex-PM.
Our 3.8% internal growth does reflect the negative impact from the events in Japan in the quarter. However, it was modest, less than 0.5 percentage point. Absent that single event, we believe we would have reported internal growth in the low 4% range.
Geographic internal growth was plus 1.1% in the US, plus 4.1% in Europe, and plus 8.4% for the rest of the world. The US growth was aided by double-digit growth in implants and solid growth in consumables, and was negatively impacted by the supply outage for orthodontic product source from Japan, as we quickly put our customers on allocation following the March 11th quake and tsunami.
On an adjusted basis, including adjusting for the impact of the supply issue in Japan, internal growth in the US would have been closer to 2%. Internal growth in Europe continued to be strong at 4.1%. And in fact, this may be understated is the key tradeshow for the new product launches in Europe was the International Dental Show, which was held the last week of the quarter in Cologne, Germany.
We had a very strong presence in the show, including numerous new product launches with most orders, the majority of the orders being shipped the first week of April. We also saw a very strong reception for our base products, our existing product lines during the show, and I’ve asked Chris to comment on this further in a moment.
In rest of world, as I mentioned, we grew 8.4% on an internal growth basis. We had very strong growth in Asia-Pacific, Latin America, Middle East, and Canada. And as expected, due to the circumstances, we are slightly negative in Japan. Overall, we believe the consumable dental market made considerable progress towards returning to what we would view as more normal growth rates as we enter 2011.
Although the market growth may not have returned completely to the pre-recession levels, they are clearly trending in that direction at present. This is obviously very good news for the industry, for the market, and for DENTSPLY, and we are hopeful that these trends will continue.
Our product line growth was led by the specialty group and chair-side consumables, which were both up mid-single digits on an internal growth basis. The strongest growth was in implants, which had positive double-digit constant currency growth and was just under double digits on an internal growth basis. But we also saw substantially improved growth rates in our chair-side consumables and our endodontics driven in part by new product introductions.