DENTSPLY International Inc. (XRAY)
Q2 2011 Earnings Call
July 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
Jeff Johnson – Robert Baird
Jonathan Block – SunTrust Robinson
Verdell Walker – Goldman Sachs
Ravi Fadah [ph] – William Blair
Ravi Fadah – William Blair
Scott Green – Bank of America/Merrill Lynch
Larry Marsh – Barclays Capital
Brandon Couillard – Jefferies
Previous Statements by XRAY
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» DENTSPLY International Inc. Q2 2010 Earnings Call Transcript
Thanks very much Caitlyn, and good morning, everyone. Thanks for joining us for DENTSPLY’s second quarter 2011 earnings conference call. I am here with 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 website at www.dentsply.com.
Before we get started, it is important to note 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. This morning we’re very pleased to announce record results for our second quarter of 2011. As noted in our release this morning, we experienced higher total sales growth rates and improved earnings performance in the quarter even in a phase of the headwinds that we’re facing from our supply disruption in orthodontics.
From a revenue perspective, we recorded total sales growth ex-precious metals of 8.7% which is the highest growth rate that we’ve had since the Q4 of 2009. Our constant currency growth was approximately 1% that includes approximately 0.1% from internal growth and the remainder from acquisitions. These figures are inclusive of our Japanese and orthodontics businesses. If we look at our internal growth excluding sales in the Japanese markets and orthodontics, the internal growth rate was 3.4% and constant currency growth was over 4%.
This reinforces our belief that the global dental market continue to slowly improve and while still not back to the long-term potential of the market, it’s certainly moving in the right direction. Currency provided a welcome relief this quarter as you know, offsetting the headwinds from Japan and orthodontics as both the euro and the Swiss franc gained strength over the dollar versus the prior year quarter to add 7.8% from currency overall. Geographic internal growth was negative 0.9% in the U.S., negative 0.8% in Europe and plus 2.3% in the rest of the world. And of course these growth rates include or reflect the decline in the orthodontics business which was down more than 20% in our key markets.
That was offset by positive internal growth across the rest of our business from the aggregate in particular endodontics and restoratives which were quite strong and our non-dental business which also continues to recover. Excluding orthodontics and Japan, our internal sales growth rate was approximately 2% in both U.S. and Europe and was about 9% outside the United States. Just a quick note on Europe, the growth rate ex-ortho and ex-Japan here slowed from about 4% in the first quarter to about 2% this quarter. Looking at the calendar, I think there is a couple of reasons while there may have been some acceleration into the first quarter at the expense of Q2 here.
The first is the timing of the Eastern Holidays which impacted Q1 more last year and Q2 and its entirety this year. Also the IDS which is the largest dental show in the world was held in the last week of March in Germany. We had a very strong performance at that show and now we believe we may have borrowed a little bit of sales from Q2 and put that into Q1 as result of that show performance. Accordingly at this point, we think it’s more meaningful to look at the first half growth rate of around 3% figure versus the second quarter.
In the rest of world, we had very strong growth in Asia-Pacific, Latin America, Middle East and Canada and as expected during the circumstances we were negative in Japan. Overall, we believe the consumable dental markets are stable and slowly progressing towards more normal growth rates. We continue to be very pleased with our performance here including the introduction of numerous new products and the launch results we have from those so far this year.
With regard to earnings, we’re very pleased with the record results we had for Q2. Earnings per share on a GAAP basis grew 6.1% to $0.52 from $0.49 a year ago and grew 10% from a non-GAAP basis to $0.55 from $.50 a year ago. There are several moving parts in these numbers and of course Bill Jellison will give you more of the details. Just a few highlights here though. First is that we had a $0.03 per share reduction in earnings versus the prior year quarter due to our businesses that were impacted by the circumstances in Japan, mainly our Japanese subsidiaries and also our global orthodontics business.
Chris will give you more insights into the status of our contingency plans however I’d like to note as we did in our first quarter call. And this negative impact will grow in the third quarter perhaps by double the impact in Q2 or more before starting to recover late in the year and early next year. So as you look at the next quarter, we expect that impact to increase. Also in the quarter, we had a stronger improvement in our tax rate, Bill will speak to this further but this is an ongoing improvement that should benefit us for several years.