DENTSPLY International Inc. (XRAY)
Q3 2012 Earnings Call
October 25, 2012 8:30 am ET
Derek Leckow - Vice President, Investor Relations
Bret Wise - Chairman and Chief Executive Officer
Chris Clark - President and Chief Operating Officer
Bill Jellison - Senior Vice President and Chief Financial Officer
Brandon Couillard - Jefferies
Glen Santangelo - Credit Suisse
Steve Beuchaw - Morgan Stanley
John Kreger - William Blair
Jeff Johnson - Robert Baird
Robert Jones - Goldman Sachs
Scott Green - Bank of America Merrill Lynch
Previous Statements by XRAY
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Thank you all for joining us this morning to discuss DENTSPLY International's third quarter 2012 results. Joining us on the call today are Bret Wise, Chairman and CEO; Chris Clark, President and COO; and Bill Jellison, Senior Vice President and CFO. We'll have some prepared remarks and then we'll be glad to answer any questions that you may have.
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 also available for download on our website at www.dentsply.com. We have also provided a set of supplemental slides to accompany this call also available for download under the Investor Relations section.
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. A recording of this call in its entirety will be available on our website.
As you can see in the release our results this quarter include a number of nonrecurring items under non-GAAP adjustments. Our comments on this call will focus on results including certain adjustments that provide operational insight beyond some distortion from these items. These items are noted on the non-GAAP reconciliation tables contained in the release. You will note that our earnings guidance is also presented on an adjusted basis.
With that, I would now like to turn the call over to Chairman and CEO, Bret Wise.
Thank you, Derek. Good morning, everyone. Thanks for joining us on our call this morning. Today we're very pleased to report another record third quarter, with strong sales growth driven by acquisitions, but also internal growth across all of our major regions. Adjusted earnings growth was also double digit, which we viewed as a strong performance in light of a relatively weak global economic environment here.
Overall, looking at the market first, in our view, the global dental market in the third quarter was generally comparable to what we saw in the second quarter. The U.S. is stable, but not really robust at this point. Europe continues to be a mix of slow growth in the north and continued contraction in the south. Combined, the European market is probably flat, plus or minus at this point.
The rest of world markets, which as you know comprise as many different countries for us continues to be a mix of slow growth in the developed regions that we have in that category, and mid to in some cases double digit growth in most of the developing markets that we include in rest of world. Overall, I'd say the dental market is doing okay at this point, but it's not great.
Getting into details a bit, on our sales performance on an organic basis, it was notably better than what we view as the market growth at this point, across most geographic regions and also on most product categories.
Our total growth with precious metals was a positive 12.3% and without metal was positive 14.8%. This 14.8% growth was driven by acquisition growth which was a positive 15.4%, but also the internal growth which was positive 4.7%, giving us constant currency growth for the quarter at a little bit over 20%.
Our currency was negative by 5.3% and add of course straight headwind for earnings as we've discussed in our second quarter call, particularly with the weakening of the euro over the second and third quarter.
The 4.7% internal growth was spread pretty equally across the regions, with the U.S. up 3.9%, Europe up 5.2% and rest of world was up 5.1%. Also important this is the first quarter in six that the orthodontics business has turned around and done accretive drug growth consistent with our re-launch plans. And of course, we've discussed on numerous of these calls stating all the way back to the natural disaster in Japan in March 2011.
Internal growth ex-ortho in Japan was a positive 2.8%. So ortho added about 190 basis points to this quarter. Just as a reminder from our second quarter call, we did re-launch the orthodontics line in Europe late in the second quarter, so we were live in that market for the entire third quarter. In U.S. we went live in August in the third quarter, so the impact in this quarter was much less than the U.S.
For competitive reasons, we're going to get away from giving you precise information by region on orthodontics. However, for your purposes, you should assume that the impact of orthodontics was much greater in Europe this quarter than in the U.S., due to the timing of the re-launch execution as discussed here. And Chris is going to have some further comments on orthodontics in his prepared remarks as well this morning.