-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V/Tkb/OzUYWhFdXrsFQ6EO2l/F4dAju4M2AqMpSE0JiMqpzzfBqpMF1ev+JNhuWJ YGxt4nWGc1Mlm8bAW3mbhg== 0000818479-95-000007.txt : 19951119 0000818479-95-000007.hdr.sgml : 19951119 ACCESSION NUMBER: 0000818479-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DENTSPLY INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000818479 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 391434669 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16211 FILM NUMBER: 95591331 BUSINESS ADDRESS: STREET 1: 570 W COLLEGE AVE CITY: YORK STATE: PA ZIP: 17405 BUSINESS PHONE: 7178460256 MAIL ADDRESS: STREET 1: 570 W COLLEGE AVE CITY: YORK STATE: PA ZIP: 17405 FORMER COMPANY: FORMER CONFORMED NAME: GENDEX CORP DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q FOR THIRD QUARTER 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 _______________________ OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _______________ Commission File Number 0-16211 DENTSPLY International Inc. _________________________________________________________________ (Exact name of registrant as specified in its charter) Delaware 39-1434669 _________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 570 West College Avenue, P. O. Box 872, York, PA 17405-0872 _________________________________________________________________ (Address of principal executive offices) (Zip Code) (717) 845-7511 ______________________ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ( X ) Yes ( ) No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At November 10, 1995 the Company had 26,950,669 shares of Common Stock outstanding, with a par value of $.01 per share. Page 1 of 21 ---- Exhibit Index at Page 19 ---- DENTSPLY INTERNATIONAL INC. FORM 10-Q For Quarter Ended September 30, 1995 ------------------------ INDEX ----- Page No. -------- PART I - FINANCIAL INFORMATION (unaudited) Item 1 - Financial Statements Consolidated Condensed Balance Sheets............ 3 Consolidated Condensed Statements of Income...... 4 Consolidated Condensed Statements of Cash Flows.. 5 Consolidated Condensed Statement of Stockholders' Equity........................... 7 Notes to Unaudited Consolidated Condensed Financial Statements........................... 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.... 13 PART II - OTHER INFORMATION Item 1 - Legal Proceedings............................ 17 Item 6 - Exhibits and Reports on Form 8-K............. 17 Signatures........................................... 18 2 PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED BALANCE SHEETS (audited) (unaudited) December 31, September 30, 1994 1995 ASSETS ------------ ------------ Current assets: (in thousands) Cash and cash equivalents $ 7,278 $ 4,241 Accounts and notes receivable-trade, net 78,771 89,519 Inventories 88,899 129,649 Prepaid expenses and other current assets 14,120 16,290 Net assets of discontinued operations 7,632 4,915 --------- --------- Total Current Assets 196,700 244,614 Property, plant and equipment, net 91,140 137,214 Other noncurrent assets, net 10,214 12,867 Identifiable intangible assets, net 35,532 34,822 Cost in excess of fair value of net assets acquired, net 140,976 150,313 --------- --------- Total Assets $ 474,562 $ 579,830 LIABILITIES AND STOCKHOLDERS' EQUITY ========= ========= Current liabilities: Accounts payable and accrued liabilities $ 60,135 $ 71,488 Income taxes payable 27,577 15,642 Notes payable and current portion of long-term debt 9,150 12,912 --------- --------- Total Current Liabilities 96,862 100,042 Long-term debt 12,789 90,104 Deferred income taxes 24,720 41,932 Other liabilities 40,854 44,666 --------- --------- Total Liabilities 175,225 276,744 --------- --------- Minority interests in consolidated subsidiary - 3,938 --------- --------- Stockholders' equity: Preferred stock, $.01 par value; 250,000 shares authorized; no shares issued - - Common stock, $.01 par value; 100,000,000 shares authorized; 27,845,288 and 27,079,669 shares issued at December 31, 1994 and September 30, 1995, respectively 278 271 Capital in excess of par value 182,087 150,028 Retained earnings 133,531 163,179 Cumulative translation adjustment 198 2,870 Employee stock ownership plan reserve (14,055) (12,857) Treasury stock, at cost, 87,500 and 130,000 shares at December 31, 1994 and September 30, 1995, respectively (2,702) (4,343) --------- --------- Total Stockholders' Equity 299,337 299,148 --------- --------- Total Liabilities and Stockholders' Equity $ 474,562 $ 579,830 ========= ========= See accompanying notes to unaudited consolidated condensed financial statements. 3 DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1994 1995 1994 1995 -------- -------- -------- -------- (in thousands, except per share data) Net sales $129,930 $137,330 $384,745 $410,313 Cost of products sold 64,315 74,411 193,927 210,796 -------- -------- -------- -------- Gross profit 65,615 62,919 190,818 199,517 Selling, general and administrative expenses 41,032 45,577 119,757 132,352 -------- -------- -------- -------- Operating income from continuing operations 24,583 17,342 71,061 67,165 Interest expense 2,068 2,564 6,133 6,565 Interest income (271) (316) (598) (899) Other (income) expense, net 167 (699) (759) 2,222 -------- -------- -------- -------- Income from continuing operations before income taxes 22,619 15,793 66,285 59,277 Provision for income taxes 8,838 6,314 27,351 23,589 -------- -------- -------- -------- Income from continuing operations 13,781 9,479 38,934 35,688 Income from the operation of discontinued Medical business (less applicable income taxes) 75 - 1,311 - -------- -------- -------- -------- Net income $ 13,856 $ 9,479 $ 40,245 $ 35,688 ======== ======== ======== ======== Earnings per common share: From continuing operations $.50 $.35 $1.40 $1.32 From discontinued operations - - .05 - ---- ---- ----- ----- $.50 $.35 $1.45 $1.32 ==== ==== ===== ===== Dividends per common share $.075 $.075 $.075 $.225 Weighted average common shares outstanding 27,805 27,001 27,763 27,033 See accompanying notes to unaudited consolidated condensed financial statements. 4 DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30, ------------------- 1994 1995 -------- -------- (in thousands) Cash flows from operating activities: Net income $ 40,245 $ 35,688 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,971 16,487 (Increase) decrease in accounts and notes receivable-trade, net (15,326) 1,516 Increase in inventories (10,384) (8,581) (Increase) decrease in prepaid expenses and other current assets 8,236 (397) Increase (decrease) in income taxes payable 4,203 (11,967) Other, net 3,934 2,059 -------- -------- Net cash provided by operating activities 45,879 34,805 -------- -------- Cash flows from investing activities: Acquisition of businesses, net of cash acquired - (74,204) Property, plant and equipment additions (9,963) (11,835) Proceeds from disposal of Medical business - 3,260 Proceeds from sale of property, plant, and equipment 124 2,294 Other, net (89) (11) -------- -------- Net cash used in investing activities (9,928) (80,496) -------- -------- Cash flows from financing activities: Debt repayment (156,705) (41,552) Proceeds from long-term debt 89,317 125,717 Cash paid for treasury stock - (42,703) Increase (decrease) in bank overdrafts and other short term debt 13,366 (3,894) Other, net 3,302 4,034 -------- -------- Net cash provided by (used in) financing activities (50,720) 41,602 -------- -------- Effect of exchange rate changes on cash and cash equivalents (908) 1,052 -------- -------- Net decrease in cash and cash equivalents (15,677) (3,037) Cash and cash equivalents at beginning of period 17,984 7,278 -------- -------- Cash and cash equivalents at end of period $ 2,307 $ 4,241 ======== ======== Supplemental disclosures of cash flow information: Interest paid $ 5,573 $ 4,337 Income taxes paid 14,476 28,954 See accompanying notes to unaudited consolidated condensed financial statements. 5 DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) Supplemental disclosures of noncash transactions (in thousands): The Company purchased all of the capital stock of KV33 Corporation for $11.5 million. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 14,329 Cash paid for capital stock (11,450) -------- Liabilities assumed $ 2,879 ======== The Company purchased approximately 96% of the capital stock of Maillefer Instruments, S.A. for $65.8 million. In conjunction with the acquisition, liabilities were assumed as follows: Estimated fair value of assets acquired $ 94,983 Cash paid for capital stock (65,798) -------- Liabilities assumed $ 29,185 ======== The Company purchased the assets of Dunvale Corporation for $1.8 million. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 2,030 Cash paid for assets (1,839) -------- Liabilities assumed $ 191 ======== See accompanying notes to unaudited consolidated condensed financial statements. 6 DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
Capital in Cumulative Total Common Excess of Retained Translation Treasury Stockholders' Stock Par Value Earnings Adjustment ESOP Reserve Stock Equity (in thousands) ------ ----------- -------- ----------- ------------ --------- ------------ Balance at December 31, 1994 $ 278 $182,087 $133,531 $ 198 $(14,055) $ (2,702) $299,337 Exercise of stock options and warrants 2 (4,794) --- --- --- 9,034 4,242 Tax benefit related to stock options and warrants exercised --- 4,754 --- --- --- --- 4,754 Repurchase of 1,255,000 shares of common stock --- --- --- --- --- (42,703) (42,703) Cash dividends declared, $.225 per share --- --- (6,040) --- --- --- (6,040) Cancellation of 935,000 shares of treasury stock (9) (32,019) --- --- --- 32,028 --- Translation adjustment --- --- --- 2,672 --- --- 2,672 Net change in ESOP reserve --- --- --- --- 1,198 --- 1,198 Net income --- --- 35,688 --- --- --- 35,688 ------ -------- -------- ------- -------- -------- -------- Balance at September 30, 1995 $ 271 $150,028 $163,179 $ 2,870 $(12,857) $ (4,343) $299,148 ====== ======== ======== ======= ======== ======== ======== See accompanying notes to unaudited consolidated condensed financial statements.
7 DENTSPLY INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -------------------------------------------------------------- SEPTEMBER 30, 1995 ------------------ The accompanying interim consolidated condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) which in the opinion of management are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. These interim financial statements conform with the requirements for interim financial statements and consequently do not include all the disclosures normally required by generally accepted accounting principles. Disclosures are updated where appropriate. NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - ---------------------------------------- Principles of Consolidation - --------------------------- The consolidated condensed financial statements include the accounts of DENTSPLY International Inc. (the "Company") and its subsidiaries. For the nine months ended September 30, 1994, the financial statements for Gendex Dental Systems S.r.l. and Gendex Dental Systeme GmbH are included on a current basis as compared to a two month lag in 1993. Accordingly, the consolidated condensed statements of income and cash flows for the nine months ended September 30, 1994 include eleven months of operations for Gendex Dental Systems S.r.l. and Gendex Dental Systeme GmbH. The effects of this change in reporting were insignificant to the consolidated financial position and operations of the Company. Minority interests in net income of consolidated subsidiary is not material and is included in other (income) expense, net. Inventories - ----------- Inventories are stated at the lower of cost or market. At December 31, 1994 and September 30, 1995, the cost of $10.2 million or 11% and $9.4 million or 7.3%, respectively, of inventories was determined by the last- in, first-out (LIFO) method. The cost of other inventories was determined by the first-in, first-out or average cost method. Property, Plant and Equipment - ----------------------------- Property, plant and equipment are stated at cost, net of accumulated depreciation. Except for leasehold improvements, depreciation for financial reporting purposes is computed by the straight-line method over the following estimated useful lives: buildings - generally 40 years; and machinery and equipment - 8 to 15 years. The cost of leasehold improvements is amortized over the shorter of the estimated useful life or the term of the lease. For income tax purposes, depreciation is computed using various methods. 8 Earnings per Share - ------------------ Earnings per share are based on the weighted average number of common shares outstanding. Common stock equivalents (options and warrants) had no material effect on the earnings per share computation. All shares held by the DENTSPLY Employee Stock Ownership Plan are considered outstanding and are included in the earnings per share computation. NOTE 2 - BUSINESS ACQUISITIONS - ------------------------------ In March 1995, the Company purchased all of the outstanding capital stock of KV33 Corporation ("KV33") in a cash transaction value at $11.5 million. The acquisition was accounted for under the purchase method of accounting and the results of KV33's operations have been included in the accompanying financial statements since the date of acquisition. The excess ($10.2 million) of acquisition cost over net assets acquired is being amortized over 25 years. Pro forma information has been omitted due to immateriality. In June 1995, the Company purchased approximately 96% of the outstanding Capital Stock of Maillefer Instruments S.A. ("Maillefer") from Maillefer stockholders for SFR11,000 per share in a cash transaction valued at approximately $65.8 million. Based in Switzerland, Maillefer Instruments is a manufacturer and distributor of principally endodontic instruments. The acquisition was accounted for under the purchase method of accounting and the results of Maillefer's operations have been included in the accompanying financial statements since the date of acquisition. The aggregate purchase price of $65.8 million plus direct acquisition costs has been allocated on the basis of preliminary estimates of the fair values of assets acquired and liabilities assumed. Since the estimated fair value of net assets acquired exceeded the purchase price by approximately $19.5 million, the values otherwise assignable to noncurrent assets acquired have been reduced by a proportionate part of the excess. The following unaudited pro forma consolidated results of operations assume that the acquisition of Maillefer occurred on January 1, 1994 (in thousands, except per share amounts): Nine Months Ended September 30, 1994 1995 -------- -------- Net sales $409,205 $427,676 Income from continuing operations 39,844 38,280 Earnings per share from continuing operations 1.44 1.42 The pro forma information does not purport to be indicative of the results that actually would have been obtained had the operations been combined during the periods presented. 9 The difference of $.10 per share between actual and pro forma results in 1995 is primarily due to the inclusion in the pro forma results of five additional months of Maillefer operations and various timing differences between actual and pro forma income statement recognition of the effects of purchase price accounting. In September 1995, the Company announced the signing of a Letter of Intent to purchase the dental manufacturing and distribution operations of Tulsa Dental Instruments LLC for $75 million in cash and an earn-out provision based on the operating performance of the acquired business. The transaction is subject to due diligence, the execution of a definitive agreement, regulatory approvals and the satisfaction of customary closing conditions. The transaction is expected to close in 1996. NOTE 3 - INVENTORIES - -------------------- Inventories consist of the following: December 31, September 30, 1994 1995 ------------ ------------ (in thousands) Finished goods $ 46,765 $ 73,112 Work-in-process 19,238 29,438 Raw materials and supplies 22,896 27,099 -------- -------- $ 88,899 $129,649 ======== ======== Pre-tax income was $.5 million lower in the nine months ended September 30, 1994 and 1995, as a result of using the LIFO method compared to the first-in, first-out (FIFO) method. If the FIFO method had been used to determine the cost of the LIFO inventories, the amounts at which net inventory is stated would be lower than reported at December 31, 1994 and September 30, 1995 by $2.2 million and $1.7 million, respectively. NOTE 4 - PROPERTY, PLANT AND EQUIPMENT - -------------------------------------- Property, plant and equipment consist of the following: December 31, September 30, 1994 1995 ------------ ------------ Assets, at cost: (in thousands) Land $ 16,130 $ 17,581 Buildings and improvements 41,420 66,961 Machinery and equipment 61,103 87,088 Construction in progress 5,244 6,220 -------- -------- 123,897 177,850 Less: Accumulated depreciation 32,757 40,636 -------- -------- $ 91,140 $137,214 ======== ======== 10 NOTE 5 - SPECIAL CHARGES - ------------------------ During the nine months ended September 30, 1995, the Company recorded, in other income, special charges which materially impacted the comparison with prior periods. These special charges, on a pre-tax basis, included the following (in thousands): Costs associated with consolidation of all executive functions in York, Pennsylvania $2,460 Loss on sale of corporate aircraft 626 ------ $3,086 ====== The impact of these expenses on earnings per share was $.07 per share in the nine months ended September 30, 1995. NOTE 6 - DISCONTINUED OPERATIONS - -------------------------------- On October 13, 1994, the Company announced its strategic decision to discontinue the operations comprising its medical business. The medical operations include Eureka X-Ray Tube Corp. (Eureka), GENDEX Medical and CMW business units which manufacture medical x-ray tubes, medical x-ray systems and orthopedic bone cement, respectively. The net assets of CMW and substantially all of the net assets of Eureka were sold in the fourth quarter of 1994. Sales from these operations were $12.2 million and $4.9 million for the three months ended September 30, 1994 and 1995, respectively. Income before applicable income taxes for the three months ended September 30, 1994 and 1995 was $.1 million and $-0-, respectively. Sales for the nine months ended September 30, 1994 and 1995 were $38.9 million and $14.9 million, respectively. Income before applicable income taxes for the nine months ended September 30, 1994 and 1995 was $1.9 million and $-0-, respectively. The sale of the remaining operations comprising the medical business is expected to be completed in 1996. The components of net assets of discontinued operations included in the Consolidated Condensed Balance Sheets are as follows: December 31, September 30, 1994 1995 ------------ ------------ (in thousands) Accounts and notes receivable-trade, net $ 4,650 $ 2,683 Inventories 6,312 6,922 Deferred income taxes 4,130 4,130 Prepaid expenses and other current assets 1,848 360 Property, plant and equipment, net 3,899 2,760 Other noncurrent assets, net 1,298 2,476 Cost in excess of fair value of net assets acquired, net 3,448 3,373 Accounts payable and accrued liabilities (11,272) (11,241) Other liabilities (6,681) (6,548) -------- -------- $ 7,632 $ 4,915 ======== ======== 11 NOTE 7 - NOTES PAYABLE AND LONG-TERM DEBT - ----------------------------------------- The increases from December 31, 1994 in Notes payable and current portion of long-term debt ($3.8 million) and Long-term debt ($77.3 million) were primarily due to utilization of the Company's credit facilities for the following transactions: - During the nine months ended September 30, 1995, the Company repurchased 1.3 million shares of its common stock for $42.7 million, in accordance with the share repurchase program authorized by the Board of Directors in December 1994. The repurchased shares included .8 million shares from the McDonough family interests pursuant to an agreement entered into on February 8, 1995, in connection with John J. McDonough's resignation as Chief Executive Officer of the Company. - In March, 1995, the Company paid $11.5 million to acquire the outstanding capital stock of KV33 Corporation. - In June, 1995, the Company paid $65.8 million to acquire approximately 96% of the outstanding capital stock of Maillefer Instruments, S.A. 12 DENTSPLY INTERNATIONAL INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Quarter Ended September 30, 1995 Compared to Quarter Ended September 30, 1994 In the quarter ended September 30, 1995, net sales increased $7.4 million, or 5.7%, to $137.3 million from $129.9 million in the same period in 1994. Sales in the United States decreased due to discontinuing certain dealer incentives which previously had the effect of encouraging dealers to place stocking orders during the third quarter. Sales increased in Europe and other international markets. Maillefer Instruments S.A. (Maillefer) accounted for a significant portion of the sales increase in Europe. Gross profit decreased $2.7 million, or 4.1%, to $62.9 million from $65.6 million in the third quarter of 1994. As a percentage of net sales, gross profit decreased from 50.5% in the quarter ended September 30, 1994 to 45.8% in the same period of 1995. In 1994, the dealer incentives favorably impacted sales mix towards higher margin products and the resulting higher sales volume improved overhead absorption, thereby increasing the gross margin percentage. In addition, the gross margin percentage in 1995 was impacted by lower margins on the sale of Maillefer products due to purchase accounting. Selling, general and administrative expenses for the third quarter of 1995 increased $4.5 million, or 11.1%. As a percentage of net sales, expenses increased from 31.6% in the quarter ended September 30, 1994 to 33.2% for the same period in 1995. The main reason for the percentage increase is that the higher United States sales level in 1994 attributed to dealer incentives was achieved with minimal additional selling, general and administrative costs. In addition, the Company incurred severance costs in 1995 relating to cost reduction programs in North America and Europe. The Company recognized other income of $.7 million in the third quarter of 1995 compared to other expense of $.2 million in the third quarter of 1994. Exchange gains due to the strengthening of the U.S. dollar were the main reason for the other income. Income from continuing operations before income taxes of $15.8 million for the three months ended September 30, 1995 decreased $6.8 million, or 30.2%, from $22.6 million in 1994. The Company's effective tax rate on income from continuing operations before income taxes was 40.0% for the three months ended September 30, 1995, compared to 39.1% for the three months ended September 30, 1994. Earnings per share from continuing operations of $.35 for the three months ended September 30, 1995 decreased $.15, or 30.0% from $.50 for the three months ended September 30, 1994. Net sales from the discontinued medical business for the quarter ended September 30, 1995 were $4.9 million, a decrease of $7.3 million from the same period of 1994, as a result of the divestiture during the fourth quarter of 1994 of two of the three business units identified as discontinued operations. 13 Nine Months Ended September 30, 1995 Compared to Nine Months Ended September 30, 1994 During the first nine months of 1995, net sales increased by $25.6 million, or 6.6%, to $410.3 million from $384.7 million in the same period of 1994. Sales in the United States decreased due to discontinuing certain dealer incentives which previously encouraged dealers to place stocking orders in the third quarter of the year. Excluding the impact these incentives had on sales in 1994, sales would have increased in the United States in 1995. After adjusting for the impact of Maillefer and the weaker U.S. dollar, sales in Europe also increased. The amount of the increase in net sales for the first nine months of 1995 attributable to a weaker U.S. dollar was significantly offset by the additional two months of sales reported in the first quarter of 1994 due to the elimination of a reporting lag at two foreign locations. Gross profit increased $8.7 million, or 4.6%, to $199.5 million from $190.8 million in the first nine months of 1994 as a result of higher net sales. As a percentage of net sales, gross profit decreased from 49.6% in the nine months ended September 30, 1994 to 48.6% in the same period of 1995. In 1994, the dealer incentives favorably impacted sales mix towards higher margin products and the resulting higher sales volume improved overhead absorption, thereby increasing the gross margin percentage. In addition, the gross margin percentage in 1995 was impacted by lower margins on the sale of Maillefer products due to purchase accounting. Selling, general and administrative expenses for the first nine months of 1995 increased $12.6 million, or 10.5%. As a percentage of net sales, expenses increased from 31.1% in the nine months ended September 30, 1994 to 32.3% for the same period of 1995. The main reason for the percentage increase is that the higher United States sales level in 1994 attributed to dealer incentives was achieved with minimal additional selling, general and administrative costs. In addition, 1995 was impacted by higher than normal expenditures for new product promotions and the implementation of management information systems in Europe. The Company incurred other expenses of $2.2 million for the first nine months of 1995, compared to other income of $.8 million in the same period of 1994. The Company took a one-time charge of $3.1 million in the second quarter of 1995 to cover the costs of closing down its Executive Offices in Illinois and consolidating its executive operations in York, Pennsylvania. This charge on an after tax basis was $1.8 million, or $.07 per share. Income from continuing operations before income taxes of $59.3 million for the nine months ended September 30, 1995 decreased $7.0 million, or 10.6%, from $66.3 million in 1994. Without the one-time charge for closing down the Executive Offices in Illinois and consolidation of executive operations in York, Pennsylvania, income from continuing operations before income taxes for the first nine months of 1995 was $62.4 million, a decrease of $3.9 million, or 5.9%, over the same period of 1994. The Company's effective tax rate on income from continuing operations before income taxes decreased from 41.3% in the nine months ended September 30, 1994 to 39.8% for the nine months ended September 30, 1995 due primarily to lower foreign losses without tax benefit in 1995. Earnings per share from continuing operations of $1.32 for the nine months ended September 30, 1995 decreased $.08, or 5.7%, from $1.40 for the nine months ended September 30, 1994. Without the one-time charge in the second 14 quarter to cover the costs of closing down the Executive Offices in Illinois and consolidating executive operations in York, Pennsylvania, earnings per share were $1.39, a decrease of $.01 over the year earlier period. Net sales from the discontinued medical business for the nine months ended September 30, 1995 were $14.9 million, a decrease of $23.9 million from the same period in 1994 as a result of the divestiture during the fourth quarter of 1994 of two of the three business units identified as discontinued operations. LIQUIDITY AND CAPITAL RESOURCES In March 1995, the Company paid $11.5 million to acquire the outstanding capital stock of KV33 Corporation ("KV33"), based in Tucson, Arizona. KV33 designs, develops, manufactures, and markets disposable articulators for the dental laboratory market, and is the leading manufacturer and distributor of disposable articulators in the United States. Articulators are used by dental laboratory technicians to replicate human jaw movement when performing restorative procedures such as crown and bridge restorations. KV33 plastic articulators are a cost-effective, disposable alternative to conventional multi-use metal articulators which require routine disinfecting. In June 1995, the Company acquired approximately 96% of the outstanding Capital Stock of Maillefer Instruments S.A. ("Maillefer") in a cash transaction for $65.8 million. Maillefer is the world's leading manufacturer and distributor of endodontic instruments. Based in Ballaigues, Switzerland, Maillefer's product offerings include endodontic broaches, files, burs, pins and post systems, surgical twist drills, and a variety of other instruments and accessory products. Maillefer products have achieved a world class reputation for high quality through continuous new, innovative research and development and state-of-the-art manufacturing processes. The Company obtained the funds for the aforementioned acquisitions from a new $60.0 million term loan (which has the same maturity date, interest rate structure, and covenants as the Company's existing $175.0 million Bank Revolving Loan Facility), short-term bank borrowings, and cash on hand. Investing activities for the nine months ended September 30, 1995 include capital expenditures of $11.8 million. During 1995 the Company repurchased 1.26 million shares of its common stock for $42.7 million, in accordance with the share repurchase program authorized by the Board of Directors in December 1994. The repurchased shares included .8 million shares from the McDonough family interests pursuant to an agreement entered into on February 8, 1995 in connection with John J. McDonough's resignation as Chief Executive Officer of the Company. Excluding the net assets of discontinued operations, at September 30, 1995, the Company's current ratio was 2.4 with working capital of $139.7 million. This compares with a current ratio of 2.0 and working capital of $92.2 million at December 31, 1994. The increase was primarily due to the acquisition of Maillefer. 15 The Company expects to be able to finance cash requirements, including capital expenditures, stock repurchases, and debt service and the anticipated acquisition of the dental manufacturing and distribution operation of Tulsa Dental Instruments LLC, from funds generated from operations and amounts available under the existing Revolving Credit Agreement. For the nine months ended September 30, 1995, cash flows from operating activities were $34.8 million compared to $45.9 million for the nine months ended September 30, 1994. The decrease is due mainly to higher income tax payments. In 1995, income tax payments included taxes on the gain from the disposal of the medical business. Income tax payments for 1994 were reduced by the deduction of the prepayment penalty on the repayment of the senior debt in January 1994. IMPACT OF INFLATION The Company has generally offset the impact of inflation on wages and the cost of purchased materials by reducing operating costs and increasing selling prices to the extent permitted by market conditions. 16 PART II OTHER INFORMATION Item 1 - Legal Proceedings The Company and its subsidiaries are from time to time parties to lawsuits arising out of their respective operations. The Company believes that pending litigation to which it is a party will not have a material adverse effect upon its consolidated financial position or results of operations. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed herewith: --------- Number Description ------ ----------- 11 Statement regarding computation of earnings per share. 27 Financial Data Schedule (pursuant to Item 601(c)(1)(iv) of Regulation S-K, this exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended) (b) Reports on Form 8-K ------------------- On July 17, 1995 the Company filed a Form 8-K (Items 2 and 7) reporting the acquisition of Maillefer Instruments, S.A. Amendment No. 1 to this Form 8-K was filed on Form 8-K/A on September 15, 1995. Financial statements filed with Form 8-K/A were as follows: (1) Financial statements of Maillefer Instruments, S.A. for the year ended December 31, 1994 (a) Balance Sheet (b) Income Statement (c) Notes to the Financial Statements (d) Generally Accepted Accounting Principles (GAAP) Reconciliation (2) Pro Forma Financial Information (a) Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1995 (b) Pro Forma Condensed Consolidated Statements of Income for the three months ended March 31, 1995 and for the year ended December 31, 1994. (c) Notes to Unaudited Pro Forma Condensed Consolidated Financial Information 17 Signatures __________ Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DENTSPLY INTERNATIONAL INC. November 14, 1995 /s/ Burton C. Borgelt ____________________ ___________________________________ Date Burton C. Borgelt Chairman and Chief Executive Officer November 14, 1995 /s/ Edward D. Yates ____________________ ___________________________________ Date Edward D. Yates Senior Vice President and Chief Financial Officer 18 EXHIBIT INDEX ------------- Number Description Sequential Page No. ------ ----------- ------------------- 11 Statement regarding computation of earnings per share. 20 27 Financial Data Schedule 21 (pursuant to Item 601(c)(1)(iv) of Regulation S-K, this exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended) 19 DENTSPLY INTERNATIONAL INC. EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Earnings per common share: - -------------------------- Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 1994 1995 1994 1995 -------- -------- -------- -------- (in thousands, except per share data) Weighted average common shares outstanding 27,805 27,001 27,763 27,033 Income from continuing operations $ 13,781 $ 9,479 $ 38,934 $ 35,688 Income from discontinued medical segment 75 - 1,311 - -------- -------- -------- -------- Net income $ 13,856 $ 9,479 $ 40,245 $ 35,688 ======== ======== ======== ======== Earnings per common share: From continuing operations $.50 $.35 $1.40 $1.32 From discontinued operations -- -- .05 -- ---- ---- ----- ---- Net income $.50 $.35 $1.45 $1.32 ==== ==== ===== ===== 20 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DENSTPLY INTERNATIONAL, INC. AT SEPTEMBER 30, 1995 AND FOR THE FISCAL QUARTER THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 4241 0 89519 0 129649 244614 177850 40636 579830 100042 90104 271 0 0 298877 579830 410313 410313 210796 210796 132352 0 6565 59277 23589 35688 0 0 0 35688 1.32 0
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