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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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, York, Pennsylvania 17405-0872
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (717) 845-7511
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
As of February 29, 2000, the aggregate market value of voting common
stock held by non-affiliates of the registrant, based upon the last reported
sale price for the registrant's Common Stock on the Nasdaq National Market on
such date, as reported in The Wall Street Journal, was $1,340,150,140
(calculated by excluding shares owned beneficially by directors and executive
officers as a group from total outstanding shares solely for the purpose of
this response).
The number of shares of the registrant's Common Stock outstanding as of
the close of business on February 29, 2000 was 52,156,355.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement of DENTSPLY
International Inc. to be used in connection with the 2000 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part
III of this Annual Report on Form 10-K to the extent provided herein. Except
as specifically incorporated by reference herein, the Proxy Statement is not
to be deemed filed as part of this Annual Report on Form 10-K.
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PART I
Item 1. Business
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General
DENTSPLY International Inc. ("DENTSPLY" or the "Company"), a Delaware
corporation, designs, develops, manufactures and markets products in two
principal categories: dental consumable and laboratory products, and dental
equipment. Dental consumable and laboratory products include dental
prosthetics, endodontic instruments and materials, impression materials,
restorative materials, crown and bridge materials, prophylaxis paste, dental
sealants, cutting instruments, dental needles, dental anesthetics, and
orthodontic appliances. Dental equipment includes dental x-ray systems,
intraoral cameras, computer imaging systems and related software, handpieces,
ultrasonic scalers and polishers, and air abrasion systems. The Company also
develops and markets practice management software for managing the dental
office and software for maintaining a database of information generated in
the dental operatory's clinical environment.
Market Overview
Professional Dental Products
General. The worldwide professional dental industry encompasses the
diagnosis, treatment and prevention of disease and ailments of the teeth,
gums and supporting bone. DENTSPLY believes that demand in a given
geographic market for dental procedures and products varies according to the
stage of social, economic and technical development that the market has
attained. Geographic markets for DENTSPLY's dental products can be
categorized into the three stages of development described below.
The United States, Canada, Western Europe, the United Kingdom,
Japan, and Australia are highly developed markets that demand the most
advanced dental procedures and products and have the highest level of
expenditure on dental care. In these markets, the focus of dental care
is increasingly upon preventive care and specialized dentistry. In
addition to basic procedures such as the excavation and filling of
cavities and tooth extraction and denture replacement, dental
professionals perform an increasing volume of preventive and cosmetic
procedures, including periodontia (the treatment of the structure
supporting the teeth), endodontia (the revitalization of teeth that
would otherwise require extraction), orthodontia (the movement and
realignment of teeth for improved function and aesthetics), gnathology
(the treatment of temporomandibular joint (TMJ) dysfunction and
occlusive modification), implantology (the insertion of prosthetic
devices to provide support for partial or full dentures) and cosmetic
dentistry. These markets require varied and complex dental products,
such as advanced cleaning and scaling equipment and related solutions,
light-cured bonding and restorative compounds, precision-molded and
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customized crowns, bridges, orthodontic appliances, bone grafting
materials, implants and other prosthodontic devices, materials and
instruments used in endodontic procedures, and aesthetically accurate
stains and tints. These markets also utilize sophisticated diagnostic and
imaging equipment, and demand high levels of attention to protection
against infection and patient cross-contamination.
In certain countries in Central America, South America and the Pacific
Rim, dental care is often limited to the excavation and filling of cavities
and other restorative techniques, reflecting more modest per capita
expenditures for dental care. These markets demand diverse products such as
high and low speed handpieces, restorative compounds, finishing devices and
custom restorative devices.
In the People's Republic of China, India, Eastern Europe, the countries
of the former Soviet Union, and other developing countries, dental ailments
are treated primarily through tooth extraction and denture replacement. These
procedures require basic surgical instruments, artificial teeth for dentures
and bridgework, and anchoring devices such as posts.
The Company offers products and equipment for use in markets at each of
these stages of development. The Company believes that as each of these
markets develops, demand for more technically advanced products will
increase. The Company also believes that its recognized brand names, high
quality and innovative products, technical support services and strong
international distribution capabilities position it well to take advantage of
any opportunities for growth in all of the markets that it serves.
The following trends support the Company's confidence in its industry
growth outlook:
Increasing worldwide population - Population growth continues
throughout the world.
Growth of the population 65 or older - The percentage of the U.S.
and European population over the age 65 is expected to double by
the year 2030. In addition to having significant needs for
dental care, the elderly are well positioned to pay for the
required procedures since they control sizable amounts of
discretionary income.
Natural teeth are being retained longer - According to the
Princeton Dental Resource Center's study on Oral Health and
Aging, "Individuals with natural teeth are over four times as
likely to visit a dentist in a given year than those without any
natural teeth remaining."
The changing dental practice in the United States - Dentistry in
North America has been transformed from a profession primarily
dealing with pain, infections and tooth decay to one with
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increased emphasis on preventive care and cosmetic dentistry.
DENTSPLY's product lines are well positioned to provide the new
sophisticated solutions that these advanced procedures require.
Continuing European governmental support - Europe continues to be
a significant dental market. In addition, European governments
are changing dental behaviors by increasing dental reimbursement
levels for preventive care.
Per capita and discretionary incomes are increasing in emerging
nations - As personal incomes continue to rise in the emerging
nations of the Pacific Rim and Latin America, healthcare
including dental services are a growing priority.
Products
DENTSPLY's two principal dental product lines are consumable and
laboratory products, and equipment. These products are produced by the
Company in the United States and internationally and are distributed
throughout the world under some of the most well-established brand
names and trademarks in the industry, including CAULK(R), CAVITRON(R),
CERAMCO(R), DENTSPLY(R), DETREY(R), GENDEX(R), MIDWEST(R), R&R(R), RINN(R),
TRUBYTE(R), MAILLEFER(R), PROFILE(R), THERMAFIL(R), ACUCAM(R), SANI-TIP(R),
OVATION(R), ANTAEOS(R), BEUTELROCK(R) and ZIPPERER(R). Sales of the Company's
professional dental products accounted for approximately 95% of
DENTSPLY's consolidated sales for 1999, 1998 and 1997, respectively.
Consumable and Laboratory Products. Consumable and laboratory products
consist of dental sundries used in dental offices in the treatment of
patients and in dental laboratories in the preparation of dental appliances,
such as crowns and bridges. The Company manufactures thousands of different
consumable and laboratory products marketed under more than 120 brand names.
Consumable and laboratory products include:
Resin-Based and Porcelain Artificial Teeth: Artificial
teeth replace natural teeth lost through deterioration,
disease or injury. The Company's artificial teeth are
marketed under the TRUBYTE(R) and PORTRAIT(R) IPN(R) brand names,
among others, and are produced by the Company in York,
Pennsylvania, Brazil and China in some 15,000
combinations of shapes, sizes and shades.
Impression Materials: Impression materials are used to
make molds of teeth for fitting crowns, bridges and
dentures. DENTSPLY's JELTRATE(R), BLUEPRINT(TM), REPROSIL(R) and
AQUASIL LV Smart Wetting(TM) Impression Material are designed to
increase the rate of successful impressions without retakes and
to set quickly to minimize patient discomfort.
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Restorative Materials: Restorative materials are used
in sealing, lining and filling excavated tooth cavities and
repairing broken or damaged teeth, and include amalgams,
bonding agents, light-cured composites and glass ionomer
filling materials for more aesthetic restorations.
DENTSPLY'S SUREFIL(TM) High Density Composite Restorative is
condensable, just like amalgam and offers true amalgam-like
packability with the aesthetics of a composite or tooth-colored
filling material. These features, combined with fluoride release,
assure both the dentist and patient of strong, long lasting and
esthetically pleasing posterior restorations. In addition, its
wear rates are equal to or less than an amalgam restoration. The
Company's DYRACT(R) AP is a patented, single component restorative
material featuring simplicity in delivery combined with
excellence in restorative results. Formulated with a resin mix,
it delivers the compressive strength of a hybrid composite. Due to
its wear resistance and strength, DYRACT(R) AP is indicated for
all classes of cavities. DYRACT(R) Flow is an easy handling
flowable compomer restorative with excellent adaption to tooth
structures; sustained, rechargeable fluoride release; ideal flow
consistency for air abrasion procedures; and availability in
seven popular shades. PRIME & BOND(R) NT is a true one coat liquid
adhesive system offering the dentist reduced procedure time
coupled with excellent physical properties. DENTSPLY also markets
a number of other brand name lines of restorative amalgams; and
DELTON(R) and DELTON(R) PLUS (with fluoride release) brand dental
sealants.
Crown and Bridge Porcelains and Ceramics: These
porcelain and ceramic products are used by dental
laboratories in making crowns, bridges, inlays and onlays
for restorative dental procedures, where aesthetics are
particularly important, and to provide functional biting and
chewing surfaces that appear and feel natural. Product offerings
include the CERAMCO(R) line, and in Europe, the DETREY(R) CARAT(R) line
of specialty crown and bridge porcelain products for use as fixed
prosthetics. FINESSE(TM) Porcelain from Ceramco, features superb
shade matching and permits the dental laboratory to fire
restorations with extraordinary aesthetics.
Endodontic Instruments and Materials: These products
are used in root canal treatment of severely damaged or
decayed teeth. Through its Maillefer, DENTSPLY Endodontics and
VDW subsidiaries, the Company has an extensive endodontic product
offering including broaches, files, and other endodontic
materials and instruments. The Company's PROFILE(R) SERIES 29(R) line
of endodontic files offer a standard 29 percent increase between
the tip diameters of each size instrument for a smooth,
progressive enlargement from one file to the next. PROFILE(R) .04
TAPERS(R) feature non-standard tapers constructed from super-
flexible nickel titanium for use in a controlled, slow-speed,
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high-torque rotary dental handpiece. PROFILE(R) GT Rotary Engine
Driven Nickel Titanium Endodontic Files are specifically designed
with unparalleled strength and flexibility to simplify root canal
operations, by giving dentists an automated method to achieve the
clinically necessary root canal funnel shape. They are used in
conjunction with PROFILE(R) .04 TAPERS(R) to efficiently create a
predefined taper. THERMASYSTEM(R) PLUS includes THERMASEAL(R) PLUS,
a patented root canal filling material which is fast, effective
and tissue-friendly and the THERMAPREP(R) PLUS Oven which cuts
required heating time for plastic THERMAFIL(R) PLUS Obturators from
up to seven minutes to as little as seventeen seconds.
THERMASYSTEM(R) PLUS provides a three dimensional root canal fill
in a fraction of the time it takes for traditional lateral
condensation procedures. Pro Root MTA(TM) is a root repair material
that uses water-based chemistry which allows for normal setting
in the presence of moisture. It out-performs other material in
providing a stable barrier to bacterial and fluid leakage. Pro
Root MTA(TM) is unlike any other root canal repair material, in that
in many cases where a tooth was previously considered a lost
cause, it may now be saved. GLYDE FILE PREP(TM) is a new root canal
therapy gel used to facilitate the cleaning and shaping of the
root canal. Used as a lubricant and irrigating agent, it lifts
debris coronally while it cleans and lubricates.
Protective Supplies: These products are designed to
ameliorate possible sources of patient cross-contamination
of infectious disease, and include RITE-ANGLE(R) and NUPRO(R)
Disposable Prophy Angles (disposable mechanical devices used
by dentists and hygienists to clean and polish teeth), hand
cleansers, disposable barriers, enzymatic cleansers, needle
stick prevention devices and disposable air-water syringe
tips.
Dental Cutting Instruments: The Company distributes
MIDWEST(R) carbide and specialty burs. Regular carbide burs
are the most commonly used dental cutting instruments in the
North American market. While these burs are primarily used
for cavity excavation, the variety of available shapes
allows for alternative uses such as limited trimming and
finishing techniques.
Tooth Whitener: DENTSPLY also offers a tooth whitening
system. The NUPRO(R) Gold Tooth Whitening System is a
complete, professionally administered program. Patients
receive a tooth whitening system in a convenient, easy-to-
use take home kit.
Other Consumable Products: Other products produced by the
Company for use in dental offices include NUPRO(R) prophylaxis
paste that is used in cleaning and polishing teeth along with
many others.
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Dental Equipment. DENTSPLY's dental equipment product lines include
high and low speed handpieces, intraoral lighting systems, ultrasonic
scalers and polishers, x-ray systems and related support equipment and
accessories, and air abrasion systems.
Handpieces: Under the MIDWEST(R) brand name, DENTSPLY
manufactures and distributes a line of high-speed and
low-speed air-driven handpieces and intraoral lighting
systems.
Air Abrasion Unit: The AIRTOUCH(TM) Cavity Preparation
System is an air-abrasion unit that delivers aluminum oxide
particles with pressurized air to cut tooth structure. The need
for anesthetic is absent from many procedures when using the
AIRTOUCH(TM) Cavity Preparation System and there is a lower
level of vibration, pressure and noise when compared with
traditional cavity preparation methods.
Ultrasonic Scalers and Polishers: DENTSPLY
manufactures and distributes the CAVITRON(R) SPS(TM) Ultrasonic
Scaler (which uses ultrasonic waves to remove hardened tooth
calculus which results from the interaction of plaque,
saliva and food particles). SPS(TM) stands for Sustained
Performance System, a patented technology which acts
much like an automobile's cruise control that measures tip
motion and compensates for reduction in tip motion once the
insert tip contacts the tooth surface. By doing this, SPS(TM)
provides more power for improved scaling efficiency and
permits the dentist to set the power control at a lower
level, providing a more comfortable scaling procedure for
the patient.
Dental X-Ray Systems: The Company also offers a full line
of dental x-ray equipment for intraoral, panoramic and
cephalometric procedures. Intraoral films provide a view of
a particular area of tooth and jaw structure. Panoramic x-
rays utilize a moving x-ray tube and provide an image of the
entire oral cavity, an image that is particularly valuable
to oral surgeons and orthodontists. The ORTHORALIX(R) 9000
panoramic x-ray system comes with a mechanical drive and
advanced microprocessor control which minimizes spinal
shadow for sharp detail throughout the x-ray film. The DENOPTIX(R)
Digital Imaging System is a patented, digital x-ray imaging
product compatible with the installed base of both intraoral and
panoramic units. This system uses storage phosphor imaging
technology to create digital x-ray images on imaging plates.
These imaging plates are thin and flexible and are available
in every intraoral and panoramic size. They are reusable,
do not require chemical processing like conventional film,
and allow the dentist to reduce the amount of radiation to
the patient by as much as 90%. When placed in a laser
scanner, the information on the imaging plate is converted
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to a digital image via a computer. The DENOPTIX(R) Ceph System is
designed to produce superior digital images for cephalometric,
panoramic and intraoral x-ray systems. It will especially
benefit orthodontists and oral surgeons in planning their
treatment.
X-Ray Support Equipment: Under the RINN(R) brand name,
DENTSPLY manufactures and distributes x-ray film mounts,
film holders and related equipment and accessories.
The Company offers SOFTDENT(R) practice management software through its
InfoSoft division. This fully integrated software is used in managing both
the dental "front" office as well as in maintaining a data base of
information generated in the operatory's clinical environment. SOFTDENT(R) is
used in more than 12,000 dental offices throughout the United States. The
InfoSoft division is also one of the leading processors of electronic dental
insurance claims in the United States. InfoSoft also provides statement
preparation and mailing at a substantial savings over what dentists can do on
their own.
Markets, Sales and Distribution
The market for DENTSPLY's dental products is primarily comprised of
dentists, dental hygienists, dental assistants, dental laboratories and
dental schools. DENTSPLY focuses its primary marketing efforts on the dental
professionals who are the end users of its products. DENTSPLY employs highly
trained, product-specific sales and technical staffs to provide comprehensive
marketing and service tailored to the particular sales and technical support
requirements of its customers. DENTSPLY's marketing efforts seek to
capitalize on the strength of the Company's brand names and international
infrastructure to expand sales of new and existing products throughout the
world, including emerging dental markets in the Pacific Rim, Central and
South America and Eastern Europe.
DENTSPLY is enhancing its position as the brand leader in most of the
categories in which it competes through an end user pull through marketing
approach. The Company has nearly 900 experienced, technically trained sales
personnel representing it globally. The Company conducts extensive
distributor and end-user marketing programs. DENTSPLY trains laboratory
technicians and dentists in the proper use of its products and introduces
them to the latest technological developments at its Educational Centers
located in key dental markets. The Company also maintains ongoing
relationships with various dental associations and recognized worldwide
opinion leaders.
DENTSPLY distributes its dental products primarily through
approximately 350 domestic and over 2,500 foreign distributors, dealers and
importers. While the overwhelming majority of DENTSPLY's products are
distributed through dental distributors and dealers, certain highly
technical products such as the Company's CERAMCO(R) line
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of crown and bridge porcelain products, DENTSPLY Endodontics'
instruments and materials, GAC's orthodontic appliances and CeraMed's bone
substitute/grafting materials are sold directly to the dental laboratory or
dentist.
The Company operates in one operating segment within the meaning of SFAS
131. See Note 4 of the Notes to the Company's Consolidated Financial
Statements - "Segment and Geographic Information".
Product Development
Technological innovation is critical to strengthening the Company's
prominent position in worldwide dental markets. DENTSPLY spends more on
research and development and has brought more innovative products to the
dental office and dental laboratory than any other manufacturer in its
industry. While many of these innovations represent sequential improvements
of existing products, DENTSPLY also continues to successfully launch products
that represent a fundamental change. Its research centers in Europe and
North America employ approximately 200 scientists/Ph.D.'s, engineers and
technicians dedicated to research and product development.
Successful product development is critical to DENTSPLY's efforts to
maintain leadership positions in product categories where it has a high
market share and to increase market share in product categories where gains
are realistic. During 1999, 1998 and 1997, approximately $18.5 million,
$18.2 million and $16.8 million, respectively, was invested by the Company in
connection with the development of new products and in the improvement of
existing products. Approximately 20 new products were successfully brought
to market during 1999, in line with the Company's annual five-year average of
20 new products. Some of these included:
PepGen P-15(TM) - The Company announced the FDA approval, on October
26, 1999 of PepGen P-15(TM) for the treatment of osseous or "bony"
defects resulting from moderate to severe periodontitis - one of
the most prevalent oral diseases affecting older adults and a
leading cause of tooth loss. PepGen P-15(TM) is the first and only
bioengineered bone replacement graft material that has
demonstrated, in multi-center clinical trials, to be 40% more
effective than the current standard of care, demineralized
freeze-dried bone allograft (DFDBA). In these same clinical
trials, the need for retreatment in patients treated with PepGen
P-15(TM) was 14% compared with 57% in those treated with DFDBA.
DENTSPLY will use its considerable resources to maximize the
potential which this exciting technology offers.
Torque Control Motors - The new Torque Control Motors allow the
user to adjust the amount of torque to the size of file being
used during endodontic procedures. When the pre-set limit is in
danger of being exceeded, the motor automatically stops and
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reverses the action of the file. The result is a reduction in
the possibility of file separation due to torsional stress.
Esthet X(TM) - New Esthet X(TM) micro matrix restorative delivers the
exceptional polish of a microfill with the resin matrix of an
advanced hybrid. Esthet X(TM) restorative's unique "Tri-
Dimensional" combination of Opaque Dentin, Regular Body and
Translucent Enamel shades allows the clinician to truly create a
restoration as close as possible to natural dentition. Esthet X(TM)
restorative is the most complete esthetic restorative system
available today, with the optimal combination of high polish,
non-sticky "sculptable" handling, and superior physical
properties.
Midwest(R) XGT(TM) handpiece - This exciting new handpiece features:
- A push-button chuck for quick, easy bur changing
- Advanced fiber optics illumination using Fusion Optics(TM)
- Exclusive ComforTouch(TM) design for better balance, greater
comfort and less hand fatigue
- Maximum flexibility in hose connections, accommodating all
5-hole and 6-pin hoses
- Anti-retraction valve virtually eliminates flow of
contaminated water back into the handpiece
- A couple-based swivel and quick-connect provides 360 degree
rotation and easy on/off handpiece connection
Cavitron(R) Select(TM) - Once again Cavitron(R) sets a new standard for
ultrasonic scaling with the Cavitron(R) Select(TM) - the first
portable Cavitron(R) unit with a self-contained water reservoir.
With the compact 25kHz Cavitron(R) Select(TM), there is no longer a
need to depend upon a dedicated water line, so scaling can be
done virtually anywhere there's a power source. What's most
amazing about this product is that it is so easy to use.
Delton(R) Sealants - The Preventive Care Division, the leader
in pit and fissure sealants, introduced 7 new products. The
biggest addition to the line is the DDS(TM) Brush Tip cartridge.
This brush cartridge will work in the current Delton(R) DDS(TM)
system. The brush tip allows easier and more precise application
of the sealant on the tooth surface. Delton(R) FS+(TM) is another new
product line that Preventive Care Division is offering. It is a
55% filled flowable sealant with fluoride. Another Delton(R)
innovation is the new syringe brush tip. This product is ideal
for use with application of etch. Other new products now
available include Delton(R) EZ Etch(TM), Delton(R) Brush Stixx(TM) and the
DDS(TM) Autoclavable applicator.
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Operating and Technical Expertise
DENTSPLY believes that its manufacturing capabilities are important to
its success. The Company continues to automate its global manufacturing
operations in order to remain a low cost producer.
The manufacture of the Company's products requires substantial and
varied technical expertise. Complex materials technology and processes are
necessary to manufacture the Company's products.
DENTSPLY has completed or has in progress a number of key initiatives
around the world that are focused on helping the Company reach its 20%
operating margin objective.
1. The Company has begun a project in Europe to centralize its
warehousing and distribution. A similar project will also begin
soon in North America. These projects are focused on minimizing
both inventory levels and multiple shipments. They will also
help improve product forecasting and service to our customers.
2. The Company's two restructuring projects (moving its tooth
manufacturing from Germany to Brazil, which has a lower cost
structure, and discontinuing the majority of activities of the
New Image division's intraoral camera operation and integrating
the remaining activities into the Gendex equipment division
located in Chicago) were both completed on schedule in 1999 and
should begin to positively affect operating performance in 2000.
3. The Company continues to focus on improving its manufacturing
processes at several of its manufacturing locations, providing
improved flexibility. This will allow them to continue to reduce
inventories and improve response times to changes in customer
demand.
4. DENTSPLY has also completed the first phase of a shared service
initiative which focuses on the consolidation and centralization
of back office support functions. This program began in the
first quarter of 1999 in Financial Accounting and should be
completed in North America in 2000.
5. DENTSPLY is making significant improvements in Information
Technology as well. A new manufacturing and financial
accounting system was implemented in 1999 and provides the
Company with common software systems for nearly all of its
locations around the world.
Foreign Operations
The Company conducts its business in over 100 foreign countries,
principally through its foreign subsidiaries which operate 44 foreign
facilities (including 12 manufacturing operations). DENTSPLY has a
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long-established presence in Canada and in the European market, particularly
in Germany, Switzerland and England. The Company also has a significant
market presence in Central and South America, Australia, China (including
Hong Kong), Thailand, India, Philippines, Taiwan, Korea and Japan. DENTSPLY
has established marketing activities in Moscow, Russia to serve the countries
of the former Soviet Union. In 1996, a wholly-owned subsidiary, including a
manufacturing facility, was established in the People's Republic of China.
Manufacturing operations in India also commenced in 1996. During 1998,
wholly owned subsidiaries were established in Taiwan, Korea, Colombia and
Chile.
For 1999, 1998 and 1997, the Company's sales outside the United States,
including export sales, accounted for approximately 45%, 46% and 48%,
respectively, of consolidated net sales. For information about the Company's
United States and foreign sales and assets for 1998, 1997 and 1996, see Note
4 of the Notes to the Company's Consolidated Financial Statements - "Segment
and Geographic Information".
As a result of the Company's significant international operations,
DENTSPLY is subject to fluctuations in exchange rates of various foreign
currencies and other risks associated with foreign trade. The impact of
currency fluctuations in any given period can be favorable or unfavorable.
The impact of foreign currency fluctuations of European currencies on
operating income is partially offset by sales in the United States of
products sourced from plants and third party suppliers located overseas,
principally in Germany and Switzerland.
Competition
The Company conducts its operations, both domestic and foreign, under
highly competitive market conditions. Competition in the dental materials
and equipment industries is based primarily upon product performance,
quality, safety and ease of use, as well as price, customer service,
innovation and acceptance by professionals and technicians. DENTSPLY
believes that its principal strengths include its well-established brand
names, its reputation for high-quality and innovative products, its
leadership in product development and manufacturing, and its commitment to
customer service and technical support.
The size and number of the Company's competitors vary by product line
and from region to region. There are many companies which produce some, but
not all, of the same types of products as those produced by the Company.
Certain of DENTSPLY's competitors may have greater resources than does the
Company in certain of its product offerings.
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Regulation
The Company's products are subject to regulation by, among other
governmental entities, the United States Food and Drug Administration (the
"FDA"). In general, if a dental "device" is subject to FDA regulation,
compliance with the FDA's requirements constitutes compliance with
corresponding state regulations. In order to ensure that dental products
distributed for human use in the United States are safe and effective, the
FDA regulates the introduction, manufacture, advertising, labeling,
packaging, marketing and distribution of, and record-keeping for, such
products.
Dental devices of the types sold by the Company are generally classified
by the FDA into a category that renders them subject only to general controls
that apply to all medical devices, including regulations regarding
alteration, misbranding, notification, record-keeping and good manufacturing
practices. The Company believes that it is in compliance with FDA
regulations applicable to its products and manufacturing operations.
All dental amalgam filling materials, including those manufactured and
sold by the Company, contain mercury. Various groups have alleged that
dental amalgam containing mercury is harmful to human health and have
actively lobbied state and federal lawmakers and regulators to pass laws or
adopt regulatory changes restricting the use, or requiring a warning against
alleged potential risks, of dental amalgams. The FDA's Dental Devices
Classification Panel, the National Institutes of Health and the United States
Public Health Service have each indicated that no direct hazard to humans
from exposure to dental amalgams has been demonstrated to them. If the FDA
were to reclassify dental mercury and amalgam filling materials as classes of
products requiring FDA premarket approval, there can be no assurance that the
required approval would be obtained or that the FDA would permit the
continued sale of amalgam filling materials pending its determination.
The introduction and sale of dental products of the types produced by
the Company are also subject to government regulation in the various foreign
countries in which they are produced or sold. Some of these regulatory
requirements are more stringent than those applicable in the United States.
DENTSPLY believes that it is in substantial compliance with the foreign
regulatory requirements that are applicable to its products and manufacturing
operations.
Sources and Supply of Raw Materials
All of the raw materials used by the Company in the manufacture of its
products are purchased from various suppliers and are available from numerous
sources. No single supplier accounts for a significant percentage of
DENTSPLY's raw material requirements.
13
Trademarks and Patents
The Company's trademark properties are important and contribute to the
Company's marketing position. To safeguard these properties, the Company
maintains trademark registrations in the United States and in significant
international markets for its products, and carefully monitors trademark use
worldwide. DENTSPLY owns and maintains approximately one thousand domestic
and foreign patents. The Company believes its patents are important to its
business, although no aspect of its business is materially dependent on any
particular patent.
Employees
As of March 15, 2000, the Company and its subsidiaries had approximately
5,700 employees, of whom approximately 2,925 were engaged in manufacturing
operations, approximately 1,985 were engaged in sales and distribution,
approximately 580 were engaged in finance and administration, and
approximately 210 were engaged in research and product development
activities. Hourly workers at the Company's Ransom & Randolph facility in
Maumee, Ohio are represented by Local No. 12 of the International Union,
United Automobile, Aerospace and Agriculture Implement Workers of America
under a collective bargaining agreement that expires on January 31, 2004; and
hourly workers at the Company's Midwest Dental Products facility in Des
Plaines, Illinois are represented by Tool & Die Makers Local 113 of the
International Association of Machinists and Aerospace Workers under a
collective bargaining agreement that expires on May 31, 2000. The Company
believes that its relationship with its employees is good.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The factors described below are important risk factors. The occurrence
of any of these risks could have a material adverse effect on the Company's
business or operating results, causing actual results to differ materially
from those expressed in forward-looking statements made by the Company or its
representatives in this report or in any other written or oral reports or
presentations. These factors are intended to serve as meaningful cautionary
statements within the meaning of the Private Securities Litigation Reform Act
of 1995.
Rate of Growth
- --------------
The Company's ability to continue to increase revenues depends on
a number of factors, including the rate of growth in the market for
dental supplies and equipment, the ability of the Company to continue
to develop innovative and cost-effective new products, and the
acceptance by dental professionals of new products and technologies.
The demand for dental services can be adversely affected by economic
conditions, healthcare reform, government regulation or more stringent
14
limits in expenditures by dental insurance providers. There is also a
risk that dental professionals may resist new products or technologies or
may not be able to obtain reimbursement from dental insurance providers for
the use of new procedures or equipment.
Acquisitions
- ------------
The Company's growth in recent years has depended to some extent on
acquisitions. The Company completed twelve acquisitions in 1997 and 1998,
the largest of which were GAC, Inc. and Vereinigte Dentalwerke GmbH. There
can be no assurance that the Company will be able to continue to identify and
complete acquisitions which will add materially to the Company's revenues.
Among the risks that could affect the Company's ability to complete such
acquisitions are competition for appropriate acquisition candidates and the
relatively small size of many such candidates. Moreover, there can be no
assurance that the Company will successfully integrate into its operations
the businesses that it acquires or that any such integration will not take
longer and cost more than anticipated.
Fluctuating Operating Results
- -----------------------------
The Company's business is subject to quarterly variations in operating
results caused by seasonality and by business and industry conditions, making
operating results more difficult to predict. The timing of acquisitions, the
impact of purchase accounting adjustments and consolidations among
distributors of the Company's products may also affect the Company's
operating results in any particular period.
Currency Translation and International Business Risks
- -----------------------------------------------------
Because approximately 40% of the Company's revenues have been
generated in currencies other than the U.S. dollar, the value of the U.S.
dollar in relation to those currencies affects the Company's operating
results. The strength of the U.S. dollar relative to foreign currencies can
have a negative effect on the Company's revenues and operating results. If
the U.S. dollar strengthens in relation to other currencies, the Company's
revenues and operating results will be adversely affected. In addition,
approximately 50% of the Company's revenues result from sales in markets
outside of the United States. Europe has been an important market for the
Company, and although Asia and South America have not historically been the
source of significant revenues, the Company has made investments in Asian
and South American markets because it believes that long-term future growth
prospects in these geographic areas are good. Weakness in economic
conditions in Europe could have a material adverse effect on the Company's
sales and operating results, and continued economic turmoil in Asia and
South America could have a material adverse effect on the Company's future
rate of growth.
15
Margin Improvements
- -------------------
The Company strives to increase its margins by controlling its costs and
improving manufacturing efficiencies. However, there can be no assurance
that the Company's efforts will continue to be successful. Margins can be
adversely affected by many factors, including competition, product mix and
the effect of acquisitions.
Ability to Attract and Retain Personnel
- ---------------------------------------
The Company's success is dependent upon its management and employees.
The loss of senior management employees or any failure to recruit and train
needed managerial, sales and technical personnel could have a material
adverse effect on the Company.
Year 2000
- ---------
The changeover to the year 2000 ("Y2K") has resulted in no significant
issues or problems for the Company. Worldwide operations continued without
interruption as the Company's information systems, equipment and utility
providers functioned as normal throughout the transition. In addition, to
date, the Company has not been adversely impacted by any Y2K problems
experienced by its customers or vendors. Although the Company has not
experienced any Y2K problems, it is continuing to monitor potential areas of
risk.
Competition
- ------------
The worldwide market for dental supplies and equipment is highly
competitive. There can be no assurance that the Company will successfully
identify new product opportunities and develop and market new products
successfully, or that new products and technologies introduced by competitors
will not render the Company's products obsolete or noncompetitive.
Antitakeover Provisions
- -----------------------
Certain provisions of the Company's Certificate of Incorporation and
By-Laws and of Delaware law could have the effect of making it difficult for
a third party to acquire control of the Company. Such provisions include the
division of the Board of Directors of the Company into three classes, with
the three-year term of each class expiring each year, a provision allowing
the Board of Directors to issue preferred stock having rights senior to those
of the Common Stock and certain procedural requirements which make it
difficult for stockholders to amend the Company's by-laws and which preclude
stockholders from calling special meetings of stockholders. In
16
addition, members of the Company's management and participants in the
Company's Employee Stock Ownership Plan collectively own approximately 15%
of the outstanding Common Stock of the Company, which may discourage a
third party from attempting to acquire control of the Company in a
transaction that is opposed by the Company's management and employees.
Item 2. Properties
- -------------------
As of March 15, 2000, DENTSPLY maintains manufacturing facilities at the
following locations:
Leased
Location Function or Owned
- -------- -------- --------
York, Pennsylvania Manufacture and distribution of Owned
artificial teeth and other dental
laboratory products; export of
dental products; corporate
headquarters
York, Pennsylvania Manufacture and distribution of Owned
dental equipment and preventive
dental products
Des Plaines, Illinois Manufacture and assembly of dental Leased
handpieces and components and
dental x-ray equipment
Franklin Park, Manufacture and distribution of Owned
Illinois needles and needle-related
products, primarily for the dental
profession
Milford, Delaware Manufacture and distribution of Owned
consumable dental products
Las Piedras, Manufacture of crown and bridge Owned
Puerto Rico materials
Elgin, Illinois Manufacture of dental x-ray film Owned
holders, film mounts and
accessories
Maumee, Ohio Manufacture and distribution of Owned
investment casting products
Lakewood, Colorado Manufacture and distribution of Leased
bone grafting materials and
Hydroxylapatite plasma-feed
coating materials
17
Commerce, California Manufacture and distribution of Leased
investment casting products
Johnson City, Manufacture and distribution of Leased
Tennessee endodontic instruments and
materials
Petropolis, Brazil Manufacture and distribution of Owned
artificial teeth and consumable
dental products
Petropolis, Brazil Manufacture and distribution of Owned
dental anesthetics
Konstanz, Germany Manufacture and distribution of Owned
consumable dental products;
distribution of dental equipment
Munich, Germany Manufacture and distribution of Owned
endodontic instruments and
materials
Milan, Italy Manufacture and distribution of Leased
dental x-ray equipment
Mexico City, Mexico Manufacture and distribution of Owned
dental products
Plymouth, England Manufacture and distribution of Leased
dental hand instruments
Ballaigues, Manufacture and distribution of Owned
Switzerland endodontic instruments
Ballaigues, Manufacture and distribution of Owned
Switzerland plastic components and packaging
material
Le Creux, Manufacture and distribution of Owned
Switzerland endodontic instruments
New Delhi, India Manufacture and distribution of Leased
dental products
Tianjin, China Manufacture and distribution of Leased
dental products
18
In addition, the Company maintains sales and distribution offices at
certain of its foreign and domestic manufacturing facilities, as well as at
six other United States locations and at 25 international locations in 18
foreign countries. Of the 31 United States and international sites used
exclusively for sales and distribution, two are owned by the Company and the
remaining 29 are leased. The Company also maintains sales offices in various
countries throughout the world.
DENTSPLY believes that its properties and facilities are well maintained
and are generally suitable and adequate for the purposes for which they are
used.
Item 3. Legal Proceedings
- --------------------------
DENTSPLY 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 DENTSPLY is a party will not have a material adverse
effect upon its consolidated financial position or results of operations.
In June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte Division with respect to the
distribution of artificial teeth and related products. On January 5, 1999,
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and is seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and are pending in the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The private party
suits seek damages in an unspecified amount. It is the Company's position
that the conduct and activities of the Trubyte Division do not violate the
antitrust laws.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
19
Executive Officers of the Registrant
The following table sets forth certain information regarding the
executive officers of the Company as of March 15, 2000.
Name Age Position
---- --- --------
John C. Miles II 58 Chairman of the Board and Chief
Executive Officer
Gerald K. Kunkle Jr. 53 President and Chief Operating Officer
William R. Jellison 42 Senior Vice President and Chief
Financial Officer
J. Henrik Roos 42 Senior Vice President
W. William Weston 52 Senior Vice President
Thomas L. Whiting 57 Senior Vice President
Brian M. Addison 46 Vice President, Secretary and
General Counsel
John C. Miles II was named Chairman of the Board effective May 20,
1998. Prior thereto, he was Vice Chairman of the Board since January 1,
1997. He was named Chief Executive Officer of the Company upon the
resignation of Burton C. Borgelt from that position on January 1, 1996. Prior
to that he was President and Chief Operating Officer and a director of the
Company since the Merger and of Old Dentsply commencing in January 1990.
Gerald K. Kunkle Jr. was named President and Chief Operating Officer
effective January 1, 1997. Prior thereto, Mr. Kunkle served as President of
Johnson and Johnson's Vistakon Division, a manufacturer and marketer of
contact lenses, from January 1994 and, from early 1992 until January 1994,
was President of Johnson and Johnson Orthopaedics, Inc., a manufacturer of
orthopaedic implants, fracture management products and trauma devices.
William R. Jellison was named Senior Vice President and Chief Financial
Officer of the Company effective April 20, 1998. Prior to that time, Mr.
Jellison held the position of Vice President of Finance, Treasurer and
Corporate Controller for Donnelly Corporation of Holland, Michigan since
1994. From 1991 to 1994, Mr. Jellison was Donnelly's Vice President of
Financial Operations, Treasurer and Corporate Controller. Prior to that, he
served one year as Treasurer and Corporate Controller, and in other financial
management positions for Donnelly. Mr. Jellison is a Certified Management
Accountant.
20
J. Henrik Roos was named Senior Vice President of the following profit
centers effective June 1, 1999: Ceramco, CeraMed, Dentsply Argentina,
Dentsply Brazil, Dentsply Canada, Dentsply Herpo, Dentsply Mexico, DeTech,
Latin American Export, Preventive Care, Ransom & Randolph and Trubyte. Prior
to his Senior Vice President appointment, Mr. Roos served as Vice President
and General Manager of the Company's Gendex division from June 1995 to June
1999. Prior to that, he served as President of Gendex European operations in
Frankfurt, Germany since joining the Company in August 1993.
W. William Weston was named Senior Vice President of the following
profit centers effective January 1, 1999: DeDent, Dentsply Asia, Dentsply
Australia, Dentsply France, Dentsply Italy, Dentsply Japan, Dentsply Russia,
Dentsply United Kingdom, L.D. Caulk, Middle East/Africa, SIMFRA and SPAD.
Prior to his Senior Vice President appointment, Mr. Weston served as the Vice
President and General Manager of DENTSPLY's DeDent Operations in Europe from
October 1, 1990 to January 1, 1996. Prior to that time he was Pharmaceutical
Director for Pfizer in Germany.
Thomas L. Whiting was named Senior Vice President of the following
profit centers effective January 1, 1999: GAC, Gendex, Gendex Germany, Gendex
Italy, InfoSoft, Maillefer, Midwest, MPL, Rinn, Tulsa Dental Products, United
Dental Manufacturing (UDM), and Vereinigte Dentalwerke (VDW). Prior to his
Senior Vice President appointment, Mr. Whiting was Vice President and General
Manager of the Company's L.D. Caulk Division from March 1987 to early 1995.
Prior to that time, Mr. Whiting held management positions with Deseret
Medical and the Parker-Davis Company.
Brian M. Addison has been Vice President, Secretary and General Counsel
of the Company since January 1, 1998. Prior to that he was Assistant
Secretary and Corporate Counsel since December 1994. From August 1994 to
December 1994 he was a Partner at the Harrisburg, Pennsylvania law firm of
McNees, Wallace & Nurick. Prior to that he was Senior Counsel at Hershey
Foods Corporation.
21
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ----------------------------------------------------------------------
Matters
- -------
The information set forth under the caption "Supplemental Stock
Information" in Part IV of this Annual Report on Form 10-K is incorporated
herein by reference in response to this Item 5.
Item 6. Selected Financial Data
- --------------------------------
The information set forth under the caption "Selected Financial Data" in
Part IV of this Annual Report on Form 10-K is incorporated herein by
reference in response to this Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
- -------------------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part IV of this
Annual Report on Form 10-K is incorporated herein by reference in response to
this Item 7.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
- -------------------------------------------------------------------
The table below provides information about the Company's market
sensitive financial instruments and includes "forward-looking statements"
that involve risks and uncertainties. Actual results could differ materially
from those expressed in the forward-looking statements. The Company's major
market risk exposures are changing interest rates, primarily in the United
States, and movements in foreign currency exchange rates. The Company's
policy is to manage interest rates through the use of floating rate debt and
interest rate swaps to adjust interest rate exposures when appropriate, based
upon market conditions. A portion of the Company's borrowings are
denominated in foreign currencies which exposes the Company to market risk
associated with exchange rate movements. The Company's policy generally is
to hedge major foreign currency exposures through foreign exchange forward
contracts. These contracts are entered into with major financial
institutions thereby minimizing the risk of credit loss. The Company does
not hold or issue derivative financial instruments for speculative or trading
purposes. The Company is subject to other foreign exchange market risk
exposure as a result of non-financial instrument anticipated foreign currency
cash flows which are difficult to reasonably predict, and have therefore not
been included in the table below. All items described are non-trading and
are stated in U.S. dollars.
22
Expected Maturity Dates December 31, 1999
----------------------------------- -------------------
There- Carrying Fair
2000 2002 2003 after Value Value
------ ------ ------ -------- -------- -------
(dollars in thousands)
Foreign Exchange Forward
Contracts:
Forward sale German mark $6,399 $ - $ - $ - $ 6,399 $ 6,472
Forward sale French franc 3,926 - - - 3,926 3,843
Forward purchase British
pound 67 - - - 67 66
Forward purchase Colombian
peso 161 - - - 161 153
Short Term Debt:
US dollar denominated 2,000 - - - 2,000 2,000
Average interest rate 6.5%
British pound denominated 1,078 - - - 1,078 1,078
Average interest rate 6.8%
Japanese yen denominated 2,420 - - - 2,420 2,420
Average interest rate 1.6%
Hong Kong dollar
denominated 4,174 - - - 4,174 4,174
Average interest rate 8.6%
German mark denominated 6,460 - - - 6,460 6,460
Average interest rate 3.9%
Italian lira denominated 1,158 - - - 1,158 1,158
Average interest rate 5.8%
Long Term Debt:
US dollar denominated - 116,000 - - 116,000 116,000
Average interest rate 7.4%
British pound denominated - 10,008 - - 10,008 10,008
Average interest rate 6.2%
Swiss franc denominated - 11,481 - - 11,481 11,481
Average interest rate 2.1%
Australian dollar
denominated - 3,922 - - 3,922 3,922
Average interest rate 5.3%
Italian lira denominated - 1,659 - - 1,659 1,659
Average interest rate 3.8%
Thai bhat denominated - 1,277 - - 1,277 1,277
Average interest rate 6.0%
Interest rate swaps - 40,000 20,000 20,000 - 2,670
Average interest rates 5.5% 5.8% 5.8%
23
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The information set forth under the captions "Consolidated Statements of
Income," "Consolidated Balance Sheets," "Consolidated Statements of
Stockholders' Equity," "Consolidated Statements of Cash Flows," "Notes to
Consolidated Financial Statements," "Management's Financial Responsibility"
and "Independent Auditors' Report" of KPMG LLP in Part IV of this Annual
Report on Form 10-K is incorporated herein by reference in response to this
Item 8.
Item 9. Changes in and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
- -----------------------------------
Previously reported.
24
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K and the information
set forth under the captions "Election of Directors", "Section 16(a)
Beneficial Ownership Reporting compliance" and "Other Matters" in the Proxy
Statement is incorporated herein by reference in response to this Item 10.
Item 11. Executive Compensation
- --------------------------------
The information set forth under the caption "Executive Compensation" in
the Proxy Statement is incorporated herein by reference in response to this
Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------------------------------------------------------------
Management
- ----------
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement is
incorporated herein by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information set forth under the subcaptions "Compensation of
Directors", "Human Resources Committee Interlocks and Insider Participation"
and "Human Resources Committee Report on Executive Compensation" in the Proxy
Statement is incorporated herein by reference to this Item 13.
25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
- ----------------------------------------------------------------
Form 8-K
- --------
Sequential
(a) Documents filed as part of this Report Page No.
-------------------------------------- ----------
1. Supplemental Stock Information 32
2. Selected Financial Data 33
3. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 34
4. Financial Statements and Supplementary
Data
--------------------------------------
The following consolidated financial
statements of the Company are filed as
part of this Annual Report on Form 10-K:
Management's Financial Responsibility 40
Independent Auditors' Report of
KPMG LLP 41
Consolidated Statements of Income
for the years ended December 31,
1999, 1998 and 1997 42
Consolidated Balance Sheets as of
December 31, 1999 and 1998 43
Consolidated Statements of
Stockholders' Equity for the years
ended December 31, 1999, 1998 and
1997 44
Consolidated Statements of Cash
Flows for the years ended
December 31, 1999, 1998 and 1997 47
Notes to Consolidated Financial
Statements 51
26
Sequential
5. Financial Statement Schedules Page No.
----------------------------- ----------
The following financial statement
schedule is filed as part of this
Annual Report on Form 10-K:
Schedule II - Valuation and qualifying 72
accounts
Financial statement schedules not
listed above have been omitted because
they are inapplicable, are not re-
quired under applicable provisions of
Regulation S-X, or the information
that would otherwise be included in
such schedules is contained in the
registrant's consolidated financial
statements or accompanying notes.
6. Exhibits. The Exhibits listed below are filed or
incorporated by reference as part of this Annual
Report on Form 10-K.
Exhibit
Number Description
------- -----------
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended
4.1 (a) 364-Day and 5-Year Competitive Advance,
Revolving Credit and Guaranty Agreements
dated as of October 23, 1997 among the
Company, the guarantors named therein,
the banks named therein, the Chase
Manhattan Bank as Administrative Agent,
and ABN Amro Bank, N.V. as Documentation
Agent. (11)
(b) Amendment to the 364-Day Competitive
Advance, Revolving Credit and Guaranty
Agreement dated as of October 21, 1999
among the Company, the guarantors named
therein, the banks named therein, the
Chase Manhattan Bank as Administrative
Agent, and ABN Amro Bank, N.V. as
Documentation Agent
4.2 (a) Commercial Paper Issuing and Paying
Agency Agreement dated as of August 12,
1999 between the Company and the Chase
Manhattan Bank
(b) Commercial Paper Dealer Agreement dated
as of August 12, 1999 between the Company
and Goldman, Sachs & Co.
27
10.1 1992 Stock Option Plan adopted May 26,
1992 (4)
10.2 1993 Stock Option Plan (2)
10.3 1998 Stock Option Plan (1)
10.4 Nonstatutory Stock Option Agreement
between the Company and Burton C.
Borgelt (3)
10.5 (a) Employee Stock Ownership Plan as amended
effective as of December 1, 1982,
restated as of January 1, 1991 (7)
(b) Second amendment to the DENTSPLY
Employee Stock Ownership Plan (10)
(c) Third Amendment to the DENTSPLY
Employee Stock Ownership Plan (12)
10.6 (a) Retainer Agreement dated December 29,
1992 between the Company and State Street
Bank and Trust Company ("State Street")
(5)
(b) Trust Agreement between the Company and
State Street Bank and Trust Company dated
as of August 11, 1993 (6)
(c) Amendment to Trust Agreement between the
Company and State Street Bank and Trust
Company effective August 11, 1993 (6)
10.7 Employment Agreement dated January 1,
1996 between the Company and Burton C.
Borgelt (9)*
10.8 (a) Employment Agreement dated as of
December 31, 1987 between the Company
and John C. Miles II (5)*
(b) Amendment to Employment Agreement between
the Company and John C. Miles II dated
February 16, 1996, effective January 1,
1996 (9)*
10.9 Employment Agreement dated as of December
31, 1987, as amended as of February 8,
1990, between the Company and Leslie A.
Jones (5)*
10.10 Employment Agreement dated as of December
10, 1992 between the Company and Michael
R. Crane (5)*
10.11 Employment Agreement dated as of December
10, 1992 between the Company and Edward
D. Yates (5)*
10.12 Employment Agreement dated January 1,
1996 between the Company and W. William
Weston (9)*
10.13 Employment Agreement dated January 1,
1996 between the Company and Thomas L.
Whiting (9)*
28
10.14 Employment Agreement dated October 11,
1996 between the Company and Gerald K.
Kunkle Jr. (10)*
10.15 Employment Agreement dated April 20,
1998 between the Company and William R.
Jellison (12)*
10.16 Employment Agreement dated September 10,
1998 between the Company and Brian M.
Addison (12)*
10.17 Employment Agreement dated June 1, 1999
between the Company and J. Henrik Roos *
10.18 Midwest Dental Products Corporation
Pension Plan as amended and restated
effective January 1, 1989 (7)*
10.19 Revised Ransom & Randolph Pension Plan,
as amended effective as of September 1,
1985, restated as of January 1, 1989 (7)*
10.20 DENTSPLY International Inc. Directors'
Deferred Compensation Plan effective
January 1, 1997 (10)*
10.21 (a) Asset Purchase and Sale Agreement, dated
January 10, 1996, between Tulsa Dental
Products, L.L.C. and DENTSPLY
International Inc. (8)
(b) Amendment to Asset Purchase and Sale
Agreement between Tulsa Dental Products,
L.L.C. and DENTSPLY, dated January 1,
1999
10.22 Supplemental Executive Retirement Plan
effective January 1, 1999 (12)*
10.23 Written Description of Year 1999
Incentive Compensation Plan
21.1 Subsidiaries of the Company
23.1 Consent of KPMG LLP
27 Financial Data Schedule
- -------------------
* Management contract or compensatory plan.
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 333-56093).
(2) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-79094).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
29
(5) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, File No. 0-16211.
(6) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-16211.
(7) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
December 31, 1994, File No. 0-16211.
(8) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File No. 0-16211.
(11) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, File No. 0-16211.
(12) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, File No. 0-16211.
Loan Documents
The Company and certain of its subsidiaries have entered into various
loan and credit agreements and issued various promissory notes and guaranties
of such notes, listed below, the aggregate principal amount of which is less
than 10% of its assets on a consolidated basis. The Company has not filed
copies of such documents but undertakes to provide copies thereof to the
Securities and Exchange Commission supplementally upon request.
(1) Master Grid Note dated November 4, 1996 executed in favor of
The Chase Manhattan Bank in connection with a line of credit
up to $20,000,000 between the Company and The Chase
Manhattan Bank.
(2) Agreement dated December 19, 1997 between Midland Bank PLC
and Dentsply Limited for $2,500,000.
30
(3) Promissory Note dated August 14, 1998 in the principal amount of
$6,000,000 of the Company in favor of First Union National Bank.
(4) Credit Agreement dated September 14, 1998 between Dentsply
Canada Limited ("DCL") and Bank of Montreal for C$3,500,000.
(5) Promissory Note dated December 1, 1995 in connection with a
line of credit up to $20,000,000 between the Company and
Mellon Bank.
(6) Form of "comfort letters" to various foreign commercial
lending institutions having a lending relationship with one
or more of the Company's international subsidiaries.
7) Unsecured Note dated June 26, 1998 between the Company and Harris
Trust and Savings Bank in the principal amount of $500,000.
(b) Reports on Form 8-K
-------------------
The Company did not file any Reports on Form 8-K
during the quarter ended December 31, 1999.
* * * * * *
31
Supplemental Stock Information
- ------------------------------
The common stock of the Company is traded on the NASDAQ National Market
under the symbol "XRAY". The following table sets forth high and low sale
prices of the Company's common stock for the periods indicated as reported on
the NASDAQ National Market (after giving effect to the two-for-one stock
split effective on October 29, 1997):
Market Range of Common Stock Cash
---------------------------- Dividend
1999 High Low Declared
- ---- -------- -------- --------
First Quarter $27.50 $21.44 $.05625
Second Quarter 29.13 21.31 .05625
Third Quarter 29.31 20.50 .05625
Fourth Quarter 24.75 20.94 .06250
1998
- ----
First Quarter $35.25 $26.25 $.05125
Second Quarter 34.75 23.25 .05125
Third Quarter 26.75 21.25 .05125
Fourth Quarter 28.00 20.00 .05625
1997
- ----
First Quarter $27.50 $23.38 $.04625
Second Quarter 26.19 22.31 .04625
Third Quarter 28.94 24.31 .05125
Fourth Quarter 31.75 26.13 .05125
The Company estimates, based on information supplied by its transfer
agent, that there are approximately 20,152 holders of common stock, including
514 holders of record.
32
DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year Ended December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Statement of Income Data: (dollars in thousands, except per share amounts)
Net sales $830,864 $795,122 $720,760 $656,557 $572,028
Gross profit 431,977 416,423 368,726 324,670 280,852
Restructuring and other costs --- 71,500 --- --- ---
Operating income 149,617 69,852 132,456 119,464 100,735
Income before income taxes 138,019 55,101 122,006 110,960 90,017
Net income $ 89,863 $ 34,825(1) $ 74,554 $ 67,222 $ 53,963(1)
Earnings per Common Share:
Net income-basic $ 1.70 $ .65(1) $ 1.38 $ 1.25 $ 1.00(1)
Net income-diluted 1.70 .65(1) 1.37 1.25 .99(1)
Cash dividends declared per common share .23125 .21 .195 .17 .154
Weighted Average Common Shares Outstanding:
Basic 52,754 53,330 53,937 53,840 54,024
Diluted 52,911 53,597 54,229 53,994 54,255
Balance Sheet Data:
Working capital $138,448 $128,076 $107,678 $113,547 $122,706
Total assets 859,588 895,322 774,376 667,662 582,383
Total debt 165,467 233,761 129,510 101,820 76,291
Stockholders' equity 468,872 413,801 423,933 365,590 315,922
Return on average stockholders' equity 20.4% 19.2%(2) 18.9% 19.9% 17.9%
Long-term debt to total capitalization 23.7% 34.4% 19.9% 17.0% 17.9%
Other Data:
Depreciation and amortization $ 39,624 $ 37,474 $ 32,405 $ 28,108 $ 21,488
Capital expenditures 33,386 31,430 27,660 20,804 17,421
Interest expense, net 14,640 14,168 11,006 10,071 7,879
Property, plant and equipment, net 180,536 158,998 147,130 141,458 140,101
Goodwill and other intangibles, net 349,421 346,073 336,905 256,199 188,409
Cash flows from operating activities 121,269(3) 93,742(3) 94,288 83,189 67,516
Income tax rate 34.9% 36.8% 38.9% 39.4% 40.1%
(1) Includes restructuring and other costs of $45.4 million or $.85 per common share in 1998 and unusual or
non-recurring charges of $1.8 million or $.04 per common share in 1995.
(2) Excludes income statement effect of restructuring and other costs.
(3) Includes negative cash flows associated with the two 1998 restructurings of $13.1 million in 1999 and
$2.6 million in 1998.
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements made by the Company, including without limitation,
statements containing the words "plans", "anticipates", "believes",
"expects", or words of similar import may be deemed to be forward-looking
statements and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements involve risks and uncertainties which may
materially affect the Company's business and prospects, and should be read in
conjunction with the risk factors set forth in the section "Factors That May
Affect Future Results" in Item I, Part I of this Annual Report on Form 10-K.
Results of Operations, 1999 Compared to 1998
- --------------------------------------------
Net sales increased $35.8 million, or 4.5%, to $830.9 million, up from
$795.1 million in 1998. Base business accounted for 3.5% of the sales growth
in 1999 while 2.8% of the sales improvement was due to acquisitions, net of
divestitures. Currency translation negatively impacted net sales by 1.8%,
mainly due to the devaluation of the Brazilian Real and the strengthening of
the U.S. dollar against the major European currencies. Sales in the United
States grew 6.1%; 4.9% from base business and 1.2% from acquisitions. There
was strong base business growth in the United States from endodontic,
orthodontic and other consumable product lines. European sales decreased
1.4%; 2.1% from base business and 3.2% from currency translation offset by
3.9% growth from acquisitions. Sales for the year in Europe were negatively
impacted by a soft dental market, especially in Germany, distributor
consolidations in the United Kingdom, and the poor economy in the
Commonwealth of Independent States (C.I.S.). There was improvement in the
fourth quarter of 1999 in Europe as consumable product sell-out rates in
Germany grew modestly. Equipment sales in Europe, however, remained
sluggish. The economy in the Pacific Rim continued to improve, resulting in a
5.9% increase in base business sales despite $1.4 million of inventory
returns from dealers in India. After excluding acquisitions and exchange,
sales in Latin America grew 9.7%. Reported sales for Latin America decreased
6.8% mainly due to the devaluation of the Brazilian Real. Sales in the rest
of the world were up 14.9%; 7.2% from base business, 6.1% from acquisitions
and 1.6% from exchange. The increase was mainly due to increases in Canada,
the Middle East and Africa.
Gross profit increased $15.6 million, or 3.7%, to $432.0 million from
$416.4 million in 1998. As a percentage of sales, gross profit decreased
from 52.4% in 1998 to 52.0% in 1999. Costs associated with moving the
remaining manufacturing operations for New Image and Germany's tooth
manufacturing facility negatively impacted performance in the first half of
1999. In addition, purchase price accounting adjustments related to the
acquisition of Vereinigte Dentalwerke GmbH (VDW) in December 1998 and a
strong Japanese Yen affecting orthodontic component purchases also negatively
impacted the gross profit percentage.
Selling, general and administrative ("SG&A") expense increased $7.3
million or 2.6%. As a percentage of sales, expenses decreased from 34.6% in
1998 to 34.0% in 1999. This percentage decrease included a $3.1 million
reduction in bad debt expense (due mainly to a bad debt reserve of $2.5
million in the third quarter of 1998 to cover softness in the C.I.S. and
34
Asian economies) and a $1.1 million benefit from the curtailment of the
Dreieich Pension Plan in Germany resulting from the restructuring in 1998.
These decreases were offset by an increase of $1.3 million in legal costs,
net of settlements. Legal costs during 1999 increased $4.7 million primarily
for litigation with the Justice Department, defense of endodontic patents and
litigation related to the disposable air/water syringe tip. This increase
was partially offset by a $3.4 million expense recovery from an arbitration
award associated with our former implant business.
Restructuring and other costs of $29.0 million were recorded in the
second quarter of 1998 to rationalize and restructure the Company's worldwide
laboratory business. In the fourth quarter of 1998, the Company took a
restructuring charge of $42.5 million primarily for the write-off of
intangibles, including goodwill, and closing costs associated with the
discontinuance of the New Image division in Carlsbad, California.
Net interest expense increased $.5 million during 1999 due to increased
interest expense on higher debt incurred during the first half of 1999 to
finance the acquisition of VDW in December 1998 and the stock repurchase
program in the second half of 1998.
Other income increased $3.6 million in 1999 including $1.6 million of
lower transaction exchange losses as the U.S. dollar strengthened against the
major European currencies and $1.3 million of other income related to the
1995 divestiture of the CMW business unit.
Income before income taxes increased $82.9 million, including $71.5
million of restructuring and other costs recorded in the second and fourth
quarters of 1998. Without these costs, income before income taxes increased
$11.4 million, or 9.0%. The effective tax rate for operations was lowered to
34.9% in 1999 compared to 36.8% in 1998 reflecting savings from federal,
state and foreign tax planning activities. Net income increased $55.0
million including the after-tax impact of $45.4 million for restructuring and
other costs. Without these costs, net income increased $9.6 million, or
12.0% in 1999 compared to 1998 due to higher sales, lower expenses as a
percentage of sales, higher other income, and a lower provision for income
taxes offset somewhat by a lower gross profit percentage in 1999.
Basic and diluted earnings per common share were $1.70 in 1999 compared
to $.65 per share in 1998. Earnings per common share in 1998 included $.85
for restructuring and other costs. Without these costs, basic and diluted
earnings per common share increased from $1.50 in 1998 to $1.70 in 1999 or
13.3%.
Results of Operations, 1998 Compared to 1997
- --------------------------------------------
Net sales increased $74.4 million, or 10.3%, from $720.8 million in 1997
to $795.1 million in 1998. Acquisitions, net of divestitures, accounted for
7.0% of the sales growth for the year. Base business sales were up 4.3% due
to sales increases of 7.7% in the United States and 2.1% in Europe, offset by
a decline of 6.5% in the Pacific Rim and Latin America. The European base
business sales increase included a decline in sales to the C.I.S. and a
decline in the German laboratory business sales. Sales in the Pacific Rim
and Latin America were adversely impacted by the downturn in the Asian and
Latin American economies and the termination of distributors in Taiwan,
35
Korea, Colombia and Chile which were replaced by newly established local
DENTSPLY subsidiaries in 1998. The translation impact of exchange rate
fluctuations in Europe, Asia and Latin America had a negligible impact on
sales in 1998. Base business sales growth in other territories (including
Canada, Australia and Japan) was strong but was offset by the adverse impact
of the translation effect of the strong U.S. dollar.
Gross profit increased $47.7 million, or 12.9%, due primarily to higher
net sales and an increase in the gross profit percentage in 1998. As a
percentage of net sales, gross profit increased from 51.2% in 1997 to 52.4%
in 1998. Favorable product and geographical mix, operational improvements
and discontinuing the implant product line all contributed to the improved
percentage.
SG&A expenses increased $38.8 million, or 16.4%. As a percentage of
sales, expenses increased from 32.8% in 1997 to 34.6% in 1998. The main
reasons for the percentage increase were: a higher expense to sales ratio for
businesses acquired during 1998; higher expenses for upgrading information
systems in the United States, Europe and Asia; bad debt provisions,
principally for customers in the C.I.S. and Asia; costs associated with
establishing new local DENTSPLY subsidiaries in countries where third party
distributors have been terminated; and increased research and development
expenses.
Restructuring and other costs of $29.0 million were recorded in the
second quarter of 1998. The major component of the charge includes costs of
$26.0 million to rationalize and restructure the Company's worldwide
laboratory business (primarily for the closure of the Company's German tooth
manufacturing facility).
In the fourth quarter of 1998, the Company took a restructuring charge
of $42.5 million primarily for the write-off of intangibles, including
goodwill, and closing costs associated with the discontinuance of the New
Image division in Carlsbad, California.
The increase in net interest expense of $3.2 million was mainly due to
debt resulting from $106.8 million spent for acquisitions and $42.0 million
to repurchase approximately 1.8 million shares of common stock during 1998.
Other expense was $.6 million in 1998 compared to other income of $.6 million
in 1997. The change is primarily due to exchange losses in 1998 compared to
a small gain in 1997.
Income before income taxes decreased $66.9 million from $122.0 million
in 1997 to $55.1 million in 1998 mainly due to the $71.5 million of
restructuring and other costs. Without these costs, income before income
taxes increased $4.6 million, or 3.8%.
The effective tax rate (before restructuring and other costs) of 36.8%
in 1998 compares to 38.9% in 1997. The 1998 rate reflects savings resulting
from federal, state and foreign tax planning.
Net income decreased $39.7 million due to the after-tax cost of $45.4
million for restructuring and other costs. Without these costs, net income
36
increased $5.7 million, or 7.6%, in 1998 due to higher sales, an improvement
in the gross profit percentage and a lower effective tax rate for the Company
in 1998.
Basic and diluted earnings per common share were $.65 in 1998 compared
to $1.38 basic and $1.37 diluted earnings per common share in 1997. Both
basic and diluted earnings per common share in 1998 included $.85 per common
share for restructuring and other costs. Without these costs, basic earnings
per common share increased from $1.38 in 1997 to $1.50 in 1998, or 8.7% and
diluted earnings per common share increased from $1.37 to $1.50 in 1998, or
9.5%.
Foreign Currency
- ----------------
Since approximately 40% of the Company's revenues have been generated in
currencies other than the U.S. dollar, the value of the U.S. dollar in
relation to those currencies affects the results of operations of the
Company. The impact of currency fluctuations in any given period can be
favorable or unfavorable. The impact of foreign currency fluctuations of
European currencies on operating income is partially offset by sales in the
U.S. of products sourced from plants and third party suppliers located
overseas, principally in Germany and Switzerland.
Liquidity and Capital Resources
- -------------------------------
Investment activities for 1999 included capital expenditures of $33.4
million. No acquisitions were completed in 1999.
During 1999, the Company repurchased .2 million shares of its common
stock for $3.9 million. In December 1999, the Board of Directors authorized
the repurchase of up to 1.0 million additional shares of common stock on the
open market or in negotiated transactions in 2000. The timing and amounts of
any additional purchases will depend upon many factors, including market
conditions and the Company's business and financial condition.
At December 31, 1999, the Company's current ratio was 1.8 with working
capital of $138.4 million. This compares with a current ratio of 1.7 and
working capital of $128.1 million at December 31, 1998.
Under its revolving credit agreements, the Company is able to borrow up
to $175 million on an unsecured basis through October 2002 and $125 million
through October 2000. The $175 million facility may be extended, subject to
certain conditions, until October 2004. The $125 million 364-day facility
terminates in October 2000, but contains a one-year term-out provision and
may be extended, subject to certain conditions, for additional periods of 364
days. The revolving credit agreements are unsecured and contain various
financial and other covenants.
Under its bank multi-currency revolving credit agreement, the Company is
able to borrow up to $25 million for foreign working capital purposes on an
unsecured basis through October 2000. The multi-currency facility contains a
one-year term-out provision and may be extended, subject to certain
conditions, for additional periods of 364 days.
37
The Company established a $200 million commercial paper facility in
September 1999. The rating agencies have assigned a rating of A-2/P-2 to the
Company's unsecured commercial paper facility. The revolving credit
facilities serve as back up to this commercial paper facility. No additional
credit has been extended.
The Company had unused lines of credit of $259.6 million at December 31,
1999.
The Company expects, on an ongoing basis, to be able to finance its cash
requirements, including capital expenditures, stock repurchases, debt service
and acquisitions from funds generated from operations and amounts available
under the Revolving Credit Agreements.
Cash flows from operating activities were $121.3 million in 1999, which
includes approximately $13.1 million of negative cash flows associated with
the two restructurings recorded in 1998, compared to $93.7 million in 1998.
The increase of $27.6 million was due primarily to increased earnings,
decreases in inventory, receivables and deferred income taxes offset by
decreases in accrued liabilities.
Derivative Instruments and Hedging Activities
- ---------------------------------------------
Statement of Financial Accounting Standards No. 133 ("FASB 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued by
the Financial Accounting Standards Board (FASB) in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either
assets or liabilities on the balance sheet and measurement of those
instruments at fair value. If certain conditions are met, a derivative may
be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment referred to as a fair value hedge, (b) a hedge of the exposure to
variability in cash flows of a forecasted transaction (a cash flow hedge), or
(c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security,
or a forecasted transaction.
This statement was originally required to be adopted effective January
1, 2000. However, in June 1999 FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133", which delays the effective date to January
1, 2001. The Company has not yet determined the effect of adopting FASB 133.
Year 2000
- ---------
The changeover to the year 2000 ("Y2K") has resulted in no significant
issues or problems for the Company. Worldwide operations continued without
interruption as the Company's information systems, equipment and utility
providers functioned as normal throughout the transition. In addition, to
date, the Company has not been adversely impacted by any Y2K problems
experienced by its customers or vendors. Although the Company has not
experienced any Y2K problems, it is continuing to monitor potential areas of
risk.
38
Euro Currency Conversion
- ------------------------
On January 1, 1999, eleven of the fifteen member countries of the
European Union (the "participating countries") established fixed conversion
rates between their legacy currencies and the newly established Euro currency.
The legacy currencies will remain legal tender in the participating
countries between January 1, 1999 and January 1, 2002 (the "transition
period"). Starting January 1, 2002 the European Central Bank will issue
Euro-denominated bills and coins for use in cash transactions. On or before
July 1, 2002, the legacy currencies of participating countries will no longer
be legal tender for any transactions.
The Company's various operating units which are affected by the Euro
conversion intend to keep their books in their respective legacy currency
through a portion of the three year transition period. At this time, the
Company does not expect the reasonable foreseeable consequences of the Euro
conversion to have material adverse effects on the Company's business,
operations or financial condition.
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.
39
Management's Financial Responsibility
The management of DENTSPLY International Inc. is responsible for the
preparation and integrity of the consolidated financial statements and all
other information contained in this Annual Report. The financial statements
were prepared in accordance with generally accepted accounting principles and
include amounts that are based on management's informed estimates and
judgements.
In fulfilling its responsibility for the integrity of financial
information, management has established a system of internal accounting
controls supported by written policies and procedures. This provides
reasonable assurance that assets are properly safeguarded and accounted for
and that transactions are executed in accordance with management's
authorization and recorded and reported properly.
The financial statements have been audited by our independent auditors,
KPMG LLP, whose unqualified report is presented below. The independent
auditors perform audits of the financial statements in accordance with
generally accepted auditing standards, which include a review of the system
of internal accounting controls to the extent necessary to determine the
nature, timing and extent of audit procedures to be performed.
The Audit and Information Technology Committee (Committee) of the Board
of Directors, consisting solely of outside Directors, meets with the
independent auditors with and without management to review and discuss the
major audit findings, internal control matters and quality of financial
reporting. The independent accountants also have access to the Committee to
discuss auditing and financial reporting matters with or without management
present.
John C. Miles II Gerald K. Kunkle William R. Jellison
Chairman and President and Chief Senior Vice President and
Chief Executive Officer Operating Officer Chief Financial Officer
40
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the consolidated financial statements of DENTSPLY International
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DENTSPLY
International Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
Philadelphia, Pennsylvania KPMG LLP
January 20, 2000
41
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------
1999 1998 1997
--------------------------------
(in thousands, except per share amounts)
Net sales $830,864 $795,122 $720,760
Cost of products sold 398,887 378,699 352,034
-------- -------- --------
Gross profit 431,977 416,423 368,726
Selling, general and administrative
expenses 282,360 275,071 236,270
Restructuring and other costs --- 71,500 ---
-------- -------- --------
Operating income 149,617 69,852 132,456
Other income and expenses:
Interest expense 15,758 15,367 12,660
Interest income (1,118) (1,199) (1,654)
Other (income) expense, net (3,042) 583 (556)
-------- -------- --------
Income before income taxes 138,019 55,101 122,006
Provision for income taxes 48,156 20,276 47,452
-------- -------- --------
Net income $ 89,863 $ 34,825 $ 74,554
======== ======== ========
Earnings per common share:
Basic $ 1.70 $ .65 $ 1.38
Diluted 1.70 .65 1.37
Cash dividends declared per common share $ .23125 $ .21 $ .195
Weighted average common shares outstanding:
Basic 52,754 53,330 53,937
Diluted 52,911 53,597 54,229
The accompanying Notes are an integral part of these Financial Statements.
42
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
1999 1998
Assets -------------------
Current assets: (in thousands)
Cash and cash equivalents $ 7,276 $ 8,690
Accounts and notes receivable - trade, net 127,911 134,218
Inventories 135,480 139,235
Prepaid expenses and other current assets 44,001 40,309
-------- --------
Total Current Assets 314,668 322,452
Property, plant and equipment 180,536 158,998
Other noncurrent assets 14,963 67,799
Identifiable intangible assets, net 80,374 80,537
Costs in excess of fair value of net assets
acquired, net 269,047 265,536
-------- --------
Total Assets $859,588 $895,322
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 20,155 $ 16,270
Accounts payable 40,467 42,654
Accrued liabilities 80,922 99,427
Income taxes payable 34,676 36,025
-------- --------
Total Current Liabilities 176,220 194,376
Long-term debt 145,312 217,491
Other liabilities 46,445 48,113
Deferred income taxes 20,240 18,803
-------- --------
Total Liabilities 388,217 478,783
-------- --------
Minority interests in consolidated subsidiaries 2,499 2,738
-------- --------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; .25 million
shares authorized; no shares issued --- ---
Common stock, $.01 par value; 100 million shares
authorized; 54.3 million shares and 54.3 million
shares issued at December 31, 1999 and 1998,
respectively 543 543
Capital in excess of par value 151,509 152,871
Retained earnings 402,408 324,745
Accumulated other comprehensive income (loss) (43,209) (14,730)
Employee stock ownership plan reserve (6,458) (7,977)
Treasury stock, at cost, 1.5 million and 1.7 million
shares at December 31, 1999 and 1998, respectively (35,921) (41,651)
-------- --------
Total Stockholders' Equity 468,872 413,801
-------- --------
Total Liabilities and Stockholders' Equity $859,588 $895,322
======== ========
The accompanying Notes are an integral part of these Financial Statements.
43
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
Balance at December 31, 1996 $ 271 $150,031 $237,300 $(4,278) $(11,016) $ (6,718) $365,590
Comprehensive Income:
Net income - - 74,554 - - - 74,554
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,122 tax - - - (12,442) - - (12,442)
--------
Comprehensive Income 62,112
Exercise of stock options and
warrants - (133) - - - 5,458 5,325
Tax benefit related to stock
options and warrants exercised - 840 - - - - 840
Repurchase of forty thousand
shares of common stock - - - - - (928) (928)
Cash dividends declared, $.195
per common share - - (10,525) - - - (10,525)
Two-for-one stock split effected
in the form of a stock dividend 271 - (271) - - - -
Net change in ESOP reserve - - - - 1,519 - 1,519
------- -------- -------- -------- -------- -------- ---------
Balance at December 31, 1997 $ 542 $150,738 $301,058 $(16,720) $ (9,497) $ (2,188) $423,933
The accompanying Notes are an integral part of these Financial Statements.
44
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
Balance at December 31, 1997 $ 542 $150,738 $301,058 $(16,720) $ (9,497) $ (2,188) $423,933
Comprehensive Income:
Net income - - 34,825 - - - 34,825
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,435 tax - - - 1,990 - - 1,990
--------
Comprehensive Income 36,815
Exercise of stock options and
warrants 1 1,227 - - - 2,586 3,814
Tax benefit related to stock
options and warrants exercised - 906 - - - - 906
Repurchase of 1.764 million
shares of common stock - - - - - (42,049) (42,049)
Cash dividends declared, $.21
per common share - - (11,138) - - - (11,138)
Net change in ESOP reserve - - - - 1,520 - 1,520
------- -------- -------- -------- -------- -------- --------
Balance at December 31, 1998 $ 543 $152,871 $324,745 $(14,730) $ (7,977) $(41,651) $413,801
The accompanying Notes are an integral part of these Financial Statements.
45
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Total
Capital in Other Employee Stock Stock-
Common Excess of Retained Comprehensive Ownership Treasury holders'
Stock Par Value Earnings Income(Loss) Plan Reserve Stock Equity
---------- ------------ ----------- ----------- -------------- ---------- -----------
(in thousands)
Balance at December 31, 1998 $ 543 $152,871 $324,745 $(14,730) $ (7,977) $(41,651) $413,801
Comprehensive Income:
Net income - - 89,863 - - - 89,863
Other comprehensive income(loss):
Foreign currency translation
adjustment, net of $1,797 tax - - - (28,479) - - (28,479)
--------
Comprehensive Income 61,384
Exercise of stock options and
warrants - (1,823) - - - 5,998 4,175
Tax benefit related to stock
options and warrants exercised - 730 - - - - 730
Reissuance of treasury stock - (269) - - - 3,622 3,353
Repurchase of .175 million
shares of common stock - - - - - (3,890) (3,890)
Cash dividends declared, $.23125
per common share - - (12,200) - - - (12,200)
Net change in ESOP reserve - - - - 1,519 - 1,519
------- -------- -------- -------- -------- -------- ---------
Balance at December 31, 1999 $ 543 $151,509 $402,408 $(43,209) $ (6,458) $(35,921) $468,872
======= ======== ======== ======== ======== ======== =======
The accompanying Notes are an integral part of these Financial Statements.
46
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from operating activities: (in thousands)
Net income $ 89,863 $ 34,825 $ 74,554
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 19,933 17,634 15,341
Amortization 19,691 19,840 17,064
Deferred income taxes 5,885 (22,084) (1,828)
Restructuring and other costs --- 71,500 ---
Other non-cash transactions 319 (513) 263
Loss on disposal of property, plant and equipment 304 107 559
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures of
businesses, effects of exchange, and restructuring
and other costs:
Accounts and notes receivable-trade, net 2,384 (7,305) (13,080)
Inventories 4,394 (5,605) 1,694
Prepaid expenses and other current assets (2,223) (3,990) (305)
Other noncurrent assets (581) 1,167 (82)
Accounts payable (1,319) (2,932) (1,795)
Accrued liabilities (14,343) (10,171) (483)
Income taxes payable (719) 1,462 4,250
Other liabilities (2,319) (193) (1,864)
-------- -------- --------
Net cash provided by operating activities 121,269 93,742 94,288
-------- -------- --------
The accompanying Notes are an integral part of these Financial Statements.
47
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from investing activities: (in thousands)
Proceeds from sale of property, plant and equipment, net 1,825 1,114 1,257
Capital expenditures (33,386) (31,430) (27,660)
Expenditures for identifiable intangible assets (3,256) (5,247) (3,382)
Acquisitions of businesses, net of cash acquired 4,327 (103,250) (78,822)
Other direct costs of acquisition and divestiture activities --- (63) (2,395)
Additional consideration for prior purchased business (5,000) (3,522) ---
Other, net --- --- (155)
-------- -------- --------
Net cash used in investing activities (35,490) (142,398) (111,157)
-------- -------- --------
The accompanying Notes are an integral part of these Financial Statements.
48
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from financing activities: (in thousands)
Proceeds from exercise of stock options and warrants,
including tax benefit 4,905 4,721 6,165
Cash paid for treasury stock (3,890) (42,049) (928)
Cash dividends paid (11,859) (10,954) (10,238)
Increase (decrease) in bank overdrafts (1) 2,552 886
Proceeds from long-term borrowings, net of deferred
financing costs 99,407 159,898 218,449
Payments on long-term borrowings (177,946) (60,337) (184,524)
Increase (decrease) in short-term borrowings 4,910 (3,962) (7,605)
Decrease in employee stock ownership plan reserve 1,519 1,520 1,519
-------- -------- --------
Net cash provided by (used in) financing activities (82,955) 51,389 23,724
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents (4,238) (3,891) (2,626)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (1,414) (1,158) 4,229
Cash and cash equivalents at beginning of period 8,690 9,848 5,619
-------- -------- --------
Cash and cash equivalents at end of period $ 7,276 $ 8,690 $ 9,848
======== ======== ========
The accompanying Notes are an integral part of these Financial Statements.
49
DENTSPLY International Inc.
and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------
1999 1998 1997
Supplemental disclosures of cash flow information: -------- -------- --------
information: (in thousands)
Interest paid $ 13,863 $ 12,215 $ 9,024
Income taxes paid 34,951 40,048 43,840
Supplemental disclosures of non-cash transactions:
Issuance of treasury stock in connection with the
acquisition of certain assets 3,353 --- ---
Note receivable for fixed assets associated with
arbitration ruling terminating the Implant
Distribution Agreement --- --- 389
Assumption of debt in connection with acquisitions --- --- 4,310
The Company assumed liabilities in conjunction with the following acquisitions:
Fair Value Cash Paid for
of Assets Assets or Liabilities
Date Acquired Acquired Capital Stock Assumed
------------- ---------- ------------- -----------
(in thousands)
Vereinigte Dentalwerke GmbH December 1998 $63,491 $45,780 $17,711
Herpo Productos Dentarios Ltda. May 1998 13,842 7,395 6,447
Crescent Dental Manufacturing Co. May 1998 5,783 5,214 569
GAC, Inc. April-Dec 1998 38,439 26,485 11,954
InfoSoft, Inc. March 1998 10,497 8,645 1,852
Blendax January 1998 7,556 6,893 663
MPL Technologies, Inc. November 1997 5,452 4,425 1,027
EFOS Corporation July 1997 15,032 14,988 44
SIMFRA S.A. July 1997 8,431 5,464 2,967
New Image Industries, Inc. March 1997 35,643 10,957 24,686
DW Industries, Inc. January 1997 18,956 16,253 2,703
Laboratoire SPAD, S.A. January 1997 47,054 35,992 11,062
All amounts represent the allocation of the purchase price as of the respective year-ends based on the estimated fair values of
assets acquired and liabilities assumed. The purchase price allocation for Vereinigte Dentalwerke GmbH was completed during 1999.
The accompanying Notes are an integral part of these Financial Statements.
50
DENTSPLY International Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
Description of Business
- -----------------------
DENTSPLY (the "Company") designs, develops, manufactures and markets a
broad range of products for the dental market. The Company believes that it
is the world's leading manufacturer and distributor of dental prosthetics,
endodontic instruments and materials, prophylaxis paste, dental sealants,
ultrasonic scalers, and crown and bridge materials; the leading United States
manufacturer and distributor of dental x-ray equipment, dental handpieces,
dental x-ray film holders, film mounts and bone substitute/grafting
materials; and a leading United States manufacturer or distributor of
impression materials, orthodontic appliances, dental cutting instruments,
intraoral cameras and dental operatory software systems. The Company
distributes its dental products in over 100 countries under some of the most
well-established brand names in the industry. DENTSPLY is committed to the
development of innovative, high quality, cost-effective new products for the
dental market.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. Intercompany accounts and
transactions are eliminated. Minority interests in net income of
consolidated subsidiaries are not material and are included in other (income)
expense, net.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Accounts and Notes Receivable-Trade
- -----------------------------------
The Company sells dental equipment and supplies primarily through a
worldwide network of distributors, although certain product lines are sold
directly to the end user. Revenue is recognized when products are shipped.
For customers on credit terms, the Company performs ongoing credit evaluation
of those customers' financial condition and generally does not require
collateral from them. Accounts and notes receivable-trade are stated net of
an allowance for doubtful accounts of $8.2 million and $7.9 million at
December 31, 1999 and 1998, respectively.
Inventories
- -----------
Inventories are stated at the lower of cost or market. At December 31,
1999 and 1998, the cost of $15.5 million, or 11%, and $15.3 million, or 11%,
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 (FIFO) or average cost method.
51
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 - 4 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.
Identifiable Intangible Assets
- ------------------------------
Identifiable intangible assets include patents, trademarks, non-compete
agreements, licensing agreements, product manufacturing rights, computer
software development costs and customer lists which are amortized on a
straight-line basis over their estimated useful lives, ranging from 5 to 40
years. Identifiable intangible assets are stated net of accumulated
amortization of $53.2 million and $44.2 million at December 31, 1999 and
1998, respectively. Identifiable intangible assets are reviewed for
impairment whenever events or circumstances provide evidence that suggest
that the carrying amount of the asset may not be recoverable. Impairment is
determined by using identifiable undiscounted cash flows.
Costs in Excess of Fair Value of Net Assets Acquired
- ----------------------------------------------------
The excess of costs of acquired companies and product lines over the
fair value of net assets acquired (goodwill) is being amortized on a
straight-line basis over 25 to 40 years. Costs in excess of the fair value
of net assets acquired are stated net of accumulated amortization of $52.5
million and $43.6 million at December 31, 1999 and 1998, respectively. Costs
in excess of fair value of net assets acquired are evaluated continually to
determine whether later events or circumstances warrant revised estimates of
useful lives.
Fair Value of Financial Instruments
- -----------------------------------
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The
Company believes the carrying amounts of cash and cash equivalents, accounts
receivable (net of allowance for doubtful accounts), prepaid expenses and
other current assets, accounts payable, accrued liabilities, income taxes
payable and notes payable and current portion of long-term debt approximate
fair value due to the short-term nature of these instruments. The Company
also believes the carrying amount of long-term debt approximates fair value
as the interest rates are variable and reflect current market rates.
Derivatives
- -----------
The Company's only involvement with derivative financial instruments is
forward contracts to hedge certain assets and liabilities denominated in
foreign currencies and interest rate swaps to convert floating rate debt to
fixed rate.
Foreign Exchange Risk Management
- --------------------------------
The Company routinely enters into forward foreign exchange contracts to
selectively hedge assets and liabilities denominated in foreign currencies.
Market value gains and losses are recognized in income currently and the
resulting gains or losses offset foreign exchange gains or losses recognized on
the foreign currency assets and liabilities hedged. Determination of hedge
activity is based upon market conditions, the magnitude of the foreign currency
assets and liabilities and perceived risks. As of December 31, 1999, the
Company's significant contracts outstanding included the sale of 12.6 million
Deutsch marks (approximately $6.4 million) and the
52
sale of 25 million French francs (approximately $3.9 million). As of December
31, 1998, the Company had contracts outstanding for the purchase of 7.9 million
Swiss francs (approximately $5.7 million) and the sale of 1.9 million Australian
dollars (approximately $1.2 million). The fair value of these foreign exchange
contracts approximate their carrying values. These foreign exchange contracts
generally have maturities of less than six months and counterparties to the
transactions are typically large international financial institutions.
Interest Rate Risk Management
- -----------------------------
In July 1998, the Company entered into interest rate swap agreements
with notional amounts totaling $80.0 million which converts a portion of the
Company's variable rate financing to fixed rates. The average fixed rate of
these agreements is 5.7% and fixes the rate for an average of five years.
The fair value of these swap agreements is the estimated amount the Company
would receive (pay) at the reporting date, taking into account the effective
interest rates. At December 31, 1999 and 1998, the estimated fair values
were positive $2.7 million and negative $2.4 million, respectively.
Foreign Currency Translation
- ----------------------------
The functional currency for foreign operations, except for those in
highly inflationary economies, has been determined to be the local currency.
Assets and liabilities of foreign subsidiaries are translated at
exchange rates on the balance sheet date; revenue and expenses are translated
at the average year-to-date rates of exchange. The effects of these
translation adjustments are reported in a separate component of stockholders'
equity.
Exchange gains and losses arising from transactions denominated in a
currency other than the functional currency of the entity involved and
translation adjustments in countries with highly inflationary economies are
included in income. Exchange losses of $.1 million in 1999, losses of $1.7
million in 1998 and gains of $.3 million in 1997 are included in other
(income) expense, net.
Research and Development Costs
- ------------------------------
Research and development costs are charged to expense as incurred and
are included in selling, general and administrative expenses. Research and
development costs amounted to approximately $18.5 million, $18.2 million and
$16.8 million for 1999, 1998 and 1997, respectively.
Reclassifications
- -----------------
Certain reclassifications have been made to prior years' data in order
to conform to the current year presentation.
53
NOTE 2 - EARNINGS PER COMMON SHARE
- ----------------------------------
The following table sets forth the computation of basic and diluted
earnings per common share:
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(in thousands, except per share amounts)
Year Ended December 31, 1999
Basic EPS $ 89,863 52,754 $1.70
Incremental shares from assumed
exercise of dilutive options
and warrants - 157
-------- ------
Diluted EPS $ 89 863 52,911 $1.70
======== ======
Year Ended December 31, 1998
Basic EPS $ 34,825 53,330 $ .65
Incremental shares from assumed
exercise of dilutive options
and warrants - 267
-------- ------
Diluted EPS $ 34,825 53,597 $ .65
======== ======
Year Ended December 31, 1997
Basic EPS $ 74,554 53,937 $1.38
Incremental shares from assumed
exercise of dilutive options
and warrants - 292
-------- ------
Diluted EPS $ 74,554 54,229 $1.37
======== ======
NOTE 3 - BUSINESS ACQUISITIONS
- ------------------------------
No acquisitions were completed in 1999.
In December 1998, the Company purchased 100% of the capital stock of
Vereinigte Dentalwerke GmbH ("VDW") and related companies. The total amount
paid for the acquisition, net of cash acquired, was $45.8 million.
Headquartered in Munich, Germany, VDW manufactures endodontic files and
accessory products, marketed worldwide under the Antaeos, Beutelrock and
Zipperer trade names. The company's Munich, Germany production facility is a
new, ultra-modern, fully automated manufacturing facility.
In May 1998, the Company purchased 100% of the capital stock of Herpo
Productos Dentarios Ltda. ("Herpo") for $7.4 million. Herpo has a broad
product line focusing on alginate impression materials, artificial teeth and
dental anesthetics. Herpo operates a modern dental anesthetic production
plant in Bonsucesso, Brazil.
In May 1998, the Company purchased 100% of the capital stock of Crescent
Dental Manufacturing Co. ("Crescent") for $5.2 million. Crescent has a
diverse product offering and is one of the leading United States
manufacturers of prophy cups and brushes, amalgamators and other professional
dental equipment and supplies.
In April and December 1998, the Company purchased 100% of the capital
stock of GAC International Inc. ("GAC") for approximately $26.5 million.
Located in Islip, New York, GAC provides a full line of high quality
orthodontic products.
54
In March 1998, the Company purchased the assets of InfoSoft Inc.
("InfoSoft") for $8.6 million. Located in Hunt Valley, Maryland, the primary
business of InfoSoft is the development and sale of full-featured, dental
practice management software. The Company believes InfoSoft is one of the
largest dental practice management claims processors in the United States.
In January 1998, the Company purchased the assets of Blendax
Professional Dental Business ("Blendax") from Procter & Gamble in a cash
transaction valued at approximately DM13 million or $6.9 million. The
Blendax product line consists of rotary cutting instruments, impression
materials, composite filling material and fluoride rinses and gels.
Each 1998 acquisition was accounted for under the purchase method of
accounting; accordingly, the results of their operations are included in the
accompanying financial statements since the respective dates of the
acquisitions. The purchase prices plus direct acquisition costs have been
allocated on the basis of estimates of the fair values of assets acquired and
liabilities assumed. During 1999, the excess of acquisition cost over net
assets acquired increased by a total of $5.3 million for Herpo, GAC, InfoSoft
and Blendax as a result of the finalization of the purchase price
allocations. The excess of acquisition cost over net assets acquired of
$15.9 million for VDW, $12.8 million for Herpo, $2.6 million for Crescent,
$18.6 million for GAC, $8.0 million for InfoSoft and $4.4 million for Blendax
is being amortized over 25 to 40 years.
In November 1997, the Company purchased certain assets of MPL
Technologies, Inc. ("MPL"), a wholly-owned subsidiary of SoloPak
Pharmaceuticals, for $4.4 million in cash. Located in Franklin Park,
Illinois, MPL is a leading manufacturer and distributor of needles and
needle-related products, primarily for the dental profession.
In July 1997, the Company purchased the dental assets of EFOS
Corporation ("EFOS") for Canadian $20.7 million in a cash transaction valued
at approximately $15.0 million. Prior to acquisition, EFOS was the developer
and manufacturer of DENTSPLY's dental curing lights and amalgamators.
Additionally, the EFOS product line includes protective eyewear products,
replacement parts and curing light repair and service.
Also in July 1997, the Company purchased the outstanding capital stock
of SIMFRA S.A. ("SIMFRA") for FF32.1 million in a cash transaction valued at
approximately $5.5 million and assumption of $1.4 million of debt. Located
in Paris, SIMFRA is the exclusive importer of Maillefer Instruments, S.A. in
France.
In March 1997, the Company purchased all of the capital stock of New
Image Industries, Inc. ("New Image") for $2.00 per share or approximately
$11.0 million and assumed $2.9 million of debt and other liabilities of $21.8
million. Subsequently, assumed liabilities were increased to $32.1 million
for recognition of liabilities associated with certain legal cases. The
primary product line for New Image is intraoral cameras exclusively for the
dental market.
In January 1997, the Company purchased the assets of DW Industries, Inc.
("DW") in a cash transaction valued at approximately $16.3 million and an
earn-out based on future sales growth of the business. No payment of earn-out
has been required to date. Through this acquisition, the Company acquired the
leading disposable air-water syringe tip for use in clinical dental office
procedures.
Also in January 1997, the Company purchased all of the outstanding
capital stock of Laboratoire SPAD, S.A. ("SPAD") for FF199.5 million or $36.0
million in cash and a deferred payment of FF 21.5 million or $3.5 million
which was paid in January 1998. SPAD is a leading French distributor of
dental anesthetic and other dental products.
55
Each 1997 acquisition was accounted for under the purchase method of
accounting; accordingly, the results of their operations are included in the
accompanying financial statements since the respective dates of the
acquisitions. The purchase prices plus direct acquisition costs have been
allocated on the basis of the fair values of assets acquired and liabilities
assumed. The excess of acquisition cost over net assets acquired of $4.2
million for DW, $33.5 million for SPAD, $3.8 million for SIMFRA, $2.8 million
for EFOS and $.1 million for MPL is being amortized over 25 years. The
excess of acquisition cost over net assets acquired of New Image was
considered impaired and was written-off with the restructuring charge in
December 1998 (See Note 15).
Certain assets of Tulsa Dental Products LLC were purchased in January
1996 for $75.1 million plus $5.0 million in May 1999 related to earn-out
provisions in the purchase agreement. The Company expects to pay an
additional earn-out based on future operating performance of the Tulsa Dental
business. The seller has the option to exercise this earn-out provision for
the two-year periods ending December 31, 2000, December 31, 2001 or December
31, 2002. It is not known at this time which optional two-year period will
be chosen by the seller. The earn-out payment is estimated to be between $65
to $75 million if the option is exercised for the two-year period ending
December 31, 2000.
NOTE 4 - SEGMENT AND GEOGRAPHIC INFORMATION
- -------------------------------------------
As of January 1, 1998, the Company adopted SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 establishes
standards for reporting information about operating segments in financial
statements. Since the Company operates in one operating segment as a
designer, manufacturer and distributor of dental products, the Company
presents Enterprise-wide Disclosures. Dental products represented
approximately 95% of sales in 1999, 1998 and 1997.
The Company's operations are structured to achieve consolidated
objectives. As a result, significant interdependencies exist among the
Company's operations in different geographic areas. Intercompany sales of
manufacturing materials between areas are at prices which, in general,
provide a reasonable profit after coverage of all manufacturing costs.
Intercompany sales of finished goods are at prices intended to provide a
reasonable profit for purchasing locations after coverage of marketing and
general and administrative costs.
The following table sets forth information about the Company's
operations in different geographic areas for 1999, 1998, and 1997. Net sales
reported below represents revenues from external customers of operations
resident in the country or territory identified. Assets by geographic area
are those used in the operations in the geographic area.
United
1999 States Foreign Consolidated
- ---- -------- -------- ------------
(in thousands)
Net Sales $504,757 $326,107 $830,864
Long-lived Assets 82,768 110,386 193,154
1998
- ----
Net Sales $470,947 $324,175 $795,122
Long-lived Assets 77,668 94,696 172,364
1997
- ----
Net Sales $402,743 $318,017 $720,760
Long-lived Assets 69,127 90,917 160,044
56
Long-lived assets in Germany accounted for $43.9 million, $25.2 million
and $28.8 million of the total foreign long-lived assets for the years ended
1999, 1998 and 1997, respectively.
Third party export sales from the United States are less than ten
percent of consolidated net sales. One customer accounted for 13% of
consolidated net sales in 1999 and 1998 and 12% in 1997. Another customer
accounted for 10% of consolidated net sales in 1999.
NOTE 5 - INVENTORIES
- --------------------
Inventories consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Finished goods $ 77,786 $ 75,637
Work-in-process 25,519 27,632
Raw materials and supplies 32,175 35,966
-------- --------
$135,480 $139,235
======== ========
Pre-tax income was $.7 million, $.2 million, and $.4 million lower in
1999, 1998, and 1997, respectively as a result of using the LIFO method as
compared to using the FIFO method. If the FIFO method had been used to
determine the cost of LIFO inventories, the amounts at which net inventories
are stated would be lower than reported at December 31, 1999 and 1998 by $.3
million and $1.0 million, respectively.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
December 31,
--------------------
1999 1998
-------- --------
Assets, at cost: (in thousands)
Land $ 15,405 $ 12,315
Buildings and improvements 86,148 74,966
Machinery and equipment 155,735 138,644
Construction in progress 9,836 13,262
-------- --------
267,124 239,187
Less: Accumulated depreciation 86,588 80,189
-------- --------
$180,536 $158,998
======== ========
57
NOTE 7 - OTHER NONCURRENT ASSETS
- --------------------------------
Other noncurrent assets consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Investment in VDW $ - $ 50,895
Noncurrent deferred tax assets 2,345 3,538
Other 12,618 13,366
-------- --------
$ 14,963 $ 67,799
======== ========
VDW was purchased in late December 1998. The allocation of the purchase
price to the fair value of assets acquired and liabilities assumed was
completed in 1999.
NOTE 8 - IDENTIFIABLE INTANGIBLE ASSETS
- ---------------------------------------
Identifiable intangible assets consist of the following:
1999 1998
-------- --------
(in thousands)
Patents $ 45,954 $ 45,330
Trademarks 29,977 26,060
Licensing agreements 29,554 28,764
Product manufacturing rights 8,039 6,829
Non-compete agreements 5,708 5,092
Computer software development costs 5,172 3,705
Customer lists 4,422 4,422
Other 4,724 4,551
-------- --------
133,550 124,753
Less: Accumulated amortization 53,176 44,216
-------- --------
$ 80,374 $ 80,537
======== ========
NOTE 9 - ACCRUED LIABILITIES
- ----------------------------
Accrued liabilities consist of the following:
December 31,
--------------------
1999 1998
-------- --------
Payroll, commissions, bonuses (in thousands)
and other cash compensation $ 17,634 $ 17,480
Employee benefits 7,915 7,015
General insurance 10,541 10,021
Restructuring and other costs 3,200 19,800
Other 41,632 45,111
-------- --------
$ 80,922 $ 99,427
======== ========
58
NOTE 10 - FINANCING ARRANGEMENTS
- --------------------------------
Short-Term Borrowings
- ---------------------
Short-term bank borrowings amounted to $19.4 million and $15.4 million
at December 31, 1999 and 1998, respectively. Unused lines of credit for
short-term financing at December 31, 1999 and 1998 were $79.6 million and
$70.0 million, respectively. Substantially all unused lines of credit have
no major restrictions and are provided under demand notes between the Company
and the lending institution. Interest is charged on borrowings under these
lines of credit at various rates, generally below prime or equivalent money
rates.
Long-Term Borrowings
- -------------------- December 31,
--------------------
1999 1998
-------- --------
(in thousands)
$175.0 million revolving credit agreement maturing October
2002, Swiss francs 18.4 million, Pounds sterling 6.2 million,
and $40.0 million outstanding at December 31, 1999, bearing
interest at a weighted average of 2.1% for Swiss francs
borrowings, 6.2% for Pounds sterling borrowings,
and 6.4% for dollar borrowings $ 61,489 $153,021
$125.0 million revolving credit agreement maturing October
2000, with no debt outstanding at December 31, 1999 - 50,000
$25.0 million bank multi-currency revolving credit agreement
maturing October 2000, various currencies outstanding at
December 31, 1999, bearing interest at a weighted average
of 5.1% 7,566 13,450
$200.0 million commercial paper facility rated A/2-P/2,
$76.0 million outstanding at December 31, 1999, bearing
interest at a weighted average of 7.9% (actual weighted
average cost was 5.8%) 76,000 -
Other borrowings, various currencies and rates 1,035 1,851
-------- --------
146,090 218,322
Less: Current portion (included in notes payable
and current portion of long-term debt) 778 831
-------- --------
$145,312 $217,491
In July 1998, the Company entered into interest rate swap agreements
with notional amounts totaling $80.0 million which converts a portion of the
Company's variable rate financing to fixed rates. The average fixed rate of
these agreements is 5.7% and fixes the rate for an average of five years.
The revolving credit agreements contain certain affirmative and negative
covenants as to the operations and financial condition of the Company, the
most restrictive of which pertain to asset dispositions, maintenance of
certain levels of net worth, and prescribed ratios of indebtedness to total
capital and operating income plus depreciation and amortization to interest
expense. The Company pays a facility fee of .125 percent annually on the
amount of the commitment under the $175.0 million five-year facility and .08
percent annually under the 364-day facility. Interest rates on amounts
borrowed under the facility will depend on the maturity of the borrowing, the
currency borrowed, the interest rate option selected, and, in the event of a
LIBOR borrowing, the ratio of interest expense to operating income.
The bank multi-currency revolving credit agreement contains
affirmative andnegative covenants as to the operations and
financial condition of the Company, which
59
are substantially equivalent to those in the revolving credit agreements. The
Company pays a facility fee of .08 percent annually on the entire amount of the
bank multi-currency revolving credit agreement commitment.
The $ 125.0 million and $25.0 million facilities contain a one-year
term-out provision and may be extended, subject to certain conditions, for
additional periods of 364 days. The Company intends to extend the $125.0
million and $25.0 million facilities each year for an additional period of
364 days. The $125.0 million and $25.0 million facilities have a utilization
premium of .10 percent annually if utilization equals or exceeds 33.3% of
available facility.
The $200.0 million commercial paper facility has utilization, dealer,
and annual appraisal fees which on average cost .11 percent per annum. The
$125.0 million and $175.0 million revolving credit facilities act as back up
credit to the commercial paper facility. No additional credit has been
extended to the Company. The short-term commercial paper borrowings are
classified as long-term reflecting the Company's intent and ability to renew
these obligations beyond 2000.
NOTE 11 - OTHER LIABILITIES
- ---------------------------
Other liabilities consist of the following:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Pension $ 29,028 $ 33,648
Medical and other postretirement benefits 9,908 10,102
Other 7,509 4,363
-------- --------
$ 46,445 $ 48,113
======== ========
NOTE 12 - STOCKHOLDERS' EQUITY
- ------------------------------
The Board of Directors authorized the repurchase of .5 million, 2.5
million and .5 million shares of common stock for the years ended December
31, 1999, 1998 and 1997, respectively, on the open market or in negotiated
transactions. Each of these authorizations to repurchase shares expired on
December 31 of those years. The Company repurchased .2 million shares for
$3.9 million, 1.8 million shares for $42.0 million and forty thousand shares
for $.9 million in 1999, 1998 and 1997, respectively. Additionally, the
Board of Directors in December 1999 authorized the repurchase of 1.0 million
shares of common stock in 2000.
A former Chairman of the Board holds options to purchase 30,000 shares
of common stock at an exercise price of $22.25, which was equal to the market
price on the date of grant. The options are exercisable at any time through
January 2004.
The Company issued 360,000 stock purchase warrants in August 1990, in
connection with an acquisition, to the principals of an investment banking
firm, one of whom is a former director of the Company. The warrants are
exercisable at any time through August 28, 2000 at an exercise price of $3.06
per share (market price at date issued). Prior to 1999, 326,000 warrants
were exercised and, during 1999, the remaining 34,000 warrants were exercised.
The Company has four stock option plans (1987 Plan, 1992 Plan, 1993
Plan and 1998 Plan). Under the 1987, 1992 and 1993 Plans, a committee
appointed by the Board of Directors granted to key employees and
directors of the Company options to purchase shares of common stock at
an exercise price determined by such committee, but not less than the
fair market value of the common stock on the date of grant. Options expire
60
ten years and one month or ten years and one day after date of grant under
the 1987 Plan and 1992 Plan, respectively. Options generally expire ten
years after the date of grant under the 1993 Plan. For the 1987 Plan, 1992
Plan and 1993 Plan, grants become exercisable over a period of three years
after the date of grant at the rate of one-third per year, except that they
become immediately exercisable upon death, disability or retirement.
The 1998 Plan authorized that 4.3 million shares of common stock, plus
shares not granted under the 1993 Plan, may be granted under the plan,
subject to adjustment as follows: each January, if 7% of the outstanding
common shares of the Company exceed 4.3 million, the excess becomes available
for grant under the plan. No further grants can be made under the 1993
Plan. The 1998 Plan enables the Company to grant "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, to key employees of the Company, and "non-discretionary
stock options" ("NSOs") which do not constitute ISOs to key employees and
non-employee directors of the Company. Each non-employee director receives
automatic NSOs to purchase 6,000 shares of common stock on the date he or she
becomes a non-employee director and an additional 6,000 options on the third
anniversary of the date the non-employee director was last granted an
option. Grants of options to key employees are solely discretionary. ISOs
and NSOs generally expire ten years from date of grant and become exercisable
over a period of three years after the date of grant at the rate of one-third
per year, except that they become immediately exercisable upon death,
disability or retirement.
The committee may shorten or lengthen the exercise schedule for any or
all options granted to key employees. The exercise price of ISOs and NSOs is
equal to the fair market value on the date of grant. ISOs granted to an
individual who possesses more than 10% of the combined voting power of all
classes of stock of the Company have an exercise price not less than 110% of
fair market value and expire five years from the date of grant.
The following is a summary of the status of the Plans as of December 31,
1999, 1998 and 1997 and changes during the years ending on those dates:
----Outstanding---- ----Exercisable----
Weighted Weighted Available
Average Average for
Exercise Exercise Grant
Shares Price Shares Price Shares
--------- -------- --------- -------- ---------
December 31, 1996 1,917,988 $19.66 805,848 $18.64 1,552,500
Authorized/(Lapsed) --- (5,586)
Granted 489,300 28.00 (489,300)
Exercised (288,235) 18.26 ---
Expired/Canceled (82,456) 19.60 82,456
--------- ---------
December 31, 1997 2,036,597 21.87 1,090,921 19.71 1,140,070
Authorized/(Lapsed) --- 3,140,466
Granted 699,900 25.81 (699,900)
Exercised (201,522) 18.66 ---
Expired/Canceled (73,264) 23.87 73,264
--------- ---------
December 31, 1998 2,461,711 23.19 1,360,967 20.83 3,653,900
Authorized/(Lapsed) --- 427,544
Granted 1,226,000 23.79 (1,226,000)
Exercised (206,966) 19.47 ---
Expired/Canceled (102,500) 25.17 102,500
--------- ---------
December 31, 1999 3,378,245 $23.57 1,601,015 $22.43 2,957,944
========= =========
61
The following table summarizes information about stock options
outstanding under the Plans at December 31, 1999:
-------Options Outstanding-------- -Options Exercisable-
Weighted
Number Average Number
Outstanding Remaining Weighted Exercisable Weighted
at Contractual Average at Average
Range of December 31, Life Exercise December 31, Exercise
Exercise Prices 1999 (in years) Price 1999 Price
- --------------- ----------- ----------- -------- ----------- --------
$ 2.60 - $10.00 28,000 1.8 $ 7.66 28,000 $ 7.66
10.01 - 18.00 156,165 5.4 17.48 156,165 17.48
18.01 - 20.00 360,740 5.5 19.02 360,740 19.01
20.01 - 22.50 363,442 4.7 22.03 354,309 22.04
22.51 - 25.00 1,825,398 9.0 23.65 440,088 24.17
25.01 - 29.50 571,100 8.2 28.45 237,238 28.89
29.51 - 33.70 73,400 8.3 32.95 24,475 32.95
--------- ---------
3,378,245 7.8 $23.57 1,601,015 $22.43
========= =========
The per share weighted average fair value of stock options granted
during 1999, 1998 and 1997 was $9.24, $9.41 and $10.43, respectively, on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions: 1999-expected dividend yield 1.04%, risk-free
interest rate 6.16%, expected volatility 29%, and an expected life of 6.5
years; 1998-expected dividend yield .8%, risk-free interest rate 4.7%,
expected volatility 29%, and an expected life of 6.5 years; and 1997-expected
dividend yield .8%, risk-free interest rate 6.0%, expected volatility 26%,
and an expected life of 6.5 years. The Black-Scholes option pricing model
was developed for tradable options with short exercise periods and is
therefore not necessarily an accurate measure of the fair value of
compensatory stock options.
The Company applies APB 25 in accounting for the Plans and, accordingly,
no compensation cost has been recognized for stock options in the financial
statements. Had the Company determined compensation cost based on the fair
value of stock options at the grant date under SFAS 123, the Company's net
income and earnings per common share would have been reduced as indicated
below:
Year Ended December 31,
1999 1998 1997
-------- -------- --------
(in thousands, except per share amounts)
Net income
As reported $ 89,863 $ 34,825 $ 74,554
Pro forma under SFAS 123 86,703 32,244 72,851
Basic earnings per common share
As reported 1.70 .65 1.38
Pro forma under SFAS 123 1.64 .60 1.35
Diluted earnings per common share
As reported 1.70 .65 1.37
Pro forma under SFAS 123 1.64 .60 1.34
Pro forma net income reflects only options granted since January 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period
of 3 years and compensation cost for options granted prior to January 1, 1995
is not considered.
62
NOTE 13 - INCOME TAXES
- ----------------------
The components of income before income taxes are as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
(in thousands)
United States $111,038 $ 47,416 $ 77,398
Foreign 26,981 7,685 44,608
-------- -------- --------
$138,019 $ 55,101 $122,006
======== ======== ========
The components of the provision for income taxes are as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Current: (in thousands)
U.S. federal $ 33,813 $ 29,225 $ 27,407
U.S. state 1,497 589 4,350
Foreign 11,252 10,906 17,523
-------- -------- --------
Total 46,562 40,720 49,280
-------- -------- --------
Deferred:
U.S. federal (1,943) (14,401) (1,671)
U.S. state (274) (924) (191)
Foreign 3,811 (5,119) 34
-------- -------- --------
Total 1,594 (20,444) (1,828)
-------- -------- --------
$ 48,156 $ 20,276 $ 47,452
======== ======== ========
The reconciliation of the U.S. federal statutory tax rate to the actual
rate is as follows:
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Effect of:
State income taxes, net of
federal benefit 0.6 0.7 2.3
Nondeductible amortization
of goodwill 1.4 3.4 1.3
Foreign earnings at various rates 1.5 1.6 1.9
Foreign tax credit (5.0) (3.5) (1.9)
Foreign losses with no tax benefit 0.9 1.7 1.2
Foreign sales corporation (1.0) (2.4) (0.2)
Other 1.5 0.3 (0.7)
-------- -------- --------
Actual income tax rate 34.9% 36.8% 38.9%
======== ======== ========
63
The tax effect of temporary differences giving rise to deferred tax
assets and liabilities are as follows:
December 31, 1999 December 31, 1998
----------------------- -----------------------
Current Noncurrent Current Noncurrent
Asset Asset Asset Asset
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
(in thousands)
Employee benefit accruals $ 1,306 $ 2,319 $ 1,075 $ 5,988
Product warranty accruals 1,481 --- 1,204 ---
Facility relocation accruals 385 128 261 128
Insurance premium accruals 3,795 --- 3,060 ---
Restructuring charges 5,192 14,420 7,269 14,164
Differences in financial
reporting and tax basis for:
Inventory 372 --- (286) ---
Property, plant and equipment --- (22,894) --- (25,283)
Identifiable intangible assets --- (10,694) --- (10,377)
Other 6,457 (1,174) 5,255 115
Tax loss carryforwards in
foreign jurisdictions --- 2,148 --- 7,834
Valuation allowance for
tax loss carryforwards --- (2,148) --- (7,834)
-------- -------- -------- --------
$ 18,988 $(17,895) $ 17,838 $(15,265)
======== ======== ======== ========
Current and noncurrent deferred tax assets and liabilities are included
in the following balance sheet captions:
December 31,
--------------------
1999 1998
-------- --------
(in thousands)
Prepaid expenses and other current assets $ 20,771 $ 19,697
Income taxes payable (1,783) (1,859)
Other noncurrent assets 2,345 3,538
Deferred income taxes (20,240) (18,803)
The provision for income taxes was reduced due to utilization of tax
loss carryforwards by $.3 million in 1999. Certain foreign subsidiaries of
the Company have tax loss carryforwards of $18.5 million at December 31,
1999, of which $6.4 million expire through 2007 and $12.1 million may be
carried forward indefinitely. The tax benefit of these tax loss
carryforwards has been offset by a valuation allowance.
Income taxes have not been provided on $74.0 million of undistributed
earnings of foreign subsidiaries, which will continue to be reinvested. If
remitted as dividends, these earnings could become subject to additional
tax. It is not practicable to estimate the amount of additional tax that
might be payable; however, the Company believes that U.S. foreign tax credits
would largely eliminate any U.S. tax payable.
64
NOTE 14 - BENEFIT PLANS
- -----------------------
Defined Contribution Plans
Substantially all of the employees of the Company and its subsidiaries
are covered by government or Company-sponsored benefit plans. Total costs
for Company-sponsored defined benefit, defined contribution and employee
stock ownership plans amounted to $5.3 million in 1999, $7.6 million in 1998
and $7.1 million in 1997.
The DENTSPLY Employee Stock Ownership Plan ("ESOP") is a
non-contributory defined contribution plan that covers substantially all of
the United States based non-union employees of the Company. Contributions to
the ESOP for 1999, 1998 and 1997 were $2.1 million, $2.1 million and $2.1
million, respectively. The Company makes annual contributions to the ESOP of
not less than the amounts required to service ESOP debt. In connection with
the refinancing of ESOP debt in March 1994, the Company agreed to make
additional cash contributions totaling at least $2.2 million over the next
four years following the refinancing date. Dividends received by the ESOP on
allocated shares are passed through to Plan participants. Most ESOP shares
were initially pledged as collateral for its debt. As the debt is repaid,
shares are released from collateral and allocated to active employees, based
on the proportion of debt service paid in the year. At December 31, 1999,
the ESOP held 6.8 million shares, of which 5.9 million were allocated to plan
participants and 0.9 million shares were unallocated and pledged as
collateral for the ESOP debt. Unallocated shares were acquired prior to
December 31, 1992 and are accounted for in accordance with Statement of
Position 76-3. Accordingly, all shares held by the ESOP are considered
outstanding and are included in the earnings per common share computations.
The ESOP reserve consists of a loan receivable from the ESOP bearing interest
at 3.06%, payable in equal quarterly installments through March 31, 2004.
The Company sponsors an employee 401(k) savings plan for its United
States workforce to which enrolled participants may contribute up to 15% of
their compensation, subject to IRS defined limits.
Defined Benefit Plans
The Company maintains a number of separate contributory and
non-contributory qualified defined benefit pension plans and other
postretirement healthcare plans for certain represented and salaried employee
groups in the United States. Pension benefits for salaried plans are based
on salary and years of service; hourly plans are based on negotiated benefits
and years of service. Annual contributions to the pension plans are
sufficient to satisfy legal funding requirements. Pension plan assets are
held in trust and consist mainly of common stock and fixed income
investments.
The Company maintains pension plans for its employees in Germany and
Switzerland. These plans provide benefits based upon age, years of service
and remuneration. The German plans are unfunded book reserve plans. Other
foreign plans are not significant individually or in the aggregate. Most
employees and retirees outside the United States are covered by government
health plans.
Postretirement Healthcare
The plans for postretirement healthcare have no plan assets. The
postretirement healthcare plan is contributory, with retiree contributions
adjusted annually to limit the Company's contribution to $21 per month per
retiree for most participants who retired after June 1, 1985. The Company
also sponsors unfunded non-contributory postretirement medical plans for a
limited number of union employees and their spouses and retirees of a
discontinued operation.
65
Reconciliations of changes in the above plans' benefit obligations, fair
value of assets, and statement of funded status are as follows:
Pension Benefits Other Benefits
-------------------- -------------------
December 31, December 31,
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
Reconciliation of benefit obligation
Benefit obligation at beginning of
year $ 58,939 $ 54,074 $ 6,790 $ 6,875
Service cost 2,430 2,423 160 124
Interest cost 3,170 3,229 488 478
Employer contributions 982 1,047 - -
Participant contributions 855 837 - -
Actuarial (gains) losses (2,952) (2,614) 52 (4)
Acquisitions (divestitures) 2,461 - - -
Effects of exchange rate changes (7,297) 2,852 - -
Benefits paid (3,020) (2,909) (734) (683)
-------- -------- -------- --------
Benefit obligations at end of year $ 55,568 $ 58,939 $ 6,756 $ 6,790
======== ======== ======== ========
Reconciliation of Plan Assets
Fair value of plan assets at beginning
of year $ 40,148 $ 33,958 $ - $ -
Actual return on assets 3,446 4,817 - -
Acquisitions (divestitures) 582 - - -
Foreign currency exchange rate changes (4,194) 1,058 - -
Employer contributions 1,085 1,120 734 683
Participant contributions 855 837 - -
Benefits paid (1,718) (1,642) (734) (683)
-------- -------- -------- --------
Fair value of plan assets at end of
year $ 40,204 $ 40,148 $ - $ -
======== ======== ======== ========
Reconciliation of Funded Status
Actuarial present value of projected
benefit obligations $ 55,568 $ 58,939 $ 6,756 $ 6,790
Plan assets at fair value 40,204 40,148 - -
-------- -------- -------- --------
Funded status (15,364) (18,791) (6,756) (6,790)
Unrecognized prior service cost 814 1,773 - -
Unrecognized net actuarial (gain)loss (9,634) (11,229) (3,152) (3,312)
-------- -------- -------- --------
Prepaid (accrued) benefit cost $(24,184) $(28,247) $ (9,908) $(10,102)
======== ======== ======== ========
66
The amounts recognized in the accompanying Consolidated Balance Sheets
are as follows:
Pension Benefits Other Benefits
-------------------- -------------------
December 31, December 31,
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands)
Accrued benefit liability $(29,683) $(32,580) $ (9,908) $(10,102)
Prepaid benefit cost 5,499 4,333 - -
-------- -------- -------- --------
Benefit obligations at end of year $(24,184) $(28,247) $ (9,908) $(10,102)
======== ======== ======== ========
The aggregate benefit obligation for those plans where the accumulated
benefit obligation exceeded the fair value of plan assets was $28.3 million
and $29.5 million at December 31, 1999 and 1998, respectively.
Components of the net periodic benefit cost for the plans are as follows:
Pension Benefits Other Benefits
------------------------- -------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
(in thousands)
Service cost $ 2,430 $ 2,423 $ 2,115 $ 160 $ 124 $ 160
Interest cost 3,170 3,229 3,067 488 478 605
Expected return on plan assets (2,435) (2,650) (2,297) - - -
Net amortization and deferral (1,300) (517) 20 (108) (124) (131)
------- ------- ------- ------- ------- -------
Net periodic benefit cost $ 1,865 $ 2,485 $ 2,905 $ 540 $ 478 $ 634
======= ======= ======= ======= ======= =======
The weighted average assumptions used in accounting for the Company's
plans are as follows:
Pension Benefits Other Benefits
------------------------- -------------------------
December 31, December 31,
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
Discount rate 5.6% 5.8% 5.8% 7.5% 7.3% 7.3%
Expected return on plan assets 5.0% 5.5% 5.5% - - -
Rate of compensation increase 3.0% 3.0% 3.0% - - -
Health care cost trend - - - 7.0% 7.0% 7.0%
Assumed health care cost trend rates have an impact on the amounts
reported for postretirement benefits. A one percentage point change in
assumed healthcare cost trend rates would have the following effects for the
year ended December 31, 1999:
Other Benefits
-------------------
1% Increase 1% Decrease
----------- -----------
(in thousands)
Effect on total of service and interest cost
components $ 68 $ (55)
Effect on postretirement benefit obligation 524 (445)
67
NOTE 15 - RESTRUCTURING AND OTHER COSTS
- ---------------------------------------
In the second quarter of 1998, the Company recorded a pre-tax charge of
$29.0 million for restructuring and other costs. The charge included costs
of $26.0 million to rationalize and restructure the Company's worldwide
laboratory business, primarily for the closure of the Company's German tooth
manufacturing facility. The remaining $3.0 million of the charge was
recorded to cover termination costs associated with its former implant
products. Included in the $26.0 million restructuring charge were costs to
cover severance, the write-down of property, plant and equipment, and tooth
product rationalization. The principal actions involved the closure of the
Company's Dreieich, Germany tooth facility and rationalization of certain
tooth products in Europe, North America and Australia. The restructuring
resulted in the elimination of approximately 275 administrative and
manufacturing positions, mostly in Germany.
In fiscal 1998, the Company paid approximately $3.5 million for legal
and professional service fees and employee related costs for the German
workforce. The Company also paid approximately $.2 million for implant
termination costs. During this period, the reserve was reduced by
approximately $2.8 million for non-cash implant termination costs and
approximately $6.0 million for a non-cash write-down of property, plant and
equipment.
In fiscal 1999, the Company paid severance and incurred other costs
relating to the restructuring of the Company's worldwide laboratory business
of $11.6 million and $2.4 million, respectively. The Company also made an
additional $1.2 million write-down of plant, property and equipment and
recovered $.6 million in implant termination costs. Certain categories of
reserves and provisions were revised from the original estimates. These
revisions include an increase in the estimated loss on the sale of property
and plant located in Dreieich, Germany, of $1.2 million. Additionally,
severance, implant termination costs and other costs were reduced by $.1
million, $.1 million and $1.0 million, respectively.
Except for the disposition of the property and plant located in
Dreieich, Germany, all major aspects of the plan were completed in 1999.
Remaining provisions at December 31, 1999, total $1.9 million. These
provisions include $1.0 million in other costs related largely to the sale of
the property and plant located in Dreieich, Germany, $.5 million related to
outstanding implant termination matters and $.4 million for remaining
severance.
The major components of the charge and remaining accruals follow:
Amounts Amounts Change Balance
Applied Applied in December 31,
Provision 1998 1999 Estimate 1999
(in thousands)
Severance $ 13,400 $ (1,300) $(11,600) $ (100) $ 400
Write-down of property,
plant, and equipment 6,000 (6,000) (1,200) 1,200 ---
Implant termination costs 3,000 (3,000) 600 (100) 500
Other costs 6,600 (2,200) (2,400) (1,000) 1,000
-------- -------- -------- ------- -------
$ 29,000 $(12,500) $(14,600) $ --- $ 1,900
======== ======== ======== ======= =======
In the fourth quarter of 1998, the Company recorded a pre-tax
restructuring charge of $42.5 million related to the discontinuance of
the intra-oral camera business at the Company's New Image division
located in Carlsbad, California. The charge included the write-off of
intangibles, including goodwill associated with the business, write-off of
discontinued products, write-down of fixed assets and other assets,
and severance and other costs associated with the discontinuance of the New
68
Image division and closure of its facility. The restructuring plan included
the elimination of approximately 115 administrative and manufacturing
positions in California.
In fiscal 1998, the Company reduced the restructuring reserve for
write-downs of intangible assets and discontinued products of $33.2 million
and $3.8 million, respectively. In addition, the Company recorded write-downs
of property, plant and equipment and other assets of $1.5 and $.7 million,
respectively.
In fiscal 1999, the Company paid severance and incurred other costs
totaling $2.4 million and recorded additional write-downs of discontinued
products of $.3 million. The Company also recovered a total of $.7 million
for previously written-down plant, property and equipment and other assets.
Certain categories of reserves and provisions were revised from the original
estimates. These revisions include increases in write-offs and provisions
relating to discontinued products of $.8 million and increases in severance
of $.1 million. Additionally, fixed asset write-downs were reduced by $.5
million and other asset write-downs and other costs were reduced by $.2
million and $.2 million, respectively.
All major aspects of the plan were completed in 1999. Remaining
provisions at December 31, 1999, total $1.3 million. These provisions include
$.5 million related to expected returns of discontinued products, $.3 million
for settlement of terminated purchase orders and $.5 million related to
future lease payments and facility closure costs for the vacated Carlsbad
location.
The major components of the charge and remaining accruals follow:
Amounts Amounts Change Balance
Applied Applied in December 31,
Provision 1998 1999 Estimate 1999
(in thousands)
Write-off of intangibles
including goodwill $ 33,200 $ (33,200) $ --- $ --- $ ---
Discontinued products 3,800 (3,800) (300) 800 500
Write-down of property,
plant, and equipment 1,500 (1,500) 500 (500) ---
Severance 1,000 --- (1,100) 100 ---
Write-down of other assets 700 (700) 200 (200) ---
Other costs 2,300 --- (1,300) (200) 800
------- -------- ------- ------- -------
$42,500 $(39,200) $(2,000) $ --- $ 1,300
======= ======== ======= ======= =======
NOTE 16 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
The Company leases automobiles and certain office, warehouse, machinery
and equipment and manufacturing facilities under non-cancelable operating
leases. These leases generally require the Company to pay insurance,
property taxes and other expenses related to the leased property. Total
rental expense for all operating leases was $10.3 million for 1999, $10.0
million for 1998 and $8.8 million for 1997.
69
Rental commitments, principally for real estate (exclusive of taxes,
insurance and maintenance), automobiles and office equipment amount to: $8.5
million for 2000, $5.7 million for 2001, $3.5 million for 2002, $2.1 million
for 2003, $1.8 million for 2004, and $6.8 million thereafter.
The Company has no material non-cancelable purchase commitments.
The Company has employment agreements with its executive officers and
certain other management employees. These agreements generally provide for
salary continuation for a specified number of months under certain
circumstances. If all of the employees under contract were to be terminated
by the Company without cause (as defined), the Company's liability would be
approximately $6.5 million at December 31, 1999.
The Company is from time to time a party to lawsuits arising out of its
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.
In June 1995, the Antitrust Division of the United States Department of
Justice initiated an antitrust investigation regarding the policies and
conduct undertaken by the Company's Trubyte division with respect to the
distribution of artificial teeth and related products. On January 5, 1999,
the Department of Justice filed a complaint against the Company in the U.S.
District Court in Wilmington, Delaware alleging that the Company's tooth
distribution practices violate the antitrust laws and is seeking an order for
the Company to discontinue its practices. Three follow on private class
action suits on behalf of dentists, laboratories and denture patients in
seventeen states, respectively, who purchased Trubyte teeth or products
containing Trubyte teeth were filed and are pending in the U.S. District
Court in Wilmington, Delaware. These cases have been assigned to the same
judge who is handling the Department of Justice action. The private party
suits seek damages in an unspecified amount. It is the Company's position
that the conduct and activities of the Trubyte division do not violate the
antitrust laws.
70
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- -----------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- -------
1999 (in thousands, except per share amounts)
- ----
Net sales $196,589 $209,125 $203,552 $221,598 $830,864
Gross profit 101,629 109,416 106,310 114,622 431,977
Operating income 34,309 36,396 34,654 44,258 149,617
Net income 19,527 21,190 20,686 28,460 89,863
Earnings per common
share-basic $ .37 $ .40 $ .39 $ .54 $ 1.70
Earnings per common
share-diluted .37 .40 .39 .54 1.70
Cash dividends declared per
common share .05625 .05625 .05625 .06250 .23125
1998
- ----
Net sales $180,706 $197,126 $196,995 $220,295 $795,122
Gross profit 95,337 103,851 103,111 114,124 416,423
Operating income 31,552 6,321(1) 31,949 30(2) 69,852(1)(2)
Net income (loss) 18,997 584(1) 17,627 (2,383)(2) 34,825(1)(2)
Earnings (loss) per common
share-basic $ .35 $ .01(1) $ .33 $ (.04)(2) $ .65(1)(2)
Earnings (loss) per common
share-diluted .35 .01(1) .33 (.04)(2) .65(1)(2)
Cash dividends declared per
common share .05125 .05125 .05125 .05625 .21
(1) Includes restructuring and other costs of $29.0 million ($18.8 million
after-tax or $.35 per basic and diluted common share).
(2) Includes a restructuring charge of $42.5 million ($26.6 million
after-tax or
$.50 per basic and diluted common share).
71
Schedule II DENTSPLY INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31,1999
Additions
--------------------------
Charged
Balance at (Credited) Charged to Write-offs Balance
Beginning To Costs Other Net of Translation at End
Description of Period And Expenses Accounts Recoveries Adjustment of Period
- ----------- ---------- ------------ ----------- ---------- ----------- ---------
(in thousands)
Allowance for doubtful accounts:
For Year Ended December 31,
1997 $ 2,475 $ 590 $ 2,496 (a) $ (746) $ (178) $ 4,637
1998 4,637 4,484 454 (b) (1,773) 89 7,891
1999 7,891 1,418 541 (e) (1,294) (404) 8,152
Allowance for trade discounts:
For Year Ended December 31,
1997 507 2,904 - (1,214) (71) 2,126
1998 2,126 2,297 - (2,556) 87 1,954
1999 1,954 2,061 - (1,538) (183) 2,294
Inventory valuation reserves:
For Year Ended December 31,
1997 16,818 (2,178) 2,282 (c) (1,679) (1,169) 14,074
1998 14,074 1,421 5,125 (d) (8,496) 191 12,315
1999 12,315 2,116 2,679 (f) (1,209) (537) 15,364
- ------------------
(a) Includes $2,498 from acquisitions of MPL, New Image, SIMFRA and SPAD.
(b) Includes $454 from acquisitions of Crescent and GAC.
(c) Includes $2,128 from acquisitions of MPL, New Image, SIMFRA and SPAD.
(d) Includes $680 from acquisitions of Crescent and GAC and $4,445 for
restructuring.
(e) Includes $62 from acquisition of VDW and $479 for the New Image
restructuring.
(f) Includes $2,679 from acquisition of VDW and Herpo.
72
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By:/s/ John C. Miles II
-----------------------
John C. Miles II
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ John C. Miles II Chairman of the March 28, 2000
- ------------------------- Board and Chief Executive
John C. Miles II Officer and a Director
(Principal Executive Officer)
/s/ Gerald K. Kunkle President and Chief March 28, 2000
- ------------------------- Operating Officer
Gerald K. Kunkle
/s/ William R. Jellison Senior Vice President March 28, 2000
- ------------------------- and Chief Financial
William R. Jellison Officer (Principal
Financial and Accounting
Officer)
/s/ Burton C. Borgelt Director March 28, 2000
- -------------------------
Burton C. Borgelt
/s/ Douglas K. Chapman Director March 28, 2000
- -------------------------
Douglas K. Chapman
/s/ Michael J. Coleman Director March 28, 2000
- -------------------------
Michael J. Coleman
/s/ Cynthia P. Danaher Director March 28, 2000
- -------------------------
Cynthia P. Danaher
73
/s/ Arthur A. Dugoni Director March 28, 2000
- -------------------------
Arthur A. Dugoni, D.D.S., M.S.D.
/s/ C. Frederick Fetterolf Director March 28, 2000
- --------------------------
C. Frederick Fetterolf
/s/ Leslie A. Jones Director March 28, 2000
- -------------------------
Leslie A. Jones
/s/Edgar H. Schollmaier Director March 28, 2000
- -------------------------
Edgar H. Schollmaier
/s/ W. Keith Smith Director March 28, 2000
- -------------------------
W. Keith Smith
74
EXHIBIT INDEX
--------------
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
3.1 Restated Certificate of Incorporation (1)
3.2 By-Laws, as amended 78
4.1 (a) 364-Day and 5-Year Competitive Advance,
Revolving Credit and Guaranty Agreements
dated as of October 23, 1997 among the
Company, the guarantors named therein,
the banks named therein, the Chase
Manhattan Bank as Administrative Agent,
and ABN Amro Bank, N.V. as Documentation
Agent. (11)
(b) Amendment to the 364-Day Competitive
Advance, Revolving Credit and Guaranty
Agreement dated as of October 21, 1999
among the Company, the guarantors named
therein, the banks named therein, the
Chase Manhattan Bank as Administrative
Agent, and ABN Amro Bank, N.V. as
Documentation Agent 91
4.2 (a) Commercial Paper Issuing and Paying
Agency Agreement dated as of August 12,
1999 between the Company and the Chase
Manhattan Bank 112
(b) Commercial Paper Dealer Agreement dated
as of August 12, 1999 between the Company
and Goldman, Sachs & Co. 120
10.1 1992 Stock Option Plan adopted May 26, 1992 (4)
10.2 1993 Stock Option Plan (2)
10.3 1998 Stock Option Plan (1)
10.4 Nonstatutory Stock Option Agreement
between the Company and Burton C.
Borgelt (3)
10.5 (a) Employee Stock Ownership Plan as amended
effective as of December 1, 1982,
restated as of January 1, 1991 (7)
(b) Second amendment to the DENTSPLY
Employee Stock Ownership Plan (10)
(c) Third Amendment to the DENTSPLY
Employee Stock Ownership Plan (12)
10.6 (a) Retainer Agreement dated December 29,
1992 between the Company and State Street
Bank and Trust Company ("State Street") (5)
(b) Trust Agreement between the Company and
State Street Bank and Trust Company dated
as of August 11, 1993 (6)
(c) Amendment to Trust Agreement between the
Company and State Street Bank and Trust
Company effective August 11, 1993 (6)
10.7 Employment Agreement dated January 1,
1996 between the Company and Burton C.
Borgelt (9)
75
10.8 (a) Employment Agreement dated as of
December 31, 1987 between the Company
and John C. Miles II (5)
(b) Amendment to Employment Agreement between
the Company and John C. Miles II dated
February 16, 1996, effective January 1, 1996 (9)
10.9 Employment Agreement dated as of December
31, 1987, as amended as of February 8,
1990, between the Company and Leslie A.
Jones (5)
10.10 Employment Agreement dated as of December
10, 1992 between the Company and Michael
R. Crane (5)
10.11 Employment Agreement dated as of December
10, 1992 between the Company and Edward
D. Yates (5)
10.12 Employment Agreement dated January 1,
1996 between the Company and W. William
Weston (9)
10.13 Employment Agreement dated January 1,
1996 between the Company and Thomas L.
Whiting (9)
10.14 Employment Agreement dated October 11,
1996 between the Company and Gerald K.
Kunkle Jr. (10)
10.15 Employment Agreement dated April 20,
1998 between the Company and William R.
Jellison (12)
10.16 Employment Agreement dated September 10,
1998 between the Company and Brian M.
Addison (12)
10.17 Employment Agreement dated June 1, 1999
between the Company and J. Henrik Roos 135
10.18 Midwest Dental Products Corporation
Pension Plan as amended and restated
effective January 1, 1989 (7)
10.19 Revised Ransom & Randolph Pension Plan,
as amended effective as of September 1,
1985, restated as of January 1, 1989 (7)
10.20 DENTSPLY International Inc. Directors'
Deferred Compensation Plan effective
January 1, 1997 (10)
10.21(a) Asset Purchase and Sale Agreement, dated
January 10, 1996, between Tulsa Dental
Products, L.L.C. and DENTSPLY
International Inc. (8)
(b) Amendment to Asset Purchase and Sale
Agreement between Tulsa Dental Products,
L.L.C. and DENTSPLY, dated January 1,
1999 142
10.22 Supplemental Executive Retirement Plan
effective January 1, 1999 (12)
10.23 Written Description of Year 1999
Incentive Compensation Plan 144
21.1 Subsidiaries of the Company 145
76
23.1 Consent of KPMG LLP 148
27 Financial Data Schedule 149
- -------------------
(1) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 333-56093).
(2) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-71792).
(3) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-79094).
(4) Incorporated by reference to exhibit included in the
Company's Registration Statement on Form S-8 (No. 33-52616).
(5) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993, File No. 0-16211.
(6) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 0-16211.
(7) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
December 31, 1994, File No. 0-16211.
(8) Incorporated by reference to exhibit included in the
Company's Current Report on Form 8-K dated January 10,
1996, File No. 0-16211.
(9) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, File No. 0-16211.
(10) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File No. 0-16211.
(11) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, File No. 0-16211.
(12) Incorporated by reference to exhibit included in the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, File No. 0-16211.
77