SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2009

 

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.)

 

221 West Philadelphia Street, York, PA                                                                                       17405-0872

_________________________________________________________________________________

(Address of principal executive offices)                                                                                       (Zip Code)

 

(717) 845-7511

(Registrant’s telephone number, including area code)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

 

Yes

X

 

No

 

 

 

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

X

 

Accelerated filer

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   

 

Yes

 

 

No

X

 

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At April 30, 2009, DENTSPLY International Inc. (the “Company”) had 148,528,582 shares of Common Stock outstanding, with a par value of $.01 per share.


DENTSPLY International Inc.

FORM 10-Q

 

For Quarter Ended March 31, 2009

 

INDEX

 

 

 

 

Page No.

 

PART I - FINANCIAL INFORMATION

 

Item 1 - Financial Statements (unaudited)

 

Consolidated Condensed Statements of Income

3

 

Consolidated Condensed Balance Sheets

4

 

Consolidated Condensed Statements of Cash Flows

5

 

Consolidated Statement of Changes in Equity

6

Notes to Unaudited Interim Consolidated Condensed

 

Financial Statements

7

 

Item 2 - Management’s Discussion and Analysis of

 

Financial Condition and Results of Operations

25

 

Item 3 - Quantitative and Qualitative Disclosures

 

About Market Risk

32

 

 

Item 4 - Controls and Procedures

32

 

 

PART II - OTHER INFORMATION

 

 

Item 1 - Legal Proceedings

33

 

 

Item 1A - Risk Factors

34

 

 

Item 2 - Unregistered Sales of Securities and Use of Proceeds

34

 

 

Item 4 - Submission of Matters to a Vote of Security Holders

34

 

 

Item 6 - Exhibits

34

 

Signatures

35

 

 

- 2 -

 

 


DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES

 

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

 

(unaudited)

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2009

 

2008

 

 

 

(in thousands, except per share amounts)

Net sales

 

$

506,949

$

560,782

Cost of products sold

 

 

239,980

 

275,539

 

 

 

 

 

 

Gross profit

 

 

266,969

 

285,243

Selling, general and administrative expenses

 

 

179,228

 

184,002

Restructuring, impairment and other costs (Note 8)

1,570

 

204

 

 

 

 

 

 

Operating income

 

 

86,171

 

101,037

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

Interest expense

 

 

6,153

 

8,252

Interest income

 

 

(1,956)

 

(5,210)

Other expense, net

 

 

913

 

3,122

 

 

 

 

 

 

Income before income taxes

 

 

81,061

 

94,873

Provision for income taxes

 

 

21,131

 

26,718

 

 

 

 

 

 

Net income

 

 

59,930

 

68,155

Less: Net Loss attributable to the

 

 

 

 

 

noncontrolling interests

 

 

(1,813)

 

(25)

Net income attributable to DENTSPLY International

 

$

61,743

$

68,180

 

 

 

 

 

 

Earnings per common share (Note 4)

 

 

 

 

 

- Basic

 

$

0.42

$

0.45

- Diluted

 

$

0.41

$

0.45

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.050

$

0.045

 

 

 

 

 

 

Weighted average common shares outstanding (Note 4):

 

 

 

Basic

 

 

148,514

 

149,945

Diluted

 

 

149,705

 

152,983

 

 

 

 

 

 

See accompanying notes to Unaudited Interim Consolidated Condensed Financial Statements.

 
- 3 -

 

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES

 

 

 

 

CONSOLIDATED CONDENSED BALANCE SHEETS

 

 

 

 

(unaudited)

 

March 31 

 

December 31,

 

 

 

2009

 

2008

 

 

 

(in thousands)

Assets

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

$

226,299

$

 203,991

 

Short-term investments

 

187

 

258

 

Accounts and notes receivable-trade, net (Note 1)

 

327,514

 

319,260

 

Inventories, net (Note 6)

 

314,089

 

306,125

 

Prepaid expenses and other current assets

 

116,800

 

120,228

 

Total Current Assets

 

984,889

 

949,862

 

 

 

 

 

 

 

Property, plant and equipment, net

 

416,393

 

432,276

 

Identifiable intangible assets, net

 

124,958

 

103,718

 

Goodwill, net

 

1,206,008

 

1,277,026

 

Other noncurrent assets, net

 

28,541

 

67,518

Total Assets

$

2,760,789

$

2,830,400

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

$

98,313

$

104,329

 

Accrued liabilities

 

188,658

 

193,660

 

Income taxes payable

 

31,119

 

36,178

 

Notes payable and current portion of long-term debt

 

25,617

 

25,795

 

Total Current Liabilities

 

343,707

 

359,962

 

 

 

 

 

 

 

Long-term debt

 

460,842

 

423,679

 

Deferred income taxes

 

59,031

 

69,049

 

Other noncurrent liabilities

 

217,612

 

318,297

 

Total Liabilities

 

1,081,192

 

1,170,987

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

Preferred stock, $.01 par value; .25 million shares authorized;

 

 

 

 

 

no shares issued

 

-

 

-

 

Common stock, $.01 par value; 200 million shares authorized;

 

 

 

 

 

162.8 million shares issued at March 31, 2009 and December 31, 2008

1,628

 

1,628

 

Capital in excess of par value

 

190,238

 

187,154

 

Retained earnings

 

1,893,242

 

1,838,958

 

Accumulated other comprehensive income (Note 3)

 

8,303

 

39,612

 

Treasury stock, at cost, 14.3 million shares at March 31, 2009

 

 

 

 

 

and 14.2 million shares at December 31, 2008

 

(479,265)

 

(479,630)

 

Total DENTSPLY International Stockholders' Equity

 

1,614,146

 

1,587,722

 

 

 

 

 

 

 

Noncontrolling interests

 

65,451

 

71,691

 

Total Stockholders’Equity

 

1,679,597

 

1,659,413

 

 

 

 

 

 

Total Liabilities and Stockholders' Equity

$

2,760,789

$

2,830,400

See accompanying notes to Unaudited Interim consolidated Condensed Financial Statements. 

 

- 4 -

 

 

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

Three Months Ended March 31,

2009

2008

Cash flows from operating activities:

Net income

$

59,930

$

68,155

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation

12,930

12,021

Amortization

3,441

2,189

Deferred income taxes

(1,750)

18,449

Share based compensation expense

 

 

4,789

 

4,093

Restructuring, impairment and other costs

 

 

790

 

204

Stock option income tax benefit

 

 

(592)

 

(1,139)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts and notes receivable-trade, net

 

 

(19,745)

 

(32,753)

Inventories, net

 

 

(18,675)

 

(6,203)

Prepaid expenses and other current assets

 

 

1,208

 

(5,480)

Accounts payable

 

 

(2,633)

 

7,812

Accrued liabilities

 

 

(27,325)

 

(26,319)

Income tax payable

 

 

(1,824)

 

(15,722)

Other, net

 

 

95

 

4,864

Net cash provided by operating activities

 

 

10,639

 

30,171

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

 

(14,183)

 

(18,682)

Cash paid for acquisitions of businesses and equity investments, net of cash acquired

 

 

(574)

 

(2,415)

Purchases of short-term investments

 

 

-

 

(90,641)

Liquidations of short-term investments

 

 

58

 

-

Proceeds from sale of property, plant and equipment, net

 

17

 

486

Net cash used in investing activities

 

 

(14,682)

 

(111,252)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net change in short-term borrowings

 

 

1,045

 

4,437

Cash paid for treasury stock

 

 

(4,664)

 

(87,824)

Cash dividends paid

 

 

(7,460)

 

(6,803)

Proceeds from long-term borrowings

 

 

108,900

 

78,254

Payments on long-term borrowings

 

 

(53,507)

 

-

Proceeds from exercise of stock options

 

 

1,360

 

3,016

Excess tax benefits from share-based compensation

 

 

592

 

1,139

Net cash provided by (used in) financing activities

 

 

46,266

 

(7,781)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(19,915)

 

10,138

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

22,308

 

(78,724)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

203,991

 

169,384

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

226,299

$

90,660

See accompanying notes to Unaudited Interim Consolidated Condensed Financial Statements.

- 5 -
 

 

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)

 

 

 

Accumulated

 

Total DENTSPLY

 

 

 

 

Capital in

 

Other

 

International

 

Total

 

Common

Excess of

Retained

Comprehensive

Treasury

Stockholders'

Noncontrolling

Stockholders'

 

Stock

Par Value

Earnings

Income (Loss)

Stock

Equity

Interest

Equity

 

(in thousands)

Balance at December 31, 2007

$1,628

$173,084

$1,582,683

$145,819

$(387,108)

$1,516,106

$296

$1,516,402

Purchase of subsidiary shares from noncontrolling interest

-

-

-

-

-

-

71,931

71,931

Comprehensive Income:

 

 

 

 

 

 

 

 

Net income

-

-

283,869

-

-

283,869

(599)

283,270

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustment

-

-

-

(71,521)

-

(71,521)

63

(71,458)

Unrealized loss on available-for-sale securities

-

-

-

-

-

-

-

-

Net loss on derivative financial instruments

-

-

-

(13,986)

-

(13,986)

-

(13,986)

Unrecognized losses and prior service cost, net

-

-

-

(20,700)

-

(20,700)

-

(20,700)

 

 

 

 

 

 

 

 

 

Comprehensive Income

 

 

 

 

 

177,662

(536)

177,126

 

 

 

 

 

 

 

 

 

Exercise of stock options

-

(7,268)

-

-

19,994

12,726

-

12,726

Tax benefit from stock options exercised

-

3,910

-

-

-

3,910

-

3,910

Share based compensation expense

-

17,290

-

-

-

17,290

-

17,290

Funding of Employee Stock Option Plan

-

62

-

-

118

180

-

180

Treasury shares purchased

-

-

-

-

(112,634)

(112,634)

-

(112,634)

RSU dividends

-

76

(76)

-

-

-

-

-

Cash dividends ($0.185 per share)

-

-

(27,518)

-

-

(27,518)

-

(27,518)

Balance at December 31, 2008

$1,628

$187,154

$1,838,958

$39,612

$(479,630)

$1,587,722

$71,691

$1,659,413

Comprehensive Income:

Net income

-

-

61,743

-

-

61,743

(1,813)

59,930

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

-

-

-

(75,758)

-

(75,758)

(4,428)

(80,186)

Unrealized loss on available-for-sale securities

-

-

-

-

-

-

-

-

Net loss on derivative financial instruments

-

-

-

42,471

-

42,471

-

42,471

Unrecognized losses and prior service cost, net

-

-

-

1,978

-

1,978

1

1,979

Comprehensive Income

30,434

(6,240)

24,194

Exercise of stock options

-

(2,261)

-

-

3,621

1,360

-

1,360

Tax benefit from stock options exercised

-

592

-

-

-

592

-

592

Share based compensation expense

-

4,789

-

-

-

4,789

-

4,789

Funding of Employee Stock Option Plan

-

(70)

-

-

1,408

1,338

-

1,338

Treasury shares purchased

-

-

-

-

(4,664)

(4,664)

-

(4,664)

RSU dividends

-

34

(34)

-

-

-

-

-

Cash dividends ($0.05 per share)

-

-

(7,425)

-

-

(7,425)

-

(7,425)

Balance at March 31, 2009

$1,628

$190,238

$1,893,242

$8,303

$(479,265)

$1,614,146

$65,451

$1,679,597

See accompanying notes to Unaudited Interim Consolidated Condensed Financial Statements.

 

 

 

 

- 6 -

 


DENTSPLY International Inc. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

March 31, 2009

 

The accompanying Unaudited Interim Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year.  These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s most recent Form 10-K/A filed May 1, 2009.

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies of DENTSPLY International Inc., as applied in the consolidated interim financial statements presented herein, are substantially the same as presented on pages 52 through 58 of the Annual Report Form 10-K/A for the fiscal year ended December 31, 2008, except as indicated below:

 

Accounts and Notes Receivable-Trade

 

Accounts and notes receivables – trade, net are stated net of allowances for doubtful accounts and trade discounts, which were $19.2 million and $19.4 million at March 31, 2009 and December 31, 2008, respectively.

 

Business Acquisitions

 

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) (“SFAS 141(R)”), “Business Combinations.” It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The Company has adopted SFAS 141(R) in the first quarter of fiscal year 2009.

 

On April 1, 2009, the FASB issued FASB Staff Position (“FSP”) No. SFAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies,” which amends and clarifies SFAS 141(R) to address application issues raised by preparers, auditors and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The FSP is effective for fiscal years ending after December 15, 2008. The Company has adopted the FSP in the first quarter of fiscal year 2009.

 

Noncontrolling Interests

 

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (“SFAS 160”), “Noncontrolling Interests (“NCI”) in Consolidated Financial Statements.” This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The Company adopted SFAS 160 on January 1, 2009 and retrospectively reclassed NCI to equity in the Condensed Balance Sheet, retrospectively included NCI in consolidated net income and consolidated comprehensive income, and provided other applicable disclosures. The implementation of SFAS 160 did not impact the Company’s net income attributable to DENTSPLY International in the current or prior periods.

 

Fair Value Measurement      

 

    On February 12, 2008, the FASB issued FASB Staff Position No. SFAS 157-2, “Effective Date of FASB Statement No. 157,” which amends SFAS 157 by delaying its effective date by one year for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Therefore, beginning on January 1, 2008, this standard applies prospectively to new fair value measurements of financial instruments and recurring fair value measurements of non-financial assets and non-financial liabilities. The Company has adopted SFAS 157-2 in the first quarter of fiscal year 2009. The implementation of SFAS 157-2 did not impact the Company’s financial statements in the current or prior periods.

- 7 -


 

Revisions in Classification

 

     Certain revisions of classification have been made to prior years' data in order to conform to current year presentation.

 

New Accounting Pronouncements     

 

    On December 31, 2008, the FASB issued FASB Staff Position No. SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” which amends SFAS 132(R) by providing guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The FSP is effective for fiscal years ending after December 15, 2009 with early application permitted. Upon initial application, the provisions of this staff position are not required for earlier periods that are presented for comparative periods. The Company is currently evaluating the impact of adopting this staff position on its disclosures.

 

NOTE 2 – STOCK COMPENSATION  

 

The Company maintains the 2002 Equity Incentive Plan (the “Plan”) under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSU”) and stock appreciation rights, collectively referred to as “Awards.” Awards are granted at exercise prices that are equal to the closing stock price on the date of grant. The Company authorizes grants of 14,000,000 shares of common stock, plus any unexercised portion of cancelled or terminated stock options granted under the DENTSPLY International Inc. 1993, 1998, and 2002 Plans, subject to adjustment as follows: each January, if 7% of the total outstanding common shares of the Company exceed 14,000,000, the excess becomes available for grant under the Plan. No more than 2,000,000 shares may be awarded as restricted stock and restricted stock units, and no key employee may be granted restricted stock units in excess of 150,000 shares of common stock in any calendar year.

 

Stock options generally expire ten years after the date of grant under these plans and grants become exercisable over a period of three years after the date of grant at the rate of one-third per year, except when they become immediately exercisable upon death, disability or qualified retirement. Restricted stock units vest 100% on the third anniversary of the date of grant and are subject to a service condition, which requires grantees to remain employed by the Company during the three year period following the date of grant. In addition to the service condition, certain key executives are subject to performance requirements. It is the Company’s practice to issue shares from treasury stock when options are exercised.

 

Under SFAS 123(R), the Company continues to use the Black-Scholes option-pricing model to estimate the fair value of the non-qualified stock options. The assumptions used to calculate the fair value of the awards granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

 

The following table represents total stock based compensation expense and the tax related benefit for the three months ended March 31, 2009 and 2008:

 

 

 

 

Three Months Ended March 31

 

 

 

2009

 

2008

 

 

 

(in millions)

Stock option expense

 

$

2.9

$

2.8

RSU expense

 

 

1.5

 

1.0

Total stock based compensation expense

$

4.4

$

3.8

 

 

 

 

 

Total related tax benefit

$

1.1

$

1.1

 

 

The remaining unamortized compensation cost related to non-qualified stock options is $19.8 million, which will be expensed over the weighted average remaining vesting period of the options, or 1.7 years. The unamortized compensation cost related to RSUs is $12.2 million, which will be expensed over the remaining restricted period of the RSUs, or 1.9 years.

 

 

- 8 -

 

 


The following table reflects the non-qualified stock options transactions from December 31, 2008 through March 31, 2009:

 

 

Outstanding

 

Exercisable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

 

Average

 

Aggregate

 

 

 

Average

 

Aggregate

 

 

 

Exercise

 

Intrinsic

 

 

 

Exercise

 

Intrinsic

 

Shares

 

Price

 

Value

 

Shares

 

Price

 

Value

 

(in thousands, except per share data)

December 31, 2008

11,285

$

26.75

$

41,428

 

8,185

$

24.71

$

37,796

Granted

35

 

22.27

 

 

 

 

 

 

 

 

Exercised

(118)

 

11.50

 

 

 

 

 

 

 

 

Forfeited

(50)

 

31.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2009

11,152

$

26.87

$

31,594

 

8,128

$

24.95

$

29,939

 

 

The weighted average remaining contractual term of all outstanding options is 6.1 years and the weighted average remaining contractual term of exercisable options is 5.0 years.

 

The following table summarizes the unvested restricted stock unit and restricted stock unit dividend transactions from December 31, 2008 through March 31, 2009:

 

 

 

Unvested Restricted Stock Units

 

 

 

 

 

 

 

 

 

Weighted Average

 

 

 

 

Grant Date

 

 

Shares

 

Fair Value

 

 

(in thousands, except per share amounts)

Unvested at December 31, 2008

 

400

$

36.11

Granted

 

279

 

26.21

Vested

 

(2)

 

26.23

Forfeited

 

(6)

 

34.42

 

 

 

 

 

Unvested at March 31, 2009

 

671

$

32.05

 

 

- 9 -

 

 


NOTE 3 – COMPREHENSIVE INCOME

 

The balances included in accumulated other comprehensive income in the consolidated balance sheets are as follows:

 

 

 

 

Three Months Ended March 31,

 

 

 

2009

 

2008

 

 

 

(in thousands)

Net income

$

59,930

$

68,155

Other comprehensive income:

 

 

 

 

Foreign currency translation adjustments, net of tax

 

(80,186)

 

100,699

Amortization of unrecognized losses and prior year service cost, net of tax

 

1,979

 

(327)

Net gain (loss) on derivative financial instruments, net of tax

 

42,471

 

(78,812)

Total other comprehensive income, net of tax

 

(35,736)

 

21,560

 

 

 

 

 

Total Comprehensive income

 

24,194

 

89,715

 

 

 

 

 

Comprehensive income attributable to the noncontrolling interest

 

(6,240)

 

(25)

 

 

 

 

 

Comprehensive income attributable to DENTSPLY International

$

30,434

$

89,740

 

During the quarter ended March 31, 2009, foreign currency translation adjustments included currency translation losses of $89.9 million and gains of $9.7 million on the Company’s loans designated as hedges of net investments. During the quarter ended March 31, 2008, foreign currency translation adjustments included currency translation gains of $116.9 million partially offset by losses of $16.2 million on the Company’s loans designated as hedges of net investments. These foreign currency translation adjustments were offset by net gains on derivatives financial instruments, which are discussed in Note 9, Financial Instruments and Derivatives.

 

The balances included in accumulated other comprehensive income in the consolidated balance sheets are as follows:

 

 

 

 

March 31,

 

December 31,

 

 

 

2009

 

2008

 

 

 

(in thousands)

Foreign currency translation adjustments

$

93,792

$

169,550

Unrecognized losses and prior service cost, net

 

(28,120)

 

(30,098)

Net loss on derivative financial instruments

 

(57,369)

 

(99,840)

 

 

$

8,303

$

39,612

 

 

The cumulative foreign currency translation adjustments included translation gains of $192.6 million and $278.1 million as of March 31, 2009 and December 31, 2008, respectively, offset by losses of $98.8 million and $108.5 million, respectively, on loans designated as hedges of net investments. These foreign currency translation adjustments were offset by net gains on derivatives financial instruments, which are discussed in Note 9, Financial Instruments and Derivatives.

 

 

 

 

 

- 10 -

 

 


NOTE 4 - EARNINGS PER COMMON SHARE

 

The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The following table sets forth the computation of basic and diluted earnings per common share:

 

 

Three Months Ended March 31,

 

 

2009

 

2008

 

 

(in thousands, except per share amounts)

Basic Earnings Per Common Share Computation

 

 

 

 

Net income attributable to DENTSPLY International

$

61,743

$

68,180

Common shares outstanding

 

148,514

 

149,945

 

 

 

 

 

Earnings per common share – basic

$

0.42

$

0.45

 

 

 

 

 

Diluted Earnings Per Common Share Computation

 

 

 

 

Net income attributable to DENTSPLY International

$

61,743

$

68,180

Common shares outstanding

 

148,514

 

149,945

Incremental shares from assumed exercise of dilutive options

 

1,191

 

3,038

Total shares

 

149,705

 

152,983

Earnings per common share - diluted

$

0.41

$

0.45

 

Options to purchase 8.1 million shares of common stock that were outstanding during the quarter ended March 31, 2009, were not included in the computation of diluted earnings per share since the options’ exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. There were 1.4 million antidilutive shares outstanding during the three months ended March 31, 2008.

 

NOTE 5 - SEGMENT INFORMATION

 

The Company follows Statement of Financial Accounting Standards No. 131 ("SFAS 131"), “Disclosures about Segments of an Enterprise and Related Information.” SFAS 131 establishes standards for disclosing information about reportable segments in financial statements. The Company has numerous operating businesses covering a wide range of products and geographic regions, primarily serving the professional dental market. Professional dental products represented approximately 97% of sales for the periods ended March 31, 2009 and 2008.

 

The operating businesses are combined into operating groups, which have overlapping product offerings, geographical presence, customer bases, distribution channels, and regulatory oversight. These operating groups are considered the Company’s reportable segments under SFAS 131 as the Company’s chief operating decision-maker regularly reviews financial results at the operating group level and uses this information to manage the Company’s operations. The accounting policies of the groups are consistent with those described in the most recently filed 10-K/A Consolidated Financial Statements in the summary of significant accounting policies. The Company measures segment income for reporting purposes as net operating profit before restructuring, interest and taxes.

 

In January 2009, the Company moved several locations between segments, which resulted in a change to the management structure, to leverage operating efficiencies. The segment information below reflects this revised structure for all periods shown.

 

United States, Germany, and Certain Other European Regions Consumable Businesses

 

This business group includes responsibility for the design, manufacturing, sales and distribution for certain small equipment and chairside consumable products in the United States, Germany, and certain other European regions. It also has responsibility for the sales and distribution of certain small equipment and chairside products in other regions, and for certain Endodontic products in Germany.

 

France, United Kingdom, Italy and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

This business group includes responsibility for the sales and distribution for certain small equipment, chairside consumable products, certain laboratory products and certain Endodontic products in France, United Kingdom, Italy, the Commonwealth of Independent States (“CIS”), Middle East, Africa, Asia (excluding Japan), Japan and Australia, as well as the sale and distribution of implant products and bone substitute/grafting materials in Italy, Asia and Australia. This business group also

- 11 -


includes the responsibility for sales and distribution for certain laboratory products, implant products and bone substitution/grafting materials for Austria. It also is responsible for sales and distribution for certain small equipment and chairside consumable products, certain laboratory products, implant products and bone substation/grafting materials in certain other European countries. In addition this business group includes the manufacturing and sale of Orthodontic products and certain laboratory products, and the sales and distribution of implant products in Japan, and the manufacturing of certain laboratory and certain Endodontic products in Asia.

 

Canada/Latin America/Endodontics/Orthodontics

 

This business group includes responsibility for the design, manufacture, and/or sales and distribution of certain small equipment, chairside consumable products, certain laboratory products and Endodontic products in Brazil. It also has responsibility for the sales and distribution of most of the Company’s dental products sold in Latin America and Canada. This business group also includes the responsibility for the design and manufacturing for Endodontic products in the United States, Switzerland and Germany and is responsible for sales and distribution of Company Endodontic products in the United States, Canada, Switzerland, Benelux, Scandinavia, Austria, Latin America and Eastern Europe, and for certain Endodontic products in Germany. This business group is also responsible for the world-wide sales and distribution as well as some manufacturing of the Company’s Orthodontic products, except for Japan. In addition, this business group is also responsible for sales and distribution in the United States for implant and bone substitute/grafting materials and the sales and distribution of implants in Brazil. This business group is also responsible for manufacture, sales and distribution of certain products in the Company’s non-dental business.

 

Dental Laboratory Business/Implants/Non-Dental

 

This business group includes the responsibility for the design, manufacture, sales and distribution for most laboratory products, excluding certain countries mentioned previously, and the design, manufacture, and/or sales and distribution of the Company’s dental implant products and bone substitute/grafting materials, excluding sales and distribution of implants and bone substitute/grafting materials in the United States; Italy, Austria, and certain other Eastern European countries; Asia; and Australia as well as implant products in Brazil and Japan. This business group is also responsible for most of the Company’s non-dental business.

 

Significant interdependencies exist among the Company’s operations in certain geographic areas. Inter-group sales are at prices intended to provide a reasonable profit to the manufacturing unit after recovery of all manufacturing costs and to provide a reasonable profit for purchasing locations after coverage of marketing and general and administrative costs.

 

Generally, the Company evaluates performance of the operating groups based on the groups’ operating income, excluding restructuring, impairment and other costs, and net third party sales, excluding precious metal content.

 

The following tables set forth information about the Company’s operating groups for the three months ended March 31, 2009 and 2008:

 

Third Party Net Sales

 

Three Months Ended March 31,

 

 

2009

 

2008

 

 

(in thousands)

United States, Germany, and Certain Other European Regions Consumable Businesses

$

124,913

$

120,555

 

 

 

 

 

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

100,805 

 

112,216

 

 

 

 

 

Canada/Latin America/Endodontics/

 

 

 

 

Orthodontics

 

144,680

 

153,798

 

 

 

 

 

Dental Laboratory Business/

 

 

 

 

Implants/Non-Dental

 

137,341

 

175,456

 

 

 

 

 

All Other (a)

 

(790)

 

(1,243)

Total

$

506,949

$

560,782

(a) Includes: amounts recorded at Corporate headquarters.
- 12 -

Third Party Net sales, excluding precious metal content

 

The presentation of net sales, excluding precious metal content, is considered a measure not calculated in accordance with generally accepted accounting principles (“GAAP”), and is therefore considered a non-GAAP measure. This non-GAAP measure is discussed further in “Management's Discussion and Analysis of Financial Condition and Results of Operations” and a reconciliation of net sales, excluding precious metal content, to net sales is provided below.

 

 

 

Three Months Ended March 31,

 

 

2009

 

2008

 

 

(in thousands)

United States, Germany, and Certain Other European Regions Consumable Businesses

$

124,913

$

120,555

 

 

 

 

 

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

93,077

 

103,914

 

 

 

 

 

Canada/Latin America/Endodontics/

 

 

 

 

Orthodontics

 

144,039

 

152,896

 

 

 

 

 

Dental Laboratory Business/

 

 

 

 

Implants/Non-Dental

 

104,411

 

120,126

All Other (a)

 

(790)

 

(1,243)

Total excluding Precious Metal Content

 

465,650

 

496,248

Precious Metal Content

 

41,299

 

64,534

Total including Precious Metal Content

$

506,949

$

560,782

 

Intersegment Net Sales

 

Three Months Ended March 31,

 

 

2009

 

2008

 

 

(in thousands)

United States, Germany, and Certain Other European Regions Consumable Businesses

$

23,080 

30,437 

 

 

 

 

 

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

3,384

 

4,215

 

 

 

 

 

Canada/Latin America/Endodontics/Orthodontics

 

28,598

 

25,108

 

 

 

 

 

Dental Laboratory Business/

 

 

 

 

Implants/Non-Dental

 

24,382

 

27,692

 

 

 

 

 

All Other (b)

 

38,326

 

46,364

Eliminations

 

(117,770)

 

(133,816)

Total

$

-

$

-

 

(a) Includes: amounts recorded at Corporate headquarters.

(b) Includes: amounts recorded at Corporate headquarters and one distribution warehouse not managed by named segments.

- 13 -

 


 

Segment Operating Income

 

Three Months Ended March 31,

 

 

2009

 

2008

 

 

(in thousands)

United States, Germany, and Certain Other European Regions Consumable Businesses

$

33,922

43,128

 

 

 

 

 

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

2,709

 

2,010

 

 

 

 

 

Canada/Latin America/Endodontics/Orthodontics

 

50,058

 

51,278

 

 

 

 

 

Dental Laboratory Business/

 

 

 

 

Implants/Non-Dental

 

22,448

 

31,718

All Other (a)

 

(21,396)

 

(26,893)

Segment Operating Income

 

87,741

 

101,241

Reconciling Items:

 

 

 

 

Restructuring, impairments and other costs

 

(1,570)

 

(204)

Interest expense

 

(6,153)

 

(8,252)

Interest income

 

1,956

 

5,210

Other (income) expense, net

 

(913)

 

(3,122)

Income before income taxes

$

81,061

$

94,873

 

Assets

 

March 31,

 

December 31,

 

 

2009

 

2008

(in thousands)

United States, Germany, and Certain Other European Regions Consumable Businesses

$

547,821

$

556,125

 

 

 

 

 

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

362,450

 

385,050

 

 

 

 

 

Canada/Latin America/Endodontics/Orthodontics

 

761,997

 

763,479

 

 

 

 

 

Dental Laboratory Business/

 

 

 

 

Implants/Non-Dental

 

909,959

 

942,504

All Other (b)

 

178,562

 

183,242

Total

$

2,760,789

$

2,830,400

 

(a) Includes: the results of Corporate headquarters, inter-segment eliminations and one distribution warehouse not managed by named segments.

(b) Includes: assets of Corporate headquarters, inter-segment eliminations and one distribution warehouse not managed by named segments.

 

NOTE 6 - INVENTORIES

 

Inventories are stated at the lower of cost or market. At March 31, 2009 and December 31, 2008, the cost of $11.2 million, or 3.6%, and $9.6 million, or 3.1%, 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 methods. The Company establishes

- 14 -


reserves for inventory estimated to be obsolete or unmarketable equal to the difference between the cost of inventory and estimated market value based upon assumptions about future demand and market conditions. The inventory valuation reserves were $29.4 million and $28.4 million as of March 31, 2009 and December 31, 2008, respectively.

 

If the FIFO method had been used to determine the cost of LIFO inventories, the amounts at which net inventories are stated would be higher than reported at March 31, 2009 and December 31, 2008 by $3.6 million and $3.5 million, respectively.

 

Inventories, net of inventory valuation reserves, consist of the following:

 

 

 

March 31,

 

December 31,

 

 

2009

 

2008

 

 

(in thousands)

Finished goods

$

187,619

$

184,226

Work-in-process

 

55,660

 

58,123

Raw materials and supplies

 

70,810

 

63,776

 

$

314,089

$

306,125

 

NOTE 7 - BENEFIT PLANS

 

The following sets forth the components of net periodic benefit cost of the Company’s benefit plans and for the Company’s other postretirement employee benefit plans for the three months ended March 31, 2009 and March 31, 2008, respectively:

 

 

 

 

Other Post Retirement

 

 

Pension Benefits

 

Benefits

 

 

Three Months Ended March 31,

 

Three Months Ended March 31,

 

 

2009

 

2008

 

2009

 

2008

 

 

(in thousands)

 

(in thousands)

Service cost

$

2,006

$

1,806

$

13

$

12

Interest cost

 

1,919

 

2,248

 

156

 

156

Expected return on assets

 

(958)

 

(1,158)

 

-

 

-

Amortization of transition obligation

57

 

61

 

-

 

-

Amortization of prior service cost

 

34

 

46

 

-

 

-

Amortization of net loss

 

403

 

73

 

50

 

37

Net periodic benefit cost

$

3,461

$

3,076

$

219

$

205

 

The following sets forth the information related to the funding of the Company’s benefit plans for 2009:

 

 

Pension Benefits

 

Other Post Retirement Benefits

 

 

(in thousands)

Actual, March 31, 2009

$

2,354

$

67

Projected for the remainder of the year

 

5,921

 

1,017

Total for year

$

8,275

$

1,084

 

NOTE 8 – RESTRUCTURING, IMPAIRMENT AND OTHER COSTS

 

Restructuring Costs

 

Restructuring costs of $1.2 million for the three months ended March 31, 2009 are recorded in Restructuring, Impairment and Other Costs in the income statement and the associated liabilities are recorded in accrued liabilities and other non-current liabilities in the consolidated condensed balance sheet. These costs consist of employee severance benefits, payments due under operating contracts and other restructuring costs.

 

During 2009, the Company initiated several restructuring plans primarily related to the integration, reorganization and closure or consolidation of certain production and selling facilities in order to better leverage the Company’s resources by minimizing costs and obtaining operational efficiencies.

- 15 -


As of March 31, 2009, the Company’s restructuring accruals were as follows:

 

 

 

Severance

 

 

2007 and

 

 

 

 

 

 

 

 

Prior Plans

 

2008 Plans

 

2009 Plans

 

Total

 

 

(in thousands)

Balance, December 31, 2008

$

664

$

2,806

$

-

$

3,470

Provisions

 

28

 

-

 

838

 

866

Amounts applied

 

(66)

 

-

 

(35)

 

(101)

Balance, March 31, 2009

$

626

$

2,806

$

803

$

4,235

 

 

 

Lease/contract terminations

 

 

2007 and

 

 

 

 

Prior Plans

 

Total

 

 

(in thousands)

Balance, December 31, 2008

$

87

$

87

Provisions

 

-

 

-

Amounts applied

 

(15)

 

(15)

Balance, March 31, 2009

$

72

$

72

 

 

 

Other restructuring costs

 

 

2007 and

 

 

 

 

 

 

Prior Plans

 

2008 Plans

 

Total

 

 

(in thousands)

Balance, December 31, 2008

$

108

$

56

$

164

Provisions

 

83

 

265

 

348

Amounts applied

 

(112)

 

(284)

 

(396)

Balance, March 31, 2009

$

79

$

37

$

116

 

The following table provides the cumulative amounts for all the plans by segment:

 

 

 

December 31,

 

 

 

Amounts

 

March 31,

 

 

2008

 

Provisions

 

applied

 

2009

 

 

(in thousands)

United States, Germany and Certain

 

 

 

 

 

 

 

 

Other European Regions

 

 

 

 

 

 

 

 

Consumables Businesses

$

102

$

210

$

(268)

$

44

France, United Kingdom, Italy, and Certain Other European Countries, CIS, Middle East, Africa, Pacific Rim Businesses

 

190

 

181

 

(61)

 

310

Canada, Latin America/

 

 

 

 

 

 

 

 

Endodontics/Orthodontics

 

178

 

361

 

(54)

 

485

Dental Laboratory Business/

 

 

 

 

 

 

 

 

Implants/Non-Dental

 

3,251

 

151

 

(129)

 

3,273

All Other (a)

 

-

 

311

 

-

 

311

Total Balance, December 31, 2008

$

3,721

$

1,214

$

(512)

$

4,423

 

 

(a)

Includes: amounts recorded at Corporate headquarters

 

Impairments and Other Costs

 

Other costs of $0.4 million for 2009 included costs primarily related to impairments of long-term assets and legal matters. These other costs are reflected in Restructuring, Impairment and Other Costs in the income statement. Legal settlements are further discussed in Note 12, Commitments and Contingencies.

- 16 -

 

NOTE 9 – FINANCIAL INSTRUMENTS AND DERIVATIVES

 

The Company has adopted the Statement of Financial Accounting Standards No. 161 (“SFAS 161”),”Disclosures about Derivative Instruments and Hedging Activities.” SFAS 161 is effective for fiscal years beginning after December 15, 2008 and amends and expands the disclosure requirements of SFAS 133, “Accounting for Derivative Instruments and Hedging.” The Company’s expanded disclosures are included below.

 

Derivative Instruments and Hedging Activities

 

The Company's activities expose it to a variety of market risks, which primarily include the risks related to the effects of changes in foreign currency exchange rates, interest rates and commodity prices. These financial exposures are monitored and managed by the Company as part of its overall risk management program. The objective of this risk management program is to reduce the volatility that these market risks may have on the Company's operating results and equity.

 

Certain of the Company's inventory purchases are denominated in foreign currencies, which expose the Company to market risk associated with exchange rate movements. The Company's policy generally is to hedge major foreign currency transaction exposures through foreign exchange forward contracts. These contracts are entered into with major financial institutions thereby minimizing the risk of credit loss. In addition, the Company's investments in foreign subsidiaries are denominated in foreign currencies, which create exposures to changes in exchange rates. The Company uses debt and derivatives denominated in the applicable foreign currency as a means of hedging a portion of this risk.

 

With the Company’s significant level of variable rate long-term debt and net investment hedges, changes in the interest rate environment can have a major impact on the Company’s earnings, depending upon its interest rate exposure. As a result, the Company manages its interest rate exposure with the use of interest rate swaps, when appropriate, based upon market conditions.

 

The manufacturing of some of the Company’s products requires the use of commodities, which are subject to market fluctuations. In order to limit the unanticipated impact on earnings from such market fluctuations, the Company selectively enters into commodity swaps for certain materials used in the production of its products. Additionally, the Company uses non-derivative methods, such as the precious metal consignment agreements to effectively hedge commodity risks.

 

Cash Flow Hedges

 

The Company uses interest rate swaps to convert a portion of its variable rate debt to fixed rate debt. As of March 31, 2009, the Company has three groups of significant variable rate to fixed rate interest rate swaps. One of the groups of swaps has notional amounts totaling 12.6 billion Japanese yen, and effectively converts the underlying variable interest rates to an average fixed rate of 1.6% for a term of ten years, ending in March 2012. Another swap has a notional amount of 65.0 million Swiss francs, and effectively converts the underlying variable interest rates to a fixed rate of 4.2% for a term of seven years, ending in March 2012. A third group of swaps has a notional amount of $150.0 million, and effectively converts the underlying variable interest rates to a fixed rate of 3.9% for a term of two years, ending March 2010. The Company enters into interest rate swap contracts infrequently as they are only used to manage interest rate risk on long-term debt instruments and not for speculative purposes.

 

The Company selectively enters into commodity swaps to effectively fix certain variable raw material costs. At March 31, 2009, the Company had swaps in place to purchase 1,905 troy ounces of platinum bullion for use in the production of its impression material products. The average fixed rate of this agreement is $1,392 per troy ounce. In addition, the Company had swaps in place to purchase 164,475 troy ounces of silver bullion for use in the production of its amalgam products at an average fixed rate of $14 per troy ounce.

 

The Company enters into forward exchange contracts to hedge the foreign currency exposure of its anticipated purchases of certain inventory. In addition, exchange contracts are used by certain of the Company's subsidiaries to hedge intercompany inventory purchases, which are denominated in non-local currencies. The forward contracts that are used in these programs typically mature in twelve months or less. For these derivatives which qualify as hedges of future anticipated cash flows, the effective portion of changes in fair value is temporarily deferred in accumulated OCI and then recognized in earnings when the hedged item affects earnings.

 

Hedges of Net Investments in Foreign Operations

 

The Company has numerous investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. Currently, the Company uses non-derivative financial instruments, including foreign currency

- 17 -


denominated debt held at the parent company level and derivative financial instruments to hedge some of this exposure. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in the non-derivative and derivative financial instruments designated as hedges of net investments.

 

In the first quarter of 2005, the Company entered into cross currency interest rate swaps with a notional principal value of Swiss francs 457.5 million paying three month Swiss franc Libor and receiving three month U.S. dollar Libor on $384.4 million. In the first quarter of 2006, the Company entered into additional cross currency interest rate swaps with a notional principal value of Swiss francs 55.5 million paying three month Swiss franc Libor and receiving three month U.S. dollar Libor on $42.0 million. In the fourth quarter of 2006, the Company entered into additional cross currency interest rate swaps with a notional principal value of Swiss francs 80.4 million paying three month Swiss franc Libor and receiving three month U.S. dollar Libor on $64.4 million. In the first quarter of 2007, the Company entered into additional cross currency interest rate swaps with a notional principal value of Swiss francs 56.6 million paying three month Swiss franc Libor and receiving three month U.S. dollar Libor on $46.3 million. Additionally, in the fourth quarter of 2005, the Company entered into cross currency interest rate swaps with a notional principal value of Euro 358.0 million paying three month Euro Libor and receiving three month U.S. dollar Libor on $419.7 million. In the first quarter of 2009, the Company terminated Swiss francs 57.5 million cross currency swap at a fair value of zero. The Swiss franc and Euro cross currency interest rate swaps are designated as net investment hedges of the Swiss and Euro denominated net assets. The interest rate differential is recognized in the earnings as interest income or interest expense as it is accrued, the foreign currency revaluation is recorded in accumulated other comprehensive income, net of tax effects.

 

The fair value of these cross currency interest rate swap agreements is the estimated amount the Company would (pay)/ receive at the reporting date, taking into account the effective interest rates and foreign exchange rates. As of March 31, 2009, the estimated net fair values of the swap agreements were negative $82.4 million, which are recorded in accumulated other comprehensive income, net of tax effects, other noncurrent liabilities and other noncurrent assets.

 

At March 31, 2009, the Company had Euro-denominated, Swiss franc-denominated, and Japanese yen-denominated debt and cross currency interest rate swaps (at the parent company level) to hedge the currency exposure related to a designated portion of the net assets of its European, Swiss and Japanese subsidiaries. At March 31, 2009 and 2008, the accumulated translation gains on investments in foreign subsidiaries, primarily denominated in Euros, Swiss francs and Japanese yen, net of these net investment hedges, were $42.7 million and $179.9 million, respectively, which are included in accumulated other comprehensive income, net of tax effects.

 

The tables below summarize the Company’s derivatives at March 31, 2009. The fair value of all derivatives is based on quarter-end currency rates.

 

 

Notional Amounts

 

Fair Value Asset (Liability)

Foreign Exchange Forward Contracts

 

2009

 

2010

 

2009

 

 

(in thousands)

Forward sale, 7.8 million Australian dollars

$

5,406

$

-

$

(186)

Forward purchase, 0.8 million British pounds

(1,054)

 

-

 

(45)

Forward sale, 0.4 million Canadian dollars

 

302

 

-

 

2

Forward sale, 1.7 billion Japanese yen

 

17,242

 

-

 

333

Forward purchase, 0.5 billion Japanese yen

(4,953)

 

-

 

(65)

Forward sale, 97.3 million Mexican Pesos

 

6,875

 

-

 

(141)

Forward sale, 5.6 million Danish Krone

 

989

 

-

 

5

Forward sale, 20.6 million Taiwanese dollars

607

 

-

 

(5)

Forward purchase, 14.3 million Euros

 

(18,937)

 

-

 

613

Forward purchase, 7.5 million Swiss francs

(6,574)

 

-

 

(3)

Forward purchase, 7.1 million British pounds

(8,992)

 

(1,178)

 

52

Forward purchase, 16.0 million Canadian dollars

11,175

 

1,485

 

504

Forward purchase, 1.7 million Japanese yen

(16,508)

 

(749)

 

(365)

Forward purchase, 6.0 million Euro

 

6,858

 

1,079

 

60

Total Foreign Exchange Forward Contracts

$

(7,564)

$

637

$

759

- 18 -


 

 

 

Notional Amount

 

Fair Value Asset (Liability)

Interest Rate Swaps

 

2009

 

2010

 

2011

 

2012

 

2013 and Beyond

 

2009

 

 

(in thousands)

Euro

$

906

$

1,739

$

1,249

$

1,249

$

5,310

$

(824)

Japanese yen

-

-

-

126,365

-

(2,634)

Swiss francs

-

-

-

56,848

-

(5,073)

U.S. dollars

-

 

150,000

 

-

 

-

 

-

 

(2,635)

Total Interest Rate Swaps

$

906

$

151,739

$

1,249

$

184,462

$

5,310

$

(11,166)

 

 

 

Notional Amount

 

Fair Value Asset (Liability)

Cross Currency Basis Swaps

 

2009

 

2010

 

2011

 

2012

 

2013 and Beyond

 

2009

 

 

(in thousands)

Swiss franc 592.5 million @ 1.14 pay CHF 3mo. Libor rec. USD 3mo. Libor

$

-

$

398,373

$

70,317

$

49,501

$

-

$

(29,561)

Euros 358.0 million @ $1.18 pay EUR 3mo. Libor rec. USD 3mo. Libor

 

-

 

473,580

 

-

 

-

 

-

 

(52,878)

Total Cross Currency Basis Swaps

$

-

$

871,953

$

70,317

$

49,501

$

-

$