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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
Commission File Number 0-16211
DENTSPLY SIRONA 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 | | 17401-2991 |
(Address of principal executive offices) | | (Zip Code) |
(717) 845-7511
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company o |
| Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o 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 October 31, 2018, DENTSPLY SIRONA Inc. had 222,547,625 shares of Common Stock outstanding, with a par value of $.01 per share.
DENTSPLY SIRONA Inc.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2018 | | 2017 | | 2018 | | 2017 |
| | | | | | | |
| Net sales | $ | 928.4 | | $ | 1,009.2 | | $ | 2,926.6 | | $ | 2,902.4 |
| Cost of products sold | 452.3 | | 450.2 | | 1,383.6 | | 1,307.2 |
| | | | | | | |
| Gross profit | 476.1 | | 559.0 | | 1,543.0 | | 1,595.2 |
| Selling, general and administrative expenses | 418.5 | | 430.5 | | 1,285.9 | | 1,252.8 |
| Goodwill impairment | — | | — | | 1,085.8 | | 1,092.9 |
| Restructuring and other costs | 12.1 | | 20.6 | | 211.2 | | 105.4 |
| | | | | | | |
| Operating income (loss) | 45.5 | | 107.9 | | (1,039.9) | | (855.9) |
| | | | | | | |
| Other income and expenses: | | | | | | | |
| Interest expense | 9.7 | | 9.8 | | 27.9 | | 28.7 |
| Interest income | (0.6) | | (0.4) | | (1.6) | | (1.7) |
| Other expense (income), net | 4.7 | | 0.9 | | (30.4) | | 7.7 |
| | | | | | | |
| Income (loss) before income taxes | 31.7 | | 97.6 | | (1,035.8) | | (890.6) |
| Provision (benefit) for income taxes | 4.2 | | 7.1 | | (23.4) | | 9.5 |
| | | | | | | |
| | | | | | | |
| Net income (loss) | 27.5 | | 90.5 | | (1,012.4) | | (900.1) |
| | | | | | | |
| Less: Net (loss) income attributable to noncontrolling interest | (0.5) | | (0.1) | | 0.4 | | (0.5) |
| | | | | | | |
| Net income (loss) attributable to Dentsply Sirona | $ | 28.0 | | $ | 90.6 | | $ | (1,012.8) | | $ | (899.6) |
| | | | | | | |
| Net income (loss) per common share attributable to Dentsply Sirona | | | | | | | |
| Basic | $ | 0.13 | | $ | 0.39 | | $ | (4.50) | | $ | (3.92) |
| Diluted | $ | 0.13 | | $ | 0.39 | | $ | (4.50) | | $ | (3.92) |
| | | | | | | |
| Weighted average common shares outstanding: | | | | | | | |
| Basic | 222.4 | | 229.5 | | 224.9 | | 229.6 |
| Diluted | 223.7 | | 233.1 | | 224.9 | | 229.6 |
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2018 | | 2017 | | 2018 | | 2017 |
| | | | | | | |
| Net income (loss) | $ | 27.5 | | $ | 90.5 | | $ | (1,012.4) | | $ | (900.1) |
| | | | | | | |
| Other comprehensive (loss) income, net of tax | | | | | | | |
| Foreign currency translation (loss) gain | (29.0) | | 122.0 | | (155.9) | | 393.7 |
| Net gain (loss) on derivative financial instruments | 2.2 | | (3.5) | | 19.8 | | (9.3) |
| Net realized holding gain on available for sale securities | — | | — | | (44.3) | | — |
| Pension liability gain | 1.0 | | 1.3 | | 5.2 | | 3.6 |
| Total other comprehensive (loss) income, net of tax | (25.8) | | 119.8 | | (175.2) | | 388.0 |
| | | | | | | |
| Total comprehensive income (loss) | 1.7 | | 210.3 | | (1,187.6) | | (512.1) |
| | | | | | | |
| Less: Comprehensive (loss) income attributable | | | | | | | |
| to noncontrolling interests | (0.6) | | 0.3 | | 0.7 | | 0.4 |
| | | | | | | |
| Total comprehensive income (loss) attributable to Dentsply Sirona | $ | 2.3 | | $ | 210.0 | | $ | (1,188.3) | | $ | (512.5) |
| | | | | | | |
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(unaudited)
| | | | | | | | | | | |
| September 30, 2018 | | December 31, 2017 |
| | | |
| Assets | | | |
| Current Assets: | | | |
| Cash and cash equivalents | $ | 233.1 | | $ | 320.6 |
| Accounts and notes receivables-trade, net | 702.0 | | 746.2 |
| Inventories, net | 672.0 | | 623.1 |
| Prepaid expenses and other current assets, net | 295.7 | | 312.6 |
| | | |
| Total Current Assets | 1,902.8 | | 2,002.5 |
| | | |
| Property, plant and equipment, net | 865.7 | | 876.0 |
| Identifiable intangible assets, net | 2,488.0 | | 2,800.7 |
| Goodwill, net | 3,443.6 | | 4,539.2 |
| Other noncurrent assets, net | 69.1 | | 156.1 |
| | | |
| Total Assets | $ | 8,769.2 | | $ | 10,374.5 |
| | | |
| Liabilities and Equity | | | |
| Current Liabilities: | | | |
| Accounts payable | $ | 287.8 | | $ | 284.4 |
| Accrued liabilities | 568.5 | | 585.8 |
| Income taxes payable | 69.0 | | 54.2 |
| Notes payable and current portion of long-term debt | 154.8 | | 30.1 |
| | | |
| Total Current Liabilities | 1,080.1 | | 954.5 |
| | | |
| Long-term debt | 1,574.8 | | 1,611.6 |
| Deferred income taxes | 513.7 | | 718.0 |
| Other noncurrent liabilities | 446.3 | | 462.5 |
| | | |
| Total Liabilities | 3,614.9 | | 3,746.6 |
| | | |
| Commitments and contingencies | — | | — |
| | | |
| Equity: | | | |
| Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued | — | | — |
| Common stock, $0.01 par value; | 2.6 | | 2.6 |
| 400.0 million shares authorized and 264.5 million shares issued at September 30, 2018 and December 31, 2017, respectively | | | |
| 222.5 million and 226.8 million shares outstanding at September 30, 2018 and December 31, 2017, respectively | | | |
| Capital in excess of par value | 6,528.7 | | 6,543.9 |
| Retained earnings | 1,243.6 | | 2,316.2 |
| Accumulated other comprehensive loss | (466.5) | | (291.0) |
| Treasury stock, at cost, 42.0 million and 37.7 million shares at September 30, 2018 and December 31, 2017, respectively | (2,166.4) | | (1,955.4) |
| Total Dentsply Sirona Equity | 5,142.0 | | 6,616.3 |
| | | |
| Noncontrolling interests | 12.3 | | 11.6 |
| | | |
| Total Equity | 5,154.3 | | 6,627.9 |
| | | |
| Total Liabilities and Equity | $ | 8,769.2 | | $ | 10,374.5 |
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common
Stock | | Capital in
Excess of
Par Value | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Treasury
Stock | | Total Dentsply Sirona
Equity | | Noncontrolling
Interests | | Total
Equity |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2017 | $ | 2.6 | | $ | 6,543.9 | | $ | 2,316.2 | | $ | (291.0) | | $ | (1,955.4) | | $ | 6,616.3 | | $ | 11.6 | | $ | 6,627.9 |
| Net income (loss) | — | | — | | 81.2 | | — | | — | | 81.2 | | (0.1) | | 81.1 |
| Other comprehensive income | — | | — | | — | | 10.0 | | — | | 10.0 | | 0.6 | | 10.6 |
| Exercise of stock options | — | | (1.8) | | — | | — | | 9.4 | | 7.6 | | — | | 7.6 |
| Cumulative effect on adoption of ASC 606 | — | | — | | (6.0) | | — | | — | | (6.0) | | — | | (6.0) |
| Reclassification on adoption of ASU No. 2016-16 | — | | — | | (2.7) | | — | | — | | (2.7) | | — | | (2.7) |
| Reclassification on adoption of ASU No. 2018-02 | — | | — | | 7.6 | | — | | — | | 7.6 | | — | | 7.6 |
| Stock based compensation expense | — | | 9.3 | | — | | — | | — | | 9.3 | | — | | 9.3 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (19.9) | | — | | — | | 9.9 | | (10.0) | | — | | (10.0) |
| RSU dividends | — | | 0.2 | | (0.2) | | — | | — | | — | | — | | — |
| Cash dividends ($.0875 per share) | — | | — | | (20.2) | | — | | — | | (20.2) | | — | | (20.2) |
| Balance at March 31, 2018 | $ | 2.6 | | $ | 6,531.7 | | $ | 2,375.9 | | $ | (281.0) | | $ | (1,936.1) | | $ | 6,693.1 | | $ | 12.1 | | $ | 6,705.2 |
| Net (loss) income | — | | — | | (1,122.0) | | — | | — | | (1,122.0) | | 1.0 | | (1,121.0) |
| Other comprehensive loss | — | | — | | — | | (159.8) | | — | | (159.8) | | (0.2) | | (160.0) |
| | | | | | | | | | | | | | | |
| Exercise of stock options | — | | (4.6) | | — | | — | | 8.2 | | 3.6 | | — | | 3.6 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Reclassification on adoption of ASU No. 2018-02 | — | | — | | 0.5 | | — | | — | | 0.5 | | — | | 0.5 |
| Stock based compensation expense | — | | 0.5 | | — | | — | | — | | 0.5 | | — | | 0.5 |
| Treasury shares purchased | — | | — | | — | | — | | (250.2) | | (250.2) | | — | | (250.2) |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (1.5) | | — | | — | | 1.1 | | (0.4) | | — | | (0.4) |
| RSU dividends | — | | 0.1 | | (0.1) | | — | | — | | — | | — | | — |
| Cash dividends ($.175 per share) | — | | — | | (38.1) | | — | | — | | (38.1) | | — | | (38.1) |
| Balance at June 30, 2018 | $ | 2.6 | | $ | 6,526.2 | | $ | 1,216.2 | | $ | (440.8) | | $ | (2,177.0) | | $ | 5,127.2 | | $ | 12.9 | | $ | 5,140.1 |
| Net income (loss) | — | | — | | 28.0 | | — | | — | | 28.0 | | (0.5) | | 27.5 |
| Other comprehensive loss | — | | — | | — | | (25.7) | | — | | (25.7) | | (0.1) | | (25.8) |
| | | | | | | | | | | | | | | |
| Exercise of stock options | — | | (0.7) | | — | | — | | 9.5 | | 8.8 | | — | | 8.8 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Stock based compensation expense | — | | 5.3 | | — | | — | | — | | 5.3 | | — | | 5.3 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (2.2) | | — | | — | | 1.1 | | (1.1) | | — | | (1.1) |
| RSU dividends | — | | 0.1 | | (0.1) | | — | | — | | — | | — | | — |
| Cash dividends | — | | — | | (0.5) | | — | | — | | (0.5) | | — | | (0.5) |
| Balance at September 30, 2018 | $ | 2.6 | | $ | 6,528.7 | | $ | 1,243.6 | | $ | (466.5) | | $ | (2,166.4) | | $ | 5,142.0 | | $ | 12.3 | | $ | 5,154.3 |
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common
Stock | | Capital in
Excess of
Par Value | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Treasury
Stock | | Total Dentsply Sirona
Equity | | Noncontrolling
Interests | | Total
Equity |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | $ | 2.6 | | $ | 6,516.7 | | $ | 3,948.0 | | $ | (705.7) | | $ | (1,647.3) | | $ | 8,114.3 | | $ | 11.6 | | $ | 8,125.9 |
| Net income (loss) | — | | — | | 59.8 | | — | | — | | 59.8 | | (0.1) | | 59.7 |
| Other comprehensive income (loss) | — | | — | | — | | 47.7 | | — | | 47.7 | | (0.1) | | 47.6 |
| | | | | | | | | | | | | | | |
| Exercise of stock options | — | | 4.9 | | — | | — | | 24.5 | | 29.4 | | — | | 29.4 |
| | | | | | | | | | | | | | | |
| Stock based compensation expense | — | | 10.8 | | — | | — | | — | | 10.8 | | — | | 10.8 |
| Reclassification on adoption of ASU No. 2016-09 | — | | 1.0 | | (1.0) | | — | | — | | — | | — | | — |
| Funding of Employee Stock Ownership Plan | — | | 3.3 | | — | | — | | 3.3 | | 6.6 | | — | | 6.6 |
| Treasury shares purchased | — | | — | | — | | — | | (84.6) | | (84.6) | | — | | (84.6) |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (20.7) | | — | | — | | 9.1 | | (11.6) | | — | | (11.6) |
| RSU dividends | — | | 0.2 | | (0.2) | | — | | — | | — | | — | | — |
| Cash dividends ($.0875 per share) | — | | — | | (20.2) | | — | | — | | (20.2) | | — | | (20.2) |
| Balance at March 31, 2017 | $ | 2.6 | | $ | 6,516.2 | | $ | 3,986.4 | | $ | (658.0) | | $ | (1,695.0) | | $ | 8,152.2 | | $ | 11.4 | | $ | 8,163.6 |
| Net loss | — | | — | | (1,050.0) | | — | | — | | (1,050.0) | | (0.3) | | (1,050.3) |
| Other comprehensive income | — | | — | | — | | 220.0 | | — | | 220.0 | | 0.6 | | 220.6 |
| | | | | | | | | | | | | | | |
| Exercise of stock options | — | | 1.4 | | — | | — | | 14.6 | | 16.0 | | — | | 16.0 |
| | | | | | | | | | | | | | | |
| Stock based compensation expense | — | | 11.1 | | — | | — | | — | | 11.1 | | — | | 11.1 |
| Reclassification on adoption of ASU No. 2016-09 | — | | — | | (0.5) | | — | | — | | (0.5) | | — | | (0.5) |
| | | | | | | | | | | | | | | |
| Treasury shares purchased | — | | — | | — | | — | | (65.7) | | (65.7) | | — | | (65.7) |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (1.4) | | — | | — | | 1.0 | | (0.4) | | — | | (0.4) |
| RSU dividends | — | | 0.1 | | (0.1) | | — | | — | | — | | — | | — |
| Cash dividends ($.0875 per share) | — | | — | | (20.2) | | — | | — | | (20.2) | | — | | (20.2) |
| Balance at June 30, 2017 | $ | 2.6 | | $ | 6,527.4 | | $ | 2,915.6 | | $ | (438.0) | | $ | (1,745.1) | | $ | 7,262.5 | | $ | 11.7 | | $ | 7,274.2 |
| Net income (loss) | — | | — | | 90.6 | | — | | — | | 90.6 | | (0.1) | | 90.5 |
| Other comprehensive income | — | | — | | — | | 119.4 | | — | | 119.4 | | 0.4 | | 119.8 |
| | | | | | | | | | | | | | | |
| Exercise of stock options | — | | 0.1 | | — | | — | | 7.4 | | 7.5 | | — | | 7.5 |
| | | | | | | | | | | | | | | |
| Stock based compensation expense | — | | 18.9 | | — | | — | | — | | 18.9 | | — | | 18.9 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| RSU distributions | — | | (1.7) | | — | | — | | 0.6 | | (1.1) | | — | | (1.1) |
| RSU dividends | — | | 0.2 | | (0.2) | | — | | — | | — | | — | | — |
| Cash dividends ($.0875 per share) | — | | — | | (20.0) | | — | | — | | (20.0) | | — | | (20.0) |
| Balance at September 30, 2017 | $ | 2.6 | | $ | 6,544.9 | | $ | 2,986.0 | | $ | (318.6) | | $ | (1,737.1) | | $ | 7,477.8 | | $ | 12.0 | | $ | 7,489.8 |
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2018 | | 2017 |
| | | |
| Cash flows from operating activities: | | | |
| Net Loss | $ | (1,012.4) | | $ | (900.1) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
| Depreciation | 103.4 | | 93.9 |
| Amortization of intangible assets | 149.7 | | 140.5 |
| Amortization of deferred financing costs | 2.0 | | 1.9 |
| Goodwill impairment | 1,085.8 | | 1,092.9 |
| Indefinite-lived intangible asset impairment | 179.2 | | 79.8 |
| Deferred income taxes | (97.9) | | (46.3) |
| Stock based compensation expense | 15.1 | | 40.8 |
| Restructuring and other costs - non-cash | 19.2 | | 11.6 |
| | | |
| | | |
| Other non-cash income | (2.0) | | (1.6) |
| Loss on disposal of property, plant and equipment | 2.7 | | 2.3 |
| Gain on sale of equity security | (44.1) | | — |
| Changes in operating assets and liabilities, net of acquisitions: | | | |
| Accounts and notes receivable-trade, net | 25.1 | | (57.6) |
| Inventories, net | (83.3) | | (67.3) |
| Prepaid expenses and other current assets, net | (47.3) | | (60.2) |
| Other noncurrent assets, net | (10.3) | | |
