SEC Filing: Dentsply Sirona

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, 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, P. O. Box 872, York, PA 17405-0872 - ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (717) 845-7511 ---------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ( X ) Yes ( ) No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At May 5, 1999 the Company had 52,773,523 shares of Common Stock outstanding, with a par value of $.01 per share. Page 1 of 21 ---- Exhibit Index at Page 20 ----

DENTSPLY INTERNATIONAL INC. FORM 10-Q For Quarter Ended March 31, 1999 ---------------- INDEX ----- Page No. -------- PART I - FINANCIAL INFORMATION (unaudited) Item 1 - Financial Statements Consolidated Condensed Balance Sheets............ 3 Consolidated Condensed Statements of Income...... 4 Consolidated Condensed Statements of Cash Flows.. 5 Consolidated Condensed Statement of Stockholders' Equity........................... 7 Notes to Unaudited Consolidated Condensed Financial Statements........................... 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.... 13 Item 3 - Quantitative and Qualitative Disclosures About Market Risk................................ 17 PART II - OTHER INFORMATION Item 1 - Legal Proceedings........................... 18 Item 6 - Exhibits and Reports on Form 8-K............ 18 Signatures........................................... 19 2

PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited) March 31, December 31, 1999 1998 ASSETS ------------ ------------ Current assets: (in thousands) Cash and cash equivalents $ 9,108 $ 8,690 Accounts and notes receivable-trade, net 133,218 134,218 Inventories 140,639 139,235 Prepaid expenses and other current assets 39,921 40,309 --------- --------- Total Current Assets 322,886 322,452 Property, plant and equipment, net 167,096 158,998 Other noncurrent assets, net 19,596 67,799 Identifiable intangible assets, net 80,674 80,537 Costs in excess of fair value of net assets acquired, net 285,572 265,536 --------- --------- Total Assets $ 875,824 $ 895,322 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,176 $ 42,654 Accrued liabilities 83,937 99,427 Income taxes payable 41,647 36,025 Notes payable and current portion of long-term debt 34,998 16,270 --------- --------- Total Current Liabilities 196,758 194,376 Long-term debt 197,571 217,491 Deferred income taxes 17,661 18,803 Other liabilities 45,249 48,113 --------- --------- Total Liabilities 457,239 478,783 --------- --------- Minority interests in consolidated subsidiaries 3,042 2,738 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 issued at March 31, 1999 and 54.3 million shares issued at December 31, 1998 543 543 Capital in excess of par value 152,306 152,871 Retained earnings 341,315 324,745 Accumulated other comprehensive income (31,394) (14,730) Employee stock ownership plan reserve (7,598) (7,977) Treasury stock, at cost, 1.7 million shares at March 31, 1999 and 1.7 million shares at December 31, 1998 (39,629) (41,651) --------- --------- Total Stockholders' Equity 415,543 413,801 --------- --------- Total Liabilities and Stockholders' Equity $875,824 $ 895,322 ========= ========= See accompanying notes to unaudited consolidated condensed financial statements. 3

DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited) Three Months Ended March 31, -------------------- 1999 1998 -------- -------- (in thousands, except per share data) Net sales $196,589 $180,706 Cost of products sold 94,960 85,369 -------- -------- Gross profit 101,629 95,337 Selling, general and administrative expenses 67,320 63,785 -------- -------- Operating income 34,309 31,552 Interest expense 4,573 2,966 Interest income (121) (218) Other (income) expense, net (554) (1,472) -------- -------- Income before income taxes 30,411 30,276 Provision for income taxes 10,884 11,279 -------- -------- Net income $ 19,527 $ 18,997 ======== ======== Earnings per common share: Basic $.37 $.35 Diluted $.37 $.35 Cash dividends declared per common share $ .05625 $ .05125 Weighted average common shares outstanding: Basic 52,566 54,124 Diluted 52,758 54,474 See accompanying notes to unaudited consolidated condensed financial statements. 4

DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31, ------------------- 1999 1998 -------- -------- Cash flows from operating activities: (in thousands) Net income $ 19,527 $ 18,997 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,090 4,436 Amortization 5,519 4,660 Other, net (12,885) (25,591) -------- -------- Net cash provided by operating activities 17,251 2,502 -------- -------- Cash flows from investing activities: Acquisition of businesses, net of cash acquired 3,446 (13,839) Additional consideration for prior purchased business --- (3,522) Property, plant and equipment additions (6,668) (7,044) Other, net --- (527) -------- -------- Net cash used in investing activities (3,222) (24,932) -------- -------- Cash flows from financing activities: Debt repayment (27,574) (14,439) Proceeds from long-term debt 7,653 27,886 Increase (decrease) in bank overdrafts and other short-term borrowings 12,829 2,205 Other, net (4,075) 1,106 -------- -------- Net cash provided by financing activities (11,167) 16,758 -------- -------- Effect of exchange rate changes on cash and cash equivalents (2,444) 1,244 -------- -------- Net increase (decrease) in cash and cash equivalents 418 (4,428) Cash and cash equivalents at beginning of period 8,690 9,848 -------- -------- Cash and cash equivalents at end of period $ 9,108 $ 5,420 ======== ======== See accompanying notes to unaudited consolidated condensed financial statements. 5

DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED (unaudited) Supplemental disclosures of cash flow information: Interest paid $ 3,848 $ 2,128 Income taxes paid 6,662 7,888 Non-cash transactions: Liabilities assumed from acquisitions - 2,511 Supplemental disclosures of non-cash transactions (in thousands): In January 1998, the Company purchased the assets of Blendax Professional Dental Business ("Blendax"). In March 1998, the Company purchased the assets of InfoSoft, Inc. ("InfoSoft"). In conjunction with the acquisitions, liabilities were assumed as follows: Blendax InfoSoft -------- -------- Fair value of assets acquired $ 6,711 $ 10,530 Cash paid for assets or capital stock (6,112) (8,618) -------- -------- Liabilities assumed $ 599 $ 1,912 ======== ======== See accompanying notes to unaudited consolidated condensed financial statements. 6

DENTSPLY INTERNATIONAL INC. CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (unaudited) Accumulated Capital in Other Total Common Excess of Retained Comprehensive Treasury Stockholders' Stock Par Value Earnings Income ESOP 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 19,527 19,527 Other comprehensive income Foreign currency translation adjustments (16,664) (16,664) -------- Comprehensive Income 2,863 Exercise of stock options and warrants (923) 2,022 1,099 Tax benefit related to stock options and warrants exercised 358 358 Net change in ESOP reserve 379 379 Cash dividends declared, $.05625 per share (2,957) (2,957) ------ -------- -------- -------- -------- -------- -------- Balance at March 31, 1999 $ 543 $152,306 $341,315 $(31,394) $ (7,598) $(39,629) $415,543 ====== ======== ======== ======== ======== ======== ======== See accompanying notes to unaudited consolidated condensed financial statements. 7

DENTSPLY INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -------------------------------------------------------------- MARCH 31, 1999 -------------- The accompanying interim consolidated condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) which in the opinion of management are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. These interim financial statements conform with the requirements for interim financial statements and consequently do not include all the disclosures normally required by generally accepted accounting principles. Disclosures are updated where appropriate. NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - ---------------------------------------- Principles of Consolidation - --------------------------- The consolidated condensed financial statements include the accounts of DENTSPLY International Inc. (the "Company") and its subsidiaries. Minority interests in net income of consolidated subsidiaries are not material and are included in other (income) expense, net. Inventories - ----------- Inventories are stated at the lower of cost or market. At March 31, 1999 and December 31, 1998, the cost of $14.7 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. 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. Derivatives - ----------- The Company's only involvement with derivative financial instruments is forward contracts to hedge certain assets and liabilities denominated in foreign currencies and swap agreements which convert current floating interest debt to fixed rates. 8

NOTE 2 - EARNINGS PER COMMON SHARE - ---------------------------------- The following table sets forth the computation of basic and diluted earnings per common share: Three Months Ended March 31, 1999 1998 Basic EPS Computation: ------- ------- Numerator (Net Income) $19,527 $18,997 ------- ------- Denominator: Common shares outstanding 52,566 54,124 ------- ------- Basic EPS $ 0.37 $ 0.35 ======= ======= Diluted EPS Computation: Numerator (Net Income) $19,527 $18,997 ------- ------- Denominator: Common shares outstanding 52,566 54,124 Incremental shares from assumed exercise of dilutive options and warrants 192 350 ------- ------- Total shares 52,758 54,474 ------- ------- Diluted EPS $ 0.37 $ 0.35 ======= ======= NOTE 3 - INVENTORIES - -------------------- Inventories consist of the following: March 31, December 31, 1999 1998 ------------ ------------ (in thousands) Finished goods $ 77,072 $ 75,637 Work-in-process 28,756 27,632 Raw materials and supplies 34,811 35,966 -------- -------- $140,639 $139,235 ======== ======== Pre-tax income was $.1 million lower in the three months ended March 31, 1999 and 1998 as a result of using the LIFO method compared to the first-in, first-out (FIFO) method. If the FIFO method had been used to determine the cost of the LIFO inventories, the amounts at which net inventory is stated would be lower than reported at March 31, 1999 and December 31, 1998 by $.9 million and $1.0 million, respectively. 9

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT - -------------------------------------- Property, plant and equipment consist of the following: March 31, December 31, 1999 1998 ------------ ------------ Assets, at cost: (in thousands) Land $ 14,075 $ 12,315 Buildings and improvements 77,632 74,966 Machinery and equipment 143,973 138,644 Construction in progress 14,287 13,262 -------- -------- 249,967 239,187 Less: Accumulated depreciation 82,871 80,189 -------- -------- $167,096 $158,998 ======== ======== NOTE 5 - NOTES PAYABLE AND LONG-TERM DEBT - ----------------------------------------- The increase from December 31, 1998 in notes payable and current portion of long-term debt ($18.7 million) was primarily due to the maturing of long-term debt. NOTE 6 - 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. This 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 business. Included in the $26.0 million restructuring charge are costs to cover severance, the write-down of property, plant and equipment, and tooth product rationalization. The principal actions involve the closure of the Company's Dreieich, Germany tooth facility and rationalization of certain tooth products in Europe, North America and Australia. The Company anticipates the restructuring will reduce production costs and increase operational efficiencies, contributing to future earnings. The restructuring results in the elimination of approximately 275 administrative and manufacturing positions, mostly in Germany. The closure of the German tooth facility was completed in the first quarter of 1999 with benefits of the restructuring expected to begin late in 1999 or early 2000. At March 31, 1999, $5.3 million remained in the restructuring accrual. Through the first quarter 1999, the Company has paid approximately $14.7 million for severance and other related shut down costs and employee related costs for the German workforce. The Company also paid approximately $.2 million for implant related termination costs. During this same period, the reserve has also been 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. 10

The major components of the charge and remaining accruals follow: Amounts Balance Provision Applied March 31, 1999 --------- ------- -------------- (in thousands) Severance $13,400 $11,900 $ 1,500 Write-down of property, plant and equipment 6,000 6,000 - Implant termination costs 3,000 3,000 - Other 6,600 2,800 3,800 ------- ------- ------- $29,000 $23,700 $ 5,300 ======= ======= ======= In the fourth quarter of 1998, the Company recorded a pre-tax charge of $42.5 million for restructuring the New Image business. This charge includes 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 Image division in Carlsbad, California. As part of the restructuring, certain intraoral camera products will be sold and supported by the Gendex Dental X-ray division in Des Plaines, Illinois. The restructuring includes the elimination of approximately 115 administrative and manufacturing positions in California. The Company plans to complete the restructuring by the end of the second quarter of 1999. The facility in California was closed at the end of the first quarter of 1999. The major components of the charge and remaining accruals follow: Amounts Balance Provision Applied March 31, 1999 --------- ------- -------------- (in thousands) Write-off of intangibles including goodwill $33,200 $33,200 $ - Discontinued products 3,800 3,800 - Write-down of fixed assets 1,500 1,500 - Severance 1,000 900 100 Write-down of other assets 700 700 - Other costs 2,300 1,300 1,000 ------- ------- ------- $42,500 $41,400 $ 1,100 ======= ======= ======= NOTE 7 - COMMITMENTS AND CONTINGENCIES - -------------------------------------- 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. 11

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 seeking an order for the Company to discontinue its practices. A follow on private class action suit on behalf of dentists who purchased Trubyte teeth was filed January 12, 1999 in the Supreme Court of the State of New York for New York County which was removed to and is now pending in the U.S. District court for the Southern District of New York. A second follow on private class action suit on behalf of laboratories who purchased Trubyte teeth was filed April 21, 1999 in the U.S. District Court in Wilmington, Delaware. This case has been assigned to the same judge who is handling the Department of Justice action. It is the Company's position that the conduct and activities of the Trubyte Division do not violate the antitrust laws. 12

DENTSPLY INTERNATIONAL INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Certain statements made by the Company that are forward-looking, including without limitation, statements containing the words "plans", "anticipates", "believes", "expects", or words of similar import constitute forward-looking statements which 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 Company's Annual Report on Form 10-K for the year ended December 31, 1998. RESULTS OF OPERATIONS Quarter Ended March 31, 1999 Compared to Quarter Ended March 31, 1998 For the quarter ended March 31, 1999, net sales increased $15.9 million, or 8.8%, to $196.6 million, up from $180.7 million in the same period of 1998. Acquisitions, net of divestitures, accounted for 6.8% of the sales growth for the quarter. Base business sales were up 2.0% with a base business sales increase of 5.3% in the United States. The sales increase was offset by a decline of 4.9% in Europe including a significant drop in sales to the Commonwealth of Independent States (C.I.S.) and a soft market in Germany, and a decline of 1.8% in the Pacific Rim and Latin America, mainly due to dealer returns in India and economic problems in Brazil. Base business sales growth in other territories was up 9.9%. Exchange rate fluctuations had a negligible impact on sales in the first quarter. Gross profit increased $6.3 million, or 6.6%, to $101.6 million from $95.3 million in the first quarter of 1998 as a result of higher net sales offset somewhat by a decrease in the gross profit percentage in the first quarter of 1999. As a percentage of sales, gross profit decreased from 52.8% in the first quarter of 1998 to 51.7% in the same period of 1999. Costs associated with moving the manufacturing operations of the New Image business and the German tooth operations in Dreieich caused most of the margin percentage decrease. Selling, general and administrative expenses increased $3.5 million, or 5.5%. As a percentage of sales, expenses decreased from 35.3% in the first quarter of 1998 to 34.2% for the same period of 1999. This decrease included a credit of $1.1 million in Germany resulting from the curtailment of the Dreieich operation pension plan. Interest expense increased $1.6 million in the first quarter of 1999 due to increased interest expense on debt incurred to finance acquisitions and the stock repurchase program in 1998. Other income decreased $0.9 million in the first quarter of 1999 due primarily to an unfavorable currency fluctuation in Brazil. Income before income taxes increased $0.1 million, or 0.4%. The effective tax rate for operations was lowered to 35.8% in the first quarter of 1999 compared to 37.3% in the first quarter of 1998 reflecting savings from federal, state and foreign tax planning activities. Net income increased $0.5 million, or 2.8%, from the first quarter of 1998 due to higher sales and lower expenses as a percentage of sales along with a lower provision 13

for income taxes in the first quarter of 1999 partially offset by a decline in the gross profit margin. Basic and diluted earnings per common share increased from $.35 in 1998 to $.37 in 1999, or 5.7%. LIQUIDITY AND CAPITAL RESOURCES Investing activities for the three months ended March 31, 1999 include capital expenditures of $6.7 million. The Company's current ratio was 1.6 with working capital of $126.1 million at March 31, 1999. This compares with a current ratio of 1.7 and working capital of $128.1 million at December 31, 1998. The Company expects to be able to finance cash requirements, including capital expenditures, stock repurchases, debt service, and possible future acquisitions, from the funds generated from operations and amounts available under the existing Bank Revolving Loan Facility. For the three months ended March 31, 1999, cash flows from operating activities were $17.3 million compared to $2.5 million for the three months ended March 31, 1998. Cash flows from operating activities for 1999 included $9.2 million of negative cash flow associated with the two restructurings recorded in 1998. The increase of $14.8 million results primarily from decreases in inventory, receivables and prepaids offset by decreases in accrued liabilities. NEW STANDARDS Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," was issued by the Financial Accounting Standards Board 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. The Company expects to adopt SFAS 133 beginning January 1, 2000. The Company has not yet determined the effect of adopting SFAS 133. YEAR 2000 The following discussion contains Year 2000 Readiness Disclosures under the Year 2000 Information and Readiness Disclosures Act. An issue affecting DENTSPLY and all other companies is whether computer systems and applications will recognize and process data for the Year 2000 and beyond. The Year 2000 issue arose because many existing computer programs use only the last two digits to refer to a year. These computer programs do not recognize a year that begins with "20" instead of "19". The inability of many computer applications to interpret the Year 2000 14

correctly may cause potential business disruptions affecting all aspects of normal operations. The Year 2000 issue has global ramifications affecting not only the Company's operations but also the operations of the Company's suppliers, vendors and customers. In 1995, the Company commenced an upgrade of its information technology ("IT") systems for all of its locations. A primary software was chosen to upgrade the Company's computerized business application systems to world class standards and also enable the Company to become Year 2000 compliant. The upgrade included necessary hardware and software improvements, training, data conversion, systems testing and implementation, and Year 2000 compliance. Most of the identification, planning, and development phases of the Year 2000 project have been completed. The Company is in the process of implementing the information system upgrade with an anticipated completion date of mid-1999. Work has been completed on 100% of North American, 98% of Latin American and Asian systems, as well as 90% of European systems. To date, the Company has spent approximately $15.8 million for the IT project. An additional $1.2 million of spending is anticipated for the remainder of 1999. These costs encompass the total upgrade of the Company's manufacturing, distribution and financial reporting systems. The Company has not deferred other IT projects due to its Year 2000 initiative, but rather, the Year 2000 initiative has been part of the upgrade of its current IT system. Possible Year 2000 issues that are not covered by the IT upgrade are being addressed separately and may require software replacement, reprogramming or other remedial action. The Company is engaged in a program to identify affected systems and applications and to develop a plan to correct any issues in the most effective manner. The Company is in the process of formulating contingency plans to the extent necessary in fiscal 1999. The Year 2000 initiative presents a number of uncertainties including the status and planning of third parties. The Company is currently surveying its significant customers and vendors as to their Year 2000 compliance. Based on the nature of their responses, the Company will develop contingency plans as appropriate. However, the Company has no means of assuring that external customers and vendors will be Year 2000 compliant. The inability of third parties to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The Company's Year 2000 remediation efforts along with the information system upgrade are funded from the Company's operating cash flows and its borrowing facilities. The following table contains historical and estimated future costs of the total IT system upgrade, which includes the Year 2000 initiative. Infrastructure and daily IT-related operating expenses have been excluded from the reported costs. Project Costs Anticipated To Date Future Costs ------------- ------------ (in thousands) Capital Expenditures $ 8,473 $ 830 Expenses 7,378 340 -------- -------- Total $ 15,851 $ 1,170 ======== ======== 15

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"). On 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. 16

Item 3 - Quantitative and Qualitative Disclosures About Market Risk There have been no significant material changes to the market risks as disclosed in the Company's Annual Report on Form 10-K filed for the year ending December 31, 1998. 17

PART II OTHER INFORMATION Item 1 - 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 seeking an order for the Company to discontinue its practices. A follow on private class action suit on behalf of dentists who purchased Trubyte teeth was filed January 12, 1999 in the Supreme Court of the State of New York for New York County which was removed to and is now pending in the U.S. District court for the Southern District of New York. A second follow on private class action suit on behalf of laboratories who purchased Trubyte teeth was filed April 21, 1999 in the U.S. District Court in Wilmington, Delaware. This case has been assigned to the same judge who is handling the Department of Justice action. It is the Company's position that the conduct and activities of the Trubyte Division do not violate the antitrust laws. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed herewith: --------- Number Description ------ ----------- 27 Financial Data Schedule (pursuant to Item 601(c)(1)(iv) of Regulation S-K, this exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended) (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed by the Company during the quarter ended March 31, 1999. 18

Signatures - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DENTSPLY INTERNATIONAL INC. May 14, 1999 /s/ John C. Miles II - ----------------- ---------------------------------- Date John C. Miles II Chairman and Chief Executive Officer May 14, 1999 /s/ William R. Jellison - ----------------- ---------------------------------- Date William R. Jellison Senior Vice President and Chief Financial Officer 19

EXHIBIT INDEX ------------- Number Description Sequential Page No. ------ ----------- ------------------- 27 Financial Data Schedule 21 (pursuant to Item 601(c)(1)(iv) of Regulation S-K, this exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended) 20

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DENTSPLY INTERNATIONAL INC. AT MARCH 31, 1999 AND FOR THE FISCAL QUARTER THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000818479 DENTSPLY INTERNATIONAL 1000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 9108 0 133218 0 140639 322886 249967 82871 875824 196758 197571 0 0 543 415000 875824 196589 196589 94960 94960 67320 0 4573 30411 10884 19527 0 0 0 19527 .37 .37