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 June 30, 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 August 5, 1999 the Company
had 52,884,555 shares of Common Stock outstanding, with a par value of $.01 per
share.
Page 1 of 36
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Exhibit Index at Page 22
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DENTSPLY INTERNATIONAL INC.
FORM 10-Q
For Quarter Ended June 30, 1999
---------------
INDEX
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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................................ 18
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings........................... 19
Item 2 - Changes in Securities and Use of Proceeds... 19
Item 4 - Submission of Matters to a Vote of
Security Holders.................................. 19
Item 6 - Exhibits and Reports on Form 8-K............ 20
Signatures........................................... 21
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
June 30, December 31,
1999 1998
ASSETS ------------ ------------
Current assets: (in thousands)
Cash and cash equivalents $ 10,836 $ 8,690
Accounts and notes receivable-trade, net 134,562 134,218
Inventories 137,430 139,235
Prepaid expenses and other current assets 43,535 40,309
--------- ---------
Total Current Assets 326,363 322,452
Property, plant and equipment, net 174,831 158,998
Other noncurrent assets, net 20,151 67,799
Identifiable intangible assets, net 79,382 80,537
Costs in excess of fair value of net
assets acquired, net 280,543 265,536
--------- ---------
Total Assets $ 881,270 $ 895,322
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Accounts payable $ 35,701 $ 42,654
Accrued liabilities 83,780 99,427
Income taxes payable 42,353 36,025
Notes payable and current portion
of long-term debt 35,132 16,270
--------- ---------
Total Current Liabilities 196,966 194,376
Long-term debt 186,060 217,491
Deferred income taxes 15,447 18,803
Other liabilities 46,846 48,113
--------- ---------
Total Liabilities 445,319 478,783
--------- ---------
Minority interests in consolidated subsidiaries 2,780 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 June 30, 1999 and 54.3
million shares issued at December 31, 1998 543 543
Capital in excess of par value 151,752 152,871
Retained earnings 359,533 324,745
Accumulated other comprehensive income (38,061) (14,730)
Employee stock ownership plan reserve (7,218) (7,977)
Treasury stock, at cost, 1.4 million shares
at June 30, 1999 and 1.7 million shares
at December 31, 1998 (33,378) (41,651)
--------- ---------
Total Stockholders' Equity 433,171 413,801
--------- ---------
Total Liabilities and Stockholders' Equity $ 881,270 $ 895,322
========= =========
See accompanying notes to unaudited consolidated condensed financial statements.
3
<PAGE>
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in thousands, except per share data)
Net sales $209,125 $197,126 $405,713 $377,832
Cost of products sold 99,709 93,275 194,669 178,644
-------- -------- -------- --------
Gross profit 109,416 103,851 211,044 199,188
Selling, general and
administrative expenses 73,020 68,530 140,340 132,315
Restructuring and other
costs - 29,000 - 29,000
-------- -------- -------- --------
Operating income 36,396 6,321 70,704 37,873
Interest expense 4,295 3,797 8,867 6,763
Interest income (376) (441) (498) (659)
Other (income) expense, net (355) 908 (909) (564)
-------- -------- -------- --------
Income before income taxes 32,832 2,057 63,244 32,333
Provision for income taxes 11,642 1,473 22,526 12,752
-------- -------- -------- --------
Net income $ 21,190 $ 584 $ 40,718 $ 19,581
======== ======== ======== ========
Earnings per common share:
Basic $.40 $.01 $.77 $.36
Diluted $.40 $.01 $.77 $.36
Cash dividends declared
per common share .05625 .05125 .1125 .1025
Weighted average common shares outstanding:
Basic 52,758 53,942 52,663 54,032
Diluted 52,947 54,278 52,854 54,393
See accompanying notes to unaudited consolidated condensed financial statements.
4
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DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
-------------------
1999 1998
-------- --------
Cash flows from operating activities: (in thousands)
Net income $ 40,718 $ 19,582
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,883 8,990
Amortization 8,474 9,340
Non-cash restructuring and other costs --- 29,000
Other, net (18,156) (45,609)
-------- --------
Net cash provided by operating activities 40,919 21,303
-------- --------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired 3,446 (49,828)
Additional consideration for prior purchased
business (5,000) ---
Property, plant and equipment additions (13,989) (15,371)
Other, net 19 (498)
-------- --------
Net cash used in investing activities (15,524) (65,697)
-------- --------
Cash flows from financing activities:
Debt repayment (45,058) (42,477)
Proceeds from long-term debt 11,894 101,496
Increase in bank overdrafts and
other short-term borrowings 15,450 15,228
Cash paid for treasury stock --- (31,210)
Cash dividends paid (5,912) (5,549)
Other, net 4,561 4,755
-------- --------
Net cash (used in) provided by financing activities (19,065) 42,243
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (4,184) (925)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,146 (3,076)
Cash and cash equivalents at beginning of period 8,690 9,848
-------- --------
Cash and cash equivalents at end of period $ 10,836 $ 6,772
======== ========
See accompanying notes to unaudited consolidated condensed financial statements.
5
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DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
(unaudited)
Six Months Ended
June 30,
-------------------
1999 1998
-------- --------
Supplemental disclosures of cash flow information:
Interest paid $ 7,270 $ 4,932
Income taxes paid 16,532 24,096
Non-cash transactions:
Liabilities assumed from acquisitions - 23,347
Issuance of treasury stock in connection with
the acquisition of certain assets 3,353 -
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 April and May of 1998, the Company purchased a
67% majority interest in GAC ("GAC"). In May 1998, the Company purchased the
capital stock of Crescent Dental Manufacturing ("Crescent") and also the capital
stock of Herpo Productos Dentarios Ltda. ("Herpo"). In conjunction with the
acquisitions, liabilities were assumed as follows:
Blendax InfoSoft GAC Crescent Herpo
-------- -------- -------- -------- --------
Estimated fair value
of assets acquired $ 6,711 $ 10,530 $ 36,475 $ 5,868 $ 13,842
Cash paid for assets
or capital stock (6,112) (8,618) (22,740) (5,214) (7,395)
-------- -------- -------- -------- --------
Liabilities assumed $ 599 $ 1,912 $ 13,735 $ 654 $ 6,447
======== ======== ======== ======== ========
See accompanying notes to unaudited consolidated condensed financial statements.
6
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<TABLE>
DENTSPLY INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited)
<CAPTION>
Accumulated
Capital in Other Total
Common Excess of Retained Comprehensive Treasury Stockholders'
Stock Par Value Earnings Income ESOP Reserve Stock Equity
(in thousands) ------ ----------- -------- ------------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 543 $152,871 $324,745 $(14,730) $ (7,977) $(41,651) $413,801
Comprehensive Income:
Net income 40,718 40,718
Other comprehensive income
Foreign currency translation
adjustments (23,331) (23,331)
--------
Comprehensive Income 17,387
Exercise of stock options and
warrants (1,365) 4,651 3,286
Tax benefit related to stock
options and warrants exercised 515 515
Reissuance of treasury stock (269) 3,622 3,353
Net change in ESOP reserve 759 759
Cash dividends declared, $.1125
per share (5,930) (5,930)
------ -------- -------- -------- -------- -------- --------
Balance at June 30, 1999 $ 543 $151,752 $359,533 $(38,061) $ (7,218) $(33,378) $433,171
====== ======== ======== ======== ======== ======== ========
<FN>
See accompanying notes to unaudited consolidated condensed financial statements.
</FN>
</TABLE>
7
<PAGE>
DENTSPLY INTERNATIONAL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------
JUNE 30, 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 June 30, 1999 and
December 31, 1998, the cost of $14.0 million or 10% 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
<PAGE>
NOTE 2 - EARNINGS PER COMMON SHARE
- ----------------------------------
The following table sets forth the computation of basic and diluted
earnings per common share:
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Basic EPS Computation: ------- ------- ------- -------
Numerator(Income) $21,190 $ 584 $40,718 $19,581
------- ------- ------- -------
Denominator:
Common shares outstanding 52,758 53,942 52,663 54,032
------- ------- ------- -------
Basic EPS $ 0.40 $ 0.01 $ 0.77 $ 0.36
======= ======= ======= =======
Diluted EPS Computation:
Numerator(Income) $21,190 $ 584 $40,718 $19,581
------- ------- ------- -------
Denominator:
Common shares outstanding 52,758 53,942 52,663 54,032
Incremental shares from assumed
exercise of dilutive options
and warrants 189 336 191 361
------- ------- ------- -------
Total shares 52,947 54,278 52,854 54,393
------- ------- ------- -------
Diluted EPS $ 0.40 $ 0.01 $ 0.77 $ 0.36
======= ======= ======= =======
NOTE 3 - INVENTORIES
- --------------------
Inventories consist of the following:
June 30, December 31,
1999 1998
------------ ------------
(in thousands)
Finished goods $ 80,628 $ 75,637
Work-in-process 26,677 27,632
Raw materials and supplies 30,125 35,966
-------- --------
$137,430 $139,235
======== ========
Pre-tax income was $.3 million lower in the six months ended June 30, 1999
and $.3 million lower for the same period in 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 inventories are stated would be lower than reported at June 30, 1999 and
December 31, 1998 by $.7 million and $1.0 million, respectively.
9
<PAGE>
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------
Property, plant and equipment consist of the following:
June 30, December 31,
1999 1998
------------ ------------
Assets, at cost: (in thousands)
Land $ 16,379 $ 12,315
Buildings and improvements 82,759 74,966
Machinery and equipment 145,537 138,644
Construction in progress 16,456 13,262
-------- --------
261,131 239,187
Less: Accumulated depreciation 86,300 80,189
-------- --------
$174,831 $158,998
======== ========
NOTE 5 - NOTES PAYABLE AND CURRENT PORTION OF LONG-TERM DEBT
- ------------------------------------------------------------
The increase from December 31, 1998 in notes payable and current portion of
long-term debt ($18.9 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.
10
<PAGE>
The major components of the charge and remaining accruals follow:
Non-Cash Cash
Amounts Amounts Balance
Provision Applied Applied June 30, 1999
--------- -------- ------- -------------
(in thousands)
Severance $13,400 $ 700 $11,200 $ 1,500
Write-down of property,
plant and equipment 6,000 6,000 - -
Implant termination costs 3,000 2,800 200 -
Other 6,600 - 2,900 3,700
------- ------- ------- -------
$29,000 $ 9,500 $14,300 $ 5,200
======= ======= ======= =======
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
restructuring was substantially completed at June 30, 1999. The facility in
California was closed at the end of the first quarter of 1999.
<PAGE>
The major components of the charge and remaining accruals follow:
Non-Cash Cash
Amounts Amounts Balance
Provision Applied Applied June 30, 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 - 1,000 -
Write-down of other assets 700 700 - -
Other costs 2,300 - 400 1,900
------- ------- ------- -------
$42,500 $39,200 $ 1,400 $ 1,900
======= ======= ======= =======
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 transferred to and is now
pending in the U.S. District Court in Wilmington, Delaware. 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
<PAGE>
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 June 30, 1999 Compared to Quarter Ended June 30, 1998
For the quarter ended June 30, 1999, net sales increased $12.0 million, or 6.1%,
to $209.1 million, up from $197.1 million in the same period of 1998.
Acquisitions net of divestitures contributed 2.7% growth to the quarter. Base
sales were up 4.8% with a base sales increase of 6.8% in the United States. The
sales increase was offset by a base business decline of 2.5% in Europe
including: lower U.K. sales due to distributor consolidations; a significant
drop in sales to the Commonwealth of Independent States (C.I.S.) due to
depressed economic conditions in that region; and continuous softness in the
German market. Base business sales increased 15.7% in the Pacific Rim and Latin
America as the Asian economies began to recover and the Company experienced some
pent up demand for endodontic and orthodontic products in Latin America. Base
business sales growth in other territories was up 4.1%. Exchange rates
negatively impacted sales by nearly 1.4% in the quarter due to the strong U.S.
dollar.
Gross profit increased $5.5 million, or 5.3%, to $109.4 million from $103.9
million in the second quarter of 1998, but decreased as a percentage of sales
from 52.7% in the second quarter of 1998 to 52.3% in the same period of 1999.
Costs associated with moving the remaining manufacturing operations for New
Image and Germany's tooth manufacturing facility negatively impacted performance
in the first quarter in addition to purchase price accounting adjustments
related to the acquisition of VDW and lower margins associated with GAC, the
Company's orthodontics distribution business acquired in the second quarter of
1998.
Selling, general and administrative expenses increased $4.5 million, or 6.6%. As
a percentage of sales, expenses remained flat at 34.9% for the second quarter of
1999 compared to 34.8% for the same period of 1998.
Restructuring and other costs of $29 million were recorded in the second quarter
of 1998. The Company's German tooth manufacturing facility has been closed and
production has been transferred to company facilities in Brazil and Pennsylvania
during the first half of 1999.
Net interest expense increased $0.6 million in the second quarter of 1999 due to
increased interest expenses on debt incurred to finance acquisitions and the
stock repurchase program in 1998.
Other income increased $1.3 million in the second quarter of 1999 due primarily
to favorable currency fluctuations as the U.S. dollar strengthened against the
major European currencies.
13
<PAGE>
Income before income taxes increased $30.8 million including $29.0 million of
restructuring and other costs recorded in the second quarter of 1998. Without
these costs, income before income taxes increased $1.8 million, or 5.8%. The
effective tax rate for operations was lowered to 35.7% in the second quarter of
1999 compared to 37.3% in the second quarter of 1998 reflecting savings from
federal, state and foreign tax planning activities. Net income increased $20.6
million including the after tax impact of $18.9 million for the restructuring
and other costs recorded in the second quarter of 1998. Without these costs, net
income increased $1.8 million, or 9.3%, from the second quarter of 1998 due to
higher sales, currency exchange gains, and a lower provision for income tax
offset somewhat by a lower gross profit margin. Reported basic and diluted
earnings per common share were $.40 in 1999 compared to $.01 in the second
quarter of 1998 including $.35 for restructuring and other costs in 1998.
Without these costs, basic and diluted earnings per common share increased from
$.36 in 1998 to $.40 in 1999, or 11.1%.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
For the six months ended June 30, 1999, net sales increased $27.9 million, or
7.4%, to $405.7 million, up from $377.8 million in the same period of 1998. The
increase resulted from strong sales growth in the United States and Latin
America both from base business and from acquisitions, net of divestitures.
European sales increased slightly due to acquisitions offset to a large extent
by the impact of dealer consolidations in the U.K. and a soft market in Germany.
Sales in the Pacific Rim were adversely impacted by inventory returns from
dealers in India during the first quarter. Sales in the rest of the world
increased from strong base sales and from acquisitions. Exchange rate
fluctuations reduced net sales by 0.8% during the first half of 1999.
Gross profit increased $11.9 million, or 5.9%, to $211.0 million from $199.2
million in the first six months of 1998. As a percentage of sales, gross profit
decreased from 52.7% in the first six months of 1998 to 52.0% in the same period
of 1999. Costs associated with moving the remaining manufacturing operations for
New Image and Germany's tooth manufacturing facility negatively impacted
performance in the first half in addition to purchase price accounting
adjustments related to the acquisition of VDW and lower margins associated with
GAC, the Company's orthodontics distribution business acquired in the second
quarter of 1998.
Selling, general and administrative expense increased $8.0 million, or 6.1%. As
a percentage of sales, expenses decreased from 35.0% in the first six months of
1998 to 34.6% for the same period of 1999. This percentage decrease included a
credit of $1.1 million in Germany resulting from the curtailment of the Dreieich
pension plan and a reduction in general insurance costs.
Restructuring and other costs of $29 million were recorded in the second quarter
of 1998.
Net interest expense increased $2.3 million during the first six months of 1999
due to increased interest expense on debt incurred to finance acquisitions and
the stock repurchase program in 1998.
Other income increased $0.3 million in the first six months of 1999 due
primarily to favorable currency fluctuations in Europe.
Income before income taxes increased $30.9 million primarily due to the $29.0
million of restructuring and other costs recorded in the second
14
<PAGE>
quarter of 1998. Without these costs, income before income taxes increased $1.9
million, or 3.1%. The effective tax rate for operations was lowered to 35.7% in
the first six months of 1999 compared to 37.3% in the first six months of 1998
reflecting the benefits of tax planning activities. Net income increased $21.1
million including the after tax impact of $18.9 million for restructuring and
other costs. Without these costs, net income increased $2.3 million, or 6.0% in
the first six months of 1999 compared to 1998 due to higher sales, lower
expenses as a percentage of sales and a lower provision for income taxes offset
somewhat by a lower gross profit percentage in the first six months of 1999.
Reported basic and diluted earnings per common share were $.77 in 1999 compared
to $.36 per share in the first six months of 1998. Earnings per share for the
first six months of 1998 included $.35 for restructuring and other costs.
Without these costs, basic and diluted earnings per common share increased from
$.71 in 1998 to $.77 in 1999 or 8.5%.
LIQUIDITY AND CAPITAL RESOURCES
Investing activities for the six months ended June 30, 1999 include capital
expenditures of $14.0 million.
The Company's current ratio was 1.7 with working capital of $129.4 million at
June 30, 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. The Company also expects to have
available a $200 million Commercial Paper Facility by the end of the third
quarter. This facility will initially be used to pay down existing bank debt and
will help minimize the Company's overall cost of capital.
For the six months ended June 30, 1999, cash flows from operating activities
were $40.9 million or approximately $53 million excluding the negative cash flow
from the restructurings compared to $21.3 million for the six months ended June
30, 1998. Cash flows from operating activities for 1999 included $11.7 million
of negative cash flow associated with the two restructurings recorded in 1998.
The increase of $19.6 million results primarily from decreases in inventory
offset by decreases in accrued liabilities.
<PAGE>
NEW STANDARDS
Statement of Financial Accounting Standards No. 133 ("FASB 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board (FASB) in June 1998. This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires recognition of all derivatives as either assets or liabilities on
the balance sheet and measurement of those instruments at fair value. If certain
conditions are met, a derivative may be designated specifically as (a) a hedge
of the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment referred to as a fair value hedge, (b) a
hedge of the exposure to variability in cash flows of a forecasted transaction
(a cash flow hedge), or (c) a hedge of the foreign currency exposure of a net
investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a forecasted transaction.
15
This statement was originally required to be adopted effective January 1, 2000;
however, in June 1999 FASB issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133", which delays the effective date to January 1, 2001. The
Company has not yet determined the effect of adopting FASB 133.
YEAR 2000
The 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 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.
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 upgrades. Work has been substantially completed on the
Company's worldwide systems. To date, the Company has spent approximately $17.3
million for the IT project. An additional $1.4 million of spending is
anticipated for the remainder of the information system's upgrade. 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 has
been engaged in a program and an audit review process to identify affected
systems and applications and to develop a plan to correct any issues in the most
effective manner. Based on this audit review, the Company does not expect to see
any significant changes in these systems and applications. 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 has surveyed its significant
customers and vendors as to their Year 2000 compliance. Based on the nature of
their responses, the Company is developing 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.
16
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 $ 9,090 $ 748
Expenses 8,166 603
-------- --------
Total $ 17,256 $ 1,351
======== ========
EURO CURRENCY CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
(the "participating countries") established fixed conversion rates between their
legacy currencies and the newly established Euro currency.
The legacy currencies will remain legal tender in the participating countries
between January 1, 1999 and January 1, 2002 (the "transition period"). Starting
January 1, 2002 the European Central Bank will issue Euro-denominated bills and
coins for use in cash transactions. On or before July 1, 2002, the legacy
currencies of participating countries will no longer
be legal tender for any transactions.
The Company's various operating units which are affected by the Euro conversion
intend to keep their books in their respective legacy currency through a portion
of the three year transition period. At this time, the Company does not expect
the reasonable foreseeable consequences of the Euro conversion to have material
adverse effects on the Company's business, operations or financial condition.
IMPACT OF INFLATION
The Company has generally offset the impact of inflation on wages and the cost
of purchased materials by reducing operating costs and increasing selling prices
to the extent permitted by market conditions.
17
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.
18
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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 transferred to and is now
pending in the U.S. District Court in Wilmington, Delaware. 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 2 - Changes in Securities and Use of Proceeds
On April 5, 1999, the Company issued an aggregate of 145,000 shares of
Common Stock to High Tech Medical Instrumentation, Inc. ("HTMI") in connection
with the acquisition of certain assets from HTMI. The issuance and sale of the
shares was intended to be exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, based on, among other things, the nature of
the purchaser, the fact that the purchaser and each of its shareholders
represented and warranted to the Company, among other things, that such
purchaser and, in the event that any shareholder received shares from the
purchaser, each shareholder was acquiring the shares for investment only and not
with a view to the resale or distribution thereof, and the fact that
certificates representing the shares were issued with legend to the effect that
such shares had not been registered under the Securities Act or any state
securities laws and could not be sold or transferred in the absence of such
registration or an exemption therefrom. The shares issued to HTMI were
subsequently registered on a shelf registration statement on Form S-3 filed with
the Securities and Exchange Commission on April 12, 1999.
Item 4 - Submission of Matters to a Vote of Security Holders
(a) On May 19, 1999, the Company held its 1999 Annual Meeting of
Stockholders.
(b) Not applicable.
19
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(c) The following matters were voted upon at the Annual Meeting, with the
results indicated:
1. Election of Class I Directors:
Votes Broker
Nominee Votes For Withheld Non-Votes
------- ---------- -------- ---------
Burton C. Borgelt 38,938,049 437,946 N/A
Douglas K. Chapman 38,811,370 564,624 N/A
C. Frederick Fetterolf 38,755,809 620,371 N/A
2. Proposal to ratify the appointment of KPMG LLP, independent
certified accountants, to audit the books and accounts of the
Company for the year ending December 31,1999:
Votes For: 39,176,543 Votes Against: 143,081
Abstentions: 56,371 Broker Non-Votes: N/A
(d) Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed herewith:
---------
Number Description
------ -----------
3.2 By laws, as amended
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 period ended
June 30, 1999.
20
<PAGE>
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.
August 16, 1999 /s/ John C. Miles II
- ----------------- ----------------------------------
Date John C. Miles II
Chairman and
Chief Executive Officer
August 16, 1999 /s/ William R. Jellison
- ----------------- ----------------------------------
Date William R. Jellison
Senior Vice President and
Chief Financial Officer
21
<PAGE>
EXHIBIT INDEX
-------------
Number Description Sequential Page No.
------ ----------- -------------------
3.2 By laws, as amended 23
27 Financial Data Schedule 36
(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)
22
BY-LAWS
OF
DENTSPLY INTERNATIONAL INC.
(Formerly GENDEX Corporation)
ARTICLE I. STOCKHOLDERS' MEETINGS
SECTION 1. Annual Meetings. The Board of Directors shall, within
seventy-five (75) days following the close of the corporation's fiscal year,
establish a date, time and place for the annual meeting of the stockholders, for
the purpose of electing directors and for the transaction of such other business
as may properly come before the meeting.
SECTION 2. Special Meetings. Except as otherwise required by law and
subject to the rights of the holders of any class or series of capital stock
having a preference over the common stock as to dividends or upon liquidation,
special meetings of stockholders of the corporation may be called only by the
Chairman of the Board, the Chief Executive Officer or the President pursuant to
a resolution adopted by the Board of Directors.
SECTION 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting, or for any special meeting called pursuant to Article I,
Section 2, above. A waiver of notice signed by all stockholders entitled to vote
at a meeting may designate any place, either within or without the State of
Delaware, as the place for the holding of such meeting. If no designation is
made, or if a special meeting shall be otherwise called, the place of meeting
shall be the principal office of the corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting either
personally or by mail, by or at the discretion of the Chief Executive Officer,
the President or the officer or persons calling the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock record
books of the corporation, with postage thereon prepaid.
23
<PAGE>
SECTION 5. Fixing of Record Date.
(a) For the purpose of determining stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof,
the Board of Directors of the corporation may fix, in advance, a date as
the record date for any such determination of stockholders, such date in
any case to be not more than sixty (60) nor less than ten (10) days prior
to the date of any proposed meeting of stockholders. In no event shall the
stock transfer books be closed. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided
in this Section, such determination shall be applied to any adjournment
thereof.
(b) For the purpose of determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights,
or in order to make a determination of stockholders for any other lawful
purpose, the Board of Directors of the corporation may fix a date as the
record date for any such determination of stockholders, which record date
shall not precede the date upon which the resolution fixing the record
date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. In no event shall the stock transfer books be
closed.
SECTION 6. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. Provided that a meeting has been duly convened in
accordance herewith, a majority of the shares represented at the meeting at the
time of adjournment, even if such shares constitute at such time less than a
majority of the outstanding shares entitled to vote, may adjourn the meeting
from time to time without further notice. At any adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. Any meeting
(a) at which all of the outstanding shares are present in person or represented
by proxy and at which none of such shares attend for the purpose of objecting,
at the beginning of the meeting, to the transaction of any business thereat
because the meeting was not lawfully called or convened, or (b) at which all of
the outstanding stock has waived notice, or (c) for which notice shall have been
duly given as provided herein, shall be deemed a properly constituted meeting of
the stockholders.
SECTION 7. Proxies. At all meetings of stockholders, a stockholder
entitled to vote may vote by proxy appointed in writing by the stockholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. An instrument
appointing a proxy shall, unless the contrary is stated thereon, be valid only
at the meeting for which it has been given or any adjournment thereof.
24
<PAGE>
SECTION 8. Voting of Shares. At each meeting of stockholders, every
stockholder entitled to vote thereat shall be entitled to vote in person or by a
proxy appointed by an instrument in writing executed by such stockholder or his
duly authorized attorney, and, subject to the provisions of applicable law, each
holder of common stock shall be entitled to one (1) vote for each share of stock
standing registered in his name at the close of business on the day fixed by the
Board of Directors as the record date for the determination of the stockholders
entitled to notice of and vote at such meeting. Shares standing in the name of
another corporation may be voted by any officer of such corporation or any proxy
appointed by any officer of such corporation in the absence of express notice of
such corporation given in writing to the Secretary of this corporation in
connection with the particular meeting, that such officer has no authority to
vote such shares.
SECTION 9. List of Stockholders. A complete list of the stockholders
entitled to vote at the ensuing meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder, shall be prepared by the Secretary, or other
officer of the corporation having charge of said stock ledger. Such list shall
be open to the examination of any stockholder during ordinary business hours,
for a period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where said
meeting is to be held, and the list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and shall be subject to the
inspection of any stockholder who may be present.
SECTION 10. Waiver of Notice by Stockholders. Whenever any notice whatever
is required to be given to any stockholder of the corporation under the
provisions of these By-Laws or under the provisions of the Certificate of
Incorporation or under the provisions of any statute, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by the
stockholder entitled to such notice, shall be deemed equivalent to the giving of
such notice.
SECTION 11. Advance Notice of Stockholder-Proposed Business at Annual
Meetings. At an annual meeting of stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board, (b) otherwise properly brought before the meeting by or at the
direction of the Board, or (c) otherwise properly brought before the meeting by
a stockholder. In addition to any other applicable requirements for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, not less
25
<PAGE>
than sixty (60) days prior to the date that the materials regarding the prior
years annual meeting were mailed to stockholders. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 11.
The chairman of an annual meeting shall, if the facts warrant, determine
that business was not properly brought before the meeting in accordance with the
provisions of this Section 11, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION 12. Procedure for Nomination of Directors. Only persons nominated
in accordance with the following procedures shall be eligible for election as
directors, except as may otherwise be provided by the terms of the corporation's
Certificate of Incorporation with respect to the rights of holders of any class
or series of preferred stock to elect directors under specified circumstances.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board, or by
any stockholder of the corporation entitled to vote for election of directors at
the meeting who complies with the notice procedures set forth in this Section
12. Nominations other than those made by or at the direction of the Board of
Directors or any nominating committee or person appointed by the Board shall be
made pursuant to timely notice in proper written form to the Secretary of the
corporation. To be timely, a stockholder's request to nominate a person for
director, together with the written consent of such person to serve as a
director, must be received by the Secretary of the corporation not less than
sixty (60) days prior to the date fixed for the meeting. To be in proper written
form, such stockholder's notice shall set forth in writing: (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director (i) the name, age, business address and residence address for such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of stock of the corporation which are beneficially
owned by such person and (iv) such other information relating to such person as
is required to be disclosed in solicitations of proxies for election of
directors, or as otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the class and number of
26
<PAGE>
shares of stock of the corporation which are beneficially owned by such
stockholder. The corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the corporation to determine
the eligibility of such proposed nominee to serve as a director of the
corporation. No persons shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth herein
and in the corporation's Certificate of Incorporation. The chairman of any
meeting shall, if the facts so warrant, determine that a nomination was not made
in accordance with the procedures prescribed by the corporation's Certificate of
Incorporation and By-Laws, and if he should so determine, he shall so declare to
the meeting and the defective nomination(s) shall be disregarded.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors. The Board of Directors may
adopt, amend or repeal by-laws adopted by the Board or by the stockholders.
SECTION 2. Number of Directors, Tenure and Qualifications. The number of
members of the Board of Directors shall be not less than three (3) nor more than
eleven (11), as determined from time to time by the Board of Directors. The
directors need not be stockholders of the corporation. The directors shall be
divided into three (3) classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third (1/3) of the
total number of directors constituting the entire Board of Directors. Effective
immediately upon the filing of the Certificate of Incorporation of the
corporation dated June 11, 1993, Class I directors shall be elected for a term
ending upon the next succeeding annual meeting of stockholders, Class II
directors for a term ending upon the second succeeding annual meeting of
stockholders and Class III directors for a term ending upon the third succeeding
annual meeting of stockholders. At each succeeding annual meeting of
stockholders beginning with the annual meeting immediately succeeding the filing
of the Certificate of Incorporation, successors to the class of directors whose
term expires at such annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
incapacitation or removal from office, and except as otherwise required by law.
In the event such election is not held at the annual meeting of stockholders, it
shall be held at any adjournment thereof or a special meeting.
27
<PAGE>
SECTION 3. Regular Meetings. Regular meetings of the Board of Directors
shall be held without any other notice than this By-Law immediately after, and
at the same place as, the annual meeting of stockholders, and each adjourned
session thereof. The Board of Directors may designate the time and place, either
within or without the State of Delaware, for the holding of additional regular
meetings without other notice than such designation.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the Chief
Executive Officer, the President or by members of the Board of Directors
constituting no less than three-fourths (3/4) of the total number of directors
then in office. The person or persons authorized to call special meetings of the
Board of Directors may fix any place either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at least
five (5) days previously thereto by written notice delivered or mailed to each
director at his last known address, or at least forty-eight (48) hours
previously thereto by personal delivery or by facsimile to a telephone number
provided to the corporation. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice is given by facsimile, such notice shall be deemed to
be delivered when transmitted with receipt confirmed. Whenever any notice
whatever is required to be given to any director of the corporation under the
provisions of these By-Laws or under the provisions of the Certificate of
Incorporation or under the provisions of any statute, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by the
director entitled to such notice, shall be deemed equivalent to the giving of
such notice. The attendance of a director at a meeting shall constitute a waiver
of notice of such meeting except where a director attends a meeting and objects
thereat to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
SECTION 6. Quorum. Three-fourths (3/4) of the directors shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors.
SECTION 7. Manner of Acting. The act of the majority of the directors then
in office shall be the act of the Board of Directors, Unless the act of a
greater number is required by these By-laws or by law.
SECTION 8. Vacancies. Except as otherwise required by law, any vacancy on
the Board of Directors that results from an increase in the number of directors
shall be filled only by a majority of the Board of Directors then in office,
provided that a quorum is present, and any other vacancy occurring on the Board
of Directors shall be filled by a majority of the directors
28
<PAGE>
then in office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his or her
predecessor. The resignation of a director shall be effective upon receipt by
the corporation, unless some subsequent time is fixed in the resignation, and
then from that time. Acceptance of such resignation by the corporation shall not
be required.
SECTION 9. Compensation. The Board of Directors, by affirmative vote of a
majority of the directors, and irrespective of any personal interest of any of
its members, may establish reasonable compensation of all directors for services
to the corporation as directors, officers or otherwise, or may delegate such
authority to an appropriate committee.
SECTION 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors or a committee thereof at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof.
Such right to dissent shall not apply to a director who voted in favor of such
action.
SECTION 11. Committees. The Board of Directors by resolution may designate
one (1) or more committees, each committee to consist of one (1) or more
directors elected by the Board of Directors, which to the extent provided in
such resolution, as initially adopted, and as thereafter supplemented or amended
by further resolution adopted by a like vote, shall have and may exercise, when
the Board of Directors is not in session, the powers of the Board of Directors
in the management of the business and affairs of the Corporation, except action
with respect to amendment of the Certificate of Incorporation or By-Laws,
adoption of an agreement of merger or consolidation (other than the adoption of
a Certificate of Ownership and Merger in accordance with Section 253 of the
General Corporation Law of the State of Delaware, as such law may be amended or
supplemented), recommendation to the stockholders of the sale, lease or exchange
of all or substantially all of the Corporation's property or assets,
recommendation to the stockholders of the dissolution or the revocation of a
dissolution of the Corporation, election of officers or the filling of vacancies
on the Board of Directors or on committees created pursuant to this Section or
declaration of dividends. The Board of Directors may elect one (1) or more of
its members as alternate members of any such committee who may take the place of
any absent or disqualified member or members at any meeting of such committee,
upon request by the Chairman of the Board, the Chief Executive Officer or the
President or upon request by the chairman of such meeting. Each such committee
may fix its own rules governing the conduct of its activities and shall make
such reports to the Board of Directors of its activities as the Board of
Directors may request.
SECTION 12. Removal of Directors. Exclusive of directors, if any,
elected by the holders of one (1) or more classes of preferred stock, no
director of the corporation may be removed from office, except for cause and
by the affirmative vote of two-thirds (2/3) of the
29
<PAGE>
outstanding shares of capital stock of the corporation entitled to vote at a
meeting of the stockholders duly called for such purpose. As used in this
Article II, the meaning of "cause" shall be limited to malfeasance arising from
the performance of a director's duty which has a materially adverse effect on
the business of the corporation.
SECTION 13. Informal Action. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
at any meeting of the Board of Directors or any committee thereof if prior to
such action a written consent thereto is signed by all members of the Board or
of the committee, as the case may be, and such written consent is filed with the
minutes of the proceedings of the Board or the committee.
SECTION 14. Conferences. Members of the Board of Directors or any
committee designated by the Board may participate in a meeting of such Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section14 shall constitute
presence in person at such meeting.
ARTICLE III. OFFICERS
SECTION 1. Number. The officers of the corporation shall consist of a
Chairman of the Board and a Chief Executive Officer. The Board of Directors may
appoint as officers a Vice Chairman of the Board, President, such number of
Senior Vice Presidents and Vice Presidents, a Secretary, a Treasurer, one (1) or
more Assistant Treasurers, one (1) or more Assistant Secretaries, and such other
officers as are created by the Board from time to time. The same person may hold
two (2) or more of such offices.
SECTION 2. Election and Term of Office. The Chairman of the Board and the
Vice Chairman of the Board shall be elected by the directors from among their
own number; other officers need not be directors. In addition to the powers
conferred upon them by these By-Laws, all officers elected or appointed by the
Board of Directors shall have such authority and shall perform such duties as
from time to time may be prescribed by the Board of Directors by resolution.
SECTION 3. Removal. Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board of Directors, whenever in its judgment
the best interests of the corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment shall not of itself create contract rights.
SECTION 4. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the Board of Directors and meetings of the stockholders. He
shall also perform such other duties as from time to time may be assigned to him
by the Board of Directors.
30
<PAGE>
SECTION 5. Vice Chairman of the Board. In the absence of the Chairman of
the Board because of death or physical disability which prevents the Chairman of
the Board from performing his duties, or in the event of his inability or
refusal to act, the Vice Chairman of the Board shall perform the duties of the
Chairman of the Board and, when so acting, have the powers of and be subject to
all of the restrictions upon the Chairman of the Board.
SECTION 6. Chief Executive Officer. The Chief Executive Officer shall be
the principal executive officer of the corporation and shall have the general
charge of and control over the business, affairs and personnel of the
corporation, subject to the authority of the Board of Directors. The Chief
Executive Officer may, together with the Secretary, sign all certificates for
shares of the capital stock of the corporation and shall perform such other
duties as shall be delegated to him by the Board of Directors. Except as may be
specified by the Board of Directors, the Chief Executive Officer shall have the
power to enter into contracts and make commitments on behalf of the corporation
and shall have the right to execute deeds, mortgages, bonds, contracts and other
instruments necessary or proper to be executed in connection with the
corporation's regular business and may authorize the President, and any other
officer of the corporation, to sign, execute and acknowledge such documents and
instruments in his place and stead.
SECTION 7. President. The President shall be the chief operating officer
of the corporation, and shall report to the Chief Executive Officer. The
President may, together with the Secretary, sign all certificates for shares of
the capital stock of the corporation and may, together with the Secretary,
execute on behalf of the corporation any contract, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or the Chief Executive Officer to some other officer or agent, and
shall perform such duties as are assigned to him by the Board of Directors or
the Chief Executive Officer.
SECTION 8. Senior Vice President and Vice Presidents. Each Senior Vice
President or Vice President shall perform such duties and have such authority as
from time to time may be assigned to him by the Board of Directors, the Chief
Executive Officer or the President.
SECTION 9. Secretary and Assistant Secretaries. The Secretary shall have
custody of the seal of the corporation and of all books, records and papers of
the corporation, except such as shall be in the charge of the Treasurer or some
other person authorized to have custody and be in possession thereof by
resolution of the Board of Directors. The Secretary shall record the proceedings
of the meetings of the stockholders and of the Board of Directors in books kept
by him for that purpose and may, at the direction of the Board of Directors,
give any notice required by statute or by these By-Laws of all such meetings.
The Secretary shall, together with the Chief Executive Officer or the President,
sign certificates for shares of the capital stock of the corporation. Any
Assistant Secretaries elected by the Board of Directors, in order of their
31
<PAGE>
seniority, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary as aforesaid. The Secretary or
any Assistant Secretary may, together with the Chief Executive Officer, the
President or any other authorized officer, execute on behalf of the corporation
any contract which has been approved by the Board of Directors, and shall
perform such other duties as the Board of Directors, the Chief Executive Officer
or the President shall prescribe.
SECTION 10. Treasurer and Assistant Treasurer. The Treasurer shall keep
accounts of all moneys of the corporation received and disbursed, and shall
deposit all monies and valuables of the corporation in its name and to its
credit in such banks and depositories as the Board of Directors shall designate.
Any Assistant Treasurers elected by the Board of Directors, in order of their
seniority, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer, and shall perform such other
duties as the Board of Directors, the Chief Executive Officer or the President
shall prescribe.
SECTION 11. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
SECTION 12. Representation in Other Companies. Unless otherwise ordered by
the Board of Directors, the Chief Executive Officer, the President or a Vice
President designated by the President shall have full power and authority on
behalf of the corporation to attend and to act and to vote at any meetings of
security holders of corporations in which the corporation may hold securities,
and at such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities, and which as the owner
thereof the corporation might have possessed and exercised, if present. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.
ARTICLE IV. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chief Executive Officer or
the President and by the Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
32
<PAGE>
SECTION 2. Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer the corporation may treat the registered
owner of such shares as the person exclusively entitled to vote, to receive
notifications and otherwise to exercise all the rights and powers of an owner.
Where a certificate for shares is presented to the corporation with a request to
register for transfer, the corporation shall not be liable to the owner or any
other person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b) the
corporation had no duty to inquire into adverse claims or has discharged any
such duty. The corporation may require reasonable assurance that said
endorsements are genuine and effective and in compliance with such other
regulations as may be prescribed under the authority of the Board of Directors.
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
SECTION 1. Indemnification Generally. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
is alleged to have violated the Employee Retirement Income Security Act of 1974,
as amended, against expenses (including attorneys' fees), judgments, fines,
penalties, and amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action, suit or proceeding if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
SECTION 2. Indemnification in Actions By or In the Right Of the
Corporation. The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense and settlement of such action or suit if he or she acted
33
<PAGE>
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
SECTION 3. Success on the Merits; Indemnification Against Expenses. To the
extent that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article V, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
SECTION 4. Determination that Indemnification is Proper. Any
indemnification under Section 1 or Section 2 of this Article V, unless ordered
by a court, shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances under the standard of conduct
set forth in such Section 1 or Section 2 of this Article V, as the case may be.
Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding;
(b) If such a quorum is not obtainable, or, even if obtainable if a
quorum of disinterested directors so directs, by independent legal counsel
in a written opinion; or
(c) By the stockholders.
SECTION 5. Insurance; Indemnification Agreements. The corporation may, but
shall not be required to, supplement the right of indemnification under this
Article V by any lawful means, including, without limitation by reason of
enumeration, (i) the purchase and maintenance of insurance on behalf of any one
or more of such indemnities, whether or not the corporation would be obligated
to indemnify such person under this Article V or otherwise, and (ii) individual
or group indemnification agreements with any one or more of such indemnities.
SECTION 6. Advancement of Expenses. Expenses (including attorneys' fees)
incurred by an indemnitee in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action; suit
34
<PAGE>
or proceeding upon receipt of an undertaking by or on behalf of the indemnitee
to repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation as to such amounts.
SECTION 7. Rights Not Exclusive. The indemnification provided by this
Article V shall be not deemed exclusive of any other right to which an
indemnified person may be entitled under Section 145 of the General Corporation
Law of the State of Delaware (or any successor provision) or otherwise under
applicable law, or under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office and shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 8. Severability. To the extent that any court of competent
jurisdiction shall determine that the indemnification provided under this
Article V shall be invalid as applied to a particular claim, issue or matter,
the provisions hereof shall be deemed amended to allow indemnification to the
maximum extent permitted by law.
SECTION 9. Modification. This Article V shall be deemed to be a contract
between the corporation and each previous, current or future director, officer,
employee or agent. The provisions of this Article V shall be applicable to all
actions, claims, suits or proceedings, commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article V shall diminish
the rights provided hereby or diminish the right to indemnification with respect
to any claim, issue or matter in any then pending or subsequent proceeding which
is based in any material respect from any alleged action or failure to act prior
to such amendment, modification or repeal.
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DENTSPLY INTERNATIONAL
INC. AT JUNE 30, 1999 AND FOR THE FISCAL QUARTER THEN ENDED, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000818479
<NAME> DENTSPLY INTERNATIONAL
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10836
<SECURITIES> 0
<RECEIVABLES> 134562
<ALLOWANCES> 0
<INVENTORY> 137430
<CURRENT-ASSETS> 326363
<PP&E> 261131
<DEPRECIATION> 86300
<TOTAL-ASSETS> 881270
<CURRENT-LIABILITIES> 196966
<BONDS> 186060
0
0
<COMMON> 543
<OTHER-SE> 432628
<TOTAL-LIABILITY-AND-EQUITY> 881270
<SALES> 405713
<TOTAL-REVENUES> 405713
<CGS> 194669
<TOTAL-COSTS> 194669
<OTHER-EXPENSES> 140340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8867
<INCOME-PRETAX> 63244
<INCOME-TAX> 22526
<INCOME-CONTINUING> 40718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40718
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.77
</TABLE>
