DENTSPLY SIRONA Inc (XRAY) 2003 Q4 法說會逐字稿

Good morning. My name is Sandra, and I will be and I will be your conference facilitator today. At this time, I would like to welcome everyone to the fourth quarter conference call. All lines are placed on mute to prevent background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. Gary Kunkle, vice chairman and Chief Executive Officer. Please go ahead.

Thank you, Sandra. Good morning. Thank you for joining the DENTSPLY fourth quarter conference call. My name is Gary Kunkle. I am the Vice Chairman and Chief Executive Officer. Also with me today are Tom Whiting, our President and Chief Operating Officer and Bret Wise, senior vice president and Chief Financial Officer.

Our review today will begin with some overview comments from me regarding the fourth quarter results and overall business. Bret will go through a more detailed review of the P&L and balance sheet. Finally, we'll all be pleased to answer any questions that you may have. Before starting, I do need our Safe Harbor statement. In accordance with the rules of the Securities and Exchange Commission, information discussed during this conference call, including the question-and-answer session, will be part of an 8-K filing made by the company after the call.

To the extent that during this conference call any nonGAAP financial items are discussed, the additional information required by the SEC about such nonGAAP matters will be available through our website by going to DENTSPLY.com and going to the investor relations section and clicking on the SEC filing link which will then provide access to the 8-K filed for this conference call. Further information other nonGAAP items also. The conference call may include forward-looking statements and are made in accordance with the Safe Harbor provisions of the securities litigation reform act.

Forward-looking statements involve risks and uncertainty which is could materially affect the company's business and should be considered in conjunction with the risk factors and uncertainties described in the company's most recent annual report on form 10-K. By now, each of you should have received a copy of the fourth quarters earnings announcement we released yesterday after the market close. I'm pleased to report that DENTSPLY had another record-setting performance in 2003.

Our reported sales from continuing operations during the fourth quarter were $429.7 million. These sales are net and announced of discontinued operations. They represent an increase of 11.9% over the comparative previous year quarter. That would be 11.4% ex-precious metals. Diluted earnings per share were 62 cents, an increase of 17% versus the fourth quarter in 2002. The 11.4% sales gain for the quarter broke out as follows. Base business, 3.9%, foreign exchange, 7.5%, and no impact from acquisitions or divestitures. The geographic based business growth for the quarter was as follows. The United States was 1.4%, Europe was 8.7%, Asia was 4.9%, Latin America was a minus 2.1, and the rest of the world was a minus 2.3. While 1.4% reported internal growth in the United States, it was below our expectations. There are unique circumstances exclusive to the fourth quarter, influencing this reported growth. Quite frankly, masking some positive trends for the business as we enter 2004.

The circumstances are as follows. First of all, as we look at our business going forward, it is almost exclusively consumables and small equipment. You can further break that down into consumables and small equipment for dental laboratories and consumables and small equipment for dental offices. We've stated all year that while visits to the dentist office continue to be robust, the lab business or the higher end restorations are good by the economy and have been flat all year.

During the fourth quarter we had a double digit increase in crown and bridge materials, indicating a renewed interest in the lab-based restoratives. This happens to be the category in which we report Cercon consumables. The small equipment segment of this category has been flat all year as dental labs have been hesitant to make additional investments in equipment until they see some evidence in the marketplace of renewed interest and activity. Our small equipment business for labs was negative by 2.5 million in the fourth quarter, which is really a traditionally high volume period for equipment. This negative growth in small equipment masked a positive trend in the materials segment. We do believe that the laboratory consumables will continue to increase throughout 2004. Along with this, it will also bring about a renewed confidence to purchase additional small equipment in the future.

Secondly, our consumables that are sold to dentists in the United States are sold both direct by DENTSPLY or through distribution, depending on the particular product or specialty. Our direct businesses to the dentists, primarily specialty businesses, had double digit growth for the quarter. While our sales to distributors for products sold to dentists were negative, versus the comparative period. Each month our distributors provide us with the sales of our products that they make to the dentists. Through September of 2003, our sales to distributors and their sales of our products to dentists has shown similar increases year on year. This is really saying that when they're buying in, they are, in turn, selling out.

During the fourth quarter, distributor sales of our products to dentists increased sharply while our sales to distributors, their purchases, are the same products declined. This, obviously, represented an inventory adjustment for the period. For distributors to have maintained the balance between the sales of our products and the purchases of those same products, as has been the case all year, they would have had to purchase another $5 million in the fourth quarter. This apparent adjustment and inventory mask is a positive improvement in the sales to dentists, one in which we believe is a positive trend as we enter 2004.

Finally, earlier this year we announced several new products would be released during the fourth quarter. Two of the largest among those planned were not released. One was released the final week of December. Those were the smart light IQ, which is our new LED curing light that was released the last week of December and East Stylus, our exciting new electric hand piece which is now scheduled for release this quarter, the first quarter of owe 04 and Quicksville a posterior restorative that had a successful introduction in Europe in 2003 and now is scheduled to receive FDA approval shortly for a U.S. launch this quarter. While the sales for those products were not realized in the fourth quarter of '03, they remain as exciting new products for the future and all are expected to be launched by the end of the first quarter of '04.

As I mentioned in the beginning, we are pleased with the trends that we saw in the fourth quarter in lab and dental consumables. In the absence of the unusual circumstances in the fourth quarter that I described, our internal growth would have been between 5% and 6% in the U.S. And worldwide.

Moving on to Europe, we had very strong growth of 8.7% for the quarter, particularly in the United Kingdom, France, and Germany. Consumables did well across Europe. This also included an improvement for the quarter in laboratory consumables, which was encouraging to see as we enter 2004.

As I mentioned earlier, Asia had a base business growth of 4.9%. This was really led by strong performances in Korea, Taiwan, and China. While there are still some isolated concerns over SARS, their businesses seem to be recovering.

Latin America was a minus 4.4%. This region continues to be challenged by both economically and politically. In spite of the negative growth, I'm confident that we are outperforming this depressed market. Recently, both Brazil and Mexico have reported improvements in industrial growth, and both countries project economic improvement in 2004. So there is a positive outlook as we move forward.

The rest of the world, really a decent performance in Australia, on offset by a continued weakness in the Middle East and mediocre performance in other areas of the world.

Other items of interest. We announced last quarter we would be divesting the Gendex dental x ray business. That transaction has proceeded as planned and is expected to close this quarter. We also recently announced to the customers involved that we would be discontinuing our dental needle business. The revenues from this business are approximately $5.5 million. This business generates virtually no income, and will require considerable investment to make it a profitable business. For these reasons, we've chosen to discontinue this operation and exit the dental needle business.

We announced previously that DENTSPLY received approval from the FDA for Oroquicks, our new non inject able anesthetic for scaling and root planning. The anesthetic is delivered to the site without a needle and anesthetizes the area for 20 minutes. This is sufficient time for the procedure. It allows the patient to have a normal feeling return shortly thereafter. We think Oroquicks will be a benefit to the millions of patients who currently receive this procedure.

We have begun development of the manufacturing molds and other related equipment in preparation for production and following the manufacturing validation, the launch of Oroquicks is expected in the second half of the year in the United States. Regulatory approval has been granted in Sweden. They will serve as the reference member state in Europe for the product. Additional approvals are expected throughout Europe during the year determining our launch schedules in Europe. This product is an enormous win for everyone, the patient, the dentist and DENTSPLY.

Our new anesthetic plan in Chicago is progressing well. We have conducted our stability runs for certain non U.S. Markets and expect the first results of those stability studies in April. We will then provide submissions for those markets as these studies are complete. These markets are Australia, the UK, Ireland and New Zealand. We expect to receive approvals during the third quarter and begin supplying product to these countries before year end. Activities for North America and Asia are under way with submissions scheduled for the third quarter. All aspects of this project, the validations, the stability studies, the submission preparation, the construction requirements continue to proceed as scheduled and on budget.

We announced during our third quarter conference call we would be taking over the management of our European distribution center and moving it from Niamagan to Germany. That transition commenced in December. It is on schedule and will be completed this quarter. We initially said that we would be building approximately $8.5 million in inventory to support this move. We have been able to do this with less than half that amount. Most importantly, this move has been transparent to the customer.

We also announced in the fourth quarter we would be consolidating our three U.S. Laboratory businesses, Truebright, Alstenol and Ceramco. The strategic intent of this is to create an organization that would have sufficient critical mass to provide more focus on their customer, the common customer, the dental lab, to direct the combined R&D groups towards a more synergized strategy and really to be one faced to their customer through combined service and support organizations. This consolidation is actually ahead of schedule and will be completed and functional during the second quarter of this year, while the primary purposes of this consolidation are to improve our ability to serve our customers and accelerate the growth of these combined businesses. When it's fully implemented it will yield an annual synergy savings of $1.5 million annually.

With respect to new products are our new product pipeline is in excellent shape. The obvious products scheduled for release early in the year are E-stylus, our new electric handpiece and Quicksville our new posterior restorative. There are many more scheduled throughout the year that will be announced as they are rolled out. Also, our new office of advanced technology has been very active. This is the organization that was created to focus on the pursuit of technologies outside of dentisrtry that may have dental applications. While this is a longer term strategy, we are excited about the opportunity it can bring to dentistry and to DENTSPLY stockholders.

Some comments on 2004 expectations. We expect that revenues to grow 5% to 6% internally, and for earnings per share to be between $2.25 and $2.30. I'd like to give you some background information on how we set these expectations. Independent market research which tracks sales to dentists in the United States has shown that consumable sales to dentists had a 4.2% increase in the first quarter 2003. It has shown a gradual increase during the year, and while we don't have the data for the fourth quarter, the trends suggest that is it would be around 5% in the fourth quarter. Consumable sales to dental labs have been virtually flat most of the year with some indicators of improvement in the third quarter. As I previously said, the fourth quarter showed an increase, at least for us, in material sales offset by a decrease in small equipment. We believe the material sales is a strong indicator of recovery of the lab business, and this should continue throughout 2004 with a corresponding return of small equipment sales. Our expectations are based on these two growing trends, and represent an average growth for the entire year of 5% to 6%. This, of course, means that we expect our performance to improve throughout the year, finishing the year above this average.

Our earnings expectations of $2.25 to $2.30 a share include approximately $5 million of start-up costs for our new anesthetic plants and an increase of approximately $8 million in R&D spending to fund our ongoing research and the addition of the new office of advanced technology.

That concludes my remarks. I would now like to turn it over to Bret Wise for his financial review and comments.

Thank you, Gary. Good morning, everyone. Thank you for joining us on our year-end call.

I would like to start by highlighting some items in the P&L for the fourth quarter, touch on cash flow in the fourth quarter and the year and cover the P&L for the full year.

Starting with the income statement, as Gary mentioned, as we announced in December, we have entered into an agreement to sell the Gendex equipment. We expect that transition will close in the first quarter 2004. Accordingly, beginning this quarter, we'll be treating the Gendex business as a discontinued operations and reporting it net of tax on one-line item after earnings from continuing operations. In addition, as Gary mentioned, we did announce to the customers that were impacted that we were discontinuing production of our dental needle line at the end of the first quarter 2004. We've commenced accounting for that business. Although it is relatively small, around $5.5 million of annual revenue, as a discontinued operation beginning with this reporting period.

All the sales for both Gendex and the needle business are no longer reported in the sales line from continuing operations. Accordingly, we have restated all the prior periods in the release to remove the sales from those operating units so you have an apples to apples comparison going forward.

Beginning with the results from continuing operations and building on Gary's comments, sales for the fourth quarter from continuing operations grew 11.9% to $429.7 million. Again, that's a record for the quarter. Excluding precious metal content revenues grew 11.4% during the quarter, including the heavy influence from currency of 7.5% and internal growth of 3.9%. Gross margins, excluding precious metals were 56.1% for the fourth quarter compared to 57.3% for the prior period. For the full year, gross margins excluding precious metal contents was 56.6% compared to 57.2% for the full year 2002. Gross margins in 2003 are primarily driven by the lower gross margins in '03 or driven by mix, including the impact of geographic mix changes and what they have on our overall sales mix.

As Gary pointed out earlier, our internal growth has been very strong in Europe, and this, combined with the significant change in currency translation, has resulted in the non U.S. Sales becoming a much larger portion of the company overall, compared to a year ago. Overall, our gross margins are the highest in the United States and, thus, as the geographic mix changes due to internal growth outside of the U.S. Or due to weakening of the U.S. Dollar, we do experience a slight decline in margins.

Over the past two years, our gross margins have improved significantly. Since 2001, gross margins have improved approx. 200 basis points. Our target is to improve margins by 50 basis points per year over the long term. We are well ahead of that target over the past several years.

SG&A for the quarter was 35.2% of sales, excluding metal. Down from 35.9% in the prior year. Or approximately a 70 basis point improvement. In the quarter we reported restructuring and other charges of 3.7 million pre-tax. The largest portion of this was the impairment charge related to certain investments made in emerging technology that we no longer view as recoverable. In addition, as announced in December, we are consolidating our U.S. Lab business. This quarter we recorded a portion of the costs to complete that consolidation. Based on restructuring activity that we've undertaken to date we expect to incur additional costs to complete the consolidation of U.S. Lab business of approximately 2.5 to $3 million in 2004. These costs cannot be accrued until incurred. Thus, we'll record those additional charges in 2004.

Below the line, net interest and other expense was 1.7 million this quarter, compared to 10.7 million in the prior year quarter. In the current quarter we realized and recognized a $5.8 million pre-tax gain on the sale of our interest and Practice Works. In the fourth quarter of 2002 we had a loss on the mark to market of Practice Works of 2.3 million. Year-over-year we had an 8.1 million pre-tax swing in the gain/loss on this investment.

On a cash flow businesses we did collect the approximately $23.5 million of proceeds itself on our sale on Practice Works in the fourth quarter. The tax rate on earnings from continuing operations was 32.5% in the current year, down from 32.6% in the prior year fourth quarter. Earnings from continuing operations were 48.7 million, up 19.4% compared to the prior year and EPS from continuing operations was 60 cents, up 17.6% from the prior year fourth quarter. Below the results from continuing operations, we have reported the operating results of the discontinued operations which includes Gendex and the needle business we referred to earlier. Earnings in the current quarter were 1.7 million net of tax compared to 1.5 million net of tax in the fourth quarter of 2002 for those two businesses. The current quarter does include a $1.6 million pre tax charge or about a million dollars after tax, a restructuring related charge connected to the decision to discontinue the needle business we mentioned earlier. Absent this charge, the needle business is, basically, neutral to earnings. Again, we do expect to dispose of both of these businesses early in 2004.

So, in total, we earned 62 cents for the quarter compared to 53 cents in the prior year fourth quarter or an increase of 17%. One way to look at this is the total earnings in the 2003 fourth quarter include a $5.8 million pretax gain on the sale of practice works and total pretax restructuring charges of $5.3 million, including $1.6 million included in discontinued operations. Excluding these items, earnings per share would have been about a half million lower or half a cent per share lower than we reported.

Just a couple comments on cash flow. This quarter we continued to experience very strong cash flow we've seen all year. For the quarter we generated operating cash flow of approximately 91 million, bringing the total for the year to approximately 258 million.. This is a 50% increase for the year over the prior year and a clear record for the company.

In the current quarter, our cash balances grew by $73 million. That's driven by our operating cash flows. Outside of operating cash flows, related to financing and investing activities, in the current quarter we repaid approximately $22 million of debt. The goose arbitration which we have mentioned in previous calls was also settled in the quarter. We paid the goose of approximately $10 million during the fourth quarter. This is the final payment on the the goose dental transaction. From a source of cash perspective we also received, as mentioned earlier, approximately $23.5 million on the closing of the Practice Works transaction. Inventory days stood at 93 at the end of the year, versus 100 at the end of the September and 100 at the end of 2002. Receivable days stood at 50 at the end of 2003 versus 56 at the end of September and 49 at the end of 2002. Capex was $23 million in the quarter and $78 million for the year. Looking forward, sources and uses of cash in the near term include $16 million that we have -- today we have paid to Astra-Zeneca in January. That's following the approval of the FDA, by the FDA of the Oro quicks. And of course we anticipate collecting $102.5 million upon the closing of our sale of the Gendex equipment business. We anticipate that in the first quarter of 2004. Also, as mentioned, in December or announced in December the board of directors has authorized a repurchase of up to 1 million shares of DENTSPLY stock. To date we have not purchased any shares under that authorization.

From a capital perspective, at the end of the quarter we had total debt balances of $812 million, including $22 million in current liabilities. We also had cash balances of $164 million. The value of our derivative contracts related to our debt, which is reported as an asset of $63 million. On a net debt basis, cash less the value of the derivative, we had net debt of $585 million. We started the year at $699 million under the same net debt measure. As can you see, we've had a substantial reduction in the leverage that's on our balance sheet during the year. As a percentage of total capital our net debt stands at 34% versus 46% if measured on a comparable net debt basis at the end of 2002.

Lastly, on capital we are pleased this month to see that Standard & Poor's upgraded the outlook on the BBB plus rating to stable. Looking at the full year results sales growth for all of 2003 increased 10.8% as reported and 11%, excluding precious metals. Excluding the precious metals internal growth was 4.5% and currency added 6.6%. Net divestitures reduced sales by .1%.

Operating margins were 19.6%, excluding precious metals compared to 20.3% for all of 2002. The margins in 2003 do reflect $3.7 million of restructuring charges which was mentioned earlier. Margins for 2002 reflect $2.7 million of restructuring type gains which accounted for most of the change in the operating margins on a year-over-year basis.

Interest and other expense in 2003 was $16.8 million, compared to $35.4 million in 2002. The 2003 amount includes a total of $7.4 million and gains related to Practice Works, including the mark to market on the warrants throughout the year, and 2002 included $2.6 million of losses related to Practice Works. In addition, 2002, we had a $3.5 million loss on currency exchange versus a small gain in 2003. The tax rate for continuing operations for the full year of '03 was 32.4%, down a half a point from 32.9% in 2002.

Net earnings from continuing operations was $169.9 million in 2003, an 18.2% increase over the prior year. Earnings per share from continuing operations was $2.11 compared to $1.80 in 2002. The current year's earnings from continuing operations include the nonrecurring gains on Practice Works that we mentioned which is about 6 cents a share. Also, the restructuring charges previously mentioned of about 3 cents a share after tax. So operationally the earnings from continuing operations was about 208, $2.08 per share for this year. Income from discontinued operations was 5 cents in both 2003 and 2002. Total net income for 2003 was $174.2 million. That's up 17.7%. Earnings per share were $2.16 per share, up 16.7% over 2002.

The $2.16 for the current year includes again 6 cents per share benefit from Practice Works and, in total, about 4 cents per share in restructuring and impairment charges, including the restructuring charges including discontinued operations. Earnings per share were $2.14 for the year. That compares to the estimates that were in place of 204 to 207.

We are pleased to report these record setting results for both the fourth quarter and full year. We would like to thank you for your continuing interest in DENTSPLY. We would like to take any questions you have at this time. Thank you.

At this time, in order to ask a question, please press star, then the number one on your telephone keypad. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Dax Valasis of Gates Capital.

Yes. I was wondering, was any debt reclassified to held for sale from what you had on your debt balances at the end of the 9/03 Q?

No. There was no debt attributed to the discontinued operations. The changes we had in debt during the quarter was we repaid about $22 million of debt. Then we also reclassified, out of long-term debt to current debt about $22 million of Japanese Yen debt that becomes due at the end of '04.

$22 million is all in current liabilities in the short-term debt and portion of long-term debt?

That's correct.

What was your D and A after reclassifying for this year and last year?

D and A for 2003 is about 48 million. Last year it would have been about 44 million.

What do you expect it to be this coming year in 2004?

I expect it to be slightly higher than the 48 million. So probably 48 to 50.

Okay. What do you expect to spend on capex in 2004?

The target today is about 65 million.

Okay. Then the tax rate, is it going to be similar to this year for 2004?

If there are no legislative changes, I think the tax rate might trend down slightly. Maybe a couple tenths of a point.

Thanks.

Your next question comes from the line of Derek Leckow of Barrington Research.

Thanks. Good morning. Congratulations on a strong finish to the year.

Thanks.

I had a question for Bret. On the sales, could you give us the sales results, including the discontinued ops for the quarter. I know there's 27.8 million in Q4 of '02. My projections included those operations.

I had it for the year. I don't have it for the quarter. For the year, the discontinued ops had about $105 million in sales.

Okay. Thanks. That's helpful. Gary, you are going to have -- you are going to developing a lot of cash on your balance sheet in the next couple of quarters. I wondered if you can discuss your plans for acquisitions. Are you going to be accelerating your pace of share buyback. You have a million authorized now. With all the cash coming in, you probably have an opportunity to do that.

The share buyback is an option. Our first choice would be acquisition. That's how we stimulate the growth of the business. We are actively looking at opportunities. Probably the most probable area would be areas that we're currently in to expand market share and product categories where we might be light or to expand market share and geographies.

If you are looking outside of areas we are currently in, we have talked about this new office of advanced technology. If we saw a technology that we were excited about that had a dental application and it required an equity position, we would consider that. In the absence of an acquisition opportunity, we would look at repurchase of stock.

That would be the most logical choice. The first choice would be acquisition. Second choice share buyback. Third chose would be increasing the dividend. Would that be an option also?

I don't think so. I think probably would -- the share buyback and acquisition might not be either/or. It might be both.

Thanks a lot.

Your next question comes from the line of Suey Wong of Robert W. Baird.

Thank you. Gary, you mentioned you are looking for internal growth to accelerate to the 5 to 6% range. There are a number of factors -- what are the most important to see the growth accelerate?

The one that's most important is our platform for growth all along, and that’s Innovation. New products are what drive customers to make change. That is a primary platform. If you are looking specifically at '04, there's certainly some things that are going to drive Innovation for -- drive growth for that year. One of which is that we've seen indicators in the fourth quarter of a pick up in consumables as I described in my comments, and I believe that's a carry forward into 2004. Secondly, if you look at some of the other markets like Met Latin America and Asia, which have been depressed all year, we see a turn around in the fourth quarter. We think that will continue in '04.

What's your outlook for growth in the lab market in '04?

Excuse me?

The outlook for growth in the lab market in '04.

That's hard to predict, Suey. We don't have data on labs like we do on dental consumables. It’s an important part because ex precious metal is about 23% of our business. We did see the crown and bridge materials have a double digit growth in the fourth quarter. If we can get the equipment piece at least to be neutral, I expect you can see the lab piece moving to mid to high single digits.

Okay. Also, you talked about distributor rebalancing. Do you think that's over now?

I sure hope so. It was a real surprise. We had gotten the information for October, November, and December for what they sold out the door and compared it to the quarter. It was an absolute $5 million swing. I don't -- of course, they have always had an ongoing desire to reduce inventory, as they should. We've never seen it of that magnitude within a short period of time. I don't expect to see that, at least that much within a short period of time in the future.

Gary, one last question. How are current January trends for the lab consumables area and for current distributor ordering?

The lab trends are strictly anecdotal, Suey. We hear that the trend we saw in the fourth quarter is continuing. Frankly, looking at January, it's hard to determine a trend in two and a half weeks. We don't see anything that's disappointing.

Was the positive feedback from the lab show recently?

Which one are you referring to?

The one that was just held in Las Vegas.

Yes. We had a good showing there and we’ve gotten good feedback. Cercon continues to be of high interest.

Lastly, the distributor ordering for the month of January, has that picked up some?

Suey, it's only two and a half weeks. It's just too early to tell.

Fair enough. Thank you.

Your next question comes from the line of Walter Landauer of Landauer capital.

Yes. I wanted to hear what your option policy is as to general guidanec. If did you have options expanded that you would make an effort to match that with share buybacks. I have a couple other questions.

The options are 1 to 1.5 million. I'm sorry. The question on share buyback was?

The question, whether you pursue a policy of matching --

No, we do not.

You do not?

No. Our strategy on share buyback is it's kind of an option there. If we have the cash available and we don't see a viable acquisition. Our preference would always be to invest in something that would grow the business.

Right. In the aggregate, the number of shares that are -- the options that you've got were between 1 and 1.5 million shares. Is that right?

That's right.

For last year?

That's correct.

I see. I also want to know whether you are expecting geographic growth in the China and India geographic areas to be substantial or just for this year versus last year.

Historically in that area we've had double digit growth. As you know, the last 18 months or so it's been depressed primarily because of SARS. The quarter, as I reported, that business is up about 4.9% internally in the fourth quarter. That's a positive trend. As long as we don't get any surprises, there's no reason why that shouldn't continue trending up to a point where it's back to its normal growth for us, at least.

That 4.9% is for -- is expected for this year versus last year from China and India?

No. That was the reported growth for the fourth quarter.

Q4. Actual growth.

Right.

Do you have any -- can you give me some feel whether you think the market share in domestic and foreign is in the aggregate is expected to increase the -- the outlook is expected to increase?

Well, our projections, should we achieve a 5% to 6% growth on average in 2004 in the categories which we are now in, would represent a market share increase.

I see. I think -- in your most recent quarter as you reported, is the effect of SARS -- has it risen or stayed about the same?

Actually, I would say it's -- the business has improved from what the impact was in the past.

I see. So the Q4 shows some improvement over preceding quarters as far as that effect is concerned.

Thank you, Walter

Your next question comes from the line of Jason Rogers of Larger Great Lakes Review.

Actually, it is Greg Halter, LJR Great Lakes Review. Bret, can you comment on what your pension expense was for 2003, if you have that figure.

I don't have that figure yet. I'll probably get it over the next couple weeks. It has been recorded because the actuarial evaluations were done. I don't have it at my finger tips. Last year in total pensions were 5.6 million. I don't expect that to change dramatically because we have very modest assumptions on asset returns. Discount rate did drop a little bit. That shouldn't be a material impact.

Okay. Can you provide a break-out in terms of percentage of your sales for each one of the geographic regions?

The balance? We can give you some idea of that. This is actually with precious metal.

Okay.

It is stated with continuing operations.

Continuing operations goes with precious metals, the United States was 44%. Europe was 37%. Asia was about 3.5%. Latin America was 4%. Japan 5%. The remainder is the rest of the world.

Okay. And last question is, will you be providing restated numbers for continuing operations for each one of the first three quarters of 2002 and 2003?

We will do that when we file our 10-K, yes. We will do that.

Great. Thank you.

You have a follow of-up question from the line of Dax Valasis of Gates Capital.

To review your non-core activities, you are the Oroquicks payment of $16 million. That happened in January?

Yeah. That happened in January '04.

You have proceeds of Gendex, which was 102 or 103?

Yeah. That's a prospective event it closes in '04.

That's the net number?

Gross proceeds.

Okay. And then cash -- accrued cash restructuring charges are 12 to $15 million?

Yes.

That's it as far as non-core?

Correct.

The total change in -- the total change in principle amount of your debt due to the change in the effects for the year?

For the year. Let me get that.

What was the principal amount of that note?

Of which note? The Euro bond? 350 million Euros. Let's see. That's all I have.

)) Greg, I can get you that number. I can get you that number after the call. I don't have it here with me.

Okay. Thanks.

Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question comes from the line of Frank Pinkerton of Bank of America securities.

Hey, guys. If I can ask a couple questions around the inventory and distribution channel. How do you go about tracking that? What are your goals as far as either day sales or weeks of sales in the channel. What are the procedures you use to regulate and keep it constant?

Let me comment on the inventory. We were pleased with 93. I have to tell you I don't think that's sustainable. I said in the last call that we would end the year at 102. Of course, within that was an $8.5 million build for the move of the warehouse. We used less than half of that build to move it which obviously reduced that inventory. The second initiative that was going on was we had a global initiative to reduce inventory at every location that began in the second quarter. We had seen a modest improvement in the third quarter and the fourth quarter was a very, very sizable improvement which really contributed to it going down to 93 days. Having looked at how we got there, finished goods are reduced entirely too much. I think it's going to compromise service. So I think moving forward you can expect it‘s going to climb back up in the first and second quarters both to make sure we don't compromise service and support new product build and then we're going to target back in the mid 90s by the end of the year. To answer your question about procedure, we have a target for our two distribution centers, North America and Europe. For each one of them annually with quarterly thresholds and they submit a plan as to how they're going to accomplish that. In each of our manufacturing locations that are supplying those warehouses we have a similar setup each year with a plan for their raw materials and work in process as to how they're going to reduce debt. That is how we get to these targeted reductions we've had year on year.

Okay. Thank you. I guess the second line of questioning here, can you speak to price increases? Are those usually things across the broader product line done at the beginning of the year and what those look like in 2004.

They are done throughout the year and are made at the individual locations based on their particular businesses.

Thank you.

You have a follow-up question from the line of Walter Landauer of Landauer capital.

Yes. To what extent do you engage in hedging operations against -- on currency and, perhaps, specifically on the precious metals?

Walter, this is Bret Wise. On currency, we hedge -- when we have intercompany cross currency exposures that we can't naturally hedge by either another cross currency exposure or by a transaction. We'll enter into hedges for that. We don't typically hedge the projected earnings of the foreign subsidiaries back to U.S. Dollars, however. With respect to metals, because our metals are held on a consignment basis, we have the capability of acquiring the metal at about the same time we price the sale of the metal to the customer. Thus, we get -- the sales of metals appear pass through. There is no need for a hedge. We don't hold a long position in the precious metals.

One other question on the precious metals. I didn't jot down the effect that the precious metals operations had on earnings per share for last year.

We don't disclose product line type earnings, Walter.

Okay. That's all.

At this time, there are no further questions.

Thank you all for joining us today. Thank you for your support and your ongoing interest in DENTSPLY.

Thank you. This concludes today's conference call. You may now disconnect.