Why Dentsply Sirona Plunged 20 Percent

06:50 08/07/2018

DENTSPLY SIRONA Inc. XRAY  today announced its financial results for the three months ended June 30, 2018.

The company reported net sales of $1,042.1 million increased 5.0% compared to $992.7 million in the second quarter of 2017. Sales growth was up 0.9% on an internal basis. Net loss attributable to Dentsply Sirona for the second quarter of 2018 was $1,122.0 million, or $4.98 per diluted share, compared to a net loss of $1,050.0 million, or a loss of $4.58 per diluted share in the second quarter of 2017. On an adjusted basis, excluding certain items, non-GAAP net earnings per diluted share were $0.60 compared to $0.65 in the second quarter of 2017. A reconciliation of the non-GAAP measures to earnings per share calculated on a US-GAAP basis is provided in the attached tables.

Don Casey, Chief Executive Officer of Dentsply Sirona, commented: “We are clearly not satisfied with our performance. Our global management team is in the middle of an extensive review of the business and is putting together a comprehensive restructuring program. This restructuring plan is focused on accelerating growth, improving our margin through aggressive cost containment programs and simplifying the organization. We will begin to execute against this plan immediately and expect it to deliver sustainable, consistent earnings growth and enhanced forecasting capability beginning in early 2019.”

During the quarter ended June 30, 2018, the Company recorded a goodwill and intangible impairment charge of $1,265 million. Of this charge, $1,196 million was in the Technologies and Equipment segment. The Technology and Equipment Segment was negatively affected by the continued transition of the Company’s distribution relationships in the U.S., lower anticipated revenue and margin in our Imaging and CAD CAM businesses, and an elevated level of expected dealer inventory destocking in the U.S. in 2018. In addition, an increase in both the risk factor and discount rate was a significant factor in driving the Technology and Equipment goodwill and intangible impairment. The Consumable Segment had a $69 million impairment, reflecting lower than expected growth for our legacy orthodontic business.

Management expects adjusted EPS for 2018 in the range of $2.00 to 2.15 per diluted share, down from our previous estimate of $2.55 to $2.65. 2018 guidance now assumes an approximately 2% constant currency revenue decline for the full year, down from our previous expectation of 2% constant currency revenue growth. The reduction in our 2018 revenue guidance reflects our lowered second half revenue forecast, partially driven by elevated levels of anticipated inventory destocking at our dealer partners. The reduction in our 2018 EPS guidance reflects the lower revenue expectation and increased margin pressure for the remainder of the year.

As part of its stock repurchase program, the Company repurchased 5.4 million shares for a total of $250 million during the second quarter of 2018. The repurchase is part of the $1 billion of common stock authorization approved by the Board of Directors earlier this year.

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