DENTSPLY SIRONA (XRAY) Q4 2015 earnings summary

Executive summary

• FY15 sales fell 8.5% reported and 7.6% excluding precious-metal content; currency translation was a 9.5% headwind, while constant-currency sales grew 2.6%.

• Adjusted diluted EPS rose 5% to $2.62; reported diluted EPS declined 21% to $1.76. Adjusted operating margin reached 20.2%, up 180 bps YoY.

• Q4 sales were $671.1M, operating income $93.1M, attributable net income $58.6M and diluted EPS $0.41.

Financial highlights

• FY15 net sales were $2,674.3M, gross profit $1,517.2M, operating income $375.2M and attributable net income $251.2M.

• Gross margin excluding precious-metal content was 58.8%, up 150 bps YoY; SG&A was 41.7% of sales excluding precious-metal content, up 80 bps.

• Restructuring and other costs were $64.7M vs. $11.1M in 2014; adjusted operating income was $521.1M vs. $512.8M.

• Q4 2015 vs. Q4 2014: net sales $671.1M vs. $719.1M; operating income $93.1M vs. $103.3M; attributable net income $58.6M vs. $84.7M; diluted EPS $0.41 vs. $0.59.

Outlook and guidance

• Expected 2016 capital expenditures are $80M–$100M, excluding the potential merger; cash needs are expected to be funded by operating cash flow and available credit.

• Management expected adjusted operating margins to remain at or above the 20% target as efficiency benefits accrue, while noting macroeconomic, currency and reinvestment variability.

• 2015 restructuring plans were expected to generate $25M–$32M in annual savings over 3–5 years; another $4M–$6M of plan-related costs were expected in 2016.

• Long-term dental market growth was estimated at 3%–6% annually, with a target to grow slightly ahead of the market; near-term internal growth remained uncertain.