DENTSPLY SIRONA Inc. (XRAY) Q4 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the DENTSPLY International Third Quarter (sic) [Fourth Quarter] 2012 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Derek Leckow, Vice President of Investor Relations. Please go ahead.

Thank you very much, Mark. Thank you, all, for joining us this morning to discuss DENTSPLY International's fourth quarter and fiscal 2012 results. Joining us on the call today are Bret Wise, Chairman and CEO; Chris Clark, President and COO; and Bill Jellison, Senior Vice President and CFO. We'll have some prepared remarks, and then we'll be glad to answer any questions you may have. I hope you all had a chance to review the press release, which we issued earlier this morning. A copy of the press release is also available for download on our website, www.dentsply.com. We've also provided a set of supplemental slides to accompany this call, also available for download under the Investor Relations section. Before we get started, it's important to note that this call may include forward-looking statements, including risks and uncertainties. These should be considered in conjunction with the risk factors and uncertainties that are described in our SEC filings. The company undertakes no obligation to update or revise any forward-looking statements reflecting events or circumstances that may arise after the date of this call. A recording of this call in its entirety will be available on our website. As you can see in the release, our results this quarter included a number of nonrecurring items and other non-GAAP adjustments. Our comments on this call will focus on results, including certain adjustments that provide operational insight, excluding these items. These items are noted on the non-GAAP reconciliation tables contained in the release. We'll also note that our earnings guidance is also presented on an adjusted basis. With that, I'd like -- now like to turn the call over to Bret Wise. Bret?

Thank you, Derek, and good morning, everyone. Thank you for joining us on our year-end call this morning. Today, we're very pleased to report record sales and earnings for both the fourth quarter and also the full year 2012. Before we dive into the results, I think it's important to take a look back at what the goals and initiatives were we had coming into the year and how we did against those. So as you recall, on the same call last year, we had several important goals that we needed to achieve in 2013. Most notably, those were to continue to grow organically above the market, to have a successful midyear relaunch of our orthodontics product line, to reach our goals in the integration of Astra Tech, while continuing to grow above market in the premium implants segment, and to have strong cash flow generation for debt reduction during the year. In addition, we had forecasted that our operating margins would lag in the first half of the year but would turn positive in the back half of the year. All told, I think we did very well against these objectives in 2012. For the full year, internal growth was 4.0%, which we believe is at least a full point above the market. A strong execution on new products launched in both 2011 and 2012 contributed to this, as well as the strategic investments that we've made in sales and marketing resources. In orthodontics, we did relaunch the line midyear and we recaptured what we estimate to be about 1/3 of the market share that we had lost following the natural disaster in Japan. Our orthodontics boosted our internal rate -- growth rate by 150 to 160 basis points in both the third and fourth quarters, while for the…

Thank you, Bret, and good morning, everyone. I'm going to take a few moments and provide some deeper insights into our strategies to drive continued above-market growth in emerging market regions, as well as an update on our new product pipeline, including highlights to some of our early 2013 launches. We're very pleased with our progress in emerging market regions, which have really been a strategic focus area for us for the past couple of years and now account for approximately 15% of our revenue. In 2012, these regions delivered double-digit internal growth. And while these countries are obviously among our fastest-growing markets, we believe we are growing faster than the dental consumables market in these countries in aggregate. Importantly, our emerging market growth is accretive to each of our major product categories, and we're generally pleased by the breadth of our performance in these markets. Our approach to these markets continues to be focused on expanding sales representation in commercial resources, particularly in the fastest-growing markets; strengthening our organization in these countries to drive and support future growth; and increasing our use of dual-branding approaches. Our investment in sales and marketing resources leverage our existing selling and distribution infrastructure and should allow us to move beyond the very premium segment of these markets and into the next layer of the emerging middle-class populations. But I'd also like to specifically comment on the expansion of our dual-branding strategies, as this approach allows us to reach larger economic segments of these growing markets while minimizing the likelihood of reimportation back into the developed markets, namely the United States and Europe. We continue to expand our dual-branding platform in the chairside consumables area to encompass additional product categories and markets. In addition, this strategy is also playing an increasing role in our…

Good morning, everyone. So Bret already discussed our sales growth within the quarter and the year, but I wanted to add a couple of additional comments regarding our sales. The 2012 geographic mix of sales, without precious metal content, was as follows. U.S. represents 33% of sales, Europe was 45% this year and the rest of the world was 22% of sales. Although it's difficult to estimate, we also believe that the internal growth rate in the period may have been benefited by approximately 50 to 100 basis points from dealer inventory changes, including buy-in ahead of our January 1 price increase; an extra selling day, albeit it was only December 31; and the offsetting impact of Hurricane Sandy on the business in the northeastern United States during the quarter. A strong U.S. dollar compared to last year in both the quarter and for the full year negatively impacted our sales by 2.1% and 3.8%, respectively. The effective changes in foreign exchange rates also had a negative impact on adjusted earnings per share compared to last year for the full year of approximately $0.04 to $0.05 per share, while the impact on the quarter was minimal. These impacts included benefit from layered currency hedges. As Derek mentioned, and as you can see in our earnings release, the fourth quarter as well as the full year included a number of items which impacted our results, which we have identified as non-GAAP adjustments. To better understand and follow some of the following comments, you can look at the tables included in our recent press release, which reconciles performance from U.S. Generally Accepted Accounting Principles or GAAP to adjusted non-GAAP performance. Gross profit margins on an adjusted basis, as a percentage of sales, ex precious metal content, in the fourth quarter of 2012…

[Operator Instructions] The first question today comes from Steve Beuchaw, Morgan Stanley.

First, just one clarification. Bill, I really appreciate the comment that you made where you tried to help us net out the impacts of inventory changes, the extra selling day and Sandy in the fourth quarter. Am I right that those 3 factors, in total, were a positive 50 to 100 basis point impacts on revenue? Is that right?

That's right. That's our best kind of estimate. It's kind of difficult with all the different moving pieces, but that should be an approximate range of that.

And that would -- I would think that would be disproportionately concentrated in the U.S. Is that also right?

A little bit more in the U.S., that's correct.

And then I wonder -- just thinking about where we are in the calendar here, looking out on 2013. If you could spend a little bit of time, I guess this would be for Bret, on a couple of markets that we think about a lot and just talk to us about what you're expecting for a couple of these markets in particular. Number one would be dental implants. And then number two would be Europe, particularly in the north. These are markets that seem pretty stable here. Is that how you're thinking about them going into 2013?

Sure, Steve. With respect to Europe, obviously, our results have been very stable in Europe for the last 3 years, really, since the end of the recession. We've generated positive internal growth in -- excluding the orthodontics disruption in each of those quarters. We think we've been well above market in each of those quarters. And as we -- for instance, as we look at our results this quarter by country, we see we had positive internal growth in every country in Europe, except for 2 countries in the south. So the indications we get from our results tell us that, that market's stable. It's still a growing market. It's not robust but it's one that's growing across the entire region. It has some places where there's still very difficult economic situations affecting the dental market, but overall, the European market appears stable and it appears to be growing slightly. Dental implants, we know now that all but one of the premium implant companies have reported. We think we're probably -- depending upon where this last company comes out, we're probably 2 to 3 percentage points better than the market on average, although the market is probably declining slightly at this point. We're kind of flattish at this point. I think 2013 can be a year this market could be flat to grow as low single digits. I don't see it getting a lot better than that in the short term, and that's kind of taken into account in our planning here.

And next is John Kreger, William Blair. John Kreger - William Blair & Company L.L.C., Research Division: Just hoping you might be able to expand a little bit more in your expectations for '13. What sort of price assumptions are you assuming in your guidance? And just curious if the med tech impact had much of an impact on that.

Sure. I think that, 2 things there. One, as you're aware, we typically get somewhere between 1 and 2 percentage points normal price. I'd say that, this year, from a broader basis, we are expecting obviously higher than that, partly because of the med tech tax that's out there, and we want to make sure that we're helping to offset as much of that as we can through this process. So I think that you should expect that, obviously, the price increases for the overall year are going to be north of 2% instead of under 2% this year. John Kreger - William Blair & Company L.L.C., Research Division: And then a follow-up. Can -- what is your view on how the preventative and restorative market is doing relative to your specialty markets? And curious what you think of the orthodontic markets doing in total at this point.

I'm going to comment on preventive and restorative and let Chris comment on orthodontics. Looking at our results, those markets are kind of mid-single-digit growth markets, let's say, low- to mid-single-digit growth markets, depending on the specific product category, in the U.S; and probably low-single-digit markets for us, maybe closer to even less than that but still positive, in Europe. So those markets, which are the everyday-dentistry type markets, I think, are good indicators of traffic flow in the dental offertory. And they appear to be stable to growing, a little bit faster in the U.S., a little bit slower in Europe at this point. Chris, what do you have to offer?

On the orthodontics side, John, I would -- yes, I guess I would say the market -- we're probably not the greatest barometer right now in terms of reading the market obviously, because our results are skewed based on the recovery. So I think that would be -- it would be tough to look at our numbers and project that back in the market. What I would say is, I think it's a pretty competitive market situation right now, with not a whole lot of growth; I would say, flat to maybe up slightly in terms of this growth. And obviously, we're doing better than that as we're growing through the recovery. John Kreger - William Blair & Company L.L.C., Research Division: And Chris, have your thoughts changed at all on your ability to recapture the lost share after the tsunami in Japan?

I think we're pretty consistent with what we said, John, earlier. I mean, I think, at this point, we think we've, again, probably gained back about 1/3 of what we had lost and we're now focused on the next 1/3 that is really a multi-year effort in terms of slugging it out at the Street level. Those customers have gone to competitors, and those competitors aren't give that -- give those up easily. And the remaining 1/3, we may never get back. And obviously, over time, you need to offset that with -- look to offset that with other competitive gains of other competitive users. So I think that we're pretty much on-track relative to what we said, but I think that we're now reaching the stage where it's tough sledding at the Street level. And again, our team is up for it and -- but it's -- there's still a lot of work to do.

Next question today will come from Jeff Johnson, Robert Baird. Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division: Bret, I was hoping I can start with you, just on kind of your market comments around U.S., Europe and AP for 2013. We have seen just in the last few days some large med tech companies talk about kind of incremental softening in the European market to start this year; in the U.S., some of the retail data with payroll tax increases, and that's starting to soften up a little bit late January or early February. But do you still feel comfortable, it sounds like, that markets are somewhat stable at this point and dental can still grow this year across most of those major markets?

Yes. I mean, I -- to me, it's a little too early to be trying to read the tea leaves on what's happened, for instance, in the last 5, 6 weeks. The markets, to us, do appear to be stable in the U.S. and in Europe, a little bit more robust in the U.S. than Europe, but stable in both markets overall. I think Bill had some comments here this morning about the way the calendar falls in the first quarter here, and I've seen 2 or 3 of our competitors comment on this as well. And that is that there's -- we're going to end up with 2 less shipping days this quarter versus a year ago. Thus, I think, when you see results come out for the first quarter across-the-board, they're going to be a little bit weaker for the quarter and then will be made up later in the year. But as far as the overall markets go, to us, they appear to be stable, with no meaningful changes at this point. Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division: And Bill, I guess, a question for you, just on FX. I mean, since the Astra Tech deal, it seems like most of your top line impact, if it's 1% to 2%, this year positive. Historically or over the last year or 2, we think that mainly flows through to the bottom line then at anywhere from 50% to 100%. This year, it's turning around exactly the opposite and going to be a drag. And I guess I just don't quite understand why that is.

Sure. Just to go back and talk about kind of what we had stated when we first did the transaction: We did a more consistent kind of FX-related, transaction-related hedging program where we're laying in ring -- layering-in hedges each and every month that take us out kind for the next 18 months. And as you kind of look at the impact, the whole purpose of that hedging process is to ultimately dampening -- dampen what the otherwise impact would be on FX. So if you take 2012, for example, the top line was impacted by, let's say, 3.8, 4 percentage points. If you took that on our total earnings, the impact last year would've been more in the $0.08- or $0.09 related impact. Our FX-related hedge ring -- hedging helped dampen that impact. But we now don't have that same level of benefit of those hedges in 2013. So in essence, the impact of last year's hedging -- FX movements actually are spread, in essence, over kind of that 2-year period. So we aren't getting the full positive benefit on the bottom line this year because of that positive benefit that we had on the FX hedges in 2012. Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division: Okay. And just to clarify, you actually said it would be a negative, I mean, so we should think of EPS being flat, if not dragged down a little bit by currency this year, even though the top line will be a slightly positive impact.

Yes, based on where rates are at right now, something kind of in that flat to a couple-cent negative impact is kind of what we would be expecting. Jeffrey D. Johnson - Robert W. Baird & Co. Incorporated, Research Division: All right, fair enough. And then Chris, just I guess, last question for you, just on new products. We've heard off and on some rumors about potentially you guys getting a little more serious on the digital impression side. And I've also heard some progress has been made on the cobalt chrome side, which -- the millable cobalt chrome side, which to me would be a sizable potential new product this year. So wondering if you can comment at all or if you're willing to comment at all on either of those.

Yes. I guess what I'd say, Jeff, is we got launches obviously coming out throughout the year. We got some coming up obviously this week at the Chicago. I'm not going to comment on either of those in the short term. What I would say is, certainly on the cobalt chrome, that's a space that we're very interested in. We're interested in both spaces, but the cobalt chrome, you'll probably hear from us before the other. And again, I think that, that's -- that we're excited about what we got coming potentially down that path. And you'll hear from us probably in another call or so.

Next we'll hear from Robert Jones with Goldman Sachs.

It sounds like you guys regained about 1/3 of the lost share in ortho, which I believe was the portion that you had previously said you thought you'd recapture pretty quickly. Just as far as we look forward, how should we be thinking about, year by year, how you guys are planning on or thinking about recapturing that remaining lost share within ortho?

Robert, it's Chris. I guess I would say the -- again, the first 1/3, I won't say it was easy, but bottom line is those were probably among our more loyal customers, certainly the first group coming back for the -- a few quarters ago. As you have product, you -- again, our bottom line, they would -- once we have product, they were very interested in coming back. Now Obviously, most recently, we're having to get to that next year where we will have to work a little bit harder for it. And yes, it's pretty consistent with what we said we thought we'd see. This next 1/3, I would probably say that's going to take 3 years-ish. It's a multiyear effort. And again, we're having to slug it out against competitors that have done what they can to try to load up end users and certainly offer inducements to try to keep those customers. So they're former customers of ours. They're positively predisposed towards our line, but in the short term, they've been obviously taken care of by somebody else. And we're going to fight it out. And again, I'm confident, over time, we'll be successful with that, but that's not going to be quite as quick. Obviously, as we go against the next couple of quarters, we have a little bit of a lower base. And again, the trajectory again improved on orthodontics throughout last year, but I think the sequential trajectory probably is not going to be as significant as what we've been seeing the last few quarters.

That's really helpful. And then if I could just cite one more another organic factor, if you will, as we try to think about our forecast. I know Astra Tech, in the synergy guidance, I think you guys have stopped updating it. But even just directionally, I know, year 1, you had originally outlined $0.12 to $0.17. Curious just if you'd be willing to share how you compare to that. And I know you're 3 -- initially, you were thinking somewhere in the $0.30 to 40% -- $0.40 range. I was just wondering kind of, even if it was more qualitative, just how you guys feel you're tracking relative to those synergies.

Sure, Bob, I'll try to give you just some high-level comments there. With respect to the original first year guidance, we've already confirmed that we were within that range and felt pretty good about the transaction. The synergy estimates that we had and are using internally look solid. And we're going after those synergies, so I think we're going to get further earnings accretion from that. The thing that's probably a disappointment to us is the global premium dental implant market today is probably flat to slightly down. At the time of the acquisition, we probably would've thought it'd be growing mid single digits at this point. So that puts a little bit of weight on the third year earnings accretion target. However, that's why we used a range, because we knew we wouldn't be correct in all of the assumptions. And at this point, we're not going to confirm or update that guidance anymore, but I'll say that, absent the slowness in the market, we feel pretty good about the targets that we set for ourselves at the time of the transaction.

Glen Santangelo with Crédit Suisse has our next question. Glen J. Santangelo - Crédit Suisse AG, Research Division: Bret, maybe if I can just kind of follow up on that last question. So it sounds like you think Astra's going to be a slight benefit next year because -- what I'm trying to do is I'm trying to reconcile all the sort of components that you've baked into your 2013 guidance. It kind of sounds like currency is sort of negligible. Ortho, Bill, I don't know if you're willing to sort of quantify in some way what you think that incremental benefit in '13 to be. Because if I sort of triangulate all these different components, it kind of feels like, Bret, you're saying that we're still expecting kind of that low-single-, maybe approaching mid-single-digit growth sort of globally in the dental business. Is that a fair characterization?

Glen, we don't give guidance on internal growth for the year. We did give a little bit of insight here on the first quarter because the calendar is affecting us so much. However, we've been growing kind of 3% to 4% in this environment for some time. We commented earlier we see the markets as stable at this point. We don't see any major disruptions to the markets, and I think you should use that in your comps or in your modeling to the extent you see fit. With respect to Astra Tech, because even in a no-growth market we have synergies to after, we think that Astra Tech can continue to be earnings accretive as we improve the cost structure and so forth in 2013, even without implant market growth. So I don't know if that helps you or not, but that's the guidance we'd be willing to give at this point. Glen J. Santangelo - Crédit Suisse AG, Research Division: Yes, yes, no, that's fine. And so maybe I could just follow up on that, I mean, how should we think about margins then in 2013, I mean, assuming for a second that, that revenue growth stays in this approximate range while margins have been stable the past couple of quarters, obviously down a little bit from what we've seen historically? And I'm wondering how does a company, absent any major mix shift, how can the company expand its margins in this current revenue environment? Are there leverage you can pull to do that?

Well, there are. New product innovations is the most important one because we usually get a margin lift from new product introductions that come out of -- at higher prices. So I think that's one. Number two is, we're looking at the cost structure to make sure that we have the most efficient cost structure possible. That will help 2 things that go against this year. Early in the year when we're short those 2 days -- those 2 shipping days, that'll be harmful to our operating margins, of course, in the first quarter. And as ortho -- just as an aside, as ortho becomes a larger percent of the portfolio again, ortho has carried a little bit lower margins than our other dental consumables because we're not the manufacturer. So that's a small headwind. The last thing I'll throw in here is that the medical device tax, although it's boosting our top line a little bit, we're essentially collecting tax and giving it to the government. So there's no income at the operating margin line even though revenue is higher, so that puts a little bit of pressure on operating margins on a percentage basis. All told, though, we've said before and we're willing to live by and state again here that we're looking to return to a more normal operating margin improvement pattern year-over-year, as we see -- we saw pre recession and pre the orthodontics events in 2011. So our guidance there is we look for 20 -- I think it's 20- to 40-basis-points improvement per year. And we're reestablishing those expectations now with the new baseline that we have. Glen J. Santangelo - Crédit Suisse AG, Research Division: Bret, maybe if I could just squeeze one last one in. And I'm kind of curious. In the press release, you stated that you feel like the balance sheet is in a better place now and maybe the company can reengage in some capital deployment priorities, and you specifically called out acquisitions. And so could you maybe give us a sense for maybe what may be specific areas of interest for you, looking to expand the product portfolio? Or is it more sort of expanding the geographic presence?

Well, our acquisition program looks at both breadth of the portfolio and the scope, the geographic scope, of the portfolio. So we target companies for technology, for brands and for geographic reach. In the latter case, it's usually sales and marketing reach. We're not ready to announce any acquisitions at this point, but the acquisitions that we do over the next couple of years, I think, will be in that category. And as you know, in dentistry, most transactions are small, so we expect most to be in kind of a tuck-under zip code with respect to magnitude. But the -- we do have more acquisitions in our pipeline that we're working on. Timing is always difficult to predict. But I think that, with the balance sheet improving and as it's going to continue to improve here in 2013 -- or we expect it to improve in 2013, we're going to be in a much better position to start doing those transactions again this year.

Jason Rogers with Great Lakes Review has a question.

Could you give a comparison of the internal growth specialties versus consumables versus lab for the quarter?

Yes, I can give you that in a high level here. For the fourth quarter, our consumables were up mid single digits. Specialties were up high single digits. Lab was slightly negative, primarily because of decline in precious metal alloys in Europe. And non-dental was up mid single digits.

Okay. And would you provide your CapEx estimate for 2013?

I think that, going into 2012, we actually were expecting that we were going to be spending higher capital expenditures on a couple of different programs. Some of those got kind of kicked out a little bit from a actual spend perspective. But as we look at 2013, you should expect that our overall CapEx is more in the range of kind of what we were looking at for last year, which is probably in the $120 million, $130 million range.

Okay. And then looking at the catheter business, just wanted to get some commentary on how that's performing.

The catheter business, which we've renamed and rebranded Wellspect HealthCare, it's -- we've got it set up as a separate division in the company now with separate resources and focus, et cetera. And it's performing very well: very strong in the U.S.; strong in Europe, although the market there is not quite as robust as it is in the U.S. And our performance there has been driven off of new innovation. We have a new female catheter that was launched during the -- I think, about 18 months ago, 2011. It's been growing rapidly. And just this month -- or excuse me, just last month, January 2013, we launched a new male catheter. And early indications are that, that's a really strong product as well. The early feedback from customers is that we're going to have good uptake on that as well. So the business is performing well, it's meeting our expectations and it looks to be a good part of our portfolio.

And then finally, the -- you talked about strength in emerging markets. Are you seeing any strength in the specialties category? Or is it mainly in just everyday dental products?

Yes, we're seeing pretty solid strength at really across the various categories. Obviously, that's kind of been a little bit -- based on the markets, there's 70, 80 countries here so it's kind of hard to generalize, but I guess I would categorize that we're pleased with the performance in the emerging markets specialties, as well as on consumables and also, to a degree, on labs. So again, I think that it's relatively broad.

Our next question will come from Jon Block, Stifel, Nicolaus. Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division: Maybe just the first one, another follow-up on orthodontics, if you would. Can you tell us about just how it's going to be staged throughout the year, maybe more from an earnings perspective? In other words, I know you've sort of brought back from the first 1/3, but do you still think it's going to be accretive by about $0.05 '13 versus '12? And then, Bill, would that primarily show up in 1Q, 2Q because of the relaunch that you had sort of in the back half of 2012?

I think, from an ortho perspective, we would still expect to see some improvement in 2013. I think the first quarter, as you mentioned, is obviously easier because it was negatively impacted still last year in the ortho business. However, keep in mind, that you also have the 2 lowers days in the first Q. So that's going to take a chunk of that away as well too, at least within that quarter. So we are expecting some improvement but probably not to the level, obviously, that we accomplished in 2012 with that business. Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And I guess, just as a follow-up there, do you think $0.05 benefit '13 versus '12 is a good number to use? Or is that a little bit too aggressive?

No, I'd say that, that's too rich. Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then second, just on capital allocation. It sounds like you've done a great job paying down debt. It seems like your leverage is right around 2.5. Is debt pay down still the main priority, you'd say, but you've got more flexibility on acquisitions? And also, should we expect share count, if you would, instead of just staying flat that maybe you'll actually take that down on an absolute basis '13 versus '12?

I think, with respect to priorities, we are kind of rebalancing them a bit here. Debt reduction is still is of importance to us, and I think you'll see us allocate some of the cash flow towards debt repurchase. But also this year, I think you'll see more go through acquisitions and some through share repurchases also. What we've said over time is we want to kind of keep the share count neutral, at least from exercises of options and so forth. We haven't really caught up with that since we did the acquisition. We do have a large share buyback authorization available to us. And would -- I don't want to predict an exact amount to how many shares we'd buy back because I don't know, but I think that that'll be an element of the capital allocation this year. Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division: Okay, okay. And then maybe the -- just a last one, Bret. Just your long-term thoughts on the implant market, maybe where it is today relative to where it was at the time of the Astra acquisition. And of course, you guys have done a great job and you're taking share in a more modest market, but has anything changed? I don't have the wording in front of me back at the Astra timing, but I think you were talking about maybe even a low-double-digit market. Do you still think that's attainable long term? Or has some stuff with what's been going on in Japan reined in the long-term expectations?

That's a complex question. I think, back at the time of the acquisition, I don't have the wording in front of me either, but I think we said we thought it could a high-single-digit market again and probably a mid-single-digit market in the near term. And in fact, immediately after the acquisition, for, I don't know, 1 year or maybe 3 quarters, it did run kind of a mid single digit. And today, in the United States, it's running in that range, I would say, as well, probably mid to maybe even a little bit better than mid single digits for a market. Longer term, I think that dental implants are still well underpenetrated in the market. It's the best solution for a difficult ailment. It doesn't destroy adjacent teeth, et cetera. And so I think that, over the next couple of decades, dental implant therapy is going to be a major part of the restorative business in both -- in global markets, really, in all geographic markets. So I think that it's an area we needed to participate in, in a significant, meaningful way. And we believe we're now positioned to do that with a very fine portfolio of products and sales reach.

[Operator Instructions] Next question will come from Yi-Dan Wang, Deutsche Bank.

I joined your call a bit late, so apologies if you've covered these already. I've got a couple of questions. First of all, on the dental implant business, can you comment on where DENTSPLY's organic sales growth were in a U.S. and x U.S. in the fourth quarter? And to what extent has the integration of Astra Tech impacted those numbers? And how should we think about this impact in 2013? And then the second question is, how big is DENTSPLY's CAD/CAM business now? And how has it performed in 2012? And what are your expectations for that in 2013? And where is DENTSPLY in opening up its CAD/CAM platform?

Okay. I'm not sure I got all those down, so you guys are going to have to help me here. But with respect to dental implants, in the fourth quarter, we were slightly negative, which was entirely attributable to Japan. If Japan hadn't been in the mix, we would have been slightly positive in the quarter. Of -- we haven't seen all of the results from all the competitors. I think there's one that's still outstanding. But from the ones that we have seen, that would put us, I don't know, 300 basis points or so, maybe 400 basis points, faster than the others or in better shape than the others. With respect to geographic reach, we don't give that for each of our businesses, but I think it's fair to say that the U.S. was much stronger than Europe. And in the Rest of World category, Japan was the weakest and the other countries within the Rest of World category were stronger. With respect to our CAD/CAM business at DENTSPLY, it's pretty complex because we have CAD/CAM technologies in our implant business. We've got bars and bridges. We've got CAD/CAM technology used in customized drill guides. We've got CAD/CAM technology used in our prosthetics business, both for sale, meaning to labs, but also in centralized manufacturing. We have not rolled that up and disclosed that to anyone, but I think you should assume that our CAD/CAM business is doing well. I'm not trying to hide the result, it's doing very well. But for us, it's a complex business across numerous of our franchises, and we have not rolled that up and disclosed that to people.

Okay. So just to cover some of the ones that I asked, the other ones I asked. So in terms of your dental implant performance, how has the integration of Astra Tech impacted those numbers? And how should we think about that impacting 2013?

Well, I mean, I think, integrating a business, it's always difficult to tell what the impact is. What I can say is that we've gone through a year where we rearranged all the subsidiaries; we merged all the sales forces, we took the rest out of the field to the train them on the products from the other company. We've changed their bosses, changed their territories, many times changed their customer base. And we're growing, we think, 300 to 400 basis points faster than market. I don't know how much of that is due to the integration and how much of that is due to good execution, but we're...

It sounds like the execution is very good so far. And you said that you will complete that integration at the end of Q1. So would you say that, if there were disruptions in your business, we would've seen it -- seen the worst of it already, or does -- we need to keep an eye out on that for a bit longer?

Yes, what's going to be done by the end of Q1 is the merger of all the country organizations, which is a process that is -- well, it's the process that's most disruptive. What you'll see going forward is us going after cost and cost synergies and so forth, at the same time using the sales forces that are now merged and trained, cross-trained, on the products to generate sales synergies. I'm not real comfortable with characterizing what's more disruptive, but I would think what we've been through would be the most disruptive part of the integration.

Yes, okay. And just on the CAD/CAM business, are you able to talk about how open your CAD/CAM systems are today? It seems that more of your competitors are pursuing that option.

Almost all of our CAD/CAM businesses and processes are open systems. There's one system, particularly in Europe, that's a closed system, but it's not a huge part of the business.

At this time, we have no questions in the queue. I will now turn the conference back over to Derek Leckow for any closing or additional remarks.

Well, thank you, everyone. That concludes our conference call today. We thank you for your interest in DENTSPLY. If you have any follow-up questions, please contact investor relations. Goodbye.

Thank you.

And that does conclude today's conference call. Thank you for your participation.