Derek Leckow – Vice President Investor Relations Bret W. Wise – Chairman of the Board & Chief Executive Officer Christopher T. Clark – President & Chief Financial Officer James G. Mosch – Chief Operating Officer & Executive Vice President.

Brandon Couillard – Jefferies & Co. Unidentified Analyst – Goldman Sachs Unidentified Analyst – William Blair & Co. Erin Wilson – Bank of America Jeff Johnson – Robert W. Baird Jonathan Block – Stifel.

Welcome to the DENTSPLY International third quarter 2014 earnings call. Today’s conference is being recorded. At this time I’d like to turn the call over to Mr. Derek Leckow, Vice President of Investor Relations. .

Thank you for joining us to discuss DENTSPLY International’s third quarter 2014 results. I’m joined by Bret Wise, DENTSPLY’s Chairman and Chief Executive Officer; Chris Clark, our President and Chief Financial Officer; and Jim Mosch, our Executive Vice President and Chief Operating Officer.

I hope you had a chance to review our press release issued earlier this morning. I’d like to point out that a copy of the release and a set of supplemental slides and information relating to non-GAAP financials are available for download in the investor relation’s section of our website www.DENTSPLY.com under the heading events and presentation.

I’d like to remind everyone that the Safe Harbor language and US GAAP reconciliation contained in today’s press release also pertains to this conference call. We may make forward-looking statements regarding risks and uncertainties.

These should be considered in conjunction with the risk factors and uncertainties that are described in the release and in our SEC filings. It is possible that the actual results may differ materially from the forward-looking statements we make today.

The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the day of this call. A recording of this call in its entirety will be available on our website. With that, I’d now like to turn the call over to Bret Wise..

I’m going to start with a few observations on the market and our own performance and then hand it off to Jim and Chris for more details. Starting with the markets, overall we would say that the global dental consumable markets are stable, not accelerating a lot at this point but also with a few notable exceptions, no real slowing.

The US market is showing some signs of life, particularly in chair side consumables which may be picking up a bit. That’s important because this is a very large category with many industry participants and frankly, it’s an area where we’re having a very good year.

In Europe, Q3 is of course, a tough benchmark because of the summer holiday period tends to be a one month quarter, but we would say that generally we’ve seen some slight improvements with notable exception of the CIS region Russia and Ukraine are still quite negative.

But ex CIS we saw modest improvements across a broad range of countries and a broad range of products throughout Europe.

This was a broader kind of improvement than we’ve seen for some time in Europe and we realize this is a bit contrary to the recent economic news coming out of the region so it’s not clear whether this is indicative of a broader market trend or simply an improvement of our own performance over this period of time.

Rest of world continues to be a mixed bag, looks pretty strong in Asia and the Middle East. Australia seems to be better despite a significant weakening of the currency while Brazil remains slow and Japan remained modestly negative, I think still suffering a bit from the excise tax hangover that occurred in March.

But overall, we would say there’s no big news in the market conditions one way or the other. Pretty stable conditions throughout the globe. For our own performance, internal growth picked up a bit in the quarter. We were up 2.4% and we were positive in all of the US, Europe, and rest of world.

Overall, we had sales growth ex PM of 1.8%, that was helped mostly by the internal growth which I mentioned was 2.4% and acquisitions added a modest 0.6% so constant currency was 3.0% in the quarter.

Currency translation was more negative than when we entered the quarter, we ended up down 1.2% because of currency so constant currency 3.0%, negative currency 1.2% yields the 1.8% growth. Internal growth was 2.0% in the US, was positive 1.0% in Europe and interestingly, it was up 2.4% without CIS in Europe.

As I mentioned, that’s a pretty notable improvement. Internal growth in rest of world regions was 5.9%, that was led by strong performance in the emerging market countries.

Growth by category and these are global categories was strongest in the chairside consumables followed by the dental specialties and medical while lab continued to be slightly negative driven by weakness in Europe. On operational execution we continued to implement changes to improve our margins in this low growth environment.

We saw good market expansion for the third quarter running. We were up 80 basis points this quarter and at this point we’re also up 80 basis points in the year-to-date area so pretty consistent margin improvement throughout the year.

This gives us an adjusted EPS growth of just under 9% in the quarter which is up nicely against a 12% EPS growth, that’s adjusted EPS growth in the third quarter last year. So we were up against a reasonably tough base period. Adjusted EPS is also up 8.5% to 9% for the year-to-date, so through nine months.

When we entered the year we had stated that margin expansion and improving asset turns were important objectives for this year while continuing to invest in future growth initiatives.

I think the margin expansion that we see here is good evidence that we’re making strong progress on margins while asset management has also been quiet strong with operating cash flows growing close to 40% year-to-date. We’re pleased with these results given the low growth environment.

We believe the actions we’re taking today will facilitate stronger earnings growth even in a low growth environment like we’re in today but much higher earnings growth when markets return to more normal growth rates. We’re moving forward on a number of fronts to improve the operational execution.

This quarter we announced that we’re in talks with the Works Council in Germany to improve the performance of the European lab business. This initiative will become more clear over the next couple of quarters based on the progression of those discussions.

Another area of emphasis is consolidating or reducing certain product lines and eliminating SKUs where it’s optimal to our operating performance. This will likely result in our discontinuing some low margin product lines but also will result in improved asset returns and returns on invested capital.

We’ll update you more on that as we move through the fourth quarter here and into next year.

Of course with a strong cash flow comes improvements in our balance sheet giving us more flexibility for external investments such as acquisitions and also returning cash to shareholders via share repurchases and dividends, and Chris is going to speak more to that.

So, as we execute three we’re updating our earnings guidance for the full year to adjusted EPS of $2.49 to $2.53. We have some very good opportunities but also some significant currency and tax headwinds in the fourth quarter and also some cost headwinds based on some reinvestment plans that we have and Chris will give you more on that in a moment.

As far as 2015, we’re going to defer discussing or giving guidance on 2015 until we report our fourth quarter and the full year results and that’s the normal schedule that we follow, so we’ll give that to you in February. That concludes my prepared remarks, I’m going to turn the call over to Jim now for some operational comments. .

US; Europe; and rest of world show growth in our implant business. We anticipate that XiVE will continue to fuel growth as we further penetrate the larger markets. To-date the feedback has been very positive and the conversion rate is greater than anticipated. In addition one-third of the conversions are coming from new customers.

In regards to new products our Midwest division which markets and manufacturers high and low speed dental hand pieces and dental burs launched the Midwest E Electric handpiece at the recent ADA. The new electric handpiece has several unique features which allow our Midwest business compete in the important and growing electric handpiece segment.

This is a category where we have not been competitive in a meaningful way historically so we believe there is a good potential for this product line addition.

While the Midwest business is a market leader in dental handpiece and the bur business in North America, it is not widely marketed outside this region with the earlier launch of the Midwest automated handpiece station and now Midwest E we plan to further develop Midwest into a global business. As we enter Q4 we will launch several new products.

First TRUSHAPE, a new endodontic file system which is a shape adjusting file that preserves dentin and supports the emerging trend of minimal invasive dentistry. This is a new approach endodontics and as the market leader we believe we are well positioned to demonstrate its clinical effectiveness.

Second, we’ve launched a new guided surgery kit for the Astra Tech ED implant system. This is based off our market leading Simplant guided surgery system and will further support the launch of the Astra Tech ED System. Finally Miyabi, Miyabi high strength composite intended for the fabrication of anterior crowns.

This is an additional indication for the potential in innovation in non-metal crown and bridge materials which is a key focus of our prosthetics business. Miyabi has been recently approved for the Japanese public market and is in launch with excellent acceptance. I’d now like to turn it over to Chris Clark for the financial review. .

I’d like to provide some detail on our financial performance for the third quarter including our efforts to improve operating margin, cash flow, and asset utilization.

As Bret mentioned, internal sales growth in the quarter accelerated from the levels we saw in Q2 both globally and in all three major geographic regions with the US growth particularly notable given the 4.3% growth in base line in last year’s third quarter.

Our results included combined headwinds of about 75 basis points from a discontinued non-core non-dental product in the US that was insourced by a customer and also from ongoing headwinds from Russia CIS. Consistent with previous years, we implemented price increases across many of our businesses effective October 1st.

We estimate the pricing impact to be generally similar to previous years, although in a lower interest rate environment we believe customers may have pulled forward a modest level of incremental purchases in advance of the pricing change.

While it’s difficult to quantify, we estimate this impact to have been approximately 40 to 50 basis points in sales growth in the quarter. Gross profit rate on an adjusted basis in the quarter was 57.7% of sales excluding precious metals which represented an improvement of 110 basis points over last year’s third quarter.

The impact here is primarily price and mix effects in the period. SG&A expenses on an adjusted basis were 39.1% of sales excluding precious metals. This was 40 basis points above our run rate in Q3 2013 and reflects increased professional services spending in the quarter.

Operating margin for the quarter improved 80 basis points to 18.7% of sales excluding precious metals on an adjusted basis and that compares to 17.9% in the third quarter last year. I would add that currency was a slight headwind to operating margin in the quarter.

We continue to be pleased with our operating margin improvement as adjusted operating margin for the first nine months of 2014 is up by 80 basis points over prior year despite a 30 basis point headwind from currency over that period.

We believe that we are solidly on track towards our objective of reaching a 20% adjusted operating margin rate in 2017 and believe our margin improvement strategies are gaining traction.

Jim spoke to a number of the initiatives here so I won’t repeat those but I do want to comment while progress towards the 20% goal will not be linear, we are very much on track against the objectives and we’ll continue to provide perspective on key events and strategies as we move forward.

Our reported tax rate for the third quarter was 21.8% and our operating tax rate was 22.8% for the quarter. As anticipated tax represented a bit of a headwind in the quarter as the operating tax rate was 70 basis points above our 22.1% rate in the third quarter last year.

Year-to-date our operating tax rate of 22.6% is a 60 basis point headwind to last year’s rate. That’s consistent with the guidance that we provided for the year.

I should also note that this is also consistent with what we expect for the operating tax rate in the fourth quarter which will be a negative comparison of last year’s fourth quarter tax rate by about 180 basis points.

Net income attributable to DENTSPLY International on an as reported basis in the third quarter was $75.3 million or $0.52 per diluted share and that compares to $79.9 million or $0.55 per diluted share in the third quarter 2013. These results include a number of items which we’ve listed in the schedules in the press release.

On an adjusted basis, net earnings grew to $89.3 million from $82.2 million in the prior year quarter and adjusted diluted earnings per share grew 8.8% to $0.62 per diluted share compared to $0.57 per diluted share in the third quarter last year.

While we commented on the Q2 earnings call that then current rates would have minimal impact on earnings for the second half of the year, exchange rates moved against us as the quarter progressed with the strengthening of the US dollar against the euro being particularly acute.

As a result earnings in the third quarter were negatively impacted by currency by approximately $0.01 per share.

While rates are highly volatile at present, we anticipated currency being a headwind in fourth quarter earnings by about $0.02 per share as we enter the quarter with a euro rate that was 7% weaker versus the US dollar compared to the prior year.

Moving onto cash flow, our operating cash flow for the quarter was $147.5 million which represents a 17% increase over last year’s $126.5 million. This represents a record third quarter cash flow performance for the company, as our third straight quarterly record.

For the first nine months of 2013, our operating cash flow of $367.8 million represents an increase of $109.5 million over prior year which is a 42% increase. Our free cash flow yield has increased to well above 6% on a trailing 12 months basis.

We continue to focus on driving better cash conversion and while we’re pleased with the progress we continue to see opportunities to improve them even further moving forward as we continue to drive working capital improvements.

With respect to working capital, I had commented previously that after strategically increasing inventories for several quarters to support anticipated operational changes, we anticipated that inventories would start to decline in the second half of the year and then gradually return to more normal levels.

We are executing to that plan as inventories dropped by four days sequentially in the quarter and now stand at 119 days on a constant currency basis compared to 123 days at the end of June and 118 days last September. Account receivable days were 62 days at the end of September down two days from last year and up sequentially.

Capital expenditures were $24 million in the quarter while depreciation was $21 million and amortization was $13 million.

We anticipate cap ex to be approximately $110 million for the year and this reflects incremental investments in initiatives to support our 20% operating margin goal including continued investment in our common ERP platform initiative.

Net debt improved by over $117 million in the quarter and our net debt to capitalization ratio now stands at 32.2% compared to 35.8% a year ago and 48.2% right after the Astra Tech acquisition.

Given our rapid deleveraging of strong cash flow, we view capital deployment as a catalyst moving forward with focus on reinvestment in growth initiatives, acquisitions, and share repurchases. We remain highly engaged on the acquisition front and continue to see opportunities to strengthen the business through M&A.

From a share repurchase standpoint, the company repurchased approximately 345,000 shares of common stock in the quarter and that brings our year-to-date total to approximately 1.5 million shares.

Through September we’ve returned almost $100 million to shareholders through dividends and share buybacks, and as I mentioned we continue to see capital deployment through both M&A and share repurchases as opportunities to accelerate value moving forward.

As we look to the fourth quarter we’re assuming generally similar market trends to what we’ve experienced recently.

We’re also anticipating comparative headwinds of approximately $0.05 per share as a result of the currency impact I mentioned previously, a modest contraction in channel inventories as a result of purchases ahead of the October price increase, incremental investments to support our operating margin improvement initiatives, and also the continued year-on-year headwind in our operating tax rate that actually increases in the fourth quarter.

Based on these factors, we’re narrowing our adjusted earnings per share guidance to a range of $2.49 to $2.53 for the year. That completes our prepared remarks. We certainly appreciate your support and we’d be glad to take any questions you may have..

(Operator Instructions) Your first question comes from Brandon Couillard – Jefferies & Co..

In terms of the organic revenue growth acceleration in the quarter, can you speak to the improvements on a sequential basis? What exactly changed to go from a modest decline in Q2 to up about 2.4% in the third quarter? Could you speak to any variability you saw month-to-month through the period and particularly how you exited the quarter, especially in the US..

The improvements we saw were pretty broad across the spectrum of both countries and products. Europe in particular was broad, I mentioned that in my prepared remarks.

If I had to point a finger at things that have improved from a product category basis, it would be the chairside consumables have been strong for us but continue to be particularly strong for us in the third quarter.

We saw our performance in implants improve in the third quarter and again, on a regional basis we saw Europe improve pretty notably in the quarter so that’s a couple items. I’d also say the things that were dragging our performance became less of a drag in the third quarter as well.

As far as improvement throughout the quarter, I’m going to tell you that September was by far the best but you know, the third quarter, particularly in Europe, is a one month quarter, September is basically all you get and in this September there was an extra selling day.

We were short a selling day in August but we had an extra selling day in September so we would have expected it to be strong. With respect to the US market, I don’t know that I saw a huge variance throughout the quarter so I would say we exited the quarter at about a pace we saw throughout the quarter, not notably stronger or weaker. .

Chris, I guess a two-part question for you, on the working capital front could you speak to what you perceive as the incremental near term opportunity on the inventory side? Should we expect those levels to decline on an absolute basis over the coming quarters? Secondly, without sort of getting into guidance for next year but just to give us a benchmark, at current rates can you quantify what the EPS headwind would be from currency in 2015 for us?.

Relative to working capital and specifically inventory, I mean, we commented previously that we had increased strategically inventories in advance of some operational changes and we anticipated in the second half of 2014 for that to begin to gradually come down and continue to come down in 2015.

Again, as I commented, I think we’re very much on that plan we came down four days sequentially in the third quarter. We’re pleased with that. We would anticipate some continued progress in the fourth quarter.

Typically our fees in terms of inventory through the year typically have this increasing inventory slightly in the first half of the year and then bringing it down. But again, I think four days coming down in a quarter is pretty strong for us.

As we look at it, I wouldn’t anticipate Q4 continuing to come down a bit and as we look to next year I think we’ll continue to come down.

We may not come down quiet as sequentially or quite to that same degree or that same rate, but we’re sitting at 119 days which gives us significant opportunity yet to bring this down to a far more reasonable number.

Regarding FX, I’m not going to quantify what the FX headwind would be for next year but obviously, as we enter Q4 we see a pretty significant strengthening of the US dollar against a number of factors, a number of other currencies.

I mean, against the euro we’re basically – we came into the quarter about 7% stronger in terms of the dollar against the euro. That’s pretty consistent among other major currencies.

Obviously, we have a cash flow hedging program in place that helps to moderate that if you will or gradualize that but there’s no doubt that in general a weaker dollar is certainly helpful to us relative to a stronger dollar. We’ll provide more flavor on that if the rates stay where they are.

In any case wherever the rates are we’ll provide more flavor on that on the call in February..

Your next question comes from Unidentified Analyst – Goldman Sachs. .

If I could just ask on the performance you saw in implants in the quarter, definitely better than we’ve seen for the last several quarters.

I’d just be curious to get your thoughts on how much of the improvement might have been tied to just stronger growth in the overall implant market versus what was maybe related to share gains that came with the launch of Astra Tech EV system..

I would say that when we look at the overall implant market we believe that’s growing at mid-single digit levels. We feel that we’re in alignment with that. The performance in the various markets obviously, CIS continues to be a very significant drag. We saw improvement in Europe ex CIS probably at the best level we’ve seen since the acquisition.

We actually would like to think that that’s a little bit better than market within Europe. As far as the rest of the geographies, I think we felt that we were pretty much in line with that. It could be a little bit stronger in North America..

I’d add to that, the EV launch really took hold with full inventory in September for us in North America so we’re just getting into that..

If I could just shift gears to the efficiency initiatives that you’re working on and the margin expansion that you’ve seen.

I’d just be curious to get your thoughts on does that allow you to invest in your competitive positioning in the market and try to go after share more aggressively? Maybe overall, kind of your thoughts on investing some of these savings back into the business..

That’s a great question and the program is designed to take cost out in certain elements of the business and reinvest a portion of those savings in variable spending for growth.

So we are now and we will be, as we move through the next two years on the margin expansion program, redirecting some of the savings – and the margin target is a net target, it’s net of the reinvestment. But we’ll be reinvesting some of those savings in four or five areas that we think can facilitate stronger growth going forward.

So, that is part of the program..

Your next question comes from [Unidentified Analyst] – William Blair & Co..

You mentioned implants a few times, how did the other specialties fair in ortho in the quarter?.

I’d say it’s a mix bag. Endo quite well, you know, we’ve got a full bag of innovation both that’s been launched in endo and that’s coming so we’re quite optimistic about that business.

Ortho, is a business that is under repair for us still and we’ve commented on these calls before, and I think it’s still true that that’s an area where competition is just really fierce meaning there’s a lot of discounting, a lot of packaged deals, people trying to load up customers, etc.

Probably the most competitive area of dentistry right now and the one area that I would say is under price pressure. Those circumstances continue from what we commented on over the last couple of quarters. .

How far along are you in the process of regaining some of those clients that you lost a few years back?.

We’ve consistently worked over the last couple of quarters on regaining those customers. I think as Bret has described, it has been somewhat of a dog fight. We believe that we got the initial two-thirds back pretty quickly. Obviously, capacity has increased in the market.

The price pressure is there, market indications may be that [K] starts are probably flat at best so it’s a very challenging market environment. I think we are putting programs in place, we are making the investments in the field organization and we are actively working to regain those customers..

I might add that I think we commented earlier or previously that we’re managing this business for customer count at this stage. So again, we’re very, very focused on basically an account-by-account war or battle if you will and again, obviously competition is doing what they can to keep those accounts as well..

One more if I could. You mentioned in your prepared remarks that there’d be some discontinued products over the next couple of quarters.

Will we see an impact to the topline from those or will it be too small to notice?.

It depends on timing and in part this is subject to what we’re doing to the lab business in Europe so that’s subject to discussions with the Works Councils. To the extent it’s significant we’ll call it out for you.

I don’t expect it to be material to the company any way, probably some trimming around the edges but if any one period is notable then we’ll comment on it for you..

Your next question comes from Erin Wilson – Bank of America..

Can you just go over kind of what are the next immediate steps to your cost savings initiatives that you’ve laid out? It sounds like you’re progressing according to plan but has anything surprised you there and can you quantify how much were incremental costs associated with those initiatives that may have offset some of the profit margin improvement in the quarter as well as what’s embedded in the guidance for the fourth quarter?.

I’m going to start by talking about the initiative itself, I’m going to let Chris address the impact in the second and third quarters and the impact we expect in the fourth quarter.

The program is pretty broad, it’s designed to take advantage of the global footprint we have, become as efficient as we can and then direct resources out to growth areas in the business model. The areas that we’ve commented on thus far are procurement initiative and that’s well under way. That’s an area actually that we’re investing in right now.

We’ve talked about consolidation of certain business units, Jim mentioned those in his remarks. Those are important, we’ve had a total of three manufacturing facilities be consolidated since we initiated the program.

I don’t want to get into forward-looking statements on the program at this point because in part where this program goes will be subject to things like discussions with the Works Council that we’ve mentioned in Germany so far.

But I think from a broad perspective it’s based on and we’ll see savings in both the gross margin line and the SG&A line and the reinvestment will probably be more in the SG&A line.

Chris, do you anything to add?.

In terms of the external costs, if you will, incremental costs associated with the program you should think of it probably in the terms of half a penny headwind to the third quarter and probably closer to a full penny in the fourth quarter and that’s embedded in the $0.05 collective headwind that I mentioned earlier. .

Can you elaborate on that pull forward in the quarter that you mentioned that benefitted revenue and if that’s something that carries forward into the next quarter or how we should think about that?.

This is an annual occurrence if you [inaudible] agree in the context of we go out and many of our businesses have annual prices increases October 1st. We telegraph those price increases to our distributor partners that basically allows them to make the necessary changes they need to in their systems relative to their pricing, their catalogs, etc.

That also provides them an opportunity to look at the price increase and make some buying decisions on their part relative to what they want to pull in, in advance of that.

In a lower interest rate environment – we took – our price increase overall was pretty similar to normal years but obviously, in a lower interest rate environment some dealers may have pulled in a little more year-on-year than they did last year.

Again, I don’t think this is that significant but it may be 40 to 50 basis points in terms of the overall internal growth number in the quarter and obviously, that would be a temporary impact that would then come out in the fourth quarter. .

Your next question comes from Jeff Johnson – Robert W. Baird..

Most of my questions have been answered at this point but let me circle back to one implant question if I could and then maybe just one quick modeling question. On the implant side, a number obviously above what a lot of us were expecting.

I was wondering if maybe you could give us some EV details by geography? You said it was more robustly launched in September, I think that’s probably a US and maybe a German comment but where else could we see that launched here in the next six, to 12, to 18 months and any comments on when you might be able to get that into Japan?.

Let me let Jim deal with the timing issues on that..

From a standpoint of the launch, the majority of our launch impacts have occurred really in Europe and some of the larger geographies, Germany really started up in summer and then in the United States we’ve been managing capacities on this launch. Conversion process has been very strong, as a result we started some of the larger markets fats.

So quite frankly, we’ve seen good growth really from the European markets and then the North American markets quite frankly are just getting started. So we expect to see favorable impacts from them over time. I would say the North American market is challenging.

It’s a large market, it’s heavily referral base and as a result the conversion process can be a bit more demanding but we’re seeing good uptake from that standpoint. As it relates to Japan, we’re in the very – obviously, we’ve gone ahead with the registration process. We don’t have a good timeframe on that right now.

If I had an expectation I would expect more towards the end of next year at the earliest for Japan..

On the North American comments, I think probably even Europe to a certain extent with EV, we’ve heard in some of our conversations that there might be some channel abutment issues you’re still kind of going through and obviously, I think some of the Atlantis specialty abutment business maybe facing a little bit of pressure in general over the last year.

But generally speaking, have you been dealing with some channel inventory issues there? Is there reason to believe that over the next quarter or two if you’re already growing back in line with market that we have a chance to see kind of some above market growth out of your implant business here over the next few quarters?.

I think that’s a little hard to predict right at this stage. I would say on our digital business, on our Atlantis businesses, it was in my prepared comments, we still see double digit growth globally in that business and we continue to integrate some other portfolios in that business such as our Essix products line.

So we’re seeing some good movement in that portfolio. The abutment issue is probably stronger in the referral based markets because you have a situation where you have general practitioners and labs that obviously have liquidation of abutment inventories and as those recover we should see improved growth..

Then Chris just a couple of modeling questions here real quickly. We talked a little bit about that pull forward effect that’ll impact fourth quarter a little bit, it doesn’t sound like from Bret’s comments that the product rationalization issues will create much of a headwind going forward or at least not a sizeable one.

How do we think about then as that customer insourcing issue comes off, I was interested to hear your lab comments that maybe that business starting to bottom out.

I think that’s maybe a 50 to 100 basis points of drag here for the last couple of years so is there – as these new products launch and those issues come off, it seems like there’s some tailwinds here going into ’15, and I know you’re not providing ’15 guidance, but is it right to think of some of those things coming off as providing some incremental tailwinds into next year?.

Obviously, you [inaudible] we’ll give some thoughts on ’15 a little bit in more depth here on the next call but I think there’s a number of pluses and minuses here. Jim spoke, I think, to the implant momentum and obviously any additional momentum there is certainly helpful.

Relative to the non-dental product in the US that’s being insourced that’ll be a headwind here for a little bit yet but sequentially a little bit less for the next couple of quarters. Obviously, a big factor for us is Russia CIS in the context of basically how that looks.

That continues to be a headwind of about 140 basis points on the European number so from that angle any improvement there is certainly going to help us. You hit it in terms of new products. I mean, innovation drives our business, Jim hit several of those and obviously, as we have stronger innovation cycles, that certainly should help us as well.

So again, I think there’s a number of pluses and minuses with it but I think that overall we certainly are pleased with the little bit more momentum that we had in Q3..

(Operator Instructions) Your next question comes from Jonathan Block – Stifel..

Maybe just two or three questions, Christ the first one, the gross margins were really big and I know you called out good mix but you had that performance in light of no longer benefitting from sort of a build in inventory.

I don’t think you’ve seen gross margin expansion north of 100 bips since early 2012 so can you just maybe parse out for us in your opinion what level of the expansion is sustainable? Then when we look out at the 20% out margin goal, maybe going forward from here how do you see that mix between op ex leverage and further gross margin expansion?.

Let me answer the second part first and then we’ll kind of come back to the quarter. As we look at the 20% operating margin goal, we see opportunities both on the SG&A side as well as on the gross profit side.

Relative to the gross profit side specifically, capacity utilization and obviously the procurements leverage that we think we can get out by acting in a far more coordinating manner globally is certainly helpful to that gross profit line and obviously, we’ve anticipated that gaining more momentum moving forward.

On the SG&A side obviously, as look to leverage our SG&A base more effectively across our businesses I think that certainly is most helpful there. So I think I would characterize the improvement to the 20% operating margin goal as really hitting both lines pretty materially.

In terms of the quarter, on the gross profit rate we were up 110 basis points. We had the two largest impacts there were price and mix in that order. I think that certainly we also did have a bit of improvement in terms of underlying manufacturing costs. But again, we certainly focus on both price and mix on an ongoing basis.

We’re pleased with the result in the quarter and again, I don’t know that I would say that I would anticipate 110 basis points every quarter in terms of gross profit rates but I also think these are strategies in place by our businesses in terms of being aggressive where they can be on price and also focusing on what they can do particularly through innovation to drive to higher margin products..

Bret, for you the efficiency that’s been impressive and quite honestly a little bit quicker to materialize than we thought especially in light of still modest growth in the industry and I believe you even got a little bit of an FX headwind on the op margin so you’re up or tracking towards probably 70 basis points here in ’14.

I think you initially said you expected the cadence to be somewhat consistent to the 20%.

Is this something where as you sit here six months post putting some of the initiatives in place you feel very confident about getting 20% in ’17 and if market growth returns you could even see going north of that?.

I think the easy answer to that question is yes, we’re very confident we can get to the 20% by 2017. I mean, it’s ingrained in all of our planning, we’ve got a number of initiatives underway to make sure we achieve that so I think you should view the confidence as high that we’ll get there.

As far as the phasing or the timing of that, thus far this year it looks a little bit linear. I don’t think it will be linear throughout the three year period because some of it will be event driven.

So there will be some periods where we get greater margin expansion, there may be some periods where we give a little bit of that back as we make reinvestments or for whatever reason. We’re pleased with where it has gone so far.

It does look linear so far but it’s unlikely to be linear going forward and I think the entire organization is fully engaged to make sure we make that 20% target in ’17..

Last one, if I can just quickly get one additional one in there.

Bret, I think this one is also for you, just on the implant side more than implant mix I’d go more down the road of channel mix, you had [inaudible] and sort of getting a new implant out here recently approved in the US and then yesterday’s announcement between Patterson and Straumann, it seems like some of your competitors are getting a little bit more aggressive in the US specific to the GP channel and maybe you could just give us your thoughts on how you see that evolving and will you change your selling effort specific to that channel in the incoming quarters or years?.

Let me comment on the model that has existed in the US for some time which is a referral model, I think Jim mentioned that.

Typically, in implants because one it’s difficult, two there’s a fair amount of risks including legal risk, by far it’s the most litigated area of dentistry that we know of, and the consequences of an implant failure are of course much greater and much more obvious than almost anything else we do.

We believe the current model has developed because there’s a fair amount of expertise required in placing the implant, placing the screw but not as much expertise required in restoring the implant.

Jim mentioned, this makes product conversions a little bit harder in this market because you’ve got to convert both the specialist and the general practitioner that is going to restore the implant. That model has worked pretty well. We’ve seen failure rates well under control and that is a model that we continue to reinforce.

You mentioned a couple of competitors, I don’t want to talk specifically about what any one competitor is doing but we’ve seen the models evolve over time, we’ve seen different competitors try different strategies and frankly, we watch those closely to see if they’re indicative of a market shift of any kind that we need to participate in or react to.

So this point, I would say we’re watching it closely but staying with our support of the surgeon in placing the implant and the referral model for the restoration by the dentist..

It appears there are no further questions at this time. I’d like to turn the call back over to our speakers for any additional or closing remarks..

Thank you very much for your support and interest in DENTSPLY. That concludes our conference call. If you have further questions I’m available today for follow up. Good bye..

This concludes today’s conference. We appreciate your participation..