10-K 1 f102003.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission file number 0-16211 DENTSPLY International Inc. (Exact name of registrant as specified in its charter) Delaware 39-143466 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 221 West Philadelphia Street, York, Pennsylvania 17405-0872 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (717) 845-7511 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None Not applicable Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ] The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 28, 2002 was $2,827,512,659. The number of shares of the registrant's Common Stock outstanding as of the close of business on March 1, 2004 was 80,239,253. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the definitive Proxy Statement of DENTSPLY International Inc. to be used in connection with the 2004 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent provided herein. Except as specifically incorporated by reference herein the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K. PART I Item 1. Business Certain statements made by the Company, including without limitation, statements containing the words "plans", "anticipates", "believes", "expects", or words of similar import may be deemed to be forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties which are described in this Item 1 and which may materially affect the Company's business and prospects. History and Overview DENTSPLY International Inc. ("DENTSPLY" or the "Company"), a Delaware corporation, was created by a merger of Dentsply International Inc. ("Old Dentsply") and GENDEX Corporation in 1993. Old Dentsply, founded in 1899, was a manufacturer and distributor of artificial teeth, dental equipment, and dental consumable products. GENDEX, founded in 1983, was a manufacturer of dental x-ray equipment and handpieces. On December 11, 2003, the Company entered into a definitive agreement to sell the x-ray equipment business of the prior GENDEX Corporation to Danaher Corporation for $102.5 million which was completed on February 27, 2004. Reference is made to the information about discontinued operations set forth in Note 6 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. DENTSPLY is the world's largest designer, developer, manufacturer and marketer of a broad range of products for the dental market. The Company's worldwide headquarters and executive offices are located in York, Pennsylvania. The Company operates within five operating segments all of which are primarily engaged in the design, manufacture and distribution of dental products in three principal categories: 1) Dental consumables, 2) Dental laboratory products, and 3) Specialty dental products. Sales of the Company's dental products accounted for approximately 98% of DENTSPLY's consolidated sales for the year ended December 31, 2003. The remaining 2% of consolidated sales is primarily related to materials sold to the investment casting industry. The Company conducts its business in over 120 foreign countries, principally through its foreign subsidiaries. DENTSPLY has a long-established presence in Canada and in the European market, particularly in Germany, Switzerland, France, Italy and the United Kingdom. The Company also has a significant market presence in Central and South America including Brazil, Mexico, Argentina, Colombia, and Chile; in South Africa; and in the Pacific Rim including Australia, New Zealand, China (including Hong Kong), Thailand, India, Philippines, Taiwan, Korea, Vietnam, Indonesia and Japan. DENTSPLY has also established marketing activities in Moscow, Russia to serve the countries of the former Soviet Union. For 2003, 2002, and 2001, the Company's sales to customers outside the United States, including export sales, accounted for approximately 58%, 56% and 39%, respectively, of consolidated net sales. Reference is made to the information about the Company's United States and foreign sales by shipment origin and assets set forth in Note 4 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. As a result of the Company's significant international operations, DENTSPLY is subject to fluctuations in exchange rates of various foreign currencies and other risks associated with foreign trade. The impact of currency fluctuations in any given period can be favorable or unfavorable. The impact of foreign currency fluctuations of European currencies on operating income is partially offset by sales in the United States of products sourced from plants and third party suppliers located overseas, principally in Germany and Switzerland. The Company enters into forward foreign exchange contracts to selectively hedge assets, liabilities and purchases denominated in foreign currencies. Reference is made to the information regarding foreign exchange risk management activities set forth in Quantitative and Qualitative Disclosure About Market Risk under Item 7A and Note 17 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. DENTSPLY believes that the dental products industry is experiencing substantial consolidation with respect to both product manufacturing and distribution, although it continues to be fragmented creating numerous acquisition opportunities. As a result, during the past three years, the Company has made numerous acquisitions including three significant acquisitions made during 2001. In January 2001, the Company acquired the outstanding shares of Friadent GmbH ("Friadent"), a global dental implant manufacturer and marketer previously headquartered in Mannheim, Germany. In March 2001, the Company acquired the dental injectible anaesthetic assets of AstraZeneca ("AZ Assets"). The assets acquired in the business consisted primarily of an exclusive, perpetual, royalty-free licensing rights to the dental products and tradenames. In addition, certain limited equipment was acquired, but no production facilities were acquired as part of the transaction. In October 2001, the Company acquired the Degussa Dental Group ("Degussa Dental"), a manufacturer and seller of dental products, including precious metal alloys, ceramics, dental laboratory equipment and chairside products previously headquartered in Hanau, Germany. Information about these acquisitions and other acquisition and divestiture activities is set forth in Note 3 of the Notes to Consolidated Financial Statements in the Company's 2003 Annual Report to Shareholders and is incorporated herein by reference. These acquisitions are intended to supplement DENTSPLY's core growth and assure ongoing expansion of its business. In addition, acquisitions have provided DENTSPLY with new technologies and additional product breadth. Certain provisions of DENTSPLY's Certificate of Incorporation and By-laws and of Delaware law could have the effect of making it difficult for a third party to acquire control of DENTSPLY. Such provisions include the division of the Board of Directors of DENTSPLY into three classes, with the three-year term of a class expiring each year, a provision allowing the Board of Directors to issue preferred stock having rights senior to those of the common stock and certain procedural requirements which make it difficult for stockholders to amend DENTSPLY's By-laws and call special meetings of stockholders. In addition, members of DENTSPLY's management and participants in its Employee Stock Ownership Plan collectively own approximately 10% of the outstanding common stock of DENTSPLY, which may discourage a third party from attempting to acquire control of DENTSPLY in a transaction that is opposed by DENTSPLY's management and employees. Principal Products The worldwide professional dental industry encompasses the diagnosis, treatment and prevention of disease and ailments of the teeth, gums and supporting bone. DENTSPLY's principal dental product categories are dental consumables, dental laboratory products and dental specialty products. These products are produced by the Company in the United States and internationally and are distributed throughout the world under some of the most well-established brand names and trademarks in the industry, including ANKYLOS(R), AQUASIL(TM), CAULK(R), CAVITRON(R), CERAMCO(R), CERCON(R), CITANEST(R), DELTON(R), DENTSPLY(R), DETREY(R), ELEPHANT(R), ESTHET.X(R), FRIALIT(R), GAC ORTHOWORKS(TM), GOLDEN GATE(R), IN-OVATION(TM), MAILLEFER(R), MIDWEST(R), MYSTIQUE(TM), NUPRO(R), PEPGEN P-15(TM), POLOCAINE(R), PROFILE(R), PROTAPER(TM), RINN(R), R&R(R), SANI-TIP(R), THERMAFIL(R), TRUBYTE(R) and XYLOCAINE(R). Dental Consumables. Consumable products consist of dental sundries used in dental offices in the treatment of patient and small equipment used by the dental professional. DENTSPLY's products in this category include dental anesthetics, prophylaxis paste, dental sealants, impression materials, restorative materials, tooth whiteners, and topical fluoride. The Company manufactures thousands of different consumable products marketed under more than a hundred brand names. Small equipment products consist of various durable goods used in dental offices for treatment of patients. DENTSPLY's small equipment products include high and low speed handpieces, intraoral curing light systems and ultrasonic scalers and polishers. Sales of general dental consumables accounted for approximately 35% of the Company's consolidated sales for the year ended December 31, 2003. Dental Laboratory Products. Laboratory products are used in dental laboratories in the preparation of dental appliances. DENTSPLY's products in this category include dental prosthetics, including artificial teeth, precious metal dental alloys, dental ceramics, and crown and bridge materials. Small equipment in this category includes computer aided machining (CAM) ceramics systems and porcelain furnaces. Sales of dental laboratory products accounted for approximately 33% of the Company's consolidated sales for the year ended December 31, 2003. Dental Specialty Products. Specialty dental products are used for specific purposes within the dental office and laboratory settings. DENTSPLY's products in this category include endodontic (root canal) instruments and materials, implants, and orthodontic appliances and accessories. Sales of specialty products accounted for approximately 30% of the Company's consolidated sales for the year ended December 31, 2003. Markets, Sales and Distribution DENTSPLY distributes approximately 55% of its dental products through domestic and foreign distributors, dealers and importers. However, certain highly technical products such as precious metal dental alloys, dental ceramics, crown and bridge porcelain products, endodontic instruments and materials, orthodontic appliances, implants and bone substitute and grafting materials are sold directly to the dental laboratory or dental professional in some markets. No single customer accounted for more than ten percent of consolidated net sales in 2003. Reference is made to the information about the Company's foreign and domestic operations and export sales set forth in Note 4 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Although much of its sales are made to distributors, dealers, and importers, DENTSPLY focuses its marketing efforts on the dentists, dental hygienists, dental assistants, dental laboratories and dental schools who are the end users of its products. As part of this end-user "pull through" marketing approach, DENTSPLY employs approximately 1,700 highly trained, product-specific sales and technical staff to provide comprehensive marketing and service tailored to the particular sales and technical support requirements of the dealers and the end users. The Company conducts extensive distributor and end-user marketing programs and trains laboratory technicians and dentists in the proper use of its products, introducing them to the latest technological developments at its Educational Centers located throughout the world in key dental markets. The Company also maintains ongoing relationships with various dental associations and recognized worldwide opinion leaders in the dental field. DENTSPLY believes that demand in a given geographic market for dental procedures and products varies according to the stage of social, economic and technical development that the market has attained. Geographic markets for DENTSPLY's dental products can be categorized into the following three stages of development: The United States, Canada, Western Europe, the United Kingdom, Japan, and Australia are highly developed markets that demand the most advanced dental procedures and products and have the highest level of expenditures on dental care. In these markets, the focus of dental care is increasingly upon preventive care and specialized dentistry. In addition to basic procedures such as the excavation and filling of cavities and tooth extraction and denture replacement, dental professionals perform an increasing volume of preventive and cosmetic procedures. These markets require varied and complex dental products, utilize sophisticated diagnostic and imaging equipment, and demand high levels of attention to protection against infection and patient cross-contamination. In certain countries in Central America, South America and the Pacific Rim, dental care is often limited to the excavation and filling of cavities and other restorative techniques, reflecting more modest per capita expenditures for dental care. These markets demand diverse products such as high and low speed handpieces, restorative compounds, finishing devices and custom restorative devices. In the People's Republic of China, India, Eastern Europe, the countries of the former Soviet Union, and other developing countries, dental ailments are treated primarily through tooth extraction and denture replacement. These procedures require basic surgical instruments, artificial teeth for dentures and bridgework. The Company offers products and equipment for use in markets at each of these stages of development. The Company believes that as each of these markets develop, demand for more technically advanced products will increase. The Company also believes that its recognized brand names, high quality and innovative products, technical support services and strong international distribution capabilities position it well to take advantage of any opportunities for growth in all of the markets that it serves. The Company believes that the following trends support the Company's confidence in its industry growth outlook: o Increasing worldwide population. o Growth of the population 65 or older - The percentage of the United States, European and Japanese population over age 65 is expected to nearly double by the year 2030. In addition to having significant needs for dental care, the elderly are well positioned to pay for the required procedures since they control sizable amounts of discretionary income. o Natural teeth are being retained longer - Individuals with natural teeth are much more likely to visit a dentist in a given year than those without any natural teeth remaining. o The Changing Dental Practice in the U.S. - Dentistry in North America has been transformed from a profession primarily dealing with pain, infections and tooth decay to one with increased emphasis on preventive care and cosmetic dentistry. o Per capita and discretionary incomes are increasing in emerging nations - As personal incomes continue to rise in the emerging nations of the Pacific Rim and Latin America, healthcare, including dental services, are a growing priority. o The Company's business is less susceptible than other industries to general downturns in the economies in which it operates. Many of the products the Company offers relate to dental procedures that are considered necessary by patients regardless of the economic environment. Product Development Technological innovation and successful product development are critical to strengthening the Company's prominent position in worldwide dental markets, maintaining its leadership positions in product categories where it has a high market share, and increasing market share in product categories where gains are possible. While many of DENTSPLY's innovations represent sequential improvements of existing products, the Company also continues to successfully launch products that represent fundamental change. Its research centers throughout the world employ approximately 400 scientists, Ph.D.'s, engineers and technicians dedicated to research and product development. Approximately $43.3 million, $39.9 million, and $27.3 million, respectively, was internally invested by the Company in connection with the development of new products and in the improvement of existing products in the years ended 2003, 2002, and 2001, respectively. There can be no assurance that DENTSPLY will be able to continue to develop innovative products and that regulatory approval of any new products will be obtained, or that if such approvals are obtained, such products will be accepted in the marketplace. Additionally, there is no assurance that entirely new technology or approaches to dental treatment will not be introduced that could obsolete the Company's products. Operating and Technical Expertise DENTSPLY believes that its manufacturing capabilities are important to its success. The manufacture of the Company's products requires substantial and varied technical expertise. Complex materials technology and processes are necessary to manufacture the Company's products.The Company continues to automate its global manufacturing operations in order to remain a low cost producer. DENTSPLY has completed or has in progress a number of key initiatives around the world that are focused on helping the Company improve its operating margins. o The Company is constructing a major dental anesthetic filling plant outside Chicago. The Company believes that the plant will become operational late in 2004, following the FDA validation of manufacturing practices, at which time it will begin to supply products to certain international markets. This initiative is very important to the Company since the assets acquired from AstraZeneca did not include production facilities. The company has a contract with AstraZeneca to produce the company's requirements at their facilities on a contract manufacturing basis pending the completion of the Company's manufacturing facility in Chicago, Illinois. The contract with AstraZeneca has recently been renegotiated and extended to March 2005, with further extensions available to the Company with six months advance notice. Based on the current contract manufacturing arrangement in place, the Company believes that it has sufficient sources of supply and contractual flexibility to ensure a continued source of supply until the facilities in Chicago are completed. o A Corporate Purchasing office has been established to leverage the buying power of Dentsply around the world and reduce our product costs through lower prices and reduced related overhead. o The Company has centralized its warehousing and distribution in North America and Europe. While the initial gains from this strategy have been realized, ongoing efforts are in place to maximize additional opportunities that can be gained through improving our functional expertise in supply chain management. In an effort to improve customer service levels and reduce costs, the Company is currently in the process of relocating its European warehouse form Nijmegen, The Netherlands to Radolfzell, Germany. This relocation is expected to be complete by the first quarter of 2004. o A Corporate Quality group is focused on improving manufacturing and distribution processes throughout the Company with a goal to eliminate non-value added activities, improving product quality and expanding product margins. o DENTSPLY has seen significant gains from the formation of a North American Shared Services group. The Company is evaluating the possible efficiency opportunities related to consolidating accounting and finance processes within Europe. o Information technology initiatives are underway to standardize worldwide telecommunications, implement improved manufacturing and financial accounting systems and an ongoing training of IT users to maximize the capabilities of global systems. o DENTSPLY continues to pursue opportunities to leverage its assets by consolidating business units where appropriate and to optimize its diversity of worldwide manufacturing capabilities. Financing DENTSPLY's long-term debt at December 31, 2003 was $790.2 million and the ratio of long-term debt to total capitalization was 41.3%. This capitalization ratio is down from 54.3% at December 31, 2001, the quarter in which the Degussa Dental acquisition was completed. DENTSPLY may incur additional debt in the future, including the funding of additional acquisitions and capital expenditures. DENTSPLY's ability to make payments on its indebtedness, and to fund its operations depends on its future performance and financial results, which, to a certain extent, are subject to general economic, financial, competitive, regulatory and other factors that are beyond its control. Although the Management believes that the Company has and will continue to have sufficient liquidity, there can be no assurance that DENTSPLY's business will generate sufficient cash flow from operations in the future to service its debt and operate its business. DENTSPLY's existing borrowing documentation contains a number of covenants and financial ratios which it is required to satisfy. Any breach of any such covenants or restrictions would result in a default under the existing borrowing documentation that would permit the lenders to declare all borrowings under such documentation to be immediately due and payable and, through cross default provisions, would entitle DENTSPLY's other lenders to accelerate their loans. DENTSPLY may not be able to meet its obligations under its outstanding indebtedness in the event that any cross default provision is triggered. The Company has $21.1 million of long-term debt coming due in the next year. Additional information about DENTSPLY's working capital, liquidity and capital resources provided in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K. Competition The Company conducts its operations, both domestic and foreign, under highly competitive market conditions. Competition in the dental products industry is based primarily upon product performance, quality, safety and ease of use, as well as price, customer service, innovation and acceptance by professionals and technicians. DENTSPLY believes that its principal strengths include its well-established brand names, its reputation for high-quality and innovative products, its leadership in product development and manufacturing, and its commitment to customer service and technical support. The size and number of the Company's competitors vary by product line and from region to region. There are many companies that produce some, but not all, of the same types of products as those produced by the Company. Certain of DENTSPLY's competitors may have greater resources than does the Company in certain of its product offerings. The worldwide market for dental supplies is highly competitive. There can be no assurance that the Company will successfully identify new product opportunities and develop and market new products successfully, or that new products and technologies introduced by competitors will not render the Company's products obsolete or noncompetitive. Regulation The Company's products are subject to regulation by, among other governmental entities, the United States Food and Drug Administration (the "FDA"). In general, if a dental "device" is subject to FDA regulation, compliance with the FDA's requirements constitutes compliance with corresponding state regulations. In order to ensure that dental products distributed for human use in the United States are safe and effective, the FDA regulates the introduction, manufacture, advertising, labeling, packaging, marketing and distribution of, and record-keeping for, such products. The anesthetic products sold by the Company are regulated as a drug by the FDA and by all other similar regulatory agencies around the world. Dental devices of the types sold by DENTSPLY are generally classified by the FDA into a category that renders them subject only to general controls that apply to all medical devices, including regulations regarding alteration, misbranding, notification, record-keeping and good manufacturing practices. DENTSPLY's facilities are subject to periodic inspection by the FDA to monitor DENTSPLY's compliance with these regulations. There can be no assurance that the FDA will not raise compliance concerns. Failure to satisfy FDA requirements can result in FDA enforcement actions, including product seizure, injunction and/or criminal or civil proceedings. In the European Union, DENTSPLY's products are subject to the medical devices laws of the various member states which are based on a Directive of the European Commission. Such laws generally regulate the safety of the products in a similar way to the FDA regulations. DENTSPLY products in Europe bear the CE sign showing that such products adhere to the European regulations. All dental amalgam filling materials, including those manufactured and sold by DENTSPLY, contain mercury. Various groups have alleged that dental amalgam containing mercury is harmful to human health and have actively lobbied state and federal lawmakers and regulators to pass laws or adopt regulatory changes restricting the use, or requiring a warning against alleged potential risks, of dental amalgams. The FDA's Dental Devices Classification Panel, the National Institutes of Health and the United States Public Health Service have each indicated that no direct hazard to humans from exposure to dental amalgams has been demonstrated. If the FDA were to reclassify dental mercury and amalgam filling materials as classes of products requiring FDA pre-market approval, there can be no assurance that the required approval would be obtained or that the FDA would permit the continued sale of amalgam filling materials pending its determination. In Europe, in particular in Scandinavia and Germany, the contents of mercury in amalgam filling materials has been the subject of public discussion. As a consequence, in 1994 the German health authorities required suppliers of dental amalgam to amend the instructions for use for amalgam filling materials, to include a precaution against the use of amalgam for children under eighteen years of age and to women of childbearing age. DENTSPLY also manufactures and sells non-amalgam dental filling materials that do not contain mercury. The introduction and sale of dental products of the types produced by the Company are also subject to government regulation in the various foreign countries in which they are produced or sold. DENTSPLY believes that it is in substantial compliance with the foreign regulatory requirements that are applicable to its products and manufacturing operations. Sources and Supply of Raw Materials All of the raw materials used by the Company in the manufacture of its products are purchased from various suppliers and are available from numerous sources. No single supplier accounts for a significant percentage of DENTSPLY's raw material requirements. Intellectual Property Products manufactured by DENTSPLY are sold primarily under its own trademarks and trade names. DENTSPLY also owns and maintains more than 1,000 patents throughout the world and is licensed under a small number of patents owned by others. DENTSPLY's policy is to protect its products and technology through patents and trademark registrations in the United States and in significant international markets for its products. The Company carefully monitors trademark use worldwide, and promotes enforcement of its patents and trademarks in a manner that is designed to balance the cost of such protection against obtaining the greatest value for the Company. DENTSPLY believes its patents and trademark properties are important and contribute to the Company's marketing position but it does not consider its overall business to be materially dependent upon any individual patent or trademark. Employees As of December 31, 2003, the Company and its subsidiaries employed approximately 7,600 employees. A small percentage of the Company's employees are represented by labor unions. Hourly workers at the Company's Ransom & Randolph facility in Maumee, Ohio are represented by Local No. 12 of the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America under a collective bargaining agreement that expires on January 31, 2008. Hourly workers at the Company's Midwest Dental Products facility in Des Plaines, Illinois are represented by International Association of Machinists and Aerospace Workers, AFL-CIO in Chicago under a collective bargaining agreement that expires on May 31, 2006. In addition, approximately 30% of DeguDent, a German subsidiary, are represented by labor unions. The Company believes that its relationship with its employees is good. The Company's success is dependent upon its management and employees. The loss of senior management employees or any failure to recruit and train needed managerial, sales and technical personnel could have a material adverse effect on the Company. Environmental Matters DENTSPLY believes that its operations comply in all material respects with applicable environmental laws and regulations. Maintaining this level of compliance has not had, and is not expected to have, a material effect on the Company's capital expenditures or on its business. Securities and Exchange Act Reports DENTSPLY makes available free of charge through its website at www.dentsply.com its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such materials are filed with or furnished to, the Securities and Exchange Commission. Item 2. Properties The following is a current list of DENTSPLY's principal manufacturing locations:

Leased Location Function or Owned United States: Los Angeles, California Manufacture and distribution of investment Leased casting products Yucaipa , California Manufacture and distribution of dental Owned laboratory products and dental ceramics Lakewood, Colorado Manufacture and distribution of bone grafting Leased materials and hydroxylapatite plasma-feed coating materials and distribution of dental implant poducts Milford, Delaware Manufacture of consumable dental products Owned Des Plaines, Illinois Manufacture and assembly of dental handpieces Leased Elk Grove Village, Illinois Future manufacture of anesthetic products Owned and Leased Elgin, Illinois Manufacture of dental x-ray film holders, film Owned mounts and accessories Maumee, Ohio Manufacture and distribution of investment Owned casting products York, Pennsylvania Manufacture and distribution of artificial teeth Owned and other dental laboratory products; York, Pennsylvania Manufacture of small dental equipment and Owned preventive dental products Johnson City, Tennessee Manufacture and distribution of endodontic Leased instruments and materials Foreign: Catanduva, Brazil Manufacture and distribution of consumable Owned dental products Petropolis, Brazil Manufacture and distribution of artificial teeth Owned and consumable dental products

Leased Location Function or Owned Bonsucesso, Brazil Manufacture and distribution of dental Owned anesthetics Tianjin, China Manufacture and distribution of dental products Leased Plymouth, England Manufacture of dental hand instruments Leased Ivry Sur-Seine, France Manufacture and distribution of investment Leased casting products Bohmte, Germany Manufacture and distribution of dental Owned laboratory products Hanau, Germany Manufacture and distribution of precious metal Owned dental alloys, dental ceramics and dental implant products Konstanz, Germany Manufacture and distribution of consumable Owned dental products Mannheim, Germany Manufacture and distribution of dental Owned implant products Munich, Germany Manufacture and distribution of endodontic Owned instruments and materials Rosbach, Germany Manufacture and distribution of dental ceramics Owned New Delhi, India Manufacture and distribution of dental products Leased Nasu, Japan Manufacture and distribution of precious metal Owned dental alloys, consumable dental products and orthodontic products Hoorn, Netherlands Manufacture and distribution of precious metal Owned dental alloys and dental ceramics Las Piedras, Puerto Rico Manufacture of crown and bridge materials Owned Ballaigues, Switzerland Manufacture and distribution of endodontic Owned instruments Ballaigues, Switzerland Manufacture and distribution of endodontic Owned instruments, plastic components and packaging material Le Creux, Switzerland Manufacture and distribution of endodontic Owned instruments

In addition, the Company maintains sales and distribution offices at certain of its foreign and domestic manufacturing facilities, as well as at various other United States and international locations. Most of the various sites around the world that are used exclusively for sales and distribution are leased. DENTSPLY believes that its properties and facilities are well maintained and are generally suitable and adequate for the purposes for which they are used. Item 3. Legal Proceedings DENTSPLY and its subsidiaries are from time to time parties to lawsuits arising out of their respective operations. The Company believes it is remote that pending litigation to which DENTSPLY is a party will have a material adverse effect upon its consolidated financial position or results of operations. In June 1995, the Antitrust Division of the United States Department of Justice initiated an antitrust investigation regarding the policies and conduct undertaken by the Company's Trubyte Division with respect to the distribution of artificial teeth and related products. On January 5, 1999 the Department of Justice filed a Complaint against the Company in the U.S. District Court in Wilmington, Delaware alleging that the Company's tooth distribution practices violate the antitrust laws and seeking an order for the Company to discontinue its practices. The trial in the government's case was held in April and May 2002. On August 14, 2003, the Judge entered a decision that the Company's tooth distribution practices do not violate the antitrust laws. On October 14, 2003, the Department of Justice appealed this decision to the U.S. Third Circuit Court of Appeals. The parties are proceeding under the briefing schedule issued by the Third Circuit. Subsequent to the filing of the Department of Justice Complaint in 1999, several private party class actions were filed based on allegations similar to those in the Department of Justice case, on behalf of laboratories, and denture patients in seventeen states who purchased Trubyte teeth or products containing Trubyte teeth. These cases were transferred to the U.S. District Court in Wilmington, Delaware. The private party suits seek damages in an unspecified amount. The Court has granted the Company's Motion on the lack of standing of the laboratory and patient class actions to pursue damage claims. The Plaintiffs in the laboratory case have filed a petition with the Third Circuit to hear an interlocutory appeal of this decision. Also, private party class actions on behalf of indirect purchasers were filed in California and Florida state courts. The California and Florida cases have been dismissed by the Plaintiffs following the decision by the Federal District Court Judge issued in August 2003. On March 27, 2002, a Complaint was filed in Alameda County, California (which was transferred to Los Angeles County) by Bruce Glover, D.D.S. alleging, inter alia, breach of express and implied warranties, fraud, unfair trade practices and negligent misrepresentation in the Company's manufacture and sale of Advance(R) cement. The Complaint seeks damages in an unspecified amount for costs incurred in repairing dental work in which the Advance(R) product allegedly failed. In September 2003, the Plaintiff filed a Motion for class certification, which the Company opposed. Oral arguments were held in December 2003, and in January, 2004, the Judge entered an Order granting class certification only on the claims of breach of warranty and fraud. In general, the Class is defined as California dentists who purchased and used Advance(R) cement and were required, because of failures of Advance(R), to repair or reperform dental procedures. The Company has filed a Writ of Mandate in the appellate court seeking reversal of the class certification. The Advance(R) cement product was sold from 1994 through 2000 and total sales in the United States during that period were approximately $5.2 million. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Registrant The following table sets forth certain information regarding the executive officers of the Company as of February 28, 2004. Name Age Position Gerald K. Kunkle Jr. 57 Vice Chairman of the Board and Chief Executive Officer Thomas L. Whiting 61 President and Chief Operating Officer Christopher T. Clark 42 Senior Vice President William R. Jellison 46 Senior Vice President Rudolf Lehner 46 Senior Vice President James G. Mosch 46 Senior Vice President J. Henrik Roos 46 Senior Vice President Bret W. Wise 43 Senior Vice President and Chief Financial Officer Brian M. Addison 49 Vice President, Secretary and General Counsel Gerald K. Kunkle Jr. was named Vice Chairman of the Board and Chief Executive Officer of the Company effective January 1, 2004. Prior thereto, Mr. Kunkle served as President and Chief Operating Officer since January, 1997. Prior to joining DENTSPLY, Mr. Kunkle served as President of Johnson and Johnson's Vistakon Division, a manufacturer and marketer of contact lenses, from January 1994 and, from early 1992 until January 1994, was President of Johnson and Johnson Orthopaedics, Inc., a manufacturer of orthopaedic implants, fracture management products and trauma devices. Thomas L. Whiting was named President and Chief Operating Officer of the Company effective January 1, 2004. Prior thereto, Mr. Whiting was appointed Executive Vice President since November, 2002.Prior to this appointment, Mr. Whiting served as Senior Vice President since early 1995. Prior to his Senior Vice President appointment, Mr. Whiting was Vice President and General Manager of the Company's L.D. Caulk Operating unit from March 1987 to early 1995. Prior to that time, Mr. Whiting held management positions with Deseret Medical and the Parke-Davis Company. Christopher T. Clark was named Senior Vice President effective November 1, 2002 and oversees the following areas: North American Group Marketing and Administration; Alliance and Government Sales; and the Ransom and Randolph, DENTSPLY Sankin, L.D. Caulk, and DeDent operating units. Prior to this appointment, Mr. Clark served as Vice President and General Manager of the Gendex operating unit since June 1999. Prior to that time, he served as Vice President and General Manager of the Trubyte operating unit since July of 1996. Prior to that, Mr. Clark was Director of Marketing of the Trubyte Operating Unit since September 1992 when he started with the Company. William R. Jellison was named Senior Vice President effective November 1, 2002 and oversees the following operating units: DENTSPLY Asia, DENTSPLY Professional, Maillefer, Dentsply Endodontics, including Tulsa Dental Products and Vereinigte Dentalwerke ("VDW"). Prior to this appointment, Mr. Jellison served as Senior Vice President and Chief Financial Officer of the Company since April 1998. Prior to that time, Mr. Jellison held various financial management positions including Vice President of Finance, Treasurer and Corporate Controller for Donnelly Corporation of Holland, Michigan since 1980. Mr. Jellison is a Certified Management Accountant. Rudolf Lehner was named Senior Vice President effective December 12, 2001 and oversees the following operating units: Degussa Dental Germany, Degussa Dental Austria, Elephant Dental, DENTSPLY France, DENTSPLY Italy, DENTSPLY Russia, DENTSPLY United Kingdom, and Middle East/Africa. Prior to that time, Mr Lehner was Chief Operating Officer of Degussa Dental since mid-2000. From 1999 to mid 2000, he had the overall responsibilities for Sales & Marketing at Degussa Dental. From 1994 to 1999, Mr. Lehner held the position of Chief Executive Officer of Elephant Dental. From 1990 to 1994, he had overall responsibility for international activities at Degussa Dental. Prior to that, Mr Lehner held various positions at Degussa Dental and its parent, Degussa AG, since starting in 1984. James G. Mosch was named Senior Vice President effective November 1, 2002 and oversees the following operating units: DENTSPLY Pharmaceutical, DENTSPLY Australia, DENTSPLY Brazil, DENTSPLY Canada, DENTSPLY Latin America and DENTSPLY Mexico.. Prior to this appointment, Mr. Mosch served as Vice President and General Manager of the DENTSPLY Professional operating unit since July 1994 when he started with the Company. J. Henrik Roos was named Senior Vice President effective June 1, 1999 and oversees the following operating units: Ceramco, CeraMed, Friadent, GAC, and Trubyte. Prior to his Senior Vice President appointment, Mr. Roos served as Vice President and General Manager of the Company's Gendex division from June 1995 to June 1999. Prior to that, he served as President of Gendex European operations in Frankfurt, Germany since joining the Company in August 1993. Bret W. Wise was named Senior Vice President and Chief Financial Officer of the Company effective December 1, 2002. In this position, he is also responsible for Business Development, Accounting, Treasury, Tax, Information Technology, Internal Audit and the Rinn operating unit. Prior to that time, Mr. Wise was Senior Vice President and Chief Financial Officer with Ferro Corporation of Cleveland, OH. Prior to joining Ferro Corporate in 1999, Mr. Wise held the position of Vice President and Chief Financial Officer at WCI Steel, Inc., of Warren, OH, from 1994 to 1999. Prior to joining WCI Steel, Inc., Mr. Wise was a partner with KPMG LLP. Mr. Wise is a Certified Public Accountant. Brian M. Addison has been Vice President, Secretary and General Counsel of the Company since January 1, 1998. Prior to that he was Assistant Secretary and Corporate Counsel since December 1994. From August 1994 to December 1994 he was a Partner at the Harrisburg, Pennsylvania law firm of McNees, Wallace & Nurick. Prior to that he was Senior Counsel at Hershey Foods Corporation. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information set forth under the caption "Supplemental Stock Information" is filed as part of this Annual Report on Form 10-K. Item 6. Selected Financial Data The information set forth under the caption "Selected Financial Data" is filed as part of this Annual Report on Form 10-K. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" is filed as part of this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosure About Market Risk The information set forth under the caption "Quantitative and Qualitative Disclosure About Market Risk" is filed as part of this Annual Report on Form 10-K. Item 8. Financial Statements and Supplementary Data The information set forth under the captions "Management's Financial Responsibility," "Report of Independent Accountants," "Consolidated Statements of Income," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial Statements" is filed as part of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Change in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART III Item 10. Directors and Executive Officers of the Registrant The information (i) set forth under the caption "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K and (ii) set forth under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the 2004 Proxy Statement is incorporated herein by reference. Code of Ethics The Company has adopted a Code of Business Conduct and Ethics that applies to the Chief Executive Officer and the Chief Financial Officer and all of the Company's employees. This Code of Business Conduct and Ethics is provided as Exhibit 99.1 of this Annual Report on Form 10-K. Item 11. Executive Compensation The information set forth under the caption "Executive Compensation" in the 2004 Proxy Statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 2004 Proxy Statement is incorporated herein by reference. Securities Authorized For Issuance Under Equity Compensation Plans The following table provides information at December 31, 2003 regarding compensation plans and arrangements under which equity securities of DENTSPLY are authorized for issuance.

Number of Number of securities Weighted average securities remaining to be issued upon exercise price available for future issuance exercise of of outstanding under equity compensation outstanding options, options, warrants plans (excluding securities Plan category warrants and rights and rights reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders (1) 8,132,457 28.42 6,116,264 (2) Equity compensation plans not approved by security holders (3) 45,000 14.83 n/a Other equity compensation plans not approved by security holders (4) 99,555 n/a n/a Total 8,277,012

(1) Consists of the DENTSPLY International Inc. 1993 Stock Option Plan, 1998 Stock Option Plan and 2002 Stock Option Plan. (2) The maximum number of shares available for issuance under the 2002 Stock Option Plan is 7,000,000 shares of common stock (plus any shares of common stock covered by any unexercised portion of canceled or terminated stock options granted under the 1993 Stock Option Plan or 1998 Stock Option Plan) (the "Maximum Number"). The Maximum Number (which includes shares already granted as options under the plan) may be increased on January 1 of each calendar year during the term of the 2002 Stock Option Plan to equal 7% of the outstanding shares of common stock on such date, prior to such increase if greater than 7,000,000. (3) Consists of the Burton C. Borgelt Nonstatutory Stock Option Agreement granted on January 13, 1994. These options were fully exercised in January 2004.. (4) See below for a description of the Directors' Deferred Compensation Plan and the Supplemental Executive Retirement Plan pursuant to which shares of common stock may be issued to outside directors and certain management employees. Directors Deferred Compensation Plan Effective January 1, 1997, the Company established a Directors' Deferred Compensation Plan (the "Deferred Plan"). The Deferred Plan permits non-employee directors to elect to defer receipt of directors fees or other compensation for their services as directors. Non-employee directors can elect to have their deferred payments administered as a cash with interest account or a stock unit account. Distributions to a director under the Deferred Plan will not be made to any non-employee director until the non-employee director ceases to be a member of the Board of Directors. Upon ceasing to be a member of the Board of Directors, the deferred non-employee director fees are paid based on an earlier election to have their accounts distributed immediately or in annual installments for up to ten (10) years. Supplemental Executive Retirement Plan Effective January 1, 1999, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (the "Plan"). The purpose of the Plan is to provide additional retirement benefits for a limited group of management employees whom the Board concluded were not receiving competitive retirement benefits. No actual benefits are put aside for participants and the participants are general creditors of the Company for payment of the benefits upon retirement or termination from the Company. Participants can elect to have these benefits administered as a cash with interest or stock unit account. Upon retirement/termination, the participant is paid the benefits in their account based on an earlier election to have their accounts distributed immediately or in annual installments for up to five (5) years. Item 13. Certain Relationships and Related Transactions No relationships or transactions are required to be reported. Item 14. Principal Accountant Fees and Services The information set forth under the caption "Relationship with Independent Auditors" in the 2004 Proxy Statement is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of this Report 1 Financial Statements The following consolidated financial statements of the Company are filed as part of this Annual Report on Form 10-K: Report of Independent Auditors Consolidated Statements of Income - Years ended December 31, 2003, 2002 and 2001 Consolidated Balance Sheets - December 31, 2003 and 2002 Consolidated Statements of Stockholders' Equity - Years ended December 31, 2003, 2002 and 2001 Consolidated Statements of Cash Flows - Years ended December 31, 2003, 2002 and 2001 Notes to Consolidated Financial Statements 2 Financial Statement Schedules The following financial statement schedule is filed as part of this Annual Report on Form 10-K: Schedule II -- Valuation and Qualifying Accounts. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required to be included herein under the related instructions or are inapplicable and, therefore, have been omitted. 3 Exhibits. The Exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K.

Exhibit Number Description 3.1 Restated Certificate of Incorporation (17) 3.2 By-Laws, as amended (16) 4.1. (a) United States Commercial Paper Issuing and paying Agency Agreement dated as of August 12,1999 between the Company and the Chase Manhattan Bank. (13) (b) United States Commercial Paper Dealer Agreement dated as of March 28, 2002 between the Company and Salomon Smith Barney Inc. (18) (c) United States Commercial Paper Dealer Agreement dated as of April 30, 2002 between the Company and Credit Suisse First Boston Corporation. (18) (d) Euro Commercial Paper Note Agreement dated as of July 18, 2002 between the Company and Citibank International plc. (18) (e) Euro Commercial Paper Dealer Agreement dated as of July 18, 2002 between the Company and Citibank International plc and Credit Suisse First Boston (Europe) Limited. (18) 4.2 (a) Note Agreement (governing Series A, Series B and Series C Notes) dated March 1, 2001 between the Company and Prudential Insurance Company of America. (14) (b) First Amendment to Note Agreement dated September 1, 2001 between the Company and Prudential Insurance Company of America. (16) 4.3 (a) 5-Year Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 25, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (16) (b) 364-Day Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 25, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (16) (c) Amendment to the 5-Year Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 25, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (18) (d) Amendment to the 364-Day Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 25, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (18) (e) Amendment to the 5-Year Competitive Advance, Revolving Credit and Guaranty Agreements dated as of August 30, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (18) (f) Amendment to the 364-Day Competitive Advance, Revolving Credit and Guaranty Agreements dated as of August 30, 2001 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (18) (g) Amendment to the 364-Day Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 24, 2002 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents. (18) (h) Amendment to the 364-Day Competitive Advance, Revolving Credit and Guaranty Agreements dated as of May 23, 2003 among the Company, the guarantors named therein, the banks named therein, the ABN Amro Bank, N.V as Administrative Agent, and First Union National Bank and Harris Trust and Savings Bank as Documentation Agents.

4.4 Private placement note dated December 28, 2001 between the Company and Massachusetts Mutual Life Insurance Company and Nationwide Life Insurance Company. (16) 4.5 (a) Eurobonds Agency Agreement dated December 13, 2001 between the Company and Citibank, N.A. (16) (b) Eurobond Subscription Agreement dated December 11, 2001 between the Company and Credit Suisse First Boston (Europe) Limited, UBS AG, ABN AMRO Bank N.V., First Union Securities, Inc.; and Tokyo-Mitsubishi International plc (the Managers). (16) (c) Pages 4 through 16 of the Company's Eurobond Offering Circular dated December 11, 2001. (16) 10.1 1993 Stock Option Plan (2) 10.2 1998 Stock Option Plan (1) 10.3 2002 Stock Option Plan (17) 10.4 Nonstatutory Stock Option Agreement between the Company and Burton C. Borgelt (3) 10.5 (a) Trust Agreement for the Company's Employee Stock Ownership Plan between the Company and T. Rowe Price Trust Company dated as of November 1, 2000. (14) (b) Plan Recordkeeping Agreement for the Company's Employee Stock Ownership Plan between the Company and T. Rowe Price Trust Company dated as of November 1, 2000. (14) 10.6 Written Description of the Chairman's Agreement between the Company and John C. Miles II 10.7 Employment Agreement dated January 1, 1996 between the Company and W. William Weston (9)* 10.8 Employment Agreement dated January 1, 1996 between the Company and Thomas L. Whiting (9)* 10.9 Employment Agreement dated October 11,1996 between the Company and Gerald K. Kunkle Jr. (10)* 10.10 Employment Agreement dated April 20, 1998 between the Company and William R. Jellison (12)* 10.11 Employment Agreement dated September 10, 1998 between the Company and Brian M. Addison (12)* 10.12 Employment Agreement dated June 1, 1999 between the Company and J. Henrik Roos (13)* 10.13 Employment Agreement dated October 1, 2001 between the Company and Rudolf Lehner (16)* 10.14 Employment Agreement dated November 1, 2002 between the Company and Christopher T. Clark (18)* 10.15 Employment Agreement dated November 1, 2002 between the Company and James G. Mosch (18)* 10.16 Employment Agreement dated December 1, 2002 between the Company and Bret W. Wise (18)* 10.17 DENTSPLY International Inc. Directors' Deferred Compensation Plan effective January 1, 1997 (10)* 10.18 Supplemental Executive Retirement Plan effective January 1, 1999 (12)* 10.19 Written Description of Year 2003 Incentive Compensation Plan. 10.20(a) AZLAD Products Agreement, dated January 18, 2001 between AstraZeneca AB and Maillefer Instruments Holdings, S.A. (a subsidiary of the Company). (14) (b) AZLAD Products Manufacturing Agreement, dated January 18, 2001 between AstraZeneca AB and Maillefer Instruments Holdings, S.A. (14) (c) AZ Trade Marks License Agreement, dated January 18, 2001 between AstraZeneca AB and Maillefer Instruments Holdings, S.A. (14) (d) AZLAD Products Manufacturing Agreement, effective March 1, 2004 between AstraZeneca AB and Maillefer Instruments Holdings, S.A. 10.21 Sale and Purchase Agreement of Gendex Equipment Business between the Company and Danaher Corporation Dated December 11, 2003. 10.22(a) Precious metal inventory Purchase and Sale Agreement dated November 30, 2001 between Fleet Precious Metal Inc. and the Company. (16) (b) Precious metal inventory Purchase and Sale Agreement dated December 20, 2001 between JPMorgan Chase Bank and the Company. (16) (c) Precious metal inventory Purchase and Sale Agreement dated December 20, 2001 between Mitsui & Co., Precious Metals Inc. and the Company. (16) 21.1 Subsidiaries of the Company 23.1 Consent of Independent Auditors - PricewaterhouseCoopers LLP 31 Section 302 Certification Statements 32 Section 906 Certification Statement 99.1 DENTSPLY International Inc. Code of Business Conduct and Ethics * Management contract or compensatory plan. (1) Incorporated by reference to exhibit included in the Company's Registration Statement on Form S-8 (No. 333-56093). (2) Incorporated by reference to exhibit included in the Company's Registration Statement on Form S-8 (No. 33-71792). (3) Incorporated by reference to exhibit included in the Company's Registration Statement on Form S-8 (No. 33-79094). (4) Incorporated by reference to exhibit included in the Company's Registration Statement on Form S-8 (No. 33-52616). (5) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993, File No. 0-16211. (6) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, File No. 0-16211. (7) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year December 31, 1994, File No. 0-16211. (8) Incorporated by reference to exhibit included in the Company's Current Report on Form 8-K dated January 10, 1996, File No. 0-16211. (9) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, File No. 0-16211. (10) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File No. 0-16211. (11) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, File No. 0-16211. (12) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 0-16211. (13) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, File No. 0-16211. (14) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, File No. 0-16211. (15) Incorporated by reference to exhibit included in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2001, File No. 0-16211. (16) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, File No. 0-16211. (17) Incorporated by reference to exhibit included in the Company's Registration Statement on Form S-8 (No. 333-101548). (18) Incorporated by reference to exhibit included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, File No. 0-16211. Loan Documents The Company and certain of its subsidiaries have entered into various loan and credit agreements and issued various promissory notes and guaranties of such notes, listed below, the aggregate principal amount of which is less than 10% of its assets on a consolidated basis. The Company has not filed copies of such documents but undertakes to provide copies thereof to the Securities and Exchange Commission supplementally upon request. (1) Master Grid Note dated November 4, 1996 executed in favor of The Chase Manhattan Bank in connection with a line of credit up to $20,000,000 between the Company and The Chase Manhattan Bank. (2) Agreement dated June 13, 2001 between Midland Bank PLC and Dentsply Limited for GBP 3,000,000 overdraft and $2,000,000 foreign exchange facility. (3) Agreement dated June 21, 2001 in the principal amount of $6,000,000 between Dentsply Research and Development Corp, Hong Kong Branch and Bank of Tokyo Mitsubishi. (4) Form of "comfort letters" to various foreign commercial lending institutions having a lending relationship with one or more of the Company's international subsidiaries. (b) Reports on Form 8-K On January 28, 2004, the Company filed a Form 8-K, under item 12, furnishing the press release issued on January 27, 2004 regarding its fourth quarter 2003 sales and earnings. On February 3, 2004, the Company filed a Form 8-K, under item 12, furnishing a transcript of its January 28, 2004, conference call regarding the Company's discussion of its fourth quarter 2003 sales and earnings. On March 1, 2004, the Company filed a Form 8-K, under item 5, furnishing a summary of the Company's quarterly results of operations for the fiscal years 2003 and 2002, related to its continuing and discontinued operations. SCHEDULE II DENTSPLY INTERNATIONAL INC. VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 2003

Additions ----------------------------- Charged Balance at (Credited) Charged to Write-offs Balance Beginning To Costs Other Net of Translation at End Description of Period And Expenses Accounts Recoveries Adjustment of Period (in thousands) Allowance for doubtful accounts: For Year Ended December 31, 2001 $ 6,360 $ 2,844 $ 5,289 (a) $(1,638) $ (253) $ 12,602 2002 12,602 2,904 3,560 (b) (1,987) 1,413 18,492 2003 18,492 569 (29) (4,771) 2,041 16,302 Allowance for trade discounts: For Year Ended December 31, 2001 1,629 555 - (1,194) (77) 913 2002 913 988 - (871) 61 1,091 2003 1,091 1,494 19 (1,681) 139 1,062 Inventory valuation reserves: For Year Ended December 31, 2001 14,942 4,369 8,409 (c) (2,996) (365) 24,359 2002 24,359 4,855 4,671 (d) (5,581) 2,366 30,670 2003 30,670 2,845 (22) (3,418) 3,037 33,112 Deferred tax asset valuation allowance: For Year Ended December 31, 2001 2,353 909 - (215) (183) 2,864 2002 2,864 3,431 - (1,129) 176 5,342 2003 5,342 5,764 - (2,596) 1,139 9,649 ------------------ (a) Includes $389 from acquisition of Friadent and $4,900 from acquisition of Degussa Dental. (b) Includes $797 from acquisition of Austenal and $2,763 related to the acquisition of Degussa Dental. (c) Includes $1,580 from acquisition of Friadent and $6,829 from acquisition of Degussa Dental. (d) Includes $588 from acquisition of Austenal and $4,083 related to the acquisition of Degussa Dental.

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA

Year ended December 31, 2003 2002 2001 2000 1999 (dollars in thousands, except per share amounts) Statement of Income Data: Net sales $ 1,570,925 $ 1,417,600 $ 1,045,275 $ 810,409 $ 763,093 Net sales without precious metal content 1,365,890 1,230,511 994,630 810,409 763,093 Gross profit 773,201 704,411 542,838 438,728 406,933 Restructuring and other costs (income) 3,700 (2,732) 5,073 (56) - Operating income 267,983 249,452 170,209 155,571 143,099 Income before income taxes 251,196 214,090 179,522 146,907 134,216 Net income from continuing operations (1) $ 169,853 $ 143,641 $ 117,714 $ 97,822 $ 87,586 Net income from discontinued operations 4,330 4,311 3,782 3,194 2,277 Total net income (1) $ 174,183 $ 147,952 $ 121,496 $ 101,016 $ 89,863 Earnings per common share - basic: Continuing operations (1) $ 2.16 $ 1.84 $ 1.51 $ 1.26 $ 1.11 Discontinued operations 0.05 0.05 0.05 0.04 0.03 Total earnings per common share - basic (1) $ 2.21 $ 1.89 $ 1.56 $ 1.30 $ 1.14 Earnings per common share - diluted Continuing operations (1) $ 2.11 $ 1.80 $ 1.49 $ 1.25 $ 1.10 Discontinued operations 0.05 0.05 0.05 0.04 0.03 Total earnings per common share - diluted (1) $ 2.16 $ 1.85 $ 1.54 $ 1.29 $ 1.13 Cash dividends declared per common share $ 0.19700 $ 0.18400 $ 0.18333 $ 0.17083 $ 0.15417 Weighted Average Common Shares Outstanding: Basic 78,823 78,180 77,671 77,785 79,131 Diluted 80,647 79,994 78,975 78,560 79,367 Balance Sheet Data: Cash and cash equivalents $ 163,755 $ 25,652 $ 33,710 $ 15,433 $ 11,418 Total assets 2,445,587 2,087,033 1,798,151 866,615 863,730 Total debt 812,175 774,373 731,158 110,294 165,467 Stockholders' equity 1,122,069 835,928 609,519 520,370 468,872 Return on average stockholders' equity 17.8% 20.5% 21.5% 20.4% 20.4% Long-term debt to total capitalization 41.3% 47.9% 54.3% 17.4% 23.7% Other Data: Depreciation and amortization $ 45,661 $ 41,352 $ 51,512 $ 39,170 $ 37,479 Capital expenditures 76,583 55,476 47,529 26,885 31,944 Property, plant and equipment, net 376,211 313,178 240,890 181,341 180,536 Goodwill and other intangibles, net 1,209,739 1,134,506 1,012,160 344,753 349,421 Interest expense, net 24,205 27,389 18,256 6,735 12,247 Cash flows from operating activities 257,992 172,983 211,068 145,622 125,622 Inventory days 93 100 93 114 122 Receivable days 50 49 46 52 52 Income tax rate 32.4% 32.9% 34.4% 33.4% 34.7%

(1) In the first and second quarters of 2003, the Company recorded pre-tax charges of $4.1 million and $5.5 million, respectively, related primarily to adjustments to inventory, accounts receivable and prepaid expense accounts at one division in the United States and two international subsidiaries. Of the $9.6 million in total pre-tax charges, $2.4 million were determined to be properly recorded as changes in estimates, $0.4 million were determined to be errors between the first and second quarters of 2003, and the remaining $6.8 million ($4.6 million after-tax) were determined to errors relating to prior periods. In addition, the Company determined that $4.8 million of reserves reversed in 2003 and $4.1 million of reserves reversed in 2001 and 2002 should have been reversed in earlier periods or had been erroneously established. In the aggregate, had the charge and reserve errors been recorded in the proper period, reported net income would have increased by $0.8 million ($0.1 per basic and diluted share) in 2000, increased by $1.2 million ($0.02 per basic and diluted share) in 2001, and decreased by $3.4 million ($0.04 per basic and diluted share) in 2002. The effect of recording the Charge Errors and Reserve Errors in 2003 reduced net income by $1.3 million ($0.02 per basic and diluted share). Following a quantitative and qualitative assessment of materiality, Company concluded that the charges and reserve errors were not material to the results of operations and financial position of the Company for the years ended December 31, 2000, 2001, 2002 and 2003 and accordingly, the prior period financial statements have not been restated. See Note 19 to the consolidated financial statements for additional information related to this matter. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements made by the Company, including without limitation, statements in the Overview section below and other statements containing the words "plans", "anticipates", "believes", "expects", or words of similar import may be deemed to be forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties which may materially affect the Company's business and prospects, and should be read in conjunction with the risk factors and uncertainties discussed within Item I, Part I of this Annual Report on Form 10-K. OVERVIEW Dentsply International Inc. is the world's largest manufacturer of professional dental products . The Company is headquartered in the United States, and operates in more than 120 other countries, principally through its foreign subsidiaries. While the United States and Europe are the Company's largest markets, the Company serves all of the major professional dental markets worldwide. In 2003, sales to customers outside the United States represented 58% of the Company's net sales. There are several important aspects of its business which the Company has commented on in the past. These include: (1) internal growth in the United States, Europe and the Pacific Rim; (2) the development and introduction of innovative new products; (3) growth through acquisition; and (4) continued focus on controlling costs and enhancing efficiency. We define "internal growth" as the increase in our net sales from period to period, excluding precious metal content, the impact of changes in currency exchange rates, and the net sales, for a period of twelve months following the transaction date, of businesses that we have acquired or divested. In 2003, overall economic conditions resulted in a slowing of the Company's internal growth rate in the United States, the largest dental market in the world. Our internal growth rate in the United States slowed to 3.3% in 2003, down from rates of 9.0% and 7.2% experienced in 2002 and 2001, respectively. Management expects that economic conditions will improve in the United States in 2004 and thus anticipates that our internal growth rate will accelerate as economic conditions improve. In contrast to the United States, the rate of internal growth in Europe in 2003 improved to 8.6%, compared to 6.6% and 5.0% in 2002 and 2001, respectively. Management believes that this growth rate resulted from strong market acceptance in Europe of our product portfolio and our improved market presence stemming from the acquisitions we completed throughout 2001. Management anticipates continued strong growth in Europe in 2004. Japan represents the third largest dental market in the world behind the United States and Europe. Japan's dental market growth closely parallels its economic growth. The Company views the Japanese market as an important growth opportunity, both in terms of a recovery in the Japanese economy and the opportunity to increase our market share. In 2002 and early 2003, the growth rate in the dental markets in Asia was among the highest in the world. The SARs crisis experienced in 2003 caused substantial disruption in the dental markets in several key Asian countries. Trends in late 2003 and early 2004 show a recovery in Asian dental market conditions, but it is not yet clear whether this improvement is sustainable. Although Asia, excluding Japan, represented only 3.3% of the Company's sales in 2003, management believes that the Asian markets represent a long-term growth opportunity for the industry and the Company. Product innovation is an important element of the Company's growth strategy. Management plans include an acceleration of investment in research and development of approximately 20% in 2004 to support new and innovative products and technology. Management believes that the Company's strategy of being a lead innovator in the industry is an important element to the long-term success of the Company. Although the professional dental market in which the Company operates has experienced consolidation, it is still a fragmented industry. The Company continues to focus on opportunities to expand the Company's product offerings through acquisition. Management believes that there will continue to be adequate opportunities to participate as a consolidator in the industry for the foreseeable future. The Company also remains focused on reducing costs and improving competitiveness. Management expects to continue to consolidate operations or functions and reduce the cost of those operations and functions while improving service levels. The Company believes that the benefits from these opportunities will improve the cost structure and offset areas of rising costs such as energy, benefits, regulatory oversight and compliance and financial reporting in the United States. FACTORS IMPACTING COMPARABILITY BETWEEN YEARS Acquisitions In January 2002, the Company acquired the partial denture business of Austenal Inc. ("Austenal"), and in 2001 the Company made three significant acquisitions. In January 2001, the Company acquired the outstanding shares of Friadent GmbH ("Friadent"), a global dental implant manufacturer and marketer. In March 2001, the Company acquired the dental injectible anaesthetic assets of AstraZeneca ("AZ Assets"). In October 2001, the Company acquired the Degussa Dental Group ("Degussa Dental"), a manufacturer and seller of dental products, including precious metal alloys, ceramics, dental laboratory equipment and chairside products. The details of these transactions are discussed in Note 3 to the Consolidated Financial Statements. The results of these acquired companies have been included in the consolidated financial statements since the dates of acquisition. These acquisitions, accounted for using the purchase method, significantly impact the comparability between 2001 and 2002. Accounting Charges and Reserve Reversals In the first and second quarters of 2003, the Company recorded pretax charges of $4.1 million and $5.5 million, respectively, related primarily to adjustments to inventory, accounts receivable, and prepaid expense accounts at one division in the United States and two international subsidiaries. All of these operating units had been involved in integrating one or more of the acquisitions completed in 2001. Of the $9.6 million in total pretax charges recorded in the first and second quarters of 2003, $2.4 million were determined to be properly recorded as changes in estimate, $0.4 million were determined to be errors between the first and second quarters of 2003, and the remaining $6.8 million ($4.6 million after tax) were determined to be errors relating in prior periods ("Charge Errors"). The Charge Errors included $3.0 million related to inaccurate reconciliations and valuation of inventory, $2.0 million related to inaccurate reconciliations and valuation of accounts receivable, $1.3 million related to unrecoverable prepaid expenses and $0.5 million related to other accounts. Had the Charge Errors been recorded in the proper period, net income as reported would have been decreased by $0.6 million ($0.01 per diluted share) in 2001 and $4.0 million ($0.05 per diluted share) in 2002. Recording the effect of the Charge Errors in 2003 reduced net income by $4.6 million ($0.06 per diluted share). In addition to the aforementioned, in the first and second quarters of 2003, the Company determined that $4.8 million in reserves reversed in 2003 and $4.1 million of reserves reversed in 2001 and 2002 should have been reversed in earlier years or had been erroneously established ("Reserve Errors). The Reserve Errors occurred in 2000 through 2002 and related primarily to asset valuation accounts and accrued liabilities, including (on a pre-tax basis) $5.1 million related to product return provisions, $1.1 million related to bonus accruals, $0.8 million related to product warranties, $0.7 million related to inventory valuation and $1.2 million related to other accounts. Had the Reserve Errors been recorded in the proper period, they would have increased net income as reported by $0.8 million ($0.01 per diluted share) in 2000, $1.8 million ($0.02 per diluted share) in 2001 and $0.7 million ($0.01 per diluted share) in 2002. Recording the effect of the Reserve Errors in 2003 increased net income by $3.3 million ($0.04 per diluted share). The above described charges (including the $2.4 million changes in estimates) and Reserve Errors amounted to $19.9 million (pre-tax) on an absolute basis and occurred from 2000 through the second quarter of 2003. Included in this total, are $2.0 million of Reserve Errors and $0.4 million of Charge Errors that originated and reversed in different quarters of same year. In the aggregate, had the Charge Errors and Reserve Errors described above been recorded in the proper period, reported net income would have increased by $0.8 million ($0.01 per diluted share) in 2000, $1.2 million ($0.02 per diluted share) in 2001 and decreased by $3.4 million ($0.04 per diluted share) in 2002. The effect of recording the Reserve Errors and Charge Errors in 2003 reduced net income by $1.3 million ($0.02 per diluted share). The Company performed an analysis of the Charge Errors and Reserve Errors on both a qualitative and quantitative basis and concluded that the errors were not material to the results of operations and financial position of the Company for the years ended December 31, 2000, 2001, 2002 and 2003. Accordingly, prior period financial statements have not been restated. Discontinued Operations In December 2003, the Company entered into an agreement to sell its Gendex equipment business to Danaher Corporation. Additionally, the Company announced to its dental needle customers that it was discontinuing production of dental needles. The sale of the Gendex business and discontinuance of dental needle production have been accounted for as discontinued operations pursuant to Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The results of operations for all periods presented have been restated to reclassify the results of operations for both the Gendex equipment and the dental needle businesses to discontinued operations. Reclassifications Certain other reclassifications have been made to prior years' data in order to conform to current year presentation. RESULTS OF CONTINUING OPERATIONS, 2003 COMPARED TO 2002 Net Sales The discussions below summarize the Company's sales growth, excluding precious metals, from internal growth and net acquisition growth and highlights the impact of foreign currency translation. These disclosures of net sales growth provide the reader with sales results on a comparable basis between periods. As the presentation of net sales excluding precious metal content could be considered a measure not calculated in accordance with generally accepted accounting principles (a so-called non-GAAP measure), the Company provides the following reconciliation of net sales to net sales excluding precious metal content. Our definitions and calculations of net sales excluding precious metal content and other operating measures derived using net sales excluding precious metal content may not necessarily be the same as those used by other companies. Year Ended December 31, 2003 2002 2001 (in millions) Net Sales $ 1,570.9 $ 1,417.6 $1,045.3 Precious Metal Content of Sales (205.0) (187.1) (50.7) Net Sales Excluding Precious Metal Conten $ 1,365.9 $ 1,230.5 $ 994.6 Management believes that the presentation of net sales excluding precious metal content provides useful information to investors because a significant portion of DENTSPLY's net sales is comprised of sales of precious metals generated through sales of the Company's precious metal alloy products, which are used by third parties to construct crown and bridge materials. Due to the fluctuations of precious metal prices and because the precious metal content of the Company's sales is largely a pass-through to customers and has minimal effect on earnings, DENTSPLY reports sales both with and without precious metal content to show the Company's performance independent of precious metal price volatility and to enhance comparability of performance between periods. The Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers. The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal alloy sale prices are adjusted when the prices of underlying precious metals change. Net sales in 2003 increased $153.3 million, or 10.8%, to $1,570.9 million. Net sales, excluding precious metal content, increased $135.4 million, or 11.0%, to $1,365.9 million. Sales growth excluding precious metal content was comprised of 4.5% internal growth, 6.6% foreign currency translation less 0.1% for net acquisitions/divestitures. The 4.5% internal growth was comprised of 8.6% in Europe, 3.3% in the United States and 0.4% for all other regions combined. The internal sales growth in 2003, excluding precious metal content, was highest in Europe with strong growth in endodontic, dental implant and certain laboratory products. In the United States internal sales growth was strongest in endodontic and orthodontic products and other chairside consumables, offset by a softening in sales to dental laboratories. The market for dental laboratory products tends to be the most sensitive to economic cycles and contracted in the United States in 2003. Gross Profit Gross profit was $773.2 million in 2003 compared to $704.4 million in 2002, an increase of $68.8 million, or 9.8%. Gross profit, including precious metal content, represented 49.2% of net sales in 2003 compared to 49.7% in 2002. The gross profit for 2003, excluding precious metal content, represented 56.6% of net sales compared to 57.2% in 2002. Gross profit as reported would have been higher by $2.8 million in 2003 and lower by $5.4 million in 2002 had the Charge Errors and Reserve Errors been recorded in the proper periods. In addition, geographic mix negatively influenced gross margins in 2003 compared to 2002. Operating Expenses Selling, general and administrative ("SG&A") expense increased $43.8 million, or 9.6%, to $501.5 million in 2003 from $457.7 million in 2002. The 9.6% increase in expenses, as reported, reflects increases for the translation impact from a weaker U.S. dollar of approximately $35.3 million. As a percentage of sales, including precious metal content, SG&A expenses decreased to 31.9% compared to 32.3% in 2002. As a percentage of sales, excluding precious metal content, SG&A expenses decreased to 36.7% compared to 37.2% in 2002. SG&A would have been higher by $0.8 million in 2003 and lower by $0.3 million in 2002, had the Charge Errors and Reserve Errors been recorded in the proper periods. The leveraging of general and administrative expenses was the primary reason for the percentage decrease in SG&A expenses from 2002 to 2003. During 2003, the Company recorded restructuring and other costs of $3.7 million. The largest portion of this was an impairment charge related to certain investments made in emerging technologies that the Company no longer views as recoverable. In addition, in December 2003, the Company announced the consolidation of its U.S. laboratory businesses and recorded a charge for a portion of the costs to complete the consolidation. Based on the restructuring activities undertaken in 2003, the U.S. laboratory businesses are expected to incur additional restructuring costs of approximately $2.5 million in 2004 to complete the plan. The Company made the decision to consolidate these laboratory businesses in order to improve operational efficiencies, to broaden customer penetration and to strengthen customer service. Upon completion, which is expected in late 2004, this plan is projected to result in future annual expense reductions of approximately $1.5 million, primarily within SG&A. During 2002, the Company recorded restructuring and other income of $2.7 million, including a $3.7 million benefit which resulted from changes in estimates related to prior period restructuring initiatives, offset somewhat by a restructuring charge for the combination of the CeraMed and U.S. Friadent divisions of $1.7 million. In addition, the Company recognized a gain of $0.7 million related to the insurance settlement for fire damages sustained at the Company's Maillefer facility. (see Note 16 to the Consolidated Financial Statements). Other Income and Expenses Net interest expense and other expenses were $16.8 million in 2003 compared to $35.4 million in 2002. The year 2003 included $24.2 million of net interest expense, less $7.4 million of income from PracticeWorks, Inc., including a $5.8 million pre-tax gain realized and recognized in the fourth quarter of 2003 on the sale of the Company's interest in PracticeWorks, Inc. The year 2002 included: $27.4 million of net interest; $3.5 million of currency transaction losses; a $1.1 million loss realized on the share exchange with PracticeWorks, Inc.; and a $2.5 million mark-to-market loss related to PracticeWorks warrants. Earnings The effective tax rate decreased to 32.4% in 2003 from 32.9% in 2002. Income from continuing operations increased $26.3 million, or 18.3%, to $169.9 million in 2003 from $143.6 million in 2002. Fully diluted earnings per share from continuing operations were $2.11 in 2003, an increase of 17.2% from $1.80 in 2002. Had the Charge Errors and Reserve Errors described above been recorded in the proper periods, income from continuing operations would have been higher by $1.3 million ($.02 per diluted share) in 2003 and lower by $3.4 million ($.04 per diluted share) in 2002. Discontinued Operations The Company entered into an agreement to sell its Gendex equipment business to Danaher Corporation in December, 2003, and completed the transaction in the first quarter of 2004. In addition, the Company announced to its dental needle customers that it was discontinuing production of dental needles. Accordingly, the Gendex equipment and needle businesses have been reported as discontinued operations for all periods presented. Income from discontinued operations was $4.3 million in both 2003 and 2002. Fully diluted earnings per share from discontinued operations were $.05 in both 2003 and 2002. Operating Segment Results The Company has five operating groups, which are managed by five Senior Vice Presidents and equate to our operating segments. Each of these operating groups covers a wide range of product categories and geographic regions. The product categories and geographic regions often overlap across the groups. Further information regarding the details of each group is presented in Note 4 of the Consolidated Financial Statements. The management of each group is evaluated for performance and incentive compensation purposes on the net third party sales, excluding precious metal content and segment operating income. Dental Consumables--U.S. and Europe/Japan/Non-dental Net sales for this group were $264.6 million in 2003, a 9.3% increase compared to $242.1 million in 2002. Internal growth was 2.8% and currency translation added 6.5% to sales in 2003. The U.S. consumables business had the highest growth in the group, which was offset by lower sales in the Japanese market and low growth in the non-dental business. Operating profit increased $11.5 million to $82.4 million from $70.9 million in 2002. Sales growth in the U.S. dental consumable business and gross margin improvement in the European dental consumable business were the most significant contributors to the increase. Operating profit benefited from currency translation. Operating profit would have been lower by $2.7 million in 2003 and higher by $1.6 million in 2002 if the Reserve Errors had been recorded in the proper period. Endodontics/Professional Division Dental Consumables/Asia Net sales for this group increased $23.9 million, or 6.7%, up from $357.6 million in 2002. Internal growth was 3.8% and currency translation added 2.9% to 2003 sales. Sales growth was strongest in the endodontic business. This was offset by lower sales in the dental consumables business due to aggressive competitive pressures in the U.S. market. Operating profit was $154.0 million, an increase of $12.4 million from $141.6 million in 2002. Continued growth in the endodontic business was primarily responsible for the increase. In addition, operating profit benefited from currency translation partially offset by the negative currency impact of intercompany transactions. Operating profit would have been lower by $0.7 million in 2003 and lower by $0.6 million in 2002 if the Reserve Errors had been recorded in the proper period. Dental Consumables--United Kingdom, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business Net sales for this group were $307.0 million in 2003, a 27.3% increase compared to $241.1 million in 2002. Internal growth was 7.0% and currency translation added 19.9% to sales in 2003. The primary reason for the sales growth was strong sales performance in Germany, France, CIS and Africa. Operating profit increased $19.2 million to $30.6 million from $11.4 million in 2002. The primary reason for the profit improvement was sales increases and margin improvement in the European dental laboratory business including improvements from the consolidation of the historical Dentsply tooth business in Europe into the DeguDent business. In addition, operating profit benefited from currency translation. Operating profit would have been lower by $0.3 million in 2003 if the Charge Errors and Reserve Errors had been recorded in the proper period. Australia/Canada/Latin America/Pharmaceutical Net sales for this group increased $4.8 million, or 4.4%, compared to $108.5 million in 2002. Internal growth was 3.6% and currency translation added 0.8% to 2003 sales. Sales were strongest in the U.S. pharmaceutical business and in Latin America. Canada and Australia experienced slower sales growth. Operating profit was $12.0 million, a $2.8 million decrease from $14.8 million in 2002. Lower operating margins in Latin America hurt profitability. Operating profit would have been higher by $1.0 million in 2003 and lower by $0.7 million in 2002 if the Charge Errors and Reserve Errors had been recorded in the proper period. U.S. Dental Laboratory Business/Implants/Orthodontics Net sales for this group were $278.7 million in 2003, a 6.9% increase compared to $260.7 million in 2002. Internal growth was 3.2% and currency translation added 3.7% to sales in 2003. Sales growth was adversely impacted by the soft U.S. dental laboratory market. Sales growth for implants in Europe and the orthodontic business showed continued strong sales growth. Operating profit decreased $8.8 million to $41.4 million from $50.2 million in 2002. The soft U.S. dental laboratory market and the negative currency impact of intercompany transactions adversely impacted operating profit. Operating profit would have been higher by $4.7 million in 2003 and lower by $5.3 million in 2002 if the Charge Errors and Reserve Errors had been booked in the proper period. RESULTS OF CONTINUING OPERATIONS, 2002 COMPARED TO 2001 Net Sales Net sales in 2002 increased $372.3 million, or 35.6%, to $1,417.6 million. Net sales, excluding precious metal content, increased $235.9 million, or 23.7%, to $1,230.5 million. The growth in sales, excluding precious metal content, was driven by internal growth of 6.7%, 15.8% growth from acquisitions and a 1.2% positive impact from currency translation as several major currencies strengthened against the U.S. dollar during the year. The 6.7% of internal growth was comprised of 9.0% in the United States, 6.6% in Europe, and 1.1% for all other regions combined. Internal growth for the dental business was 7.1% excluding precious metal content. The internal sales growth in 2002, excluding precious metal content, was highest in United States, with strong growth in endodontic and orthodontic products and other chairside consumable products. In Europe internal sales growth was 6.6% with strong sales gains in endodontic and orthodontic products, implants, and other chairside consumable products. The internal sales growth, excluding precious metal content, in all other regions was 1.1%, with strong sales growth in Canada and Japan offset by softening sales in Latin America and the Middle East regions. Gross Profit Gross profit was $704.4 million in 2002 compared to $542.8 million in 2001, an increase of $161.6 million, or 29.8%. Gross profit, including precious metal content, represented 49.7% of net sales in 2002 compared to 51.9% in 2001. The decline in 2002 is due to the inclusion of the Degussa Dental business for a full year versus just one quarter in 2001 and the corresponding relatively high precious metal content of Degussa Dental's sales. Gross profit for 2002, excluding precious metal content, represented 57.2% of net sales compared to 54.6% in 2001. The gross profit margin in 2002, excluding the precious metal content pass through, benefited from new product introductions, a favorable product mix, and the integration and restructuring benefits related to acquisitions completed over the past several years. The 2001 period included the negative impact of the amortization of the Friadent and Degussa Dental inventory step-ups recorded in connecton with purchase price accounting. Gross profit as reported would have been lower by $5.4 million in 2002 and higher by $1.8 million in 2001 had the Charge Errors and Reserve Errors been recorded in the proper periods. Operating Expenses Selling, general and administrative ("SG&A") expense increased $90.1 million, or 24.5%, to $457.7 million in 2002 from $367.6 million in 2001. As a percentage of sales, including precious metal content, SG&A expenses decreased to 32.3% compared to 35.2% in 2001. This decrease is mainly due to the discontinuation of goodwill and indefinite-lived intangible asset amortization in 2002, which in 2001 amounted to $17.6 million ($13.8 million, net of tax). As a percentage of sales, excluding precious metal content, SG&A expenses increased to 37.2% compared to 37.0% in 2001. This increase was primarily driven by the inclusion of the Degussa Dental business, and its higher SG&A expense ratio (excluding precious metal content), for a full year versus one quarter in 2001, offset by the discontinuation of goodwill and indefinite-lived intangible asset amortization in 2002. This increase was also reflective of higher insurance and legal expenses in 2002. SG&A would have been lower by $0.3 million in 2002 and lower by $0.1 million in 2001, had the Charge Errors and Reserve Errors been recorded in the proper periods. During 2002, the Company recorded restructuring and other income of $2.7 million, including $3.7 million which resulted from changes in estimates related to prior period restructuring initiatives, offset somewhat by a restructuring charge for the combination of the CeraMed and U.S. Friadent divisions of $1.7 million. In addition, the Company recognized a gain of $0.7 million related to the insurance settlement for fire damages sustained at the Company's Maillefer facility. The 2001 period included a restructuring charge of $5.5 million to improve efficiencies in Europe, Brazil and North America and $11.5 million of restructuring and other costs primarily related to the Degussa Dental acquisition and its integration with DENTSPLY. An additional cost of $2.4 million was recorded for a payment made at the point of regulatory filings related to Oraqix, a product for which the Company acquired rights in the AZ Asset acquisition. These charges were offset by a gain of $8.5 million related to the restructuring of the Company's U.K. pension arrangements and a gain of $5.8 million for an insurance settlement for equipment destroyed in the fire at the Company's Maillefer facility in Switzerland. The above items in 2001, on a net basis, amount to charges of $5.1 million (see Note 16 to the Consolidated Financial Statements). Other Income and Expenses Net interest expense increased $9.1 million in 2002 due to higher debt levels associated with the acquisition activities in 2002 and 2001. Other income decreased $35.5 million in 2002, due primarily to income recognized in 2001 of $24.5 million ($15.1 million, net of tax) which included a $23.1 million gain from the sale of Infosoft, LLC and a $1.4 million minority interest benefit related to an intangible impairment charge included in restructuring and other costs. Other income and expense in 2002 also included a $4.7 million unfavorable change in currency transaction gain/loss resulting from the significant weakening of the U.S. dollar in 2002, a $1.1 million loss realized on the share exchange with PracticeWorks, Inc. and a net loss of $2.5 million on mark-to-market adjustment for the warrants received in the transaction. Also contributing to the decrease in other income in 2002 was a decrease of $0.8 million in accrued dividends related to the PracticeWorks, Inc. preferred stock prior to the time of the PracticeWorks share exchange. Earnings The effective tax rate decreased to 32.9% in 2002 from 34.4% in 2001. This decrease was largely related to the discontinuance of goodwill amortization in 2002, which in the past negatively impacted the effective tax rate since much of this amortization was non-deductible for tax purposes. Net income from continuing operations increased $25.9 million, or 22.0%, to $143.6 million in 2002 from $117.7 million in 2001. Fully diluted earnings per share from continuing operations were $1.80 in 2002, an increase of 20.8% from $1.49 in 2001. Had the Charge Errors and Reserve Errors described above been recorded in the proper periods, net income from continuing operations would have been lower by $3.4 million ($.04 per diluted share) in 2002 and higher by $1.2 million ($.02 per diluted share) in 2001. Discontinued Operations Net income from discontinued operations was $4.3 million in 2002 compared to $3.8 million in 2001. Fully diluted earnings per share from discontinued operations were $.05 in both 2002 and 2001. Operating Segment Results Dental Consumables--U.S. and Europe/Japan/Non-dental Net sales for the group were $242.1 million in 2002, a 27.0% increase compared to $190.7 million in 2001. Internal growth was 6.3%, currency translation added 6.3% and acquisitions added 14.4% to sales in 2002. Sales of dental consumables in the U.S. and Europe and sales in Japan had strong growth. This was partially offset by soft sales of non-dental products. Operating profit increased $11.1 million to $70.9 million from $59.8 million in 2001. The two primary reasons for this increase are the higher margins associated with the dental consumables sales increase and a full year of sales in 2002 for the Sankin business in Japan which was acquired as part of the Degussa Dental acquisition on October 1, 2001. Operating profit would have been higher by $1.6 million in 2002 and higher by $0.5 million in 2001 if the Reserve Errors had been recorded in the proper period. Endodontics/Professional Division Dental Consumables/Asia Net sales for this group increased $41.3 million, or 13.1%, up from $316.3 million in 2001. Internal growth was 11.1%, currency translation added 1.5% and acquisitions added 0.5% to 2002 sales. The endodontics business experienced substantial growth during 2002, especially in the U.S. and Europe. Operating profit was $141.6 million, an increase of $31.5 million from $110.1 million in 2002. The increase was a result of the strong growth in high margin endodontic products. In addition, operating profit benefited from currency translation. Operating profit would have been lower by $0.6 million in 2002 and higher by $1.3 million in 2001 if the Reserve Errors had been recorded in the proper period. Dental Consumables--United Kingdom, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business Net sales for this group were $241.1 million in 2002, a 72.8% increase compared to $139.5 million in 2001. Internal growth was 0.6%, currency translation added 1.9% and acquisitions added 70.3% to 2002 sales. The Company acquired the Degussa Dental business in October, 2001, which competes primarily in the European dental laboratory market. This market was soft during 2002. Operating profit increased to $11.4 million in 2002 from breakeven in 2001. The increase was primarily due to improved margins and a full year of operations in 2002 for the Degussa Dental business compared to three months in 2001. In addition, operating profit benefited from currency translation. Operating profit would have been higher by $0.3 in 2001 if the Charge Errors and Reserve Errors had been recorded in the proper period. Australia/Canada/Latin America/Pharmaceutical Net sales for this group decreased $13.5 million, or 11.1%, compared to $122.0 million in 2001. Internal growth was 4.7%, acquisitions added 6.8%, while currency translation had a negative impact of 22.6% on sales mainly due to the devaluation in the currencies of Latin America. Internal growth came mainly from the Canadian, Australian and U.S. pharmaceutical businesses offset partially by the softening Latin American economies. Operating profit was $14.8 million, a $5.4 million decrease from $20.2 million in 2001. The main reason for the decrease was the redistribution in 2002 of the non-U.S. pharmaceutical business across the other operating groups. In 2001, the worldwide pharmaceutical business was accounted for in this group. In addition, operating profit was negatively impacted from currency translation as a result of the devalued Latin American currencies. Operating profit would have been lower by $0.7 million in 2002 and lower by $0.5 million in 2001 had the Charge Errors and Reserve Errors been recorded in the proper period. U.S. Dental Laboratory Business/Implants/Orthodontics Net sales for this group were $260.7 million in 2002, a 24.6% increase compared to $209.2 million in 2001. Internal growth was 7.4%, currency translation added 6.1% and acquisitions added 11.1% to 2002 sales. The internal growth came mainly from significant growth in both the implant and orthodontic businesses. Acquisition growth came from the acquisition of Degussa Dental in October, 2001. Operating profit increased $8.2 million to $50.2 million from $42.0 million in 2001. The increase primarily came from the significant increase in sales of the implant and orthodontic businesses. In addition, operating profit benefited from currency translation. Operating profit would have been lower by $5.3 million in 2002 and higher by $0.2 million in 2001 had the Charge Errors and Reserve Errors been reported in the proper period. FOREIGN CURRENCY Since approximately 55% of the Company's 2003 revenues were generated in currencies other than the U.S. dollar, the value of the U.S. dollar in relation to those currencies affects the results of operations of the Company. The impact of currency fluctuations in any given period can be favorable or unfavorable. The impact of foreign currency fluctuations of European currencies on operating income is partially offset by sales in the U.S. of products sourced from plants and third party suppliers located overseas, principally in Germany, Switzerland, and the Netherlands. On a net basis, net income benefited from changes in currency translation in both 2003 and 2002 compared to the prior year. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES The Company has identified below the accounting estimates believed to be critical to its business and results of operations. These critical estimates represent those accounting policies that involve the most complex or subjective decisions or assessments. Goodwill and Other Long-Lived Assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". This statement requires that the amortization of goodwill and indefinite-lived intangible assets be discontinued and instead an annual impairment approach be applied. The Company performed the annual impairment tests during 2002 and 2003, as required, and no impairment was identified. These impairment tests are based upon a fair value approach rather than an evaluation of the undiscounted cash flows. If impairment is identified under SFAS 142, the resulting charge is determined by recalculating goodwill through a hypothetical purchase price allocation of the fair value and reducing the current carrying value to the extent it exceeds the recalculated goodwill. If impairment is identified on indefinite-lived intangibles, the resulting charge reflects the excess of the asset's carrying cost over its fair value. Other long-lived assets, such as identifiable intangible assets and fixed assets, are amortized or depreciated over their estimated useful lives. These assets are reviewed for impairment whenever events or circumstances provide evidence that suggest that the carrying amount of the asset may not be recoverable with impairment being based upon an evaluation of the identifiable undiscounted cash flows. If impaired, the resulting charge reflects the excess of the asset's carrying cost over its fair value. If market conditions become less favorable, future cash flows, the key variable in assessing the impairment of these assets, may decrease and as a result the Company may be required to recognize impairment charges. The Company's impairment tests relating to the perpetual license rights to the trademarks and formulations for dental anaesthetic products acquired from Astra Zeneca in 2001 are highly sensitive to cash flow assumptions resulting from the sale of these products and the Company's success in completing and starting up a greenfield sterile filling plant to produce these products in the United States. Inventories Inventories are stated at the lower of cost or market. The cost of inventories is determined primarily by the first-in, first-out ("FIFO") or average cost methods, with a small portion being determined by the last-in, first-out ("LIFO") method. The Company establishes reserves for inventory estimated to be obsolete or unmarketable equal to the difference between the cost of inventory and estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those anticipated, additional inventory reserves may be required. Accounts Receivable The Company sells dental equipment and supplies primarily through a worldwide network of distributors, although certain product lines are sold directly to the end user. For customers on credit terms, the Company performs ongoing credit evaluation of those customers' financial condition and generally does not require collateral from them. The Company establishes allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, their ability to make required payments may become impaired, and increases in these allowances may be required. In addition, a negative impact on sales to those customers may occur. Accruals for Product Returns, Customer Rebates and Product Warranties The Company makes provisions for customer returns, customer rebates and for product warranties at the time of sale. These accruals are based on past history, projections of customer purchases and sales and expected product performance in the future. Because the actual results for product returns, rebates and warranties are dependent in part on future events, these matters require the use of estimates. The Company has a long history of product performance in the dental industry and thus has an extensive knowledge base from which to draw in measuring these estimates. Income Taxes Income taxes are determined in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the difference between financial statements and tax bases of liabilities and assets using enacted tax rates in effect for the year in which the differences are expected to reverse. SFAS 109 also provides for the recognition of deferred tax assets if it is more likely than not that the assets will be realized in future years. A valuation allowance has been established for deferred tax assets for which realization is not likely. In assessing the valuation allowance, the Company has considered future taxable income and ongoing tax planning strategies. Changes in these circumstances, such as a decline in future taxable income, may result in an additional valuation allowance being required. As of December 31, 2003, the Company had recorded a valuation allowance of $9.6 million on net operating carryforwards of its foreign subsidiaries, essentially fully reserving these losses. If profitability improves in those foreign subsidiaries in the future, some, or all, of the valuation allowance may be reversed to income. Except for certain earnings that the Company intends to reinvest indefinitely, provision has been made for the estimated U.S. federal income tax liabilities applicable to undistributed earnings of affiliates and associated companies. Judgement is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. If the outcome of these future tax consequences differs from our estimates the outcome could materially impact our financial position or our results of operations. In addition, we operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. We record accruals for the estimated outcomes of these audits and the accruals may change in the future due to the outcome of these audits. Litigation The Company and its subsidiaries are from time to time parties to lawsuits arising out of their respective operations. The Company records liabilities when a loss is probable and can be reasonably estimated. These estimates made by management are based on an analysis made by internal and external legal counsel which considers information known at the time. The Company believes it has estimated any liabilities for probable losses well in the past; however, the unpredictability of court decisions could cause liability to be incurred in excess of estimates. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities during the year ended December 31, 2003 were $258.0 million compared to $173.0 million during the year ended December 31, 2002. The increase of $85.0 million results primarily from increased earnings and deferred taxes and more favorable working capital changes versus the prior year specifically with respect to accounts receivable, inventories and accounts payable. Investing activities, for the year ended December 31, 2003, include capital expenditures of $76.6 million. The Company expects that capital expenditures will be approximately $65 million in 2004. Net acquisition activity for the year ended December 31, 2003 was $17.4 million which relates to the purchase of one of the Company's suppliers, additional investments in partially owned subsidiaries, a payment related to the Oraqix agreement and the final payment related the Degussa Dental acquisition. In December 2003, final payments of $16.0 million became due to AstraZeneca upon the approval of Oraqix by the Food and Drug Administration in the United States, and accordingly, the Company accrued the payments in December 2003 and made the payments in January 2004 (see Note 3 to the Consolidated Financial Statements). In addition, during the fourth quarter, the Company received $23.5 million in proceeds from its common stock and warrant holdings in PracticeWorks as a result of the Eastman Kodak acquisition. In February 2004, the Company completed the sale of its Gendex equipment business and received cash proceeds of $102.5 million. The Company's long-term debt increased by $20.4 million during the year ended December 31, 2003 to $790.2 million. This net change included an increase of $109.8 million due to exchange rate fluctuations on debt denominated in foreign currencies and changes in the value of interest rate swaps, net of $70.1 million of debt payments made during the year. During the year ended December 31, 2003, the Company's ratio of long-term debt to total capitalization decreased to 41.3% compared to 47.9% at December 31, 2002. Under its multi-currency revolving credit agreement, the Company is able to borrow up to $250 million through May 2006 ("the five-year facility") and $250 million through May 2004 ("the 364 day facility"). The 364-day facility terminates in May 2004, but may be extended, subject to certain conditions, for additional periods of 364 days. This revolving credit agreement is unsecured and contains various financial and other covenants. The Company also has available an aggregate $250 million under two commercial paper facilities; a $250 million U.S. facility and a $250 million U.S. dollar equivalent European facility ("Euro CP facility"). Under the Euro CP facility, borrowings can be denominated in Swiss francs, Japanese yen, Euros, British pounds and U.S. dollars. The 364-day facility serves as a back-up to these commercial paper facilities. The total available credit under the commercial paper facilities and the 364-day facility in the aggregate is $250 million and no debt was outstanding under these facilities at December 31, 2003. The Company also has access to $88.0 million in uncommitted short-term financing under lines of credit from various financial institutions. The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions. The Company had unused lines of credit of $472.0 million available at December 31, 2003 contingent upon the Company's compliance with certain affirmative and negative covenants relating to its operations and financial condition. The most restrictive of these covenants pertain to asset dispositions, maintenance of certain levels of net worth, and prescribed ratios of indebtedness to total capital and operating income plus depreciation and amortization to interest expense. At December 31, 2003, the Company was in compliance with these covenants. The following table presents the Company's scheduled contractual cash obligations at December 31, 2003:

Greater Less Than 1-3 3-5 Than Contractual Obligations 1 Year Years Years 5 Years Total (in thousands) Long-term debt $ 22,780 $743,831 $ 44,727 $ -- $811,338 Operating leases 18,115 19,633 7,385 6,830 $ 51,963 Precious metal consignment agreements 61,300 -- -- -- $ 61,300 $102,195 $763,464 $ 52,112 $ 6,830 $924,601

Upon acquiring Degussa Dental in October 2001, Dentsply management changed Degussa Dental's practice of holding a long position in precious metals used in the production of precious metal alloy products, to holding the precious metal on a consignment basis from various financial institutions. In connection with this change in practice, the Company sold certain precious metals to various financial institutions in the fourth quarter of 2001 for a value of $41.8 million and in the first quarter of 2002 for a value of $6.8 million. These transactions effectively transferred the price risk on the precious metals to the financial institutions and allow the Company to acquire the precious metal at approximately the same time and for the same price as alloys are sold to the Company's customers. In the event that the financial institutions would discontinue offering these consignment arrangements, and if the Company could not obtain other comparable arrangements, the Company may be required to obtain financing to fund an ownership position in the required precious metal inventory levels. At December 31, 2003, the value of the consigned precious metals held by the Company was $61.3 million. The Company's cash increased $138.1 million during the year ended December 31, 2003 to $163.8 million. The Company accumulated cash in 2003 rather than reduce debt due to pre-payment penalties that would be incurred in retiring debt and the related interest rate swap agreements. The Company anticipates that cash will continue to build throughout 2004. The Company expects on an ongoing basis, to be able to finance cash requirements, including capital expenditures, stock repurchases, debt service, operating leases and potential future acquisitions, from the funds generated from operations and amounts available under its existing credit facilities. NEW ACCOUNTING PRONOUNCEMENTS In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an interpretation of ARB 51". The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights ("variable interest entities") and how to determine when and which business enterprise should consolidate the variable interest entity (the "primary beneficiary"). This new model for consolidation applies to an entity which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a variable interest entity make additional disclosures. Certain disclosure requirements of FIN 46 are effective for financial statements issued after January 31, 2003. The remaining provisions of FIN 46 are effective immediately for all variable interests in entities created after January 31, 2003. Adoption of this provision did not have an effect on the Company. In December 2003, the FASB released a revised version of FIN 46, FIN 46R, to clarify certain aspects of FIN 46 and to provide certain entities with exemptions from the requirements of FIN 46. FIN 46R requires the application of either FIN 46 or FIN 46R to all Special Purpose Entitied ("SPE's") created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after December 15, 2003. Adoption of this provision did not have an effect on the Company. FIN 46R will be applicable to all non-SPE entities created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after March 15, 2004. The Company does not expect the application of this portion of FIN 46R to have a material impact on the Company's financial statements. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". Specifically, the statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The Application of this standard has not had a material impact on the Company's financial statements. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 ("SFAS 150"), " Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Adoption of the provisions of SFAS No. 150 in the third quarter of 2003 related to mandatorily redeemable financial instruments had no effect on the Company's financial statements. In November 2003, the FASB issued FSP No. 150-3, "Effective Date, Disclosures and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". For public companies, FSP 150-3 deferred the provisions of SFAS 150 related to classification and measurement of certain mandatorily redeemable noncontrolling interests issued prior to November 5, 2003. For mandatorily redeemable noncontrolling interests issued after November 5, 2003, SFAS 150 applies without any deferral. The Company continues to analyze the provisions of SFAS 150 related to mandatorily redeemable noncontrolling interests, but does not believe that application of these provisions will have a material impact on the Company's financial statements. In January 2004, the FASB released FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" requires a company to consider current changes in applicable laws when measuring its postretirement benefit costs and accumulated postretirement benefit obligation. However, because of uncertainties of the effect of the provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") on plan sponsors and certain accounting issues raised by the Act, FSP 106-1 allows plan sponsors to elect a one-time deferral of the accounting for the Act. The Company is electing the deferral provided by FSP 106-1 to analyze the impact of the Act on prescription drug coverage provided to a limited number of retirees from one of its business units. The Company does not expect the Act to have a material impact on the Company's postretiremenent benefits liabilities or the Company's financial statements. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The information below provides information about the Company's market sensitive financial instruments and includes "forward-looking statements" that involve risks and uncertainties. Actual results could differ materially from those expressed in the forward-looking statements. The Company's major market risk exposures are changing interest rates, movements in foreign currency exchange rates and potential price volatility of commodities used by the Company in its manufacturing processes. The Company's policy is to manage interest rates through the use of floating rate debt and interest rate swaps to adjust interest rate exposures when appropriate, based upon market conditions. A portion of the Company's borrowings are denominated in foreign currencies which expose the Company to market risk associated with exchange rate movements. The Company's policy generally is to hedge major foreign currency exposures through foreign exchange forward contracts. These contracts are entered into with major financial institutions thereby minimizing the risk of credit loss. In order to limit the unanticipated earnings fluctuations from volatility in commodity prices, the Company selectively enters into commodity price swaps to convert variable raw material costs to fixed costs. The Company does not hold or issue derivative financial instruments for speculative or trading purposes. The Company is subject to other foreign exchange market risk exposure in addition to the risks on its financial instruments, such as possible impacts on its pricing and production costs, which are difficult to reasonably predict, and have therefore not been included in the table below. All items described are non-trading and are stated in U.S. dollars. Financial Instruments The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. The Company believes the carrying amounts of cash and cash equivalents, accounts receivable (net of allowance for doubtful accounts), prepaid expenses and other current assets, accounts payable, accrued liabilities, income taxes payable and notes payable approximate fair value due to the short-term nature of these instruments. The Company estimates the fair value of its total long-term debt was $815.8 million versus its carrying value of $811.3 million as of December 31, 2003. The fair value approximated the carrying value since much of the Company's debt is variable rate and reflects current market rates. The fixed rate Eurobonds are effectively converted to variable rate as a result of an interest rate swap and the interest rates on revolving debt and commercial paper are variable and therefore the fair value of these instruments approximates their carrying values. The Company has fixed rate Swiss franc and Japanese yen denominated notes with estimated fair values that differ from their carrying values. At December 31, 2003, the fair value of these instruments was $241.8 million versus their carrying values of $237.4 million. The fair values differ from the carrying values due to lower market interest rates at December 31, 2003 versus the rates at issuance of the notes. Derivative Financial Instruments The Company employs derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Additionally, the Company utilizes interest rate swaps to convert floating rate debt to fixed rate, fixed rate debt to floating rate, cross currency basis swaps to convert debt denominated in one currency to another currency and commodity swaps to fix its variable raw materials. Foreign Exchange Risk Management The Company enters into forward foreign exchange contracts to selectively hedge assets and liabilities denominated in foreign currencies. Market value gains and losses are recognized in income currently and the resulting gains or losses offset foreign exchange gains or losses recognized on the foreign currency assets and liabilities hedged. Determination of hedge activity is based upon market conditions, the magnitude of the foreign currency assets and liabilities and perceived risks. The Company's significant contracts outstanding as of December 31, 2003 are summarized in the table that follows. These foreign exchange contracts generally have maturities of less than twelve months and counterparties to the transactions are typically large international financial institutions. The Company has numerous investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. Currently, the Company uses both non-derivative financial instruments, including foreign currency denominated debt held at the parent company level and long-term intercompany loans, for which settlement is not planned or anticipated in the foreseeable future and derivative financial instruments to hedge some of this exposure. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in the non-derivative and derivative financial instruments designated as hedges of net investments. At December 31, 2003 and 2002, the Company had Swiss franc-denominated and Japanese yen-denominated debt (at the parent company level) to hedge the currency exposure related to a designated portion of the net assets of its Swiss and Japanese subsidiaries. At December 31, 2003, the Company also had Euro-denominated debt designated as a hedge of a designated portion of the net assets of its European subsidiaries, due to the change in the cross-currency element of the integrated transaction discussed below. At December 31, 2003 and 2002, the accumulated translation losses related to foreign currency denominated-debt included in Accumulated Other Comprehensive income (loss) were $83.5 million and $26.4 million, respectively. Interest Rate Risk Management The Company uses interest rate swaps to convert a portion of its variable rate debt to fixed rate debt. As of December 31, 2003, the Company has two groups of significant variable rate to fixed rate interest rate swaps. One of the groups of swaps was entered into in January 2000 and February 2001, has a notional amount totaling 180 million Swiss francs, and effectively converts the underlying variable interest rates on the debt to a fixed rate of 3.3% for a period of approximately four years. The other significant group of swaps entered into in February 2002, has notional amounts totaling 12.6 billion Japanese yen, and effectively converts the underlying variable interest rates to an average fixed rate of 1.6% for a term of ten years. As part of entering into the Japanese yen swaps in February 2002, the Company entered into reverse swap agreements with the same terms to offset 115 million of the 180 million of Swiss franc swaps. Additionally, in the third quarter of 2003, the Company exchanged the remaining portion of the Swiss franc swaps, 65 million Swiss francs, for a forward-starting variable to fixed interest rate swap. Completion of this exchange allowed the Company to pay down debt and the forward-starting interest rate swap locks in the rate of borrowing for future Swiss franc variable rate debt, that will arise upon the maturity of the Company's fixed rate Swiss franc notes in 2005, at 4.2% for a term of seven years. The Company uses interest rate swaps to convert a portion of its fixed rate debt to variable rate debt. In December 2001, the Company issued 350 million in Eurobonds at a fixed rate of 5.75% maturing in December 2006 to partially finance the Degussa Dental acquisition. Coincident with the issuance of the Eurobonds, the Company entered into two integrated transactions: (a) an interest rate swap agreement with notional amounts totaling Euro 350 million which converted the 5.75% fixed rate Euro-denominated financing to a variable rate (based on the London Interbank Borrowing Rate) Euro-denominated financing; and (b) a cross-currency basis swap which converted this variable rate Euro-denominated financing to variable rate U.S. dollar-denominated financing. The Euro 350 million interest rate swap agreement was designated as a fair value hedge of the Euro 350 million in fixed rate debt pursuant to SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). In accordance with SFAS No. 133, the interest rate swap and underlying Eurobond have been marked-to-market via the income statement. As of December 31, 2003 and 2002, the accumulated fair value of the interest rate swap was $14.1 million and $10.9 million, respectively, and was recorded in Other Noncurrent Assets. The notional amount of the underlying Eurobond was increased by a corresponding amount at December 31, 2003 and 2002. From inception through the first quarter of 2003, the cross-currency element of the integrated transaction was not designated as a hedge and changes in the fair value of the cross-currency element of the integrated transaction were marked-to-market in the income statement, offsetting the impact of the change in exchange rates on the Eurobonds that were also recorded in the income statement. As of December 31, 2003 and 2002, the accumulated fair value of the cross-currency element of the integrated transaction was $56.6 million and $52.3 million, respectively, and was recorded in Other Noncurrent Assets. The notional amount of the underlying Eurobond was increased by a corresponding amount at December 31, 2003 and 2002.See Hedges of Net Investments in Foreign Operations below for further information related to the cross-currency element of the integrated transaction. In the first quarter of 2003, the Company amended the cross-currency element of the integrated transaction to realize the $ 51.8 million of accumulated value of the cross-currency swap. The amendment eliminated the final payment (at a fixed rate of $.90) of $315 million by the Company in exchange for the final payment of Euro 350 million by the counterparty in return for the counterparty paying the Company LIBOR plus 4.29% for the remaining term of the agreement or approximately $14.0 million on an annual basis. Other cash flows associated with the cross-currency element of the integrated transaction, including the Company's obligation to pay on $315 million LIBOR plus approximately 1.34% and the counterparty's obligation to pay on Euro 350 million LIBOR plus approximately 1.47%, remained unchanged by the amendment. Additionally, the cross-currency element of the integrated transaction continue to be marked-to-market. No gain or loss was recognized upon the amendment of the cross currency element of the integrated transaction, as the interest rate of LIBOR plus 4.29% was established to ensure that the fair value of the cash flow streams before and after amendment were equivalent. Since, as a result of the amendment, the Company became economically exposed to the impact of exchange rates on the final principal payment on the Euro 350 million Eurobonds, the Company designated the Euro 350 million Eurobonds as a hedge of net investment, on the date of the amendment. Since March 2003, the effect of currency on the Euro 350 million Eurobonds of $ 35.2 million has been recorded as part of Accumulated Other Comprehensive income (loss). The fair value of these swap agreements is the estimated amount the Company would receive (pay) at the reporting date, taking into account the effective interest rates and foreign exchange rates. As of December 31, 2003 and 2002, the estimated net fair values of the swap agreements was $63.1 million and $52.4 million, respectively. Commodity Price Risk Management The Company selectively enters into commodity price swaps to effectively fix certain variable raw material costs. These swaps are used purely to stabilize the cost of components used in the production of certain of the Company's products. The Company generally accounts for the commodity swaps as cash flow hedges under SFAS 133. As a result, the Company records the fair value of the swap primarily through other comprehensive income based on the tested effectiveness of the commodity swap. Realized gains or losses in other comprehensive income are released and recorded to costs of products sold as the products associated with the commodity swaps are sold. At December 31, 2003, the Company had no commodity swaps in place. Consignment Arrangements The Company consigns the precious metals used in the production of precious metal alloy products from various financial institutions. Under these consignment arrangements, the banks own the precious metal, and, accordingly, the Company does not report this consigned inventory as part of its inventory on its consolidated balance sheet. The consignment agreements allow the Company to take ownership of the metal at approximately the same time customer orders are received and to closely match the price of the metal acquired to the price charged to the customer (i.e., the price charged to the customer is largely a pass through). As precious metal prices fluctuate, the Company evaluates the impact of the precious metal price fluctuation on its target gross margins for precious metal alloy products and revises the prices customers are charged for precious metal alloy products accordingly, depending upon the magnitude of the fluctuation. While the Company does not separately invoice customers for the precious metal content of our precious metal alloy products, the underlying precious metal content is the primary component of the cost and sales price of the precious metal alloy products. For practical purposes, if the precious metal prices go up or down by a small amount, the Company will not immediately modify prices, as long as the cost of precious metals embedded in the Company's precious metal alloy price closely approximates the market price of the precious metal. If there is a significant change in the price of precious metals, the Company adjusts the price for the precious metal alloys, maintaining its margin on the products. At December 31, 2003, the Company had 149,097 troy ounces of precious metal, primarily gold, platinum and palladium) on consignment for periods of less than one year with a market value of $61.3 million. Under the terms of the consignment agreements, the Company also makes compensatory payments to the consignor banks based on a percentage of the value of the consigned precious metals inventory. At December 31, 2003, the average annual rate charged by the consignor banks was 2.5%. These compensatory payments are considered to be a cost of the metals purchased and are recorded as cost of products sold.

EXPECTED MATURITY DATES DECEMBER 31, 2003 (represents notional amounts for derivative financial instruments) 2009 and Carrying Fair 2004 2005 2006 2007 2008 beyond Value Value (dollars in thousands) Financial Instruments Notes Payable: Denmark krone denominated $ 59 $ - $ - $ - $ - $ - $ 59 $ 59 Average interest rate 6.50% 6.50% Euro denominated 623 - - - - - 623 623 Average interest rate 5.46% 5.46% Japanese yen denominated 155 - - - - - 155 155 Average interest rate 1.38% 1.38% --------------------------------------------------------------------------------------------- 837 - - - - - 837 837 4.78% 4.78% Current Portion of Long-term Debt: U.S. dollar denominated 408 - - - - - 408 408 Average interest rate 4.01% 4.01% Japanese yen denominated 20,728 - - - - - 20,728 20,847 Average interest rate 1.44% 1.44% --------------------------------------------------------------------------------------------- 21,136 - - - - - 21,136 21,255 1.49% 1.49% Long Term Debt: U.S. dollar denominated - 329 310 27 - - 666 666 Average interest rate 3.59% 3.42% 3.40% 3.50% Swiss franc denominated - 44,701 109,321 44,700 - - 198,722 202,939 Average interest rate 4.49% 4.77% 4.49% 4.64% Japanese yen denominated 1,505 19,708 116,659 - - - 137,872 137,991 Average interest rate 0.03% 1.40% 0.56% 0.67% Euro denominated - - 452,712 - - - 452,712 452,712 Average interest rate 5.75% 5.75% Thai baht denominated 139 - - - - - 139 139 Average interest rate 2.75% 2.75% Chile peso denominated - - 91 - - - 91 91 Average interest rate 6.80% 6.80% --------------------------------------------------------------------------------------------- 1,644 64,738 679,093 44,727 - - 790,202 794,538 0.26% 3.54% 4.70% 4.49% 4.58% Derivative Financial Instruments Foreign Exchange Forward Contracts: Forward sale, 9.9 million Australian dollars 7,444 - - - - - 63 63 Forward sale, 0.8 million Swedish krone 117 - - - - - 1 1 Forward sale, 3.0 billion Japanese yen 28,851 - - - - - 248 248 Forward sale, 6.1 million British pounds 10,869 - - - - - 12 12 Forward sale, 0.3 million US Dollar 300 - - - - - 19 19 Forward purchase, 13.5 million Canadian dollars 10,526 - - - - - (70) (70) Interest Rate Swaps: Interest rate swaps - U.S. dollar, terminated 2/2001 (33) (21) - - - - (54) (54) Interest rate swaps - Japanese yen - - - - - 116,767 (3,717) (3,717) Average interest rate 1.6% Interest rate swaps - Swiss francs - - - - - 52,242 (3,868) (3,868) Average interest rate 4.2% Interest rate swaps - Euro - - 329,092 - - - 14,092 14,092 Average interest rate 3.6% Basis swap - Euro-U.S. Dollar - - 315,000 - - - 56,620 56,620 Average interest rate 2.5%

Management's Financial Responsibility The management of DENTSPLY International Inc. is responsible for the preparation and integrity of the consolidated financial statements and all other information contained in this Annual Report. The financial statements were prepared in accordance with generally accepted accounting principles and include amounts that are based on management's informed estimates and judgments. In fulfilling its responsibility for the integrity of financial information, management has established a system of internal accounting controls supported by written policies and procedures. This provides reasonable assurance that assets are properly safeguarded and accounted for and that transactions are executed in accordance with management's authorization and recorded and reported properly. The financial statements have been audited by our independent auditors, PricewaterhouseCoopers LLP, whose unqualified report is presented below. The independent accountants perform audits of the financial statements in accordance with generally accepted auditing standards, which includes consideration of the system of internal accounting controls to determine the nature, timing and extent of audit procedures to be performed. The Audit and Information Technology Committee (the "Committee") of the Board of Directors, consisting solely of outside Directors, meets with the independent accountants with and without management to review and discuss the major audit findings, internal control matters and quality of financial reporting. The independent accountants also have access to the Committee to discuss auditing and financial reporting matters with or without management present. /s/ Gerald K. Kunkle, Jr. /s/ Thomas L. Whiting /s/Bret W. Wise Gerald K. Kunkle, Jr. Thomas L. Whiting Bret W. Wise Vice Chairman and President and Senior Vice President Chief Executive Officer Chief Operating and Chief Financial Officer Officer Report of Independent Auditors To the Board of Directors and Shareholders of DENTSPLY International Inc.: In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of DENTSPLY International Inc. and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15 (a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Notes 1 and 9 to the consolidated financial statements, on January 1, 2002 the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". PricewaterhouseCoopers LLP Philadelphia, PA March 15, 2004 DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31, 2003 2002 2001 (in thousands, except per share amounts) Net sales (Note 4) $ 1,570,925 $ 1,417,600 $ 1,045,275 Cost of products sold 797,724 713,189 502,437 Gross profit 773,201 704,411 542,838 Selling, general and administrative expenses 501,518 457,691 367,556 Restructuring and other costs (income) (Note 16) 3,700 (2,732) 5,073 Operating income 267,983 249,452 170,209 Other income and expenses: Interest expense 26,079 29,242 19,358 Interest income (1,874) (1,853) (1,102) Other (income) expense, net (Note 5) (7,418) 7,973 (27,569) Income before income taxes 251,196 214,090 179,522 Provision for income taxes (Note 14) 81,343 70,449 61,808 Income from continuing operations 169,853 143,641 117,714 Income from discontinued operations, net of tax (Note 6) 4,330 4,311 3,782 Net income $ 174,183 $ 147,952 $ 121,496 Earnings per common share - basic (Note 2) Continuing operations $ 2.16 $ 1.84 $ 1.51 Discontinued operations 0.05 0.05 0.05 Total earnings per common share - basic $ 2.21 $ 1.89 $ 1.56 Earnings per common share - diluted (Note 2) Continuing operations $ 2.11 $ 1.80 $ 1.49 Discontinued operations 0.05 0.05 0.05 Total earnings per common share - diluted $ 2.16 $ 1.85 $ 1.54 Cash dividends declared per common share $ 0.19700 $ 0.18400 $ 0.18333 Weighted average common shares outstanding (Note 2): Basic 78,823 78,180 77,671 Diluted 80,647 79,994 78,975 The accompanying notes are an integral part of these financial statements.

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

December 31, 2003 2002 (in thousands) Assets Current Assets: Cash and cash equivalents $ 163,755 $ 25,652 Accounts and notes receivable-trade, net (Note 1) 241,385 221,262 Inventories, net (Notes 1 and 7) 205,587 214,492 Prepaid expenses and other current assets 88,463 79,595 Assets held for sale (Note 6) 28,262 -- Total Current Assets 727,452 541,001 Property, plant and equipment, net (Notes 1 and 8) 376,211 313,178 Identifiable intangible assets, net (Notes 1 and 9) 246,475 236,009 Goodwill, net (Notes 1 and 9) 963,264 898,497 Other noncurrent assets 114,736 98,348 Noncurrent assets held for sale (Note 6) 17,449 -- Total Assets $ 2,445,587 $ 2,087,033 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 86,338 $ 66,625 Accrued liabilities (Note 10) 172,684 190,783 Income taxes payable 36,483 35,907 Notes payable and current portion of long-term debt (Note 11) 21,973 4,550 Liabilities of discontinued operations (Note 6) 20,206 -- Total Current Liabilities 337,684 297,865 Long-term debt (Note 11) 790,202 769,823 Deferred income taxes 51,241 27,039 Other noncurrent liabilities (Note 12) 142,704 155,119 Noncurrent liabilities of discontinued operations (Note 6) 1,269 -- Total Liabilities 1,323,100 1,249,846 Minority interests in consolidated subsidiaries 418 1,259 Commitments and contingencies (Note 18) Stockholders' Equity: Preferred stock, $.01 par value; .25 million shares authorized; no shares issued -- -- Common stock, $.01 par value; 200 million shares authorized; 81.4 million shares issued at December 31, 2003 and December 31, 2002 814 814 Capital in excess of par value 166,952 156,898 Retained earnings 889,601 730,971 Accumulated other comprehensive income 104,920 1,624 Unearned ESOP compensation (380) (1,899) Treasury stock, at cost, 2.1 million shares at December 31, 2003 and 3.0 million shares at December 31, 2002 (39,838) (52,480) Total Stockholders' Equity 1,122,069 835,928 Total Liabilities and Stockholders' Equity $ 2,445,587 $ 2,087,033 The accompanying notes are an integral part of these financial statements.

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Accumulated Total Capital in Other Unearned Stock- Common Excess of Retained Comprehensive ESOP Treasury holders' Stock Par Value Earnings Income (Loss) Compensation Stock Equity (in thousands) Balance at December 31, 2000 $ 543 $ 151,899 $ 490,167 $ (49,296) $ (4,938) $ (68,005) $ 520,370 Comprehensive Income: Net income - - 121,496 - - - 121,496 Other comprehensive loss, net of tax: Foreign currency translation adjustment - - - (26,566) - - (26,566) Cumulative effect of change in accounting principle for derivative and hedging activities (SFAS 133) - - - (503) - - (503) Net loss on derivative financial instruments - - - (810) - - (810) Minimum pension liability adjustment - - - (213) - - (213) Comprehensive Income 93,404 Exercise of stock options - (45) - - - 8,062 8,017 Tax benefit from stock options exercised - 1,333 - - - - 1,333 Repurchase of common stock, at cost - - - - - (875) (875) Cash dividends ($0.18333 per share) - - (14,249) - - - (14,249) Decrease in unearned ESOP compensation - - - - 1,519 - 1,519 Three-for-two common stock split 271 (271) - - - - - Balance at December 31, 2001 814 152,916 597,414 (77,388) (3,419) (60,818) 609,519 Comprehensive Income: Net income - - 147,952 - - - 147,952 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment - - - 88,739 - - 88,739 Unrealized loss on available-for-sale securities - - - (4,854) - - (4,854) Net loss on derivative financial instruments - - - (4,670) - - (4,670) Minimum pension liability adjustment - - - (203) - - (203) Comprehensive Income 226,964 Exercise of stock options - 715 - - - 8,338 9,053 Tax benefit from stock options exercised - 3,320 - - - - 3,320 Cash dividends ($0.184 per share) - - (14,395) - - - (14,395) Decrease in unearned ESOP compensation - - - - 1,520 - 1,520 Fractional share payouts - (53) - - - - (53) Balance at December 31, 2002 814 156,898 730,971 1,624 (1,899) (52,480) 835,928 Comprehensive Income: Net income - - 174,183 - - - 174,183 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment - - - 95,984 - - 95,984 Unrealized gain on available-for-sale securities - - - 5,005 - - 5,005 Net gain on derivative financial instruments - - - 2,430 - - 2,430 Minimum pension liability adjustment - - - (123) - - (123) Comprehensive Income 277,479 Exercise of stock options - 4,229 - - - 12,642 16,871 Tax benefit from stock options exercised - 5,825 - - - - 5,825 Cash dividends ($0.197 per share) - - (15,553) - - - (15,553) Decrease in unearned ESOP compensation - - - - 1,519 - 1,519 Balance at December 31, 2003 $ 814 $ 166,952 $ 889,601 $ 104,920 $ (380) $ (39,838) $1,122,069 The accompanying notes are an integral part of these financial statements.

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, ------------------------------- 2003 2002 2001 (in thousands) Cash flows from operating activities: Net income from continuing operations $ 169,853 $ 143,641 $ 117,714 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 36,897 32,338 23,702 Amortization 8,764 9,014 27,810 Deferred income taxes 32,411 (8,435) 7,021 Restructuring and other (income) costs 3,700 (2,732) 5,073 Other non-cash costs (income) (1,173) 9,281 (3,849) Gain on sale of business -- -- (23,121) Loss on disposal of property, plant and equipment 459 1,703 54 Gain on sale of PracticeWorks securities (5,806) -- -- Non-cash ESOP compensation 1,519 1,520 1,519 Changes in operating assets and liabilities, net of acquisitions and divestitures: Accounts and notes receivable-trade, net (4,899) (13,030) (3,783) Inventories, net 15,197 (5,686) 16,241 Prepaid expenses and other current assets 4,894 (1,601) -- Accounts payable 16,538 (7,698) 8,416 Accrued liabilities (26,561) (12,922) 24,679 Income taxes (271) 20,425 3,608 Other, net (657) 3,712 (4,004) Cash flows from discontinued operating activities 7,127 3,453 9,988 Net cash provided by operating activities 257,992 172,983 211,068 Cash flows from investing activities: Acquisitions of businesses, net of cash acquired (15,038) (49,805) (812,523) Expenditures for identifiable intangible assets (2,410) (2,629) (2,414) Proceeds from bulk sale of precious metals inventory -- 6,754 41,814 Insurance proceeds received for fire-destroyed equipment -- 2,535 8,980 Redemption of PracticeWorks preferred stock -- 15,000 -- Proceeds from sale of PracticeWorks securities 23,506 -- -- Proceeds from sale of property, plant and equipment 2,959 1,777 645 Capital expenditures (76,583) (55,476) (47,529) Cash flows used in discontinued operations' investing activities (1,811) (2,658) (3,659) Net cash used in investing activities (69,377) (84,502) (814,686) Cash flows from financing activities: Proceeds from long-term borrowings, net of deferred financing costs 634 100,244 1,435,175 Payments on long-term borrowings (70,738) (190,589) (819,186) (Decrease) increase in short-term borrowings (3,277) (3,666) 7,511 Proceeds from exercise of stock options and warrants 16,871 9,053 8,017 Cash paid for treasury stock -- -- (875) Cash dividends paid (14,999) (14,358) (14,228) Realization of cross currency swap value 10,736 -- -- Proceeds from the termination of a pension plan -- -- 8,486 Fractional share payout -- (53) -- Net cash (used in) provided by financing activities (60,773) (99,369) 624,900 Effect of exchange rate changes on cash and cash equivalents 10,261 2,830 (3,005) Net increase (decrease) in cash and cash equivalents 138,103 (8,058) 18,277 Cash and cash equivalents at beginning of period 25,652 33,710 15,433 Cash and cash equivalents at end of period $ 163,755 $ 25,652 $ 33,710 The accompanying notes are an integral part of these financial statements.

DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31, 2003 2002 2001 (in thousands) Supplemental disclosures of cash flow information: Interest paid $25,796 $25,545 $15,967 Income taxes paid 57,733 55,913 47,215 Supplemental disclosures of non-cash transactions: Receipt of PracticeWorks convertible preferred stock in connection with the sale of Infosoft business -- -- 32,000 Receipt of PracticeWorks common stock and stock warrants in exchange for convertible preferred stock -- 18,582 --

The company assumed liabilities in conjunction with the following acquisitions: Fair Value Cash Paid for of Assets Assets or Liabilities Date Acquired Acquired Capital Stock Assumed (in thousands) Austenal, Inc. January 2002 $ 31,929 $ 17,770 $ 14,159 Degussa Dental Group October 2001 654,878 528,487 126,391 CeraMed Dental (remaining 49%) July 2001 20,000 20,000 -- Tulsa Dental Products (earn-out payment) May 2001 84,627 84,627 -- Dental injectible anesthetic assets of AstraZeneca March 2001 130,469 119,347 11,122 Friadent GmbH January 2001 128,356 97,749 30,607 The accompanying notes are an integral part of these financial statements. DENTSPLY INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES Description of Business DENTSPLY designs, develops, manufactures and markets a broad range of products for the dental market. The Company believes that it is the world's leading manufacturer and distributor of dental prosthetics, precious metal dental alloys, dental ceramics, endodontic instruments and materials, prophylaxis paste, dental sealants, ultrasonic scalers and crown and bridge materials; the leading United States manufacturer and distributor of dental handpieces, dental x-ray film holders, film mounts and bone substitute/grafting materials; and a leading worldwide manufacturer or distributor of dental injectable anesthetics, impression materials, orthodontic appliances, dental cutting instruments and dental implants. The Company distributes its dental products in over 120 countries under some of the most well established brand names in the industry. DENTSPLY is committed to the development of innovative, high-quality, cost effective new products for the dental market. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates, if different assumptions are made or if different conditions exist. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts and Notes Receivable-Trade The Company sells its products through a worldwide network of distributors or direct to the end user. For customers on credit terms, the Company performs ongoing credit evaluation of those customers' financial condition and generally does not require collateral from them. The Company establishes allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Accounts and notes receivable-trade are stated net of these allowances which were $15.1 million and $18.5 million at December 31, 2003 and 2002, respectively. Certain of the Company's customers are offered cash rebates based on targeted sales increases. In accounting for these rebate programs, the Company records an accrual as a reduction of net sales for the estimated rebate as sales take place throughout the year in accordance with EITF 01-09, " Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)". Inventories Inventories are stated at the lower of cost or market. At December 31, 2003 and 2002, the cost of $11.4 million, or 6%, and $13.0 million, or 6%, respectively, of inventories was determined by the last-in, first-out ("LIFO") method. The cost of other inventories was determined by the first-in, first-out ("FIFO") or average cost methods. The Company establishes reserves for inventory estimated to be obsolete or unmarketable equal to the difference between the cost of inventory and estimated market value based upon assumptions about future demand and market conditions. If the FIFO method had been used to determine the cost of LIFO inventories, the amounts at which net inventories are stated would be higher than reported at December 31, 2003 and December 31, 2002 by $1.0 million and $0.8 million, respectively. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Except for leasehold improvements, depreciation for financial reporting purposes is computed by the straight-line method over the following estimated useful lives: buildings - generally 40 years and machinery and equipment - 4 to 15 years. The cost of leasehold improvements is amortized over the shorter of the estimated useful life or the term of the lease. Maintenance and repairs are charged to operations; replacements and major improvements are capitalized. These assets are reviewed for impairment whenever events or circumstances provide evidence that suggest that the carrying amount of the asset may not be recoverable. Impairment is based upon an evaluation of the identifiable undiscounted cash flows. If impaired, the resulting charge reflects the excess of the asset's carrying cost over its fair value. Identifiable Finite-lived Intangible Assets Identifiable finite-lived intangible assets, which primarily consist of patents, trademarks and licensing agreements, are amortized on a straight-line basis over their estimated useful lives, ranging from 5 to 40 years. These assets are reviewed for impairment whenever events or circumstances provide evidence that suggest that the carrying amount of the asset may not be recoverable. The Company performs ongoing impairment analysis on intangible assets related to new technology. Impairment is based upon an evaluation of the identifiable undiscounted cash flows. If impaired, the resulting charge reflects the excess of the asset's carrying cost over its fair value. Goodwill and Indefinite-Lived Intangible Assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". This statement requires that the amortization of goodwill and indefinite-lived intangible assets be discontinued and instead an annual impairment approach be applied. The Company performed the the annual impairment tests during 2002 and 2003, as required, and no impairment was identified. These impairment tests are based upon a fair value approach rather than an evaluation of the undiscounted cash flows. If impairment is identified under SFAS 142, the resulting charge is determined by recalculating goodwill through a hypothetical purchase price allocation of the fair value and reducing the current carrying value to the extent it exceeds the recalculated value. If impairment is identified on indefinite-lived intangibles, the resulting charge reflects the excess of the asset's carrying cost over its fair value. Derivative Financial Instruments The Company adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", on January 1, 2001. This standard, as amended by SFAS 138 and 149, requires that all derivative instruments be recorded on the balance sheet at their fair value and that changes in fair value be recorded each period in current earnings or comprehensive income. The Company employs derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Additionally, the Company utilizes interest rate swaps to convert floating rate debt to fixed rate, fixed rate debt to floating rate, cross currency basis swaps to convert debt denominated in one currency to another currency, and commodity swaps to fix its variable raw materials costs. Litigation The Company and its subsidiaries are from time to time parties to lawsuits arising out of their respective operations. The Company records liabilities when a loss is probable and can be reasonably estimated. These estimates are made by management based on an analysis made by internal and external legal counsel which considers information known at the time. Foreign Currency Translation The functional currency for foreign operations, except for those in highly inflationary economies, has been determined to be the local currency. Assets and liabilities of foreign subsidiaries are translated at exchange rates on the balance sheet date; revenue and expenses are translated at the average year-to-date rates of exchange. The effects of these translation adjustments are reported in stockholders' equity within "Accumulated other comprehensive income". During the years ended December 31, 2003 and 2002 the Company had translation gains of $153.0 million and $121.4 million, respectively, offset by losses of $57.0 million and $32.7 million, respectively, on its loans designated as hedges of net investments. During the year ended December 31, 2001 the Company had translation losses of $32.1 million offset by gains of $5.5 million on its loans designated as hedges of net investments. Exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved and translation adjustments in countries with highly inflationary economies are included in income. Exchange gains of $0.3 million in 2003 and $1.2 million in 2001 and exchange losses of $3.5 million in 2002 are included in "Other expense (income), net". Revenue Recognition Revenue, net of related discounts and allowances, is recognized at the time of shipment in accordance with shipping terms and as title and risk of loss pass to customers. Net sales include shipping and handling costs collected from customers in connection with the sale. A significant portion of the Company's net sales is comprised of sales of precious metals generated through its precious metal alloy product offerings. The precious metals content of sales was $205.0 million, $187.1 million and $50.7 million for 2003, 2002 and 2001, respectively. Warranties The Company provides warranties on certain equipment products. Estimated warranty costs are accrued when sales are made to customers. Estimates for warranty costs are based primarily on historical warranty claim experience. Research and Development Costs Research and development ("R&D") costs relate primarily to internal costs for salaries and direct overhead costs. In addition, the Company contracts with outside vendors to conduct R&D activities. All such R&D costs are charged to expense when incurred. The Company capitalizes the costs of equipment that has general R&D uses and expenses such equipment that is solely for specific R&D projects. The depreciation related to this capitalized equipment is included in the Company's R&D costs. R&D costs are included in "Selling, general and administrative expenses" and amounted to approximately $43.3 million, $39.9 million and $27.3 million for 2003, 2002 and 2001, respectively. Income Taxes Income taxes are determined in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the difference between financial statements and tax bases of liabilities and assets using enacted tax rates in effect for the year in which the differences are expected to reverse. SFAS 109 also provides for the recognition of deferred tax assets if it is more likely than not that the assets will be realized in future years. A valuation allowance has been established for deferred tax assets for which realization is not likely. The Company accounts for income tax contingencies in accordance with the Statement of Financial Standards No. 5, "Accounting for Contingencies". Earnings Per Share Basic earnings per share is calculated by dividing net earnings by the weighted average number of shares outstanding for the period. Diluted earnings per share is calculated by dividing net earnings by the weighted average number of shares outstanding for the period, adjusted for the effect of an assumed exercise of all dilutive options outstanding at the end of the period. Stock Compensation The Company has stock-based employee compensation plans which are described more fully in Note 13. The Company applies the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for stock compensation plans. Under this method, no compensation expense is recognized for fixed stock option plans, provided that the exercise price is greater than or equal to the price of the stock at the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation.

Year Ended December 31, 2003 2002 2001 (in thousands, except per share amounts) Net income as reported $ 174,183 $ 147,952 $ 121,496 Deduct: Stock-based employee compensation expense determined under fair value method, net of related tax (11,062) (9,576) (6,137) Pro forma net income $ 163,121 $ 138,376 $ 115,359 Basic earnings per common share As reported $ 2.21 $ 1.89 $ 1.56 Pro forma under fair value based method $ 2.07 $ 1.77 $ 1.49 Diluted earnings per common share As reported $ 2.16 $ 1.85 $ 1.54 Pro forma under fair value based method $ 2.02 $ 1.73 $ 1.46

Other Comprehensive Income (Loss) Other comprehensive income (loss) includes foreign currency translation adjustments related to the Company's foreign subsidiaries, net of the related changes in certain financial instruments hedging these foreign currency investments. In addition, changes in the fair value of the Company's available-for-sale investment securities and certain derivative financial instruments and changes in its minimum pension liability are recorded in other comprehensive income (loss). These adjustments are recorded in other comprehensive income (loss) net of any related tax effects. For the years ended 2003 and 2002, these adjustments were net of tax benefits of $29.1 million and $32.9 million, respectively. For the year ended 2001, these adjustments were net of tax liabilities of $5.6 million. The balances included in accumulated other comprehensive income (loss) in the consolidated balance sheets are as follows:

December 31, 2003 2002 (in thousands) Foreign currency translation adjustments $ 109,532 $ 13,548 Net loss on derivative financial instruments (3,553) (5,983) Unrealized gain (loss) on available-for-sale securities 151 (4,854) Minimum pension liability (1,210) (1,087) $ 104,920 $ 1,624

The cumulative foreign currency translation adjustments included translation gains of $193.0 million and $39.9 million as of December 31, 2003 and 2002, respectively, offset by losses of $83.5 million and $26.4 million, respectively, on loans designated as hedges of net investments. Reclassifications Certain reclassifications have been made to prior years' data in order to conform to the current year presentation. New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities, an interpretation of ARB 51". The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights ("variable interest entities") and how to determine when and which business enterprise should consolidate the variable interest entity (the "primary beneficiary"). This new model for consolidation applies to an entity which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a variable interest entity make additional disclosures. Certain disclosure requirements of FIN 46 are effective for financial statements issued after January 31, 2003. The remaining provisions of FIN 46 are effective immediately for all variable interests in entities created after January 31, 2003. Adoption of this provision did not have an effect on the Company. In December 2003, the FASB released a revised version of FIN 46, FIN 46R, to clarify certain aspects of FIN 46 and to provide certain entities with exemptions from the requirements of FIN 46. FIN 46R requires the application of either FIN 46 or FIN 46R to all Special Purpose Entitied ("SPE's") created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after December 15, 2003. Adoption of this provision did not have an effect on the Company. FIN 46R will be applicable to all non-SPE entities created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after March 15, 2004. The Company does not expect the application of this portion of FIN 46R to have a material impact on the Company's financial statements. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". Specifically, the statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The Application of this standard has not had a material impact on the Company's financial statements. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 ("SFAS 150"), " Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Adoption of the provisions of SFAS No. 150 in the third quarter of 2003 related to mandatorily redeemable financial instruments had no effect on the Company's financial statements. In November 2003, the FASB issued FSP No. 150-3, "Effective Date, Disclosures and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". For public companies, FSP 150-3 deferred the provisions of SFAS 150 related to classification and measurement of certain mandatorily redeemable noncontrolling interests issued prior to November 5, 2003. For mandatorily redeemable noncontrolling interests issued after November 5, 2003, SFAS 150 applies without any deferral. The Company continues to analyze the provisions of SFAS 150 related to mandatorily redeemable noncontrolling interests, but does not believe that application of these provisions will have a material impact on the Company's financial statements. In January 2004, the FASB released FASB Staff Position ("FSP") No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" requires a company to consider current changes in applicable laws when measuring its postretirement benefit costs and accumulated postretirement benefit obligation. However, because of uncertainties of the effect of the provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") on plan sponsors and certain accounting issues raised by the Act, FSP 106-1 allows plan sponsors to elect a one-time deferral of the accounting for the Act. The Company is electing the deferral provided by FSP 106-1 to analyze the impact of the Act on prescription drug coverage provided to a limited number of retirees from one of its business units. The Company does not expect the Act to have a material impact on the Company's postretiremenent benefits liabilities or the Company's financial statements. NOTE 2 - EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per common share:

Earnings per common share -------------------------------------- Income From Income From Continuing Discontinued Net Continuing Discontinued Operations Operations Income Shares Operations Operations Total (in thousands, except per share amounts) Year Ended December 31, 2003 Basic $169,853 $ 4,330 $174,183 78,823 $ 2.16 $ 0.05 $ 2.21 Incremental shares from assumed exercise of dilutive options -- -- -- 1,824 Diluted $169,853 $ 4,330 $174,183 80,647 $ 2.11 $ 0.05 $ 2.16 Year Ended December 31, 2002 Basic $143,641 $ 4,311 $147,952 78,180 $ 1.84 $ 0.05 $ 1.89 Incremental shares from assumed exercise of dilutive options -- -- -- 1,814 Diluted $143,641 $ 4,311 $147,952 79,994 $ 1.80 $ 0.05 $ 1.85 Year Ended December 31, 2001 Basic $117,714 $ 3,782 $121,496 77,671 $ 1.51 $ 0.05 $ 1.56 Incremental shares from assumed exercise of dilutive options -- -- -- 1,304 Diluted $117,714 $ 3,782 $121,496 78,975 $ 1.49 $ 0.05 $ 1.54

Options to purchase 1.4 million and 0.1 million shares of common stock that were outstanding during the years ended 2003 and 2002, respectively, were not included in the computation of diluted earnings per share since the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. NOTE 3 - BUSINESS ACQUISITIONS AND DIVESTITURES Acquisitions All acquisitions completed in 2002 and 2001 were accounted for under the purchase method of accounting; accordingly, the results of the operations acquired are included in the accompanying financial statements for the periods subsequent to the respective dates of the acquisitions. The purchase prices were allocated on the basis of estimates of the fair values of assets acquired and liabilities assumed. In January 2002, the Company acquired the partial denture business of Austenal Inc. ("Austenal") in a cash transaction valued at approximately $17.8 million. Previously headquartered in Chicago, Illinois, Austenal manufactured dental laboratory products and was the world leader in the manufacture and sale of systems used by dental laboratories to fabricate partial dentures. In October 2001, the Company completed the acquisition of the Degussa Dental Group ("Degussa Dental"). The Company paid 548 million Euros or $503 million at the closing date and paid 12.1 million Euros, or $11.4 million, as a closing balance sheet adjustment in June 2002. The final closing balance payment to Degussa of $9.3 million was made in December 2003, as a result of an arbitration ruling. Prior to the acquisition, Degussa Dental had carried large amounts of precious metals, for its production of precious metal alloy products, in inventory which resulted in exposure to the risk of price changes in the precious metals. After the acquisition, Dentsply management changed Degussa Dental's practice of holding a long position in the metal to holding metal on a consignment basis from various financial institutions. In connection with this change in practice, the Company sold certain precious metals to various financial institutions in the fourth quarter of 2001 for a value of $41.8 million and in the first quarter of 2002 for a value of $6.8 million. These transactions effectively transferred the price risk on the precious metals to the financial institutions and allows the Company to acquire the precious metal at approximately the same time and for the same price as alloys are sold to the Company's customers. As the precious metal inventory was recorded at fair value as of the acquisition date, which was based on the value realized in the transactions with the financial institutions, the Company did not recognize a gain or loss on these transactions. In March 2001, the Company acquired the dental injectible anesthetic assets of AstraZeneca ("AZ Assets"). The total purchase price of this transaction was composed of the following: an initial $96.5 million payment which was made at closing in March 2001; a $20 million contingency payment (including related accrued interest) associated with the first year sales of injectible dental anesthetic which was paid during the first quarter of 2002. In a separate agreement, as amended, the Company acquired the know-how, patent and trademark rights to the non-injectible periodontal anesthetic product known as Oraqix with a purchase price composed of the following: a $2.0 million payment upon submission of a New Drug Application ("NDA") in the U.S. and a Marketing Authorization Application ("MAA") in Europe for the Oraqix product under development; payments of $6.0 million and $2.0 million upon the approval of the NDA and MAA, respectively, for licensing rights; and a $10.0 million prepaid royalty payment upon approval of both applications. The $2.0 million payment related to the application filings was accrued as restructuirng and other costs during the fourth quarter of 2001 and was paid during the first quarter of 2002. The MAA was approved in Sweden, the European Union member reference state, and the Company made the required $2.0 million payment to AstraZeneca in the second quarter of 2003. The NDA application was approved in December 2003 and as a result the remaining payments of $16.0 million became due and were accrued in 2003 and the payments were made in January 2004. These payments were capitalized and will be amortized over the term of the licensing agreement. In January 2001, the Company acquired the outstanding shares of Friadent GmbH ("Friadent") for 220 million German marks or $106 million ($105 million, net of cash acquired). During the first quarter of 2002, the Company received cash of 16.5 million German marks or approximately $7.3 million, representing a final balance sheet adjustment. As a result of this closing balance sheet adjustment, goodwill was reduced by approximately $7.3 million. Previously headquartered in Mannheim, Germany, Friadent was a major global dental implant manufacturer and marketer with subsidiaries in Germany, France, Denmark, Sweden, the United States, Switzerland, Brazil, and Belgium. The respective purchase prices plus direct acquisition costs for Austenal, Degussa Dental, Friadent and the AZ Assets have been allocated on the basis of estimated fair values at the dates of acquisition. The purchase price allocations for these acquisitions are as follows:

Austenal Degussa Dental AZ Assets Friadent (in thousands) Current assets $ 5,991 $ 166,216 $ -- $ 16,244 Property, plant and equipment 2,413 71,641 878 4,184 Identifiable intangible assets and goodwill 20,227 402,678 129,591 98,282 Other long-term assets 3,298 14,343 -- 4,882 Current liabilities (8,357) (62,550) (11,122) (18,855) Other long-term liabilities (5,802) (63,841) -- (6,988) $ 17,770 $ 528,487 $ 119,347 $ 97,749

A summary of the identifiable intangible assets and goodwill acquired in these acquisitions is as follows:

Austenal Degussa Dental AZ Assets Friadent ---------------------- ----------------------- ----------------------- ----------------------- Weighted Weighted Weighted Weighted Average Average Average Average Amorti- Amorti- Amorti- Amorti- Value zation Value zation Value zation Value zation Assigned Period Assigned Period Assigned Period Assigned Period Finite-lived intangible assets: Patents $ 548 9.0 $ 8,300 12.3 $ - $ 2,302 7.3 Trademarks - 6,800 40.0 - 603 10.0 Licensing agreements - 4,143 18.0 - 1,909 3.3 Other - 1,479 3.0 - 875 2.8 548 9.0 20,722 21.9 - 5,689 5.6 Indefinite-lived intangible assets: Licensing agreements - N/A - N/A 129,591 N/A - N/A Goodwill 19,679 N/A 381,956 N/A - N/A 92,593 N/A $20,227 $402,678 $ 129,591 $98,282

The factors that contributed to the purchase price for Austenal, and the resulting goodwill, included its partial denture products which helped to expand the Company's product offerings. None of the goodwill recognized as a result of the Austenal transaction is expected to be deductible for tax purposes. The factors that contributed to the purchase price for Degussa Dental, and the resulting goodwill, included its product breadth and worldwide position in precious metal alloys used in dentistry, its ceramics technology for crown and bridge applications and its strong position in Europe and Japan. The Company expects that approximately 50% of the goodwill recognized as a result of the transaction will be deductible for tax purposes. The factors that contributed to the purchase price for Friadent, and the resulting goodwill, included its strong position in dental implants, one of the highest growth areas in dentistry. The Company expects that approximately 25% of the goodwill recognized as a result of the transaction will be deductible for tax purposes. In August 1996, the Company purchased a 51% interest in CeraMed Dental ("CeraMed") for $5 million with the right to acquire the remaining 49% interest. In March 2001, the Company entered into an agreement for an early buy-out of the remaining 49% interest in CeraMed at a cost of $20 million, which was made in July 2001, with a potential contingent consideration ("earn-out") provision capped at $5 million. The earn-out was based on future sales of CeraMed products during the August 1, 2001 to July 31, 2002 time frame, with any additional pay out due on September 30, 2002. The Company was not required to make a payment under this earn-out provision. Certain assets of Tulsa Dental Products LLC were purchased in January 1996 for $75.1 million, plus $5.0 million paid in May 1999 related to earn-out provisions in the purchase agreement based on performance of the acquired business. The purchase agreement provided for an additional earn-out payment based upon the operating performance of the Tulsa Dental business for one of the three two-year periods ending December 31, 2000, December 31, 2001 or December 31, 2002, as selected by the seller. The seller chose the two-year period ended December 31, 2000 and the final earn-out payment of $84.6 million was made in May 2001 resulting in an increase in goodwill. Divestitures In March 2001, the Company sold InfoSoft, LLC to PracticeWorks Inc. ("PracticeWorks"). InfoSoft, LLC was the wholly owned subsidiary of the Company, that developed and sold software and related products for dental practice management. In the transaction, the Company received 6.5% convertible preferred stock in PracticeWorks, with a fair value of $32 million. The sale resulted in a $23.1 million pretax gain which was included in "Other expense (income), net" in 2001. The Company recorded the preferred stock investment and subsequent accrued dividends to "Other noncurrent assets". In June 2002, the Company completed a transaction with PracticeWorks to exchange the accumulated balance of this preferred stock investment for a combination of $15.0 million of cash, 1.0 million shares of PracticeWorks' common stock valued at $15.0 million and 450,000 seven-year term stock warrants issued by PracticeWorks, valued at $3.6 million, based on the Black-Scholes option pricing model. The transaction resulted in a loss to the Company of $1.1 million, which is included in "Other expense (income), net" in 2002. In October 2003, PracticeWorks was acquired by Eastman Kodak in a cash transaction and as a result the Company received $23.5 million for its common stock and warrant holdings. This buyout resulted in a Company recognizing a $5.8 million pre-tax gain, which is included in "Other expense (income), net" in 2003. NOTE 4 - SEGMENT AND GEOGRAPHIC INFORMATION Segment Information The Company follows Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information". SFAS 131 establishes standards for disclosing information about reportable segments in financial statements. The Company has numerous operating businesses covering a wide range of products and geographic regions, primarily serving the professional dental market. Professional dental products represented approximately 98%, 98% and 97% of sales in 2003, 2002 and 2001, respectively. Operating businesses are combined into five operating groups which have overlapping product offerings, geographical presence, customer bases, distribution channels, and regulatory oversight. In determining reportable segments, the Company considers its operating and management structure and the types of information subject to regular review by its chief operating decision-maker. The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies (see Note 1). The Company measures segment income for reporting purposes as net operating profit before restructuring, interest and taxes. A description of the services provided within each of the Company's five reportable segments follows: Dental Consumables - U.S. and Europe/Japan/Non-Dental This business group includes responsibility for the design, manufacturing, sales, and distribution for certain small equipment and chairside consumable products in the U.S., Germany, Scandinavia, Iberia and Eastern Europe; the design and manufacture of certain chairside consumable and laboratory products in Japan, the sales and distribution of all Company products in Japan; and the design and the Company's non-dental business. Endodontics/Professional Division Dental Consumables/Asia This business group includes the responsibility for the design and manufacturing for endodontic products in the U.S., Switzerland and Germany; certain small equipment and chairside consumable products in the U.S.; and laboratory products in China. The business is responsible for sales and distribution of all Company products throughout Asia - except Japan; all Company endodontic products in the U.S., Canada, Swtizerland, Benelux, Scandinavia, and Eastern Europe, and certain endodontic products in Germany; and certain small equipment and chairside consumable products in the U.S. Dental Consumables - United Kingdom, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business This business group includes responsibility for the design and manufacture of dental laboratory products in Germany and the Netherlands and the sales and distribution of these products in Europe, Eastern Europe, Middle East, Africa and the CIS. The group also has responsibility for sales and distribution of the Company's other products in France, United Kingdom, Italy, Middle East, Africa and the CIS. Australia/Canada/Latin America/U.S. Pharmaceutical This business group includes responsibility for the design, manufacture, sales and distribution of dental anesthetics in the U.S. and Brazil; chairside consumable and laboratory products in Brazil. It also has responsibility for the sales and distribution of all Company products sold in Australia, Canada, Latin America and Mexico. U.S. Dental Laboratory Business/Implants/Orthodontics This business group includes the responsibility for the design, manufacture, sales and distribution for laboratory products in the U.S. and the sales and distribution of U.S. manufactured laboratory products in certain international markets; the design, manufacture, world-wide sales and distribution of the Company's dental implant and bone generation products; and the world-wide sales and distribution of the Company's orthodontic products. Significant interdependencies exist among the Company's operations in certain geographic areas. Inter-group sales are at prices intended to provide a reasonable profit to the manufacturing unit after recovery of all manufacturing costs and to provide a reasonable profit for purchasing locations after coverage of marketing and general and administrative costs. Generally, the Company evaluates performance of segments based on the segments operating income and net third party sales excluding precious metal content. The following table sets forth information about the Company's operating groups for 2003, 2002 and 2001. Third Party Net Sales

2003 2002 2001 Dental Consumables - U.S. and Europe/Japan/Non-dental $ 277,304 $ 254,503 $ 193,788 Endodontics/Professional Division Dental Consumables/Asia 384,706 358,227 316,257 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 455,431 376,441 178,382 Australia/Canada/Latin America/U.S. Pharmaceutical 114,447 109,661 122,052 U.S. Dental Laboratory Business/Implants/Orthodontics 318,292 298,287 217,839 All Other (a) 20,745 20,481 16,957 Total $1,570,925 $1,417,600 $1,045,275

Third Party Net Sales, excluding precious metal content

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 264,648 $ 242,117 $ 190,708 Endodontics/Professional Division Dental Consumables/Asia 381,509 357,643 316,257 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 307,017 241,135 139,530 Australia/Canada/Latin America/U.S. Pharmaceutical 113,262 108,454 121,983 U.S. Dental Laboratory Business/Implants/Orthodontics 278,709 260,682 209,195 All Other 20,745 20,481 16,957 Total excluding precious metal content 1,365,890 1,230,512 994,630 Precious Metal Content 205,035 187,088 50,645 Total including Precious Metal Content $1,570,925 $1,417,600 $1,045,275

Intersegment Net Sales

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 207,284 $ 190,520 $ 173,875 Endodontics/Professional Division Dental Consumables/Asia 158,501 151,125 144,110 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 76,648 63,636 15,511 Australia/Canada/Latin America/U.S. Pharmaceutical 33,276 37,923 21,714 U.S. Dental Laboratory Business/Implants/Orthodontics 31,737 29,036 29,005 All Other 158,377 153,842 109,680 Eliminations (665,823) (626,082) (493,895) Total $ - $ - $ -

Depreciation and amortization

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 6,719 $ 6,869 $ 6,127 Endodontics/Professional Division Dental Consumables/Asia 11,042 10,574 16,166 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 9,189 7,140 1,768 Australia/Canada/Latin America/U.S. Pharmaceutical 1,715 1,259 2,791 U.S. Dental Laboratory Business/Implants/Orthodontics 7,652 7,259 7,800 All Other 9,344 8,251 16,860 Total $ 45,661 $ 41,352 $ 51,512

Segment Operating Income

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 82,378 $ 70,941 $ 59,789 Endodontics/Professional Division Dental Consumables/Asia 154,025 141,585 110,111 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 30,545 11,356 (72) Australia/Canada/Latin America/U.S. Pharmaceutical 12,031 14,758 20,167 U.S. Dental Laboratory Business/Implants/Orthodontics 41,428 50,191 42,034 All Other (48,724) (42,111) (56,747) Segment Operating Income 271,683 246,720 175,282 Reconciling Items: Restructuring and other costs (income) 3,700 (2,732) 5,073 Interest Expense 26,079 29,242 19,358 Interest Income (1,874) (1,853) (1,102) Other (income) expense, net (7,418) 7,973 (27,569) Income before income taxes $ 251,196 $ 214,090 $ 179,522

Assets

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 187,248 $ 181,747 $ 149,664 Endodontics/Professional Division Dental Consumables/Asia 1,215,723 1,189,961 1,160,798 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 590,208 517,067 499,812 Australia/Canada/Latin America/U.S. Pharmaceutical 256,299 169,989 124,926 U.S. Dental Laboratory Business/Implants/Orthodontics 311,782 310,258 253,870 All Other (115,673) (281,989) (390,919) Total $2,445,587 $2,087,033 $1,798,151

Capital Expenditures

2003 2002 2001 Dental consumables - U.S. and Europe/Japan/Non-dental $ 8,569 $ 8,394 $ 8,444 Endodontics/Professional Division Dental Consumables/Asia 8,517 12,550 18,458 Dental Consumables - UK, France, Italy, CIS, Middle East, Africa/European Dental Laboratory Business 5,075 9,624 2,525 Australia/Canada/Latin America/U.S. Pharmaceutical 39,547 3,434 2,752 U.S. Dental Laboratory Business/Implants/Orthodontics 5,265 8,870 10,356 All Other 9,610 12,604 4,994 Total $ 76,583 $ 55,476 $ 47,529

(a) Includes: two operating divisions not managed by named segments, operating expenses of two distribution warehouses not managed by named segments, Corporate and inter-segment eliminations. Geographic Information The following table sets forth information about the Company's operations in different geographic areas for 2003, 2002 and 2001. Net sales reported below represent revenues for shipments made by operating businesses located in the country or territory identified, including export sales. Assets reported represent those held by the operating businesses located in the respective geographic areas.

United Other States Germany Foreign Consolidated (in thousands) 2003 Net sales $ 705,541 $ 397,357 $ 468,027 $ 1,570,925 Long-lived assets 213,607 121,481 129,059 464,147 2002 Net sales $ 684,809 $ 325,301 $ 407,490 $ 1,417,600 Long-lived assets 178,978 100,707 114,099 393,784 2001 Net sales $ 578,755 $ 152,010 $ 314,510 $ 1,045,275 Long-lived assets 130,362 66,756 91,288 288,406

Product and Customer Information The following table presents sales information by product category: Year Ended December 31, 2003 2002 2001 (in thousands) Dental consumables $ 555,738 $ 523,060 $ 457,344 Dental laboratory products 521,131 473,485 225,788 Specialty dental products 460,506 388,066 327,150 Non-dental 33,550 32,989 34,993 $1,570,925 $1,417,600 $1,045,275 Dental consumable products consist of dental sundries and small equipment products used in dental offices in the treatment of patients. DENTSPLY's products in this category include dental injectable anesthetics, prophylaxis paste, dental sealants, impression materials, restorative materials, tooth whiteners, and topical fluoride. The Company manufactures thousands of different consumable products marketed under more than a hundred brand names. Small equipment products consist of various durable goods used in dental offices for treatment of patients. DENTSPLY's small equipment products include high and low speed handpieces, intraoral curing light systems and ultrasonic scalers and polishers. Dental laboratory products are used in dental laboratories in the preparation of dental appliances. DENTSPLY's products in this category include dental prosthetics, including artificial teeth, precious metal dental alloys, dental ceramics, and crown and bridge materials and small equipment products used in laboratories consisting of computer aided machining (CAM) ceramics systems and porcelain furnaces. Specialty dental products are used for specific purposes within the dental office and laboratory settings. DENTSPLY's products in this category include endodontic (root canal) instruments and materials, dental implants, and orthodontic appliances and accessories. Non-dental products are comprised primarily of investment casting materials that are used in the production of jewelry, golf club heads and other casted products. Third party export sales from the United States are less than ten percent of consolidated net sales. No customers accounted for more than ten percent of consolidated net sales in 2003 and 2002. In 2001, one customer, a distributor, accounted for 11% of consolidated net sales. NOTE 5 - OTHER (INCOME) EXPENSE Other (income) expense, net consists of the following: Year Ended December 31, ----------------------------- 2003 2002 2001 (in thousands) Foreign exchange transaction (gains) losses $ (263) $ 3,481 $ (1,177) Gain on sale of InfoSoft, LLC -- -- (23,121) (Gain) loss on PracticeWorks securities (7,395) 2,598 (1,710) Minority interests (312) 364 (1,265) Other 552 1,530 (296) $ (7,418) $ 7,973 $(27,569) NOTE 6 - DISCONTINUED OPERATIONS During the fourth quarter of the year ended December 31, 2003, the Company's management and board of directors made the decision to divest of its Gendex equipment business. The sale of Gendex narrows the Company's product lines to focus primarily on dental consumables. Gendex is a manufacturer of dental x-ray equipment and accessories and intraoral cameras. On December 11, 2003, the Company entered into a definitive agreement to sell the assets and related liabilities of the Gendex business to Danaher Corporation for $102.5 million cash, plus the assumption of certain pension liabilities. The agreement also contains a provision for a post-closing adjustment to the purchase price bosed on changes in certain balance sheet accounts. The transaction closed on February 27, 2004. Also during the fourth quarter of the year ended December 31, 2003, the Company's management and board of directors made a decision to discontinue the operations of the Company's dental needle business. The Gendex business and the dental needle business are distinguishable as separate components of the Company in accordance with Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets". The Gendex business and the needle business are classified as held for sale at December 31, 2003 in accordance with SFAS 144. Direct costs to transact the sales are comprised of, but not limited to, broker commissions, legal and title transfer fees and closing costs. The statements of operations and related financial statement disclosures for all prior years have been restated to present the Gendex business and needle business as discontinued operations separate from continuing operations. Discontinued operations net revenue and income before income taxes for the periods presented were as follows: Year Ended December 31, ----------------------------- 2003 2002 2001 (in thousands) Net sales $106,313 $ 96,142 $ 87,693 Income before income taxes 7,329 6,893 5,605 The following assets and liabilities are reclassified as held for sale for the periods presented as follows: December 31, 2003 (in thousands) Accounts and notes receivable-trade, net $10,626 Inventories, net 16,848 Prepaid expenses and other current assets 788 Current assets of discontinued operations held for sale $28,262 Property, plant and equipment, net $ 7,656 Identifiable intangible assets, net 4,022 Goodwill, net 5,771 Noncurrent assets of discontinued operations held for sale $17,449 Accounts payable $10,021 Accrued liabilities 10,185 Current liabilities of discontinued operations $20,206 Other noncurrent liabilities $ 1,269 Noncurrent liabilities of discontinued operations $ 1,269 NOTE 7 - INVENTORIES Inventories consist of the following: December 31, 2003 2002 (in thousands) Finished goods $123,290 $134,989 Work-in-process 41,997 39,065 Raw materials and supplies 40,300 40,438 $205,587 $214,492 NOTE 8- PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:

December 31, 2003 2002 (in thousands) Assets, at cost: Land $ 40,553 $ 34,746 Buildings and improvements 190,222 160,566 Machinery and equipment 295,354 274,915 Construction in progress 60,036 28,368 586,165 498,595 Less: Accumulated depreciation 209,954 185,417 $376,211 $313,178

NOTE 9 - GOODWILL AND INTANGIBLE ASSETS Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". This statement requires that the amortization of goodwill and indefinite-lived intangible assets be discontinued and instead an annual impairment test approach be applied. The impairment tests are required to be performed annually (or more often if adverse events occur) and are based upon a fair value approach rather than an evaluation of undiscounted cash flows. If goodwill impairment is identified, the resulting charge is determined by recalculating goodwill through a hypothetical purchase price allocation of the fair value and reducing the current carrying value to the extent it exceeds the recalculated goodwill. If impairment is identified on indefinite-lived intangibles, the resulting charge reflects the excess of the asset's carrying cost over its fair value. Other intangible assets with finite lives will continue to be amortized over their useful lives. The Company performed the required annual impairment tests in the second quarter of 2003 and no impairment was identified. This impairment assessment was based upon a review of twenty reporting units. In accordance with SFAS 142, prior period amounts have not been restated. The following table presents prior year reported amounts adjusted to eliminate the amortization of goodwill and indefinite-lived intangible assets.

Year Ended December 31, 2003 2002 2001 (in thousands, except per share amounts) Reported net income $ 174,183 $ 147,952 $ 121,496 Add: amortization adjustment, net of related tax - - 13,963 Adjusted net income $ 174,183 $ 147,952 $ 135,459 Reported basic earnings per share $ 2.21 $ 1.89 $ 1.56 Add: amortization adjustment - - 0.18 Adjusted basic earnings per share $ 2.21 $ 1.89 $ 1.74 Reported diluted earnings per share $ 2.16 $ 1.85 $ 1.54 Add: amortization adjustment - - 0.18 Adjusted diluted earnings per share $ 2.16 $ 1.85 $ 1.72

The table below presents the net carrying values of goodwill and identifiable intangible assets. December 31, 2003 2002 (in thousands) Goodwill $ 963,264 $ 898,497 Indefinite-lived identifiable intangible assets: Trademarks $ 4,080 $ 4,080 Licensing agreements 165,621 149,254 Finite-lived identifiable intangible assets 76,774 82,675 Total identifiable intangible assets $ 246,475 $ 236,009 A reconciliation of changes in the Company's goodwill is as follows: December 31, 2003 2002 (in thousands) Balance, beginning of the year $ 898,497 $ 763,270 Acquisition activity 15,153 28,176 Changes to purchase price allocation (28,381) 40,025 Reclassification to assets held for sale(Note 6) (5,771) -- Impairment charges (Note 16) (360) -- Effects of exchange rate changes 84,126 67,026 Balance, end of the year $ 963,264 $ 898,497 The change in the net carrying value of goodwill in 2003 was primarily due to the final payment related to the Degussa Dental acquisition, several small acquisitions including the purchase of one of the Company's suppliers and additional investments in partially owned subsidiaries, foreign currency translation adjustments, reclassification to assets held for sale and changes to the purchase price allocations of Austenal, Degussa Dental and Friadent. These purchase price allocation changes were primarily related to the reversal of preacquisition tax contingencies due to expiring statutes. The increase in indefinite-lived licensing agreements was due to foreign currency translation adjustments. These intangible assets relate exclusively to the royalty-free licensing rights to AstraZeneca's dental products and tradenames, which are primarily denominated in Swiss francs. The change in finite-lived identifiable intangible assets was due primarily to amortization for the period, reclassification to assets held for sale, additions related to the Oraqix agreement and foreign currency translation adjustments. Finite-lived identifiable intangible assets consist of the following:

December 31, 2003 December 31, 2002 ---------------------------------- ----------------------------------- Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount (in thousands) Patents $ 55,142 $ (33,425) $ 21,717 $ 53,902 $ (30,015) $ 23,887 Trademarks 34,936 (7,142) 27,794 37,145 (6,608) 30,537 Licensing agreements 30,858 (8,105) 22,753 23,730 (6,411) 17,319 Other 12,573 (8,063) 4,510 26,151 (15,219) 10,932 $ 133,509 $ (56,735) $ 76,774 $ 140,928 $ (58,253) $ 82,675

Amortization expense for finite-lived identifiable intangible assets for 2003, 2002 and 2001 was $8.8 million, $9.0 million and $10.4 million, respectively. The annual estimated amortization expense related to these intangible assets for each of the five succeeding fiscal years is $8.1 million, $7.2 million, $6.4 million, $5.7 million and $5.2 million for 2004, 2005, 2006, 2007 and 2008, respectively. NOTE 10 - ACCRUED LIABILITIES Accrued liabilities consist of the following: December 31, 2003 2002 (in thousands) Payroll, commissions, bonuses and other cash compensation $ 42,200 $ 44,490 Employee benefits 14,692 13,181 General insurance 15,852 14,965 Sales and marketing programs 15,944 15,424 Restructuring and other costs (Note 16) 7,781 15,190 Accrued Oraqix payments 16,000 -- Warranty liabilities 3,629 7,429 Other 56,586 80,104 $172,684 $190,783 A reconciliation of changes in the Company's warranty liability for 2003 is as follows: Warranty Liability December 31, 2003 (in thousands) Balance, beginning of the year $ 7,429 Accruals for warranties issued during the year 5,064 Accruals related to pre-existing warranties (1,328) Warranty settlements made during the year (4,663) Reclassification to liabilities of discontinued operations (3,378) Effects of exchange rate changes 505 Balance, end of the year $ 3,629 NOTE 11 - FINANCING ARRANGEMENTS Short-Term Borrowings Short-term bank borrowings amounted to $0.8 million and $3.2 million at December 31, 2003 and 2002, respectively. The weighted average interest rates of these borrowings were 4.8% and 2.5% at December 31, 2003 and 2002, respectively. Unused lines of credit for short-term financing at December 31, 2003 and 2002 were $84.9 million and $80.0 million, respectively. Substantially all short-term borrowings were classified as long-term as of December 31, 2003 and 2002, reflecting the Company's intent and ability to refinance these obligations beyond one year and are included in the table below. The unused lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institution. Interest is charged on borrowings under these lines of credit at various rates, generally below prime or equivalent money rates. Long-Term Borrowings

December 31, 2003 2002 (in thousands) $250 million multi-currency revolving credit agreement expiring May 2006, Japanese yen 12.6 billion at 0.56% $ 116,659 $ 152,803 $250 million multi-currency revolving credit agreement expiring May 2004 - - Prudential Private Placement Notes, Swiss franc denominated, 84.4 million at 4.56% and 82.5 million at 4.42% maturing March 2007, 80.4 million at 4.96% maturing October 2006 198,722 178,881 ABN Private Placement Note, Japanese yen 6.2 billion at 1.39% maturing December 2005 38,646 52,562 Euro 350.0 million Eurobonds at 5.75% maturing December 2006 452,712 378,144 $250 million commercial paper facility rated A/2-P/2 U.S. dollar borrowings - - Other borrowings, various currencies and rates 4,599 8,836 811,338 771,226 Less: Current portion (included in notes payable and current portion of long-term debt) 21,136 1,403 $ 790,202 $ 769,823

The table below reflects the contractual maturity dates of the various borrowings at December 31, 2003 (in thousands). The individual borrowings under the revolving credit agreement are structured to mature on a quarterly basis but because the Company has the intent and ability to extend them until the expiration date of the agreement, these borrowings are considered contractually due in May 2006. 2004 $ 22,780 2005 64,738 2006 679,093 2007 44,727 $811,338 The Company utilizes interest rate swaps to convert the variable rate Japanese yen-denominated debt under the revolving facility to fixed rate debt. In addition, swaps are used to convert the fixed rate Eurobond to variable rate financing. The Company's use of interest rate swaps is further described in " QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK" and in Note 17. The Company has a $500 million revolving credit agreement with participation from thirteen banks. The revolving credit agreements contain certain affirmative and negative covenants as to the operations and financial condition of the Company, the most restrictive of which pertain to asset dispositions, maintenance of certain levels of net worth, and prescribed ratios of indebtedness to total capital and operating income plus depreciation and amortization to interest expense. The Company pays a facility fee of 0.125 % annually on the amount of the commitment under the $250 million five year facility ("facility B") and 0.125% annually under the $250 million 364-day facility ("facility A"). Interest rates on amounts borrowed under the facility will depend on the maturity of the borrowing, the currency borrowed, the interest rate option selected, and the Company's long-term credit rating from Moody's and Standard and Poors. The $250 million facility A may be extended, subject to certain conditions, for additional periods of 364 days, which the Company intends to extend annually. The entire $500 million revolving credit agreement has a usage fee of 0.125 % annually if utilization exceeds 50% of the total available facility. The Company has complementary U.S. dollar and Euro multicurrency commercial paper facilities totaling $250 million which have utilization, dealer, and annual appraisal fees which on average cost 0.11% annually. The $250 million facility A acts as back-up credit to this commercial paper facility. The total available credit under the commercial paper facilities and the facility A is $250 million There were no outstanding commercial paper obligations at December 31, 2003. In March 2001, the Company issued Series A and B private placement notes to Prudential Capital Group totaling Swiss francs 166.9 million at an average rate of 4.49% with six year final maturities. The notes were issued to finance the acquisition of the AZ Assets. In October 2001, the Company issued a Series C private placement note to Prudential Capital Group for Swiss francs 80.4 million at a rate of 4.96% with a five year final maturity. The series A and B notes were also amended in October 2001 to increase the interest rate by 30 basis points, reflecting the Company's higher leverage. In December 2001, the Company issued a private placement note through ABN AMRO for Japanese yen 6.2 billion at a rate of 1.39% with a four year final maturity. The Series C note and the ABN note were issued to partially finance the Degussa Dental acquisition. In December 2001, the Company issued 350 million Eurobonds with a coupon of 5.75%, maturing December 2006 at an effective yield of 5.89%. These bonds were issued to partially finance the Degussa Dental acquisition. At December 31, 2003, the Company had total unused lines of credit, including lines available under its short-term arrangements, of $472 million. NOTE 12 - OTHER NONCURRENT LIABILITIES Other noncurrent liabilities consist of the following: December 31, 2003 2002 (in thousands) Pension benefits (Note 15) $ 67,854 $ 55,063 Noncurrent income taxes payable (Note 18) 45,750 67,880 Other postretirement benefits (Note 15) 10,711 10,676 Derivative instruments (Note 17) 5,843 7,890 Other 12,546 13,610 $142,704 $155,119 NOTE 13 - STOCKHOLDERS' EQUITY The Board of Directors authorized the repurchase of up to 1.5 million shares of common stock for the year ended December 31, 2001 on the open market or in negotiated transactions, with the authorization expiring on December 31 of that year. The Company repurchased 37,500 shares for $0.9 million in 2001. No share repurchases were made during 2003 and 2002. In December 2003, the Board of Directors authorized the repurchase of up to 1.0 million shares of common stock for the year ended December 31, 2004 on the open market. The Company has stock options outstanding under three stock option plans (1993 Plan, 1998 Plan and 2002 Plan). Further grants can only be made under the 2002 Plan. Under the 1993 and 1998 Plans, a committee appointed by the Board of Directors granted to key employees and directors of the Company options to purchase shares of common stock at an exercise price determined by such committee, but not less than the fair market value of the common stock on the date of grant. Options generally expire ten years after the date of grant under these plans and grants become exercisable over a period of three years after the date of grant at the rate of one-third per year, except that they become immediately exercisable upon death, disability or retirement. The 2002 Plan authorized grants of 7.0 million shares of common stock, (plus any unexercised portion of canceled or terminated stock options granted under the DENTSPLY International Inc. 1993 and 1998 Stock Option Plans), subject to adjustment as follows: each January, if 7% of the outstanding common shares of the Company exceed 7.0 million, the excess becomes available for grant under the Plan. The 2002 Plan enables the Company to grant "incentive stock options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to key employees of the Company, and "non-qualified stock options" ("NSOs") which do not constitute ISOs to key employees and non-employee directors of the Company. Grants of options to key employees are solely discretionary with the Board of Directors of the Company. ISOs and NSOs generally expire ten years from date of grant and become exercisable over a period of three years after the date of grant at the rate of one-third per year, except that they become immediately exercisable upon death, disability or retirement. Such options are granted at exercise prices not less than the fair market value of the common stock on the grant date. Future option grants may only be made under the 2002 Plan, which will include the unexercised portion of canceled or terminated options granted under the 1993 or 1998 Plans. Each non-employee director receives an automatic grant of NSOs to purchase 9,000 shares of common stock on the date he or she becomes a non-employee director and an additional 9,000 options on the third anniversary of the date of the non-employee director was last granted an option. The following is a summary of the status of the Plans as of December 31, 2003, 2002 and 2001 and changes during the years ending on those dates:

Outstanding Exercisable --------------------- ---------------------- Weighted Weighted Available Average Average for Exercise Exercise Grant Shares Price Shares Price Shares December 31, 2000 5,792,243 17.85 2,989,478 $ 15.64 3,226,467 Authorized (Lapsed) - (83,444) Granted 1,605,900 30.43 (1,605,900) Exercised (497,813) 16.01 - Expired/Canceled (167,087) 18.47 167,087 December 31, 2001 6,733,243 20.97 3,732,179 16.76 1,704,210 Authorized (Lapsed) - 7,023,106 Granted 1,574,550 36.91 (1,574,550) Exercised (515,565) 17.33 - Expired/Canceled (100,639) 19.08 100,639 December 31, 2002 7,691,589 24.50 4,649,889 18.99 7,253,405 Authorized (Lapsed) - 177,882 Granted 1,434,300 43.84 (1,434,300) Exercised (829,155) 19.30 - Expired/Canceled (119,277) 29.38 119,277 December 31, 2003 8,177,457 $ 28.35 5,225,300 $ 22.22 6,116,264

The following table summarizes information about stock options outstanding under the Plans at December 31, 2003:

Options Outstanding Options Exercisable --------------------------------- ------------------------ Weighted Number Average Number Outstanding Remaining Weighted Exercisable Weighted at Contractual Average at Average December 31 Life Exercise December 31 Exercise Exercise Price Range 2003 (in years) Price 2003 Price $10.01 - $15.00 528,751 1.4 $ 13.12 528,751 $ 13.12 15.01 - 20.00 2,211,089 5.0 16.44 2,211,089 16.44 20.01 - 25.00 1,166,026 6.8 24.62 1,132,926 24.66 25.01 - 30.00 69,650 7.5 27.94 41,000 27.98 30.01 - 35.00 1,272,412 7.9 31.23 822,662 31.20 35.01 - 40.00 1,570,929 8.9 36.93 488,872 36.97 40.01 - 45.00 1,346,400 9.9 44.26 - - 45.01 - 50.00 12,200 9.7 45.53 - - 8,177,457 7.1 $ 28.35 5,225,300 $ 22.22

The Company uses the Black-Scholes option pricing model to value option awards. The per share weighted average fair value of stock options and the weighted average assumptions used to determine these values are as follows: Year Ended December 31, 2003 2002 2001 Per share fair value $ 14.85 $ 12.69 $ 11.47 Expected dividend yield 0.48% 0.50% 0.61% Risk-free interest rate 3.36% 3.35% 5.01% Expected volatility 31% 34% 33% Expected life (years) 5.50 5.50 5.50 The Black-Scholes option pricing model was developed for tradable options with short exercise periods and is therefore not necessarily an accurate measure of the fair value of compensatory stock options. The rollforward of the common shares and the treasury shares outstanding is as follows: Common Treasury Outstanding Shares Shares Shares (in thousands) Balance at December 31, 2000 81,389 (3,971) 77,418 Exercise of stock options -- 500 500 Repurchase of common stock, at cost -- (38) (38) Balance at December 31, 2001 81,389 (3,509) 77,880 Exercise of stock options -- 519 519 Fractional share payouts (1) -- (1) Balance at December 31, 2002 81,388 (2,990) 78,398 Exercise of stock options -- 853 853 Balance at December 31, 2003 81,388 (2,137) 79,251 NOTE 14 - INCOME TAXES The components of income before income taxes from continuing operations are as follows: Year Ended December 31, 2003 2002 2001 (in thousands) United States ("U.S.") $113,994 $116,160 $131,010 Foreign 137,202 97,930 48,512 $251,196 $214,090 $179,522 The components of the provision for income taxes from continuing operations are as follows: Year Ended December 31, 2003 2002 2001 (in thousands) Current: U.S. federal $ 28,693 $ 47,627 $ 42,159 U.S. state 1,941 2,520 1,331 Foreign 18,298 28,737 11,297 Total 48,932 78,884 54,787 Deferred: U.S. federal 12,077 (7,586) 12,854 U.S. state 2,466 (908) 2,359 Foreign 17,868 59 (8,192) Total 32,411 (8,435) 7,021 $ 81,343 $ 70,449 $ 61,808 The reconcilation of the U.S. federal statutory tax rate to the effective rate is as follows:

Year Ended December 31, 2003 2002 2001 Statutory federal income tax rate 35.0 % 35.0 % 35.0 % Effect of: State income taxes, net of federal benefit 1.1 0.5 1.3 Nondeductible amortization of goodwill - - 1.1 Foreign earnings at lower rates than US federal (4.5) (2.3) (2.2) Foreign tax credit - - (0.8) Extraterritorial income (0.9) (1.1) (1.0) Taxes on unremitted earnings of certain foreign subsidiaries 2.5 - 0.1 Other (0.8) 0.8 0.9 Effective income tax rate on continuing operations 32.4 % 32.9 % 34.4 %

The tax effect of temporary differences giving rise to deferred tax assets and liabilities are as follows:

December 31, 2003 December 31, 2002 Current Noncurrent Current Noncurrent Asset Asset Asset Asset (Liability) (Liability) (Liability) (Liability) (in thousands) Employee benefit accruals $ 2,225 $ 9,053 $ 1,496 $ 9,961 Product warranty accruals 1,155 -- 1,012 -- Insurance premium accruals 4,035 -- 3,919 -- Commission and bonus accrual 1,526 -- 3,156 -- Sales and marketing accrual 1,474 -- 2,612 -- Restructuring and other cost accruals 2,947 2,824 7,595 4,352 Differences in financial reporting and tax basis for: Inventory 8,467 -- 7,838 -- Property, plant and equipment -- (34,793) -- (29,272) Identifiable intangible assets -- (59,578) -- (35,086) Unrealized losses (gains) included in other comprehensive income -- 45,305 -- 18,324 Miscellaneous Accruals 12,561 -- 10,403 -- Other 3,884 8,455 855 5,515 Discontinued Operations 1,883 4,293 2,633 4,315 Tax loss carryforwards in foreign jurisdictions -- 9,649 -- 9,521 Valuation allowance for tax loss carryforwards -- (9,649) -- (5,342) $ 40,157 $(24,441) $ 41,519 $(17,712)

Current and noncurrent deferred tax assets and liabilities are included in the following balance sheet captions: December 31, 2003 2002 (in thousands) Prepaid expenses and other current assets $ 41,427 $ 42,096 Income taxes payable (1,270) (577) Other noncurrent assets 26,800 9,327 Deferred income taxes (51,241) (27,039) Certain foreign subsidiaries of the Company have tax loss carryforwards of $30.6 million at December 31, 2003, of which $4.9 million expire through 2011 and $25.7 million may be carried forward indefinitely. The tax benefit of these tax loss carryforwards has been fully offset by a valuation allowance as of December 31, 2003. The valuation allowance of $9.6 million and $5.3 million at December 31, 2003 and 2002, respectively, relates to foreign tax loss carryforwards for which realizability is uncertain. The change in the valuation allowances for 2003 and 2002 results primarily from the generation of additional foreign tax loss carryforwards in excess of loss carryforwards utilized in certain foreign jurisdictions. The Company has provided for the potential repatriation of certain undistributed earnings of its foreign subsidiaries and considers earnings above the amounts on which tax has been provided to be permanently reinvested. Income taxes have not been provided on $343 million of undistributed earnings of foreign subsidiaries, which will continue to be permanently reinvested. If remitted as dividends, these earnings could become subject to additional tax, however such repatriation is not anticipated. The pretax income from discontinued operations for the years ended December 31, 2003, 2002 and 2001 was $7.3 million, $6.9 million and $5.6 million, respectively. The income tax expense related to discontinued operations for the years ended December 31, 2003, 2002 and 2001 was $3.0 million, $2.6 million and $1.8 million, respectively. NOTE 15 - BENEFIT PLANS Substantially all of the employees of the Company and its subsidiaries are covered by government or Company-sponsored benefit plans. Total costs for Company-sponsored defined benefit, defined contribution and employee stock ownership plans amounted to $13.5 million in 2003, $11.5 million in 2002 and $7.9 million in 2001. Defined Contribution Plans The DENTSPLY Employee Stock Ownership Plan ("ESOP") is a non-contributory defined contribution plan that covers substantially all of the United States based non-union employees of the Company. Contributions to the ESOP were $2.2 million for 2003, $2.2 million for 2002 and $2.1 million for 2001. The Company makes annual contributions to the ESOP of not less than the amounts required to service ESOP debt. In connection with the refinancing of ESOP debt in March 1994, the Company agreed to make additional cash contributions totaling at least $0.6 million through 2003. Dividends received by the ESOP on allocated shares are either reinvested in participants' accounts or passed through to Plan participants, at the participant's election. Most ESOP shares were initially pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to active employees based on the proportion of debt service paid in the year. At December 31, 2003, the ESOP held 7.0 million shares, of which 6.9 million were allocated to plan participants and 0.1 million shares were unallocated and pledged as collateral for the ESOP debt. Unallocated shares were acquired prior to December 31, 1992 and are accounted for in accordance with Statement of Position 76-3. Accordingly, all shares held by the ESOP are considered outstanding and are included in the earnings per common share computations. The Company sponsors an employee 401(k) savings plan for its United States workforce to which enrolled participants may contribute up to IRS defined limits. Defined Benefit Plans The Company maintains a number of separate contributory and non-contributory qualified defined benefit pension plans and other postretirement medical plans for certain union and salaried employee groups in the United States. Pension benefits for salaried plans are based on salary and years of service; hourly plans are based on negotiated benefits and years of service. Annual contributions to the pension plans are sufficient to satisfy legal funding requirements. Pension plan assets are held in trust and consist mainly of common stock and fixed income investments. The Company maintains defined benefit pension plans for its employees in Germany, Japan, The Netherlands, and Switzerland. These plans provide benefits based upon age, years of service and remuneration. The German plans are unfunded book reserve plans. Other foreign plans are not significant individually or in the aggregate. Most employees and retirees outside the United States are covered by government health plans. Postretirement Healthcare The plans for postretirement healthcare have no plan assets. The postretirement healthcare plan covers certain union and salaried employee groups in the United States and is contributory, with retiree contributions adjusted annually to limit the Company's contribution for participants who retired after June 1, 1985. The Company also sponsors unfunded non-contributory postretirement medical plans for a limited number of union employees and their spouses and retirees of a discontinued operation. The Company uses a December 31 measurement date for the majority of it plans. Reconciliations of changes in the above plans' benefit obligations, fair value of assets, and statement of funded status are as follows:

Other Postretirement Pension Benefits Benefits ----------------------- --------------------- December 31, December 31, 2003 2002 2003 2002 (in thousands) Reconciliation of Benefit Obligation Benefit obligation at beginning of year $ 103,711 $ 81,134 $ 10,735 $ 7,877 Service cost 4,137 3,428 235 419 Interest cost 5,358 4,464 726 833 Participant contributions 1,185 972 570 442 Actuarial (gains) losses (3,561) 2,877 1,165 2,537 Amendments 343 -- -- -- Acquisitions -- -- -- -- Effects of exchange rate changes 15,248 14,955 -- -- Benefits paid (3,854) (4,119) (1,231) (1,373) Benefit obligation at end of year $ 122,567 $ 103,711 $ 12,200 $ 10,735 Reconciliation of Plan Assets Fair value of plan assets at beginning of year $ 51,238 $ 43,348 $ -- $ -- Actual return on assets 520 (10) -- -- Acquisitions -- -- -- -- Effects of exchange rate changes 5,584 7,716 -- -- Employer contributions 5,435 3,331 661 931 Participant contributions 1,185 972 570 442 Benefits paid (3,854) (4,119) (1,231) (1,373) Fair value of plan assets at end of year $ 60,108 $ 51,238 $ -- $ -- Reconciliation of Funded Status Actuarial present value of projected benefit obligations $ 122,567 $ 103,711 $ 12,200 $ 10,735 Plan assets at fair value 60,108 51,238 -- -- Funded status (62,459) (52,473) (12,200) (10,735) Unrecognized transition obligation 1,495 1,581 -- -- Unrecognized prior service cost 795 590 3,743 2,998 Unrecognized net actuarial loss (gain) 6,043 7,499 (2,254) (2,940) Net amount recognized $ (54,126) $ (42,803) $ (10,711) $ (10,677)

The amounts recognized in the accompanying Consolidated Balance Sheets are as follows: Other Postretirement Pension Benefits Benefits ----------------- ------------------ December 31, December 31, 2003 2002 2003 2002 (in thousands) Other noncurrent liabilities $ (67,854) $ (55,063) $ (10,711) $ (10,676) Other noncurrent assets 11,905 10,498 - - Accumulated other comprehensive loss 1,823 1,762 - - Net amount recognized $ (54,126) $ (42,803) $ (10,711) $ (10,676) Information for pension plans with an accumulated benefit obligation in excess of plan assets December 31, 2003 2002 (in thousands) Projected benefit obligation $ 122,569 $ 104,528 Accumulated benefit obligation 116,865 97,304 Fair value of plan assets 60,109 50,973 Components of the net periodic benefit cost for the plans are as follows:

Other Postretirement Pension Benefits Benefits --------------------------------- -------------------------------- 2003 2002 2001 2003 2002 2001 (in thousands) Service cost $ 4,137 $ 3,428 $ 1,877 $ 235 $ 419 $ 205 Interest cost 5,358 4,464 3,548 726 833 539 Expected return on plan assets (3,018) (2,706) (2,525) -- -- -- Net amortization and deferral 576 445 287 (265) 27 (63) Net periodic benefit cost $ 7,053 $ 5,631 $ 3,187 $ 696 $ 1,279 $ 681

The weighted average assumptions used to determine benefit obligations for the Company's plans, principally in foreign locations, are as follows:

Other Postretirement Pension Benefits Benefits --------------------------------- --------------------------------- 2003 2002 2001 2003 2002 2001 Discount rate 5.0% 5.1% 5.4% 6.0% 6.8% 7.3% Expected return on plan assets 5.5% 5.5% 5.0% n/a n/a n/a Rate of compensation increase 3.0% 3.0% 2.5% n/a n/a n/a Initial health care cost trend n/a n/a n/a 9.5% 10.0% 7.0% Ultimate health care cost trend n/a n/a n/a 5.0% 5.0% 7.0% Years until ultimate trend is reached n/a n/a n/a 9.0 10.0 n/a

The weighted average assumptions used to determine net periodic benefit cost for the Company's plans, principally in foreign locations, are as follows:

Other Postretirement Pension Benefits Benefits --------------------------------- --------------------------------- 2003 2002 2001 2003 2002 2001 Discount rate 5.1% 5.4% 5.7% 6.8% 7.3% 7.0% Expected return on plan assets 5.5% 5.0% 5.7% n/a n/a n/a Rate of compensation increase 3.0% 2.5% 3.5% n/a n/a n/a Initial health care cost trend n/a n/a n/a 10.0% 7.0% 7.0% Ultimate health care cost trend n/a n/a n/a 5.0% 7.0% 7.0% Years until ultimate trend is reached n/a n/a n/a 10.0 n/a n/a

Assumed health care cost trend rates have an impact on the amounts reported for postretirement benefits. A one percentage point change in assumed healthcare cost trend rates would have the following effects for the year ended December 31, 2003: Other Postretirement Benefits --------------------- 1% Increase 1% Decrease (in thousands) Effect on total of service and interest cost components $ 131 $ (105) Effect on postretirement benefit obligation 1,416 (1,162) Plan Assets: The weighted average asset allocations of the U.S. plans at December 31, 2003 and 2002 by asset category are as follows: Target December 31, Allocation 2003 2002 Equity 40%-65% 51% 44% Debt 35%-60% 47% 53% Real estate 0%-15% 0% 0% Other 0%-15% 2% 3% --------- --------- Total 100% 100% --------- --------- Equity securities do not include Company stock of Dentsply International Inc. The expected return on plan assets is the weighted average long-term expected return based upon asset allocations and historic average returns for the markets where the assets are invested, principally in foreign locations. Cash Flows: The Company expects to contribute $0.7 million to its U.S. defined benefit pension plans and $0.7 million to its other postretirement benefit plan in 2004. NOTE 16 - RESTRUCTURING AND OTHER COSTS (INCOME) Restructuring and other costs (income) consists of the following:

Year Ended December 31, 2003 2002 2001 (in thousands) Restructuring and other costs $ 4,497 $ 1,669 $ 17,774 Reversal of restructuring charges due to changes in estimates (797) (3,687) (802) Gain on pension plan termination -- -- (8,486) Gain on insurance settlement associated with fire -- (714) (5,758) Costs related to the Oraqix agreement -- -- 2,345 Total restructuring and other costs (income) $ 3,700 $ (2,732) $ 5,073

During the fourth quarter of 2003, the Company recorded restructuring and other costs of $4.5 million. These costs were primarily related to impairment charges recorded to certain investments in emerging technologies. The products related to these technologies were abandoned and therefore these assets were no longer viewed as being recoverable. In addition, certain costs were associated with the consolidation of the Company's U.S. laboratory businesses. Included in this charge were severance costs of $0.9 million, lease/contract termination costs of $0.6 million and intangible and other asset impairment charges of $3.0 million. This restructuring plan will result in the elimination of approximately 65 administrative and manufacturing positions primarily in the United States, most of which remain to be eliminated as of December 31, 2003. Certain of these positions will need to be replaced at the consolidated site and therefore the net reduction in positions is expected to be approximately 25. This plan is expected to be complete by December 31, 2004. The major components of these charges and the remaining outstanding balances at December 31, 2003 are as follows:

Amounts Balance 2003 Applied December 31, Provisions 2003 2003 Severance $ 908 $ (49) $ 859 Lease/contract terminations 562 (410) 152 Other restructuring costs 27 (27) -- Intangible and other asset impairment charges 3,000 (3,000) -- $ 4,497 $(3,486) $ 1,011

On January 25, 2001, the Company suffered a fire at its Maillefer facility in Switzerland. The fire caused severe damage to a building and to most of the equipment it contained. During the third quarter of 2002, the Company received insurance proceeds for settlement of the damages caused to the building. These proceeds resulted in the Company recognizing a net gain on the damaged building of approximately $0.7 million. The Company also received insurance proceeds on the destroyed equipment during the fourth quarter of 2001 and recorded the related disposal gains of $5.8 million during that period. During the second quarter of 2002, the Company recorded a charge of $1.7 million for restructuring and other costs. The charge primarily related to the elimination of duplicative functions created as a result of combining the Company's Ceramed and U.S. Friadent divisions. Included in this charge were severance costs of $0.6 million, lease/contract termination costs of $0.9 million and $0.2 million of impairment charges on fixed assets that will be disposed of as a result of the restructuring plan. This restructuring plan resulted in the elimination of approximately 35 administrative and manufacturing positions in the United States and was substantially complete as of December 31, 2002. As part of combining Austenal with the Company in 2002, $4.4 million of liabilities were established through purchase price accounting for the restructuring of the acquired company's operations, primarily in the United States and Germany. Included in this liability were severance costs of $2.9 million, lease/contract termination costs of $1.4 million and other restructuring costs of $0.1 million. During 2003 the Company reversed a total of $1.1 million, which was recorded to goodwill, as a change in estimate as it determined the costs to complete the plan were lower than originally estimated. This restructuring plan included the elimination of approximately 75 administrative and manufacturing positions in the United States and Germany, 20 of which remain to be eliminated as of December 31, 2003. The Company anticipates that most aspects of this plan will be completed by the first quarter of 2004. The major components of the 2002 restructuring charges and the amounts recorded through purchase price accounting and the remaining outstanding balances at December 31, 2003 are as follows:

Change in Estimate Amounts Recorded Recorded Through Through Amounts Change Amounts Purchase Balance 2002 Purchase Applied in Estimate Applied Accounting December 31, Provisions Accounting 2002 2002 2003 2003 2003 Severance $ 541 $ 2,927 $ (530) $ (164) $ (988) $ (878) $ 908 Lease/contract terminations 895 1,437 (500) 120 (665) (245) 1,042 Other restructuring costs 38 60 (60) (36) -- -- 2 Fixed asset impairment charges 195 -- (195) -- -- -- -- $ 1,669 $ 4,424 $(1,285) $ (80) $(1,653) $(1,123) $ 1,952

The Company's subsidiary in the United Kingdom restructured its pension plans in the fourth quarter of 2001, simplifying its structure by consolidating its two separate defined contribution plans into one plan and terminating the other plan. An unallocated surplus of approximately $8.5 million existed in the terminated plan. As a result, these unallocated funds reverted back to the Company. As discussed in Note 3, the Company agreed in 2001 to a payment of $2.0 million to AstraZeneca related to the submission of the Oraqix product New Drug Application in the U.S. and a Marketing Authorization Application in Europe. Under the terms of the agreement, this payment and related estimated application costs were accrued during the fourth quarter of 2001. In the fourth quarter of 2001, the Company recorded a charge of $12.3 million for restructuring and other costs. The charge included costs of $6.0 million to restructure the Company's existing operations, primarily in Germany, Japan and Brazil, as a result of the integration with Degussa Dental. Included in this charge were severance costs of $2.1 million, lease/contract termination costs of $1.1 million and other restructuring costs of $0.2 million. In addition, the Company recorded $2.6 million of impairment charges on fixed assets that will be disposed of as a result of the restructuring plan. The remaining charge of $6.3 million involves impairment charges on intangible assets. During 2002 and 2003 the Company reversed a net total of $1.0 million and $0.8 million, respectively, as a change in estimate as it determined the costs to complete the plan were lower than originally estimated. This restructuring plan resulted in the elimination of approximately 160 administrative and manufacturing positions in Germany, Japan and Brazil. As part of these reorganization activities, some of these positions were replaced with lower-cost outsourced services. This plan was substantially complete at December 31, 2003. The impairment charge of $6.3 million includes the impairment of intangible assets related to two acquisitions made in prior periods. One of these acquisitions involved the exclusive patent rights for technology related to cutting teeth in preparation for restoration, which was acquired in September 1996. The other acquisition involved technology related to a line of lotions and creams used to protect the hands from irritants, which was acquired in September 2000. Based on a slowing trend in sales related to the product lines associated with these technologies in 2001, the Company performed impairment evaluations, and as a result, recorded impairment charges of $2.0 million and $4.3 million for the teeth preparation product intangibles and lotion product intangibles, respectively. In the first quarter of 2001, the Company recorded a charge of $5.5 million related to reorganizing certain functions within Europe, Brazil and North America. The primary objectives of this reorganization were to consolidate duplicative functions and to improve efficiencies within these regions. Included in this charge were severance costs of $3.1 million, lease/contract termination costs of $0.6 million and other restructuring costs of $0.8 million. In addition, the Company recorded $1.0 million of impairment charges on fixed assets that will be disposed of as a result of the restructuring plan. This restructuring plan resulted in the elimination of approximately 310 administrative and manufacturing positions in Brazil and Germany. As part of these reorganization activities, some of these positions were replaced with lower-cost outsourced services. During the first quarter of 2002, this plan was substantially completed and the remaining accrual balances of $1.9 million were reversed as a change in estimate. As part of combining Friadent and Degussa Dental with the Company in 2001, $14.1 million of liabilities were established through purchase price accounting for the restructuring of the acquired companies' operations in Germany, Brazil, the United States and Japan. Included in this liability were severance costs of $11.9 million, lease/contract termination costs of $1.1 million and other restructuring costs of $1.1 million. During 2003 the Company reversed a total of $3.4 million, which was recorded to goodwill, as a change in estimate as it determined the costs to complete the plan were lower than originally estimated. This restructuring plan resulted in the elimination of approximately 190 administrative and manufacturing positions in Germany, Brazil and the United States. This plan was substantially complete at December 31, 2003. The major components of the 2001 restructuring charges and the amounts recorded through purchase price accounting and the remaining outstanding balances at December 31, 2003 are as follows:

Change Change in Estimate in Estimate Amounts Recorded Recorded Recorded Through Through Through Amounts Amounts Change Purchase Amounts Change Purchase Balance 2001 Purchase Applied Applied in Estimate Accounting Applied in Estimate Accounting December Provisions Accounting 2001 2002 2002 2002 2003 2003 2003 31, 2003 Severance $ 5,270 $ 11,929 $ (1,850) $ (6,257) $ (655) $ (174) $ (985) $ (816) $ (2,971) $ 3,491 Lease/contract terminations 1,682 1,071 (563) (579) (721) 203 (291) - (50) 752 Other restructuring costs 897 1,062 - (552) (759) 458 (175) 19 (375) 575 Fixed asset impairment charges 3,634 - (3,634) 223 (747) 524 - - - - Intangible asset impairment charges 6,291 - (6,291) - - - - - - - $ 17,774 $ 14,062 $ (12,338) $ (7,165) $(2,882) $1,011 $(1,451) $ (797) $ (3,396) $ 4,818

During the fourth quarter 2003, the Company made the decision to discontinue the operations of its dental needle business. The business consists of one manufacturing location which will cease operations by March 31, 2004. As a result of this decision, the Company has recorded a charge of $1.6 million included in income from discontinued operations. Included in this charge were severance costs of $0.4 million, fixed asset impairment charges of $0.5 million, $0.4 million of impairment charges related to goodwill and other restructuring costs of $0.3 million. This plan will result in the elimination of approximately 55 administrative and manufacturing positions in the United States, most of which remain to be eliminated at December 31, 2003. This plan is expected to be substantially completed by March 31, 2004. The major components of these charges and the remaining outstanding balances at December 31, 2003 are as follows: Amounts Balance 2003 Applied December 31, Provisions 2003 2003 Severance $ 405 $ -- $ 405 Other restructuring costs 300 (300) -- Fixed asset impairment charges 520 (520) -- Goodwill impairment charges 360 (360) -- $ 1,585 $(1,180) $ 405 NOTE 17 - FINANCIAL INSTRUMENTS AND DERIVATIVES Fair Value of Financial Instruments The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. The Company believes the carrying amounts of cash and cash equivalents, accounts receivable (net of allowance for doubtful accounts), prepaid expenses and other current assets, accounts payable, accrued liabilities, income taxes payable and notes payable approximate fair value due to the short-term nature of these instruments. The Company estimates the fair value of its total long-term debt was $815.8 million versus its carrying value of $811.3 million as of December 31, 2003. The fair value approximated the carrying value since much of the Company's debt is variable rate and reflects current market rates. The fixed rate Eurobonds are effectively converted to variable rate as a result of an interest rate swap and the interest rates on revolving debt and commercial paper are variable and therefore the fair value of these instruments approximates their carrying values. The Company has fixed rate Swiss franc and Japanese yen denominated notes with estimated fair values that differ from their carrying values. At December 31, 2003, the fair value of these instruments was $241.8 million versus their carrying values of $237.4 million. The fair values differ from the carrying values due to lower market interest rates at December 31, 2003 versus the rates at issuance of the notes. Derivative Instruments and Hedging Activities The Company's activities expose it to a variety of market risks which primarily include the risks related to the effects of changes in foreign currency exchange rates, interest rates and commodity prices. These financial exposures are monitored and managed by the Company as part of its overall risk-management program. The objective of this risk management program is to reduce the potentially adverse effects that these market risks may have on the Company's operating results. A portion of the Company's borrowings and certain inventory purchases are denominated in foreign currencies which exposes the Company to market risk associated with exchange rate movements. The Company's policy generally is to hedge major foreign currency transaction exposures through foreign exchange forward contracts. These contracts are entered into with major financial institutions thereby minimizing the risk of credit loss. In addition, the Company's investments in foreign subsidiaries are denominated in foreign currencies, which creates exposures to changes in exchange rates. The Company uses debt denominated in the applicable foreign currency as a means of hedging a portion of this risk. With the Company's significant level of long-term debt, changes in the interest rate environment can have a major impact on the Company's earnings, depending upon its interest rate exposure. As a result, the Company manages its interest rate exposure with the use of interest rate swaps, when appropriate, based upon market conditions. The manufacturing of some of the Company's products requires the use of commodities which are subject to market fluctuations. In order to limit the unanticipated earnings fluctuations from such market fluctuations, the Company selectively enters into commodity price swaps, primarily for silver, used in the production of dental amalgam. Additionally, the Company uses non-derivative methods, such as the precious metal consignment agreement to effectively hedge commodity risks. Cash Flow Hedges The Company uses interest rate swaps to convert a portion of its variable rate debt to fixed rate debt. As of December 31, 2003, the Company has two groups of significant variable rate to fixed rate interest rate swaps. One of the groups of swaps was entered into in January 2000 and February 2001, has a notional amount totaling 180 million Swiss francs, and effectively converts the underlying variable interest rates on the debt to a fixed rate of 3.3% for a period of approximately four years. The other significant group of swaps entered into in February 2002, has notional amounts totaling 12.6 billion Japanese yen, and effectively converts the underlying variable interest rates to an average fixed rate of 1.6% for a term of ten years. As part of entering into the Japanese yen swaps in February 2002, the Company entered into reverse swap agreements with the same terms to offset 115 million of the 180 million of Swiss franc swaps. Additionally, in the third quarter of 2003, the Company exchanged the remaining portion of the Swiss franc swaps, 65 million Swiss francs, for a forward-starting variable to fixed interest rate swap. Completion of this exchange allowed the Company to pay down debt and the forward-starting interest rate swap locks in the rate of borrowing for future Swiss franc variable rate debt, that will arise upon the maturity of the Company's fixed rate Swiss franc notes in 2005, at 4.2% for a term of seven years. The Company selectively enters into commodity price swaps to effectively fix certain variable raw material costs. In November 2002, the Company entered into a commodity price swap agreement with notional amounts totaling 300,000 troy ounces of silver bullion to hedge forecasted purchases throughout calendar year 2003. The average fixed rate of this agreement is $4.65 per troy ounce. The Company generally hedges between 33% and 67% of its projected annual silver needs. The Company enters into forward exchange contracts to hedge the foreign currency exposure of its anticipated purchases of certain inventory from Japan. The forward contracts that are used in this program mature in twelve months or less. The Company generally hedges between 33% and 67% of its anticipated purchases from Japan. During 2002 and 2001, the Company recognized net losses of $0.1 million and $0.4 million, respectively, in "Other expense (income), net", which represented the total ineffectiveness of all cash flow hedges. During 2003, the Company recognized gains of $0.1 million offset by losses of $0.1 million due to ineffectiveness of its cash flow hedges. As of December 31, 2003, $0.3 million of deferred net gains on derivative instruments recorded in "Accumulated other comprehensive gain (loss)" are expected to be reclassified to current earnings during the next twelve months. Transactions and events that are expected to occur over the next twelve months that will necessitate such a reclassification include the sale of inventory that includes previously hedged purchases made in Japanese yen. The maximum term over which the Company is hedging exposures to variability of cash flows (for all forecasted transactions, excluding interest payments on variable-rate debt) is eighteen months. Fair Value Hedges The Company uses interest rate swaps to convert a portion of its fixed rate debt to variable rate debt. In December 2001, the Company issued 350 million in Eurobonds at a fixed rate of 5.75% maturing in December 2006 to partially finance the Degussa Dental acquisition. Coincident with the issuance of the Eurobonds, the Company entered into two integrated transactions: (a) an interest rate swap agreement with notional amounts totaling Euro 350 million which converted the 5.75% fixed rate Euro-denominated financing to a variable rate (based on the London Interbank Borrowing Rate) Euro-denominated financing; and (b) a cross-currency basis swap which converted this variable rate Euro-denominated financing to variable rate U.S. dollar-denominated financing. The Euro 350 million interest rate swap agreement was designated as a fair value hedge of the Euro 350 million in fixed rate debt pursuant to SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133). In accordance with SFAS No. 133, the interest rate swap and underlying Eurobond have been marked-to-market via the income statement. As of December 31, 2003 and 2002, the accumulated fair value of the interest rate swap was $14.1million and $10.9 million, respectively, and was recorded in Other Noncurrent Assets. The notional amount of the underlying Eurobond was increased by a corresponding amount at December 31, 2003 and 2002. From inception through the first quarter of 2003, the cross-currency element of the integrated transaction was not designated as a hedge and changes in the fair value of the cross-currency element of the integrated transaction were marked-to-market in the income statement, offsetting the impact of the change in exchange rates on the Eurobonds that were also recorded in the income statement. As of December 31, 2003 and 2002, the accumulated fair value of the cross-currency element of the integrated transaction was $56.6 million and $52.3 million, respectively, and was recorded in Other Noncurrent Assets. The notional amount of the underlying Eurobond was increased by a corresponding amount at December 31, 2003 and 2002.See Hedges of Net Investments in Foreign Operations below for further information related to the cross-currency element of the integrated transaction. Hedges of Net Investments in Foreign Operations The Company has numerous investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. Currently, the Company uses both non-derivative financial instruments, including foreign currency denominated debt held at the parent company level and long-term intercompany loans, for which settlement is not planned or anticipated in the foreseeable future and derivative financial instruments to hedge some of this exposure. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in the non-derivative and derivative financial instruments designated as hedges of net investments. At December 31, 2003 and 2002, the Company had Swiss franc-denominated and Japanese yen-denominated debt (at the parent company level) to hedge the currency exposure related to a designated portion of the net assets of its Swiss and Japanese subsidiaries. At December 31, 2003, the Company also had Euro-denominated debt designated as a hedge of a designated portion of the net assets of its European subsidiaries, due to the change in the cross-currency element of the integrated transaction discussed below. At December 31, 2003 and 2002, the accumulated translation losses related to foreign currency denominated-debt included in Accumulated Other Comprehensive income (loss) were $83.5 million and $26.4 million, respectively. In the first quarter of 2003, the Company amended the cross-currency element of the integrated transaction to realize the $ 51.8 million of accumulated value of the cross-currency swap. The amendment eliminated the final payment (at a fixed rate of $.90) of $315 million by the Company in exchange for the final payment of Euro 350 million by the counterparty in return for the counterparty paying the Company LIBOR plus 4.29% for the remaining term of the agreement or approximately $14.0 million on an annual basis. Other cash flows associated with the cross-currency element of the integrated transaction, including the Company's obligation to pay on $315 million LIBOR plus approximately 1.34% and the counterparty's obligation to pay on Euro 350 million LIBOR plus approximately 1.47%, remained unchanged by the amendment. Additionally, the cross-currency element of the integrated transaction continue to be marked-to-market. No gain or loss was recognized upon the amendment of the cross currency element of the integrated transaction, as the interest rate of LIBOR plus 4.29% was established to ensure that the fair value of the cash flow streams before and after amendment were equivalent. Since, as a result of the amendment, the Company became economically exposed to the impact of exchange rates on the final principal payment on the Euro 350 million Eurobonds, the Company designated the Euro 350 million Eurobonds as a hedge of net investment, on the date of the amendment. Since March 2003, the effect of currency on the Euro 350 million Eurobonds of $ 35.2 million has been recorded as part of Accumulated Other Comprehensive income (loss). Other As of December 31, 2003, the Company had recorded assets representing the fair value of derivative instruments of $8.4 million in "Prepaid expenses and other current assets" and $62.5 million in "Other noncurrent assets" on the balance sheet and liabilities representing the fair value of derivative instruments of $1.8 million in "Accrued liabilities" and $5.8 million in "Other noncurrent liabilities". In accordance with SFAS 52, "Foreign Currency Translation", the Company utilizes long-term intercompany loans to eliminate foreign currency transaction exposures of certain foreign subsidiaries. Net gains or losses related to these long-term intercompany loans, those for which settlement is not planned or anticipated in the foreseeable future, are included "Accumulated other comprehensive income (loss)". NOTE 18 - COMMITMENTS AND CONTINGENCIES Leases The Company leases automobiles and machinery and equipment and certain office, warehouse, and manufacturing facilities under non-cancelable operating leases. These leases generally require the Company to pay insurance, taxes and other expenses related to the leased property. Total rental expense for all operating leases was $20.7 million for 2003, $17.4 million for 2002, and $12.0 million for 2001. Rental commitments, principally for real estate (exclusive of taxes, insurance and maintenance), automobiles and office equipment are as follows (in thousands): 2004 $ 18,115 2005 11,778 2006 7,855 2007 4,420 2008 2,965 2009 and thereafter 6,830 $ 51,963 Litigation DENTSPLY and its subsidiaries are from time to time parties to lawsuits arising out of their respective operations. The Company believes it is remote that pending litigation to which DENTSPLY is a party will have a material adverse effect upon its consolidated financial position or results of operations. In June 1995, the Antitrust Division of the United States Department of Justice initiated an antitrust investigation regarding the policies and conduct undertaken by the Company's Trubyte Division with respect to the distribution of artificial teeth and related products. On January 5, 1999 the Department of Justice filed a Complaint against the Company in the U.S. District Court in Wilmington, Delaware alleging that the Company's tooth distribution practices violate the antitrust laws and seeking an order for the Company to discontinue its practices. The trial in the government's case was held in April and May 2002. On August 14, 2003, the Judge entered a decision that the Company's tooth distribution practices do not violate the antitrust laws. On October 14, 2003, the Department of Justice appealed this decision to the U.S. Third Circuit Court of Appeals. The parties are proceeding under the briefing schedule issued by the Third Circuit. Subsequent to the filing of the Department of Justice Complaint in 1999, several private party class actions were filed based on allegations similar to those in the Department of Justice case, on behalf of laboratories, and denture patients in seventeen states who purchased Trubyte teeth or products containing Trubyte teeth. These cases were transferred to the U.S. District Court in Wilmington, Delaware. The private party suits seek damages in an unspecified amount. The Court has granted the Company's Motion on the lack of standing of the laboratory and patient class actions to pursue damage claims. The Plaintiffs in the laboratory case have filed a petition with the Third Circuit to hear an interlocutory appeal of this decision. Also, private party class actions on behalf of indirect purchasers were filed in California and Florida state courts. The California and Florida cases have been dismissed by the Plaintiffs following the decision by the Federal District Court Judge issued in August 2003. On March 27, 2002, a Complaint was filed in Alameda County, California (which was transferred to Los Angeles County) by Bruce Glover, D.D.S. alleging, inter alia, breach of express and implied warranties, fraud, unfair trade practices and negligent misrepresentation in the Company's manufacture and sale of Advance(R) cement. The Complaint seeks damages in an unspecified amount for costs incurred in repairing dental work in which the Advance(R) product allegedly failed. In September 2003, the Plaintiff filed a Motion for class certification, which the Company opposed. Oral arguments were held in December 2003, and in January, 2004, the Judge entered an Order granting class certification only on the claims of breach of warranty and fraud. In general, the Class is defined as California dentists who purchased and used Advance(R) cement and were required, because of failures of Advance(R), to repair or reperform dental procedures. The Company has filed a Writ of Mandate in the appellate court seeking reversal of the class certification. The Advance(R) cement product was sold from 1994 through 2000 and total sales in the United States during that period were approximately $5.2 million. Other The Company has no material non-cancelable purchase commitments. The Company has employment agreements with its executive officers. These agreements generally provide for salary continuation for a specified number of months under certain circumstances. If all of the employees under contract were to be terminated by the Company without cause (as defined in the agreements), the Company's liability would be approximately $11.4 million at December 31, 2003. Noncurrent Income Taxes Payable, included as part of Other Noncurrent Liabilities (Note 12), represent accruals for tax contingencies, the majority of which are attributable to acquired companies. These reserves were established at the time of purchase to provide for the adverse outcome of tax proceedings related to pre-acquisition periods. The Company is subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, the Company may record incremental tax expense or reductions of excess purchase price based on the outcome of such matters. The change from 2002 to 2003 of $22.1 million is primarily related the reversal of preacquisition tax contingencies as discussed in Note 9. NOTE 19 - ACCOUNTING CHARGES AND RESERVE REVERSALS In the first and second quarters of 2003, the Company recorded pretax charges of $4.1 million and $5.5 million, respectively, related primarily to adjustments to inventory, accounts receivable, and prepaid expense accounts at one division in the United States and two international subsidiaries. All of these operating units had been involved in integrating one or more of the acquisitions completed in 2001. Of the $9.6 million in total pretax charges recorded in the first and second quarters of 2003, $2.4 million were determined to be properly recorded as changes in estimate, $0.4 million were determined to be errors between the first and second quarters of 2003, and the remaining $6.8 million ($4.6 million after tax) were determined to be errors relating in prior periods ("Charge Errors"). The Charge Errors included $3.0 million related to inaccurate reconciliations and valuation of inventory, $2.0 million related to inaccurate reconciliations and valuation of accounts receivable, $1.3 million related to unrecoverable prepaid expenses and $0.5 million related to other accounts. Had the Charge Errors been recorded in the proper period, net income as reported would have been decreased by $0.6 million ($0.01 per diluted share) in 2001 and $4.0 million ($0.05 per diluted share) in 2002. Recording the effect of the Charge Errors in 2003 reduced net income by $4.6 million ($0.06 per diluted share). In addition to the aforementioned, in the first and second quarters of 2003, the Company determined that $4.8 million in reserves reversed in 2003 and $4.1 million of reserves reversed in 2001 and 2002 should have been reversed in earlier years or had been erroneously established ("Reserve Errors). The Reserve Errors occurred in 2000 through 2002 and related primarily to asset valuation accounts and accrued liabilities, including (on a pre-tax basis) $5.1 million related to product return provisions, $1.1 million related to bonus accruals, $0.8 million related to product warranties, $0.7 million related to inventory valuation and $1.2 million related to other accounts. Had the Reserve Errors been recorded in the proper period, they would have increased net income as reported by $0.8 million ($0.01 per diluted share) in 2000, $1.8 million ($0.02 per diluted share) in 2001 and $0.7 million ($0.01 per diluted share) in 2002. Recording the effect of the Reserve Errors in 2003 increased net income by $3.3 million ($0.04 per diluted share). The above described charges (including the $2.4 million changes in estimates) and Reserve Errors amounted to $19.9 million (pre-tax) on an absolute basis and occurred from 2000 through the second quarter of 2003. Included in this total, are $2.0 million of Reserve Errors and $0.4 million of Charge Errors that originated and reversed in different quarters of same year. In the aggregate, had the Charge Errors and Reserve Errors described above been recorded in the proper period, reported net income would have increased by $0.8 million ($0.01 per diluted share) in 2000, $1.2 million ($0.02 per diluted share) in 2001 and decreased by $3.4 million ($0.04 per diluted share) in 2002. The effect of recording the Reserve Errors and Charge Errors in 2003 reduced net income by $1.3 million ($0.02 per diluted share). The Company performed an analysis of the Charge Errors and Reserve Errors on both a qualitative and quantitative basis and concluded that the errors were not material to the results of operations and financial position of the Company for the years ended December 31, 2000, 2001, 2002 and 2003. Accordingly, prior period financial statements have not been restated. NOTE 20 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

First Second Third Fourth Total Quarter Quarter Quarter Quarter Year (in thousands, except per share amounts) 2003 Net sales $371,236 $394,478 $375,503 $429,708 $1,570,925 Gross profit 182,762 198,075 183,801 208,563 773,201 Operating income 60,524 69,840 63,781 73,838 267,983 Income from continuing operations 37,439 43,450 40,287 48,677 169,853 Income from discontinued operations 828 768 1,027 1,707 4,330 Net income $ 38,267 $ 44,218 $ 41,314 $ 50,384 $ 174,183 Earnings per common share - basic Continuing operations $ 0.48 $ 0.55 $ 0.51 $ 0.62 $ 2.16 Discontinued operations 0.01 0.01 0.01 0.02 0.05 Total earnings per common share - basic $ 0.49 $ 0.56 $ 0.52 $ 0.64 $ 2.21 Earnings per common share - diluted Continuing operations $ 0.47 $ 0.54 $ 0.50 $ 0.60 $ 2.11 Discontinued operations 0.01 0.01 0.01 0.02 0.05 Total earnings per common share - diluted $ 0.48 $ 0.55 $ 0.51 $ 0.62 $ 2.16 Cash dividends declared per common share $ 0.046 $ 0.046 $0.0525 $0.0525 $ 0.197 2002 Net sales $331,650 $361,601 $340,301 $384,048 $1,417,600 Gross profit 163,169 178,654 171,239 191,349 704,411 Operating income 55,715 62,945 59,539 71,253 249,452 Income from continuing operations 32,148 35,810 34,900 40,783 143,641 Income from discontinued operations 948 1,010 866 1,487 4,311 Net income $ 33,096 $ 36,820 $ 35,766 $ 42,270 $ 147,952 Earnings per common share - basic Continuing operations $ 0.41 $ 0.46 $ 0.45 $ 0.52 $ 1.84 Discontinued operations 0.01 0.01 0.01 0.02 0.05 Total earnings per common share - basic $ 0.42 $ 0.47 $ 0.46 $ 0.54 $ 1.89 Earnings per common share - diluted Continuing operations $ 0.40 $ 0.45 $ 0.44 $ 0.51 $ 1.80 Discontinued operations 0.01 0.01 0.01 0.02 0.05 Total earnings per common share - diluted $ 0.41 $ 0.46 $ 0.45 $ 0.53 $ 1.85 Cash dividends declared per common share $ 0.046 $ 0.046 $ 0.046 $ 0.046 $ 0.184

As described in Note 19, the Company recorded pre-tax charges of $4.1 million and $5.5 million in the first and second quarters of 2003, respectively.; Of these amounts, $3.3 million and $3.5 million, respectively, were determined to be errors related primarily to prior years and $0.8 million and $1.6 million, respectively, were determined to be changes in estimates. In addition $0.4 of charges recognized in the second quarter of 2003, should have been recognized in the first quarter of 2003 Also in the first and second quarters of 2003, the Company reversed $2.4 million and $4.4 million, respectively, of certain reserves that should have been reversed in earlier periods or had been erroneously established, including $2.0 million of reserves reversed in the second quarter of 2003 that should have been reversed in the first quarter of 2003. If the above described errors had been recorded in the proper periods, net income would have been higher by $1.7 million ($0.02 per diluted share) in the first quarter of 2003 and lower by $0.4 million (less than $0.01 per diluted share) in the second quarter of 2003. Of the above described charge errors, $6.0 million should have been recorded as an expense in 2002. Of this amount, $2.1 million (pre-tax) is related to physical inventory-related issues at one of the Company's operations in the United States. While the Company has concluded that the inventory issues arose in 2002, due to the nature of the issues, the Company is unable to allocate the $2.1 million to any interim period within 2002. If the remaining $3.9 million of pre-tax charge errors ($2.6 million after-tax) had been recorded in the appropriate interim periods, net income would have decreased by $0.4 million (less than $0.01 per diluted share) in the first quarter of 2002, $1.1 million ($0.01 per diluted share) in the second quarter of 2002, $0.3 million (less than $0.01 per diluted share) in the third quarter of 2002 and $0.8 million ($0.01 per diluted share) in the fourth quarter of 2002. Of the above described reserve errors, $1.0 million pre-tax, should have been recorded as a reduction of expense in 2002, net of the impact of reserves that reversed in error in 2002. If these reserves and reversals had been recorded in the appropriate interim periods net income would have decreased by $0.3 million (less than $0.01 per diluted share) in the first quarter of 2002, increased by $0.6 million ($0.01 per diluted share) in the second quarter of 2002, decreased by $0.6 million ($0.01 per diluted share) in the third quarter of 2002, and increased by $1.0 million ($0.01 per diluted share) in the fourth quarter of 2002. Supplemental Stock Information The common stock of the Company is traded on the NASDAQ National Market under the symbol "XRAY". The following table sets forth high, low and closing sale prices of the Company's common stock for the periods indicated as reported on the NASDAQ National Market:

Market Range of Common Stock Period-end Cash Closing Dividend High Low Price Declared 2003 First Quarter $ 37.95 $ 32.10 $ 34.79 $0.04600 Second Quarter 41.10 32.35 40.96 0.04600 Third Quarter 47.05 40.41 44.84 0.05250 Fourth Quarter 47.40 41.85 45.17 0.05250 2002 First Quarter $ 37.93 $ 31.60 $ 37.06 $0.04600 Second Quarter 40.95 35.25 36.91 0.04600 Third Quarter 43.50 31.25 40.17 0.04600 Fourth Quarter 43.10 31.89 37.20 0.04600 2001 First Quarter $ 26.67 $ 21.67 $ 24.33 $0.04583 Second Quarter 31.07 23.33 29.57 0.04583 Third Quarter 31.63 26.01 30.63 0.04583 Fourth Quarter 34.69 28.62 33.47 0.04584 All amounts reflect the 3-for-2 stock split effective January 31, 2002.

The Company estimates, based on information supplied by its transfer agent, that there are approximately 26,700 holders of common stock, including 493 holders of record. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DENTSPLY INTERNATIONAL INC. By:/s/ Gerald K. Kunkle, Jr. ----------------------------- Gerald K. Kunkle, Jr. Vice Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ John C. Miles II March 15, 2004 ------------------------- -------------------- John C. Miles II Date Chairman of the Board and a Director /s/ Gerald K. Kunkle, Jr. March 15, 2004 ---------------------------- -------------------- Gerald K. Kunkle, Jr. Date Vice Chairman of the Board and Chief Executive Officer and a Director (Principal Executive Officer) /s/ Bret W. Wise March 15, 2004 ------------------------- -------------------- Bret W. Wise Date Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Dr. Michael C. Alfano March 15, 2004 ------------------------- -------------------- Dr. Michael C. Alfano Date Director /s/ Paula H. Cholmondeley March 15, 2004 ------------------------- -------------------- Paula H. Cholmondeley Date Director /s/ Michael J. Coleman March 15, 2004 ------------------------- -------------------- Michael J. Coleman Date Director /s/ William F. Hecht March 15, 2004 ------------------------- -------------------- William F. Hecht Date Director /s/ Leslie A. Jones March 15, 2004 ------------------------- -------------------- Leslie A. Jones Date Director /s/ Betty Jane Scheihing March 15, 2004 ------------------------- -------------------- Betty Jane Scheihing Date Director /s/Edgar H. Schollmaier March 15, 2004 ------------------------- -------------------- Edgar H. Schollmaier Date Director /s/ W. Keith Smith March 15, 2004 ------------------------- -------------------- W. Keith Smith Date Director