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Dentsply International Inc (NASDAQ:XRAY)
Q4 2019 Earnings Call
Mar 2, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 Dentsply Sirona Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to introduce your host for today's conference call, Mr. John Sweeney. You may begin, sir.

John Sweeney -- Vice President, Investor Relations

Thank you, Kevin, and good morning, everyone.

Welcome to our fourth quarter and full-year 2019 earnings conference call. I'd like to remind you that an earnings call press release and slide presentation related to the call are available on our website at www.dentsplysirona.com.

Before we begin, please take a moment to read the forward-looking statements on our earnings press release. During today's call, we'll make certain predictive statements that reflect our current views about future performance and financial results. We base these statements on certain assumptions and expectations of future events that are subject to risks and uncertainties. Our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.

And with that, I'll now turn the program over to Don Casey, Chief Executive Officer, Dentsply Sirona.

Donald M. Casey -- Chief Executive Officer

Thanks, John, and thank all of you for joining our fourth quarter and full-year 2019 earnings call. By almost any measure, Dentsply Sirona delivered a strong performance in 2019, both in the absolute, as well as against the restructuring plan we outlined in late 2018. As we will review today, financial results were strong and the Company took important steps to create a foundation that will allow us to deliver consistent and sustainable value to our shareholders in the future.

To start reviewing the financial results, let's turn to Slide 6. Revenues for the full year were $4 billion. This represents an internal growth rate of 5.7%, ahead of our long-term targets outlined in the restructuring. These results were driven by an improved approach to both innovation as well as demand creation. The recent launch of Primescan and our newly launched Primemill are a testament to the efforts to deliver more impactful new products and execute better commercially.

Solid sales growth and a sharp focus on operating discipline around expenses and headcount contributed to a 310 basis point expansion of our operating margin versus prior year. Non-GAAP EPS for 2019 was $2.45, up 22% versus prior year. This performance included a $0.05 headwind due mainly to the weakening of the euro. Operating cash flow showed a marked improvement versus 2018, up 27% to $633 million for the year.

Now, turning to results from the fourth quarter 2019 shown on Slide 7. Fourth quarter revenues were $1.1 billion, up 4.8%. On an internal sales growth basis, sales increased 8.4% versus prior year. This strong performance was driven by our new product activity. Adjusted operating income margin came in at 20.2% in the fourth quarter of 2019, up 340 basis points versus 2018. This is an important milestone for the Company and speaks to the execution against our restructuring plans.

Non-GAAP EPS for the fourth quarter was $0.73, up 26% versus a year ago. Operating cash flow was $299 million, up an impressive 48%, compared to prior year and reflects the focus we have been putting against this area.

I will now turn the call over to our CFO, Jorge Gomez.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Thank you, Don and good morning everyone. Don already covered the key highlights of our total fiscal year 2019 financial performance. I will focus today on the results of the fourth quarter and our expectations for 2020.

On Slide 9, we show our fourth quarter 2019 P&L. Internal revenue growth reached 8.4%, driven by a strong growth in Digital Dentistry and solid Equipment & Instruments performance. Currency was a revenue headwind of approximately 1.8%, mainly due to a strengthening of the US dollar relative to the euro. Gross profit was $642 million or 58.2% of sales, up 380 basis points year-over-year. Please note that as a result of our work with standardized policies across the corporation, we reclassified $18.1 million of expenses out of cost of goods sold into SG&A. This shift accounted for 170 basis points of the year-over-year increase in gross margin. The remaining 210 basis point improvement was primarily driven by our ongoing efficiency and portfolio shaping initiatives.

SG&A totaled $419 million and was up 5.9%, as compared to prior year. Here are three key components of this increase. First, the largest driver of the variance was the $18.1 million reclass I just discussed. In addition, two smaller drivers of the SG&A increase were sales compensation resulting from strong sales in our Technology & Equipment segment, and the timing of DS World, which was held in the third quarter of 2018 and in the fourth quarter of 2019.

Operating income increased 26% to $222 million. The tax rate in the fourth quarter was higher than we anticipated at 25.5%, due to income mixed variances. Adjusted EPS was $0.73, up 26% versus last year.

Moving on to Slide 10, where we review our fourth quarter Consumable segment performance. Net sales were $433 million, down 4.8% and down 3.1% on an internal sales growth basis. As you may recall, disruptions at our Venlo facility in Europe, caused a shift of some revenues out of the third quarter of 2018 into the fourth quarter. Due to the more difficult comparison, we had a decline in consumable sales in Europe in the fourth quarter of 2019. In contrast, our US consumables business grew in the quarter. Consumables operating income margin was 22.2%, up 30 basis points, as compared to prior year.

On Slide 11, we highlight our Technologies & Equipment fourth quarter performance. Net sales were $670 million, up 12.2% versus prior year, representing a strong internal growth of 17.2%. This growth was driven primarily by Digital Dentistry, specifically by a strong Primescan sales. Equipment & Instruments also saw a strong growth, driven by our Orthophos new product introduction and robust sales to institutional customers.

Technologies & Equipment operating income margin was 23.7%, up 820 basis points as compared to the prior year. More than half of this improvement was driven by our efficiency and portfolio-shaping initiatives. The remaining margin expansion was due to Primescan sales growth and the high level of dealer destocking last year.

On Slide 12, we show our business performance for the fourth quarter on a regional basis. US sales of $392 million increased 24.3% compared to the prior year and increased 27.5% on an internal sales growth basis. We experienced solid growth in Technologies & Equipment and positive sales growth in Consumables. European sales were $427 million, down 6.5% compared to the prior year and down 2.9% on an internal sales growth basis. Technologies & Equipment posted growth in the quarter. Consumables sales were down in Europe in the quarter, impacted by the disruption at Venlo. Rest of the world sales were $283 million, up 1.5% and up 5.1% on an internal basis. T&E growth was solid and Consumables growth was slightly positive in this region in the fourth quarter.

On slide 13, we show our non-GAAP results for the full year. We are very pleased with our operational and financial performance in 2019. Overall, our financial metrics experienced a significant improvement. During FY '19, the entire organization undertook tremendous efforts to implement decisive operational and portfolio-shaping initiatives. Let me highlight some of the results from these initiatives: increased productivity through disciplined headcount management; higher production efficiency through consolidation of sites and operational improvements; centralization of direct and indirect procurement activities that create economies of scale and greater visibility; increased discipline on discretionary spending with new programs to ensure we use our scale to drive savings; rationalization of marketing and promotional spending, while increasing the effectiveness of our programs.

In terms of our portfolio-shaping initiatives, in the past year, we took steps to optimize our portfolio by shedding underperforming assets and adding capabilities to drive sustainable growth. Since we announced the restructuring, we shut down our FONA business, terminated our imaging software partnership with SICAT, sold the surgical line within our Wellspect business, exited the 1-800-DENTIST business and shut down a small orthodontics lab. All of these actions improve our margin profile and free up management capacity to focus on more profitable activities going forward.

On Slide 17, we show our cash flow performance. In 2019, we made great progress in driving cash flow with operating cash flow of $633 million, up 27%. Our capital expenditures were $123 million and our free cash flow was $510 million, up 61% versus last year. This solid performance was the direct result of enhanced internal capital allocation policies and controls, with a heightened emphasis on working capital and return on invested capital. During fiscal '19, we paid dividends of $81 million, repurchased shares of $260 million and repaid $201 million of total debt. Including share repurchases and dividends, we returned to shareholders over 50% of the operating cash flow generated in 2019, while sufficiently funding all of our key initiatives.

Let's go now to Slide 18 where I will talk about our 2020 expectations. I will first discuss the simplification to our revenue presentation that will make it easier for investors to understand our financial statements. Traditionally, we publish our financial results excluding the impact of precious metals. It made sense to look at our financials this way a decade ago when precious metals accounted for about $200 million of annual sales. Today, these materials account for only $40 million of annual revenues and are consequently significantly less impactful to our overall financial performance.

Also, our custom has been to report internal sales growth. This metric is revenue growth adjusted for precious metals, non-GAAP acquisition-related adjustments, currency fluctuations, discontinued products and M&A. On a going-forward basis, we will stop reporting the internal revenue growth metric and instead report a simpler metric that we will call organic revenue growth. Organic revenue growth adjusts reported revenues for currency translation, discontinued products and the impact of M&A. No other adjustments will be made to reported revenue going forward. We will begin this practice of using only reported revenue and organic revenue growth in the first quarter of 2020.

I will now address the coronavirus situation. As you are aware, the impact of the virus has expanded beyond China and is affecting other countries like Japan, Korea, Taiwan and even parts of Europe. As it is the case across all industries, our commercial operations in China and now in other areas are being affected by this fluid public healthcare situation. During this difficult period, our priority has been the safety and welfare of our associates. At the current time, we have not experienced a significant disruption to our global supply chain due to coronavirus. However, in many parts of China, dental clinics and hospitals remain closed for business and in other parts of the world, we are beginning to see an impact. Given the unique situation, today we are letting you know that China, Japan, Korea, and Taiwan represented approximately 10% of 2019 sales. While we hope the impact of the virus is controlled as soon as possible, it is difficult to estimate at this time when commercial activities and, more specifically, the dental market will return to normal levels.

We estimate that in the first quarter of 2020, we have an exposure of approximately $60 million to $70 million in sales, stemming from coronavirus. Assuming activities get back to normal in April, we estimate a non-GAAP EPS impact of $0.10 to $0.12. We acknowledge it is more difficult to forecast accurately in the current environment, and this explains the wider-than-usual EPS guidance range we are providing today. With that said, these are the key elements of our guidance for fiscal '20.

We expect 3% to 4% internal revenue growth. However, accounting for the potential impact of coronavirus in the first quarter, we believe growth will likely be toward the bottom end of the range. We expect roughly a $30 million currency headwind for the year. In addition, there is a [Indecipherable] portion from our portfolio-shaping activities of about $10 million that we expect to run-off in the first quarter. That will get us to a revenue range of $4.1 billion to $4.15 billion.

Operating income margin for 2020 is expected to be in the range of 19.5% to 20.5%. We expect our effective tax rate to be between 24.5% and 25.5%. and our estimate for share count is a range of 222 million to 224 million. That brings our non-GAAP EPS guidance for 2020 to a range of $2.55 to $2.80.

Our capital allocation approach will remain consistent and we will balance reinvestment in the business with capital return to shareholders through dividends and share repurchases. In 2020, we plan to fund approximately $150 million in capital expenditures and approximately $150 million in R&D.

To conclude, we are very pleased with the execution of our plan and the resulting financial performance delivered in 2019. As we move forward, we remain optimistic about our industry, the progress we are making at Dentsply Sirona and our ability to continue to execute our strategy consistently. Despite the near-term challenges presented by the ongoing public healthcare issues, we are mindful of the targets we set and we remain focused on achieving our objectives.

With that, I will now turn the call back to Don.

Donald M. Casey -- Chief Executive Officer

Thanks Jorge.

In addition to the financial results, I wanted to take a few minutes to talk about the progress against our restructuring, planned priorities that included accelerating growth, improving operating margin, and simplifying the organization. The targets for that plan are shown on Slide 20. One year into the restructuring, I'm pleased to say that we are making substantial progress toward achieving our objectives and importantly doing it in a way that creates a solid foundation for delivering those results in a sustainable manner.

Core to the entire restructuring was accelerating our growth. That growth will be driven not only by improving our innovation engine, but also by bringing that innovation to market globally through an improved commercial organization. As you can see on Slide 21, the year 2019 marked a step change in the pace of our innovation, as demonstrated in the sharply improved pipeline. R&D projects are now managed as a portfolio allowing Dentsply Sirona to focus on the biggest opportunities and bring them to market faster.

Nowhere has that acceleration been more evident than in our Digital Dentistry Group. Dentsply Sirona has an aggressive vision for how digital technology can transform the standard of dental care, benefiting both patients and dentists. A critical part of that vision starts with Primescan. This product has been extremely well received because it is so accurate, very fast, and easy to use. Primescan is such a breakthrough that it allows a dental assistant to take a full scan in under a minute. It's also an open platform that could be used chairside or with major lab-based manufacturing systems. Since launch, we have upgraded the Primescan software with CEREC 5.1, as well is adding OraCheck.

In late January, we launched Primemill, which is shown on Slide 22. This represents another major new product launch. This product is designed to save the dentists time at every step of the entire chairside procedure and is extremely simple to use. This mill is state-of-the-art and really delivers a meaningful difference in speed for the dental office. Primescan, combined with Primemill, has really created a whole new standard of performance for CEREC, and we have seen some of the early users of the integrated system literally change how they schedule patients as Primescan integrated with Primemill is that much more efficient and that efficiency translates into healthier practices.

But Dentsply Sirona's digital efforts go well beyond chairside milling, a great example is SureSmile, our clear aligner. We recently launched new software that allows for treatment of Class 2 cases and new software that integrates seamlessly with Primescan. Our digital efforts extend into the imaging area and we are seeing a good response to our Orthophos line extensions. So, taking a step back, Dentsply Sirona has a large installed base of digital scanners, imaging units, and treatment centers that position the Company very well to advanced Digital Dentistry.

From Palodent to Digital Dentures to TruNatomy to Primescan, 2019 was an important year for new products and we are poised to push to higher levels of innovation going forward, but growth is not purely about launching new products. It's also important to have a world-class global commercial network and that has been a critical area of focus for our organization. During the past 14 months in the US, we have overhauled our demand creation capabilities in a significant way. It starts with a single view of the customer moving to a single CRM system creating a single loyalty program for the entire Company for the first time and focusing on a more impactful promotional strategy. We are encouraged by the results to date in the US and we are in the process of moving that model globally.

The second major pillar of our restructuring was developing a comprehensive plan to improve our margins. A lot of those efforts involve identifying areas where Dentsply Sirona can create scale and use that scale to improve cost and efficiency. For the first time, the Company, which has historically been decentralized, has begun to scale critical functions. One example of this is our consolidated supply chain organization under the leadership of Dan Key. Dan joined Dentsply Sirona about a year ago and brings world class experience in managing scaled global supply chains.

Over the past year, the supply chain organizations begun centralizing procurement, logistics, demand planning, and manufacturing, and results so far have shown improved cost and importantly improved operating efficiency. While early in the development of that organization, results are encouraging and we are optimistic about its future.

In addition to supply chain, areas like finance, HR, QA, RA, can all be scaled for efficiency and effectiveness. During 2019, margins also benefited from improved discipline around expense control as evidenced by the fact that we hit our headcount target ahead of schedule. In addition to headcount, the organization demonstrated excellent discipline in managing cost as shown by the lower SG&A numbers. Jorge also mentioned the actions taken during the year on portfolio shaping, an area that we will continue to pursue as we look to deliver expanded margins. Jorge and I would like to acknowledge all the work that Dentsply Sirona team did in 2019 and thank them for their consistent commitment to transforming our Company.

We also know that this is a multi-year plan and progress in one year while encouraging is merely the first step in creating sustainable consistent growth and value for our shareholders, but 2019 shows the organization is committed to sustained improvement and we are optimistic about the future.

With that, I will conclude by thanking all of you for joining us today and then move on to questions. John?

John Sweeney -- Vice President, Investor Relations

Operator, we'd now like to open it up for questions please.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Brandon Couillard with Jefferies.

Brandon Couillard -- Jefferies -- Analyst

Hey, thanks. Good morning. Don and Jorge, as far as coronavirus is concerned, appreciate you quantifying the $60 million to $70 million impact. Is that more on the Consumables side or the Equipment side of the business? Is there any portion of that you would expect to recoup perhaps in the second quarter or later in the year? And how do we think about the impact as far as 2Q goes?

Donald M. Casey -- Chief Executive Officer

Yeah, Brandon. Thanks for the question. Let's start a little broader and then we'll get into it. Look, as we look at coronavirus, we think there is a couple of things we have to look at. First, it's our employees. How do we make sure that they're safe? And we've obviously spent a lot of time educating them thinking about travel and a few other steps. And we feel that, again, that's our first priority.

The second area, and Jorge mentioned this, was supply chain. To date, we haven't seen any supply chain disruption. And as we look out into the future, under the current scenarios, we feel pretty good that we do not anticipate disruptions to our supply chain and we're spending a lot of time developing contingencies if there is a kind of a sea change in how countries react.

The last issue, and this was what we were trying to quantify is, what's going on from a demand perspective. And obviously, as we look at the quarter -- China, Japan, Taiwan, Korea and to a smaller extent, Italy, we're obviously seeing a dampening impact on demand creation there. And that's what we try to quantify when we offered the $60 million to $70 million sales number.

What we are having a harder time doing is really trying to understand what happens if there is a significant change in how countries are trying to manage this in terms of -- if there is a significant shutdown in border-to-border transfers and other things beyond what we're seeing today, and look, if there is a significant sea change, obviously, we will work, plan and develop plans for that.

But we felt right now the responsible thing to do was to give you guys our best thoughts on what the quarter would look like and quantify what's the revenue impact. Look, we're smarter every single day. And in a month, we'll be a lot smarter than we are today in terms of what's going on both in the markets that we can see and then how countries around the world are reacting to it. And obviously, as the situation goes on, we'll develop plans accordingly.

And, Jorge, you may want to chime in a little bit here.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Yeah, Brandon, with respect to your question about consumables versus technology is up, to be honest at this point, in those areas that I mentioned where we are feeling the impact, the activities have slowed down for both consumables and T&E. So, there is no one segment that has been more impacted than the other. I think the impact is similar across the board.

With respect to how much of that can be recovered down the road, it is hard to predict at this time. I'd tell you there are constraints relative to chairtime and things that you will probably have to figure out over time as to how much of this can be recovered, but absolutely we are working on contingency plans and we are developing some strategies and ideas to upset some of this Q1 impact, but it is early to tell.

Brandon Couillard -- Jefferies -- Analyst

Okay, thanks. If I look at the consumables business, you have been negative comp three over the last four quarters, would you expect to be in that 2% to 3% range in 2020? How do you think you're performing relative to the market? And how would you characterize sort of your confidence in that portfolio returning to growth in 2020?

Donald M. Casey -- Chief Executive Officer

Yeah, Brandon, first, obviously the quarter Venlo created a really tough comp over in Europe. I think Jorge mentioned in his prepared remarks that we saw growth in the US and right now we feel like we're growing with the market and when we set out our restructuring plan, we offered long-term guidance, which we said we think that we can grow the Consumable business in the 2% to 3% range and while quarter-to-quarter we are confident that's going to occur, no, but we do feel that as we look out to 2020 and beyond, we've spent a lot of time working on two things, I mean the first is innovation and I kind of rattled off some of those in the prepared comments if you look at Digital Dentures, if you look at TruNatomy, which is our endo business, which shows up as in the Consumable segment, you're looking at things like Palodent, SureFil SDR, and other things, we feel that we're starting to see a pretty significant platform of innovation and innovation is what we need to do to provide growth.

The second thing and the reason we separate out the US a little bit is, we have put programs into place, which we believe revolve around a much more aggressive and efficient promotional strategy, things like One DS where we're trying to leverage the power of all of Dentsply Sirona. It's been pretty well received and we think is starting to have an impact on the Consumables as demonstrated by the US performance in Q4.

As we look beyond our sales force effectiveness program, we're all designed to really bring all of Dentsply Sirona to a dentist in the way that it is easy to consume. So, again, we -- the guidance we put out long-term 3% to 4% for Dentsply Sirona in total and that's coupled by Technology & Equipment segment growing a little bit faster, but when we put out the guidance and we're still pretty comfortable that when we get through some of the lumpiness and things like Venlo that create tough comps for us that we are going to be able to post growth in the Consumable business.

Brandon Couillard -- Jefferies -- Analyst

Great, thank you.

Donald M. Casey -- Chief Executive Officer

Thanks, Brandon.

John Sweeney -- Vice President, Investor Relations

Next question?

Operator

Our next question comes from John Kreger from William Blair.

John Kreger -- William Blair -- Analyst

Hi, thanks very much. Jorge just wanted to clarify one thing and in terms of how you handled guidance for the coronavirus, is it correct that you are not factoring anything yet into the second through the fourth quarters, you are just baking in a Q1 impact, is that right?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

That is correct, John. Yeah, at this point, it would be very hard for us to go beyond Q1. So, that's how we have model guidance -- sharing with you the impact that we see in Q1 and as you know the situation is fluid. It's changing day-by-day and we will be back together in a few weeks to talk about Q1 results and at that point we will have a much better point of view with respect to our future quarters.

John Kreger -- William Blair -- Analyst

Okay, thank you. And then, Don, can you maybe just run through how your various specialty product lines are doing, implants, ortho and endo? Thanks.

Donald M. Casey -- Chief Executive Officer

Yeah, thanks, John. We don't give a lot of specificity around how each of those businesses are doing, but let's put it this way. Our implant business is, in our opinion, a missed opportunity. It's basically flat this year. We have a quarter where it's up, a quarter where it's down. In my mind, what we have to be doing with that business is growing it at the pace of the category. And we feel that we've started to put the plans in place. A couple of things of note. We really felt that our portfolio wasn't where it needed to be. We didn't have an immediate load product. And now that we have Astra EV in there, we feel pretty good that we're competitive. One of the things we've also been doing is taking our MIS business and really integrating that into the portfolio, which we think makes us more competitive, particularly in the DSO space. So, implants, to me, it's an OK performance. It's a disappointment that we're not growing with the market.

Endo for us has been somewhat of a disappointment. Endo for us is, obviously, a big business and it's very, very important to us. I think the -- what we've been focusing on is restarting that innovation engine that, in my opinion, we really hadn't -- after the ProTaper Gold and other launches, we really hadn't been as quick with follow-ups. We're very happy with what's going on with TruNatomy. It's basically the first new product and kind of new treatment modality that's been launched in the space in a while. It's all about dentin preservation. Look, if you're thinking about endodontics, the idea is, how do you preserve teeth. And we believe TruNatomy gives us a really good competitive story. And by the way, it's a story that allows our reps, which we believe are very well trained from a clinical perspective, to talk about a clinical story. And we're pretty optimistic about what we have in our pipeline as we look out into the future in the endo space.

Ortho, in our mind, it's all about the clear aligner. And we have this kind of funny dialog, which is, you guys don't mention SureSmile, and one of the reasons for that is we're trying to say, what's material in terms of creating movement for total Dentsply Sirona. But we're very happy with where we are with SureSmile. Just came off a big convention this last week, well attended. We're really talking to our power users and we feel that we're starting to see good momentum. One of the things that we are very happy about, particularly in the US, was after the One DS program launch and really talking about Primescan and SureSmile and One DS, we created a pretty good opportunity for a lot of our CEREC doctors to participate in SureSmile and we're starting to see some momentum there. So, we're very comfortable with where we are with clear aligners and we look forward to that becoming a significant growth engine for the company in the future.

John Kreger -- William Blair -- Analyst

Thanks much.

Donald M. Casey -- Chief Executive Officer

Thanks, John.

Operator

Our next question comes from Nathan Rich with Goldman Sachs.

Nathan Rich -- Goldman Sachs -- Analyst

Hi, good morning. Thanks for the questions. Don, maybe just following up on your last comments there, can you maybe talk about the performance of One DS in the quarter? And what has the response of the program been like so far? How are practices sort of responding with the incremental purchases? And then, as we think forward to 2020, how should we think about the contribution from this program?

Donald M. Casey -- Chief Executive Officer

Yeah. Nate, thanks for the question. One DS, we feel pretty good about -- obviously, we launched that at DS World. We had a very strong initial response. As a matter of fact, we liked the response, and enough that we basically said, OK, how do we carry that program into 2020. We made a few tweaks to it. So, we actually have One DS 2.0, which makes things simpler. There is less, like, category requirements. We think it's one of the drivers of the positive results we saw, particularly in the US in the fourth quarter. We look forward to running that program around the world. Obviously, there is a lot of work to do in different countries. I mean, the US, we've spent over a year getting the sales force effectiveness program in place. But, look, I would tell you the way that we believe that we have to deliver Dentsply Sirona to the dentist is as Dentsply Sirona, not as, hey, we're here to sell you an Orthophos.

And, Nate, if I -- we're not going to quantify, specifically, this is the number of doctors and this is the amount that they were buying. But we've been -- remember, One DS is a multi-year program. It's a -- there was things available, 2019, 2020 and 2021 that gives the dentists an opportunity to lower the price of their technology and equipment over that time period based on their purchases.

The thing that I think was a little misconceived about what One DS was, they had to buy incremental product to their practice, and we were never saying that. What they have to do is buy incremental Dentsply Sirona products for their practice and that's a key differentiator. So, if a practice was buying $100,000 worth of consumables, we weren't asking them to buy $105,000 or $110,000, what we were asking them to do is switch share. So, chances are you're already buying things in categories we participate. It just gives you a great opportunity to participate in a great loyalty program if you switch some of that $100,000 from where you may have been spending it to spending it on our products. And given the amount of innovation we put in our Consumables business, pretty much in the back half of last year and the first half of this year, we think that's a win-win for the dentists and us. Thanks. That's helpful. And then, maybe just to follow-up on margins, obviously, coming off of a year where cost savings kind of ran ahead of your initial plan going into 2019. Can you maybe just talk about what you're assuming in terms of incremental savings that you think you can kind of go after in 2020 and just the pacing over the next several years of capturing that additional, I think, $115 million to $140 million that's left in terms of that restructuring target that you've laid out?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Nate, I'll take that question. Clearly, we had a good performance in 2019. We achieved savings of about $88 million in '19. And we have a number of initiatives in motion already that make me feel good about the fact that we are on track to deliver the total savings we have projected of $200 million to $225 million by the end of 2021. So, I expect that the balance of this program will be executed roughly half and half over the next couple of years, probably, we'll do a little bit more in '20 than in '21. And we have a lot of opportunities still that we have -- that we are going after. We have programs around procurement, both direct and indirect materials. We will still have opportunities for a conciliation of facilities and overall consolidation of our footprint around the globe.

There is one area that we are going to tackle pretty decisively this year, order to cash. So, we have opportunities there. And although we've done a lot of work centralizing activities within the Company, across the Company, I believe we still have opportunities to centralize even further. So, good progress. And we are very much on track to deliver the $200 million to $225 million by the end of '21.

Nathan Rich -- Goldman Sachs -- Analyst

Thank you.

Operator

Our next question comes from Tycho Peterson with JP Morgan.

Tycho Peterson -- JPMorgan -- Analyst

Hey, thanks. Dan, I wanted to [Technical Issues] you highlighted the combination with Primescan. Can you talk a little bit about how you think about this driving a CEREC upgrade cycle? Any numbers you can provide on how much of the installed base you think could turnover an upgrade in the next year?

Donald M. Casey -- Chief Executive Officer

Hey, Tycho. You broke up right in the first sentence. So, why don't you...

Tycho Peterson -- JPMorgan -- Analyst

Yeah. The question was on Primemill combined with Primescan and the potential to drive a CEREC upgrade cycle. And how much of the installed base you think could upgrade over the next year?

Donald M. Casey -- Chief Executive Officer

It's interesting, Tycho. And you've followed the Sirona stock and you've followed us for a long time. So, traditionally, you'd see an upgrade cycle where we come out with a product and within three months we'd be out doing the upgrade. And in a lot of cases, that worked out really, really well. Where we were on Primescan was, we really felt we were selling full side units and it was appropriate for us to stay focused on that. We launched the upgrade program a little later in the cycle than we would typically and we had a good response. But so far, we haven't seen a dramatic acceleration versus what we would see historically. It's kind of like we just picked it up and we moved it.

I think with Primemill, Tycho, the reaction from the installed base has been really, really positive. Again, it's the first mill we've launched in about 7.5 years. And this thing really -- it's quick and it has immediate tangible benefits to the office. So, we look at Primemill as a real opportunity to continue seeing very positive trends from an upgrade perspective.

We also think that the story when you put this thing together is you're talking about dentistry in under an hour, and that's a big story for us. So, we would like to see growth come from three things. The first is, how do we sell new full chairside units on the basis of this integrated system as transformative to the dentist practice? The second is, how do we continue the upgrade cycle? And for perspective, we haven't run Primescan upgrades around the world yet. At some point, we'll do that. And with Primemill, we believe that gives us a real jump-start there. And the third is an area that we don't necessarily talk about with the mill, but in DI. That's become a really important area for us. Historically, we were only interested in focusing on chairside and a change that we've made over the last year and a half is we believe that we need to be competitive in the DI space and we feel that, with Prime, we're doing a good job on that. But in terms of numbers, Tycho, to date, and again, you've seen the cycles before. It's the penetration change -- the penetration of upgrades is not different than what we've seen, but you probably need to adjust how rapidly we did it in the past versus here we were a good 6.5 months to 7 months later.

Tycho Peterson -- JPMorgan -- Analyst

And then a follow-up on SureSmile. A couple of things. You had mentioned in the past for One DS, that's the easiest product for SureSmile. So, have you actually seen adoption and uptake from the One DS loyalty program for SureSmile? And then, can you talk to some of the market development efforts you're undertaking now as you're rolling that out more broadly? And then, lastly, any updated thoughts on some of the DTC providers moving into the ortho channel for clear aligners?

Donald M. Casey -- Chief Executive Officer

Yeah. Let's unpack a couple of things there. Yeah, One DS absolutely drove some SureSmile trial. And the idea was to, again, we're going to offer a relatively significant opportunity for them to save on their technology and equipment business and we're actually, by the way, asking them to perform as opposed to just giving them a price discount, SureSmile, you buy two SureSmile trial kits and you've basically fulfilled your obligation and we got really good positive reaction to it. The level of integration, Tycho -- and you've seen SureSmile, literally, it's a button. I mean it's an app, that is a button where you're getting instantaneous treatment planning right there and it works really, really well. The challenge for us, and one that we're pleasantly, I wouldn't say surprised, we expected it, but we're happy with is the conversion. Once the docs who have had great experience with Primescan understand how to use it, we're seeing improved penetration.

Now, in our mind, first, we have an opportunity to push that around the world, which is important to us. The second is, as we enter this phase, one of the things we think it's important to do is provide the dentist with kind of the direct-to-consumer tools that they need. And by the way, we're always about supporting the dentist in those activities as opposed to us going out and trying to create a independent consumer brand around SureSmile and the reaction we've been getting from our doctors, they're pretty comfortable with that.

And just the last issue in terms of some of the DTC-oriented brands coming into the more clinical space, I'm sure that they have data that says that's a good idea. We're pretty comfortable that the dentists that we talk to in our environment, whether they're the orthos or whether they're the general practitioners, are pretty comfortable with the approach we're taking and like having a doctor brand that starts with a dentist and stays with a dentist. So, we're very happy with our chosen channel strategy.

Tycho Peterson -- JPMorgan -- Analyst

Understood. Thank you.

Donald M. Casey -- Chief Executive Officer

Thanks, Tycho.

Operator

Our next question comes from Steven Valiquette with Barclays.

Steven Valiquette -- Barclays -- Analyst

Hey, thanks. Good morning, Dan and Jorge. So, I know company executives love it when analysts do back of the envelope math during the conference call. So, I have just one or two math questions for you. First, the $0.10 to $0.12 expected EPS reduction in 1Q '20 around coronavirus, that implies about a 40% net after-tax margin on $60 million to $70 million of reduced sales. So, I guess, the question around that is, if nothing really improve for the remainder of calendar '20, whatever the overall sales impact may be from coronavirus in 2020 overall, should we assume the same roughly 40% net margin on whatever lost sales you may have? Or would you be able to pull some levers to reduce some costs to mitigate the EPS impact if it becomes an extended duration situation?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Thanks, Steve. Good morning. Yeah, no, your math is -- your back of the envelope math is pretty close. And we are already thinking about levers that we can pull in order to offset some of the potential impact from the drop through of lost revenues. So, a lot of things going on. And my expectation is that, at the next call, we will have a much better view for that, but we are absolutely working on those plans. And our expectation is, we are not giving up on this revenue impact that we have in Q1 and we'll try to recover some of that margin. And there is a few things that we are contemplating right now. So, that's absolutely the intention from the Company to offset some of this margin.

Steven Valiquette -- Barclays -- Analyst

Okay. And one other quick math question -- oh, sorry. Go ahead.

Donald M. Casey -- Chief Executive Officer

No. I'd say it's kind of hard for us to, OK, what is the second quarter, third quarter. Obviously, if this becomes an extended duration situation, we then change gears pretty significantly in terms of how we look at cost savings and some of the work we did in 2019, really our understanding of what our levers are much better today than they were, say, 14 months, 15 months ago. But I cut you off, Steve. What else did you want to ask us?

Steven Valiquette -- Barclays -- Analyst

Yeah, just one other quick math question. So, if Dentsply Sirona is doing, call it, roughly $1 billion in quarterly sales, and as you stated, 10% of revenues or roughly $100 million of revs are in the four Asian countries, you mentioned earlier on this call, I mean, obviously, implies that the $60 million to $70 million sales reduction, you're wiping about -- wiping out about maybe 60% to 70% of the sales in those four Asian countries. I just want to confirm that the sales reduction is primarily in those four Asian countries and maybe only a little bit in Europe and really nothing in the US? Or do I have the allocations wrong as far as how you're thinking about it by the regions?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

No. The $0.10 to $0.12 or the $60 million to $70 million revenue risk that I highlighted is exclusive to those countries. So, it's China, it's Japan, it's Taiwan, it's Korea. We are not including any impact for European regions at this point or the US, for that matter, because we haven't seen that impact in those places. So, it's only Asia in the countries that I listed.

Steven Valiquette -- Barclays -- Analyst

Okay. Yeah, that confirms exactly what I thought. Perfect. Okay, thanks.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Okay.

Donald M. Casey -- Chief Executive Officer

Strong math skills, Steve.

Operator

Our next question comes from Erin Wright with Credit Suisse.

Erin Wright -- Credit Suisse -- Analyst

Great, thanks. A follow-up on SureSmile here. I think you recently updated or upgraded the platform for SureSmile. Can you speak to the latest SureSmile update as well as the percentage of ortho cases that you can address now versus what you could do previously? How does this expand the addressable market for you and will this be meaningful from a financial contribution standpoint? Thanks.

Donald M. Casey -- Chief Executive Officer

Yeah. Thanks, Erin. With the most recent software update, and I forget the exact -- whether it's 7 -- 7.6 or 7.7, it gives us Class 2 treatment capabilities, which we think is very, very important for us. Do I think it's significant? Yeah, I do. Look, everything we're focusing on right now is to make sure that SureSmile offers the dentists a very, very complete package. And, look, we feel very good right now that our treatment planning is extremely well-received by customers and the dentists are finding it increasingly easy to use with the expansion of treatment to Class 2.

The expandable universe gets pretty big. It's like 65% to 75% [Phonetic] depending on whether you're talking adult or more pediatric indications. And in our mind, again, the biggest space that we're seeing used right now is tends to be in the adult aesthetic arena, which right now, we feel that we're extremely competitive in terms of being able to offer treatment solutions Class 1, Class 2 with adult aesthetics in mind. So, yeah, we think it's going to be significant. It makes us very competitive and we're gratified that we got it.

Erin Wright -- Credit Suisse -- Analyst

Okay...

John Sweeney -- Vice President, Investor Relations

Thank you, Erin. Next question please.

Donald M. Casey -- Chief Executive Officer

Erin, did you have a follow-up? I mean, John?

Erin Wright -- Credit Suisse -- Analyst

I did have a quick follow-up, if that's OK. I just wanted to...

John Sweeney -- Vice President, Investor Relations

Sorry, sorry, Erin.

Erin Wright -- Credit Suisse -- Analyst

Understand a little bit of the quarterly cadence here for the equipment trend. If you exclude kind of the coronavirus, we do have a lot of events that happened like DS World and the Primemill launch and other product launches. Just on an underlying basis, if you could speak to that quarterly progression of the underlying equipment trend, that would be helpful, thanks, excluding corona.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Let me start. So, first, let's talk about fiscal '19, right. So, you're correct. There was a lot of moving pieces in '19 relative to dealer destocking and launches and other things, but when you peel back the onion and look through the numbers, our growth rate for Technology & Equipment in the third quarter, the fourth quarter of 2019 was very strong.

And as we go into the fiscal 2020, the momentum for the equipment business is very good, the continuation of Primescan sales, the launch of Primemill. So, we feel good about the progression of our sales growth in Technology & Equipment going into '20, building on the momentum we started in fiscal '19.

Donald M. Casey -- Chief Executive Officer

Yeah. And, Erin, just to amplify what Jorge is saying, typically, you would do the DS upgrade, the CEREC upgrade in one shot, all around the world, because that is not a lever that's been pulled yet and with Primemill, we think we've got, as Jorge said, a lot of momentum there.

Erin Wright -- Credit Suisse -- Analyst

Okay, thank you.

John Sweeney -- Vice President, Investor Relations

Thank you, Erin. Next question, please.

Operator

Our next question comes from Glen Santangelo with Guggenheim Securities.

Glen Santangelo -- Guggenheim Securities -- Analyst

Hi, yeah, thanks for the questions. I just want to follow-up on Primescan a little bit. Don, maybe could you give us a sense for your sales in terms of how they're trending, in terms of what may be considered an upgrade versus what may be considered a brand new CAD/CAM sale? And I'm trying to sort of compare or contrast the experiences you had with the Bluecam or the Omnicam upgrade cycles just to get a better sense for how we should think about the sustainability of this current trend.

Donald M. Casey -- Chief Executive Officer

Yeah. Glen, you could have gone C2 and Redcam and Bluecam, I mean, if we're going to go total old school. Look, Primemill, the way we're looking at it is that the percent of current users that are upgrading has not been all that different than what we've seen in the past. What we're seeing is just later. So, typically, if you go back to Omni and you go back to Blue, the upgrade cycle was usually within three months. And this time, it was seven months. By the way, those were global upgrades. This was a US upgrade. So, as we think about it, we're not sure the trend line is dramatically different. We've been very gratified by it and we think we've got a great product. We charged a premium for it. We think, with Primemill and the opportunity to potentially do the upgrade beyond the US, now that we feel very good about our supply chain, we think that should give us a fair amount of momentum as we run into 2020.

And then for us, the things that we're counting as upgrade is, if you've purchased a CEREC system in the past, any CEREC system, we consider that an upgrade. DI, if you're just basically buying the acquisition unit and scanner and haven't bought something from us in the past, that's new. Or if you've never bought -- whether you're buying DI or whether you're buying full chairside. And we believe we've expanded the CEREC franchise with the introduction of Primescan.

Glen Santangelo -- Guggenheim Securities -- Analyst

True. Maybe if I can just follow-up with Jorge on the margins really quickly. Jorge, in your restructuring plan, you have a target of about 20% EBIT margins by the end of this year. And your guidance today, it suggests 20% EBIT margins for the full year, which maybe suggests kind of a flat trend throughout the year. Could you help us think about, maybe, some of the puts and takes on the profitability and the trajectory as you go through the year?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Yeah, Glen. I would not characterize it as flat. I think, as you probably remember from prior cycles, each quarter is a little bit different, but as we have modeled our budget and our plans for 2020, there is a continuation of the ramp that we show in 2019. We finished at about 18.6% for the year. Our Q4 was very strong over 20%, but Q4 is typically a very, very strong quarter. So, as I look at the cadence and going into 2020, there will be natural fluctuations, given that the typical quarterly cycles. But, overall, I see a trend line that is pointing upwards, getting to the 20% and trying to set up the year for the future, so that we achieve the targets, the long-term targets that we have for operating profit. So, some variability between quarters, but net-net, increasing between the first quarter and the fourth quarter of 2020.

Glen Santangelo -- Guggenheim Securities -- Analyst

Okay, thank you.

Donald M. Casey -- Chief Executive Officer

Thanks, Glen.

Operator

The next question comes from Jon Block with Stifel.

Jon Block -- Stifel -- Analyst

Thanks. Good morning, guys. I'll keep it to one in the interest of time, but of course, that one will have two parts. So, I guess, first one, Jorge, can you just level set for us on Venlo, so we can get the underlying trend. I think there is a lot of questions out there. When we look back to last year, was it $25 million to $30 million impact in 3Q '18? And if so, did you get back about half of that in the fourth quarter of 2018, so we can think about the comp?

And then, part B would just be done at a higher level, what gives you the confidence in the 2% to 3% long-term consumable number? Is it innovation? Is it market share gains? Is it One DS? Just maybe if you can detail for us what drives, call it, that modest acceleration of the '19 numbers? Thanks, guys.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

So, let me start with the first part of your question. So, the way we're sizing the Venlo impact, our number is about $20 million. That was the impact that we have in our numbers and I think it's fair to say that we recovered most of that impact. Don?

Donald M. Casey -- Chief Executive Officer

Yeah and -- yeah, Jon, good single question with two completely different parts. But on the Consumables side, look, we think, basically, we should be able to gain share across our business. If you really break down what is our Consumables business, there's four different pieces to it. It's preventive, it's restorative, obviously our endo business and our lab business. We feel that the preventive and restore business have been chugging along nicely. We think that TruNatomy and some other innovations that we have should enable us to reignite growth in the endo business. By the way, the endo business ex-US, has tended to be stronger than in the US, just as a point of reference.

And last point is the lab business not a business we talk a whole heck of a lot about, we think with Digital Dentures and some other steps that we've taken, we think that is an opportunity to expand share. So, when we say the 2% to 3% in our mind, it's new products. When we launch the new products, if we can do it, we want to get a premium for it and that's going to help us gain share.

John Sweeney -- Vice President, Investor Relations

Thank you very much. Next question please.

Operator

Our next question comes from Steve Beuchaw with Wolfe Research.

Steve Beuchaw -- Wolfe Research -- Analyst

Hi. Thanks for sneaking me in. I know you guys are just about out of time, but it would really help, Jorge, actually, if you could help us with summing up your free cash flow bridge for 2020. Can you put a view out on free cash in dollar terms or conversion and then just give us something of a minor walk? How are you thinking about the impacts of particularly working capital and capex next year? And then, I'll drop back out. Thanks so much.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Steve, let me give you a couple data points. And there are some that we have not included in our guidance, but starting with capital expenditures. So, we believe that or we are targeting a capital expenditure number of about $150 million for fiscal '20. That is slightly higher than what we did in fiscal 2019 that we believe is a prudent amount of investments to make in the business.

I would expect our cash flow generation, in general, both operating cash flow as well as free cash flow, to continue to trend in a positive way. We had a very strong free cash flow of over $500 million in '19. And given the trajectory of our earnings, the work that we're doing on working capital, for example in '19, we brought down inventory by a significant amount and I believe we have more opportunities there. I would expect that good working capital performance in '20 as well. And so, the trends for operating cash flow and free cash flow should be consistent with what we experienced in '19.

Obviously, all of this is subject to what happens with coronavirus and based on the impact in Q1. I don't see any impact to our cash flows. When we close the quarter and we talk next time and we have a better visibility for the rest of the year, we will update this commentary as necessary.

Steve Beuchaw -- Wolfe Research -- Analyst

Okay. Great, Jorge.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

All right. Thank you.

Donald M. Casey -- Chief Executive Officer

Thanks, Dave.

Operator

Our next question comes from...

John Sweeney -- Vice President, Investor Relations

One more? Sorry. Go ahead, operator. Next question?

Operator

Our next question comes from Kevin Caliendo with UBS.

Kevin Caliendo -- UBS -- Analyst

Hey, guys. Thanks for getting me in. I guess a question about the cost savings and margin expansion going forward. If you think about where you started, where you are today, between you went through and gave us some details on the cost savings, but there has also been the improvement in the overall operations, in margins there, and there's also been some portfolio reshaping. As we think about getting from here through the end of, say, '21 or '22, what will be the biggest impact on margins going forward compared to sort of what we've accomplished or what you've accomplished over the last 12 months to 15 months?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Yeah. The way I see it, I think, is well balanced. So, I think the first source of margin improvement will continue to be our top line. So, in '19, we benefited significantly from the increased level of sales, driven by Technology & Equipment. As we look in our guidance for 2019, a 3% to 4% top line growth. That is going to have a pretty substantial drop through to the bottom line. Then, from a gross profit perspective, we are doing a lot of work on pricing and we should expect to see some benefits there. The procurement side, as I indicated in my prepared remarks, we have opportunities from a direct materials cost perspective, manufacturing efficiencies. So, there are some, in our plan, we are contemplating improvements to our COGS as well.

And then, from an SG&A perspective, the initiatives that I mentioned before in terms of order to cash, consolidation of certain activities, that will contribute to our benefits. If I look back, historically, the last couple of years or 18 months, the vast [Phonetic] benefits have come from both the gross margin side as well as the SG&A side, has been pretty [Technical Issues] believe that that combination will continue into '20 and '21.

Kevin Caliendo -- UBS -- Analyst

Great. And one quick one on SureSmile. With the software update, are you able to do the sort of before and after, when somebody comes in and gets a scan, showing what do their teeth look like now and what they might look like at the end of a treatment protocol? Are you able to do that now?

Donald M. Casey -- Chief Executive Officer

Yeah, absolutely. And I'll tell you, one of the things that we feel long term will be a competitive advantage for us is the fact that our treatment planning is really quick, really easy to use. And what the dentists are telling us, they have a lot of confidence presenting it to the customers. We're just coming off a big SureSmile event this weekend, and the amount of change that we've made in upgrading the interactivity and the ease of use has been remarkable among people who have been with us for a while.

Kevin Caliendo -- UBS -- Analyst

Okay, thank you very much.

John Sweeney -- Vice President, Investor Relations

Thank you.

Operator

Our next question comes from Jeff Johnson with Baird.

Jeff Johnson -- Baird -- Analyst

Thank you. Good morning, guys. Two quick ones. One, I guess, Don, just looking at 2020 look forward and then one question looking back. On 2020, 9% growth in the US, 27% in the fourth quarter. Is 2019 the year of the US growth and we need to think about US tougher to grow against those comps and Europe and rest of world really driving 2020 or just how to think about kind of the geographic split?

Donald M. Casey -- Chief Executive Officer

No, I actually think the US is going to be pretty darn important to us and we want to see that growth continue. Obviously, you've got to look at inventory burn and a few other things there, Jeff. I would tell you I would expect US to be among the front in terms of the growers. We're very optimistic as we pull a couple of levers on Primescan, whether it's One DS, whether it's upgrades, rolling out Primemill and really pushing the SFE program beyond the US. We've got Germany, China, Japan targeted for that activity this year where that gives you the base to launch One DS. So, we're expecting a good strong year in the US.

And we think, as we put the programs into place, get the rest of the innovation, we'd like to see balanced growth. Europe cleans up a little bit. Remember, once we get out of the Venlo comps, we think we can grow Europe, but no, I wouldn't read this as the rest of the world picks up. I would like to think balanced with the US still being strong.

Jeff Johnson -- Baird -- Analyst

All right, that's helpful. And then, just in the fourth quarter, from a revenue perspective, I think you beat the high end of your guidance by about 300 basis points. You were at the midpoint or slightly below from an EPS perspective. What was the lack of flow-through in the quarter from a profitability standpoint? And maybe if you could tie that back to One DS, is it just a lot of promotional activity there with some of the roll-out of One DS? And do you think the returns on that program, even if it's helping the top line are where you need them to be at this point? Thanks.

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Yeah. In the fourth quarter, our SG&A number was elevated relative to the trend that we were having. And so, that had an impact on the bottom line. And as I indicated in my prepared remarks, we had a reclass of $18.1 million in SG&A. We had -- also, because of the strong sales we had in the fourth quarter, we had an elevated amount of sales comp and incentive compensation in general. We also had -- there was the timing of DS World. As you remember, in 2018, that event happened in the third quarter. And in 2019, we had the event in the fourth quarter. So, that also created a little bit of a headwind from an SG&A perspective in Q4. And there were some other investments in some of our key initiatives around digital transformation and a couple of other programs that had a pretty significant amount of spend in the quarter as we had planned it. So, all of those things combined, resulted in a lower than you would have expected operating margin, given the beat on the top line.

Donald M. Casey -- Chief Executive Officer

All right.

John Sweeney -- Vice President, Investor Relations

Thanks, Jeff. And now, we'll take our next question, please.

Operator

Our next question comes from Elizabeth Anderson with Evercore ISI.

Elizabeth Anderson -- Evercore ISI -- Analyst

Good morning, guys. Thanks for the question. In terms of the portfolio shaping impact, I know, Jorge, you said there'd be a $10 million impact on the first quarter. Can you talk about where you sort of feel like you are with that? Obviously, you've done a lot of the heavy lifting there, but in terms of the impact and how to think about the rest of the year?

Jorge Gomez -- Executive Vice President and Chief Financial Officer

So, my comment was mechanical with respect to how the activities that we did in '19 impact the run rate in '20. And at that point, we will lap that impact in the first couple of quarters of the year. Beyond that, we don't have anything right now that has been executed. We, obviously, from a portfolio shaping perspective, remain very active and always contemplating new opportunities for us to improve our growth rate and our margin rates, but there is nothing beyond that $10 million that I mentioned when I provided guidance.

Elizabeth Anderson -- Evercore ISI -- Analyst

Okay, thank you. That's helpful.

Donald M. Casey -- Chief Executive Officer

All right.

John Sweeney -- Vice President, Investor Relations

And the final question, please, operator.

Operator

Our next question comes from Michael Cherny with Bank of America.

Allen Lutz -- Bank of America -- Analyst

Hey. This is Allen Lutz in for Mike. Regarding coronavirus, have US dentists made any change to their purchasing patterns that are worth calling out, for example, on masks or anything like that?

Donald M. Casey -- Chief Executive Officer

Yeah, Allen. We don't sell masks. So, we really can't comment on that. And to date, we really haven't seen any impact in the US.

Allen Lutz -- Bank of America -- Analyst

Okay, thank you.

Donald M. Casey -- Chief Executive Officer

Thanks, Allen.

John Sweeney -- Vice President, Investor Relations

Thank you very much. Operator, we'd now like to wrap it up, please.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

John Sweeney -- Vice President, Investor Relations

Donald M. Casey -- Chief Executive Officer

Jorge Gomez -- Executive Vice President and Chief Financial Officer

Brandon Couillard -- Jefferies -- Analyst

John Kreger -- William Blair -- Analyst

Nathan Rich -- Goldman Sachs -- Analyst

Tycho Peterson -- JPMorgan -- Analyst

Steven Valiquette -- Barclays -- Analyst

Erin Wright -- Credit Suisse -- Analyst

Glen Santangelo -- Guggenheim Securities -- Analyst

Jon Block -- Stifel -- Analyst

Steve Beuchaw -- Wolfe Research -- Analyst

Kevin Caliendo -- UBS -- Analyst

Jeff Johnson -- Baird -- Analyst

Elizabeth Anderson -- Evercore ISI -- Analyst

Allen Lutz -- Bank of America -- Analyst

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