Arbitration Decision With SDC Entities Requires Align to Close Invisalign Stores
March 05 2019 - 8:30AM
Align Technology, Inc. (NASDAQ: ALGN) announced today the outcome
of the arbitration of the claims asserted against it by SDC
Financial LLC, SmileDirectClub LLC, and the Members of SDC
Financial LLC other than the Company (collectively, the SDC
Entities). By April 3, 2019, Align will close its Invisalign
Stores, which were first piloted in November 2017 and expanded to a
total of 12 stores by the end of 2018, as part of Align’s strategy
to help millions of consumers connect with an Invisalign doctor to
improve their smile with Invisalign® treatment.
“Since April 2018 Align has been engaged in an
arbitration proceeding with the SDC Entities stemming from the
claim that our Invisalign retail stores violate non-compete
provisions applicable to the members of SDC Financial LLC,
including Align,” said Joe Hogan, Align Technology president and
CEO. “Throughout this process we have maintained that we have acted
in good faith and integrity with regards to the SDC Entities and
our contractual obligations. And we believe that what makes
Invisalign Stores and every part of the Invisalign experience
substantially different from SDC scan shops is our focus on a
doctor’s office for treatment. While we are disappointed by the
arbitrator’s decision, it has no bearing on our long-held strategy
of educating millions of consumers worldwide on the benefits of a
having better smile and connecting them directly with Invisalign
providers. We’ll continue to raise consumer awareness and drive
patients to doctor’s offices for great outcomes and great treatment
experiences.”
As previously disclosed, the arbitration
concluded on January 23, 2019. The arbitrator issued his
decision on March 4, 2019. The arbitrator held that Align
breached the non-compete provision applicable to the members of SDC
Financial LLC, including that Align misused the SDC Entities’
confidential information and violated fiduciary duties to SDC
Financial LLC. The arbitrator ordered Align to close its
Invisalign stores by April 3, 2019, and enjoined Align from opening
new Invisalign stores or providing certain services in physical
retail establishments in connection with the marketing and sale of
clear aligners, and enjoined Align from using the SDC Entities’
confidential information. The arbitrator extended the
expiration date of the non-compete provision to August 18,
2022. The arbitrator also ordered Align to tender its SDC
Financial LLC membership interests to the SDC Entities for a
purchase price equal to the capital account balance as of October
31, 2017, a price which is significantly below the current fair
market value of such investment. No financial damages were
awarded to the SDC Entities. This decision does not impact Align’s
existing supply agreement with SDC which remains in place through
2019.
Align is currently evaluating the financial
impacts of closing its Invisalign stores and the divestiture of its
equity investment in SDC. Align expects to record a material charge
in the first quarter of 2019; however, Align does not expect the
arbitrator’s decision to have a material impact on its revenues for
the first quarter or on fiscal 2019. We expect to complete our
evaluation of the financial impacts prior to the end of the first
quarter.
Forward Looking StatementsThis
news release contains forward-looking statements within the meaning
of the federal securities laws, including those statements relating
to the Invisalign store closing (including the Align's expectations
regarding the impact the arbitrator’s decision will have on Align’s
revenues for the first quarter of 2019 or on fiscal 2019,
the charges and costs associated with the closure of the
Invisalign Stores, and Align’s expectations regarding
the period in which such charges and costs will be
recorded). These forward-looking statements are based on
management's current expectations, estimates, forecasts,
projections, beliefs, and assumptions and are not guarantees of
future performance. Although Align believes that the expectations
reflected in the forward-looking statements are reasonable, actual
results and the timing of selected events may differ materially
from those expectations. Factors that could cause actual results to
differ materially from those in the forward-looking statements
include, among other things, the risks and uncertainties that are
described in Align’s Annual Report on Form 10-K filed on February
28, 2019. Align undertakes no obligation to revise or update
publicly any forward looking-statements for any reason.
About Align Technology,
Inc.Align Technology designs and manufactures the
Invisalign® system, the most advanced clear aligner system in the
world, and iTero® intraoral scanners and services. Align's products
help dental professionals achieve the clinical results they expect
and deliver effective, cutting-edge dental options to their
patients. Visit www.aligntech.com for more information.
For additional information about the Invisalign
system or to find an Invisalign doctor in your area, please visit
www.invisalign.com. For additional information about the iTero
digital scanning system, please visit www.itero.com.
Align TechnologyMadelyn Homick(408)
470-1180mhomick@aligntech.com
Zeno GroupSarah Johnson (828) 551-4201
sarah.johnson@zenogroup.com
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