Sybron Dental Specialties, Inc. Reports 23% Increase in Earnings
per Share ORANGE, Calif., Jan. 24 /PRNewswire-FirstCall/ -- Sybron
Dental Specialties, Inc. (NYSE:SYD), a leading manufacturer of a
broad range of value-added products for the professional dental
market and the specialty markets of orthodontics, endodontics,
implants and infection prevention, announced today its financial
results for its first fiscal quarter ended December 31, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001204/SDSLOGO) FIRST
Quarter Results Net sales for the first quarter of fiscal 2005
totaled $149.0 million, an increase of 13.0% over the $131.9
million in net sales in the prior year period. Sybron's internal
net sales, which exclude currency fluctuations and the impact of
acquisitions made in the past twelve months, grew 6.7% in the first
quarter. The Company's consumable products, which represented
approximately 97.5% of total net sales in the first quarter of
fiscal 2005, had an internal net sales growth rate of 8.2%. Net
income for the first quarter of fiscal 2005 was $15.0 million, or
$0.37 per diluted share, compared with net income of $11.9 million,
or $0.30 per diluted share, in the same period of the previous
year. Diluted earnings per share increased by 23% over the prior
year period. In the first quarter of fiscal 2005, Sybron generated
$16.4 million in free cash flow, defined as cash flows from
operating activities of $19.8 million minus capital expenditures of
$3.4 million. This compares with free cash flow of $17.6 million in
the same period of the previous year (cash flows from operating
activities of $20.3 million minus capital expenditures of $2.7
million). "We had an excellent start to the fiscal year driven by a
strong response to our recently introduced products," said Floyd W.
Pickrell, Jr., Chief Executive Officer of Sybron Dental
Specialties. "We believe we are continuing to increase our market
share in orthodontics, and we are pleased with the strong internal
growth of our consumable professional dental products. We are also
seeing the benefits of our recent facility rationalization efforts,
which, along with more favorable foreign currency exchange rates,
produced an increase in gross margin of almost three percentage
points over the prior year." ORMCO AND KERR HIGHLIGHTS During the
first quarter, the internal net sales of the Company's Specialty
Products segment (Ormco) grew 10.4% over the same period in the
prior year. Sales in the quarter were positively impacted by
account conversions to the new Damon 3 self-ligating bracket, and
strong sales of the new Elements Obturation device for endodontic
procedures. Total sales of the Specialty Products segment were also
positively impacted by the acquisition in October of Innova
LifeSciences and its line of dental implants, the sales of which
are meeting the Company's expectations. During the first quarter,
internal net sales of the Company's Professional Dental segment
(Kerr) increased 3.3% over the same period in the prior year.
Internal net sales of Professional Dental consumable products
increased 6.4%. Sales in the quarter were positively impacted by
continued solid sales of the Premise nanocomposite, a strong
response to the new MaxCem self-adhesive cement, and higher sales
of infection prevention products, driven by further penetration of
the medical market. FIRST QUARTER FINANCIAL HIGHLIGHTS Gross
margins in the first quarter of 2004 were 57.3%, compared with
54.6% in the same period of the previous year. The increase in
overall gross margin is primarily attributable to increased
manufacturing efficiencies resulting from facility rationalization
efforts, as well as more favorable foreign currency rates. Selling,
general and administrative expenses (SG&A) were $58.0 million,
or 38.9% of net sales, in the first quarter of 2005, compared with
$48.5 million, or 36.8% of net sales, in the same period of the
prior year. The increase in SG&A as a percentage of sales from
the previous year is primarily attributable to foreign currency
fluctuations, as well as the addition of Innova LifeSciences, which
carries a higher SG&A as a percentage of net sales. Research
and development expenditures were $2.8 million in the first quarter
of 2005, compared with $3.1 million of expenditures in the same
period of the prior year. Operating income for the first quarter of
2005 was $27.4 million, compared to $23.5 million in the first
quarter of 2004. Earnings before interest, taxes, depreciation and
amortization (EBITDA) for the quarter were $31.5 million. Operating
income was 18.4% and EBITDA was 21.1% of net sales for the quarter,
compared with 17.8% and 20.6%, respectively, in the same period of
2004. First quarter 2005 EBITDA is calculated by adding net income
of $15.0 million, income taxes of $7.1 million, net interest
expense of $5.3 million, and depreciation and amortization of
approximately $4.1 million. First quarter 2004 EBITDA of $27.1
million is calculated by adding net income of $11.9 million, income
taxes of $5.9 million, other expense (including interest expense)
of $5.6 million, and depreciation and amortization of approximately
$3.7 million. Sybron's effective tax rate in the first quarter of
fiscal 2005 was 32%, a decrease of 1% from the first quarter of
fiscal 2004. The effective tax rate of 32% is based on current
assumptions regarding the income contributions from our various
operations around the world. Should the income contributions from
territories with higher tax rates exceed our expectations, then our
effective tax rate could be higher than 32%. Net trade receivables
were $97.7 million and days sales outstanding (DSOs) were 61.7 days
at December 31, 2004, which compares with 61.1 days at December 31,
2003. The Company typically experiences an increase in DSOs during
its first fiscal quarter due to delays in payments caused by the
holiday season. Net inventory was $104.7 million at the end of the
first quarter and inventory days were 149 days, which compares to
130 days at December 31, 2003 and 133 days at September 30, 2004.
The increase in inventory days from September 30, 2004 is primarily
attributable to the addition of Innova LifeSciences, which
maintains a higher level of inventory days than Sybron, as well as
the continued inventory build ahead of the expiration of the
Company's current contract with union members at its Romulus,
Michigan facility. Please refer to the supplemental schedules
provided on the Financial Report's section of Sybron's Investor
Relations web site
(http://www.sybrondental.com/investors/index.html) that detail the
calculation of the Company's DSOs and inventory days. Capital
expenditures were $3.4 million in the first quarter of fiscal 2005,
compared with $2.7 million in the same period of the previous year.
The average debt outstanding for the quarter was $249.0 million
with an average interest rate of 7.8%. Total debt outstanding at
December 31, 2004 was $245.3 million. Total debt outstanding
increased during the quarter due to the $44.5 million in borrowings
used to finance the acquisition of Innova LifeSciences, which was
partially offset by $19.7 million in debt repayments during the
quarter. Sybron's cash and cash equivalents balance increased to
$49.6 million at December 31, 2004 from $40.6 million at September
30, 2004. The Company is currently evaluating the impact of the
American Jobs Creation Act of 2004, which allows for the
repatriation of foreign earnings at favorable tax rates. Sybron's
capital structure was 42.0% debt and 58.0% equity at December 31,
2004. This compares with 53.6% debt and 46.4% equity at December
31, 2003. OUTLOOK As part of the Company's continuing efforts to
enhance efficiencies and optimize capacity utilization throughout
its manufacturing facilities, Sybron has implemented a plan to
close Kerr's Demetron facility, which develops and manufactures
curing lights, and transfer production to Kerr's Orascoptic
facility, which develops and manufactures magnification devices for
dental procedures. When the closure is completed, the Company
expects that the facility rationalization will result in annual
savings of $0.5 million, which will positively impact the Company's
gross margins. Over the next three quarters, the Company expects to
record $1.4 million in expenses related to this closure. Sybron
expects the plant closure will result in the following expenses and
cost savings in each quarter: Expenses Cost Savings Pre-Tax Impact
Q2 2005 $979,000 $0 $(979,000) Q3 2005 $292,000 $63,000 $(229,000)
Q4 2005 $108,000 $111,000 $3,000 The Company continues to explore
other opportunities to increase capacity utilization and believes
it can further consolidate its facilities to yield positive gross
margin benefits. In the second quarter of fiscal 2005, Sybron also
expects to record a $1.4 million charge related to the retirement
of the Company's Chief Financial Officer, Gregory D. Waller, who
has announced his intention to retire in 2005. Approximately $1.0
million of this charge (non-cash) relates to the extension of the
expiration date for Mr. Waller's stock options, and will only be
triggered if Mr. Waller has not exercised his stock options before
his retirement date. For the second quarter of fiscal 2005, Sybron
expects revenue to range from $160 million to $167 million, and
diluted earnings per share to range from $0.44 to $0.47, which
reflects the one-time charges for the Demetron facility closure,
the retirement transition package for Mr. Waller and an effective
tax rate of 32%. Sybron also reaffirmed its revenue guidance for
the full fiscal year 2005. Sybron continues to expect revenue to
range from $620 million to $630 million (with organic revenue
growth at the high end of the Company's historical 4%-6% growth
rate). The Company now expects diluted earnings per share to range
from $1.68 to $1.78 for the full fiscal year 2005, which reflects
the one-time charges for the Demetron facility closure, the
retirement transition package for Mr. Waller and an effective tax
rate of 32%. Commenting on the outlook for Sybron, Mr. Pickrell
said, "We are very pleased that many of our new products are
driving the level of growth that we projected. We are just
beginning to penetrate the market with products like the Damon 3
bracket, MaxCem, and the Elements Obturation device, and we have
excellent opportunities to continue to increase the sales of these
products. Combined with the enhanced efficiencies that are driving
improvement in our gross and operating margins, we expect fiscal
2005 to be a strong year of profitable growth for Sybron." NON-GAAP
FINANCIAL MEASURES The Company has included information concerning
EBITDA and free cash flow because management believes that certain
investors use this information as measures of a company's
performance and ability to service its debt. EBITDA and free cash
flow should not be considered as alternatives to, or more
meaningful than, net income as an indicator of Sybron's operating
performance or cash flows as a measure of liquidity. EBITDA and
free cash flow have not been prepared in accordance with generally
accepted accounting principals (GAAP). EBITDA and free cash flow,
as presented by Sybron, may not be comparable to similarly titled
measures reported by other companies. CONFERENCE CALL AND WEBCAST
The Company will host a conference call on Tuesday, January 25th at
10:00 a.m. Pacific Standard Time to review the information in this
press release and respond to questions. The dial-in number for the
call is (877) 209-0397 for domestic callers and (612) 332-0923 for
international callers. A recorded replay of the conference call
will be offered beginning at 1:30 p.m. Pacific Standard Time on
Tuesday, January 25th via both the Company's website and a
telephone dial-in number. The telephone dial-in number for the
recorded replay is (800) 475-6701, passcode 765273 for domestic
callers and (320) 365-3844, passcode 765273 for international
callers. The telephone replay will be available through 11:59 p.m.
Pacific Standard Time on January 28th, 2005. The live webcast and
archived replay may be accessed in the Investor Relations section
of Sybron Dental's website at http://www.sybrondental.com/. CAUTION
REGARDING FORWARD-LOOKING STATEMENTS Statements made in this press
release regarding future matters are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements, including those dealing with
the Company's expectations as to its future revenue; earnings per
share; organic growth; the demand for its products; the
introduction and sales of new products; the success of its self
ligating orthodontic brackets; the benefits it will realize from
the closing of its Demetron facility; the elimination of certain
operating expenses; and its ability to maintain the improvements in
its operating margins are based on the Company's current
expectations. Our actual results may differ materially from those
currently expected or desired because of a number of risks and
uncertainties, including the level of demand for the Company's
products; regulatory compliance; currency fluctuations; distributor
inventory adjustments; the intensity of competition; and other
factors affecting the Company's business and prospects discussed in
the filings made by the Company, from time to time, with the SEC
including the factors discussed in the "Cautionary Factors" section
in Item 7 of the Company's most recent Annual Report on Form 10-K
and its periodic reports on Form 10-Q. We undertake no obligation
to publicly update any forward-looking statement, whether as a
result of new information, future events or otherwise. BUSINESS
DESCRIPTION Sybron Dental Specialties and its subsidiaries are
leading manufacturers of a comprehensive line of consumable general
dental and specialty products for the orthodontic, endodontic,
implant and infection prevention markets worldwide. SYBRON DENTAL
SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
INCOME (in thousands, except per share amounts) (unaudited) Three
Months Ended December 31, 2004 2003 Net sales $149,040 $131,857
Cost of sales 63,673 59,899 Gross profit 85,367 71,958 Selling,
general and administrative expenses 57,488 48,193 Amortization of
intangible assets 497 309 Total selling, general and administrative
expenses 57,985 48,502 Operating income 27,382 23,456 Other
expense: Interest expense (4,995) (5,160) Amortization of deferred
financing fees (415) (407) Other, net 144 (54) Income before income
taxes 22,116 17,835 Income taxes 7,077 5,886 Net income $15,039
$11,949 Earnings per share: Basic earnings per share $0.38 $0.31
Diluted earnings per share $0.37 $0.30 Weighted average basic
shares outstanding 39,479 38,310 Weighted average diluted shares
outstanding 41,068 39,897 SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per
share amounts) (unaudited) December 31, September 30, 2004 2004
ASSETS Current assets: Cash and cash equivalents $49,647 $40,602
Accounts receivable (less allowance for doubtful receivables of
$2,803 and $2,094 at December 31, 2004 and September 30, 2004,
respectively) 97,662 104,148 Inventories 104,721 93,689 Deferred
income taxes 3,356 3,293 Prepaid expenses and other current assets
12,215 12,975 Total current assets 267,601 254,707 Property, plant
and equipment, net of accumulated depreciation of $107,546 and
$101,934 at December 31, 2004 and September 30, 2004, respectively
87,506 83,121 Goodwill 299,022 268,768 Intangible assets, net
35,077 16,178 Other assets 24,565 23,784 Total assets $713,771
$646,558 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $19,371 $19,512 Current portion of long-term debt
898 882 Income taxes payable 14,985 17,089 Accrued payroll and
employee benefits 25,959 29,712 Restructuring reserve 711 711
Accrued rebates 11,249 9,475 Accrued interest 936 3,620 Other
current liabilities 13,925 12,291 Total current liabilities 88,034
93,292 Long-term debt 94,372 69,589 Senior subordinated notes
150,000 150,000 Deferred income taxes 8,873 12,266 Other
liabilities 33,264 22,639 Total liabilities 374,543 347,786
Commitments and contingent liabilities Stockholders' equity:
Preferred stock, $.01 par value; authorized 20,000 shares, no
shares outstanding -- -- Common stock, $.01 par value; authorized
250,000 shares, 39,894 and 39,307 shares issued and outstanding at
December 31, 2004 and September 30, 2004, respectively 399 393
Additional paid-in capital 106,478 93,817 Retained earnings 203,195
188,156 Accumulated other comprehensive income 29,156 16,406 Total
stockholders' equity 339,228 298,772 Total liabilities and
stockholders' equity $713,771 $646,558 SYBRON DENTAL SPECIALTIES,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands) (unaudited) Three Months Ended December 31, 2004 2003
Cash flows from operating activities: Net income $15,039 $11,949
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 3,635 3,355 Amortization of
intangible assets 497 309 Amortization of deferred financing fees
415 407 (Gain)/loss on sales of property, plant and equipment 93
(5) Provision for losses on doubtful receivables 483 197 Inventory
provisions 1,377 1,069 Deferred income taxes (525) (1,673) Tax
benefit from issuance of stock under employee stock option plan
4,051 278 Changes in assets and liabilities, net of effects of
businesses acquired: Decrease in accounts receivable 8,707 16,757
Increase in inventories (7,616) (1,910) (Increase)/decrease in
prepaid expenses and other current assets 1,149 (766) Decrease in
accounts payable (926) (4,165) Decrease in income taxes payable
(3,112) (370) Decrease in accrued payroll and employee benefits
(3,753) (6,052) Increase in accrued rebates 1,774 1,840 Decrease in
restructuring reserve -- (23) Decrease in accrued interest (2,684)
(3,170) Decrease in other current liabilities (1,093) (2,511) Net
change in other assets and liabilities 2,295 4,790 Net cash
provided by operating activities 19,806 20,306 Cash flows from
investing activities: Capital expenditures (3,398) (2,679) Proceeds
from sales of property, plant, and equipment 146 118 Net payments
for businesses acquired (45,975) -- Payments for intangibles (274)
(232) Net cash used in investing activities (49,501) (2,793) Cash
flows from financing activities: Proceeds from credit facility
59,000 33,500 Principal payments on credit facility (34,160)
(51,210) Proceeds from long-term debt -- 818 Principal payments on
long-term debt (219) (2,030) Cash received from exercise of stock
options 7,868 1,142 Cash received from employee stock purchase plan
748 522 Net cash provided by (used in) financing activities 33,237
(17,258) Effect of exchange rate changes on cash and cash
equivalents 5,503 (76) Net increase in cash and cash equivalents
9,045 179 Cash and cash equivalents at beginning of period 40,602
22,868 Cash and cash equivalents at end of period $49,647 $23,047
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES INTERNAL GROWTH
For period ended December 31, 2004 Professional Specialty Total
Dental Products SDS Quarter 3.3% 10.4% 6.7% Total SDS Foreign
Domestic Quarter 1.5% 11.5%
http://www.newscom.com/cgi-bin/prnh/20001204/SDSLOGO
http://photoarchive.ap.org/ DATASOURCE: Sybron Dental Specialties,
Inc. CONTACT: Gregory D. Waller, Chief Financial Officer of Sybron
Dental Specialties, Inc., +1-714-516-7400 Web site:
http://www.sybrondental.com/
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