Sybron Dental Specialties, Inc. Reports Second Quarter Fiscal 2005
Financial Results ORANGE, Calif., April 25 /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 fiscal year 2005
second quarter, which ended on March 31, 2005. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001204/SDSLOGO ) SECOND
QUARTER RESULTS Net sales for the second quarter of fiscal 2005
totaled $165.1 million, an increase of 9.4% over the $150.9 million
in net sales in the corresponding prior year period. Sybron's
internal net sales, which exclude currency fluctuations and
includes only the organic growth of acquisitions made in the past
twelve months, grew 5.6% in the second quarter. The internal net
sales growth rate of the Company's consumable products was 6.2%.
The sales of these products accounted for 97% of the Company's
total sales in the quarter. Net income for the second quarter of
fiscal 2005 was $19.4 million, an increase of 11.0% over net income
of $17.5 million in the same period of the prior year. Fully
diluted earnings per share totaled $0.47 in the second quarter of
fiscal 2005, an increase of 6.8% over earnings of $0.44 per diluted
share in the same period of the previous year. In the second
quarter of fiscal 2005, Sybron generated $13.7 million in free cash
flow, defined as cash flows from operating activities of $16.6
million minus capital expenditures of $2.9 million. This compares
with free cash flow of $4.9 million in the same period of the
previous year (cash flows from operating activities of $7.6 million
minus capital expenditures of $2.7 million). "During the second
quarter, we saw a continuation of the positive trends that have
driven our strong performance for the past several quarters," said
Floyd W. Pickrell, Jr., Chief Executive Officer of Sybron Dental
Specialties. "The Damon 3 bracket is having a positive impact on
the adoption rate for the Damon system, and through the first half
of fiscal 2005 we have continued to convert accounts to the Damon
system at a robust rate. We are also continuing to get an excellent
response to our innovative new products in categories such as
composites and self-adhesive cements. The general dental products
that have been launched within the past year have generated over
$7.0 million in revenue during the first two quarters of fiscal
2005, and we believe the demand for a number of them will continue
to be solid for years to come." SEGMENT HIGHLIGHTS During the
second quarter, the internal net sales of the Company's Specialty
Products segment grew 8.9% over the same period in the prior year.
The highlight of the quarter was the Fourth Annual Users Conference
for the Damon System, which had almost three times as many
attendees as last year's conference. The Company continues to see
strong demand for its Damon self- ligating brackets, the sales of
which in the second quarter increased substantially over the second
quarter of the prior fiscal year. The Company's new Elements
Obturation device also contributed to the increase in the internal
net sales of the Specialty Products segment and helped drive a
double-digit year-over-year increase in the segment's sales of its
endodontic products. In the second quarter, internal net sales of
the Company's Professional Dental segment increased 2.8% over the
same period in the prior year. Internal net sales of Professional
Dental consumable products increased 4.7%. Sales in the quarter
were positively impacted by continued solid sales of Premise(TM)
nanocomposite and MaxCem(TM) self-adhesive cement. The Company was
also pleased with the response to two new products launched during
the second quarter: OptiDam(TM), a 3-dimensional rubber dental dam
used in restorative procedures; and CompoRoller(TM), a composite
modeling instrument, which is frequently being purchased in tandem
with Premise nanocomposite. SECOND QUARTER FINANCIAL HIGHLIGHTS The
Company incurred approximately $600,000 in the quarter in charges
related to the consolidation of its Demetron and Orascoptic
operations into one facility. Approximately $100,000 of these
expenses was included in the cost of goods sold and the remaining
$500,000 was included in selling, general and administrative
expenses. The consolidation is proceeding on schedule, and the
Company continues to expect annual savings of approximately
$500,000 upon completion of the consolidation in the fourth quarter
of fiscal 2005. Gross margins in the second quarter of 2005 were
56.5%, compared with 54.7% 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
$60.3 million, or 36.5% of net sales, in the second quarter of
2005, compared with $51.1 million, or 33.9% of net sales, in the
same period of the prior year. The increase in SG&A as a
percentage of sales was primarily attributable to the impairment of
an asset; the addition of Innova LifeSciences, which has SG&A
expenses as a percent of sales that are higher than the Company's
other operations; the expenses associated with the
Demetron/Orascoptic consolidation; CFO transition costs; and
increased internal and external resources involved in evaluating
M&A opportunities. Research and development expenditures were
$3.4 million in the second quarter of 2005, compared with $3.1
million of expenditures in the same period of the prior year.
Operating income for the second quarter of 2005 was $32.9 million,
compared to $31.5 million in the second quarter of 2004. Earnings
before interest, taxes, depreciation and amortization (EBITDA) for
the quarter were $37.1 million. Operating income was 20.0% and
EBITDA was 22.5% of net sales for the quarter, compared with 20.8%
and 23.3%, respectively, in the same period of 2004. Second quarter
2005 EBITDA is calculated by adding net income of $19.4 million,
income taxes of $9.1 million, net interest expense of $5.1 million,
and depreciation and amortization of approximately $4.2 million,
less other income of approximately $0.7 million. Second quarter
2004 EBITDA of $35.1 million is calculated by adding net income of
$17.5 million, income taxes of $8.6 million, net interest expense
of $5.2 million, and depreciation and amortization of approximately
$3.8 million. Sybron's effective tax rate in the second quarter of
fiscal 2005 was 32%, compared with 33% in the second quarter of
fiscal 2004. Net trade receivables were $108.0 million and days
sales outstanding (DSOs) were 56.3 days at March 31, 2005, which
compares with the 56.7 days at March 31, 2004. DSOs also decreased
from the 61.7 days at December 31, 2004. Net inventory was $102.6
million at the end of the second quarter and inventory days were
145 days, which compares to 122 days at March 31, 2004 and 149 days
at December 31, 2004. As expected, inventory days declined from the
end of the previous quarter and are expected to continue to decline
as the Company works off inventory built ahead of the expiration of
its contract with the union members at its Romulus, Michigan
facility. Effective February 1, 2005, the Company entered into a
new multi-year contract with the union. 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 $2.9 million in the second 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 $237.9
million with an average interest rate of 7.85%. The Company paid
down $14.5 million in debt during the quarter, leaving total debt
outstanding at March 31, 2005 of $230.8 million. Sybron's cash and
cash equivalents balance was $47.6 million at March 31, 2005,
compared with $49.6 million at December 31, 2004. The Company
continues to maintain a larger than usual cash balance at several
of its foreign subsidiaries as it evaluates 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 39.2% debt and 60.8% equity at March 31,
2005. This compares with 50.1% debt and 49.9% equity at March 31,
2004. OUTLOOK For the third quarter of fiscal 2005, Sybron expects
revenue to range from $160 million to $165 million, and diluted
earnings per share to range from $0.44 to $0.48. Sybron also
revised its revenue and EPS estimates for the full fiscal year
2005. Sybron now expects revenue to range from $630 million to $640
million (with internal net sales growth at the high end of the
Company's historical 4%-6% internal net sales growth rate), and
diluted earnings per share to range from $1.70 to $1.78. Commenting
on the outlook for Sybron, Mr. Pickrell said, "We believe we are
still in the early stages of generating demand for products such as
the Damon 3 bracket, Elements Obturation device, Premise
nanocomposite and MaxCem cement, and that they will continue to
pick up market share in their respective categories. We also have
an excellent pipeline of new products that are scheduled for launch
during the second half of fiscal 2005, such as a more powerful
version of our industry-leading curing light, an extension to the
MaxCem product line, and the first self-ligating buccal tubes
specifically designed for use with the Damon system. Collectively,
we believe our new product lineup will enable Sybron to continue
driving consistent growth in sales, earnings and cash flow."
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, April 26th at
10:00 a.m. Pacific Time to review the information in this press
release and respond to questions. The dial-in number for the call
is (800) 288-8975 for domestic callers and (612) 332-0932 for
international callers. A recorded replay of the conference call
will be offered beginning at 1:30 p.m. Pacific Time on Tuesday,
April 26th 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 776180 for domestic callers and (320)
365-3844, passcode 776180 for international callers. The telephone
replay will be available through 11:59 p.m. Pacific Time on April
29th, 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; internal net sales
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; and the reduction of its inventory levels 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 Six Months Ended March 31,
March 31, 2005 2004 2005 2004 Net sales $165,056 $150,921 $314,096
$282,778 Cost of sales: Cost of products sold 71,787 66,854 135,460
126,753 Restructuring charge 84 1,482 84 1,482 Total cost of sales
71,871 68,336 135,544 128,235 Gross Profit 93,185 82,585 178,552
154,543 Selling, general and administrative expenses 59,207 50,800
116,695 98,993 Restructuring charge 488 -- 488 -- Amortization of
intangible assets 559 322 1,056 631 Total selling, general and
administrative expenses 60,254 51,122 118,239 99,624 Operating
income 32,931 31,463 60,313 54,919 Other expense: Interest expense
(4,638) (4,941) (9,633) (10,101) Amortization of deferred financing
fees (416) (402) (831) (809) Other, net 708 11 852 (43) Income
before income taxes 28,585 26,131 50,701 43,966 Income taxes 9,147
8,623 16,224 14,509 Net income $19,438 $17,508 $34,477 $29,457
Earnings per share: Basic earnings per share $0.49 $0.46 $0.87
$0.77 Diluted earnings per share $0.47 $0.44 $0.84 $0.74 Weighted
average basic shares outstanding 39,986 38,471 39,732 38,391
Weighted average diluted shares outstanding 41,485 40,166 41,276
40,032 SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per share
amounts) (unaudited) March 31, September 30, 2005 2004 ASSETS
Current assets: Cash and cash equivalents $47,627 $40,602 Accounts
receivable (less allowance for doubtful receivables of $2,723 and
$2,094 at March 31, 2005 and September 30, 2004, respectively)
108,003 104,148 Inventories 102,637 93,689 Deferred income taxes
4,323 3,293 Prepaid expenses and other current assets 13,793 12,975
Total current assets 276,383 254,707 Property, plant and equipment,
net of accumulated depreciation of $109,874 and $101,934 at March
31, 2005 and September 30, 2004, respectively 84,093 83,121
Goodwill 295,340 268,768 Intangible assets, net 34,686 16,178 Other
assets 24,085 23,784 Total assets $714,587 $646,558 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $16,531
$19,512 Current portion of long-term debt 846 882 Income taxes
payable 15,578 17,089 Accrued payroll and employee benefits 29,266
29,712 Restructuring reserve 711 711 Accrued rebates 6,635 9,475
Accrued interest 3,784 3,620 Other current liabilities 15,932
12,291 Total current liabilities 89,283 93,292 Long-term debt
79,904 69,589 Senior subordinated notes 150,000 150,000 Deferred
income taxes 11,088 12,266 Other liabilities 26,952 22,639 Total
liabilities 357,227 347,786 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, 40,034 and 39,307 shares issued
and outstanding at March 31, 2005 and September 30, 2004,
respectively 400 393 Additional paid-in capital 109,571 93,817
Retained earnings 222,633 188,156 Accumulated other comprehensive
income 24,756 16,406 Total stockholders' equity 357,360 298,772
Total liabilities and stockholders' equity $714,587 $646,558 SYBRON
DENTAL SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF CASH FLOWS (in thousands) (unaudited) Six Months Ended March 31,
2005 2004 Cash flows from operating activities: Net income $34,477
$29,457 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 7,264 6,709 Amortization of
intangible assets 1,056 631 Amortization of deferred financing fees
831 809 Loss on sales of property, plant and equipment 84 26
Provision for losses on doubtful receivables 431 415 Inventory
provisions 3,203 2,124 Deferred income taxes (557) (998) Tax
benefit from issuance of stock under employee stock option plan
4,736 814 Changes in assets and liabilities, net of effects of
businesses acquired: Increase in accounts receivable (1,554)
(1,903) Increase in inventories (5,843) (2,772) Increase in prepaid
expenses and other current assets (429) (2,763) Decrease in
accounts payable (3,766) (4,034) Increase (decrease) in income
taxes payable (2,519) 354 Increase (decrease) in accrued payroll
and employee benefits 54 (1,530) Decrease in accrued rebates
(2,840) (2,246) Decrease in restructuring reserve -- (406) Increase
(decrease) in accrued interest 164 (203) Increase in other current
liabilities 914 1,711 Net change in other assets and liabilities
721 1,708 Net cash provided by operating activities 36,427 27,903
Cash flows from investing activities: Capital expenditures (6,342)
(5,334) Proceeds from sales of property, plant, and equipment 938
194 Net payments for businesses acquired (46,049) -- Payments for
intangibles (849) (559) Net cash used in investing activities
(52,302) (5,699) Cash flows from financing activities: Proceeds
from credit facility 86,000 84,000 Principal payments on credit
facility (75,607) (106,895) Proceeds from long-term debt -- 2,469
Principal payments on long-term debt (292) (8,730) Cash received
from exercise of stock options 10,254 3,353 Cash received from
employee stock purchase plan 771 522 Net cash provided by (used in)
financing activities 21,126 (25,281) Effect of exchange rate
changes on cash and cash equivalents 1,774 1,508 Net increase
(decrease) in cash and cash equivalents 7,025 (1,569) Cash and cash
equivalents at beginning of period 40,602 22,868 Cash and cash
equivalents at end of period $47,627 $21,299 SYBRON DENTAL
SPECIALTIES, INC. AND SUBSIDIARIES INTERNAL GROWTH For periods
ended March 31, 2005 Professional Specialty Total Dental Products
SDS Quarter 2.8% 8.9% 5.6% Year to date 3.0% 9.6% 6.1% Total SDS
Foreign Domestic Quarter 2.8% 8.0% Year to date 4.1% 7.9%
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/investors/index.html Web site:
http://www.sybrondental.com/
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