Sybron Dental Specialties, Inc. Reports 10.4% Increase in Third
Quarter Net Income ORANGE, Calif., July 26 /PRNewswire-FirstCall/
-- Sybron Dental Specialties, Inc. (NYSE:SYD), a leading
manufacturer of a broad range of value-added products for the
dental and orthodontic professions including the specialty markets
of endodontics and infection prevention, announced today its
financial results for its third fiscal quarter ended June 30, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001204/SDSLOGO) Third
Quarter Results Net sales for the third quarter of fiscal 2004
totaled $145.5 million, an increase of 8.4% over $134.2 million in
the prior year period. Sybron's total internal net sales growth
rate, which excludes currency fluctuations and the impact of
acquisitions made in the past twelve months, was 3.7% for the third
quarter. The Company's consumable products, which represented
approximately 96% of total net sales in the third quarter of fiscal
2004, had an internal net sales growth rate of 6.7%. As expected,
equipment sales declined by approximately 38% from the prior year
period, which benefited from the introduction of the Company's LED
curing light in fiscal 2003. Net income for the third quarter of
fiscal 2004 was $16.5 million, or $0.41 per diluted share, an
increase of 10.4% over net income of $15.0 million, or $0.38 per
diluted share, in the same period of the previous year. In the
third quarter of fiscal 2004, Sybron generated $21.5 million in
free cash flow, defined as cash flows from operating activities of
$24.7 million minus capital expenditures of $3.2 million. This
compares with free cash flow of $10.5 million in the same period of
the previous year (cash flows from operating activities of $13.0
million minus capital expenditures of $2.5 million). "We recorded
another quarter of solid results through a combination of organic
growth and a meaningful contribution from our August 2003
acquisition of SpofaDental," said Floyd W. Pickrell, Jr., Chief
Executive Officer of Sybron Dental Specialties. "We have a number
of new products, such as the Premise(TM) nanocomposite, that are
being well received. We also continue to successfully increase the
user base for our established products, such as the Damon
self-ligating brackets, which is also having a positive impact on
sales of peripheral products like archwires." ORMCO AND KERR
HIGHLIGHTS During the third quarter, the Company's Ormco subsidiary
generated internal net sales growth of 9.7%, with strong growth in
both domestic and international sales. Sales in the quarter were
positively impacted by strong demand for the Damon 2 self-ligating
bracket and the Inspire Ice(TM) clear-ceramic bracket. In addition,
Ormco also had a very successful preview promotion for the new
Damon 3 self-ligating bracket, in which hundreds of top users of
the Damon system placed orders for an advance shipment of the new,
more esthetic version of the Damon bracket. The Company is planning
a broad launch of the Damon 3 bracket in September. During the
third quarter, the Kerr subsidiary's internal net sales growth rate
was negative 0.7%. Internal net sales of Kerr's consumable
products, which exclude equipment sales including the popular LED
curing light launched in fiscal 2003, increased 3.7% over the prior
year period. Strong sales of the Premise nanocomposite, the new
HiRes magnification loupe, and infection prevention products helped
to offset the significant decline in sales of curing lights from
the previous year. In addition, SpofaDental continues to perform
well following its acquisition last year by Kerr and is seeing
significant sales of a new impression material developed for the
Central and Eastern European markets. The consolidation of
SpofaDental's operations from five facilities into one facility in
the city of Jicin in the Czech Republic is progressing on schedule.
THIRD QUARTER FINANCIAL HIGHLIGHTS Gross margins in the third
quarter of 2004 improved to 56.3%, compared with 55.4% in the same
period of the previous year. Selling, general and administrative
expenses (SG&A) were $52.0 million, or 35.7% of net sales, in
the third quarter of 2004, compared with $44.8 million, or 33.4% 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 an increase in legal expenses related to
patent infringement lawsuits, as well as more activity related to
the evaluation of prospective mergers and acquisitions. One of the
M&A considerations resulted in the purchase of the Bioplant(R)
product line, announced on July 22, 2004, while other discussions
remain ongoing pursuant to the Company's strategy of maintaining
consistent dialogue with potential acquisition candidates. Research
and development expenditures were $2.5 million in the third quarter
of 2004, an increase of 15.9% from the $2.1 million of expenditures
in the same period of the prior year. Operating income for the
third quarter of 2004 was $29.6 million, compared to $29.3 million
in the third quarter of 2003. Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the quarter were $33.0
million. Operating income was 20.3% and EBITDA was 22.7% of net
sales for the quarter. Third quarter 2004 EBITDA is calculated by
adding net income of $16.5 million, income taxes of $8.1 million,
net interest expense of $5.0 million, and depreciation and
amortization of approximately $3.4 million. Sybron's effective tax
rate in the third quarter of fiscal 2004 was 33%, compared to 36%
in the same period of the prior year. The reduced tax rate is
primarily attributable to the benefits resulting from the Company's
consolidation of several of its European facilities into
Switzerland, which has a lower tax rate. Net trade receivables were
$103.5 million and days sales outstanding (DSOs) were 59.3 days at
June 30, 2004, which compares with 58.7 days at June 30, 2003. Net
inventory was $88.8 million at the end of the third quarter and
inventory days were 123 days, which compares to 132 days at June
30, 2003. 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 $3.2 million in the third quarter of fiscal 2004,
compared with $2.5 million in the same period of the previous year.
The Company has determined that continuing to lease its current
corporate headquarters in Orange, California provides greater
economic benefits than purchasing the facility, and is currently
negotiating a 15 year lease extension. The average debt outstanding
for the quarter was approximately $240.6 million with an average
interest rate of 7.7%. The Company paid down $15.8 million of debt
in the third quarter, leaving total debt outstanding of
approximately $233.0 million at June 30, 2004. Sybron's capital
structure was 46.1% debt and 53.9% equity at June 30, 2004. This
compares with 61.8% debt and 38.2% equity at June 30, 2003. AMENDED
CREDIT FACILITY As a result of the recent upgrade in Sybron's
credit rating by S&P and Moody's, the Company has received a 50
basis point reduction in the margin on its term loan. In addition,
the covenants of Sybron's credit facility have been amended to
allow the Company to utilize up to $100 million for stock
repurchases or dividend payments, at the Company's discretion.
Previously, the Company was limited to $25 million for these
purposes. At this point in time, Sybron does not have plans to
initiate a stock repurchase program or begin issuing a dividend.
OUTLOOK For the fourth quarter of fiscal 2004, Sybron expects
revenue to range from $137 million to $142 million, and diluted
earnings per share to range from $0.37 to $0.42. Commenting on the
outlook for Sybron, Mr. Pickrell said, "We expect to see a
continuation of recent trends in the near-term, with growth in the
orthodontic and endodontic areas outpacing growth in the general
dental area. At Kerr, we are focused on raising additional
awareness for the superior features of Premise and utilizing its
popularity to cross-market some of our other products used in the
restorative process, such as finishing discs and polishers. We will
also further strengthen our product offerings for restorative
procedures with the introduction of a new self-adhesive cement
during the fourth quarter that we believe has excellent potential.
"There are a number of catalysts in place that we believe will
continue to drive strong results at Ormco, including the broad
launch of the Damon 3 bracket in September, which we believe will
enhance our efforts to convert orthodontists from traditional
brackets. Going forward, we intend to continue building the Damon
brand and introduce products such as Damon wires and other high
value peripheral products that can increase our share of the
overall treatment expenditures," said Mr. Pickrell. NON-GAAP
FINANCIAL MEASURES The Company has included information concerning
internal net sales growth, EBITDA and free cash flow because
management believes that certain investors use internal net sales
growth, EBITDA and free cash flow as measures of a company's
performance and EBITDA and free cash flow as measures of a
company's ability to service its debt. Internal net sales growth,
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.
Internal net sales growth, EBITDA and free cash flow have not been
prepared in accordance with generally accepted accounting
principals (GAAP). Internal net sales growth, EBITDA and free cash
flow, as presented by Sybron, may not be comparable to similarly
titled measures reported by other companies. CONFERENCE CALL The
Company will host a conference call on Tuesday, July 27th at 1:00
p.m. Eastern Daylight Time to review the information in this press
release and respond to questions. The dial-in number for the call
is (888) 273-9890 passcode 738411 for domestic callers and (612)
332-0820 passcode 738411 for international callers. A recorded
replay of the conference call will be offered beginning at 4:30
p.m. Eastern Daylight Time on Tuesday, July 27th 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
738411 for domestic callers and (320) 365-3844, passcode 738411 for
international callers. The telephone replay will be available
through 11:59 p.m. Pacific Daylight Time on July 30, 2004. The
website 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; and the success of its self
ligating orthodontic brackets 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 and 8-K (if any). 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 value-added products for
the dental and orthodontic professions and products for use in
infection control. Sybron Dental Specialties develops,
manufactures, and sells through independent distributors a
comprehensive line of consumable general dental and infection
prevention products to the dental industry worldwide. It also
develops, manufactures, markets and distributes an array of
consumable orthodontic and endodontic products worldwide. SYBRON
DENTAL SPECIALTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF INCOME (in thousands except per share amounts) (unaudited) Three
Months Ended Nine Months Ended June 30, June 30, 2004 2003 2004
2003 Net sales $145,518 $134,232 $428,296 $388,648 Cost of sales
63,517 59,850 190,270 175,341 Restructuring charge 132 -- 1,614 --
Total cost of sales 63,649 59,850 191,884 175,341 Gross profit
81,869 74,382 236,412 213,307 Selling, general and administrative
expenses 51,976 44,799 150,969 131,573 Amortization of intangible
assets 307 329 938 939 Total selling, general and administrative
expenses 52,283 45,128 151,907 132,512 Operating income 29,586
29,254 84,505 80,795 Other expense: Interest expense (4,677)
(5,418) (14,778) (16,397) Amortization of deferred financing fees
(401) (416) (1,210) (1,237) Other, net 163 (35) 120 825 Income
before income taxes 24,671 23,385 68,637 63,986 Income taxes 8,141
8,406 22,650 23,835 Net income $16,530 $14,979 $45,987 $40,151
Earnings per share: Basic earnings per share $0.43 $0.39 $1.19
$1.05 Diluted earnings per share $0.41 $0.38 $1.15 $1.03 Weighted
average basic shares outstanding 38,722 38,166 38,501 38,058
Weighted average diluted shares outstanding 40,343 39,735 40,143
38,874 SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands except share amounts)
(unaudited) June 30, September 30, 2004 2003 ASSETS Current assets:
Cash and cash equivalents $30,018 $22,868 Accounts receivable (less
allowance for doubtful receivables of $2,157 and $2,247 at June 30,
2004 and September 30, 2003, respectively) 103,536 103,565
Inventories 88,845 84,239 Deferred income taxes 5,769 4,896 Prepaid
expenses and other current assets 12,701 11,624 Total current
assets 240,869 227,192 Property, plant and equipment, net of
accumulated depreciation of $99,441 and $92,273 at June 30, 2004
and September 30, 2003, respectively 80,428 80,750 Goodwill 261,846
258,590 Intangible assets, net 16,160 16,455 Other assets 27,750
28,672 Total assets $627,053 $611,659 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $14,585 $19,620
Current portion of long-term debt 768 3,714 Income taxes payable
17,201 16,274 Accrued payroll and employee benefits 29,974 28,712
Restructuring reserve 1,125 1,486 Accrued rebates 8,988 9,872
Accrued interest 709 3,901 Other current liabilities 14,008 10,917
Total current liabilities 87,358 94,496 Long-term debt 82,239
124,008 Senior subordinated notes 150,000 150,000 Deferred income
taxes 12,885 13,748 Other liabilities 22,677 21,422 Total
liabilities 355,159 403,674 Commitments and contingent liabilities
Stockholders' equity: Preferred stock, $.01 par value; authorized
20,000,000 shares, no shares outstanding -- -- Common stock, $.01
par value; authorized 250,000,000 shares, 38,945,673 issued and
38,285,224 shares issued and outstanding at June 30, 2004 and
September 30, 2003, respectively 389 383 Additional paid-in capital
87,778 74,934 Retained earnings 172,031 126,044 Accumulated other
comprehensive income 11,696 6,624 Total stockholders' equity
271,894 207,985 Total liabilities and stockholders' equity $627,053
$611,659 SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended June 30, 2004 2003 Cash flows from operating
activities: Net income $45,987 $40,151 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
9,785 8,637 Amortization of intangible assets 938 939 Amortization
of deferred financing fees 1,210 1,237 Gain on sales of property,
plant and equipment (102) (659) Provision for losses on doubtful
receivables 586 223 Inventory provisions 2,436 2,180 Deferred
income taxes (1,118) (2,147) Tax benefit from issuance of stock
under employee stock option plan 2,904 450 Changes in assets and
liabilities, net of effects of businesses acquired:
(Increase)/decrease in accounts receivable 120 (10,930)
(Increase)/decrease in inventories (5,592) 3,640
(Increase)/decrease in prepaid expenses and other current assets
(1,077) 1,219 Increase/(decrease) in accounts payable (5,035) 682
Increase in income taxes payable 927 11,444 Increase in accrued
payroll and employee benefits 1,262 32 Increase/(decrease) in
accrued rebates (884) 746 Decrease in restructuring reserve (361)
(2,094) Decrease in accrued interest (3,192) (3,366) Increase in
other current liabilities 3,091 3,084 Net change in other assets
and liabilities 721 (2,898) Net cash provided by operating
activities 52,606 52,570 Cash flows from investing activities:
Capital expenditures (8,537) (5,352) Proceeds from sales of
property, plant, and equipment 159 5,304 Deposit -- (16,083)
Payments for intangibles (750) (911) Net cash used in investing
activities (9,128) (17,042) Cash flows from financing activities:
Proceeds from credit facility 108,500 104,500 Principal payments on
credit facility (146,555) (141,074) Proceeds from long-term debt
2,469 3,259 Principal payments on long-term debt (9,345) (3,651)
Payment of deferred financing fees -- (473) Cash received from
exercise of stock options 8,775 3,105 Cash received from ESP Plan
1,171 -- Net cash used in financing activities (34,985) (34,334)
Effect of exchange rate changes on cash and cash equivalents
(1,343) 6,037 Net increase in cash and cash equivalents 7,150 7,231
Cash and cash equivalents at beginning of period 22,868 12,652 Cash
and cash equivalents at end of period $30,018 $19,883 SYBRON DENTAL
SPECIALTIES, INC. AND SUBSIDIARIES INTERNAL GROWTH For period ended
June 30, 2004 Professional Total Dental Orthodontics SDS Quarter
-0.7% 9.7% 3.7% Year to date -1.6% 10.0% 3.3% Total SDS Foreign
Domestic Quarter 3.4% 3.9% Year to date 4.2% 2.6%
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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