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Sirona Reports Record Fiscal 2013 First Quarter Results

Stocks in this article: SIRO

* Non-GAAP adjusted EPS and constant currency growth and results are non-GAAP financial measures that exclude certain items. Please refer to ”Reconciliation of GAAP and non-GAAP Information (unaudited)” in the attached exhibits for a description of these items.

 

SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

         
Three months ended
December 31,
2012 2011

$'000s (except per share amounts)

 
Revenue $ 272,404 $ 258,116
Cost of sales 120,533 119,333
Gross profit 151,871 138,783
 
Selling, general and administrative expense 85,783 73,646
Research and development 14,095 13,286
Provision for doubtful accounts and notes receivable 70 39
Net other operating income (6,914) (2,500)
 
Operating income 58,837 54,312
 
(Gain)/loss on foreign currency transactions, net 4,580 2,230
(Gain)/loss on derivative instruments (1,346) 436
Interest expense, net 970 903
Other expense/(income) 340 262
Income before taxes 54,293 50,481
Income tax provision 15,226 11,611
Net income 39,067 38,870

Less: Net income attributable to noncontrolling interests

765 593
Net income attributable to Sirona Dental Systems, Inc. $ 38,302 $ 38,277
 

Income per share (attributable to Sirona Dental

Systems, Inc. common shareholders):

- Basic $ 0.70 $ 0.69
- Diluted $ 0.68 $ 0.67
Weighted average shares - basic 55,004,471 55,783,648
Weighted average shares - diluted 56,327,927 57,121,505
 

SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

             
December 31, September 30,
2012 2012
(unaudited)
$'000s (except per share amounts)
ASSETS
 
Current assets
Cash and cash equivalents $ 124,170 $ 151,088
Accounts receivable, net of allowance for doubtful accounts
of $1,290 and $1,408, respectively 145,569 132,569
Inventories, net 92,124 81,007
Deferred tax assets 27,942 24,781
Prepaid expenses and other current assets 24,242 17,622
Income tax receivable 2,291 2,213
 
Total current assets 416,338 409,280
 

Property, plant and equipment, net of accumulated depreciation

and amortization of $135,418 and $125,706, respectively

147,400

143,351

Goodwill 659,533 631,077
Investments 25 14
Intangible assets, net of accumulated amortization of

$463,164 and $446,447, respectively

326,837 288,556
Other non-current assets 4,642 9,368
Deferred tax assets 13,051 12,888
 
Total assets $ 1,567,826 $ 1,494,534
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
Trade accounts payable $ 61,838 $ 51,961
Short-term debt and current portion of long-term debt 419 478
Income taxes payable 19,155 14,906
Deferred tax liabilities 499 817
Accrued liabilities and deferred income 111,329 118,075
 
Total current liabilities 193,240 186,237
 
Long-term debt 75,000 75,000
Deferred tax liabilities 136,959 122,441
Other non-current liabilities 24,336 16,852
Pension related provisions 62,977 61,629
Deferred income 37,500 40,000
 
Total liabilities 530,012 502,159
 
Shareholders' equity

Preferred stock ($0.01 par value; 5,000,000 shares authorized;

 

 

none issued and outstanding)

0

0

Common stock ($0.01 par value; 95,000,000 shares authorized;
 
56,776,626 shares issued and 54,946,874 shares outstanding at Dec. 31, 2012;

56,598,045 shares issued and 55,051,673 shares outstanding at Sept. 30, 2012

567 566
Additional paid-in capital 706,745 699,279
Treasury stock (at cost)
 
1,829,752 shares held at cost at Dec. 31, 2012;

1,546,372 shares held at cost at Sept. 30, 2012

(86,230) (69,058)
Excess of purchase price over predecessor basis (49,103) (49,103)
Retained earnings 475,773 437,471
Accumulated other comprehensive income/(loss) (13,332) (29,797)
Total Sirona Dental Systems, Inc. shareholders' equity 1,034,420 989,358
Noncontrolling interests 3,394 3,017
 
Total shareholders' equity 1,037,814 992,375
 
Total liabilities and shareholders' equity $ 1,567,826 $ 1,494,534
 

SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Three months ended

December 31,
2012  

2011

$'000s
Cash flows from operating activities
Net income $ 39,067 $ 38,870
 
Adjustments to reconcile net income

to net cash provided by operating activities

Depreciation and amortization 17,912 19,255
(Gain)/loss on disposal of property, plant and equipment (30) -
(Gain)/loss on derivative instruments (1,346) 436
(Gain)/loss on foreign currency transactions 4,580 2,230
Deferred income taxes 8,815 (4,428)
Amortization of debt issuance cost 138 199
Share-based compensation expense 6,097 2,093
 
Changes in assets and liabilities
Accounts receivable (12,753) (28,626)
Inventories (10,589) 2,129
Prepaid expenses and other current assets (6,054) 5,022
Restricted cash - 646
Other non-current assets (81) (273)
Trade accounts payable 9,078 (10,478)
Accrued liabilities and deferred income (26,908) (17,060)
Other non-current liabilities 1,873 193
Income taxes receivable (41) 1,741
Income taxes payable 3,932 4,389
 
Net cash provided by operating activities 33,690 16,338
 
Cash flows from investing activities
Investment in property, plant and equipment (10,347) (7,875)
Proceeds from sale of property, plant and equipment 83 -
Purchase of intangible assets (12) (66)
Acquisition of business, net of cash acquired (35,019) -
 
Net cash used in investing activities (45,295) (7,941)
 
 
 

 

Three months ended

December 31,
2012 2011
$'000s
Cash flows from financing activities
Repayments of short-term and long-term debt (98) (366,646)
Proceeds from borrowings - 129,209
Purchase of treasury stock (17,172) (7,020)
Debt issuance cost - (2,289)
Dividend distributions to noncontrolling interest (434) (1,689)
Common shares issued under share based
compensation plans 2,790 464
Tax effect of common shares issued under share based
compensation plans (1,910) (639)
 
Net cash used in financing activities (16,824) (248,610)
 
Change in cash and cash equivalents (28,429) (240,213)
Effect of exchange rate change on cash and cash equivalents 1,511 33
Cash and cash equivalents at beginning of period 151,088 345,859
 
Cash and cash equivalents at end of period $ 124,170 $ 105,679
 
 
Supplemental information
Interest paid $ 684 $ 241
Interest capitalized 29 102
Income taxes paid 14,379 9,579
 
Acquisition of business
Current assets $ 5,185 $ -
Non-current assets 61,237 -
Current liabilities (7,835) -
Non-current liabilities (11,951) -
46,636 -
Cash paid (36,673)
Settlement of balances (4,544)  
Fair value of liabilities incurred $ 5,419 $ -
 

Reconciliation of GAAP and Non-GAAP Information (unaudited)

 

HISTORICAL

 

Non-GAAP Adjusted Net Income Financial Measures (unaudited)

 
        GAAP Reconciliation to Non-GAAP
Three months ended December 31, 2012
Pre Tax    

Tax Impact*

   

After Tax

   

Per Diluted

Share

$'000s, except per share amount
 
GAAP net income attributable to Sirona Dental Systems, Inc. shareholders         $ 38,302 $ 0.68
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 9,633 $ 2,312 7,321
(Gain)/loss on foreign currency transactions, net 4,580 1,099 3,481
(Gain)/loss on derivative instruments (1,346) (323) (1,023)
Other items:
Non-cash remeasurement of deferred tax assets and liabilities due to an increase in German trade tax rate 2,196 2,196
Non-cash compensation charge for the revaluation of share based compensation in connection with the Transition Agreement for the departing CEO and Chairman 3,764 903 2,861  
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 53,137 $ 0.94
 

* tax impact calculated using estimated effective tax rate of 24%

 
 
GAAP Reconciliation to Non-GAAP
Three months ended December 31, 2011
Pre Tax     Tax Impact*     After Tax Per Diluted Share
$'000s, except per share amount
 
GAAP net income attributable to Sirona Dental Systems, Inc. shareholders $ 38,277 $ 0.67
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 11,958 $ 2,750 9,208
 
(Gain)/loss on foreign currency transactions, net 2,230 513 1,717
(Gain)/loss on derivative instruments 436 100 336  
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 49,538 $ 0.87
 

** tax impact calculated using estimated effective tax rate of 23%

 
 

FORWARD-LOOKING

 

Non-GAAP Adjusted EPS Guidance (unaudited)

       
Low End of Guidance
Pre Tax     Tax Impact     After Tax   Per Diluted Share

$ millions, except per share amount

 
GAAP net income attributable to Sirona Dental Systems, Inc. Shareholders         $ 155 $ 2.73
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

 

 

 

 

 

 

$

38

$

9

$

29

(Gain)/loss Foreign Currency Transactions, net** - - -
(Gain)/loss on derivative instruments, net** - - -
Non-cash remeasurement of deferred tax assets and liabilities due to an increase in German trade tax rate 2 2
Non-cash compensation charge for the revaluation of share based compensation in connection with the Transition Agreement for the departing CEO and Chairman 4 1   3    
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 189 $ 3.33
 
High End of Guidance
Pre Tax     Tax Impact     After Tax Per Diluted Share
$ millions, except per share amount
 
GAAP net income attributable to Sirona Dental Systems, Inc. shareholders $ 161 $ 2.84
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations

 

 

 

 

 

38

$

9

$

29

(Gain)/loss Foreign Currency Transactions, net** $ - - $ -
(Gain)/loss on derivative instruments, net** - - -
Non-cash remeasurement of deferred tax assets and liabilities due to an increase in German trade tax rate 2 2
Non-cash compensation charge for the revaluation of share based compensation in connection with the Transition Agreement for the departing CEO and Chairman 4 1   3    
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 195 $ 3.43
 

 

**We are unable to provide estimates for these items because we are unable to predict the 2013 and long-term impact of foreign exchange due to unpredictability of future changes in foreign exchange rates.

 

To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: (i) non-GAAP adjusted net income, and (ii) non-GAAP adjusted earnings per diluted share, which exclude, as applicable, amortization and depreciation expense resulting from the step-up to fair values of intangible and tangible assets related to past business combinations, gain/loss on foreign currency transactions, gain/loss on derivative instruments and any related tax effects and to the extent relevant in a particular period, any other cash or non-cash items that management does not view as indicative of its on-going operating performance. Also set forth above under the heading “FORWARD-LOOKING” are reconciliations of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures.

Management recognizes that the use of these non-GAAP measures has limitations, including the fact that they might not be comparable with similar non-GAAP measures used by other companies and that management must exercise judgment in determining which types of charges and other items should be excluded from its non-GAAP financial measures. Management currently compensates for these limitations by providing full disclosure of each non-GAAP financial measure and a reconciliation to the most directly comparable GAAP measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our "core operating performance". Management believes that "core operating performance" represents Sirona’s operating performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from "core operating performance" the impact of acquisition-related intangible depreciation and amortization in order to compare our underlying financial performance to prior periods, certain charges related to currency revaluation of assets and liabilities that do not reflect our period-to-period core operating performance, and to the extent relevant in a particular period, any other cash or non-cash items that management does not view as indicative of its on-going operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal evaluation of period-to-period comparisons. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are provided to and used by our institutional investors and the analyst community to facilitate comparisons with prior and subsequent reporting periods.

Constant Currency: We have included certain revenue information in this press release on a constant currency basis. This information is a non-GAAP financial measure. We additionally present revenue on a constant currency basis because we believe it facilitates a comparison of our operating results from period to period without regard to changes resulting solely from fluctuations in currency rates.

Sirona calculates constant currency revenue growth by comparing current period revenues to prior period revenues with both periods converted at the U.S. Dollar/Euro average foreign exchange rate for each month of the current period. The average exchange rate for the three months ended December 31, 2012, was $1.29708 and varied from $1.28296 to $1.31075. For the three months ended December 31, 2011, an average exchange rate converting Euro denominated revenues into U.S. Dollars of $1.34934 was applied.

Our forecasted 2013 constant currency net revenue guidance excludes the impact of foreign exchange. We are unable to reconcile our projected 2013 constant currency net revenue growth to our full-year projected 2013 net revenue growth because we are unable to predict the 2013 and long-term impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates. Therefore, we are unable to provide a reconciliation of these measures.

Copyright Business Wire 2010
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