Sirona Reports Fiscal 2012 Third Quarter Results

Sirona (Nasdaq: SIRO), the dental technology leader, today announced its financial results for the quarter ended June 30, 2012.

Third Quarter Fiscal 2012 vs. Third Quarter Fiscal 2011 Financial Results

Revenue was $242.0 million, a decrease of $2.7 million or down 1.1% (but up 7.0% on a constant currency basis). The Company's business segments grew as follows: CAD/CAM Systems increased 2.7% (up 9.5% on a constant currency basis), Treatment Centers increased 1.3% (up 13.3% on a constant currency basis), Imaging Systems decreased 3.4% (up 2.8% on a constant currency basis), and Instruments decreased 10.0% (up 0.6% on a constant currency basis).

Revenue in the United States increased 7.7%, while revenues outside the United States decreased 4.6% (up 6.6% constant currency), with particularly robust performance in the Asia-Pacific region.

Gross profit was $128.4 million, up $1.6 million. Gross profit margin was 53.1% in the third quarter of Fiscal 2012, compared to 51.8% in the prior year. Gross profit margin as a percent of sales was positively impacted by lower amortization.

Third quarter 2012 operating income excluding amortization expense was $57.8 million (operating income of $45.9 million plus amortization expense of $11.9 million, compared to $60.4 million (operating income of $46.4 million plus amortization expense of $14.1 million) in the third quarter of 2011.

Net income for the third quarter of 2012 was $30.3 million, or $0.53 per diluted share, versus $36.3 million, or $0.63 per diluted share in the prior year period. Non-GAAP earnings per diluted share for the third quarter of 2012 was $0.80 compared to $0.78 in the prior year quarter.

At June 30, 2012, the Company had cash and cash equivalents of $104.6 million and total debt of $79.0 million, resulting in net cash of $25.6 million. This compares to net debt of $22.5 million at September 30, 2011.

Jost Fischer, Chairman and CEO of Sirona commented: “I am very pleased to report solid results for the third quarter of fiscal 2012. Our 7.0% constant currency revenue growth was particularly noteworthy compared to a record setting third quarter of fiscal 2011. Last year we grew 24.0% constant currency in the third quarter, benefiting from the International Dental Show and numerous product launches.”

Mr. Fischer continued: “Treatment Centers and CAD/CAM led our growth, up 13.3% and 9.5% respectively on a constant currency basis. Revenue growth was particularly strong in non-European international markets, led again by the Asia-Pacific. The U.S. continues to improve for us, up a robust 7.7%. These results validate our strategy to invest in our global sales and service infrastructure with innovation as our top priority. We expect our momentum to continue into the fourth quarter as reflected in our increased revenue guidance.”

Fiscal 2012 Guidance

Management now anticipates fiscal year 2012 constant currency revenue growth to be in the range of 8% to 10% (previously at the upper-end of the announced guidance range of 6% to 8%). Operating income plus amortization is now expected to be in the range of $228 to $232 million (previously $227 to $234 million).

First Nine Months Fiscal 2012 vs. First Nine Months Fiscal 2011 Financial Results

Revenue was $732.0 million, an increase of $36.9 million or up 5.3% (up 9.3% on a constant currency basis). The Company's business segments grew as follows: Imaging Systems increased 7.6% (up 10.7% on a constant currency basis), Treatment Centers increased 5.3% (up 11.1% on a constant currency basis), CAD/CAM Systems increased 4.8% (up 8.2% on a constant currency basis), and Instruments decreased 0.1% (up 5.4% on a constant currency basis).

Revenue in the United States increased 4.9%, while revenues outside the United States increased 5.5% (up 11.2% constant currency), with particularly robust performance in the Asia-Pacific region.

Gross profit was $391.9 million, up $18.9 million. Gross profit margin was 53.5% in the first nine months of Fiscal 2012, compared to 53.7% in the prior year. Gross profit margin as a percent of sales was positively impacted by lower amortization.

For the first nine months of Fiscal 2012 operating income excluding amortization expense was $176.6 million (operating income of $140.3 million plus amortization expense of $36.2 million), compared to $177.0 million (operating income of $135.9 million plus amortization expense of $41.1 million) in the first nine months of Fiscal 2011.

Conference Call/Webcast Information

Sirona will hold a conference call to discuss its financial results at 8:30 a.m. Eastern Time on August 3, 2012. The teleconference can be accessed by calling +1 866.783.2144 (domestic) or +1 857.350.1603 (international) using passcode # 71442427. The webcast will be available via the Internet at http://ir.sirona.com and a presentation relating to the call will be available on our website. A replay of the conference call will be available through August 10, 2012 by calling +1 888 286 8010 (domestic) or +1 617 801 6888 (international) using passcode # 48436638. A web archive will be available for 30 days at www.sirona.com.

About Sirona Dental Systems, Inc.

Sirona, the dental technology leader, has served dealers and dentists worldwide for more than 130 years. Sirona develops, manufactures, and markets a complete line of dental products, including CAD/CAM restoration systems (CEREC), digital intra-oral, panoramic and 3D imaging systems, dental treatment centers and handpieces. Visit http://www.sirona.com for more information about Sirona and its products.

This press release contains forward-looking information about Sirona Dental Systems, Inc.’s financial results, guidance and estimates, business prospects, and products and services that involve substantial risks and uncertainties or other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You can identify these statements by the use of words such as "may," "could," "estimate," "will," "believe," "anticipate," "think," "intend," "expect," "project," "plan," "target," "forecast", and similar words and expressions which identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and involve known and unknown risks and uncertainties, and other factors. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date hereof. For a discussion of such risks, uncertainties and other matters that could cause actual results to differ materially, including risks relating to, among other factors, the market for dental product and services, pricing, future sales volume of the Company's products, the possibility of changing economic, market and competitive conditions, dependence on products, dependence on key personnel, technological developments, intense competition, market uncertainties, dependence on distributors, ability to manage growth, dependence on key suppliers, dependence on key members of management, government regulation, acquisitions and affiliations and currency exchange rate fluctuations, readers are urged to carefully review and consider various disclosures made by the Company in its Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K filed with the U.S. Securities and Exchange Commission, which can be accessed through the SEC’s website, www.sec.gov . This presentation contains non GAAP financial measures, which should not be viewed in isolation and do not purport to be an alternative to net income (loss) as an indicator of operating performance or an alternative to cash flows from operating activities as a measure of liquidity. The Company assumes no obligation to and expressly disclaims any obligation to update or revise any forward-looking statements contained in this document to reflect new information or future events or developments after the date any such statement is made.
______________________

* Operating income plus amortization 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 Nine months ended
June 30, June 30,
2012 2011 2012 2011
$'000s (except per share amounts) $'000s (except per share amounts)
 
Revenue $ 242,007 $ 244,686 $ 731,987 $ 695,069
Cost of sales 113,567 117,854 340,115 322,134
Gross profit 128,440 126,832 391,872 372,935
 
Selling, general and administrative expense 72,434 68,540 218,747 202,444
Research and development 13,092 14,390 40,016 42,045
Provision for doubtful accounts and notes receivable (504) 13 263 34
Net other operating income (2,500) (2,500) (7,500) (7,500)
 
Operating income 45,918 46,389 140,346 135,912
 
Loss/(gain) on foreign currency transactions, net 2,675 (3,435) 6,255 (8,532)
Loss on derivative instruments 2,686 1,081 186 1,162
Interest expense, net 866 984 2,783 2,863
Other expense/(income) (218) 383 272 (140)
Income before taxes 39,909 47,376 130,850 140,559
Income tax provision 9,180 10,423 30,096 30,923
Net income 30,729 36,953 100,754 109,636
Less: Net income attributable to noncontrolling interests 431 622 1,658 1,601
Net income attributable to Sirona Dental Systems, Inc. $ 30,298 $ 36,331 $ 99,096 $ 108,035
 
Income per share (attributable to Sirona Dental Systems, Inc. common shareholders):
- Basic $ 0.55 $ 0.65 $ 1.78 $ 1.94
- Diluted $ 0.53 $ 0.63 $ 1.74 $ 1.89
Weighted average shares - basic 55,507,312 55,992,911 55,721,869 55,619,151
Weighted average shares - diluted 56,717,943 57,577,513 56,939,621 57,246,485
 
     
SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30, September 30,
2012   2011  
(unaudited)
$'000s (except per share amounts)
ASSETS
 
Current assets
Cash and cash equivalents $ 104,600 $ 345,859
Accounts receivable, net of allowance for doubtful accounts
of $1,575 and $1,868, respectively 117,491 97,853
Inventories, net 89,451 93,028
Deferred tax assets 24,501 25,014
Prepaid expenses and other current assets 11,772 15,477
Income tax receivable 2,953   4,193  
 
Total current assets 350,768 581,424
 
Property, plant and equipment, net of accumulated depreciation
and amortization of $122,694 and $111,832, respectively 130,048 131,044
Goodwill 617,518 653,799
Investments 2,507 2,453
Restricted cash - 655
Intangible assets, net of accumulated amortization of
$425,707 and $412,428, respectively 295,130 346,442
Other non-current assets 9,141 2,884
Deferred tax assets 8,357   7,427  
 
Total assets $ 1,413,469   $ 1,726,128  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
Trade accounts payable $ 40,262 $ 48,697
Short-term debt and current portion of long-term debt 4,017 368,403
Income taxes payable 11,932 6,811
Deferred tax liabilities 250 1,108
Accrued liabilities and deferred income 94,592   110,207  
 
Total current liabilities 151,053 535,226
 
Long-term debt 75,000 -
Deferred tax liabilities 122,218 138,327
Other non-current liabilities 18,613 16,978
Pension related provisions 46,372 49,677
Deferred income 42,500   50,000  
 
Total liabilities 455,756   790,208  
 
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;
 
56,478,084 shares issued and 55,270,838 shares outstanding at Jun. 30, 2012;

56,292,420 shares issued and 55,815,323 shares outstanding at Sept. 30, 2011
565 563
Additional paid-in capital 693,725 685,617
Treasury stock (at cost)
 
1,207,246 shares held at cost at Jun. 30, 2012;

477,097 shares held at cost at Sept. 30, 2011
(52,481 ) (19,749 )
Excess of purchase price over predecessor basis (49,103 ) (49,103 )
Retained earnings 402,735 303,639
Accumulated other comprehensive income/(loss) (40,562 ) 11,309  
Total Sirona Dental Systems, Inc. shareholders' equity 954,879   932,276  
Noncontrolling interests 2,834   3,644  
 
Total shareholders' equity 957,713   935,920  
Total liabilities and shareholders' equity $ 1,413,469   $ 1,726,128  
 
       
SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 

 

Nine months ended
June 30,
2012   2011  
$'000s
Cash flows from operating activities
Net income $ 100,754 $ 109,636
 
Adjustments to reconcile net income

to net cash provided by operating activities
Depreciation and amortization 58,107 59,839
Loss on derivative instruments 186 1,162
Loss/(gain) on foreign currency transactions 6,255 (8,532 )
Deferred income taxes (11,079 ) (9,143 )
Amortization of debt issuance cost 491 895
Share-based compensation expense 6,375 7,241
 
Changes in assets and liabilities
Accounts receivable (25,939 ) (27,953 )
Inventories (1,503 ) (13,801 )
Prepaid expenses and other current assets 3,528 10,042
Restricted cash 646 20
Other non-current assets (252 ) (243 )
Trade accounts payable (6,239 ) 1,171
Accrued liabilities and deferred income (14,928 ) (19,478 )
Other non-current liabilities 818 712
Income taxes receivable 1,167 (5,518 )
Income taxes payable 5,631   (604 )
 
Net cash provided by operating activities 124,018 105,446
 
Cash flows from investing activities
Investment in property, plant and equipment (29,675 ) (37,097 )
Prepayments for other assets (4,612 ) -
Purchase of intangible assets (82 ) (247 )
Purchase of long-term investments (48 ) (95 )
Acquisition of business, net of cash acquired -   (20,840 )
 
Net cash used in investing activities (34,417 ) (58,279 )
 
     

Nine months ended
June 30,
2012     2011  
$'000s
 
Cash flows from financing activities
Repayments of short-term and long-term debt (433,093 ) -
Proceeds from borrowings 141,297 -
Purchase of treasury stock (32,732 ) -
Debt issuance cost (2,765 ) -
Dividend distributions to noncontrolling interest (1,698 ) (487 )
Common shares issued under share based
compensation plans 1,744 10,365
Tax effect of common shares issued under share based
compensation plans (1,067 ) 8,283  
 
Net cash (used in)/provided by financing activities (328,314 ) 18,161
 
Change in cash and cash equivalents (238,713 ) 65,328
Effect of exchange rate change on cash and cash equivalents (2,546 ) 14,108
Cash and cash equivalents at beginning of period 345,859   251,767  
 
Cash and cash equivalents at end of period $ 104,600   $ 331,203  
 
 
Supplemental information
Interest paid $ 2,005 $ 3,114
Interest capitalized 203 376
Income taxes paid 32,460 37,291
 
Acquisition of business
Current assets $ - $ 201
Non-current assets - 47,277
Current liabilities - (269 )
Non-current liabilities -   (16,156 )
- 31,053
Cash paid -   (20,898 )
Fair value of liabilities incurred $ -   $ 10,155  
 

 
           
Reconciliation of GAAP and Non-GAAP Information (unaudited)
 
HISTORICAL
 
Non-GAAP Adjusted Net Income Financial Measures (unaudited)

 

 
Three months ended June 30, 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 $ 30,298 $ 0.53
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 11,537 $ 2,654 $ 8,883
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee 3,153 725 2,428
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans 4,822 1,109 3,713  

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders
$ 45,322 $ 0.80
 
Three months ended June 30, 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 $ 36,331 $ 0.63
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 13,693 $ 3,012 $ 10,681
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee (1,248) (275) (973)
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans (1,618) (356) (1,262)  

Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders
$ 44,776 $ 0.78
 
Nine months ended June 30, 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 $ 99,096 $ 1.74
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 35,203 $ 8,097 $ 27,106
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee 3,914 900 3,014
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans 5,866 1,349 4,517  
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 133,733 $ 2.35
 
Nine months ended June 30, 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 $ 108,035 $ 1.89
Adjustments
Amortization and depreciation expense resulting from the step-up to fair values of intangible assets related to past business combinations $ 40,031 $ 8,807 $ 31,224
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee (3,718) (818) (2,900)
Unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans (4,619) (1,016) (3,603)  
Non-GAAP adjusted net income attributable to Sirona Dental Systems, Inc. shareholders $ 132,756 $ 2.32
 

* tax impact calculated using estimated effective tax rate of 23% for first six months of FY12 and 22% for first six months of FY11
         

Non-GAAP Adjusted Operating Income (unaudited)
 
Three months ended June 30, Nine months ended June 30,
2012   2011 2012   2011
$ ‘000s $ ‘000s
GAAP operating income $ 45,918 $ 46,389 $ 140,346 $ 135,912
Adjustments
Amortization expense 11,869 14,055 36,206 41,067
Non-GAAP adjusted operating income       $ 57,787   $ 60,444     $ 176,552   $ 176,979
 
     
FORWARD-LOOKING
 
Non-GAAP Adjusted Operating Income (unaudited)
 
Year Ending September 30, 2012
Low Range   High Range
$ millions
GAAP operating income guidance $ 180.0 $ 184.0
Adjustments

Amortization expense
48.0 48.0
Non-GAAP adjusted operating income guidance       $ 228.0   $ 232.0
 

To supplement our consolidated financial statements and our business outlook, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and 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, unrealized, non-cash loss/(gain) on revaluation of the carrying value of the $-denominated exclusivity fee, unrealized, non-cash loss/(gain) on revaluation of the carrying value of short-term intra-group loans and any related tax effects. In addition, we supplement our business outlook by using non-GAAP adjusted operating income, which excludes amortization. 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 non-cash charges related to currency revaluation that do not reflect our period-to-period 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 supplementally 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 and nine months ended June 30, 2012, was $1.28513 and $1.31527, respectively and varied from $1.25378 to $1.37045. For the three and nine months ended June 30, 2011, an average exchange rate converting Euro denominated revenues into U.S. Dollars of $1.43894 and $1.38876, respectively, was applied.

Our forecasted 2012 constant currency net revenue guidance excludes the impact of foreign exchange. We are unable to reconcile our projected 2012 constant currency net revenue growth to our full-year projected 2012 net revenue growth because we are unable to predict the 2012 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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