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Sirona Dental Systems Inc. Reports Operating Results (10-Q)

February 08, 2013 | About:
10qk

10qk

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Sirona Dental Systems Inc. (SIRO) filed Quarterly Report for the period ended 2012-12-31.

Sirona Dental Systems, Inc. has a market cap of $4.01 billion; its shares were traded at around $72.91 with a P/E ratio of 30.8642 and P/S ratio of 4.2265. Sirona Dental Systems, Inc. had an annual average earning growth of 16.5% over the past 10 years. GuruFocus rated Sirona Dental Systems, Inc. the business predictability rank of 2.5-star.
This is the annual revenues and earnings per share of SIRO over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SIRO.


Highlight of Business Operations:

For the three months ended December 31, 2012, we posted a record quarter, with revenues up 8.6% on a constant currency basis over a strong first quarter in fiscal year 2012, where revenues grew 10.2% constant currency. Revenues were exceptionally strong in the U.S., where we grew 29.0%. On a segment basis, we experienced very strong growth in our CAD/CAM segment, where we benefited from the Omnicam launch and as well as a generally increasing demand for products in this segment. During the quarter, we experienced capacity constraints due to the ramp up of the Omnicam production; thus, we prioritized shipments to the U.S. Gross profit increased by $13.1 million, which was largely offset by a $12.1 million increase in SG&A expenses. SG&A expenses include $7.3 million related to the Transition Agreement for the departing Chairman and CEO, filed as an Exhibit with the Company’s Annual Report on Form 10-K on November 16, 2012 (the “Transition Agreement”). The major driver of the residual increase in SG&A expenses of $4.8 million was the continued strategic expansion of our sales and service infrastructure in key growth markets. As a result, operating income increased 8.3%. Operating income includes a year-over-year decrease in amortization of $2.6 million. Operating cash flow remained very strong and doubled over the comparative prior-year period.

Although the U.S. Dollar is Sirona’s reporting currency, its functional currencies vary depending on the country of operation. For the three months ended December 31, 2012, approximately 37% of Sirona’s revenue and approximately 72% of its expenses were in Euro. During the periods under review, the U.S. Dollar/Euro exchange rate has fluctuated significantly, thereby impacting Sirona’s financial results. Between October 1, 2011 and December 31, 2012, the U.S. Dollar/Euro exchange rate used to calculate items included in Sirona’s financial statements varied from a low of $1.2326 to a high of $1.4155. Sirona has entered into foreign exchange forward contracts to manage foreign currency exposure. The Company does not apply hedge accounting to such contracts. As of December 31, 2012, these contracts had notional amounts totaling $68.6 million. As these agreements are relatively short-term (generally six months), continued fluctuation in the U.S. Dollar/Euro exchange rate could materially affect Sirona’s results of operations.

Revenue for the three months ended December 31, 2012 was $272.4 million, an increase of $14.3 million, or 5.5%, as compared with the three months ended December 31, 2011. On a constant currency basis, adjusting for the fluctuations in the U.S. Dollar/Euro exchange rate, total revenue increased by 8.6%. By segment, CAD/CAM Systems increased 13.5% (up 16.5% on a constant currency basis), Treatment Centers increased 4.3% (up 8.4% on a constant currency basis), Imaging Systems increased 2.7% (up 4.9% on a constant currency basis), and Instruments decreased 5.8% (down 2.1% on a constant currency basis).

Cost of sales for the three months ended December 31, 2012 was $120.5 million, an increase of $1.2 million, or 1.0%, as compared with the three months ended December 31, 2011. Gross profit as a percentage of revenue was 55.8% compared to 53.8% in the prior year period. Cost of sales included amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $9.0 million as well as non-cash share-based compensation expense of $0.03 million for the three months ended December 31, 2012 compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $11.2 million and non-cash share-based compensation expense of $0.03 million for the three months ended December 31, 2011. Excluding these amounts, cost of sales as a percentage of revenue was 40.9 % for the three months ended December 31, 2012 compared with 41.9% for the three months ended December 31, 2011, and therefore gross profit as a percentage of revenue was 59.1%, compared to 58.1% in the prior year period. The increase in the gross profit margin was mainly due to product and regional mix.

Net income for the three months ended December 31, 2012 was $39.1 million, an increase of $0.2 million, as compared with the three months ended December 31, 2011. Major influencing factors on net income were (i) the increase in gross profit, mainly due to increased sales, (ii) a gain from a patent infringement settlement, (iii) an increase in SG&A expense due to the expenses related to the Transition Agreement for the departing Chairman and CEO of $7.3 million and continued investments in the expansion of our global sales and service infrastructure, and (iv) foreign currency transaction losses. Net income for the three months ended December 31, 2012 included amortization and depreciation expense resulting from the step-up to fair values of intangible and tangible assets related to past business combinations (i.e. the Exchange and the MDP Transaction—deal related amortization and depreciation) of $ 9.6 million ($7.3 million net of tax), a foreign currency gain on the deferred income from the Patterson exclusivity payment of $1.0 million ($0.8 million net of tax), a gain on the revaluation of short-term intra-group loans of $1.8 million ($1.4 million net of tax), and the effect from a non-cash remeasurement of deferred tax assets and liabilities resulting from a local trade tax rate increase at our principal German operations of $2.2 million.

Read the The complete Report

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