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

February 05, 2009 | About:

Sirona Dental Systems Inc. (SIRO) filed Quarterly Report for the period ended 2008-12-31.

Sirona Dental Systems Inc. is a company dedicated to creating and producing the finest dental equipment available. Its leading global position rests on our commitment to technological innovation manufacturing excellence and international sales expertise. It is combined with a highly skilled workforce enables us to deliver and distribute products and services that give our customers the advantages necessary for today?s and tomorrow?s demands. All Sirona products represent the cutting-edge of modern dental treatment research and development. Sirona Dental Systems Inc. has a market cap of $606.27 million; its shares were traded at around $13.08 with a P/E ratio of 7.9 and P/S ratio of 0.8. Sirona Dental Systems Inc. had an annual average earning growth of 58.8% over the past 5 years.

Highlight of Business Operations:

Cost of sales for the three months ended December 31, 2008 was $92.7 million, a decrease of $13.0 million, or down 12.3%, as compared with the prior year. Gross profit as a percentage of revenue was 48.4% compared to 47.2% in the prior year. Cost of sales included amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $16.2 million for the three months ended December 31, 2008, compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $20.6 million for the three months ended December 31, 2007. Excluding these amounts, costs of

For the three months ended December 31, 2008, SG&A expense was $57.4 million, an increase of $1.5 million, or 2.7%, as compared with the three months ended December 31, 2007. SG&A expense included amortization and depreciation resulting from the step-up to fair values of tangible and intangible assets of $1.0 million, as well as non-cash option expense in the amount of $3.6 million for the three months ended December 31, 2008, compared with $1.0 million and $3.2 million, respectively, for the three months ended December 31, 2007. Excluding these amounts, as a percentage of revenue, SG&A expense increased to 29.4% for the three months ended December 31, 2008 as compared with 25.8% for the three months ended December 31, 2007. This increase was primarily due to our expanded presence in Japan and increased expenses in the U.S.

Loss on foreign currency transactions for the three months ended December 31, 2008 amounted to $3.6 million compared to a gain of $5.9 million for the three months ended December 31, 2007. For the three months ended December 31, 2008 the loss included an unrealized non-cash foreign currency loss of $2.3 million on the U.S. Dollar denominated deferred income, resulting from the currency revaluation adjustment of Pattersons exclusivity payment and a $1.4 million loss due to the currency revaluation of U.S. Dollar denominated short-term intra-group loans. For the three months ended December 31, 2007 the gain included an unrealized non-cash foreign currency gain of $3.6 million on the U.S. Dollar denominated deferred income, resulting from the currency revaluation adjustment of Pattersons exclusivity payment, as well as a non-cash foreign currency gain on U.S. Dollar denominated short-term intra-group loans to European entities of $2.1 million.

Loss on derivative instruments for the three months ended December 31, 2008 amounted to $5.0 million compared to a loss of $2.2 million for the three months ended December 31, 2007. For the three months ended December 31, 2008 the loss included an unrealized non-cash loss of $8.1 million on interest swaps, as well as a non-cash gain on foreign currency derivatives of $3.1 million. The loss for the three months ended December 31, 2007 included an unrealized non-cash loss of $1.7 million on interest swaps, as well as a non-cash loss on foreign currency derivatives of $0.5 million.

Sironas net income for the three months ended December 31, 2008 was $5.6 million, a decrease of $11.4 million, as compared with the three months ended December 31, 2007. First quarter 2009 net income included amortization and depreciation expense resulting from the step-up to fair values of intangible and tangible assets related to the Exchange and the MDP Transaction (deal related amortization and depreciation) of $17.2 million ($12.4 million net of tax), unrealized, non-cash foreign currency losses on the deferred income from the Patterson exclusivity payment of $2.3 million ($1.6 million net of tax) and losses on short-term intra-group loans of $1.4 million ($1.0 million net of tax). Sironas net income for the three month period ended December 31, 2007 included deal related amortization and depreciation of $21.7 million ($15.2 million net of tax), currency revaluation gains on the Patterson exclusivity payment of $3.6 million ($2.5 million net of tax) and revaluation gains on short-term intra-group loans of $2.1 million ($1.5 million net of tax).

Net cash (used in)/provided by operating activities was $(1.6) million for the three months ended December 31, 2008 compared to $2.6 million for the three months ended December 31, 2007. The primary contributing factors to the decrease in cash from operating activities were a decrease in net income as well as an increase in working capital, mainly driven by the development of accounts receivables. Net cash (used in)/provided by operating activities was also impacted by net interest income of $0.7 million for the three months ended December 31, 2008 and net interest payments of $14.2 million for the three months December 31, 2007 resulting from different interest payment periods.

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