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

May 06, 2009 | About:
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Sirona Dental Systems Inc. (SIRO) filed Quarterly Report for the period ended 2009-03-31.

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 $1.04 billion; its shares were traded at around $19.05 with a P/E ratio of 12 and P/S ratio of 1.4. 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 March 31, 2009 was $84.5 million, a decrease of $18.6 million, or down 18.0%, as compared with the prior year. Gross profit as a percentage of revenue was 48.7% compared to 45.6% 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 $16.1 million as well as non-cash option expense of $0.1 million for the three months ended March 31, 2009, compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $21.2 million and non-cash option expense of $0.2 million for the three months ended March 31, 2008. Excluding these amounts, costs of sales as a percentage of revenue was 41.5% for the three months ended March 31, 2009 compared with 43.1% for the three months ended March 31, 2008 and therefore gross profit as a percentage of revenue was 58.5% compared to 56.9%.

For the three months ended March 31, 2009, SG&A expense was $56.0 million, a decrease of $4.6 million, or 7.6%, as compared with the three months ended March 31, 2008. 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 $3.8 million for the three months ended March 31, 2009, compared with $1.1 million and $3.5 million, respectively, for the three months ended March 31, 2008. Excluding these amounts, as a percentage of revenue, SG&A expense increased to 31.1% for the three months ended March 31, 2009 as compared

Sironas net income for the three months ended March 31, 2009 was $0.6 million, a decrease of $10.3 million, as compared with the three months ended March 31, 2008. Second 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 $17.3 million ($12.5 million net of tax), unrealized, non-cash foreign currency losses on the deferred income from the Patterson exclusivity payment of $4.0 million ($2.9 million net of tax) and losses on short-term intra-group loans of $2.5 million ($1.8 million net of tax). Sironas net income for the three month period ended March 31, 2008 included deal related amortization and depreciation of $22.3 million ($15.6 million net of tax), currency revaluation gains on the Patterson exclusivity payment of $6.7 million ($4.7 million net of tax) and revaluation gains on short-term intra-group loans of $4.4 million ($3.1 million net of tax).

Cost of sales for the six months ended March 31, 2009 was $177.2 million, a decrease of $31.6 million, or 15.1%, as compared with the six months ended March 31, 2008. Cost of sales included amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $32.3 million as well as non-cash option expense of $0.2 million for the six months ended March 31, 2009, compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $41.8 million and non-cash option expense of $0.4 million for the six months ended March 31, 2008. Excluding these amounts, costs of sales as a percentage of revenue decreased to 42.1% for the six months ended March 31, 2009 compared with 42.8% for the six months ended March 31, 2008 and gross profit as a percentage of revenue increased by 0.7 percentage points to 57.9% from 57.2%. The positive development of the gross profit margin was mainly due to product mix.

For the six months ended March 31, 2009, SG&A expense was $113.5 million, a decrease of $3.0 million, or 2.6%, as compared with the six months ended March 31, 2008. SG&A expense included amortization and depreciation resulting from the step-up to fair values of tangible and intangible assets of $2.0 million as well as non-cash option expense in the amount of $7.4 million for the six months ended March 31, 2009, compared with $2.1 million and $6.6 million, respectively, for the six months ended March 31, 2008. Excluding these amounts, as a percentage of revenue, SG&A expense increased to 30.2% for the six months ended March 31, 2009 as compared with 27.7% for the six months ended March 31, 2008. The decrease in SG&A is mainly driven by variations in the U.S. Dollar/Euro exchange rate as most of the expenses were denominated in Euro, whereas the increase as a percentage of sales is mainly due to our expanded presence in Japan and Italy as well as expenses for the bi-annual international trade show IDS.

Sironas net income for the six months ended March 31, 2009 was $6.2 million, a decrease of $21.7 million, as compared with the six months ended March 31, 2008. 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 $34.5 million ($24.8 million net of tax), unrealized, non-cash foreign currency losses on the deferred income from the Patterson exclusivity payment of $6.3 million ($4.6 million net of tax) and losses on short-term intra-group loans of $3.9 million ($2.8 million net of tax). Sironas net income for the six month period ended March 31, 2008 included deal related amortization and depreciation of $43.9 million ($30.7 million net of tax), currency revaluation gains on the Patterson exclusivity payment of $10.4 million ($7.3 million net of tax) and revaluation gains on short-term intra-group loans of $6.5 million ($4.6 million net of tax).

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