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

July 31, 2009 | About:

Sirona Dental Systems Inc. (SIRO) filed Quarterly Report for the period ended 2009-06-30.

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 $1.43 billion; its shares were traded at around $25.99 with a P/E ratio of 16.1 and P/S ratio of 1.8. 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 June 30, 2009 was $93.8 million, a decrease of $9.7 million, or 9.4%, as compared with the prior year. Gross profit as a percentage of revenue was 48.1% compared to 44.7% 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 $16.6 million as well as non-cash option expense of $0.1 million for the three months ended June 30, 2009, compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $21.9 million and non-cash option expense of $0.2 million for the three months ended June 30, 2008. Excluding these amounts, costs of sales as a percentage of revenue was 42.7% for the three months ended June 30, 2009 compared with 43.5% for the three months ended June 30, 2008 and therefore gross profit as a percentage of revenue was 57.3% compared to 56.5%. The increase in the gross profit margin is due to product and regional mix.

Gain on derivative instruments for the three months ended June 30, 2009 amounted to $3.1 million compared to a gain of $6.1 million for the three months ended June 30, 2008. For the three months ended June 30, 2009 the gain included an unrealized non-cash gain of $2.1 million on interest swaps, as well as a non-cash gain on foreign currency hedges of $1.0 million. The gain for the three months ended June 30, 2008 included an unrealized non-cash gain of $7.4 million on interest swaps, as well as a non-cash loss on foreign currency hedges of $1.3 million.

Sironas net income for the three months ended June 30, 2009 was $20.5 million, an increase of $13.8 million, as compared with the three months ended June 30, 2008. Third 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 $17.6 million ($13.4 million net of tax), unrealized, non-cash foreign currency gains on the deferred income from the Patterson exclusivity payment of $4.8 million ($3.7 million net of tax) and gains on short-term intra-group loans of $3.1 million ($2.3 million net of tax). Sironas net income for the three month period ended June 30, 2008 included deal related amortization and depreciation of $23.9 million ($16.7 million net of tax), currency revaluation losses on the Patterson exclusivity payment and revaluation losses on short-term intra-group loans of $0.1 million ($0.07 million net of tax).

Cost of sales for the nine months ended June 30, 2009 was $271.0 million, a decrease of $41.3 million, or 13.2%, as compared with the nine months ended June 30, 2008. Cost of sales included amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $48.9 million, as well as non-cash option expense of $0.2 million for the nine months ended June 30, 2009, compared to amortization and depreciation expense resulting from the step-up to fair values of tangible and intangible assets of $63.7 million and non-cash option expense of $0.5 million for the nine months ended June 30, 2008. Excluding these amounts, costs of sales as a percentage of revenue decreased to 42.3% for the nine months ended June 30, 2009 compared with 43.0% for the nine months ended June 30, 2008, and gross profit as a percentage of revenue increased to 57.7% compared to 57.1% for the nine months ended June 30, 2008.

Loss on derivative instruments for the nine months ended June 30, 2009 amounted to $1.6 million compared to a gain of $0.9 million for the nine months ended June 30, 2008. For the nine months ended June 30, 2009, the loss included an unrealized non-cash loss of $6.5 million on interest swaps, as well as a non-cash gain on foreign currency hedges of $4.9 million. The gain for the nine months ended June 30, 2008 included an unrealized non-cash gain of $1.1 million on interest swaps, as well as a non-cash loss on foreign currency hedges of $0.2 million.

Sironas net income for the nine months ended June 30, 2009 was $26.6 million, a decrease of $8.0 million as compared with the nine months ended June 30, 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 $51.9 million ($38.0 million net of tax), unrealized, non-cash foreign currency losses on the deferred income from the Patterson exclusivity payment of $1.5 million ($0.9 million net of tax) and revaluation losses on short-term intra-group loans of $0.8 million ($0.5 million net of tax). Sironas net income for the nine month period ended June 30, 2008 included deal related amortization and depreciation of $67.8 million ($47.4 million net of tax), currency revaluation gains on the Patterson exclusivity payment of $10.2 million ($7.1 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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