Sybron Dental Specialties, Inc. Reports 23% Increase in Earnings per Share

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Sybron Dental Specialties, Inc. Reports 23% Increase in Earnings per Share

ORANGE, Calif., Jan. 24 /PRNewswire-FirstCall/
Sybron Dental Specialties, Inc. (NYSE: SYD), a leading manufacturer of a broad range of value-added products for the professional dental market and the specialty markets of orthodontics, endodontics, implants and infection prevention, announced today its financial results for its first fiscal quarter ended December 31, 2004.
FIRST Quarter Results
Net sales for the first quarter of fiscal 2005 totaled $149.0 million, an increase of 13.0% over the $131.9 million in net sales in the prior year period. Sybron's internal net sales, which exclude currency fluctuations and the impact of acquisitions made in the past twelve months, grew 6.7% in the first quarter. The Company's consumable products, which represented approximately 97.5% of total net sales in the first quarter of fiscal 2005, had an internal net sales growth rate of 8.2%.
Net income for the first quarter of fiscal 2005 was $15.0 million, or $0.37 per diluted share, compared with net income of $11.9 million, or $0.30 per diluted share, in the same period of the previous year. Diluted earnings per share increased by 23% over the prior year period.
In the first quarter of fiscal 2005, Sybron generated $16.4 million in free cash flow, defined as cash flows from operating activities of $19.8 million minus capital expenditures of $3.4 million. This compares with free cash flow of $17.6 million in the same period of the previous year (cash flows from operating activities of $20.3 million minus capital expenditures of $2.7 million).
"We had an excellent start to the fiscal year driven by a strong response to our recently introduced products," said Floyd W. Pickrell, Jr., Chief Executive Officer of Sybron Dental Specialties. "We believe we are continuing to increase our market share in orthodontics, and we are pleased with the strong internal growth of our consumable professional dental products. We are also seeing the benefits of our recent facility rationalization efforts, which, along with more favorable foreign currency exchange rates, produced an increase in gross margin of almost three percentage points over the prior year."
ORMCO AND KERR HIGHLIGHTS
During the first quarter, the internal net sales of the Company's Specialty Products segment (Ormco) grew 10.4% over the same period in the prior year. Sales in the quarter were positively impacted by account conversions to the new Damon 3 self-ligating bracket, and strong sales of the new Elements Obturation device for endodontic procedures. Total sales of the Specialty Products segment were also positively impacted by the acquisition in October of Innova LifeSciences and its line of dental implants, the sales of which are meeting the Company's expectations.
During the first quarter, internal net sales of the Company's Professional Dental segment (Kerr) increased 3.3% over the same period in the prior year. Internal net sales of Professional Dental consumable products increased 6.4%. Sales in the quarter were positively impacted by continued solid sales of the Premise nanocomposite, a strong response to the new MaxCem self-adhesive cement, and higher sales of infection prevention products, driven by further penetration of the medical market.
FIRST QUARTER FINANCIAL HIGHLIGHTS
Gross margins in the first quarter of 2004 were 57.3%, compared with 54.6% in the same period of the previous year. The increase in overall gross margin is primarily attributable to increased manufacturing efficiencies resulting from facility rationalization efforts, as well as more favorable foreign currency rates.
Selling, general and administrative expenses (SG&A) were $58.0 million, or 38.9% of net sales, in the first quarter of 2005, compared with $48.5 million, or 36.8% of net sales, in the same period of the prior year. The increase in SG&A as a percentage of sales from the previous year is primarily attributable to foreign currency fluctuations, as well as the addition of Innova LifeSciences, which carries a higher SG&A as a percentage of net sales.
Research and development expenditures were $2.8 million in the first quarter of 2005, compared with $3.1 million of expenditures in the same period of the prior year.
Operating income for the first quarter of 2005 was $27.4 million, compared to $23.5 million in the first quarter of 2004. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $31.5 million. Operating income was 18.4% and EBITDA was 21.1% of net sales for the quarter, compared with 17.8% and 20.6%, respectively, in the same period of 2004. First quarter 2005 EBITDA is calculated by adding net income of $15.0 million, income taxes of $7.1 million, net interest expense of $5.3 million, and depreciation and amortization of approximately $4.1 million. First quarter 2004 EBITDA of $27.1 million is calculated by adding net income of $11.9 million, income taxes of $5.9 million, other expense (including interest expense) of $5.6 million, and depreciation and amortization of approximately $3.7 million.
Sybron's effective tax rate in the first quarter of fiscal 2005 was 32%, a decrease of 1% from the first quarter of fiscal 2004. The effective tax rate of 32% is based on current assumptions regarding the income contributions from our various operations around the world. Should the income contributions from territories with higher tax rates exceed our expectations, then our effective tax rate could be higher than 32%.
Net trade receivables were $97.7 million and days sales outstanding (DSOs) were 61.7 days at December 31, 2004, which compares with 61.1 days at December 31, 2003. The Company typically experiences an increase in DSOs during its first fiscal quarter due to delays in payments caused by the holiday season.
Net inventory was $104.7 million at the end of the first quarter and inventory days were 149 days, which compares to 130 days at December 31, 2003 and 133 days at September 30, 2004. The increase in inventory days from September 30, 2004 is primarily attributable to the addition of Innova LifeSciences, which maintains a higher level of inventory days than Sybron, as well as the continued inventory build ahead of the expiration of the Company's current contract with union members at its Romulus, Michigan facility.
Please refer to the supplemental schedules provided on the Financial Report's section of Sybron's Investor Relations web site (www.sybrondental.com/investors/index.html) that detail the calculation of the Company's DSOs and inventory days.
Capital expenditures were $3.4 million in the first quarter of fiscal 2005, compared with $2.7 million in the same period of the previous year.
The average debt outstanding for the quarter was $249.0 million with an average interest rate of 7.8%. Total debt outstanding at December 31, 2004 was $245.3 million. Total debt outstanding increased during the quarter due to the $44.5 million in borrowings used to finance the acquisition of Innova LifeSciences, which was partially offset by $19.7 million in debt repayments during the quarter.
Sybron's cash and cash equivalents balance increased to $49.6 million at December 31, 2004 from $40.6 million at September 30, 2004. The Company is currently evaluating the impact of the American Jobs Creation Act of 2004, which allows for the repatriation of foreign earnings at favorable tax rates.
Sybron's capital structure was 42.0% debt and 58.0% equity at December 31, 2004. This compares with 53.6% debt and 46.4% equity at December 31, 2003.