UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-16057
SYBRON DENTAL SPECIALTIES, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 33-0920985 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1717 WEST COLLINS AVENUE, ORANGE, CALIFORNIA 92867
(Address of principal executive offices) (Zip Code)
(714) 516-7400
(Registrant’s Telephone Number, Including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At April 28, 2004, there were 38,543,849 shares of the Registrant’s Common Stock outstanding.
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
2
PART I - FINANCIAL INFORMATION
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 31, 2004 |
September 30, 2003 | |||||
| (in thousands except share and per share amounts) | ||||||
| ASSETS | ||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 21,299 | $ | 22,868 | ||
| Accounts receivable, net |
105,737 | 103,565 | ||||
| Inventories |
85,839 | 84,239 | ||||
| Deferred income taxes |
4,987 | 4,896 | ||||
| Prepaid expenses and other current assets |
14,387 | 11,624 | ||||
| Total current assets |
232,249 | 227,192 | ||||
| Property, plant and equipment, net |
80,033 | 80,750 | ||||
| Goodwill |
261,168 | 258,590 | ||||
| Intangible assets, net |
16,276 | 16,455 | ||||
| Other assets |
28,111 | 28,672 | ||||
| Total assets |
$ | 617,837 | $ | 611,659 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: |
||||||
| Accounts payable |
$ | 15,586 | $ | 19,620 | ||
| Current portion of long-term debt |
1,460 | 3,714 | ||||
| Income taxes payable |
16,628 | 16,274 | ||||
| Accrued payroll and employee benefits |
27,182 | 28,712 | ||||
| Restructuring reserve |
1,080 | 1,486 | ||||
| Accrued rebates |
7,626 | 9,872 | ||||
| Accrued interest |
3,698 | 3,901 | ||||
| Other current liabilities |
12,628 | 10,917 | ||||
| Total current liabilities |
85,888 | 94,496 | ||||
| Long-term debt |
97,322 | 124,008 | ||||
| Senior subordinated notes |
150,000 | 150,000 | ||||
| Deferred income taxes |
12,714 | 13,748 | ||||
| Other liabilities |
24,456 | 21,422 | ||||
| Total liabilities |
370,380 | 403,674 | ||||
| Commitments and contingent liabilities |
||||||
| Stockholders’ equity: |
||||||
| Preferred stock, $.01 par value; authorized 20,000,000 shares, no shares outstanding |
— | — | ||||
| Common stock, $.01 par value; authorized 250,000,000 shares, 38,536,348 and 38,285,224 shares issued and outstanding at March 31, 2004 and September 30, 2003, respectively |
385 | 383 | ||||
| Additional paid-in capital |
79,621 | 74,934 | ||||
| Retained earnings |
155,501 | 126,044 | ||||
| Accumulated other comprehensive income |
11,950 | 6,624 | ||||
| Total stockholders’ equity |
247,457 | 207,985 | ||||
| Total liabilities and stockholders’ equity |
$ | 617,837 | $ | 611,659 | ||
See accompanying notes to unaudited condensed consolidated financial statements.
3
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended March 31, |
Six Months Ended March 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands except for per share amounts) | ||||||||||||||||
| Net sales |
$ | 150,921 | $ | 134,267 | $ | 282,778 | $ | 254,416 | ||||||||
| Cost of sales: |
||||||||||||||||
| Cost of products sold |
66,854 | 59,917 | 126,753 | 115,491 | ||||||||||||
| Restructuring charge |
1,482 | — | 1,482 | — | ||||||||||||
| Total cost of sales |
68,336 | 59,917 | 128,235 | 115,491 | ||||||||||||
| Gross profit |
82,585 | 74,350 | 154,543 | 138,925 | ||||||||||||
| Selling, general and administrative expenses |
50,800 | 44,060 | 98,993 | 86,774 | ||||||||||||
| Amortization of intangible assets |
322 | 206 | 631 | 610 | ||||||||||||
| Total selling, general and administrative expenses |
51,122 | 44,266 | 99,624 | 87,384 | ||||||||||||
| Operating income |
31,463 | 30,084 | 54,919 | 51,541 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
(4,941 | ) | (5,403 | ) | (10,101 | ) | (10,979 | ) | ||||||||
| Amortization of deferred financing fees |
(402 | ) | (400 | ) | (809 | ) | (821 | ) | ||||||||
| Other, net |
11 | 893 | (43 | ) | 860 | |||||||||||
| Income before income taxes |
26,131 | 25,174 | 43,966 | 40,601 | ||||||||||||
| Income taxes |
8,623 | 9,567 | 14,509 | 15,429 | ||||||||||||
| Net income |
$ | 17,508 | $ | 15,607 | $ | 29,457 | $ | 25,172 | ||||||||
| Basic earnings per share |
$ | 0.46 | $ | 0.41 | $ | 0.77 | $ | 0.66 | ||||||||
| Diluted earnings per share |
$ | 0.44 | $ | 0.40 | $ | 0.74 | $ | 0.66 | ||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
38,471 | 38,018 | 38,391 | 38,004 | ||||||||||||
| Diluted |
40,166 | 38,658 | 40,032 | 38,379 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED MARCH 31, 2004
(UNAUDITED)
| Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income |
Total Stockholders’ Equity | |||||||||||||
| Number of Shares |
Par Value |
||||||||||||||||
| (in thousands except share amounts) | |||||||||||||||||
| Balance at September 30, 2003 |
38,285,224 | $ | 383 | $ | 74,934 | $ | 126,044 | $ | 6,624 | $ | 207,985 | ||||||
| Comprehensive income: |
|||||||||||||||||
| Net income |
— | — | — | 29,457 | — | 29,457 | |||||||||||
| Translation adjustment |
— | — | — | — | 5,153 | 5,153 | |||||||||||
| Unrealized gain on derivative instruments |
— | — | — | — | 173 | 173 | |||||||||||
| Total comprehensive income |
34,783 | ||||||||||||||||
| Issuance of common stock from stock options exercised |
224,733 | 2 | 3,351 | — | — | 3,353 | |||||||||||
| Income tax benefit from stock options exercised |
— | — | 814 | — | — | 814 | |||||||||||
| Issuance of common stock from ESP plan |
26,391 | — | 522 | — | — | 522 | |||||||||||
| Balance at March 31, 2004 |
38,536,348 | $ | 385 | $ | 79,621 | $ | 155,501 | $ | 11,950 | $ | 247,457 | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (in thousands) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 29,457 | $ | 25,172 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
6,709 | 5,772 | ||||||
| Amortization of intangible assets |
631 | 610 | ||||||
| Amortization of deferred financing fees |
809 | 821 | ||||||
| Loss (gain) on sales of property, plant and equipment |
26 | (616 | ) | |||||
| Provision for losses on doubtful receivables |
415 | 117 | ||||||
| Inventory provisions |
2,124 | 1,736 | ||||||
| Deferred income taxes |
(998 | ) | (2,482 | ) | ||||
| Tax benefit from issuance of stock under employee stock option plans |
814 | 59 | ||||||
| Changes in assets and liabilities, net of effects of businesses acquired: |
||||||||
| Increase in accounts receivable |
||||||||