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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 DECEMBER 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 February 1, 2005, there were 39,996,617 shares of the Registrant’s Common Stock outstanding.

 



Table of Contents

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

 

               PAGE

PART I -

   FINANCIAL INFORMATION     

        Item 1.

   Financial Statements (unaudited)     
          Condensed Consolidated Balance Sheets    3
          Condensed Consolidated Statements of Income    4
          Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income    5
          Condensed Consolidated Statements of Cash Flows    6
          Notes to Unaudited Condensed Consolidated Financial Statements    7

        Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    16

        Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    26

        Item 4.

   Controls and Procedures    28

PART II -

   OTHER INFORMATION     

        Item 6.

   Exhibits    28

Signature

   29

Exhibit Index

   30

 

2


Table of Contents

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

    

December 31,

2004


  

September 30,

2004


    

(in thousands, except

per share amounts)

ASSETS              

Current assets:

             

Cash and cash equivalents

   $ 49,647    $ 40,602

Accounts receivable, net

     97,662      104,148

Inventories

     104,721      93,689

Deferred income taxes

     3,356      3,293

Prepaid expenses and other current assets

     12,215      12,975
    

  

Total current assets

     267,601      254,707

Property, plant and equipment, net

     87,506      83,121

Goodwill

     299,022      268,768

Intangible assets, net

     35,077      16,178

Other assets

     24,565      23,784
    

  

Total assets

   $ 713,771    $ 646,558
    

  

LIABILITIES AND STOCKHOLDERS’ EQUITY              

Current liabilities:

             

Accounts payable

   $ 19,371    $ 19,512

Current portion of long-term debt

     898      882

Income taxes payable

     14,985      17,089

Accrued payroll and employee benefits

     25,959      29,712

Restructuring reserve

     711      711

Accrued rebates

     11,249      9,475

Accrued interest

     936      3,620

Other current liabilities

     13,925      12,291
    

  

Total current liabilities

     88,034      93,292

Long-term debt

     94,372      69,589

Senior subordinated notes

     150,000      150,000

Deferred income taxes

     8,873      12,266

Other liabilities

     33,264      22,639
    

  

Total liabilities

     374,543      347,786

Commitments and contingent liabilities

             

Stockholders’ equity:

             

Preferred stock, $0.01 par value; authorized 20,000 shares, no shares outstanding

     —        —  

Common stock, $0.01 par value; authorized 250,000 shares, 39,894 and 39,307 shares issued and outstanding at December 31, 2004 and September 30, 2004, respectively

     399      393

Additional paid-in capital

     106,478      93,817

Retained earnings

     203,195      188,156

Accumulated other comprehensive income

     29,156      16,406
    

  

Total stockholders’ equity

     339,228      298,772
    

  

Total liabilities and stockholders’ equity

   $ 713,771    $ 646,558
    

  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3


Table of Contents

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

     Three Months Ended
December 31,


 
     2004

    2003

 
     (in thousands, except for
per share amounts)
 

Net sales

   $ 149,040     $ 131,857  

Cost of sales

     63,673       59,899  
    


 


Gross profit

     85,367       71,958  

Selling, general and administrative expenses

     57,488       48,193  

Amortization of intangible assets

     497       309  
    


 


Total selling, general and administrative expenses

     57,985       48,502  
    


 


Operating income

     27,382       23,456  

Other income (expense):

                

Interest expense

     (4,995 )     (5,160 )

Amortization of deferred financing fees

     (415 )     (407 )

Other, net

     144       (54 )
    


 


Income before income taxes

     22,116       17,835  

Income taxes

     7,077       5,886  
    


 


Net income

   $ 15,039     $ 11,949  
    


 


Basic earnings per share

   $ 0.38     $ 0.31  
    


 


Diluted earnings per share

   $ 0.37     $ 0.30  
    


 


Weighted average shares outstanding:

                

Basic

     39,479       38,310  
    


 


Diluted

     41,068       39,897  
    


 


 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31, 2004

(UNAUDITED)

 

     Common Stock

   Additional
Paid-in
Capital


   Retained
Earnings


   Accumulated
Other
Comprehensive
Income


    Total
Stockholders’
Equity


    Total
Comprehensive
Income


 
     Number of
Shares


   Par Value

            
     (in thousands)  

Balance at September 30, 2004

   39,307    $ 393    $ 93,817    $ 188,156    $ 16,406     $ 298,772          

Comprehensive income:

                                                  

Net income

   —        —        —        15,039      —         15,039     $ 15,039  

Translation adjustment

   —        —        —        —        15,986       15,986       15,986  

Unrealized loss on derivative instruments

   —        —        —        —        (3,236 )     (3,236 )     (3,236 )
    
  

  

  

  


 


 


Total comprehensive income

                                             $ 27,789  
                                              


Issuance of common stock from stock options exercised

   557      6      7,862      —        —         7,868          

Income tax benefit from stock options exercised

   —        —        4,051      —        —         4,051          

Issuance of common stock from employee stock purchase plan

   30      —        748      —        —         748          
    
  

  

  

  


 


       

Balance at December 31, 2004

   39,894    $ 399    $ 106,478    $ 203,195    $ 29,156     $ 339,228          
    
  

  

  

  


 


       

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


Table of Contents

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Three Months Ended
December 31,


 
     2004

    2003

 
     (in thousands)  

Cash flows from operating activities:

                

Net income

   $ 15,039     $ 11,949  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation

     3,635       3,355  

Amortization of intangible assets

     497       309  

Amortization of deferred financing fees

     415       407  

(Gain)/loss on sales of property, plant and equipment

     93       (5 )

Provision for losses on doubtful receivables

     483       197  

Inventory provisions

     1,377       1,069  

Deferred income taxes

     (525 )     (1,673 )

Tax benefit from issuance of stock under employee stock plan and stock options exercised

     4,051       278  

Changes in assets and liabilities, net of effects of businesses acquired:

                

Decrease in accounts receivable

     8,707       16,757  

Increase in inventories

     (7,616 )     (1,910 )

(Increase)/decrease in prepaid expenses and other current assets

     1,149       (766 )

Decrease in accounts payable

     (926 )     (4,165 )

Decrease in income taxes payable

     (3,112 )     (370 )

Decrease in accrued payroll and employee benefits

     (3,753 )     (6,052 )

Increase in accrued rebates

     1,774       1,840  

Decrease in restructuring reserve

     —         (23 )

Decrease in accrued interest

     (2,684 )     (3,170 )

Decrease in other current liabilities

     (1,093 )     (2,511 )

Net change in other assets and liabilities

     2,295       4,790  
    


 


Net cash provided by operating activities

     19,806       20,306  

Cash flows from investing activities:

                

Capital expenditures

     (3,398 )     (2,679 )

Proceeds from sales of property, plant and equipment

     146       118  

Net payments for businesses acquired

     (45,975 )     —    

Payments for intangibles

     (274 )     (232 )
    


 


Net cash used in investing activities

     (49,501 )     (2,793 )

Cash flows from financing activities:

                

Proceeds from credit facility

     59,000       33,500  

Principal payments on credit facility

     (34,160 )     (51,210 )

Proceeds from long-term debt