Sirona third-quarter revenue increases 1.0% to $182.4 million

Sirona (Nasdaq: SIRO), the dental technology leader, today announced its financial results for the three and nine months ended June 30, 2010.

Third Quarter Fiscal 2010 vs. Third Quarter Fiscal 2009 Financial Results

Revenue was $182.4 million, an increase of $1.8 million or up 1.0% (up 6.0% on a constant currency basis), with growth rates for the Company's business segments as follows: Imaging Systems increased 17.7% (up 22.0% constant currency); CAD CAM increased 0.1% (up 4.3% constant currency); Instruments declined 4.8% (up 1.6% constant currency); and Treatment Centers declined 15.3% (down 9.6% constant currency). Revenue in the United States increased 33.7%, driven by strong demand for our Galileos 3D imaging system and increased CAD CAM shipments in advance of the U.S. CEREC AC upgrade program. Outside the United States, revenue declined 10.2% (down 4.2% constant currency). In the third quarter of Fiscal 2009, international revenues benefited from sales at the biannual International Dental Show, resulting in a challenging comparison for Germany and other European countries in the third quarter of Fiscal 2010. Revenues in the Asia Pacific region showed solid growth, particularly in Japan, China and Australia.

Gross profit was $94.2 million, up $7.4 million. Gross profit margin was 51.6% in the third quarter of Fiscal 2010, compared to 48.1% in the prior year. The gross profit margin expansion was the result of product and regional mix, lower levels of amortization expense and a favorable currency impact.

Third quarter 2010 operating income excluding amortization expense was $45.3 million (operating income of $30.7 million plus amortization expense of $14.5 million), compared to $42.6 million (operating income of $24.9 million plus amortization expense of $17.7 million) in the prior year.

Net income for the third quarter of 2010 was $16.6 million, or $0.29 per diluted share, compared to $20.5 million, or $0.37 per diluted share in the prior year period. Third quarter 2010 earnings per share included $0.20 of amortization and depreciation expense attributable to the write-up in value of assets due to purchase accounting, a loss of $0.10 related to the revaluation of the Patterson exclusivity fee, a loss of $0.08 resulting from the revaluation of short-term intra-group loans and a $0.01 gain on the release of accrued restructuring expenses. For the third quarter of 2009, earnings per share included $0.24 of amortization and depreciation expense attributable to the write-up in value of assets due to purchase accounting, a gain of $0.07 related to the revaluation of the Patterson exclusivity fee, a $0.04 gain resulting from the revaluation of short-term intra-group loans, a $0.025 restructuring expense and a $0.016 gain on the sale of a business.

At June 30, 2010, the Company had cash and cash equivalents of $200.2 million and total debt of $345.4 million, resulting in net debt of $145.2 million. This compares to net debt of $293.8 million at September 30, 2009. The $148.6 million decrease in net debt was primarily driven by strong cash flow from operations.

Jost Fischer, Chairman, President and CEO of Sirona commented: "I am pleased with our third quarter operating performance as we delivered solid revenue, margin and record cash flow results. Sirona's innovative technology continues to perform in the marketplace, with particularly strong growth in our imaging segment, which was driven by considerable demand for our Galileos 3D imaging system. Year-to-date, our constant currency revenues have increased by 9% and our operating income plus amortization has increased by 33%. Looking out to the rest of the year, we expect positive revenue growth to continue and therefore we are increasing our guidance for fiscal 2010."

Mr. Fischer continued, "For the fourth quarter, revenues are expected to increase in the low to mid single digits on a constant currency basis. CAD CAM revenues are anticipated to be down compared to a very strong fourth quarter of fiscal 2009, with this result more than offset by growth in other segments. Today, we are increasing our operating income plus amortization guidance to $186 million to $190 million. For the full year, this would represent an increase of 19% to 21%."

Fiscal 2010 Guidance Update

The Company expects to achieve Fiscal 2010 constant currency revenue growth towards the upper end of the previously announced guidance range of 6% to 8%. Operating income excluding amortization expense is now expected to be in the range of $186 to $190 million, up from the previous guidance range of $178 million to $184 million.

First Nine Months Fiscal 2010 vs. First Nine Months Fiscal 2009 Financial Results

Revenue was $587.4 million, an increase of $62.3 million or up 11.9% (up 9.0% constant currency) with growth rates for the Company's business segments as follows: Imaging Systems increased 15.2% (up 13.0% constant currency); CAD CAM Systems increased 13.5% (up 11.2% constant currency); Instruments increased 11.4% (up 7.4% constant currency); and Treatment Centers increased 4.7% (up 0.9% constant currency). Revenue in the United States increased 16.8%. Outside the United States, revenue increased 9.7% (up 5.7% constant currency) driven by solid performance in Australia, Japan and China.

Gross profit increased by $51.8 million to $305.9 million, up 20.4%. Gross profit margins expanded 370 basis points to 52.1 percent, due to product mix and lower levels of amortization expense.

First nine months 2010 operating income excluding amortization expense was $151.0 million (operating income of $104.9 million plus amortization expense of $46.2 million), up 33.3% compared to $113.3 million (operating income of $60.4 million plus amortization expense of $52.9 million) in the prior year. First nine months 2009 results included a $4.6 million restructuring expense.