Sirona fourth quarter revenue decreases 2.8% to $182.9 million

Sirona (Nasdaq: SIRO), the dental technology leader, today announced its financial results for the quarter and fiscal year ended September 30, 2010.

“Despite continued global economic uncertainty, we are pleased with the strong demand we are seeing for our technologically advanced product range. As a result of this strong demand, we currently expect robust constant currency revenue growth in the first quarter.”

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

Revenue was $182.9 million, a decrease of $5.3 million or down 2.8% (up 4.9% on a constant currency basis), with growth rates for the Company's business segments as follows: Treatment Centers increased 11.0% (up 24.1% on a constant currency basis); Imaging Systems increased 0.9% (up 7.2% constant currency); Instruments declined 4.2% (up 7.1% constant currency); and CAD CAM declined 13.8% (down 8.5% constant currency). Revenue in the United States declined 15.1%, due to the timing of CAD/CAM shipments, which had helped drive U.S. revenue growth of 33.7% in the third quarter of 2010. Outside the United States, revenue increased 2.8% (up 15.1% constant currency), with very strong growth in Asia Pacific and the Middle East, and solid growth in Europe.

Gross profit was $93.1 million, up $1.1 million. Gross profit margin was 50.9% in the fourth quarter of Fiscal 2010, compared to 48.9% in the prior year. The gross profit margin expansion was mainly the result of lower levels of amortization expense.

Fourth quarter 2010 operating income excluding amortization expense was $37.9 million (operating income of $23.2 million plus amortization expense of $14.7 million), compared to $43.3 million (operating income of $24.7 million plus amortization expense of $18.6 million) in the prior year.

Net income for the fourth quarter of 2010 was $24.7 million, or $0.44 per diluted share, compared to $26.7 million, or $0.48 per diluted share in the prior year period. Fourth 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 gain of $0.11 related to the revaluation of the Patterson exclusivity fee, and a gain of $0.09 resulting from the revaluation of short-term intra-group loans. For the fourth quarter of 2009, earnings per share included $0.39 of amortization and depreciation expense attributable to the write-up in value of assets due to purchase accounting, a gain of $0.04 related to the revaluation of the Patterson exclusivity fee, a gain of $0.03 resulting from the revaluation of short-term intra-group loans, a $0.065 restructuring charge and a $0.03 one-time, non-cash gain.

At September 30, 2010, the Company had cash and cash equivalents of $251.8 million and total debt of $370.7 million, resulting in net debt of $119.0 million. This compares to net debt of $293.8 million at September 30, 2009. The $174.8 million decrease in net debt was primarily driven by strong cash flow from operations.

Jost Fischer, Chairman and CEO of Sirona commented: "Sirona posted another solid quarter to close out a very successful 2010 fiscal year. We delivered revenue and operating income results at the upper end of our guidance. Sirona generated industry leading revenue growth, margin expansion and record cash flow results, all of which were driven by our commitment to innovation and dedication to advancing dentistry. Our position as the undisputed leader in dental technology allows us to compete effectively by offering practitioners best in class solutions to improve their workflow and enhance their profitability. As we enter fiscal 2011, we remain fully committed to our longstanding tradition of investing in research and development. These investments will ensure that Sirona is ideally positioned to compete and win in 2011 and beyond."

Mr. Fischer continued, "Despite continued global economic uncertainty, we are pleased with the strong demand we are seeing for our technologically advanced product range. As a result of this strong demand, we currently expect robust constant currency revenue growth in the first quarter."

Fiscal 2011 Guidance

The Company expects to achieve Fiscal 2011 constant currency revenue growth in the range of 7% to 9%. Operating income excluding amortization expense is now expected to be in the range of $200 to $208 million.

Fiscal 2010 vs. Fiscal 2009 Financial Results

Revenue was $770.3 million, an increase of $57.0 million, or 8.0% (up 7.9% constant currency) with growth rates for the Company's business segments as follows: Imaging Systems increased 11.4% (up 11.3% constant currency); Instruments increased 7.3% (up 7.1% constant currency); Treatment Centers increased 6.3% (up 6.1% constant currency); and CAD/CAM increased 6.1% (up 6.0% constant currency). Revenue in the United States increased 8.3% compared to prior year, driven by the Imaging segment and with particularly strong performance of our Galileos 3D Imaging System. Outside the United States, revenue increased 7.9% (up 7.7% constant currency) benefiting from strong growth in Asia Pacific and the Middle East.

Gross profit increased by $52.9 million to $399.0 million, up 15.3%. Gross profit margin of 51.8% was up 330 basis points compared to the prior year, mainly driven by lower levels of deal related amortization, a favourable product mix shift, and cost containment initiatives.

2010 operating income excluding amortization expense was $188.9 million (operating income of $128.1 million plus amortization expense of $60.8 million). This compares to 2009 operating income excluding amortization expense of $156.6 million (operating income of $85.1 million plus amortization expense of $71.5 million). Operating income in fiscal 2009 included restructuring expenses in the amount of $8.2 million.