Sirona Reports Record Results for First Quarter of Fiscal 2014

  Sirona Reports Record Results for First Quarter of Fiscal 2014

  *First quarter revenues of $298.7 million, up 9.7% compared to prior year,
    or up 6.3% constant currency^*.
  *First quarter diluted earnings per share of $0.79 on a GAAP reported basis
    compared to $0.68 in the prior year. First quarter non-GAAP adjusted EPS^*
    of $0.96, up 1.8% compared to $0.94 in the prior year.
  *Management continues to anticipate FY14 constant currency revenue growth
    of 4% to 6%, and non-GAAP adjusted EPS^* in the range of $3.60 to $3.70
    (reflecting growth of approximately 6% to 9%).

Business Wire

LONG ISLAND CITY, N.Y. -- February 7, 2014

Sirona (Nasdaq:SIRO), the dental technology leader, today announced its
financial results for the quarter ended December 31, 2013.

First Quarter Fiscal 2014 vs. First Quarter Fiscal 2013 Financial Results

Revenue was $298.7 million, an increase of $26.3 million or up 9.7% (and up
6.3% on a constant currency basis). The Company's business segments performed
as follows: Instruments increased 23.9% (up 18.1% on a constant currency
basis), CAD/CAM Systems increased 10.7% (up 7.6% on a constant currency
basis), Imaging Systems increased 9.2% (up 7.0% on a constant currency basis),
and Treatment Centers increased 1.7% (down 3.0% on a constant currency basis).

Revenue in the United States increased 12.2%, and revenues outside the United
States increased 8.4% (up 3.4% constant currency). U.S. revenues continued to
benefit from strong demand for our Imaging and CAD/CAM products. Sales growth
in international markets was driven by Europe, excluding Germany, and other
international markets.

Gross profit was $162.7 million, down $10.9 million. Gross profit margin was
54.5% in the first quarter of Fiscal 2014, compared to 55.8% in the prior
year. The change in gross profit margin as a percent of sales reflects the
development of product and regional sales mix as well as unfavorable impacts
of foreign exchange rate fluctuations.

Net income for the first quarter of 2014 was $44.2 million, or $0.79 per
diluted share, versus $38.3 million, or $0.68 per diluted share in the
prior-year period. Non-GAAP adjusted earnings per diluted share for the first
quarter of 2014 was $0.96 compared to $0.94 in the prior-year quarter, or an
increase of 1.8%. Non-GAAP adjusted EPS growth was impacted by unfavorable
developments in foreign currencies as well as a difficult comparable resulting
from a $4.4 million patent infringement settlement in last year’s first
quarter. A reconciliation of the non-GAAP measure to earnings per share
calculated on a GAAP basis is provided in the attached table.

At December 31, 2013, the Company had cash and cash equivalents of $210.9
million and total debt of $75.5 million, resulting in net cash of $135.4
million. This compares to net cash of $166.3 million at September 30, 2013.

Jeffrey Slovin, President and CEO of Sirona commented: “I am pleased to report
record quarterly revenues and earnings. Our strong performance was
geographically broad based. The U.S. grew 12.2%, driven by strength in both
CAD/CAM and Imaging. Outside of Germany, our international business grew 8.3%
on our constant currency basis.”

Mr. Slovin continued: “On a segment level, Instruments led the way with 18.1%
constant currency growth, benefiting from the increased capacity of our new
state-of-the-art manufacturing facility. CAD/CAM grew 7.6%, on our constant
currency basis, despite a difficult comparable, reflecting the strong demand
for Sirona’s products. Our “CAD/CAM for Everyone” strategy is driving new user
demand, and early indications are that customers remain focused on Omnicam and
our new chairside milling units. These factors contributed to our 69.3%CAD/CAM
segment gross profit margin.”

Fiscal 2014 Guidance

Management continues to anticipate FY14 constant currency revenue growth of 4%
to 6%, and non-GAAP adjusted EPS^* in the range of $3.60 to $3.70 (reflecting
growth of approximately 6% to 9%).

Conference Call/Webcast Information

Sirona will hold a conference call to discuss its financial results at 8:30
a.m. Eastern Time on February 7, 2014. The teleconference can be accessed by
calling +1-877-703-6107 (domestic) or +1-857-244-7306 (international) using
passcode # 16950014. The webcast will be available via the Internet at
http://ir.sirona.com, and a presentation relating to the call will be
available on our website. A replay of the conference call will be available
through February 14, 2014 by calling +1-888-286-8010 (domestic) or
+1-617-801-6888 (international) using passcode #45731244. A web archive will
be available for 30 days at www.sirona.com.

About Sirona Dental Systems, Inc.

Sirona, the dental technology leader, has served dealers and dentists
worldwide for more than 130 years. Sirona develops, manufactures, and markets
a complete line of dental products, including CAD/CAM restoration systems
(CEREC), digital intra-oral, panoramic and 3D imaging systems, dental
treatment centers, and handpieces. Visit http://www.sirona.com for more
information about Sirona and its products.

This press release contains forward-looking information about Sirona Dental
Systems, Inc.’s financial results, guidance and estimates, business prospects,
and products and services that involve substantial risks and uncertainties or
other factors that may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. You can identify
these statements by the use of words such as "may," "could," "estimate,"
"will," "believe," "anticipate," "think," "intend," "expect," "project,"
"plan," "target," "forecast", and similar words and expressions which identify
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are not guarantees of future
performance and involve known and unknown risks and uncertainties, and other
factors. Readers are cautioned not to place undue reliance on such statements,
which speak only as of the date hereof. For a discussion of such risks,
uncertainties and other matters that could cause actual results to differ
materially, including risks relating to, among other factors, the market for
dental product and services, pricing, future sales volume of the Company's
products, the possibility of changing economic, market and competitive
conditions, dependence on products, dependence on key personnel, technological
developments, intense competition, market uncertainties, dependence on
distributors, ability to manage growth, dependence on key suppliers,
dependence on key members of management, government regulation, acquisitions
and affiliations and currency exchange rate fluctuations, readers are urged to
carefully review and consider various disclosures made by the Company in its
Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K filed with
the U.S. Securities and Exchange Commission, which can be accessed through the
SEC’s website, www.sec.gov. This presentation contains non-GAAP financial
measures, which should not be viewed in isolation and do not purport to be an
alternative to net income (loss) as an indicator of operating performance or
an alternative to cash flows from operating activities as a measure of
liquidity. The Company assumes no obligation to and expressly disclaims any
obligation to update or revise any forward-looking statements contained in
this document to reflect new information or future events or developments
after the date any such statement is made.


SIRONA DENTAL SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

                                           Three months ended
                                             December 31,
                                             2013              2012       
                                             $'000s (except per share amounts)
                                             
Revenue                                    $ 298,726            $ 272,404
Cost of sales                                135,995             120,533    
                                                                             
Gross profit                                 162,731              151,871
                                                                  
Selling, general and administrative          88,057               85,853
expense
Research and development                     15,118               14,095
Net other operating income                   (2,500      )        (6,914     )
                                                                  
Operating income                             62,056               58,837
(Gain)/loss on foreign currency              2,604                4,580
transactions, net
(Gain)/loss on derivative instruments        (567        )        (1,346     )
Interest expense, net                        782                  970
Other expense/(income)                       464                 340        
Income before taxes                          58,773               54,293
Income tax provision                         13,812              15,226     
Net income                                   44,961               39,067
Less: Net income attributable to             790                 765        
noncontrolling interests
Net income attributable to Sirona          $ 44,171            $ 38,302     
Dental Systems, Inc.
                                                                  
Income per share (attributable to
Sirona Dental Systems, Inc. common
shareholders):
- Basic                                    $ 0.80               $ 0.70
- Diluted                                  $ 0.79               $ 0.68
Weighted average shares - basic              55,054,040           55,004,471
Weighted average shares - diluted            56,130,008           56,327,927



SIRONA DENTAL SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

                                           December 31,      September 30,
                                             2013               2013       
                                             (unaudited)
                                             $'000s (except per share amounts)
ASSETS
                                                                 
Current assets
Cash and cash equivalents                  $ 210,920           $ 241,745
Restricted cash                              674                 681
Accounts receivable, net of allowance
for doubtful accounts
of $1,526 and $1,588, respectively           161,577             145,212
Inventories, net                             120,710             109,175
Deferred tax assets                          30,115              31,370
Prepaid expenses and other current           34,567              32,556
assets
Income tax receivable                        1,535              2,345      
                                                                 
Total current assets                         560,098             563,084
                                                                 
Property, plant and equipment, net of
accumulated depreciation
and amortization of $168,270 and             219,709             182,737
$156,730, respectively
Goodwill                                     683,074             672,086
Intangible assets, net of accumulated
amortization of
$520,407 and $503,130, respectively          296,552             301,718
Other non-current assets                     4,573               5,620
Deferred tax assets                          16,422             13,174     
                                                                 
Total assets                               $ 1,780,428        $ 1,738,419  
                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                 
Current liabilities
Trade accounts payable                     $ 59,486            $ 73,235
Short-term debt and current portion of       480                 447
long-term debt
Income taxes payable                         9,151               9,319
Deferred tax liabilities                     1,353               745
Accrued liabilities and deferred             154,078            162,341    
income
                                                                 
Total current liabilities                    224,548             246,087
                                                                 
Long-term debt                               75,000              75,000
Deferred tax liabilities                     131,103             131,455
Other non-current liabilities                26,016              27,447
Indebtedness to related parties
Pension related provisions                   67,354              65,985
Deferred income                              31,704             34,401     
                                                                 
Total liabilities                            555,725            580,375    
                                                                 
Shareholders' equity
Common stock ($0.01 par value;
95,000,000 shares authorized;
57,447,203 shares issued and
55,224,468 shares outstanding at Dec.
31, 2013;
                                             574                 572
57,213,615 shares issued and
54,999,436 shares outstanding at Sept.
30, 2013
Additional paid-in capital                   729,733             723,288
Treasury stock (at cost)
2,222,735 shares held at cost at Dec.
31, 2013;
                                             (112,548    )       (111,955   )
2,214,179 shares held at cost at Sept.
30, 2013
Excess of purchase price over                (49,103     )       (49,103    )
predecessor basis
Retained earnings                            628,387             584,216
Accumulated other comprehensive              24,540             8,607      
income/(loss)
Total Sirona Dental Systems, Inc.            1,221,583          1,155,625  
shareholders' equity
Noncontrolling interests                     3,120              2,419      
                                                                 
Total shareholders' equity                   1,224,703          1,158,044  
                                                                 
Total liabilities and shareholders'        $ 1,780,428        $ 1,738,419  
equity



SIRONA DENTAL SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                                                  Three months ended
                                                     December 31,
                                                     2013         2012    
                                                     $'000s
Cash flows from operating activities
Net income                                         $ 44,961        $ 39,067
                                                                     
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization                        19,010          17,912
(Gain)/loss on disposal of property, plant and       -               (30     )
equipment
(Gain)/loss on derivative instruments                (567    )       (1,346  )
(Gain)/loss on foreign currency transactions         2,604           4,580
Deferred income taxes                                (3,979  )       8,815
Amortization of debt issuance cost                   101             138
Share-based compensation expense                     3,361           6,097
                                                                     
Changes in assets and liabilities
Accounts receivable                                  (15,588 )       (12,753 )
Inventories                                          (11,354 )       (10,589 )
Prepaid expenses and other current assets            (1,750  )       (6,054  )
Restricted cash                                      (15     )       -
Other non-current assets                             781             (81     )
Trade accounts payable                               (14,848 )       9,078
Accrued liabilities and deferred income              (10,206 )       (26,909 )
Other non-current liabilities                        (1,768  )       1,873
Income taxes receivable                              835             (41     )
Income taxes payable                                 (293    )       3,932   
                                                                     
Net cash provided by operating activities            11,285          33,689
                                                                     
Cash flows from investing activities
Investment in property, plant and equipment          (43,123 )       (10,347 )
Proceeds from sale of property, plant and            308             83
equipment
Purchase of intangible assets                        (220    )       (12     )
Acquisition of business, net of cash acquired        -              (35,019 )
Net cash used in investing activities                (43,035 )       (45,295 )
                                                                     


                                                  Three months ended
                                                     December 31,
                                                     2013         2012    
                                                     $'000s
Cash flows from financing activities
Repayments of short-term and long-term debt          -               (98     )
Purchase of treasury stock                           (593    )       (17,172 )
Dividend distributions to noncontrolling             (147    )       (434    )
interest
Common shares issued under share based
compensation plans                                   2,351           2,791
Tax effect of common shares issued under share
based
compensation plans                                   (1,485  )       (1,910  )
                                                                             
Net cash used in financing activities                126             (16,823 )
                                                                     
Change in cash and cash equivalents                  (31,624 )       (28,429 )
Effect of exchange rate change on cash and           799             1,511
cash equivalents
Cash and cash equivalents at beginning of            241,745        151,088 
period
                                                                             
Cash and cash equivalents at end of period         $ 210,920      $ 124,170 



Reconciliation of GAAP and Non-GAAP Information (unaudited)

HISTORICAL         

Non-GAAP Adjusted
Net Income
Financial
Measures
(unaudited)

                      Three months ended December 31, 2013
                                       Tax                             Per
                       Pre Tax     Impact*      After Tax    Diluted
                                                                       Share
                       $'000s, except per share amount
                        
GAAP net income
attributable to
Sirona Dental                                    $ 44,171      $ 0.79
Systems, Inc.
shareholders
                                                                       
Adjustments
Amortization and
depreciation
expense resulting
from the step-up
to fair values of     $ 9,431        $ 2,216           7,215
intangible assets
related to past
business
combinations
                                                                       
(Gain)/loss on
foreign currency        2,604          612             1,992
transactions,
net^
(Gain)/loss on
derivative              (567   )       (133   )        (434    )
instruments^
                                                                       
Other items:
Compensation
charge for
expenses in             1,286          302             984            
connection with
the CFO
Transition
                                                                       
Non-GAAP adjusted
net income
attributable to                                      $ 53,928       $ 0.96
Sirona Dental
Systems, Inc.
shareholders
                                                                       
* tax impact
calculated using
estimated
effective tax
rate of 23.5%
                                                                       
                      Three months ended December 31, 2012
                                       Tax                             Per
                       Pre Tax     Impact**     After Tax    Diluted
                                                                       Share
                       $'000s, except per share amount
                        
GAAP net income
attributable to
Sirona Dental                                       $ 38,302        $ 0.68
Systems, Inc.
shareholders
                                                                       
Adjustments
Amortization and
depreciation
expense resulting
from the step-up
to fair values of     $ 9,633        $ 2,312           7,321
intangible assets
related to past
business
combinations
                                                                       
(Gain)/loss on
foreign currency        4,580          1,099           3,481
transactions,
net^
(Gain)/loss on
derivative              (1,346 )       (323   )        (1,023  )
instruments^
                                                                       
Other items:
                                                                       
Non-cash
remeasurement of
deferred tax
assets and              2,196                          2,196
liabilities due
to an increase in
German trade tax
rate
Non-cash
compensation
charge for the
revaluation of
share based
compensation in         3,764          903             2,861          
connection with
the Transition
Agreement for the
departing CEO and
Chairman
                                                                       
Non-GAAP adjusted
net income
attributable to                                      $ 53,138       $ 0.94
Sirona Dental
Systems, Inc.
shareholders
                                                                       
** tax impact
calculated using
estimated
effective tax
rate of 24%



FORWARD-LOOKING         
                               
Non-GAAP Adjusted EPS
Guidance (unaudited)
                               
                               Low End of Guidance
                                             Tax           After       Per
                               Pre-Tax     Impact      Tax       Diluted
                                                                       Share
                               $ millions, except per share amount
                               
GAAP net income
attributable to
Sirona Dental                                            $ 174       $ 3.10
Systems, Inc.
shareholders
                                                                       
Adjustments
Amortization and
depreciation expense
resulting from the
step-up to fair             $  36          $ 9           $ 27
values of intangible
assets related to
past business
combinations
                                                                       
Other items:
Compensation charge
for expenses in                1             -             1           
connection with the
CFO Transition
                                                                       
Non-GAAP adjusted net
income attributable
to Sirona Dental                                         $ 202       $ 3.60
Systems, Inc.
shareholders
                                                                       
                               High End of Guidance
                                             Tax           After       Per
                               Pre-Tax       Impact        Tax         Diluted
                                                                       Share
                               $ millions, except per share amount
                               
GAAP net income
attributable to
Sirona Dental                                            $ 179       $ 3.20
Systems, Inc.
shareholders
                                                                       
Adjustments
Amortization and
depreciation expense
resulting from the
step-up to fair                36            9             27
values of intangible
assets related to
past business
combinations
                                                                       
Other items:
Compensation charge
for expenses in                1             -             1           
connection with the
CFO Transition
                                                                       
Non-GAAP adjusted net
income attributable
to Sirona Dental                                         $ 207       $ 3.70
Systems, Inc.
shareholders
                                                                       
^We are unable to provide estimates for these items because we are unable to
predict the 2014 and long-term impact of foreign exchange due to
unpredictability of future changes in foreign exchange rates.
                                                                       

To supplement our consolidated financial statements and our business outlook,
we use the following non-GAAP financial measures: (i) non-GAAP adjusted net
income, and (ii) non-GAAP adjusted earnings per diluted share, which exclude,
as applicable, amortization and depreciation expense resulting from the
step-up to fair values of intangible and tangible assets related to past
business combinations gain/loss on foreign currency transactions, gain/loss on
derivative instruments and any related tax effects and to the extent relevant
in a particular period, any other cash or non-cash items that management does
not view as indicative of its ongoing operating performance. Also set forth
above under the heading “FORWARD-LOOKING” are reconciliations of
forward-looking non-GAAP financial measures to the most directly comparable
GAAP financial measures.

Management recognizes that the use of these non-GAAP measures has limitations,
including the fact that they might not be comparable with similar non-GAAP
measures used by other companies and that management must exercise judgment in
determining which types of charges and other items should be excluded from its
non-GAAP financial measures. Management currently compensates for these
limitations by providing full disclosure of each non-GAAP financial measure
and a reconciliation to the most directly comparable GAAP measure. The
presentation of this financial information is not intended to be considered in
isolation or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational
decision making and as a means to evaluate period-to-period comparisons. Our
management believes that these non-GAAP financial measures provide meaningful
supplemental information regarding our "core operating performance".
Management believes that "core operating performance" represents Sirona’s
operating performance in the ordinary, ongoing and customary course of its
operations. Accordingly, management excludes from "core operating performance"
the impact of acquisition-related intangible depreciation and amortization in
order to compare our underlying financial performance to prior periods,
certain charges related to currency revaluation of assets and liabilities that
do not reflect our period-to-period core operating performance, and to the
extent relevant in a particular period, any other cash or non-cash items that
management does not view as indicative of its ongoing operating performance.
We believe that both management and investors benefit from referring to these
non-GAAP financial measures in assessing our performance and when planning,
forecasting and analyzing future periods. These non-GAAP financial measures
also facilitate management's internal evaluation of period-to-period
comparisons. We believe these non-GAAP financial measures are useful to
investors both because (1) they allow for greater transparency with respect to
key metrics used by management in its financial and operational decision
making and (2) they are provided to and used by our institutional investors
and the analyst community to facilitate comparisons with prior and subsequent
reporting periods.

Constant Currency: We have included certain revenue information in this press
release on a constant currency basis. This information is a non-GAAP financial
measure. We additionally present revenue on a constant currency basis because
we believe it facilitates a comparison of our operating results from period to
period without regard to many changes resulting solely from fluctuations in
currency rates.

Sirona calculates constant currency revenue growth by comparing current period
revenues to prior period revenues with both periods converted at the U.S.
Dollar/Euro average foreign exchange rate for each month of the current
period. The average exchange rate for the three months ended December 31,
2013, was $1.36115 and varied from $1.34970 to $1.36970 . For the three months
ended December 31, 2012, an average exchange rate converting Euro denominated
revenues into U.S. Dollars of $1.29708 was applied.

Our forecasted 2014 constant currency net revenue guidance excludes the impact
of foreign exchange. We are unable to reconcile our projected 2014 constant
currency net revenue growth to our full-year projected 2014 net revenue growth
because we are unable to predict the 2014 and long-term impact of foreign
exchange due to the unpredictability of future changes in foreign exchange
rates. Therefore, we are unable to provide a reconciliation of these measures.

^* Non-GAAP adjusted EPS and constant currency growth and results are non-GAAP
financial measures that exclude certain items. Please refer to “Reconciliation
of GAAP and non-GAAP Information (unaudited)” in the attached exhibits for a
description of these items.

Contact:

Sirona Dental Systems, Inc.
Joshua Zable, +1-718-482-2184
Vice President, Investor Relations
joshua.zable@sirona.com
 
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