Sirona Reports Fiscal 2010 First Quarter Results

• Revenue was $214.8 million, an increase of 19.5% compared to prior year, or up 10.9% on a constant currency basis.
• Operating income excluding amortization expense totaled $59.6 million, up 51.5% versus $39.4 million in the prior year.
• Cash flow from Operations was $40.6 million, compared to ($1.6) million in the prior year.
• Sirona updates guidance.

Sirona (Nasdaq: SIRO), the dental technology leader, today announced its financial results for the quarter ended December 31, 2009.

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

Revenue was $214.8 million, an increase of $35.1 million or 19.5% (up 10.9% on a constant currency basis), with growth rates for the Company's business segments as follows: CAD/CAM increased 37.5% (up 29.3% constant currency); Instruments increased 19.0% (up 6.7% constant currency); Imaging Systems increased 9.2% (up 3.7% constant currency); and Treatment Centers increased 12.2% (up 0.5% constant currency). Revenue in the United States increased by 12.1% driven by the CAD/CAM and Imaging segments. Outside the United States, revenue increased by 23.3% (up 10.4% constant currency), driven by strength in Germany, Australia, Canada and Japan.

Gross profit was $112.4 million, up $25.4 million compared to prior year. Gross profit margin was 52.3% in the first quarter of fiscal 2010, compared to 48.4% in the prior year. The gross profit margin expansion was driven by product and regional mix and lower levels of amortization expense.

First quarter 2010 operating income excluding amortization expense was $59.6 million (operating income of $43.5 million plus amortization expense of $16.2 million), compared to $39.4 million (operating income of $21.8 million plus amortization expense of $17.6 million) in the prior year.

Net income for the first quarter of 2010 was $31.2 million, or $0.55 per diluted share, compared to $5.6 million, or $0.10 per diluted share in the prior year period. First quarter 2010 earnings per share included $0.22 of amortization and depreciation expense attributable to the write-up in value of assets due to purchase accounting, a loss of $0.02 related to the revaluation of the Patterson exclusivity fee, and a loss of $0.02 resulting from the revaluation of short-term intra-group loans. For the first quarter of 2009, earnings per share included $0.22 of amortization and depreciation expense attributable to the write-up in value of assets due to purchase accounting, a loss of $0.03 related to the revaluation of the Patterson exclusivity fee, a $0.02 loss resulting from the revaluation of short-term intra-group loans and a $0.01 gain on sale of an asset.

At December 31, 2009, the Company had cash and cash equivalents of $215.9 million and total debt of $470.1 million, resulting in net debt of $254.2 million. This compares to net debt of $293.8 million at September 30, 2009. The decrease in net debt was driven by strong cash flow from operations.

Chairman, President & CEO, Jost Fischer commented; "We are pleased with our exceptionally strong performance in the first quarter. Sirona's top line growth was driven by our recent innovative product launches and our technologically advanced product portfolio. The bottom line benefited from robust sales growth, margin expansion, expense management initiatives and deleveraging. We are pleased with our results and are confident in the prospects of our business."

Fiscal 2010 Guidance Update

The Company expects to achieve revenue growth at the higher end of its fiscal 2010 guidance range of 4% to 6%. Operating income excluding amortization expense is expected to be in the range of $170 to $176 million, compared to the previous range of $166 million to $176 million.

Conference Call/Webcast Information

Sirona will hold a conference call to discuss its financial results at 8:30 a.m. Eastern Time on February 8, 2010. The teleconference can be accessed by calling [phone] (domestic) or [phone] (international) using passcode # 57202316. The webcast will be available via the Internet at www.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 15, 2010 by calling [phone] (domestic) or [phone] (international) using passcode # 86135161. 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 and any attachment thereto contains forward-looking information aboutSirona 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, 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. The Company assumes no obligation to update any forward-looking statements contained in this document or the attachments to reflect new information or future events or developments after the date any such statement is made.

Â
SIRONA DENTAL SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
	Â			Â
			Three months
			ended
			December 31,
			2009			2008
			$'000s (except per share amounts)
						Â
Revenue		$	214,823		$	179,721
Cost of sales			102,453			92,720
						Â
Gross profit			112,370			87,001
						Â
Selling, general and administrative expense			59,852			57,422
Research and development			11,465			11,058
Provision for doubtful accounts and notes receivable			64			225
Net other operating income			(2,500)			(3,461)
						Â
Operating income			43,489			21,757
						Â
(Gain)/loss on foreign currency transactions, net			(633)			3,592
(Gain)/loss on derivative instruments			(1,023)			4,967
Interest expense, net			5,202			6,064
Other expense			380			-
Income before taxes			39,563			7,134
Income tax provision			7,913			1,998
Net income			31,650			5,136
Less: Net income attributable to noncontrolling interests			475			(423)
Net income attributable to Sirona Dental Systems, Inc.		$	31,175		$	5,559
						Â
Income per share (attributable to Sirona Dental Systems, Inc. common shareholders):
- Basic		$	0.57		$	0.10
- Diluted		$	0.55		$	0.10
Weighted average shares - basic			54,968,399			54,862,708
Weighted average shares - diluted			56,356,288			55,130,373

Â
SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Â
	Â		December 31,	Â		September 30,
			2009			2009
			(unaudited)
			$'000s (except per share amounts)
ASSETS
						Â
Current assets
Cash and cash equivalents		$	215,880		$	181,098
Restricted cash			886			902
Accounts receivable, net of allowance for doubtful accounts
of $2,115 and $2,088, respectively			117,025			98,277
Inventories, net			71,634			74,525
Deferred tax assets			17,887			16,483
Prepaid expenses and other current assets			15,131			20,239
Income tax receivable			4,567			3,956
						Â
Total current assets			443,010			395,480
						Â
Property, plant and equipment, net of accumulated depreciation
and amortization of $72,510 and $70,061, respectively			99,680			102,775
Goodwill			685,595			696,355
Investments			1,905			1,739
Intangible assets, net of accumulated amortization of
$338,022 and $327,183, respectively			425,780			447,946
Other non-current assets			2,410			2,837
Deferred tax assets			991			943
						Â
Total assets		$	1,659,371		$	1,648,075
						Â
LIABILITIES AND SHAREHOLDERS' EQUITY
						Â
Current liabilities
Trade accounts payable		$	41,117		$	38,463
Short-term debt and current portion of long-term debt			87,884			4,688
Income taxes payable			10,841			5,191
Deferred tax liabilities			966			466
Accrued liabilities and deferred income			87,548			95,602
						Â
Total current liabilities			228,356			144,410
						Â
Long-term debt			382,200			470,224
Deferred tax liabilities			152,373			159,659
Other non-current liabilities			8,164			8,699
Pension related provisions			49,441			50,328
Deferred income			67,500			70,000
						Â
Total liabilities			888,034			903,320
						Â
Shareholders' equity
Preferred stock ($0.01 par value; 5,000,000 shares authorized;
none issued and outstanding)			-			-
Common stock ($0.01 par value; 95,000,000 shares authorized;    55,069,213 shares issued and 55,041,490 shares outstanding at Dec. 31, 2009 and    54,972,754 shares issued and 54,945,031 shares outstanding at Sept. 30, 2009)
			551			550
Additional paid-in capital			643,054			637,264
Treasury stock (27,723 shares at cost)			(284)			(284)
Excess of purchase price over predecessor basis			(49,103)			(49,103)
Retained earnings			123,032			91,857
Accumulated other comprehensive income			52,287			63,154
Total Sirona Dental Systems, Inc. shareholders' equity			769,537			743,438
Noncontrolling interests			1,800			1,317
						Â
Total shareholders' equity			771,337			744,755
						Â
Total liabilities and shareholders' equity		$	1,659,371		$	1,648,075

	Â
SIRONA DENTAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
			Â
			Three months ended December 31,
			2009	Â		2008
			$'000s
Cash flows from operating activities
Net income		$	31,650		$	5,136
			Â
Adjustments to reconcile net income   to net cash provided by/(used in) operating activities
Depreciation and amortization			21,779			22,221
Loss on disposal of property, plant and equipment			3			15
(Gain)/loss on derivative instruments			(1,023)			4,967
(Gain)/loss on foreign currency transactions			(633)			3,592
Deferred income taxes			(6,347)			(7,355)
Amortization of debt issuance cost			295			299
Compensation expense from stock options			3,939			3,835
						Â
Changes in assets and liabilities
Accounts receivable			(21,129)			(30,726)
Inventories			1,627			(364)
Prepaid expenses and other current assets			8,987			(632)
Restricted cash			-			(46)
Other non-current assets			235			(224)
Trade accounts payable			3,412			(7,020)
Accrued interest on long-term debt			1,393			5,864
Accrued liabilities and deferred income			(6,569)			(645)
Other non-current liabilities			(2,900)			(2,592)
Income taxes receivable			(113)			(662)
Income taxes payable			5,969			2,763
						Â
Net cash provided by/(used in) operating activities			40,575			(1,574)
						Â
Cash flows from investing activities
Investment in property, plant and equipment			(4,233)			(4,852)
Proceeds from sale of property, plant and equipment			45			283
Purchase of intangible assets			(6)			(52)
Purchase of long-term investments			(166)			-
Sale of businesses, net of cash sold			-			4,985
						Â
Net cash provided by/(used in) investing activities			(4,360)			364
						Â
Cash flows from financing activities
Repayments of short-term and long-term debt			-			(1,153)
Purchase of treasury stock			-			(264)
Common shares issued under share based
compensation plans			1,056			-
Tax effect of common shares exercised under share based
compensation plans			624			-
						Â
Net cash provided by/(used in) financing activities			1,680			(1,417)
						Â
Change in cash and cash equivalents			37,895			(2,627)
Effect of exchange rate change on cash and cash equivalents			(3,113)			(3,355)
Cash and cash equivalents at beginning of period			181,098			149,663
						Â
Cash and cash equivalents at end of period		$	215,880		$	143,681

Â

Â

Â

Â

Â

Â

Â

Other Financial Data (unaudited)

Â

Three months

ended

December 31,

2009

Â

Â

Â

Â

Â

2008

$'000s

Â

Net income attributable to Sirona Dental Systems, Inc.

$

31,175

$

5,559

Net interest expense

5,202

6,064

Provision for income taxes

7,913

1,998

Depreciation

5,622

4,608

Amortization

Â

16,157

Â

17,613

Â

EBITDA

$

Â

66,069

$

Â

35,842

Â

Â

Â

Â

Â

Â

Supplemental Information

Â

Three months

ended

December 31,

2009

Â

Â

Â

Â

Â

2008

$'000s

Â

Share-based compensation

$

3,939

$

3,835

Unrealized, non-cash loss on revaluation

of the carrying value of the $-denominated

exclusivity fee

1,352

2,291

Unrealized, non-cash loss on

revaluation of the carrying value of

short-term intra-group loans

Â

1,267

Â

1,402

Â

$

Â

6,558

$

Â

7,528

Notes to Tables Above

EBITDA is a non-GAAP financial measure that is reconciled to net income, its most directly comparable GAAP measure, in the accompanying financial tables.EBITDA is defined as net earnings before interest, taxes, depreciation and amortization.Sirona's management utilizesEBITDA as an operating performance measure in conjunction with GAAP measures, such as net income and gross margin calculated in conformity with GAAP.EBITDA should not be considered in isolation or as a substitute for net income prepared in conformity with GAAP.There are material limitations associated with making adjustments to Sirona's earnings to calculate EBITDA and using this non-GAAP financial measure as compared to the most directly comparable GAAP financial measure. For instance, EBITDA does not include:

•interest expense, and because Sirona has borrowed money in order to finance its operations, interest expense is a necessary element of its costs and ability to generate revenue;

•depreciation and amortization expense, and because Sirona uses capital assets, depreciation and amortization expense is a necessary element of its costs and ability to generate revenue; and

•tax expense, and because the payment of taxes is part of Sirona's operations, tax expense is a necessary element of costs and impacts Sirona's ability to operate.

In addition, other companies may define EBITDA differently.EBITDA, as well as the other information in this filing, should be read in conjunction with Sirona's financial statements and footnotes contained in the documents that Sirona files with the U.S. Securities and Exchange Commission.

In addition to EBITDA, the accompanying financial tables also set forth certainsupplementary information that Sirona believes is useful for investors in evaluating Sirona's underlying operations.This supplemental information includes share-based compensation expense and revaluation of the carrying value of the dollar-denominated exclusivity payment and on the carrying value of short-term intra-group loans.Sirona's management believes that these items, which are noncash in nature, should be considered by investors in assessing Sirona's financial condition, operating performance and underlying strength.

Sirona's management uses EBITDA together with this supplemental information as an integral part of its reportingand planning processes and as one of the primary measures to, among other things:

(i)monitor and evaluate the performance of Sirona's business operations;

(ii)facilitate management's internal comparisons of the historical operating performance of Sirona's business operations;

(iii)facilitate management's external comparisons of the results of Sirona's overall business to the historical operating performance of other companies that may have different capital structures and debt levels;

(iv)analyze and evaluate financial and strategic planning decisions regarding future operating investments; and

(v)plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Sirona's management believes that EBITDA and the supplemental information provided is useful to investors as it provides them with disclosure of Sirona's operating results on the same basis as that used by Sirona's management.

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 supplementally 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 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 monthly exchange rates used in converting Euro denominated revenues into U.S. Dollars in the Company's financial statements prepared in accordance with U.S. GAAP were: $1.48102 (October), $1.48990 (November), and $1.46064 (December) for the three months ended December 31, 2009. For the three months ended December 31, 2008, an average quarterly foreign exchange rate converting Euro-denominated revenues into U.S. Dollars of $1.31883 was applied.

Contacts:

Sirona Dental Systems, Inc.
John Sweeney, CFA, [phone]
Vice President, Investor Relations
[e-mail]