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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(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



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SYBRON DENTAL SPECIALTIES, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



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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.



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##### 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                                                                                   



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##### 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.



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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



|                                                   |  |                                             |         |   |      |   |         |  
|-------------------------------------------------- |  | ------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                   |  | Three Months EndedDecember 31,              |        
|                                                   |  | 2004                                        |         |   | 2003 |  
|                                                   |  | (in thousands, except forper 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.



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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    |  | AdditionalPaid-inCapital |     | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome |  |   | TotalStockholdersEquity |  |   | TotalComprehensiveIncome |  
|                                                           |  | Number ofShares |  | 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.



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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                         |  |                                |         |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                         |  | Three Months EndedDecember 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                                                             |  |                                |        |   |      |   | 818     |  
|Principal payments on long-term debt                                                     |  |                                | (219    | ) |      |   | (2,030  | )
|Proceeds from exercise of stock options                                                  |  |                                | 7,868   |   |      |   | 1,142   |  
|Proceeds from employee stock purchase plan                                               |  |                                | 748     |   |      |   | 522     |  
|                                                                                         |  |                                |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                      |  |                                | 33,237  |   |      |   | (17,258 | )
|Effect of exchange rate changes on cash and cash equivalents                             |  |                                | 5,503   |   |      |   | (76     | )
|                                                                                         |  |                                |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                                |  |                                | 9,045   |   |      |   | 179     |  
|Cash and cash equivalents at beginning of period                                         |  |                                | 40,602  |   |      |   | 22,868  |  
|                                                                                         |  |                                |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                               |  | $                              | 49,647  |   |      | $ | 23,047  |  
|                                                                                         |  |                                |         |   |      |   |         |  
|Supplemental cash flow information:                                                      |  |                                |         |   |      |   |         |  
|Cash paid during the period for interest                                                 |  | $                              | 7,732   |   |      | $ | 8,434   |  
|                                                                                         |  |                                |         |   |      |   |         |  
|Cash paid during the period for income taxes                                             |  | $                              | 4,942   |   |      | $ | 4,906   |  
|                                                                                         |  |                                |         |   |      |   |         |  



See accompanying notes
to unaudited condensed consolidated financial statements.



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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(AMOUNTS IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)



1. OVERVIEW AND BASIS OF PRESENTATION



Sybron Dental Specialties, Inc. (SDS or the Company)
was incorporated in Delaware on July 17, 2000. At the time of its incorporation the Company was a wholly-owned subsidiary of Apogent Technologies Inc. (Apogent), which in August 2004 was acquired by and became a wholly-owned subsidiary
of Fisher Scientific International Inc. The Company was created to effect the spin-off by Apogent of its dental business in December 2000. Apogent distributed to its shareholders, by means of pro rata distribution, all of the Companys
outstanding common stock together with related preferred stock purchase rights (the spin-off). As a result, SDS became an independent, publicly-traded company.



The unaudited condensed consolidated financial statements reflect the operations of SDS and its wholly-owned subsidiaries.
The Companys fiscal year ends on September 30. All significant intercompany balances and transactions have been eliminated in consolidation. The quarters ended December 31, 2004 and 2003 refer to the first quarters of fiscal years 2005 and
2004, respectively.



In the opinion of management, all
adjustments, which are necessary for a fair presentation of the results for the interim periods presented, have been included. All such adjustments were of a normal recurring nature. The results for the period ended December 31, 2004 are not
necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note
disclosures required by accounting principles generally accepted in the United States of America. This information should only be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2004.



2. INVENTORIES



Inventories at December 31, 2004 and September 30, 2004 are presented below.



|                           |  |                   |         |   |                    |   |        |  
|-------------------------- |  | ----------------- | ------- | - | ------------------ | - | ------ | -
|                           |  | December 31, 2004 |         |   | September 30, 2004 |  
|Raw materials and supplies |  | $                 | 23,720  |   |                    | $ | 25,110 |  
|Work in process            |  |                   | 27,332  |   |                    |   | 22,015 |  
|Finished goods             |  |                   | 59,740  |   |                    |   | 51,825 |  
|Inventory reserves         |  |                   | (6,071  | ) |                    |   | (5,261 | )
|                           |  |                   |         |   |                    |   |        |  
|                           |  | $                 | 104,721 |   |                    | $ | 93,689 |  
|                           |  |                   |         |   |                    |   |        |  



3. GOODWILL AND INTANGIBLE ASSETS,
NET



Definite lived intangible assets are recorded at cost
and are amortized using the straight-line method, over their estimated useful lives. Indefinite lived intangible assets are not amortized but rather are tested for impairment annually. The following table details the balances of the intangible
assets as of December 31, 2004:



|                                                |  |                       |        |                          |   |                     |  |   |       
|----------------------------------------------- |  | --------------------- | ------ | ------------------------ | - | ------------------- |  | - | ------
|                                                |  | Gross Carrying Amount |        | Accumulated Amortization |   | Net Carrying Amount
|Intangibles Assets Subject To Amortization:     |  |                       |        |                          |   |                     |  |   |       
|Proprietary technology                          |  | $                     | 35,677 |                          | $ | 10,543              |  | $ | 25,134
|Other                                           |  |                       | 14,793 |                          |   | 14,661              |  |   | 132   
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total                                           |  | $                     | 50,470 |                          | $ | 25,204              |  |   | 25,266
|                                                |  |                       |        |                          |   |                     |  |   |       
|Intangibles Assets Not Subject To Amortization: |  |                       |        |                          |   |                     |  |   |       
|Trademarks                                      |  |                       |        |                          |   |                     |  |   | 9,811 
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total Intangible Assets                         |  |                       |        |                          |   |                     |  | $ | 35,077
|                                                |  |                       |        |                          |   |                     |  |   |       



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The following table details the balances of the intangible assets as of September 30, 2004:



|                                                |  |                       |        |                          |   |                     |  |   |       
|----------------------------------------------- |  | --------------------- | ------ | ------------------------ | - | ------------------- |  | - | ------
|                                                |  | Gross Carrying Amount |        | Accumulated Amortization |   | Net Carrying Amount
|Intangibles Assets Subject To Amortization:     |  |                       |        |                          |   |                     |  |   |       
|Proprietary technology                          |  | $                     | 16,283 |                          | $ | 10,084              |  | $ | 6,199 
|Other                                           |  |                       | 14,791 |                          |   | 14,623              |  |   | 168   
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total                                           |  | $                     | 31,074 |                          | $ | 24,707              |  |   | 6,367 
|                                                |  |                       |        |                          |   |                     |  |   |       
|Intangibles Assets Not Subject To Amortization: |  |                       |        |                          |   |                     |  |   |       
|Trademarks                                      |  |                       |        |                          |   |                     |  |   | 9,811 
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total Intangible Assets                         |  |                       |        |                          |   |                     |  | $ | 16,178
|                                                |  |                       |        |                          |   |                     |  |   |       



Amortization of
intangible assets is included as a component of selling, general and administrative expense.



In the first quarter of fiscal 2005, in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, the Company tested goodwill and intangible assets with indefinite
useful lives for impairment. As a result of this testing the Company has determined that there was no impairment of goodwill or intangible assets.



4. EMPLOYEE BENEFIT PLANS



Pension and Other Postretirement Benefits:The Company participates in various defined benefit pension plans covering substantially all of its U.S.
and Canadian employees. The benefits are generally based on various formulas, the principal factors of which are years of service and compensation. Plan assets are invested primarily in U.S. stocks, bonds and international stocks. In addition to the
defined benefit plans, the Company provides certain health care benefits for certain U.S. employees, which are funded as costs are incurred. Certain salaried employees who reached age 55 prior to January 1, 1996 became eligible for postretirement
health care benefits, if they reach retirement age while working for SDS. In addition, under the current collective bargaining agreement between Kerr Corporation and the United Auto Workers, the bargaining unit employees qualify for postretirement
health care benefits. The Company accrues, as current costs, the future lifetime retirement benefits for qualifying active employees. The postretirement health care plans currently follow a policy instituted by the predecessor of Apogent in 1986
where the Companys contributions were frozen at the levels equal to the Companys contributions on December 31, 1988, except where collective bargaining agreements or early retirement agreements prohibit such a freeze.



The following table provides the components of net periodic benefit cost:



|                                   |  |                                |        |   |                                |   |       |      |  |      |     |  |   |    
|---------------------------------- |  | ------------------------------ | ------ | - | ------------------------------ | - | ----- | ---- |  | ---- | --- |  | - | ---
|                                   |  | Pension Benefits               |        |   | Other PostretirementBenefits  
|                                   |  | Three Months EndedDecember 31, |        |   | Three Months EndedDecember 31,
|                                   |  | 2004                           |        |   | 2003                           |   |       | 2004 |  | 2003
|Service cost                       |  | $                              | 1,094  |   |                                | $ | 985   |      |  | $    | 149 |  | $ | 119
|Interest cost                      |  |                                | 972    |   |                                |   | 820   |      |  |      | 253 |  |   | 205
|Expected return on plan assets     |  |                                | (1,108 | ) |                                |   | (948  | )    |  |      |    |  |   |   
|Amortization of prior service cost |  |                                | 24     |   |                                |   | 24    |      |  |      |    |  |   |   
|Amortization of actuarial loss     |  |                                | 241    |   |                                |   | 302   |      |  |      | 153 |  |   | 121
|                                   |  |                                |        |   |                                |   |       |      |  |      |     |  |   |    
|Net periodic benefit cost          |  | $                              | 1,223  |   |                                | $ | 1,183 |      |  | $    | 555 |  | $ | 445
|                                   |  |                                |        |   |                                |   |       |      |  |      |     |  |   |    



The Companys
funding policy is to generally make annual contributions in excess of both the minimum required contributions required by applicable regulations and the amount needed in order to avoid any Pension Benefit Guarantee Corporation (PBGC)
variable premium payments, and to not have any additional minimum liability under SFAS No. 87 Employers Accounting for Pensions. The Company expects to contribute approximately $380 to its pension plan assets in fiscal 2005. No
contributions were made in the quarter ended December 31, 2004.



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5. RESTRUCTURING CHARGES



In fiscal 2004, the Company implemented and completed a plan to close its facility in Tijuana, Mexico and as a result of this plan, recorded
restructuring charges of $1,471 ($986 after tax) in the fiscal year ended 2004. The charges are recorded as a component of cost of goods sold and are comprised of severance and termination costs associated with the 246 employees whose employment the
Company terminated as a result of the closure. The 2004 restructuring was completed in the first quarter of fiscal 2005 and all severance was paid.



In September 2002, the Company recorded a restructuring charge of approximately $3,666 ($2,353 after tax). The charge was primarily comprised of severance
and termination costs associated with the 71 employees whose employment the Company terminated as a result of the consolidation of several of its European facilities into its Hawe Neos facility in Switzerland. Of the $3,666 restructuring charge,
approximately $3,064 was related to cash payments for severance and contractual obligations, $300 for the cash payment of tax liabilities included in income taxes payable while the balance of approximately $302 relates to non-cash charges. The
Company completed the 2002 restructuring in fiscal 2004, and made an adjustment to restructuring charges of approximately $200, primarily for over accruals of anticipated costs associated with severance and related costs. A balance of $300 remains
in the Companys accrued tax liability until it is remitted.



In June 1998, the Company recorded a restructuring charge of approximately $14,600 (approximately $10,700 after tax) for the rationalization of certain acquired companies, combination of certain duplicate production facilities, movement of
certain customer service and marketing functions, and the exiting of several product lines. In fiscal 2004 the Company made an adjustment to restructuring charges of approximately $200 relating to over accruals of anticipated costs associated with
the restructuring activity. A tax liability of approximately $700 remains in the Companys accrued tax liability until it is remitted.



6. SEGMENT INFORMATION



The Company is a global manufacturer and marketer of a broad range of consumable dental products and related small equipment and a manufacturer and
distributor of products for use in infection prevention in both the medical and dental markets. The Companys subsidiaries operate in two business segments: Professional Dental and Specialty Products. The Specialty Products segment was
previously referred to as the Orthodontics segment. The name was changed to more accurately describe the products of this segment. The composition of the Specialty Products segment has not changed.



Our corporate office general and administrative expenses have been allocated
to the segments on the basis of net sales.



The following table
presents the results of operations for these business segments for the quarters ended December 31:



|                                             |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|-------------------------------------------- |  | ------------------- | ------ | ----------------- | - | ------------ |  | - | ------ | - |  | - | -------
|Three Months Ended December 31,              |  | Professional Dental |        | SpecialtyProducts |   | Eliminations |  |   | Total 
|2004                                         |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                   | 75,887 |                   | $ | 73,153       |  | $ |       |   |  | $ | 149,040
|Intersegment                                 |  |                     | 844    |                   |   | 832          |  |   | (1,676 | ) |  |   |       
|                                             |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                   | 76,731 |                   | $ | 73,985       |  | $ | (1,676 | ) |  | $ | 149,040
|                                             |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                   | 41,558 |                   | $ | 43,809       |  | $ |       |   |  | $ | 85,367 
|Selling, general and administrative expenses |  |                     | 29,986 |                   |   | 27,999       |  |   |       |   |  |   | 57,985 
|Operating income                             |  |                     | 11,572 |                   |   | 15,810       |  |   |       |   |  |   | 27,382 
|                                             |  |                     |        |                  
|2003                                         |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                   | 71,444 |                   | $ | 60,413       |  | $ |       |   |  | $ | 131,857
|Intersegment                                 |  |                     | 1,117  |                   |   | 957          |  |   | (2,074 | ) |  |   |       
|                                             |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                   | 72,561 |                   | $ | 61,370       |  | $ | (2,074 | ) |  | $ | 131,857
|                                             |  |                     |        |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                   | 38,123 |                   | $ | 33,835       |  | $ |       |   |  | $ | 71,958 
|Selling, general and administrative expenses |  |                     | 26,527 |                   |   | 21,975       |  |   |       |   |  |   | 48,502 
|Operating income                             |  |                     | 11,596 |                   |   | 11,860       |  |   |       |   |  |   | 23,456 



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The following table presents the segment assets as of December 31, 2004 compared to the prior fiscal year
end:



|                   |  |                     |         |                    |   |         |  |   |        
|------------------ |  | ------------------- | ------- | ------------------ | - | ------- |  | - | -------
|                   |  | Professional Dental |         | Specialty Products |   | Total  
|December 31, 2004  |  | $                   | 489,835 |                    | $ | 223,936 |  | $ | 713,771
|September 30, 2004 |  | $                   | 461,140 |                    | $ | 185,418 |  | $ | 646,558



7. EARNINGS PER SHARE



Basic earnings per share are calculated by dividing net
income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilutive effect, calculated using the treasury stock method, of additional common
shares that are issuable upon exercise of outstanding stock options as follows:



|                                            |  |                                |  |       
|------------------------------------------- |  | ------------------------------ |  | ------
|                                            |  | Three Months EndedDecember 31,
|                                            |  | 2004                           |  | 2003  
|Basic shares outstanding (weighted average) |  | 39,479                         |  | 38,310
|Effect of dilutive securities               |  | 1,589                          |  | 1,587 
|                                            |  |                                |  |       
|Diluted shares outstanding                  |  | 41,068                         |  | 39,897
|                                            |  |                                |  |       



No options to purchase
shares of common stock were excluded from the computation of dilutive securities during the three months ended December 31, 2004 and 2003.



8. STOCK-BASED COMPENSATION



The Company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations.



As required under SFAS No. 123, Accounting for Stock-Based Compensation, as amended, the pro forma effects of stock-based compensation on net
income and earnings per common share have been estimated as of the date of grant using the Black-Scholes option-pricing model.



The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are
fully transferable and negotiable in a free trading market. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Companys options have
characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide
a reliable single measure of the fair value of its options. There were no stock options granted in the quarters ended December 31, 2004 and 2003. The Black-Scholes weighted average estimated fair value of purchase rights pursuant to the employee
stock purchase plan during the three months ended December 31, 2004 and 2003 was $9.58 and $4.91, respectively.



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For purposes of pro forma disclosures, the estimated fair value of each option is assumed to be amortized
over its vesting period. The pro forma recognition of compensation expense under the fair value method on net income and earnings per share is as follows:



|                                                                                                                                            |  |                                 |        |      |   |       
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------
|                                                                                                                                            |  | Three Months Ended December 31,
|                                                                                                                                            |  | 2004                            |        | 2003
|Net income, as reported                                                                                                                     |  | $                               | 15,039 |      | $ | 11,949
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                 | 913    |      |   | 947   
|                                                                                                                                            |  |                                 |        |      |   |       
|Pro forma net income:                                                                                                                       |  | $                               | 14,126 |      | $ | 11,002
|                                                                                                                                            |  |                                 |        |      |   |       
|Earnings per share:                                                                                                                         |  |                                 |        |      |   |       
|Basic - as reported                                                                                                                         |  | $                               | 0.38   |      | $ | 0.31  
|                                                                                                                                            |  |                                 |        |      |   |       
|Basic - pro forma                                                                                                                           |  | $                               | 0.36   |      | $ | 0.29  
|                                                                                                                                            |  |                                 |        |      |   |       
|Diluted - as reported                                                                                                                       |  | $                               | 0.37   |      | $ | 0.30  
|                                                                                                                                            |  |                                 |        |      |   |       
|Diluted - pro forma                                                                                                                         |  | $                               | 0.34   |      | $ | 0.28  
|                                                                                                                                            |  |                                 |        |      |   |       



The pro forma net
income may not be representative of future disclosures since the estimated fair value of stock options granted subsequent to the spin-off is amortized to expense over the vesting period, which was only a partial year in 2001, and additional options
may be granted in varying quantities in future years.



In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment,which requires the recognition of costs resulting from transactions in which the Company acquires goods and
services by issuing its shares, share options, or other equity instruments. This standard requires a fair value-based measurement method in accounting for share-based payment transactions with both employees and nonemployees. This standard replaces
SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, the use of the intrinsic value method as provided under APB Opinion No. 25 will
be eliminated. SFAS No. 123(R) is effective for all awards of share-based payments granted, modified, or cancelled after June 15, 2005. In addition, compensation costs for the unvested portion of awards issued prior to and outstanding as of June 15,
2005 would continue to be recognized at the grant-date fair value as the remaining requisite service is rendered. The Company will adopt the provisions of FAS 123(R) in the fourth quarter of fiscal 2005 using a modified prospective application. At
December 31, 2004, unamortized compensation expense, as determined in accordance with FAS 123, that the Company expects to record during the fourth quarter of fiscal 2005 was approximately $400 before income taxes. The Company will incur additional
expense during the fourth quarter of fiscal 2005 that cannot yet be quantified, related to new stock option awards granted during the last nine months of fiscal 2005.



9. CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The Companys domestic subsidiaries are guarantors of the Companys 81/8% Senior Subordinated Notes due 2012, on an unsecured senior subordinated basis. Except to the extent necessary to avoid a fraudulent conveyance, the note
guarantees are full and unconditional. The notes and the subsidiary guarantees are unsecured and subordinated to all of the Companys and the Companys guarantor subsidiaries existing and future unsubordinated debt, including debt
under the credit facility entered into on June 6, 2002.



Below are the unaudited condensed consolidating balance sheets as of December 31, 2004 and September 30, 2004, statements of income for the three months ended December 31, 2004 and 2003, and statements of cash flows for the three months
ended December 31, 2004 and 2003, of Sybron Dental Specialties, Inc. and its subsidiaries, reflecting the subsidiary guarantors of the Senior Subordinated Notes.



Certain general corporate expenses have been allocated to the subsidiaries. As a matter of course, the Company retains
certain assets and liabilities at the corporate level that are not allocated to the subsidiaries including, but not limited to, certain employee benefit, insurance and tax liabilities. Intercompany balances include receivables/payables incurred in
the normal course of business in addition to investments and loans transacted by subsidiaries of the Company with other subsidiaries or with the Company.



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Condensed Consolidating Balance Sheets



|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|---------------------------------------------- |  | ------------------------- | ------- | ---------------------- | - | -------------------------- |  | ------------ | ------- |  | ------------ | ---------- | - |  | - | -------
|                                               |  | As of December 31, 2004  
|                                               |  | Sybron Dental Specialties |         | Guarantor Subsidiaries |   | Non Guarantor Subsidiaries |  | Eliminations |         |  | Consolidated
|ASSETS                                         |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Current assets:                                |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Cash and cash equivalents                      |  | $                         | 3,373   |                        | $ | 2,248                      |  | $            | 44,026  |  | $            |           |   |  | $ | 49,647 
|Account receivable, net                        |  |                           | 16      |                        |   | 49,050                     |  |              | 48,596  |  |              |           |   |  |   | 97,662 
|Inventories                                    |  |                           |        |                        |   | 63,152                     |  |              | 41,569  |  |              |           |   |  |   | 104,721
|Other current assets                           |  |                           | 7,753   |                        |   | 2,481                      |  |              | 5,337   |  |              |           |   |  |   | 15,571 
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total current assets                           |  |                           | 11,142  |                        |   | 116,931                    |  |              | 139,528 |  |              |           |   |  |   | 267,601
|Property, plant and equipment, net             |  |                           | 9,383   |                        |   | 26,450                     |  |              | 51,673  |  |              |           |   |  |   | 87,506 
|Goodwill                                       |  |                           |        |                        |   | 199,390                    |  |              | 99,632  |  |              |           |   |  |   | 299,022
|Intangible assets, net                         |  |                           |        |                        |   | 15,894                     |  |              | 19,183  |  |              |           |   |  |   | 35,077 
|Investment in subsidiaries                     |  |                           | 889,184 |                        |   |                           |  |              |        |  |              | (889,184   | ) |  |   |       
|Intercompany balances                          |  |                           |        |                        |   | 204,171                    |  |              | 137,987 |  |              | (342,158   | ) |  |   |       
|Other assets                                   |  |                           | 11,964  |                        |   | 9,089                      |  |              | 3,512   |  |              |           |   |  |   | 24,565 
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total assets                                   |  | $                         | 921,673 |                        | $ | 571,925                    |  | $            | 451,515 |  | $            | (1,231,342 | ) |  | $ | 713,771
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Current liabilities:                           |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Account payable                                |  | $                         | 1,349   |                        | $ | 10,231                     |  | $            | 7,791   |  | $            |           |   |  | $ | 19,371 
|Current portion of long-term debt              |  |                           | 123     |                        |   | 773                        |  |              | 2       |  |              |           |   |  |   | 898    
|Income taxes payable                           |  |                           | 4,652   |                        |   | 2,283                      |  |              | 8,050   |  |              |           |   |  |   | 14,985 
|Accrued expenses and other current liabilities |  |                           | 8,762   |                        |   | 22,531                     |  |              | 21,487  |  |              |           |   |  |   | 52,780 
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total current liabilities                      |  |                           | 14,886  |                        |   | 35,818                     |  |              | 37,330  |  |              |           |   |  |   | 88,034 
|Long-term debt                                 |  |                           | 35,021  |                        |   | 59,351                     |  |              |        |  |              |           |   |  |   | 94,372 
|Senior subordinated notes                      |  |                           | 150,000 |                        |   |                           |  |              |        |  |              |           |   |  |   | 150,000
|Deferred income taxes                          |  |                           | 8,254   |                        |   |                           |  |              | 619     |  |              |           |   |  |   | 8,873  
|Other liabilities                              |  |                           | 32,126  |                        |   |                           |  |              | 1,138   |  |              |           |   |  |   | 33,264 
|Intercompany balances                          |  |                           | 342,158 |                        |   |                           |  |              |        |  |              | (342,158   | ) |  |   |       
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total liabilities                              |  |                           | 582,445 |                        |   | 95,169                     |  |              | 39,087  |  |              | (342,158   | ) |  |   | 374,543
|Stockholders equity:                          |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Preferred stock                                |  |                           |        |                        |   |                           |  |              |        |  |              |           |   |  |   |       
|Common stock                                   |  |                           | 399     |                        |   | 3,953                      |  |              | 15,805  |  |              | (19,758    | ) |  |   | 399    
|Additional paid-in capital                     |  |                           | 106,478 |                        |   | 309,183                    |  |              | 247,247 |  |              | (556,430   | ) |  |   | 106,478
|Retained earnings                              |  |                           | 203,195 |                        |   | 151,024                    |  |              | 108,047 |  |              | (259,071   | ) |  |   | 203,195
|Accumulated other comprehensive income         |  |                           | 29,156  |                        |   | 12,596                     |  |              | 41,329  |  |              | (53,925    | ) |  |   | 29,156 
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total stockholders equity                     |  |                           | 339,228 |                        |   | 476,756                    |  |              | 412,428 |  |              | (889,184   | ) |  |   | 339,228
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        
|Total liabilities and stockholders equity     |  | $                         | 921,673 |                        | $ | 571,925                    |  | $            | 451,515 |  | $            | (1,231,342 | ) |  | $ | 713,771
|                                               |  |                           |         |                        |   |                            |  |              |         |  |              |            |   |  |   |        



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Condensed Consolidating Balance Sheets



|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|---------------------------------------------- |  | ------------------------- | ------- | ---------------------- | - | ------- | -------------------------- |  | ------------ | ------- |  | ------------ | ---------- | - |  | - | -------
|                                               |  | As of September 30, 2004 
|                                               |  | Sybron Dental Specialties |         | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  | Eliminations |         |  | Consolidated
|ASSETS                                         |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Current assets:                                |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Cash and cash equivalents                      |  | $                         | 7,402   |                        | $ | (1,801  | )                          |  | $            | 35,001  |  | $            |           |   |  | $ | 40,602 
|Account receivable, net                        |  |                           | 7       |                        |   | 53,894  |                            |  |              | 50,247  |  |              |           |   |  |   | 104,148
|Inventories                                    |  |                           |        |                        |   | 62,240  |                            |  |              | 31,449  |  |              |           |   |  |   | 93,689 
|Other current assets                           |  |                           | 7,458   |                        |   | 3,131   |                            |  |              | 5,679   |  |              |           |   |  |   | 16,268 
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total current assets                           |  |                           | 14,867  |                        |   | 117,464 |                            |  |              | 122,376 |  |              |           |   |  |   | 254,707
|Property, plant and equipment, net             |  |                           | 8,564   |                        |   | 26,736  |                            |  |              | 47,821  |  |              |           |   |  |   | 83,121 
|Goodwill                                       |  |                           |        |                        |   | 199,275 |                            |  |              | 69,493  |  |              |           |   |  |   | 268,768
|Intangible assets, net                         |  |                           |        |                        |   | 15,980  |                            |  |              | 198     |  |              |           |   |  |   | 16,178 
|Investment in subsidiaries                     |  |                           | 741,104 |                        |   |        |                            |  |              |        |  |              | (741,104   | ) |  |   |       
|Intercompany balances                          |  |                           |        |                        |   | 184,917 |                            |  |              | 75,343  |  |              | (260,260   | ) |  |   |       
|Other assets                                   |  |                           | 11,963  |                        |   | 9,532   |                            |  |              | 2,289   |  |              |           |   |  |   | 23,784 
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total assets                                   |  | $                         | 776,498 |                        | $ | 553,904 |                            |  | $            | 317,520 |  | $            | (1,001,364 | ) |  | $ | 646,558
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Current liabilities:                           |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Account payable                                |  | $                         | 789     |                        | $ | 10,738  |                            |  | $            | 7,985   |  | $            |           |   |  | $ | 19,512 
|Current portion of long-term debt              |  |                           | 109     |                        |   | 770     |                            |  |              | 3       |  |              |           |   |  |   | 882    
|Income taxes payable                           |  |                           | 11,108  |                        |   | (2,312  | )                          |  |              | 8,423   |  |              | (130       | ) |  |   | 17,089 
|Accrued expenses and other current liabilities |  |                           | 12,715  |                        |   | 22,813  |                            |  |              | 20,281  |  |              |           |   |  |   | 55,809 
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total current liabilities                      |  |                           | 24,721  |                        |   | 32,009  |                            |  |              | 36,692  |  |              | (130       | ) |  |   | 93,292 
|Long-term debt                                 |  |                           | 10,045  |                        |   | 59,544  |                            |  |              |        |  |              |           |   |  |   | 69,589 
|Senior subordinated notes                      |  |                           | 150,000 |                        |   |        |                            |  |              |        |  |              |           |   |  |   | 150,000
|Deferred income taxes                          |  |                           | 11,171  |                        |   |        |                            |  |              | 1,095   |  |              |           |   |  |   | 12,266 
|Other liabilities                              |  |                           | 21,659  |                        |   |        |                            |  |              | 980     |  |              |           |   |  |   | 22,639 
|                                               |  |                           |         |                        |  
|Intercompany balances                          |  |                           | 260,130 |                        |   |        |                            |  |              |        |  |              | (260,130   | ) |  |   |       
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total liabilities                              |  |                           | 477,726 |                        |   | 91,553  |                            |  |              | 38,767  |  |              | (260,260   | ) |  |   | 347,786
|Stockholders equity:                          |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Preferred stock                                |  |                           |        |                        |   |        |                            |  |              |        |  |              |           |   |  |   |       
|Common stock                                   |  |                           | 393     |                        |   | 3,944   |                            |  |              | 7,081   |  |              | (11,025    | ) |  |   | 393    
|Additional paid-in capital                     |  |                           | 93,817  |                        |   | 306,949 |                            |  |              | 144,758 |  |              | (451,707   | ) |  |   | 93,817 
|Retained earnings                              |  |                           | 188,156 |                        |   | 142,460 |                            |  |              | 101,439 |  |              | (243,899   | ) |  |   | 188,156
|Accumulated other comprehensive income         |  |                           | 16,406  |                        |   | 8,998   |                            |  |              | 25,475  |  |              | (34,473    | ) |  |   | 16,406 
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total stockholders equity                     |  |                           | 298,772 |                        |   | 462,351 |                            |  |              | 278,753 |  |              | (741,104   | ) |  |   | 298,772
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        
|Total liabilities and stockholders equity     |  | $                         | 776,498 |                        | $ | 553,904 |                            |  | $            | 317,520 |  | $            | (1,001,364 | ) |  | $ | 646,558
|                                               |  |                           |         |                        |   |         |                            |  |              |         |  |              |            |   |  |   |        





13



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##### Table of Contents

Condensed Consolidating Statements of Income



|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | -------------------------------------------- | ------ | - | ---------------------- | - | ------ | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             |  | For The Three Months Ended December 31, 2004 |       
|                                             |  | Sybron Dental Specialties                    |        |   | Guarantor Subsidiaries |   |        | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                            |       |   |                        | $ | 78,291 |                            |  | $ | 72,425       |   |  | $            | (1,676  | ) |  | $ | 149,040 |  
|Cost of sales                                |  |                                              | 293    |   |                        |   | 25,376 |                            |  |   | 39,680       |   |  |              | (1,676  | ) |  |   | 63,673  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                              | (293   | ) |                        |   | 52,915 |                            |  |   | 32,745       |   |  |              |        |   |  |   | 85,367  |  
|Selling, general and administrative expenses |  |                                              | 6,732  |   |                        |   | 30,033 |                            |  |   | 21,220       |   |  |              |        |   |  |   | 57,985  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                              | (7,025 | ) |                        |   | 22,882 |                            |  |   | 11,525       |   |  |              |        |   |  |   | 27,382  |  
|Other income (expense):                      |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                              | (3,619 | ) |                        |   | (1,352 | )                          |  |   | (24          | ) |  |              |        |   |  |   | (4,995  | )
|Amortization of deferred financing fees      |  |                                              |       |   |                        |   | (415   | )                          |  |   |             |   |  |              |        |   |  |   | (415    | )
|Income from equity method investments        |  |                                              | 15,039 |   |                        |   |       |                            |  |   |             |   |  |              | (15,039 | ) |  |   |        |  
|Other, net                                   |  |                                              | 10,644 |   |                        |   | (8,918 | )                          |  |   | (1,582       | ) |  |              |        |   |  |   | 144     |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                              | 15,039 |   |                        |   | 12,197 |                            |  |   | 9,919        |   |  |              | (15,039 | ) |  |   | 22,116  |  
|Income taxes                                 |  |                                              |       |   |                        |   | 4,560  |                            |  |   | 2,517        |   |  |              |        |   |  |   | 7,077   |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                            | 15,039 |   |                        | $ | 7,637  |                            |  | $ | 7,402        |   |  | $            | (15,039 | ) |  | $ | 15,039  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|                                             | 
|                                             |  | For The Three Months Ended December 31, 2003 |       
|                                             |  | Sybron Dental Specialties                    |        |   | Guarantor Subsidiaries |   |        | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                            |       |   |                        | $ | 73,515 |                            |  | $ | 60,416       |   |  | $            | (2,074  | ) |  | $ | 131,857 |  
|Cost of sales                                |  |                                              | 263    |   |                        |   | 26,970 |                            |  |   | 34,740       |   |  |              | (2,074  | ) |  |   | 59,899  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                              | (263   | ) |                        |   | 46,545 |                            |  |   | 25,676       |   |  |              |        |   |  |   | 71,958  |  
|Selling, general and administrative expenses |  |                                              | 5,464  |   |                        |   | 27,780 |                            |  |   | 15,258       |   |  |              |        |   |  |   | 48,502  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                              | (5,727 | ) |                        |   | 18,765 |                            |  |   | 10,418       |   |  |              |        |   |  |   | 23,456  |  
|Other income (expense):                      |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                              | (3,353 | ) |                        |   | (1,721 | )                          |  |   | (86          | ) |  |              |        |   |  |   | (5,160  | )
|Amortization of deferred financing fees      |  |                                              |       |   |                        |   | (407   | )                          |  |   |             |   |  |              |        |   |  |   | (407    | )
|Income from equity method investments        |  |                                              | 11,949 |   |                        |   |       |                            |  |   |             |   |  |              | (11,949 | ) |  |   |        |  
|Other, net                                   |  |                                              | 9,080  |   |                        |   | (8,007 | )                          |  |   | (1,127       | ) |  |              |        |   |  |   | (54     | )
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                              | 11,949 |   |                        |   | 8,630  |                            |  |   | 9,205        |   |  |              | (11,949 | ) |  |   | 17,835  |  
|Income taxes                                 |  |                                              |       |   |                        |   | 3,377  |                            |  |   | 2,509        |   |  |              |        |   |  |   | 5,886   |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                            | 11,949 |   |                        | $ | 5,253  |                            |  | $ | 6,696        |   |  | $            | (11,949 | ) |  | $ | 11,949  |  
|                                             |  |                                              |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  





14



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##### Table of Contents

Condensed Consolidating Statements of Cash Flows



|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|------------------------------------------------------------ |  | -------------------------------------------- | ------- | - | ---------------------- | - | ------- | -------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | ------- | -
|                                                             |  | For The Three Months Ended December 31, 2004 |        
|                                                             |  | Sybron Dental Specialties                    |         |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by (used in) operating activities        |  | $                                            | (51,367 | ) |                        | $ | 48,140  |                            |  | $ | 23,033       |   |              | $ |  |  | $ | 19,806  |  
|Cash flows from investing activities:                        |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Capital expenditures                                         |  |                                              | (1,362  | ) |                        |   | (1,138  | )                          |  |   | (898         | ) |              |   |  |  |   | (3,398  | )
|Proceeds from sales of property, plant and equipment         |  |                                              |        |   |                        |   | 15      |                            |  |   | 131          |   |              |   |  |  |   | 146     |  
|Net payments for businesses acquired                         |  |                                              |        |   |                        |   |        |                            |  |   | (45,975      | ) |              |   |  |  |   | (45,975 | )
|Payments for intangibles                                     |  |                                              |        |   |                        |   | (274    | )                          |  |   |             |   |              |   |  |  |   | (274    | )
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net cash used in investing activities                        |  |                                              | (1,362  | ) |                        |   | (1,397  | )                          |  |   | (46,742      | ) |              |   |  |  |   | (49,501 | )
|Cash flows from financing activities:                        |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Proceeds from credit facility                                |  |                                              | 59,000  |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 59,000  |  
|Principal payments on credit facility                        |  |                                              | (34,000 | ) |                        |   | (160    | )                          |  |   |             |   |              |   |  |  |   | (34,160 | )
|Principal payments on long-term debt                         |  |                                              | (10     | ) |                        |   | (209    | )                          |  |   |             |   |              |   |  |  |   | (219    | )
|Proceeds from exercise of stock options                      |  |                                              | 7,868   |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 7,868   |  
|Proceeds from employee stock purchase plan                   |  |                                              | 748     |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 748     |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net cash provided by (used in) financing activities          |  |                                              | 33,606  |   |                        |   | (369    | )                          |  |   |             |   |              |   |  |  |   | 33,237  |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                              | (1,064  | ) |                        |   | 3,599   |                            |  |   | 2,968        |   |              |   |  |  |   | 5,503   |  
|Net change in intercompany balances                          |  |                                              | 16,158  |   |                        |   | (45,924 | )                          |  |   | 29,766       |   |              |   |  |  |   |        |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents         |  |                                              | (4,029  | ) |                        |   | 4,049   |                            |  |   | 9,025        |   |              |   |  |  |   | 9,045   |  
|Cash and cash equivalents at beginning of period             |  |                                              | 7,402   |   |                        |   | (1,801  | )                          |  |   | 35,001       |   |              |   |  |  |   | 40,602  |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash and cash equivalents at end of period                   |  | $                                            | 3,373   |   |                        | $ | 2,248   |                            |  | $ | 44,026       |   |              | $ |  |  | $ | 49,647  |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Supplemental cash flow information:                          |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash paid during the period for interest                     |  | $                                            | 6,432   |   |                        | $ | 1,300   |                            |  | $ |             |   |              | $ |  |  | $ | 7,732   |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash paid during the period for income taxes                 |  | $                                            | 2,372   |   |                        | $ |        |                            |  | $ | 2,570        |   |              | $ |  |  | $ | 4,942   |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|                                                            
|Condensed Consolidating Statements of Cash Flows             | 
|                                                             | 
|                                                             |  | For The Three Months Ended December 31, 2003 |        
|                                                             |  | Sybron Dental Specialties                    |         |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by (used in) operating activities        |  | $                                            | (6,920  | ) |                        | $ | 14,350  |                            |  | $ | 12,876       |   |              | $ |  |  | $ | 20,306  |  
|Cash flows from investing activities:                        |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Capital expenditures                                         |  |                                              | (311    | ) |                        |   | (1,668  | )                          |  |   | (700         | ) |              |   |  |  |   | (2,679  | )
|Proceeds from sales of property, plant and equipment         |  |                                              |        |   |                        |   |        |                            |  |   | 118          |   |              |   |  |  |   | 118     |  
|Payments for intangibles                                     |  |                                              |        |   |                        |   | (232    | )                          |  |   |             |   |              |   |  |  |   | (232    | )
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net cash used in investing activities                        |  |                                              | (311    | ) |                        |   | (1,900  | )                          |  |   | (582         | ) |              |   |  |  |   | (2,793  | )
|Cash flows from financing activities:                        |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |  |  |   |         |  
|Proceeds from credit facility                                |  |                                              | 18,500  |   |                        |   | 15,000  |                            |  |   |             |   |              |   |  |  |   | 33,500  |  
|Principal payments on credit facility                        |  |                                              | (16,000 | ) |                        |   | (35,210 | )                          |  |   |             |   |              |   |  |  |   | (51,210 | )
|Proceeds from long-term debt                                 |  |                                              |        |   |                        |   |        |                            |  |   | 818          |   |              |   |  |  |   | 818     |  
|Principal payments on long-term debt                         |  |                                              |        |   |                        |   | (23     | )                          |  |   | (2,007       | ) |              |   |  |  |   | (2,030  | )
|Proceeds from exercise of stock options                      |  |                                              | 1,142   |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 1,142   |  
|Proceeds from employee stock purchase plan                   |  |                                              | 522     |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 522     |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net cash provided by (used in) financing activities          |  |                                              | 4,164   |   |                        |   | (20,233 | )                          |  |   | (1,189       | ) |              |   |  |  |   | (17,258 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                                              | (2,603  | ) |                        |   | 1,338   |                            |  |   | 1,189        |   |              |   |  |  |   | (76     | )
|Net change in intercompany balances                          |  |                                              | 71      |   |                        |   | 4,387   |                            |  |   | (4,458       | ) |              |   |  |  |   |        |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents         |  |                                              | (5,599  | ) |                        |   | (2,058  | )                          |  |   | 7,836        |   |              |   |  |  |   | 179     |  
|Cash and cash equivalents at beginning of period             |  |                                              | 3,817   |   |                        |   | 1,164   |                            |  |   | 17,887       |   |              |   |  |  |   | 22,868  |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash and cash equivalents at end of period                   |  | $                                            | (1,782  | ) |                        | $ | (894    | )                          |  | $ | 25,723       |   |              | $ |  |  | $ | 23,047  |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Supplemental cash flow information:                          |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash paid during the period for interest                     |  | $                                            | 6,398   |   |                        | $ | 1,940   |                            |  | $ | 96           |   |              | $ |  |  | $ | 8,434   |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  
|Cash paid during the period for income taxes                 |  | $                                            | 2,429   |   |                        | $ |        |                            |  | $ | 2,477        |   |              | $ |  |  | $ | 4,906   |  
|                                                             |  |                                              |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |         |  



10. ACQUISITION



In the first quarter of fiscal 2005, Sybron Canada Limited, one of the
Companys subsidiaries, acquired all of the common shares of Innova LifeSciences Corporation (Innova) for approximately $47,720. The purchase price represented a 33 percent premium over Innovas closing share price of Cdn $1.06
on the Toronto Stock Exchange on August 23, 2004, the date on which the Companys offer to purchase the common shares of Innova for Cdn $1.4106 was announced. Innova is a Canadian manufacturer and marketer of dental implants and markets its
products to oral surgeons, periodontist, prosthodontists and general dentists. The addition of Innova provides the Company with an opportunity to participate in the growing dental implant market.



15



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##### Table of Contents

The preliminary allocation of purchase price to the acquired assets and assumed liabilities based on the
estimated fair values was as follows:



|                              |  |   |       
|----------------------------- |  | - | ------
|Cash                          |  | $ | 1,745 
|Accounts receivable, net      |  |   | 2,763 
|Inventory, net                |  |   | 3,981 
|Goodwill                      |  |   | 22,152
|Intangible assets             |  |   | 18,200
|Property, plant and equipment |  |   | 1,017 
|Other assets                  |  |   | 1,841 
|                              |  |   |       
|Total assets acquired         |  | $ | 51,699
|                              |  |   |       
|Liabilities assumed           |  |   | 3,979 
|                              |  |   |       
|Total purchase price          |  | $ | 47,720
|                              |  |   |       



The Company is
obtaining an independent valuation of the major asset categories of acquired assets and liabilities assumed. The preliminary valuation of identifiable intangible assets is $18,200. The Company expects to finalize the purchase price allocations in
the second quarter. Amounts allocated to other intangible assets are being amortized on a straight-line basis over their estimated useful lives ranging from five to thirty years. The consolidated financial statements include the operating results of
this business from the date of acquisition.



ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations



When we use the terms SDS, we, us, Company, or our in this report, unless the context requires
otherwise, we are referring to Sybron Dental Specialties, Inc. and its subsidiaries. Our fiscal year ends on September 30 and, accordingly, all references to quarters refer to our fiscal quarters. The quarters ended December 31, 2004 and 2003 refer
to the first quarters of fiscal 2005 and 2004, respectively.



General



We are a leading global manufacturer and marketer of a
broad range of consumable dental products and related small equipment and a manufacturer and distributor of products for use in infection prevention in both the medical and dental markets. Our subsidiaries operate in two business segments:



| |  |  | Professional Dental. We develop and manufacture a variety of branded dental consumable products and consumable infection prevention products sold through independent
distributors to the dental industry worldwide, as well as to medical markets; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Specialty Products.We develop, manufacture, and market an array of consumable orthodontic products, endodontic products and implants to orthodontists, endodontic
specialists, oral surgeons, prosthodontists, and periodontists worldwide. This segment was previously referred to as the Orthodontics segment. The name was changed to more accurately describe the products of this segment. The composition of this
segment has not changed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our primary
subsidiaries in each of our business segments are as follows:



|                            |  |                                     
|--------------------------- |  | ------------------------------------
|Professional Dental         |  | Specialty Products                  
|Kerr Corporation            |  | Ormco Corporation                   
|Kerr Italia S.p.A           |  | Ormco B.V.                          
|Sybron Canada Limited       |  | Ormodent Group                      
|Pinnacle Products, Inc.     |  | Allesee Orthodontic Appliances, Inc.
|KerrHawe S.A.               |  | Innova LifeSciences Corporation     
|Metrex Research Corporation |  |                                     
|SpofaDental a.s             |  |                                     



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Results of Operations



Overview



Based upon the information we have available to us, we estimate the growth of the worldwide dental market for the type of products we sell to be between
4% and 6%, with the U.S. market growing at the upper end of the range. The factors that we believe will allow the market to continue to grow in the 4% to 6% range are, among others things, a steadily growing demand by consumers for endodontic,
periodontic, orthodontic, cosmetic and other specialized procedures in an effort to retain and improve the appearance of their natural teeth; the aging baby-boomer segment of the population who we think are more likely to require repair and
reconstructive dental procedures, such as root canals and the placement of crowns or bridges; technological advances in dental products which reduce both the discomfort to the patient and the treatment time thereby attracting more patients; an
increasing worldwide population, creating more dental patients; and an expected growth in per capita and discretionary incomes in emerging nations which should result in healthcare, including dental services, becoming a greater priority.



Our net sales were $149.0 million in the first quarter of fiscal 2005, an
increase of $17.2 million, or 13.0%, from net sales of $131.9 million in the comparable prior year period. The increase in our first quarter fiscal 2005 net sales is due to internal net sales growth of 6.7%, favorable foreign currency fluctuations
of 3.8% and acquisitions of 2.5%. We define internal net sales as total net sales excluding foreign currency fluctuations and the impact of acquisitions made in the preceding twelve months.



In the first quarter of fiscal 2005 our overall net sales growth was 13.0%
and our internal net sales growth was 6.7%. In the first quarter of fiscal 2004 the overall net sales growth rate was 9.7% and internal net sales growth was 1.5%. The increase in the first fiscal quarter of 2005 in our overall net sales growth and
internal net sales is attributable to greater growth in both our Specialty Products and Professional Dental segments. The growth occurred in the U.S. market where our internal net sales growth rate increased from 1.1% in the first quarter of fiscal
2004 to 11.5% in the first quarter of fiscal 2005. Our internal net sales growth in all other markets decreased from 2.1% in the first quarter of fiscal 2004 to 1.5% in the first quarter of fiscal 2005. The reduction in the internal net sales growth
rate we experienced in our international markets was the result of the negative 2.4% internal growth experienced by our Professional Dental segment and a reduction in internal net sales growth in our Specialty Products segment from 10.5% in the
first fiscal quarter of 2004 to 5.1% in the first quarter of fiscal 2005. The reduction in our Specialty Products international internal net sales growth rate represents a return to a more normalized growth rate.



Our Specialty Products internal net sales increased by 10.4% in the first
quarter of fiscal 2005. The increase is primarily attributable to an increase in the sales of: Damon 3 self-ligating brackets, dental implants (by our newly acquired company, Innova LifeSciences), the Elements Obturation device and orthodontic
laboratory products. Partially offsetting the segments increased sales was a decrease in the sales of Damon 2 self-ligating brackets, due to customers transitioning to Damon 3 brackets. We plan to continue to focus our selling efforts on the
Damon self-ligating bracket system, our Inspire Ice ceramic brackets, our Titanium Orthos® brackets, dental implant products and Ni-Ti endodontic files, as we believe those product lines have the greatest potential for increasing the sales of our Specialty Products in fiscal 2005. We may experience
a decline in our internal sales growth rate in the remainder of our 2005 fiscal year, as our first quarter benefited from the introduction of our Elements Obturation device, which has a higher average net selling price than many of the other
products sold by our Specialty Products segment and is not a consumable product that generates repeat sales. In addition, our competitors have introduced self-ligating brackets which complete with our Damon Bracket system.



The Professional Dental segment experienced an overall internal net sales
increase of 3.3%, with a 6.4% internal net sales increase in consumable products. The net sales growth is primarily attributable to an increase in the net sales of our Premise nanocomposite, MaxCem, our new self-adhesive cement, our dental amalgam
products, and our line of infection prevention products. We continue to experience the same decline we experienced in fiscal 2004 in the net sales of our LED curing light. The LED curing light, which was introduced in fiscal 2003 and is unlike our
consumable products which generate consistent sales as the products cannot be reused, has a life span of 4 to 5 years. As a result, we expect the sales of that product will continue to decline over the remainder of fiscal 2005. Although we do not
expect the increase we experienced in the first quarter in the sales of our dental amalgam products to continue, we anticipate experiencing a slight increase in the internal net sales growth of our Professional Dental segment during the remainder of
fiscal 2005, as a result of the sales of products such as Premise, MaxCem, and Standout, our newest impression material.



Operating income in the first quarter of fiscal 2005 was $27.4 million, or 18.4% of net sales compared to operating income of $23.5 million, or 17.8% of
net sales in the first quarter of fiscal 2004. The improvement in our operating income as a percent of sales is primarily attributable to the increase in our gross margin from 54.6% in the first quarter of fiscal 2004 to 57.3% in the first quarter
of fiscal 2005. The improvement in gross margins as a percent of net sales is attributable to more favorable foreign currency rates, the



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increased sales levels at each of our business segments, an increase in the sales of higher margin products, and a reduction in costs as a result of our
facility rationalization efforts last year in Eastern Europe and Mexico. We experienced a 2.1% increase in our selling, general and administrative expenses in the first quarter of fiscal 2005, as a percent of sales from the comparable prior year
period. The increase is primarily attributable to fluctuations in foreign currency transaction gains and losses and the addition of Innova LifeSciences, whose selling, general and administrative expense are generally higher as a percent of net sales
than the Companys other operations.



Our operating income
in the remaining fiscal quarters of 2005 will be affected by the $1.4 million in expenses we expect to incur in transferring the production currently performed at our Danbury, Connecticut facility to our facility in Middleton, Wisconsin and a $1.4
million charge we expect to record in fiscal 2005 related to the retirement of our Chief Financial officer, Gregory D. Waller, who has announced his intention to retire in fiscal 2005. Approximately $1.0 million of the $1.4 million charge related to
the retirement of Mr. Waller is a non-cash charge related to the extension of the exercise period for Mr. Wallers stock options, and will only be triggered if Mr. Waller has not exercised his stock options before his retirement date. Excluding
these non-recurring expenses, we continue to expect our selling, general and administrative expenses to decline as a percent of sales in future quarters.



Our interest expense in the first quarter of fiscal 2005 was $5.0 million compared to our interest expense of $5.2 million in the comparable prior year
period. Our average debt outstanding during the quarter was $249.0 million and our average interest rate was 7.8%, compared to the average debt we had outstanding in the first quarter of fiscal 2004 of $269.8 million and an average interest rate for
that quarter 7.5%. The increase in the average interest rate is the result of the reduction during the quarter of our floating rate debt, which carries a lower interest rate than our fixed rate debt. Additionally, the London InterBank Offered Rate
(LIBOR), which rate affects the interest rate in our Credit Facility for amounts borrowed under the Term B tranche and Revolver tranche, increased in the first quarter of fiscal 2005. We expect to continue to see a slight increase in our
average interest rate in the remaining quarters of fiscal 2005, as we anticipate LIBOR rates will continue to rise and we anticipate continuing to pay down our Term B loan balance, which has a lower interest rate than our average rate.



Income taxes in the first quarter of fiscal 2005 were $7.1 million or 32%
of income before taxes as compared to income taxes of $5.9 million, or 33% of income before taxes in the first quarter of fiscal 2004. The effective tax rate of 32% is based on current assumptions regarding the income contributions from our various
operations around the world. Should the income contributions from territories with higher tax rates exceed our expectations, our effective tax rate could be higher than 32%. We are continuing to evaluate the impact of the American Jobs Creation Act
of 2004 (the Jobs Creation Act). Should we decide to repatriate earnings of non-U.S. subsidiaries under the terms of the Jobs Creation Act, there may be a negative impact on our effective tax rate.



We entered into a new agreement with the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America and its New West Side Local 174 effective as of February 1, 2005 with an expiration date of January 31, 2008, pertaining to the bargaining unit employees that are employed by us at
our Professional Dental business segments Romulus Michigan facility.



Quarter Ended December 31, 2004 Compared to the Quarter Ended December 31, 2003



Net Sales



|                    |  |                |         |             |   |        
|------------------- |  | -------------- | ------- | ----------- | - | -------
|Net Sales           |  | Fiscal 2005    |         | Fiscal 2004
|                    |  | (in thousands)
|Professional Dental |  | $              | 75,887  |             | $ | 71,444 
|Specialty Products  |  |                | 73,153  |             |   | 60,413 
|                    |  |                |         |             |   |        
|Total Net Sales     |  | $              | 149,040 |             | $ | 131,857
|                    |  |                |         |             |   |        



Overall Company.Net sales for the quarter ended December 31, 2004 increased by $17.2 million, or 13.0%, from the corresponding fiscal 2004 quarter.



Professional Dental.Increased net sales in the Professional Dental segment resulted primarily from: (a) net sales of new products (approximately
$4.5 million), (b) favorable foreign currency fluctuations (approximately $2.2 million), and (c) the net sales of products from an acquired company (approximately $0.5 million). The increase in net sales was partially offset by: (a) decreased net
sales of existing products (approximately $2.1 million), (b) the loss of the net sales of the prior years exited product lines (approximately $0.6 million), and (c) increased rebate payments (approximately $0.1 million).



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Specialty Products.Increased net sales in the Specialty Products segment resulted primarily from:
(a) net sales of new products (approximately $8.0 million), (b) net sales of products from an acquired company (approximately $4.3 million), (c) favorable foreign currency fluctuations (approximately $2.1 million), and (d) decreased rebate payments
(approximately $0.9 million). The increase in net sales was offset by decreased net sales of existing products (approximately $2.6 million).



Gross Profit



|                    |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|------------------- |  | ---------------------------------- | ------ | -------------------- | ---- | - | ----------- | - | -------------------- |  | ---- | -
|Gross Profit        |  | Fiscal 2005                        |        | Percent of Net Sales |      |   | Fiscal 2004 |   | Percent of Net Sales | 
|                    |  | (in thousands, except percentages) |       
|Professional Dental |  | $                                  | 41,558 |                      | 54.8 | % |             | $ | 38,123               |  | 53.4 | %
|Specialty Products  |  |                                    | 43,809 |                      | 59.9 |   |             |   | 33,835               |  | 56.0 |  
|                    |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|Total Gross Profit  |  | $                                  | 85,367 |                      | 57.3 | % |             | $ | 71,958               |  | 54.6 | %
|                    |  |                                    |        |                      |      |   |             |   |                      |  |      |  



Overall Company.Gross profit for the quarter ended December 31, 2004 increased by $13.4 million or 18.6% from the corresponding fiscal 2004 quarter. The increase in gross profit as a percent of net sales is attributable to more favorable foreign currency rates,
the increased sales levels at each subsidiary, a shift in sales of higher margin products and the impact of the facility rationalization efforts in Eastern Europe and Mexico last year.



Professional Dental.Increased gross profit in the Professional Dental segment resulted primarily from: (a) gross
profit relating to new products (approximately $2.7 million), (b) an increase in gross profit caused by the increase in manufacturing volumes, causing the manufacturing overhead to be absorbed over a higher unit volume (approximately $1.1 million),
(c) favorable foreign currency fluctuations (approximately $0.9 million), (d) gross profit derived from the net sales of products of an acquired company (approximately $0.4 million), and (e) inventory adjustments (approximately $0.1 million). The
increase in gross profit was partially offset by: (a) decreased net sales of existing products (approximately $1.2 million), (b) gross profit lost from the prior years exited product lines (approximately $0.3 million), (c) a decrease in sales
of higher margin products (approximately $0.1 million), (d) increased rebate (approximately $0.1 million), and (e) increased royalty expense (approximately $0.1 million).



Specialty Products.Increased gross profit in the Specialty Products segment resulted primarily from: (a) gross
profit relating to new products (approximately $4.8 million), (b) gross profit derived from the net sales of products of an acquired company (approximately $2.8 million), (c) favorable foreign currency fluctuations (approximately $2.1 million), (d)
an increase in sales of higher margin products (approximately $1.9 million), (e) decreased rebate (approximately $0.9 million), and (f) an increase in gross profit caused by the increase in manufacturing volumes, causing the manufacturing overhead
to be absorbed over a higher unit volume (approximately $0.2 million). The increase in gross profit was partially offset by: (a) increased royalty expense (approximately $1.3 million), (b) decreased net sales of existing products (approximately $1.2
million), and (c) inventory adjustments (approximately $0.2 million).



Selling, General and Administrative Expenses



|                                                   |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|-------------------------------------------------- |  | ---------------------------------- | ------ | -------------------- | ---- | - | ----------- | - | -------------------- |  | ---- | -
|Selling, General and Administrative Expenses       |  | Fiscal 2005                        |        | Percent of Net Sales |      |   | Fiscal 2004 |   | Percent of Net Sales | 
|                                                   |  | (in thousands, except percentages) |       
|Professional Dental                                |  | $                                  | 29,986 |                      | 39.5 | % |             | $ | 26,527               |  | 37.1 | %
|Specialty Products                                 |  |                                    | 27,999 |                      | 38.3 |   |             |   | 21,975               |  | 36.4 |  
|                                                   |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|Total Selling, General and Administrative Expenses |  | $                                  | 57,985 |                      | 38.9 | % |             | $ | 48,502               |  | 36.8 | %
|                                                   |  |                                    |        |                      |      |   |             |   |                      |  |      |  



Overall Company.Selling, general and administrative expenses for the quarter ended December 31, 2004 increased by $9.5 million or 19.6% from the corresponding fiscal 2004 quarter. All corporate general and administrative expenses are allocated to the
Companys business segments in proportion to each segments net sales, regardless of the extent to which a particular expense may relate to one segment or the other.



Professional Dental.Increased selling, general and administrative expenses in the Professional Dental segment
resulted primarily from: (a) increased expenses relating to foreign currency fluctuations (approximately $2.0 million), (b) increased selling and



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marketing expenses (approximately $0.9 million), (c) increased general and administrative expenses (approximately $0.8 million), and (d) expenses of an
acquired company (approximately $0.1 million). The increase in selling, general and administrative expenses were offset by decreased research and development expenses (approximately $0.3 million).



Specialty Products.Increased selling, general and administrative
expenses in the Specialty Products segment resulted primarily from: (a) expenses of an acquired company (approximately $2.2 million), (b) increased selling and marketing expenses (approximately $1.9 million), (c) increased general and administrative
expenses (approximately $1.5 million), and (d) increased expenses related to foreign currency fluctuations (approximately $0.5 million). The increase in selling, general and administrative expenses was offset by decreased research and development
expenses (approximately $0.1 million).



Operating Income



|                       |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|---------------------- |  | ---------------------------------- | ------ | -------------------- | ---- | - | ----------- | - | -------------------- |  | ---- | -
|Operating Income       |  | Fiscal 2005                        |        | Percent of Net Sales |      |   | Fiscal 2004 |   | Percent of Net Sales | 
|                       |  | (in thousands, except percentages) |       
|Professional Dental    |  | $                                  | 11,572 |                      | 15.2 | % |             | $ | 11,596               |  | 16.2 | %
|Specialty Products     |  |                                    | 15,810 |                      | 21.6 |   |             |   | 11,860               |  | 19.6 |  
|                       |  |                                    |        |                      |      |   |             |   |                      |  |      |  
|Total Operating Income |  | $                                  | 27,382 |                      | 18.4 | % |             | $ | 23,456               |  | 17.8 | %
|                       |  |                                    |        |                      |      |   |             |   |                      |  |      |  



As a result of the
foregoing, operating income for the quarter ended December 31, 2004 increased by 16.7% or $3.9 million from operating income in the corresponding quarter of fiscal 2004.



Interest Expense



Interest expense was $5.0 million in the first quarter of fiscal 2005, a decrease of $0.2 million from the corresponding fiscal 2004 quarter. The decrease
resulted from reduced average debt balances from $269.8 million in fiscal 2004 to $249.0 million in fiscal 2005, partially offset by an increase in the average interest rate on debt from 7.48% in fiscal 2004 to 7.80% in fiscal 2005. The debt that
was repaid in the first quarter of fiscal 2005 was adjustable rate debt with a lower average interest rate than the remaining debt. This decrease in debt and increase in average interest rates is expected to continue for the balance of the year.



Income Taxes



Taxes on income in the first quarter of fiscal 2005 were $7.1 million, or
32.0% of income before taxes, an increase of $1.2 million from the prior fiscal quarter taxes on income of $5.9 million, or 33.0% of income before taxes.



Liquidity and Capital Resources



Our main source of liquidity is cash generated by operating activities and, to a lesser extent, borrowings under our credit facility (Credit
Facility). The borrowings under our Credit Facility are made from our $150.0 million revolving credit facility, which is part of our $350 million syndicated credit facility. As of December 31, 2004, $120.3 million of the $150.0 million
revolving credit facility was available for borrowing.



Cash
provided by operations for the three months ended December 31, 2004 was $19.8 million, as compared to $20.3 million in the comparable prior year period. Working capital increased to $179.6 million at December 31, 2004 from $161.4 million at
September 30, 2004. The current ratio increased to 3.0:1 at December 31, 2004 from 2.7:1 at September 30, 2004, primarily due to increases in inventory and cash at our foreign subsidiaries as well as decreases in income taxes payable and accrued
payroll and employee benefits due to the timing of tax payments and incentive compensation payments, respectively. Days sales outstanding (DSO) was 61.7 days at December 31, 2004, as compared to 61.1 days at December 31, 2003, and 58.8
days at September 30, 2004. We typically experience an increase in DSO during our fiscal first quarter due to delays in payments caused by the holiday season. Inventory days were 149 as of December 31, 2004, as compared to 133 days at September 30,
2004. The increase from September 30, 2004 was due to the following reasons: (a) we built inventory in both the U.S. and Europe in anticipation of the January 31, 2005 expiration of our contract with union members at our Romulus, Michigan facility,
and (b) the acquisition of Innova LifeSciences in October 2004 increased our inventory balances by $4.0 million. Prior to the acquisition, Innova typically held around 270 days in inventory, which is much higher than our inventory levels. We are
currently in the process of examining the inventory needs of this business, and determining whether this level of inventory days can be reduced in future quarters. We expect inventory days to gradually return to the mid 130s over the remainder
of the fiscal year.



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Capital expenditures for property, plant and equipment were $3.4 million and $2.7 million for the first
three months of fiscal 2005 and fiscal 2004, respectively. We expect capital expenditures for all of fiscal 2005 to be approximately $16 to $18 million.



Net cash provided by financing activities for the three months ended December 31, 2004 was $33.2 million, as compared to $17.3 million net cash used in
financing activities for the same period in fiscal 2004. We borrowed $44.5 million in October 2004 to finance the acquisition of Innova LifeSciences. Cash received from the exercise of stock options of $7.9 million also contributed to the net cash
provided by financing activities.



We expect to be able to
finance our ordinary cash requirements, including capital expenditures, debt service and operating leases from the funds generated from operations and amounts available under our existing Credit Facility.



Our ability to meet our debt service requirements and to comply with our debt
covenants is dependent upon our future performance, which is subject to financial, economic, competitive and other factors affecting us, many of which are beyond our control. We were in compliance with all such debt covenants as of December 31,
2004.



New Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment,which requires the recognition of costs resulting from transactions in which SDS acquires goods and services
by issuing shares, share options, or other equity instruments. This standard requires a fair value-based measurement method in accounting for share-based payment transactions with both employees and nonemployees. This standard replaces SFAS No. 123,
Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, the use of the intrinsic value method as provided
under APB Opinion No. 25 will be eliminated. SFAS No. 123(R) is effective for all awards of share-based payments granted, modified, or cancelled after June 15, 2005. In addition, compensation costs for the unvested portion of awards issued prior to
and outstanding as of June 15, 2005 would continue to be recognized at the grant-date fair value as the remaining requisite service is rendered. We will adopt the provisions of FAS 123(R) in the fourth quarter of fiscal 2005 using a modified
prospective application. At December 31, 2004, unamortized compensation expense, as determined in accordance with FAS 123, that we expect to record during the fourth quarter of fiscal 2005 was approximately $400 before income taxes. We will incur
additional expense during the fourth quarter of fiscal 2005 that cannot yet be quantified, related to new stock option awards that may be granted during the last nine months of fiscal 2005.



In November 2004, the FASB issued SFAS No. 151, Inventory
Costs,which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15,
2005. This statement also requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. We are currently assessing the effect that the adoption of SFAS No. 151 will
have on our consolidated financial statements.



Off-Balance Sheet
Arrangements



None.



Contractual Obligations



There have been no material changes to our contractual obligations outside the ordinary course of our business from those
disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004.



Cautionary Factors



This report contains, and other disclosures that we make from time to time may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as anticipate,
believe, continue, estimate, expect, goal, objective, outlook, could, intend, may, might, plan,
potential, predict, should, or will or the negative of these terms or other comparable terminology signify forward-looking statements. You should read statements that contain these words carefully
because they discuss our future expectations; contain projections of our future results of operations or our financial conditions; or state other forward-looking information.



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Forward-looking statements involve known and unknown risks, uncertainties, and 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 any forward-looking statements. Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact our business and financial
prospects and affect our future results of operations and financial condition:



We are a holding company and are dependent upon dividends, interest income and loans from our subsidiaries to meet our debt service obligations.



We are a United States holding company and conduct substantially all of our operations through our subsidiaries, some of
which are located in other countries. Our ability to meet our debt service obligations will therefore be dependent on receipt of dividends, interest income and loans from our direct and indirect subsidiaries. Our subsidiaries may be limited in the
amounts they are permitted to pay as dividends to us on their capital stock as a result of statutory and other contractual restrictions. In particular, there are significant tax and other legal restrictions on the ability of non-U.S. subsidiaries to
remit money to us. As a result, some or all of our subsidiaries may not be able to pay dividends to us. If they do not, we may not be able to make debt service payments on our debt instruments.



We operate in a highly competitive industry and we cannot be certain that
we will be able to compete effectively.



Numerous
competitors participate in our business segments, some of which have substantially greater financial and other resources than we do. Our principal competitors in the Professional Dental business segment include Dentsply International Inc., 3M ESPE
and Ivoclar Vivadent Group; and in the Specialty Products business segment, our principal competitors include 3M Unitek, (an affiliate of 3M Company), GAC International (a subsidiary of Dentsply), American Orthodontics, Nobel Biocare and Straumann.
Some of the companies have a larger sales force and invest more heavily in research, product development and product marketing than we do. As a result, we may not be able to achieve or maintain adequate market share or margins, or compete
effectively, against these companies.



We rely heavily on
manufacturing operations to produce the products we sell, and we could be injured by disruptions of our manufacturing operations.



We rely upon our manufacturing operations to produce most of the products we sell. While we do not presently anticipate any significant disruption of
those operations, should a disruption occur, for any reason, such as strikes, labor disputes, or other labor unrest, power interruptions, fire, war, or other force majuere, could adversely affect our sales and customer relationships and therefore
adversely affect our business. In particular, we rely upon our facilities in Mexico to manufacture a substantial portion of our orthodontic products. Any disruption in our ability to import those products into the United States could severely impact
our orthodontics sales. Although most of our raw materials are available from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices.



We rely upon others to assist in the education and promotion of our
products, and the loss of the participation of these individuals could adversely affect our net sales.



We work with various dental clinicians to educate the dental community on the features and benefits of our products. Some clinicians, such as Dr. Dwight
Damon, are a key component to our strategy for growing our sales. The inability or unwillingness of one or more of these clinicians to continue to assist us could negatively impact our ability to increase the sales of certain significant products.



Our substantial level of indebtedness could adversely
affect our financial condition.



We presently have, and
will continue to have, a substantial amount of indebtedness which requires significant interest payments. As of December 31, 2004, we had $245.3 million in total long-term borrowings (including current portion), and $339.2 million in
stockholders equity. In addition, subject to restrictions in the indenture for our Senior Subordinated Notes and our Credit Facility, we may incur additional indebtedness.





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Our substantial level of indebtedness could have important consequences, which include the following:



| |  |  | our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impaired;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we must use a substantial portion of our cash flow from operations to service on our Senior Subordinated Notes and other indebtedness, which will reduce the funds available to us
for other purposes such as potential acquisitions and capital expenditures;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we are exposed to fluctuations in interest rates, to the extent our borrowings bear variable rates of interest, including through interest rate swap agreements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we have a higher level of indebtedness than some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in planning for, or responding to,
changing conditions in our industry, including increased competition; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we are more vulnerable to general economic downturns and adverse developments in our business.
| | - |  | ----------------------------------------------------------------------------------------------



From time to time we have engaged in interest rate hedges to mitigate the impact of interest rate fluctuations. If we are
unable to, or elect not to employ interest rate hedges, it could have a material adverse effect on our profitability.



In addition, our Credit Facility contains numerous restrictive operating and financial covenants, which could limit our operating flexibility. Our ability
to pay or refinance our indebtedness will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, and other factors beyond our control. Increases in interest rates
would adversely affect our cash flows and therefore our results of operations. In addition, the terms of any additional debt or equity financing that we may incur could restrict our operational flexibility and prevent us from pursuing business
opportunities of value to our stockholders.



We may incur
impairment charges on our intangible assets with indefinite lives that would reduce our earnings.



On October 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires that goodwill and intangible assets that
have an indefinite useful life be tested at least annually for impairment. Goodwill and other intangible assets with indefinite lives must also be tested for impairment between the annual test if an event occurs that would more likely than not
reduce the fair value of the asset below its carrying amount. As of December 31, 2004, goodwill and other intangible assets with indefinite lives represented approximately 43% of our total assets. If during the testing an impairment is determined,
our financial results for the relevant period will be reduced by the amount of the impairment, net of income tax effects, if any.



Future exchange rate fluctuations or inflation may adversely affect our results of operations.



We manufacture many of our products, including those in our Professional
Dental business segment, in our facilities in Mexico, Canada, Switzerland, Czech Republic and Italy. These products are supported by our sales offices in Europe, Japan, Australia, Czech Republic, South America and Mexico. In fiscal 2004, our foreign
facilities selling, general and administrative expenses represented approximately 34% of our consolidated selling, general and administrative expenses while our foreign sales represented approximately 46% of our total net sales.



We measure our financial position and results of operations from
substantially all of our international operations, other than most U.S. export sales, using local currency of the countries in which we conduct such operations and then translate them into U.S. dollars.



The reported income of our foreign subsidiaries will be impacted by a
weakening or strengthening of the U.S. dollar in relation to a particular local currency. Our U.S. export sales may also be affected by foreign currency fluctuations relative to the value of the U.S. dollar as foreign customers may adjust their
level of purchases according to the weakness or strength of their respective currencies versus the U.S. dollar. In addition, any future increases in the inflation rate in any country where we have operations may negatively affect our results of
operations. To the extent these local currencies depreciate against the U.S. dollar, our business, financial condition and results of operations could be adversely affected.



We have engaged in currency hedges to mitigate the impact of foreign currency fluctuations. If we are unable to, or elect
not to continue to employ currency hedges, it could have a material adverse effect on our net sales and profitability. As we expand our international presence, these risks may increase.



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Acquisitions have been and continue to be an important part of our growth strategy; failure to
consummate strategic acquisitions could limit our growth and failure to successfully integrate acquisitions could adversely impact our results.



Our business strategy includes continued growth through strategic acquisitions, which depends upon the availability of suitable acquisition candidates at
reasonable prices and our ability to quickly resolve transitional challenges. Failure to consummate appropriate acquisitions would adversely impact our growth and failure to successfully integrate them would adversely affect our results. These
challenges include integration of product lines, sales forces and manufacturing facilities and decisions regarding divestitures, cost reductions, and realizing other synergies. Also, these challenges involve risks of employee turnover, disruption in
product cycles and the loss of sales momentum. We cannot be certain that we will successfully manage them in the future. Also, our Credit Facility and the indenture for the Senior Subordinated Notes limit our ability to consummate acquisitions by
imposing various conditions which must be satisfied.



Our
profitability may be affected by factors outside our control.



Our ability to increase sales, and to profitably distribute and sell our products, is subject to a number of risks, including changes in our business relationships with our principal distributors, competitive risks such as the entrance of
additional competitors into our markets, pricing and technological competition, risks associated with the development and marketing of new products in order to remain competitive and risks associated with changes in demand for dental services which
can be affected by economic conditions, health care reform, government regulation, and more stringent limits on expenditures by dental insurance providers or governmental programs.



We strive to increase our margins by controlling our costs and by improving our manufacturing efficiencies. There can be no
assurance, however, that our efforts will continue to be successful. Margins can be affected by many factors, including competition, product mix, and the effect of acquisitions.



If we are unable to successfully manage growth and retain qualified personnel, we may not be able to compete effectively
and our revenues may drop significantly.



We intend to
continue to expand our business over time into new geographic regions and additional products and services, subject to the sufficiency of our cash resources and our ability to comply with the covenants in our various debt instruments. Our future
performance will depend, in large part, upon our ability to implement and manage our growth effectively. Our growth in the future will continue to place a significant strain on our administrative, operational, and financial resources. We anticipate
that, if we are successful in expanding our business, we will be required to recruit and hire a substantial number of new managerial, finance, accounting, and support personnel. Failure to retain and attract additional management personnel who can
manage our growth effectively would have a material adverse effect on our performance. To manage our growth successfully, we will also have to continue to improve and upgrade operational, financial and accounting systems, controls and infrastructure
as well as expand, train and manage our employees. Our failure to manage the future expansion of our business could have a material adverse effect on our revenues and profitability.



Our ability to hire and retain competent employees is also subject to a number of risks, including unionization of our
non-union employees and changes in relationships with our unionized employees. In particular, many of our non-management employees in Europe are subject to national labor contracts, which are negotiated from time to time at the national level
between the national labor union and the employees council. There is a risk of strikes or other labor disputes at our locations which are unionized or are subject to national contracts which could affect our operations.



We rely heavily upon key distributors, and we could lose sales if any of
them stop doing business with us.



In fiscal 2004,
approximately 22% of our sales were made through our top five independent distributors. Mergers and consolidation of our distributors have temporarily slowed sales of our products in the past and may do so in the future. We believe that the loss of
either one of our top two distributors, the only distributors who account for more than 5% of our consolidated net sales and who sell primarily into the dental segment, could have a material adverse effect on our results of operations or financial
condition until we find alternative means to distribute our products.





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We are subject to product liability litigation and related risks which could adversely affect our
business.



Because many of our products are designed for
use in and around a patients mouth, and because many of these products contain chemicals, metals, and other materials, we are subject to claims and litigation brought by patients or dental professionals alleging harm caused by the use of or
exposure to our products. We may need to devote substantial amounts of time and attention to defending ourselves and may also be required to pay large amounts in settlement or upon judgment. We may also be required to or may voluntarily recall
products, which would require substantial effort and cost. Litigation or a product recall could divert significant amounts of our managements time from other important matters. Our business could also be adversely affected by public
perceptions about the safety of our products, whether or not any such concerns are justified.



Our business is subject to quarterly variations in operating results due to factors outside of our control.



Our business is subject to quarterly variations in operating results caused by a number of factors, including business and industry conditions, the timing
of acquisitions, distribution chain issues, and other factors beyond our control. All these factors make it difficult to predict operating results for any particular period. We may be subject to risks arising from other business and investment
considerations that may be disclosed from time to time in our Securities and Exchange Commission filings or in other publicly written documents.



Changes in international trade laws and in the business, political and regulatory environment abroad could materially adversely affect our business.



Our foreign operations include manufacturing facilities
in Canada, Switzerland, Italy, the Czech Republic and Mexico. Accordingly, an event that has a material adverse impact on our foreign operations may materially adversely affect our operations as a whole. The business, regulatory and political
environments in countries where we have operations differ from those in the United States and our foreign operations are exposed to a number of inherent risks, including, but not limited to:



| |  |  | changes in international trade laws, such as the North American Free Trade Agreement, or NAFTA, affecting our activities in Mexico and Canada;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in local labor laws and regulations affecting our ability to hire and retain local employees;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | currency exchange restrictions and fluctuations in the value of foreign currency;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | longer payment cycles;
| | - |  | ----------------------



| |  |  | greater difficulties in collecting accounts receivable;
| | - |  | -------------------------------------------------------



| |  |  | political conditions in countries where we have operations;
| | - |  | -----------------------------------------------------------



| |  |  | unexpected changes in the regulatory environment; and
| | - |  | -----------------------------------------------------



| |  |  | changes in general economic conditions in countries, such as Italy and Mexico, that have historically been less stable than the United States.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



If any of the events described were to occur, it could have a material
adverse effect on our business, financial condition and results of operations.



As we incur more indebtedness and greater interest expense, we may not be able to maintain our level of investment in research and development.



The indenture relating to our Senior Subordinated Notes and our Credit Facility permit us to incur significant amounts of
additional debt. If we incur additional debt, our interest expense will rise. We may find we do not have enough available cash to pay for the increased interest expense and other budgeted expenses. We may need to reduce our discretionary expenses,
including research and development, which could reduce or delay the introduction of new products. We may not be able to maintain our level of investment in research and development as we incur more indebtedness and greater interest expense.



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Certain of our products and manufacturing facilities are subject to regulation, and our failure to
obtain or maintain the required regulatory approvals for these products could hinder or prevent their sale and increase our costs of regulatory compliance.



Our ability to continue manufacturing and selling those of our products that are subject to regulation by the United States Food and Drug
Administration, state laws or other domestic or foreign governments or agencies is subject to a number of risks, including the promulgation of stricter laws or regulations, reclassification of our products into categories subject to more stringent
requirements, or the withdrawal of the approval needed to sell one or more of our products. The costs of complying with these regulations and the delays in receiving required regulatory approvals or the enactment of new adverse regulations or
regulatory requirements may force us to cut back our operations, recall products, increase our costs of regulatory compliance, prevent us from selling a product or hinder our growth.



We may be required to satisfy certain indemnification obligations to Apogent, or may not be able to collect on
indemnification rights from Apogent.



Pursuant to the
terms of the agreements executed in connection with our spin-off from Apogent in December 2000, we and our U.S. subsidiaries, in general, indemnify Apogent and its subsidiaries and affiliates against liabilities, litigation and claims actually or
allegedly arising out of the dental business, including discontinued operations relating to our business. Similarly, Apogent and its U.S. subsidiaries indemnify us and our subsidiaries and affiliates against liabilities, litigation and claims
actually or allegedly arising out of Apogents business, including discontinued operations related to the laboratory business, and other operations and assets not transferred to us. These indemnification obligations could be significant. The
availability of these indemnities will depend upon the future financial strength of each of the companies. We cannot determine whether we will have substantial indemnification obligations to Apogent and its affiliates in the future. We also cannot
assure you that, if Apogent has substantial indemnification obligations to us and our affiliates, Apogent will have the ability to satisfy those obligations.



Except as may be required by applicable securities laws or regulations, we undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.



ITEM 3.Quantitative and Qualitative Disclosures About Market Risk.



Foreign Exchange Currency Risk Management



We operate internationally; therefore, our earnings, cash flows, and financial position are exposed to foreign currency risk from foreign currency
denominated receivables and payables, forecasted sales transactions, as well as net investments in certain foreign operations. These items are denominated in foreign currencies, including but not limited to the euro, Japanese yen, Swiss franc,
Mexican peso, Canadian dollar, Czech koruna and the Australian dollar.



For fiscal year 2005, our projected total foreign currency exposure is estimated to be approximately 80.8 million euros, 786.7 million Japanese yen, 7.7 million Canadian dollars, 17.5 million Australian dollars, 11.6 million Mexican peso,
60.8 million Czech koruna, and 18.1 million Swiss francs. We have put in place a strategy to manage our euro, Japanese yen, and Australian dollar cash flow exposure through the use of zero cost collar contracts. There were no such contracts in place
for the Canadian dollar, Mexican peso, Czech koruna and Swiss franc at December 31, 2004.



At December 31, 2004, an unrealized loss of $3.3 million (net of income tax), representing the fair value of the zero cost collars, is included in accumulated other comprehensive income. In addition, none of the
foreign currency cash flow hedges have been discontinued.



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Zero cost collar contracts in place as of December 31, 2004 are as follows (in thousands, except rates):



|         |  |            |  |                |  |               |  |                       |  |            |  |             
|-------- |  | ---------- |  | -------------- |  | ------------- |  | --------------------- |  | ---------- |  | ------------
|Currency |  | Trade Date |  | Effective Date |  | Maturity Date |  | Local Currency Amount |  | Floor Rate |  | Ceiling Rate
|Euro     |  | 01/09/2004 |  | 01/14/2005     |  | 03/15/2005    |  | 9,000                 |  | 1.24       |  | 1.30        
|Euro     |  | 05/18/2004 |  | 04/15/2005     |  | 09/15/2005    |  | 21,000                |  | 1.17       |  | 1.22        
|Euro     |  | 10/22/2004 |  | 10/14/2005     |  | 12/15/2005    |  | 9,000                 |  | 1.25       |  | 1.28        
|Euro     |  | 12/23/2004 |  | 01/17/2006     |  | 03/15/2006    |  | 9,000                 |  | 1.33       |  | 1.39        
|Yen      |  | 01/27/2004 |  | 01/14/2005     |  | 03/15/2005    |  | 180,000               |  | 107.00     |  | 100.25      
|Yen      |  | 05/18/2004 |  | 04/15/2005     |  | 09/15/2005    |  | 360,000               |  | 115.00     |  | 107.30      
|Yen      |  | 10/21/2004 |  | 10/14/2005     |  | 12/15/2005    |  | 150,000               |  | 108.00     |  | 100.88      
|Yen      |  | 12/23/2004 |  | 01/17/2006     |  | 03/15/2006    |  | 150,000               |  | 104.00     |  | 94.80       
|AUD      |  | 06/24/2004 |  | 01/14/2005     |  | 03/15/2005    |  | 1,800                 |  | 0.68       |  | 0.69        
|AUD      |  | 06/24/2004 |  | 04/15/2005     |  | 06/15/2005    |  | 1,800                 |  | 0.67       |  | 0.69        
|AUD      |  | 06/24/2004 |  | 07/15/2005     |  | 09/15/2005    |  | 1,800                 |  | 0.67       |  | 0.68        
|AUD      |  | 10/21/2004 |  | 10/14/2005     |  | 12/15/2005    |  | 1,800                 |  | 0.71       |  | 0.72        
|AUD      |  | 12/23/2004 |  | 01/17/2006     |  | 03/15/2006    |  | 1,800                 |  | 0.74       |  | 0.75        



In June 2002, we
entered into four cross currency debt swap transactions to hedge our net investment in Hawe Neos and one cross currency debt swap transaction to hedge our net investment in SDS Japan. The agreements have effective dates of June 27, June 28, and July
1, 2002, and are contracts to exchange U.S. dollar principal aggregating a total amount of $45.0 million in exchange for a Swiss franc principal aggregating a total amount of 67.5 million and U.S. dollar principal amount of $4.0 million in exchange
for a Japanese yen amount of 486.0 million. Both the Swiss franc contracts and the Japanese yen contract mature on June 15, 2007. The mechanics of the agreements are similar to the original cross currency debt swap terminated on June 6, 2002.
However, the fixed interest rate to be paid to us on the U.S. dollar leg of the agreements is a rate equal to the Senior Subordinated Notes rate of 81/8% while the fixed interest rate to be paid by us on the Swiss franc leg of the agreements ranges from 6.39% to 6.45% and the Japanese yen leg of the agreements is 3.65%, with the interest payments due
semi-annually.



The following are the details of the
cross currency debt swaps (amounts in millions, except rates):



|           |  |                |  |          |  |     |      |          |      |   |        |            |          |       |  
|---------- |  | -------------- |  | -------- |  | --- | ---- | -------- | ---- | - | ------ | ---------- | -------- | ----- | -
|Trade Date |  | Effective Date |  | Maturity |  | US$ |      | Interest |      |   | FX Amt |            | Interest |      
|06/25/02   |  | 06/27/02       |  | 06/15/07 |  | $   | 15.0 |          | 81/8 | % |        | CHF 22.50  |          | 6.450 | %
|06/26/02   |  | 06/28/02       |  | 06/15/07 |  | $   | 15.0 |          | 81/8 | % |        | CHF 22.50  |          | 6.390 | %
|06/27/02   |  | 07/01/02       |  | 06/15/07 |  | $   | 7.5  |          | 81/8 | % |        | CHF 11.25  |          | 6.390 | %
|06/27/02   |  | 07/01/02       |  | 06/15/07 |  | $   | 7.5  |          | 81/8 | % |        | CHF 11.25  |          | 6.390 | %
|06/25/02   |  | 06/27/02       |  | 06/15/07 |  | $   | 4.0  |          | 81/8 | % |        | JPY 486.00 |          | 3.650 | %



At December 31, 2004,
an unrealized loss of $10.7 million (net of income tax), representing the fair value of the cross currency debt swap, was included in accumulated other comprehensive income.



Interest Rate Exposure - Interest Rate Risk Management



We use our Credit Facility and Senior Subordinated Notes to finance our operations. The Credit Facility exposes us to
variability in interest payments due to changes in interest rates. If interest rates increase, our interest expense increases. Conversely, if interest rates decrease, our interest expense also decreases. We entered into interest rate swap agreements
to manage fluctuations in cash flows resulting from interest rate risk. These interest rate swaps change a portion of our variable-rate cash flow exposure to fixed-rate cash flows. We continue to assess our exposure to interest rate risk on an
ongoing basis.





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The table below provides information about our debt obligations that are sensitive to changes in interest
rates as of December 31, 2004. For these debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Weighted average variable rates are based on implied forward 3-month LIBOR
rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents.



|                      |  |                                   |       |   |                                    |   |       |            |  |   |        |   |  |      |       |   |  |   |        |   |  |   |         |   |  |   |        
|--------------------- |  | --------------------------------- | ----- | - | ---------------------------------- | - | ----- | ---------- |  | - | ------ | - |  | ---- | ----- | - |  | - | ------ | - |  | - | ------- | - |  | - | -------
|                      |  | Twelve Months Ending December 31, |       |   | Thereafter                         |   |       | Fair Value
|Liabilities           |  | 2005                              |       |   | 2006                               |   |       | 2007       |  |   | 2008   |   |  | 2009 |       |   | 
|                      |  |                                   |       |   | (in thousands, except percentages) |   |       |            |  |   |       
|Long-Term Debt:       |  |                                   |       |   |                                    |   |       |            |  |   |        |   |  |      |       |   |  |   |        |   |  |   |         |   |  |   |        
|Fixed Rate Debt       |  |                                   |      |   |                                    |   |      |            |  |   |       |   |  |      |      |   |  |   |       |   |  | $ | 150,000 |   |  | $ | 162,750
|Average Interest Rate |  |                                   | 8.125 | % |                                    |   | 8.125 | %          |  |   | 8.125  | % |  |      | 8.125 | % |  |   | 8.125  | % |  |   | 8.125   | % |  |   |        
|Variable Rate Debt    |  | $                                 | 898   |   |                                    | $ | 821   |            |  | $ | 25,805 |   |  | $    | 8,191 |   |  | $ | 30,573 |   |  | $ | 28,982  |   |  | $ | 95,270 
|Average Interest Rate |  |                                   | 5.212 | % |                                    |   | 5.692 | %          |  |   | 6.037  | % |  |      | 6.402 | % |  |   | 6.762  | % |  |   | 7.077   | % |  |   |        



For the quarter ended
December 31, 2004, the total net cost of converting from floating rate (3-month LIBOR) to fixed rate from a portion of the interest payments under our long-term debt obligations was approximately $0.3 million. At December 31, 2004, an unrealized
loss of $0.7 million (net of income tax) is included in accumulated other comprehensive income. Below is a table listing the interest expense exposure detail and the fair value of the interest rate swap agreements as of December 31, 2004 (in
thousands):



|        |  |                 |        |      |         |       |          |           |           |          |           |                                      |   |                      |  |   |        
|------- |  | --------------- | ------ | ---- | ------- | ----- | -------- | --------- | --------- | -------- | --------- | ------------------------------------ | - | -------------------- |  | - | -------
|Loan    |  | Notional Amount |        | Term |         | Trade |          | Effective |           | Maturity |           | Three Months Ended December 31, 2004 |   | Fair Value (Pre-tax)
|Kerr B  |  | $               | 9,655  |      | 4 years |       | 1/2/2001 |           | 3/30/2001 |          | 3/31/2005 |                                      | $ | 100.6                |  | $ | 183.8  
|Ormco B |  |                 | 25,345 |      | 5 years |       | 1/2/2001 |           | 3/30/2001 |          | 6/30/2006 |                                      |   | 212.1                |  |   | 879.6  
|        |  |                 |        |      |         |       |          |           |           |          |           |                                      |   |                      |  |   |        
|Total   |  | $               | 35,000 |      |         |       |          |           |           |          |           |                                      | $ | 312.7                |  | $ | 1,063.4
|        |  |                 |        |      |         |       |          |           |           |          |           |                                      |   |                      |  |   |        



The fair value of
interest rate swap agreements designated as hedging instruments against the variability of cash flows associated with floating-rate, long-term debt obligations are reported in accumulated other comprehensive income. These amounts subsequently are
reclassified into interest expense as a yield adjustment in the same period in which the related interest on the floating-rate debt obligations affects earnings.



ITEM 4.Controls and Procedures



Disclosure Controls and Procedures: The Companys management, with the participation of the Companys Chief Executive Office and Chief Financial Officer, has evaluated the effectiveness of the
Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report.
Based on such evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.



Internal Control Over Financial Reporting: The Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Companys internal control over financial reporting to determine whether any changes occurred during the Companys first fiscal quarter
that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Based on that evaluation, the Company has concluded that there have been no such changes during the first
fiscal quarter.



PART II - OTHER INFORMATION



ITEM 6.Exhibits



See the Exhibit Index included on the last page in this report, which is incorporated herein by reference.



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SIGNATURE



Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |                                             
|---------------------- |  | --------------------------------------------
|                       |  | SYBRON DENTAL SPECIALTIES, INC. (Registrant)
|                       | 
|Date: February 9, 2005 |  | /s/ GREGORY D. WALLER                       
|                       |  | Gregory D. Waller Vice President - Finance, 
|                       |  | Chief Financial Officer & Treasurer*        

---

|* | executing as both the principal financial officer and a duly authorized officer of the Company.
|- | -----------------------------------------------------------------------------------------------



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SYBRON DENTAL SPECIALTIES, INC.

(THE REGISTRANT)

(COMMISSION FILE NO. 1-16057)

EXHIBIT INDEX

TO

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2004



|               |  |                                                                                                                                                                       |  |                                                                                                                                                             |  |               
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Exhibit Number |  | Description                                                                                                                                                           |  | Incorporated Herein By Reference To                                                                                                                         |  | Filed Herewith
|3.1            |  | (a) Restated Certificate of Incorporation of the Registrant                                                                                                           |  | Exhibit 3.1 to Amendment No. 2 to the Registrants Registration Statement on Form 10/A filed on November 9, 2000 (File No. 1-16057) (the Form 10/A No. 2) |  |               
|               |  |                                                                                                                                                                       | 
|               |  | (b) Certificate of Designation, Preferences and Rights of Series A Preferred Stock                                                                                    |  | Exhibit 3.1(b) to the Registrants Form 10-K for the fiscal year ended September 30, 2000                                                                   |  |               
|               |  |                                                                                                                                                                       | 
|3.2            |  | Bylaws of the Registrant                                                                                                                                              |  | Exhibit 3.2 to the Form 10/A No. 2                                                                                                                          |  |               
|               |  |                                                                                                                                                                       | 
|10.8           |  | Termination Agreement dated as of November 16, 2004 between Sybron Dental Specialties and Gregory D. Waller                                                           |  | Exhibit 10.1 to the Registrants Form 8-K dated November 15, 2004 and filed on November 16, 2004                                                            |  |               
|               |  |                                                                                                                                                                       | 
|10.8(a)        |  | Amendment to Termination Agreement dated as of November 16, 2004 between Sybron Dental Specialties and Gregory D. Waller                                              |  | Exhibit 10.1 to the Registrants Form 8-K dated December 23, 2004 and filed on December 30, 2004                                                            |  |               
|               |  |                                                                                                                                                                       | 
|31.1           |  | Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002                                      |  |                                                                                                                                                             |  | X             
|               |  |                                                                                                                                                                       | 
|31.2           |  | Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002                                      |  |                                                                                                                                                             |  | X             
|               |  |                                                                                                                                                                       | 
|32             |  | Chief Executive and Chief Financial Officers certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes- Oxley Act of 2002 |  |                                                                                                                                                             |  | X             



30