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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)

|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005



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  þ    No ̈



Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  þ    No ̈



At August 2, 2005, there were 40,356,326 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                                                                  |  |     
|              |  | 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 |  | 20  
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 32  
|Item 4.       |  | Controls and Procedures                                                               |  | 33  
|              |  |                                                                                      
|PART II -     |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 2        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 35  
|Item 6.       |  | Exhibits                                                                              |  | 35  
|Signature     |  | 36                                                                                   
|Exhibit Index |  | 37                                                                                   



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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)



|                                                                                                                                                                |  |                                          |         |                   |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | ----------------- | - | -------
|                                                                                                                                                                |  | June 30,2005                             |         | September 30,2004
|                                                                                                                                                                |  | (in thousands, except per share amounts)
|ASSETS                                                                                                                                                          |  |                                          |         |                   |   |        
|Current assets:                                                                                                                                                 |  |                                          |         |                   |   |        
|Cash and cash equivalents                                                                                                                                       |  | $                                        | 46,774  |                   | $ | 40,602 
|Accounts receivable, net                                                                                                                                        |  |                                          | 107,839 |                   |   | 104,148
|Inventories                                                                                                                                                     |  |                                          | 96,194  |                   |   | 93,689 
|Deferred income taxes                                                                                                                                           |  |                                          | 6,011   |                   |   | 3,293  
|Prepaid expenses and other current assets                                                                                                                       |  |                                          | 13,782  |                   |   | 12,975 
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total current assets                                                                                                                                            |  |                                          | 270,600 |                   |   | 254,707
|Property, plant and equipment, net                                                                                                                              |  |                                          | 83,679  |                   |   | 83,121 
|Goodwill                                                                                                                                                        |  |                                          | 293,648 |                   |   | 268,768
|Intangible assets, net                                                                                                                                          |  |                                          | 52,409  |                   |   | 16,178 
|Other assets                                                                                                                                                    |  |                                          | 33,626  |                   |   | 23,784 
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total assets                                                                                                                                                    |  | $                                        | 733,962 |                   | $ | 646,558
|                                                                                                                                                                |  |                                          |         |                   |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                            |  |                                          |         |                   |   |        
|Current liabilities:                                                                                                                                            |  |                                          |         |                   |   |        
|Accounts payable                                                                                                                                                |  | $                                        | 15,386  |                   | $ | 19,512 
|Current portion of long-term debt                                                                                                                               |  |                                          | 812     |                   |   | 882    
|Income taxes payable                                                                                                                                            |  |                                          | 16,433  |                   |   | 17,089 
|Accrued payroll and employee benefits                                                                                                                           |  |                                          | 30,422  |                   |   | 29,712 
|Restructuring reserve                                                                                                                                           |  |                                          |        |                   |   | 711    
|Accrued rebates                                                                                                                                                 |  |                                          | 7,926   |                   |   | 9,475  
|Accrued interest                                                                                                                                                |  |                                          | 752     |                   |   | 3,620  
|Other current liabilities                                                                                                                                       |  |                                          | 16,626  |                   |   | 12,291 
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total current liabilities                                                                                                                                       |  |                                          | 88,357  |                   |   | 93,292 
|Long-term debt                                                                                                                                                  |  |                                          | 82,729  |                   |   | 69,589 
|Senior subordinated notes                                                                                                                                       |  |                                          | 150,000 |                   |   | 150,000
|Deferred income taxes                                                                                                                                           |  |                                          | 14,363  |                   |   | 12,266 
|Other liabilities                                                                                                                                               |  |                                          | 20,742  |                   |   | 22,639 
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total liabilities                                                                                                                                               |  |                                          | 356,191 |                   |   | 347,786
|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, 40,356 and 39,307 shares issued and outstanding at June 30, 2005 and September 30,
2004, respectively |  |                                          | 403     |                   |   | 393    
|Additional paid-in capital                                                                                                                                      |  |                                          | 117,507 |                   |   | 93,817 
|Retained earnings                                                                                                                                               |  |                                          | 243,312 |                   |   | 188,156
|Accumulated other comprehensive income                                                                                                                          |  |                                          | 16,549  |                   |   | 16,406 
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total stockholders equity                                                                                                                                      |  |                                          | 377,771 |                   |   | 298,772
|                                                                                                                                                                |  |                                          |         |                   |   |        
|Total liabilities and stockholders equity                                                                                                                      |  | $                                        | 733,962 |                   | $ | 646,558
|                                                                                                                                                                |  |                                          |         |                   |   |        



See accompanying notes
to unaudited condensed consolidated financial statements.



3



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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | -------------------------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                   |  | Three Months EndedJune 30,                   |         |   | Nine Months EndedJune 30, |  
|                                                   |  | 2005                                         |         |   | 2004                      |   |         | 2005 |  |   | 2004    |  
|                                                   |  | (in thousands, except for per share amounts) |        
|Net sales                                          |  | $                                            | 165,174 |   |                           | $ | 145,518 |      |  | $ | 479,270 |   |  | $ | 428,296 |  
|Cost of sales:                                     |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Cost of products sold                              |  |                                              | 72,908  |   |                           |   | 63,517  |      |  |   | 208,368 |   |  |   | 190,270 |  
|Restructuring charge                               |  |                                              | (8      | ) |                           |   | 132     |      |  |   | 76      |   |  |   | 1,614   |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total cost of sales                                |  |                                              | 72,900  |   |                           |   | 63,649  |      |  |   | 208,444 |   |  |   | 191,884 |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                       |  |                                              | 92,274  |   |                           |   | 81,869  |      |  |   | 270,826 |   |  |   | 236,412 |  
|Selling, general and administrative expenses       |  |                                              | 58,257  |   |                           |   | 51,976  |      |  |   | 174,952 |   |  |   | 150,969 |  
|Restructuring charge                               |  |                                              |        |   |                           |   |        |      |  |   | 488     |   |  |   |        |  
|Amortization of intangible assets                  |  |                                              | 734     |   |                           |   | 307     |      |  |   | 1,790   |   |  |   | 938     |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total selling, general and administrative expenses |  |                                              | 58,991  |   |                           |   | 52,283  |      |  |   | 177,230 |   |  |   | 151,907 |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                   |  |                                              | 33,283  |   |                           |   | 29,586  |      |  |   | 93,596  |   |  |   | 84,505  |  
|Other income (expense):                            |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Interest expense                                   |  |                                              | (4,404  | ) |                           |   | (4,677  | )    |  |   | (14,037 | ) |  |   | (14,778 | )
|Amortization of deferred financing fees            |  |                                              | (414    | ) |                           |   | (401    | )    |  |   | (1,245  | ) |  |   | (1,210  | )
|Other, net                                         |  |                                              | (308    | ) |                           |   | 163     |      |  |   | 544     |   |  |   | 120     |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                         |  |                                              | 28,157  |   |                           |   | 24,671  |      |  |   | 78,858  |   |  |   | 68,637  |  
|Income taxes                                       |  |                                              | 7,478   |   |                           |   | 8,141   |      |  |   | 23,702  |   |  |   | 22,650  |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net income                                         |  | $                                            | 20,679  |   |                           | $ | 16,530  |      |  | $ | 55,156  |   |  | $ | 45,987  |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Basic earnings per share                           |  | $                                            | 0.51    |   |                           | $ | 0.43    |      |  | $ | 1.38    |   |  | $ | 1.19    |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Diluted earnings per share                         |  | $                                            | 0.50    |   |                           | $ | 0.41    |      |  | $ | 1.33    |   |  | $ | 1.15    |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Weighted average shares outstanding:               |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Basic                                              |  |                                              | 40,180  |   |                           |   | 38,722  |      |  |   | 39,882  |   |  |   | 38,501  |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Diluted                                            |  |                                              | 41,521  |   |                           |   | 40,343  |      |  |   | 41,358  |   |  |   | 40,143  |  
|                                                   |  |                                              |         |   |                           |   |         |      |  |   |         |   |  |   |         |  



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
NINE MONTHS ENDED JUNE 30, 2005

(UNAUDITED)



|                                                           |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  
|---------------------------------------------------------- |  | ---------------- |  | -------------------------- | --- | ----------------- | - | -------------------------------------- |  | - | -------------------------- |  | - | -------------------------- | - |  | - | ------- | - |  | - | ------ | -
|                                                           |  | Common Stock     |  | Additional Paid-in Capital |     | Retained Earnings |   | Accumulated Other Comprehensive Income |  |   | Total Stockholders Equity |  |   | Total Comprehensive Income |  
|                                                           |  | Number of Shares |  | Par Value                  |     |                   |   |                                        | 
|                                                           |  | (in thousands)   | 
|Balance at September 30, 2004                              |  | 39,307           |  | $                          | 393 |                   | $ | 93,817                                 |  | $ | 188,156                    |  | $ | 16,406                     |   |  | $ | 298,772 |   |  |   |        |  
|Comprehensive income:                                      |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  
|Net income                                                 |  |                 |  |                            |    |                   |   |                                       |  |   | 55,156                     |  |   |                           |   |  |   | 55,156  |   |  | $ | 55,156 |  
|Translation adjustment                                     |  |                 |  |                            |    |                   |   |                                       |  |   |                           |  |   | (2,774                     | ) |  |   | (2,774  | ) |  |   | (2,774 | )
|Minimum pension liability adjustments                      |  |                 |  |                            |    |                   |   |                                       |  |   |                           |  |   | 799                        |   |  |   | 799     |   |  |   | 799    |  
|Unrealized gain on derivative instruments                  |  |                 |  |                            |    |                   |   |                                       |  |   |                           |  |   | 2,118                      |   |  |   | 2,118   |   |  |   | 2,118  |  
|                                                           |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  
|Total comprehensive income                                 |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  | $ | 55,299 |  
|                                                           |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  
|Issuance of common stock from stock options exercised      |  | 989              |  |                            | 10  |                   |   | 14,548                                 |  |   |                           |  |   |                           |   |  |   | 14,558  |   |  |   |        |  
|Income tax benefit from stock options exercised            |  |                 |  |                            |    |                   |   | 7,481                                  |  |   |                           |  |   |                           |   |  |   | 7,481   |   |  |   |        |  
|Issuance of common stock from employee stock purchase plan |  | 60               |  |                            |    |                   |   | 1,661                                  |  |   |                           |  |   |                           |   |  |   | 1,661   |   |  |   |        |  
|                                                           |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  
|Balance at June 30, 2005                                   |  | 40,356           |  | $                          | 403 |                   | $ | 117,507                                |  | $ | 243,312                    |  | $ | 16,549                     |   |  | $ | 377,771 |   |  |   |        |  
|                                                           |  |                  |  |                            |     |                   |   |                                        |  |   |                            |  |   |                            |   |  |   |         |   |  |   |        |  



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)



|                                                                                         |  |                            |          |   |      |   |          |  
|---------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                         |  | Nine Months Ended June 30, |         
|                                                                                         |  | 2005                       |          |   | 2004 |  
|                                                                                         |  | (in thousands)             |         
|Cash flows from operating activities:                                                    |  |                            |          |   |      |   |          |  
|Net income                                                                               |  | $                          | 55,156   |   |      | $ | 45,987   |  
|Adjustments to reconcile net income to net cash provided by operating activities:        |  |                            |          |   |      |   |          |  
|Depreciation                                                                             |  |                            | 10,813   |   |      |   | 9,785    |  
|Amortization of intangible assets                                                        |  |                            | 1,790    |   |      |   | 938      |  
|Amortization of deferred financing fees                                                  |  |                            | 1,245    |   |      |   | 1,210    |  
|Loss on impairment of long-lived assets                                                  |  |                            | 1,192    |   |      |   |         |  
|(Gain)/loss on sales of property, plant and equipment                                    |  |                            | 316      |   |      |   | (102     | )
|Provision for losses on doubtful receivables                                             |  |                            | 527      |   |      |   | 586      |  
|Inventory provisions                                                                     |  |                            | 3,981    |   |      |   | 2,436    |  
|Deferred income taxes                                                                    |  |                            | (518     | ) |      |   | (1,118   | )
|Tax benefit from issuance of stock under employee stock plan and stock options exercised |  |                            | 7,481    |   |      |   | 2,904    |  
|Changes in assets and liabilities, net of effects of businesses acquired:                |  |                            |          |   |      |   |          |  
|(Increase)/decrease in accounts receivable                                               |  |                            | (902     | ) |      |   | 120      |  
|(Increase)/decrease in inventories                                                       |  |                            | 2,403    |   |      |   | (5,592   | )
|Increase in prepaid expenses and other current assets                                    |  |                            | (321     | ) |      |   | (1,077   | )
|Decrease in accounts payable                                                             |  |                            | (5,403   | ) |      |   | (5,035   | )
|Increase/(decrease) in income taxes payable                                              |  |                            | (1,939   | ) |      |   | 927      |  
|Increase in accrued payroll and employee benefits                                        |  |                            | 1,210    |   |      |   | 1,262    |  
|Decrease in accrued rebates                                                              |  |                            | (1,549   | ) |      |   | (884     | )
|Decrease in restructuring reserve                                                        |  |                            | (711     | ) |      |   | (361     | )
|Decrease in accrued interest                                                             |  |                            | (2,868   | ) |      |   | (3,192   | )
|Increase in other current liabilities                                                    |  |                            | 977      |   |      |   | 3,091    |  
|Net change in other assets and liabilities                                               |  |                            | (10,894  | ) |      |   | 721      |  
|                                                                                         |  |                            |          |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                            | 61,986   |   |      |   | 52,606   |  
|Cash flows from investing activities:                                                    |  |                            |          |   |      |   |          |  
|Capital expenditures                                                                     |  |                            | (12,030  | ) |      |   | (8,537   | )
|Proceeds from sales of property, plant and equipment                                     |  |                            | 1,013    |   |      |   | 159      |  
|Net payments for businesses acquired                                                     |  |                            | (69,218  | ) |      |   |         |  
|Payments for intangibles                                                                 |  |                            | (1,170   | ) |      |   | (750     | )
|                                                                                         |  |                            |          |   |      |   |          |  
|Net cash used in investing activities                                                    |  |                            | (81,405  | ) |      |   | (9,128   | )
|Cash flows from financing activities:                                                    |  |                            |          |   |      |   |          |  
|Proceeds from credit facility                                                            |  |                            | 135,500  |   |      |   | 108,500  |  
|Principal payments on credit facility                                                    |  |                            | (122,254 | ) |      |   | (146,555 | )
|Proceeds from long-term debt                                                             |  |                            |         |   |      |   | 2,469    |  
|Principal payments on long-term debt                                                     |  |                            | (354     | ) |      |   | (9,345   | )
|Proceeds from exercise of stock options                                                  |  |                            | 14,558   |   |      |   | 8,774    |  
|Proceeds from employee stock purchase plan                                               |  |                            | 1,661    |   |      |   | 1,172    |  
|                                                                                         |  |                            |          |   |      |   |          |  
|Net cash provided by (used in) financing activities                                      |  |                            | 29,111   |   |      |   | (34,985  | )
|Effect of exchange rate changes on cash and cash equivalents                             |  |                            | (3,520   | ) |      |   | (1,343   | )
|                                                                                         |  |                            |          |   |      |   |          |  
|Net increase in cash and cash equivalents                                                |  |                            | 6,172    |   |      |   | 7,150    |  
|Cash and cash equivalents at beginning of period                                         |  |                            | 40,602   |   |      |   | 22,868   |  
|                                                                                         |  |                            |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                               |  | $                          | 46,774   |   |      | $ | 30,018   |  
|                                                                                         |  |                            |          |   |      |   |          |  
|Supplemental cash flow information:                                                      |  |                            |          |   |      |   |          |  
|Cash paid during the period for interest                                                 |  | $                          | 17,124   |   |      | $ | 18,338   |  
|                                                                                         |  |                            |          |   |      |   |          |  
|Cash paid during the period for income taxes                                             |  | $                          | 19,361   |   |      | $ | 19,422   |  
|                                                                                         |  |                            |          |   |      |   |          |  



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)
and its subsidiaries are leading manufacturers of both a broad range of value-added products for the dental profession, including the specialty markets of orthodontics, endodontics and implantology, and a variety of infection prevention products for
use by the medical profession. The Companys fiscal year ends on September 30th. The quarters ended June 30,
2005 and 2004 are the third quarters of the Companys fiscal years 2005 and 2004, respectively.



The Company has prepared the condensed consolidated financial statements presented herein following the requirements of the Securities and Exchange
Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (GAAP) have
been condensed or omitted. 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. All
significant intercompany balances and transactions have been eliminated in consolidation.



The results and trends in these interim financial statements are not necessarily representative of those for the full year, as revenues, expenses, assets and liabilities can vary during each quarter of the year. The
information included in this Quarterly Report on Form 10-Q 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 June 30, 2005 and September 30, 2004 are presented below.



|                           |  |               |        |                    |   |       
|-------------------------- |  | ------------- | ------ | ------------------ | - | ------
|                           |  | June 30, 2005 |        | September 30, 2004
|Raw materials and supplies |  | $             | 21,606 |                    | $ | 24,138
|Work in process            |  |               | 23,417 |                    |   | 20,960
|Finished goods             |  |               | 51,171 |                    |   | 48,591
|                           |  |               |        |                    |   |       
|                           |  | $             | 96,194 |                    | $ | 93,689
|                           |  |               |        |                    |   |       



During the three
months ended June 30, 2005, the Company identified an overstatement of inventory at a subsidiary of the Companys Professional Dental segment relating to prior periods. As a result, inventory was reduced by $1,321 to account for this
overstatement and a charge of $1,321 to cost of sales was recorded in the three months ended June 30, 2005. The effect of the overstatement was not material to any prior period or to the three month period ended June 30, 2005.



3. INTANGIBLE ASSETS, NET



Definite lived intangible assets are recorded at cost and are amortized over
their estimated useful lives using the straight-line method. 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 June 30, 2005:



|                                                |  |                       |        |                          |   |                     |  |   |       
|----------------------------------------------- |  | --------------------- | ------ | ------------------------ | - | ------------------- |  | - | ------
|                                                |  | Gross Carrying Amount |        | Accumulated Amortization |   | Net Carrying Amount
|Intangibles Assets Subject To Amortization:     |  |                       |        |                          |   |                     |  |   |       
|Proprietary technology                          |  | $                     | 49,672 |                          | $ | 11,762              |  | $ | 37,910
|Other                                           |  |                       | 14,791 |                          |   | 14,735              |  |   | 56    
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total                                           |  | $                     | 64,463 |                          | $ | 26,497              |  |   | 37,966
|                                                |  |                       |        |                          |   |                     |  |   |       
|Intangibles Assets Not Subject To Amortization: |  |                       |        |                          |   |                     |  |   |       
|Trademarks                                      |  |                       |        |                          |   |                     |  |   | 14,443
|                                                |  |                       |        |                          |   |                     |  |   |       
|Total Intangible Assets                         |  |                       |        |                          |   |                     |  | $ | 52,409
|                                                |  |                       |        |                          |   |                     |  |   |       



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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 expenses.



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 pension 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 where the Companys contributions are 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 Postretirement Benefits
|                                   |  | Three Months Ended June 30, |        |   | Nine Months EndedJune 30,     |   |       | Three Months Ended June 30, |  | Nine Months Ended June 30,
|                                   |  | 2005                        |        |   | 2004                          |   |       | 2005                        |  |                            | 2004   |   |  | 2005 |        | 2004 |  | 2005 |     | 2004
|Service cost                       |  | $                           | 1,094  |   |                               | $ | 985   |                             |  | $                          | 3,282  |   |  | $    | 2,955  |      |  | $    | 149 |      | $ | 119 |  | $ | 447   |  | $ | 357  
|Interest cost                      |  |                             | 972    |   |                               |   | 820   |                             |  |                            | 2,916  |   |  |      | 2,460  |      |  |      | 253 |      |   | 205 |  |   | 759   |  |   | 615  
|Expected return on plan assets     |  |                             | (1,108 | ) |                               |   | (948  | )                           |  |                            | (3,324 | ) |  |      | (2,844 | )    |  |      |    |      |   |    |  |   |      |  |   |     
|Amortization of prior service cost |  |                             | 24     |   |                               |   | 24    |                             |  |                            | 72     |   |  |      | 72     |      |  |      |    |      |   |    |  |   |      |  |   |     
|Amortization of actuarial loss     |  |                             | 241    |   |                               |   | 302   |                             |  |                            | 723    |   |  |      | 906    |      |  |      | 153 |      |   | 121 |  |   | 459   |  |   | 363  
|                                   |  |                             |        |   |                               |   |       |                             |  |                            |        |   |  |      |        |      |  |      |     |      |   |     |  |   |       |  |   |      
|Net periodic benefit cost          |  | $                           | 1,223  |   |                               | $ | 1,183 |                             |  | $                          | 3,669  |   |  | $    | 3,549  |      |  | $    | 555 |      | $ | 445 |  | $ | 1,665 |  | $ | 1,335
|                                   |  |                             |        |   |                               |   |       |                             |  |                            |        |   |  |      |        |      |  |      |     |      |   |     |  |   |       |  |   |      



The Companys
funding policy is to generally make annual contributions to its defined benefit pension plans 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 Statement of Financial Accounting Standards (SFAS) No. 87 Employers Accounting for Pensions. The
Company made approximately $10,107 in contributions in the quarter ended June 30, 2005. The Company expects to contribute an additional amount of approximately $100 to its pension plan assets in the fourth fiscal quarter of 2005.



5. RESTRUCTURING CHARGES



In the three month period ended March 31, 2005, the Company recorded a
restructuring charge of approximately $572 ($389 after tax). The charge was primarily comprised of estimated severance and termination costs associated with the employees whose employment the Company plans to terminate as a result of the
consolidation of its Demetron and Orascoptic operations into one facility. In the third quarter of fiscal 2005, the Company reduced the restructuring charge recorded by $8 to reflect a change in its estimate of the severance and termination costs.
The Company



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expects to record additional charges of approximately $315 in the next six months associated with additional severance
and facility moving costs. The majority of the 2005 restructuring is expected to be completed by the end of the first quarter of fiscal 2006.



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 sales 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 for a tax
contingency remains in the Companys accrued tax liability.



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 the restructuring charge of approximately $200 relating to over accruals of anticipated costs associated
with the restructuring activity. In the third quarter of fiscal 2005, the Company reversed a tax liability accrual of approximately $700 when the determination was made by the Company that it was unlikely that the amount would be paid.



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.



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



The following table presents the results of operations for these business segments for the three month and nine month periods ended June 30:



|                                             |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|-------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ------------ |  | - | ------ | - |  | - | -------
|Three Months Ended June 30,                  |  | ProfessionalDental |        | SpecialtyProducts |   | Eliminations |  |   | Total 
|2005                                         |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 86,899 |                   | $ | 78,275       |  | $ |       |   |  | $ | 165,174
|Intersegment                                 |  |                    | 689    |                   |   | 1,181        |  |   | (1,870 | ) |  |   |       
|                                             |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 87,588 |                   | $ | 79,456       |  | $ | (1,870 | ) |  | $ | 165,174
|                                             |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                  | 46,283 |                   | $ | 45,991       |  | $ |       |   |  | $ | 92,274 
|Selling, general and administrative expenses |  |                    | 29,973 |                   |   | 29,018       |  |   |       |   |  |   | 58,991 
|Operating income                             |  |                    | 16,310 |                   |   | 16,973       |  |   |       |   |  |   | 33,283 
|                                             |  |                    |        |                  
|2004                                         |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 80,698 |                   | $ | 64,820       |  | $ |       |   |  | $ | 145,518
|Intersegment                                 |  |                    | 569    |                   |   | 1,084        |  |   | (1,653 | ) |  |   |       
|                                             |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 81,267 |                   | $ | 65,904       |  | $ | (1,653 | ) |  | $ | 145,518
|                                             |  |                    |        |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                  | 44,663 |                   | $ | 37,206       |  | $ |       |   |  | $ | 81,869 
|Selling, general and administrative expenses |  |                    | 28,771 |                   |   | 23,512       |  |   |       |   |  |   | 52,283 
|Operating income                             |  |                    | 15,892 |                   |   | 13,694       |  |   |       |   |  |   | 29,586 



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|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|-------------------------------------------- |  | ------------------ | ------- | ----------------- | - | ------------ |  | - | ------ | - |  | - | -------
|Nine Months Ended June 30,                   |  | ProfessionalDental |         | SpecialtyProducts |   | Eliminations |  |   | Total 
|2005                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 250,353 |                   | $ | 228,917      |  | $ |       |   |  | $ | 479,270
|Intersegment                                 |  |                    | 2,009   |                   |   | 2,936        |  |   | (4,945 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 252,362 |                   | $ | 231,853      |  | $ | (4,945 | ) |  | $ | 479,270
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                  | 137,306 |                   | $ | 133,520      |  | $ |       |   |  | $ | 270,826
|Selling, general and administrative expenses |  |                    | 90,645  |                   |   | 86,585       |  |   |       |   |  |   | 177,230
|Operating income                             |  |                    | 46,661  |                   |   | 46,935       |  |   |       |   |  |   | 93,596 
|                                             |  |                    |         |                  
|2004                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 235,991 |                   | $ | 192,305      |  | $ |       |   |  | $ | 428,296
|Intersegment                                 |  |                    | 2,481   |                   |   | 3,003        |  |   | (5,484 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 238,472 |                   | $ | 195,308      |  | $ | (5,484 | ) |  | $ | 428,296
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Gross profit                                 |  | $                  | 129,212 |                   | $ | 107,200      |  | $ |       |   |  | $ | 236,412
|Selling, general and administrative expenses |  |                    | 83,084  |                   |   | 68,823       |  |   |       |   |  |   | 151,907
|Operating income                             |  |                    | 46,128  |                   |   | 38,377       |  |   |       |   |  |   | 84,505 



The following table
presents the segment assets as of June 30, 2005 compared to the prior fiscal year end:



|                   |  |                    |         |                   |   |         |  |   |        
|------------------ |  | ------------------ | ------- | ----------------- | - | ------- |  | - | -------
|                   |  | ProfessionalDental |         | SpecialtyProducts |   | Total  
|June 30, 2005      |  | $                  | 482,400 |                   | $ | 251,562 |  | $ | 733,962
|September 30, 2004 |  | $                  | 461,140 |                   | $ | 185,418 |  | $ | 646,558



7. EARNINGS PER SHARE



Basic earnings per common share is computed by dividing
net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive common share equivalents, comprised of shares
issuable under the Companys share-based compensation plans, and the weighted average number of common shares outstanding during the reporting 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 Ended June 30, |  | Nine Months Ended June 30,
|                                            |  | 2005                        |  | 2004                       |  | 2005   |  | 2004  
|Basic shares outstanding (weighted average) |  | 40,180                      |  | 38,722                     |  | 39,882 |  | 38,501
|Effect of dilutive securities               |  | 1,341                       |  | 1,621                      |  | 1,476  |  | 1,642 
|                                            |  |                             |  |                            |  |        |  |       
|Diluted shares outstanding                  |  | 41,521                      |  | 40,343                     |  | 41,358 |  | 40,143
|                                            |  |                             |  |                            |  |        |  |       



Options outstanding
during the three month and nine month periods ended June 30, 2005 and 2004 to purchase approximately 3,301 and 60 shares of common stock, respectively, were not included in the computation of dilutive shares because inclusion would be anti-dilutive.



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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. Because the Company establishes the exercise price based on the fair market value of the Companys stock at the date of
grant, the stock options have no intrinsic value upon grant, and therefore no expense is recorded. Each quarter, the Company reports the potential dilutive impact of stock options in its diluted earnings per common share using the treasury stock
method. Out-of-the-money stock options (i.e. the average stock price during the period is below the strike price of the stock option) are not included in diluted earnings per common share as their effect is anti-dilutive.



As required under SFAS No. 123 (FAS 123), Accounting for
Stock-Based Compensation, 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 an option valuation model. Prior to the three month period ended June 30,
2005, the Company used the Black-Scholes option-pricing model to estimate a valuation for stock options. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no restrictions and are
fully transferable and negotiable in a free trading market. This model does not consider the employment, transfer or vesting restrictions that are inherent in the Companys employee stock options or purchase rights granted pursuant to the
Employee Stock Purchase Plan. During the three month period ended June 30, 2005, the Company conducted an evaluation of the benefits of using a lattice model rather than the Black-Scholes model. A lattice model considers historical patterns of
employee exercise behavior and stock price volatility to project an appropriate array of future exercise behaviors, while the Black-Scholes model uses weighted average assumptions about option characteristics. As a result of the evaluation, the
Company concluded that a lattice model provides a more accurate estimated valuation for stock options and has adopted a lattice model to estimate the fair value of stock options granted as of April 1, 2005.



The weighted average estimated fair values of stock options granted during
the three months and nine months ended June 30, 2005 were $16.49 and $16.33 per share, respectively. The weighted average estimated fair values of stock options granted during the three months and nine months ended June 30, 2004 were $8.11 per
share. The weighted average estimated fair values of purchase rights granted pursuant to the Employee Stock Purchase Plan during the three months and nine months ended June 30, 2005 were $8.02 and $8.80 per share, respectively. The weighted average
estimated fair values of purchase rights granted pursuant to the Employee Stock Purchase Plan during the three months and nine months ended June 30, 2004 were $4.91 and $5.75 per share, respectively.



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 June 30, |        | Nine Months Ended June 30,
|                                                                                                                                            |  | 2005                        |        | 2004                       |   | 2005   |  | 2004
|Net income, as reported                                                                                                                     |  | $                           | 20,679 |                            | $ | 16,530 |  | $    | 55,156 |  | $ | 45,987
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                             | 1,451  |                            |   | 914    |  |      | 2,953  |  |   | 2,954 
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       
|Pro forma net income:                                                                                                                       |  | $                           | 19,228 |                            | $ | 15,616 |  | $    | 52,203 |  | $ | 43,033
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       
|Earnings per share:                                                                                                                         |  |                             |        |                            |   |        |  |      |        |  |   |       
|Basic - as reported                                                                                                                         |  | $                           | 0.51   |                            | $ | 0.43   |  | $    | 1.38   |  | $ | 1.19  
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       
|Basic - pro forma                                                                                                                           |  | $                           | 0.48   |                            | $ | 0.40   |  | $    | 1.31   |  | $ | 1.12  
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       
|Diluted - as reported                                                                                                                       |  | $                           | 0.50   |                            | $ | 0.41   |  | $    | 1.33   |  | $ | 1.15  
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       
|Diluted - pro forma                                                                                                                         |  | $                           | 0.46   |                            | $ | 0.39   |  | $    | 1.26   |  | $ | 1.07  
|                                                                                                                                            |  |                             |        |                            |   |        |  |      |        |  |   |       



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 FASB replaced SFAS 123, Accounting for Stock-Based Compensation, with FASB Statement No. 123 (revised 2004), Share-Based Payment, (FAS 123R). FAS 123R requires companies to expense the



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estimated fair value of employee stock options and similar awards. On April 14, 2005, the U.S. Securities and Exchange
Commission adopted a new rule amending the compliance dates for FAS 123R. In accordance with the new rule, the accounting provisions of FAS 123R will be effective for the Company on October 1, 2005, the beginning of fiscal 2006. The Company will
adopt the provisions of FAS 123R using a modified prospective application. Under modified prospective application, FAS 123R, which provides certain changes to the method for valuing share-based compensation among other changes, will apply to awards
made after October 1, 2005, and awards outstanding on October 1, 2005 that are subsequently modified or cancelled. Compensation expense for outstanding awards for which the requisite service had not been rendered as of October 1, 2005 will be
recognized over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under FAS 123. At June 30, 2005, unamortized compensation expense, as determined in accordance with FAS 123, that the Company
expects to record during fiscal 2006 was approximately $8,086 before income taxes. The Company may incur additional expense during fiscal 2006, which cannot currently be determined, if new awards are granted during the remainder of fiscal 2005 and
fiscal 2006. The Company is in the process of determining how the guidance regarding valuing share-based compensation as prescribed in FAS 123R will be applied to valuing share-based awards granted after the effective date and the impact the
recognition of compensation expense related to such awards will have on its consolidated financial statements.



9. CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The Companys domestic subsidiaries are guarantors of the Companys 8 1/8% Senior Subordinated Notes due 2012 (the subsidiary guarantors), 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 subsidiary guarantors 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 June 30, 2005 and September 30, 2004, statements of income for the three months and
nine months ended June 30, 2005 and 2004, and statements of cash flows for the nine months ended June 30, 2005 and 2004, of the Company, the subsidiary guarantors and non-guarantors subsidiaries.



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 June 30, 2005     
|                                               |  | Sybron DentalSpecialties |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  | Eliminations |         |  | Consolidated
|ASSETS                                         |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Current assets:                                |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Cash and cash equivalents                      |  | $                        | (615    | ) |                       | $ | (838    | )                        |  | $            | 48,227  |  | $            |           |   |  | $ | 46,774 
|Account receivable, net                        |  |                          | 34      |   |                       |   | 54,897  |                          |  |              | 52,908  |  |              |           |   |  |   | 107,839
|Inventories                                    |  |                          |        |   |                       |   | 61,912  |                          |  |              | 34,282  |  |              |           |   |  |   | 96,194 
|Other current assets                           |  |                          | 9,735   |   |                       |   | 3,329   |                          |  |              | 6,729   |  |              |           |   |  |   | 19,793 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total current assets                           |  |                          | 9,154   |   |                       |   | 119,300 |                          |  |              | 142,146 |  |              |           |   |  |   | 270,600
|Property, plant and equipment, net             |  |                          | 7,886   |   |                       |   | 30,085  |                          |  |              | 45,708  |  |              |           |   |  |   | 83,679 
|Goodwill                                       |  |                          |        |   |                       |   | 197,756 |                          |  |              | 95,892  |  |              |           |   |  |   | 293,648
|Intangible assets, net                         |  |                          |        |   |                       |   | 17,620  |                          |  |              | 34,789  |  |              |           |   |  |   | 52,409 
|Investment in subsidiaries                     |  |                          | 907,399 |   |                       |   |        |                          |  |              |        |  |              | (907,399   | ) |  |   |       
|Intercompany balances                          |  |                          |        |   |                       |   | 222,070 |                          |  |              | 131,865 |  |              | (353,935   | ) |  |   |       
|Other assets                                   |  |                          | 21,884  |   |                       |   | 8,398   |                          |  |              | 3,344   |  |              |           |   |  |   | 33,626 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total assets                                   |  | $                        | 946,323 |   |                       | $ | 595,229 |                          |  | $            | 453,744 |  | $            | (1,261,334 | ) |  | $ | 733,962
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Current liabilities:                           |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Account payable                                |  | $                        | 533     |   |                       | $ | 7,804   |                          |  | $            | 7,049   |  | $            |           |   |  | $ | 15,386 
|Current portion of long-term debt              |  |                          | 82      |   |                       |   | 730     |                          |  |              |        |  |              |           |   |  |   | 812    
|Income taxes payable                           |  |                          | (8,551  | ) |                       |   | 15,063  |                          |  |              | 9,921   |  |              |           |   |  |   | 16,433 
|Accrued expenses and other current liabilities |  |                          | 9,980   |   |                       |   | 23,307  |                          |  |              | 22,439  |  |              |           |   |  |   | 55,726 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total current liabilities                      |  |                          | 2,044   |   |                       |   | 46,904  |                          |  |              | 39,409  |  |              |           |   |  |   | 88,357 
|Long-term debt                                 |  |                          | 28,700  |   |                       |   | 54,029  |                          |  |              |        |  |              |           |   |  |   | 82,729 
|Senior subordinated notes                      |  |                          | 150,000 |   |                       |   |        |                          |  |              |        |  |              |           |   |  |   | 150,000
|Deferred income taxes                          |  |                          | 14,231  |   |                       |   |        |                          |  |              | 132     |  |              |           |   |  |   | 14,363 
|Other liabilities                              |  |                          | 19,642  |   |                       |   | 85      |                          |  |              | 1,015   |  |              |           |   |  |   | 20,742 
|Intercompany balances                          |  |                          | 353,935 |   |                       |   |        |                          |  |              |        |  |              | (353,935   | ) |  |   |       
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total liabilities                              |  |                          | 568,552 |   |                       |   | 101,018 |                          |  |              | 40,556  |  |              | (353,935   | ) |  |   | 356,191
|Stockholders equity:                          |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Preferred stock                                |  |                          |        |   |                       |   |        |                          |  |              |        |  |              |           |   |  |   |       
|Common stock                                   |  |                          | 403     |   |                       |   | 3,777   |                          |  |              | 15,981  |  |              | (19,758    | ) |  |   | 403    
|Additional paid-in capital                     |  |                          | 117,507 |   |                       |   | 307,008 |                          |  |              | 250,203 |  |              | (557,211   | ) |  |   | 117,507
|Retained earnings                              |  |                          | 243,312 |   |                       |   | 172,096 |                          |  |              | 127,090 |  |              | (299,186   | ) |  |   | 243,312
|Accumulated other comprehensive income         |  |                          | 16,549  |   |                       |   | 11,330  |                          |  |              | 19,914  |  |              | (31,244    | ) |  |   | 16,549 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total stockholders equity                     |  |                          | 377,771 |   |                       |   | 494,211 |                          |  |              | 413,188 |  |              | (907,399   | ) |  |   | 377,771
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total liabilities and stockholders equity     |  | $                        | 946,323 |   |                       | $ | 595,229 |                          |  | $            | 453,744 |  | $            | (1,261,334 | ) |  | $ | 733,962
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        



13



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##### Table of Contents

Condensed Consolidating Balance Sheets



|                                               |  |                          |         |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|---------------------------------------------- |  | ------------------------ | ------- | --------------------- | - | ------- | ------------------------ |  | ------------ | ------- |  | ------------ | ---------- | - |  | - | -------
|                                               |  | As of September 30, 2004
|                                               |  | Sybron DentalSpecialties |         | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  | 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
|                                               |  |                          |         |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        



14



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##### Table of Contents

Condensed Consolidating Statements of Income



|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------------------------------- | ------ | - | ---------------------- | - | ------ | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             |  | For The Three Months Ended June 30, 2005 |       
|                                             |  | Sybron Dental Specialties                |        |   | Guarantor Subsidiaries |   |        | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                        |       |   |                        | $ | 90,247 |                            |  | $ | 76,797       |   |  | $            | (1,870  | ) |  | $ | 165,174 |  
|Cost of sales                                |  |                                          | 299    |   |                        |   | 31,106 |                            |  |   | 43,365       |   |  |              | (1,870  | ) |  |   | 72,900  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                          | (299   | ) |                        |   | 59,141 |                            |  |   | 33,432       |   |  |              |        |   |  |   | 92,274  |  
|Selling, general and administrative expenses |  |                                          | 6,791  |   |                        |   | 30,517 |                            |  |   | 21,683       |   |  |              |        |   |  |   | 58,991  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                          | (7,090 | ) |                        |   | 28,624 |                            |  |   | 11,749       |   |  |              |        |   |  |   | 33,283  |  
|Other income (expense):                      |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                          | (3,509 | ) |                        |   | (865   | )                          |  |   | (30          | ) |  |              |        |   |  |   | (4,404  | )
|Amortization of deferred financing fees      |  |                                          |       |   |                        |   | (414   | )                          |  |   |             |   |  |              |        |   |  |   | (414    | )
|Income from equity method investments        |  |                                          | 20,679 |   |                        |   |       |                            |  |   |             |   |  |              | (20,679 | ) |  |   |        |  
|Other, net                                   |  |                                          | 10,599 |   |                        |   | (9,274 | )                          |  |   | (1,633       | ) |  |              |        |   |  |   | (308    | )
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                          | 20,679 |   |                        |   | 18,071 |                            |  |   | 10,086       |   |  |              | (20,679 | ) |  |   | 28,157  |  
|Income taxes                                 |  |                                          |       |   |                        |   | 5,098  |                            |  |   | 2,380        |   |  |              |        |   |  |   | 7,478   |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                        | 20,679 |   |                        | $ | 12,973 |                            |  | $ | 7,706        |   |  | $            | (20,679 | ) |  | $ | 20,679  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|                                             | 
|                                             |  | For The Three Months Ended June 30, 2004 |       
|                                             |  | Sybron Dental Specialties                |        |   | Guarantor Subsidiaries |   |        | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                        |       |   |                        | $ | 81,857 |                            |  | $ | 65,314       |   |  | $            | (1,653  | ) |  | $ | 145,518 |  
|Cost of sales                                |  |                                          | 269    |   |                        |   | 28,203 |                            |  |   | 36,830       |   |  |              | (1,653  | ) |  |   | 63,649  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                          | (269   | ) |                        |   | 53,654 |                            |  |   | 28,484       |   |  |              |        |   |  |   | 81,869  |  
|Selling, general and administrative expenses |  |                                          | 7,335  |   |                        |   | 28,709 |                            |  |   | 16,239       |   |  |              |        |   |  |   | 52,283  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                          | (7,604 | ) |                        |   | 24,945 |                            |  |   | 12,245       |   |  |              |        |   |  |   | 29,586  |  
|Other income (expense):                      |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                          | (3,401 | ) |                        |   | (1,315 | )                          |  |   | 39           |   |  |              |        |   |  |   | (4,677  | )
|Amortization of deferred financing fees      |  |                                          |       |   |                        |   | (401   | )                          |  |   |             |   |  |              |        |   |  |   | (401    | )
|Income from equity method investments        |  |                                          | 16,530 |   |                        |   |       |                            |  |   |             |   |  |              | (16,530 | ) |  |   |        |  
|Other, net                                   |  |                                          | 11,005 |   |                        |   | (9,982 | )                          |  |   | (860         | ) |  |              |        |   |  |   | 163     |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                          | 16,530 |   |                        |   | 13,247 |                            |  |   | 11,424       |   |  |              | (16,530 | ) |  |   | 24,671  |  
|Income taxes                                 |  |                                          |       |   |                        |   | 5,322  |                            |  |   | 2,819        |   |  |              |         |   |  |   | 8,141   |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                        | 16,530 |   |                        | $ | 7,925  |                            |  | $ | 8,605        |   |  | $            | (16,530 | ) |  | $ | 16,530  |  
|                                             |  |                                          |        |   |                        |   |        |                            |  |   |              |   |  |              |         |   |  |   |         |  



15



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##### Table of Contents

Condensed Consolidating Statements of Income



|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | --------------------------------------- | ------- | - | ---------------------- | - | ------- | -------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             |  | For The Nine Months Ended June 30, 2005 |        
|                                             |  | Sybron Dental Specialties               |         |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                       |        |   |                        | $ | 257,706 |                            |  | $ | 226,509      |   |  | $            | (4,945  | ) |  | $ | 479,270 |  
|Cost of sales                                |  |                                         | 893     |   |                        |   | 87,698  |                            |  |   | 124,798      |   |  |              | (4,945  | ) |  |   | 208,444 |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                         | (893    | ) |                        |   | 170,008 |                            |  |   | 101,711      |   |  |              |        |   |  |   | 270,826 |  
|Selling, general and administrative expenses |  |                                         | 22,536  |   |                        |   | 92,045  |                            |  |   | 62,649       |   |  |              |        |   |  |   | 177,230 |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                         | (23,429 | ) |                        |   | 77,963  |                            |  |   | 39,062       |   |  |              |        |   |  |   | 93,596  |  
|Other income (expense):                      |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                         | (10,637 | ) |                        |   | (3,335  | )                          |  |   | (65          | ) |  |              |        |   |  |   | (14,037 | )
|Amortization of deferred financing fees      |  |                                         |        |   |                        |   | (1,245  | )                          |  |   |             |   |  |              |        |   |  |   | (1,245  | )
|Income from equity method investments        |  |                                         | 55,156  |   |                        |   |        |                            |  |   |             |   |  |              | (55,156 | ) |  |   |        |  
|Other, net                                   |  |                                         | 34,066  |   |                        |   | (28,733 | )                          |  |   | (4,789       | ) |  |              |        |   |  |   | 544     |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                         | 55,156  |   |                        |   | 44,650  |                            |  |   | 34,208       |   |  |              | (55,156 | ) |  |   | 78,858  |  
|Income taxes                                 |  |                                         |        |   |                        |   | 16,116  |                            |  |   | 7,586        |   |  |              |        |   |  |   | 23,702  |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                       | 55,156  |   |                        | $ | 28,534  |                            |  | $ | 26,622       |   |  | $            | (55,156 | ) |  | $ | 55,156  |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|                                             | 
|                                             |  | For The Nine Months Ended June 30, 2004 |        
|                                             |  | Sybron Dental Specialties               |         |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                       |        |   |                        | $ | 236,105 |                            |  | $ | 197,675      |   |  | $            | (5,484  | ) |  | $ | 428,296 |  
|Cost of sales                                |  |                                         | 817     |   |                        |   | 85,640  |                            |  |   | 110,911      |   |  |              | (5,484  | ) |  |   | 191,884 |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                         | (817    | ) |                        |   | 150,465 |                            |  |   | 86,764       |   |  |              |        |   |  |   | 236,412 |  
|Selling, general and administrative expenses |  |                                         | 19,785  |   |                        |   | 85,002  |                            |  |   | 47,120       |   |  |              |        |   |  |   | 151,907 |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                         | (20,602 | ) |                        |   | 65,463  |                            |  |   | 39,644       |   |  |              |        |   |  |   | 84,505  |  
|Other income (expense):                      |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense                             |  |                                         | (10,174 | ) |                        |   | (4,532  | )                          |  |   | (72          | ) |  |              |        |   |  |   | (14,778 | )
|Amortization of deferred financing fees      |  |                                         |        |   |                        |   | (1,210  | )                          |  |   |             |   |  |              |        |   |  |   | (1,210  | )
|Income from equity method investments        |  |                                         | 45,987  |   |                        |   |        |                            |  |   |             |   |  |              | (45,987 | ) |  |   |        |  
|Other, net                                   |  |                                         | 30,776  |   |                        |   | (27,542 | )                          |  |   | (3,114       | ) |  |              |        |   |  |   | 120     |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                         | 45,987  |   |                        |   | 32,179  |                            |  |   | 36,458       |   |  |              | (45,987 | ) |  |   | 68,637  |  
|Income taxes                                 |  |                                         |        |   |                        |   | 13,048  |                            |  |   | 9,602        |   |  |              |        |   |  |   | 22,650  |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                       | 45,987  |   |                        | $ | 19,131  |                            |  | $ | 26,856       |   |  | $            | (45,987 | ) |  | $ | 45,987  |  
|                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |  |              |         |   |  |   |         |  



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Condensed Consolidating Statements of Cash Flows



|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|------------------------------------------------------------ |  | --------------------------------------- | -------- | - | ---------------------- | - | ------- | -------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | -------- | -
|                                                             |  | For The Nine Months Ended June 30, 2005 |         
|                                                             |  | Sybron Dental Specialties               |          |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by (used in) operating activities        |  | $                                       | (66,720  | ) |                        | $ | 76,680  |                            |  | $ | 52,026       |   |              | $ |  |  | $ | 61,986   |  
|Cash flows from investing activities:                        |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Capital expenditures                                         |  |                                         | (2,012   | ) |                        |   | (7,906  | )                          |  |   | (2,112       | ) |              |   |  |  |   | (12,030  | )
|Proceeds from sales of property, plant and equipment         |  |                                         |         |   |                        |   | 379     |                            |  |   | 634          |   |              |   |  |  |   | 1,013    |  
|Net payments for businesses acquired                         |  |                                         |         |   |                        |   |        |                            |  |   | (69,218      | ) |              |   |  |  |   | (69,218  | )
|Payments for intangibles                                     |  |                                         |         |   |                        |   | (979    | )                          |  |   | (191         | ) |              |   |  |  |   | (1,170   | )
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                         | (2,012   | ) |                        |   | (8,506  | )                          |  |   | (70,887      | ) |              |   |  |  |   | (81,405  | )
|Cash flows from financing activities:                        |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Proceeds from credit facility                                |  |                                         | 135,500  |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 135,500  |  
|Principal payments on credit facility                        |  |                                         | (116,800 | ) |                        |   | (5,454  | )                          |  |   |             |   |              |   |  |  |   | (122,254 | )
|Principal payments on long-term debt                         |  |                                         | (90      | ) |                        |   | (264    | )                          |  |   |             |   |              |   |  |  |   | (354     | )
|Proceeds from exercise of stock options                      |  |                                         | 14,558   |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 14,558   |  
|Proceeds from employee stock purchase plan                   |  |                                         | 1,661    |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 1,661    |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net cash provided by (used in) financing activities          |  |                                         | 34,829   |   |                        |   | (5,718  | )                          |  |   |             |   |              |   |  |  |   | 29,111   |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                         | (1,202   | ) |                        |   | 2,332   |                            |  |   | (4,650       | ) |              |   |  |  |   | (3,520   | )
|Net change in intercompany balances                          |  |                                         | 27,088   |   |                        |   | (63,825 | )                          |  |   | 36,737       |   |              |   |  |  |   |         |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents         |  |                                         | (8,017   | ) |                        |   | 963     |                            |  |   | 13,226       |   |              |   |  |  |   | 6,172    |  
|Cash and cash equivalents at beginning of period             |  |                                         | 7,402    |   |                        |   | (1,801  | )                          |  |   | 35,001       |   |              |   |  |  |   | 40,602   |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                                       | (615     | ) |                        | $ | (838    | )                          |  | $ | 48,227       |   |              | $ |  |  | $ | 46,774   |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Supplemental cash flow information:                          |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for interest                     |  | $                                       | 13,714   |   |                        | $ | 3,410   |                            |  | $ |             |   |              | $ |  |  | $ | 17,124   |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for income taxes                 |  | $                                       | 12,021   |   |                        | $ |        |                            |  | $ | 7,340        |   |              | $ |  |  | $ | 19,361   |  
|                                                             |  |                                         |          |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  



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|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|------------------------------------------------------------ |  | --------------------------------------- | ------- | - | ---------------------- | - | ------- | -------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | -------- | -
|                                                             |  | For The Nine Months Ended June 30, 2004 |        
|                                                             |  | Sybron Dental Specialties               |         |   | Guarantor Subsidiaries |   |         | Non Guarantor Subsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by (used in) operating activities        |  | $                                       | (13,388 | ) |                        | $ | 31,913  |                            |  | $ | 34,081       |   |              | $ |  |  | $ | 52,606   |  
|Cash flows from investing activities:                        |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Capital expenditures                                         |  |                                         | (899    | ) |                        |   | (4,576  | )                          |  |   | (3,062       | ) |              |   |  |  |   | (8,537   | )
|Proceeds from sales of property, plant and equipment         |  |                                         |        |   |                        |   | 92      |                            |  |   | 67           |   |              |   |  |  |   | 159      |  
|Payments for intangibles                                     |  |                                         |        |   |                        |   | (631    | )                          |  |   | (119         | ) |              |   |  |  |   | (750     | )
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                         | (899    | ) |                        |   | (5,115  | )                          |  |   | (3,114       | ) |              |   |   |  |   | (9,128   | )
|Cash flows from financing activities:                        |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Proceeds from credit facility                                |  |                                         | 73,500  |   |                        |   | 35,000  |                            |  |   |             |   |              |   |  |  |   | 108,500  |  
|Principal payments on credit facility                        |  |                                         | (71,000 | ) |                        |   | (75,555 | )                          |  |   |             |   |              |   |  |  |   | (146,555 | )
|Proceeds from long-term debt                                 |  |                                         |        |   |                        |   |        |                            |  |   | 2,469        |   |              |   |  |  |   | 2,469    |  
|Principal payments on long-term debt                         |  |                                         |        |   |                        |   | (60     | )                          |  |   | (9,285       | ) |              |   |  |  |   | (9,345   | )
|Proceeds from exercise of stock options                      |  |                                         | 8,774   |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 8,774    |  
|Proceeds from employee stock purchase plan                   |  |                                         | 1,172   |   |                        |   |        |                            |  |   |             |   |              |   |  |  |   | 1,172    |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net cash provided by (used in) financing activities          |  |                                         | 12,446  |   |                        |   | (40,615 | )                          |  |   | (6,816       | ) |              |   |  |  |   | (34,985  | )
|Effect of exchange rate changes on cash and cash equivalents |  |                                         | (2,408  | ) |                        |   | 269     |                            |  |   | 796          |   |              |   |  |  |   | (1,343   | )
|Net change in intercompany balances                          |  |                                         | 58      |   |                        |   | 11,304  |                            |  |   | (11,362      | ) |              |   |  |  |   |         |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents         |  |                                         | (4,191  | ) |                        |   | (2,244  | )                          |  |   | 13,585       |   |              |   |   |  |   | 7,150    |  
|Cash and cash equivalents at beginning of period             |  |                                         | 3,817   |   |                        |   | 1,164   |                            |  |   | 17,887       |   |              |   |  |  |   | 22,868   |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                                       | (374    | ) |                        | $ | (1,080  | )                          |  | $ | 31,472       |   |              | $ |  |  | $ | 30,018   |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Supplemental cash flow information:                          |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for interest                     |  | $                                       | 13,218  |   |                        | $ | 5,027   |                            |  | $ | 93           |   |              | $ |  |  | $ | 18,338   |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for income taxes                 |  | $                                       | 12,151  |   |                        | $ |        |                            |  | $ | 7,271        |   |              | $ |  |  | $ | 19,422   |  
|                                                             |  |                                         |         |   |                        |   |         |                            |  |   |              |   |              |   |   |  |   |          |  



10. ACQUISITIONS



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 $47,814. The purchase price represented a 33 percent premium over Innovas closing share price of CAD 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 CAD 1.4106 was announced. Innova is a Canadian based manufacturer and marketer of dental implants and markets
its products to oral surgeons, periodontists, prosthodontists and general dentists.



In the third quarter of fiscal 2005, Ormco B.V., a subsidiary of the Specialty Products business segment, acquired all of the outstanding shares of Oral Implant Technology GmbH (Oraltronics) for
approximately $23,559. Oraltronics is headquartered in Bremen, Germany and is engaged in the manufacture and sale of dental implants.



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The preliminary allocation of the purchase prices of Innova and Oraltronics to the acquired assets and
assumed liabilities based on the estimated fair values of those assets and liabilities is as follows:



|                              |  |        |        |             |   |        |  |   |       
|----------------------------- |  | ------ | ------ | ----------- | - | ------ |  | - | ------
|                              |  | Innova |        | Oraltronics |   | Total 
|Cash                          |  | $      | 1,745  |             | $ | 409    |  | $ | 2,154 
|Accounts receivable, net      |  |        | 2,704  |             |   | 881    |  |   | 3,585 
|Inventory, net                |  |        | 3,804  |             |   | 1,618  |  |   | 5,422 
|Goodwill                      |  |        | 19,717 |             |   | 7,471  |  |   | 27,188
|Intangible assets             |  |        | 21,000 |             |   | 14,208 |  |   | 35,208
|Property, plant and equipment |  |        | 1,017  |             |   | 234    |  |   | 1,251 
|Other assets                  |  |        | 2,559  |             |   | 100    |  |   | 2,659 
|                              |  |        |        |             |   |        |  |   |       
|Total assets acquired         |  | $      | 52,546 |             | $ | 24,921 |  | $ | 77,467
|                              |  |        |        |             |   |        |  |   |       
|Liabilities assumed           |  |        | 4,732  |             |   | 1,362  |  |   | 6,094 
|                              |  |        |        |             |   |        |  |   |       
|Total purchase price          |  | $      | 47,814 |             | $ | 23,559 |  | $ | 71,373
|                              |  |        |        |             |   |        |  |   |       



The Company is
obtaining an independent valuation of the major asset categories of acquired assets and liabilities assumed. The Company expects to finalize the purchase price allocations for Innova in the fourth quarter of fiscal 2005 and for Oraltronics in fiscal
2006. Amounts allocated to intangible assets are being amortized on a straight-line basis over five to thirty years, the estimated useful lives of the assets. The condensed consolidated financial statements include the operating results of these
businesses from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisitions is not material.



11. IMPAIRMENT OF LONG-LIVED ASSETS



The Company recorded an impairment charge of $903 in selling, general and administrative expenses in the three months ended March 31, 2005. The impairment
charge was related to the Companys fractional ownership of an aircraft. The Company received notice that the type of aircraft owned is being eliminated from the fleet of the service provider, which will result in the sale of the aircraft at a
price less than its net book value. The Company used the quoted market price from the service provider to determine the fair value of the aircraft.



During the three months ended June 30, 2005, the Company ascertained that manufacturing equipment related to a product line within the Specialty Products
segment that had been discontinued prior to fiscal 2005 continued to be depreciated as a performing asset. The manufacturing equipment had no other identifiable use and the determination had been made prior to fiscal 2005 to scrap the equipment. The
asset should have been recorded as an impaired asset when the decision to scrap the equipment was made. To correct this error, the Company recorded an impairment charge of $289 to cost of sales and a corresponding reduction to property, plant and
equipment in the three months ended June 30, 2005. The effect of this error was not material to any affected prior period or to the three month period ended June 30, 2005.



12. REVENUE RECOGNITION



During the quarter ended June 30, 2005, the Company discovered that the Professional Dental segment was erroneously recognizing revenue on inventory
shipped to suppliers for additional processing. The cumulative overstatement of net sales and cost of sales, as a result of this practice, for the six months prior to the three months ended June 30, 2005 was approximately $1,630. To correct this
error, an entry was made to reduce net sales and cost of sales by $1,630 in the Condensed Consolidated Statements of Income for the three months ended June 30, 2005. The effect of this error was not material to any affected prior period or to the
three month period ended June 30, 2005.



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##### Table of Contents

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 June 30, 2005 and 2004 refer to
the third 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, small non-consumable equipment 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, small non-consumable endodontic products and implants to orthodontists,
endodontic specialists, oral surgeons, prosthodontists and periodontists worldwide.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.            |  |                                     



Results of Operations



Overview



Based upon available information, 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. We believe that the factors contributing most to the markets growth are among others things, consumers
increased desire to retain and improve the appearance of their natural teeth which increases consumers demand for endodontic, periodontic, orthodontic, cosmetic and other specialized procedures; 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 patient discomfort and treatment time,
thereby attracting more patients; an increasing worldwide population, creating more dental patients; and expected growth in per capita discretionary incomes in emerging nations which should result in healthcare, including dental services, becoming a
greater priority.



In monitoring our growth, we rely on a
number of benchmarks, including internal growth in our domestic and foreign markets, growth from new products and the impact of currency fluctuations. We define internal net sales as total net sales excluding foreign currency fluctuations and
including only the organic growth of acquisitions made in the preceding twelve months (Oral Implant Technology GmbHs (Oraltronics) third quarter net sales figures were excluded from the calculation as its net sales for the
comparable prior year period were unavailable).



In the third
quarter of fiscal 2005, our net sales were $165.2 million, an increase of $19.7 million, or 13.5%, from net sales of $145.5 million in the third quarter of fiscal 2004. The increase in our third quarter fiscal 2005 net sales comprised of internal
net sales growth of 8.0%, a 1.8% increase from favorable foreign currency fluctuations, and a 3.7% increase from sales associated with acquisitions made in the preceding twelve month period.



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##### Table of Contents

Our overall sales growth in the third quarter of fiscal 2005 was greater than the overall sales growth
rate in the third quarter of fiscal 2004, during which our overall sales growth rate was 8.4%. In addition, our internal growth rate in the third quarter of fiscal 2005 of 8.0% was greater than the 5.1% internal net sales growth rate in the
corresponding prior year period.



Operating income in the third
quarter of fiscal 2005 was $33.3 million, or 20.2% of net sales, compared to operating income of $29.6 million or 20.3% of net sales in the same period of the prior year. Gross profit as a percent of net sales in the third quarter of fiscal 2005 was
55.9%, compared with 56.3% in the same period of the prior year. The decrease in gross profit as a percent of net sales is attributable to a $1.5 million ($1.0 million after tax) adjustment to cost of goods sold for prior period accounting errors,
which is described in more detail below, and to unfavorable manufacturing variances that were capitalized in earlier periods and then recognized when the inventory was sold during the third quarter of fiscal 2005. These charges were partially offset
by gross profit improvements that resulted from the factory rationalizations that took place in Europe and Mexico in fiscal 2004, continued manufacturing process improvements and favorable changes in geographic mix.



Our interest expense in the third quarter of fiscal 2005 was $4.4 million
compared to interest expense of $4.7 million in the comparable prior year period.



Taxes on income in the third quarter of fiscal 2005 were $7.5 million, or 26.6% of income before taxes, a decrease of $0.6 million from the prior fiscal quarter taxes of $8.1 million, or 33.0% of income before taxes.



Prior Period Accounting Errors



During the third quarter of fiscal 2005, we identified accounting errors
primarily made at one of the subsidiaries in our Professional Dental segment. Most of these errors related to inventory and were not detected because complete inventory reconciliations were not being performed. We also identified a practice that was
being followed at this same location that resulted in revenue being incorrectly recognized when inventory was shipped to suppliers for further processing. These errors, along with a number of other smaller errors, occurred over multiple quarters.
The cumulative effect of these prior period errors resulted in a charge in the third quarter of $1.5 million ($1.0 million after tax) to cost of goods sold and a reversal of $1.6 million of revenue and cost of sales that had been improperly
recognized earlier in fiscal 2005.



We completed an internal
review of the errors and determined that certain accounting personnel at the subsidiary failed to follow proper accounting procedures related to account reconciliations and revenue recognition. Management concluded that the effect of the errors was
not material to any of the prior quarters in which they occurred and the correcting entries are not material to the third quarter. Our Audit Committee, following an independent review conducted by outside legal counsel under the direction of the
Committee, concurred with managements conclusion. Management has determined that these failures evidenced two material weaknesses in our internal control over financial reporting in prior periods. We have since improved our internal controls
over accounting for inventory. The procedures related to shipping inventory to suppliers for further processing have been improved to provide assurance that revenue is not recognized on these types of shipments.



Since the effects of the identified accounting errors were determined not to
be material, after an analysis on both a quantitative and a qualitative basis, correcting entries have been made in the third quarter of fiscal 2005 instead of making prior period adjustments.



Quarter Ended June 30, 2005 Compared to the Quarter Ended June 30, 2004



Net Sales



|                    |  |                |         |            |   |        
|------------------- |  | -------------- | ------- | ---------- | - | -------
|Net Sales           |  | Fiscal2005     |         | Fiscal2004
|                    |  | (in thousands)
|Professional Dental |  | $              | 86,899  |            | $ | 80,698 
|Specialty Products  |  |                | 78,275  |            |   | 64,820 
|                    |  |                |         |            |   |        
|Total Net Sales     |  | $              | 165,174 |            | $ | 145,518
|                    |  |                |         |            |   |        



Overall Company.Net sales for the quarter ended June 30, 2005 increased by $19.7 million, or 13.5%, from the corresponding fiscal 2004 quarter.



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Professional Dental.For the third quarter of fiscal 2005, net sales in the Professional Dental
segment increased $6.2 million or 7.7% over the same period of the prior year. The increase in net sales was comprised of internal net sales growth of 5.9% over the same period in the prior year and sales growth from foreign currency fluctuations of
1.8% over the third quarter of fiscal 2004. Internal net sales of Professional Dental consumable products increased 8.3%. The Professional Dental segments internal net sales growth rate improved to 5.9% for the third quarter of fiscal 2005,
compared to the third quarter of the prior year when the segment experienced an internal net sales decrease of 0.7%. The increase in the segments internal net sales is attributable to an increase in the sales of its consumable products in the
third quarter of fiscal 2005, which grew 8.3%, compared to an internal net sales growth rate of 3.7% of its consumable products in the same period of the prior year. The segments internal net sales growth rate occurred primarily in the U.S.
market, where the growth rate was 10.3% in the third quarter of fiscal 2005, compared to an internal net sales growth rate of 0.5 % in the same period of the prior year. Internal net sales growth in the segments international markets in the
third quarter of fiscal 2005 increased to 0.5% from a decrease of 2.2% in the third quarter of fiscal 2004. The increase in the international market sales growth is primarily attributable to European sales. The overall net sales growth of the
Professional Dental segment is primarily attributable to an increase in the net sales of its Premise nanocomposite, Maxcem self-adhesive cement, a new high resolution loupe from its Orascoptic subsidiary and its line of infection prevention
products. While the segments consumable products continue to grow, it continued to experience the same decline it experienced in fiscal 2004 in the net sales of its LED curing light. The LED curing light, which was introduced in fiscal 2003
and is unlike our consumable products that generate consistent sales and cannot be reused, has a life span of 4 to 5 years. The introduction of our next generation LED curing light in the fourth quarter of fiscal 2005 should reduce the decline. We
anticipate that internal net sales for our Professional Dental segment will continue to grow within the historical range of 4% to 6% during the remainder of fiscal 2005, as a result of the sales of products such as Premise and Maxcem, along with
AlgiNot, a replacement for alginate impression material and our new Demetron LED II curing light.



Specialty Products.During the third quarter of fiscal 2005, net sales in the Specialty Products segment increased $13.5 million or 20.8% over the
same period of the prior year. The increase in net sales was comprised of internal net sales growth of 10.3% over the same period in the prior year, sales growth from currency fluctuations of 1.8%, and sales growth from acquired companies of 8.7%.
The internal net sales growth of 10.3% overall was comprised of internal net sales growth of 12.5% internationally and 8.2% domestically. The segments growth rate in the international market is primarily the result of increased sales in
Europe. The products that significantly contributed to the net sales increase for the Specialty Product segment include our family of Damon products, dental implants, the Elements Obturation Unit, nickel-titanium (Ni-Ti) files and
products made by our orthodontic laboratory. We plan to continue to focus our selling efforts on the Damon self-ligating bracket system, our Inspire Ice line of brackets, dental implant products and Ni-Ti endodontic files, as we believe these
product lines have the greatest potential for increasing the sales of our Specialty Products segment over the next twelve months.



Gross Profit



|                    |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Gross Profit        |  | Fiscal2005                         |        | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                    |  | (in thousands, except percentages) |       
|Professional Dental |  | $                                  | 46,283 |                     | 53.3 | % |            | $ | 44,663              |  | 55.3 | %
|Specialty Products  |  |                                    | 45,991 |                     | 58.8 |   |            |   | 37,206              |  | 57.4 |  
|                    |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Gross Profit  |  | $                                  | 92,274 |                     | 55.9 | % |            | $ | 81,869              |  | 56.3 | %
|                    |  |                                    |        |                     |      |   |            |   |                     |  |      |  



Overall Company.Gross profit for the quarter ended June 30, 2005 increased by $10.4 million or 12.7% from the corresponding fiscal 2004 quarter.



Professional Dental.During the third quarter of fiscal 2005, gross profit as a percent of net sales in the Professional Dental segment was 53.3%
versus 55.3% during the same period of the prior year. The decline in gross profit as a percent of net sales in the Professional Dental segment resulted from the correction of prior period accounting errors, unfavorable currency fluctuations that
impacted one of our foreign-based manufacturing facilities, as well as unfavorable manufacturing variances that were capitalized in earlier periods and then recognized as the Company sold that inventory during the third quarter of fiscal 2005. These
charges were partially offset by continued manufacturing process improvements and favorable changes in geographic mix.



Specialty Products. During the third quarter of fiscal 2005, gross profit as a percent of net sales in the Specialty Products segment was 58.8%
versus 57.4% in the same period of the prior year. The increase in gross profit in the Specialty



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Products segment resulted from favorable currency fluctuations and reductions in manufacturing costs resulting from the
segments rationalization efforts that took place in Mexico in fiscal 2004. These improvements were partially offset by increased rebate provisions during the third quarter of fiscal 2005 as compared to the third quarter of fiscal 2004.



Selling, General and Administrative
Expenses



|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|-------------------------------------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Selling, General and Administrative Expenses       |  | Fiscal2005                         |        | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                                                   |  | (in thousands, except percentages) |       
|Professional Dental                                |  | $                                  | 29,973 |                     | 34.5 | % |            | $ | 28,771              |  | 35.7 | %
|Specialty Products                                 |  |                                    | 29,018 |                     | 37.1 |   |            |   | 23,512              |  | 36.3 |  
|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Selling, General and Administrative Expenses |  | $                                  | 58,991 |                     | 35.7 | % |            | $ | 52,283              |  | 35.9 | %
|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  



Overall Company.Selling, general and administrative expenses for the quarter ended June 30, 2005 increased by $6.7 million or 12.8% 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. During the third quarter of fiscal 2005, selling general and administrative expenses in the Professional Dental segment
increased $1.2 million or 4.2% over the third quarter of fiscal 2004. As a percent of net sales, selling, general and administrative expenses in the Professional Dental segment decreased to 34.5% of net sales in the third quarter of 2005 versus
35.7% in the same period of fiscal 2004. This decrease in selling, general and administrative expenses as a percent of sales was primarily due to foreign currency transaction gains in the third quarter of fiscal 2005 as opposed to foreign currency
transaction losses in the corresponding quarter of fiscal 2004, partially offset by increased incentive accruals due to the improved performance of the Professional Dental segment.



Specialty Products. During the third quarter of fiscal 2005, selling, general and administrative expenses in the
Specialty Products Segment increased $5.5 million or 23.4% over the third quarter of fiscal 2004. As a percent of sales, selling, general and administrative expenses were 37.1% of net sales versus 36.3% of net sales during the same period in the
prior year. This increase in selling, general and administrative expenses as a percentage of sales was primarily due to the acquisitions of our implantology subsidiaries, which have a higher selling, general and administrative expense as a percent
of net sales than our other operations.



Operating Income



|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|---------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Operating Income       |  | Fiscal2005                         |        | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                       |  | (in thousands, except percentages) |       
|Professional Dental    |  | $                                  | 16,310 |                     | 18.8 | % |            | $ | 15,892              |  | 19.7 | %
|Specialty Products     |  |                                    | 16,973 |                     | 21.7 |   |            |   | 13,694              |  | 21.1 |  
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Operating Income |  | $                                  | 33,283 |                     | 20.2 | % |            | $ | 29,586              |  | 20.3 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  



As a result of the
foregoing, operating income for the quarter ended June 30, 2005 increased by 12.5% or $3.7 million from operating income in the corresponding quarter of fiscal 2004 but decreased as a percent of net sales by 0.1%.



Interest Expense



Our interest expense in the third quarter of fiscal 2005 was $4.4 million
compared to interest expense of $4.7 million in the comparable prior year period. Our average debt outstanding during the quarter was $226.6 million and our average interest rate was 7.02%, compared to the average debt we had outstanding in the
third quarter of fiscal 2004 of $240.6 million and an average interest rate for that quarter of 7.70%. The decrease in the average interest rate is the result of the maturity of one of our interest rate swaps on March 31, 2005, which carried a
higher interest rate than our adjustable rate debt. However, we do not expect the reduction in interest rate to continue in the remainder of fiscal 2005 as we continue to reduce our floating rate debt, which carries a lower interest rate than our
fixed rate debt. Debt is expected to decrease over the remainder of the fiscal year unless we make any significant acquisitions.



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Income Taxes



Taxes on income in the third quarter of fiscal 2005 were $7.5 million, or 26.6% of income before taxes, a decrease of $0.7
million from the prior fiscal quarter taxes of $8.1 million, or 33.0% of income before taxes. During the third quarter of 2005, it was determined that it was no longer necessary to maintain several accruals established for potential domestic and
foreign tax liabilities. As a result, the accruals, totaling $1.5 million were reversed. We continue to maintain cash balances at several of our foreign subsidiaries that is in excess of traditional working capital requirements. We have evaluated
the impact of the portion of the American Jobs Creation Act of 2004 which allows for the repatriation of foreign earnings at favorable tax rates, and have concluded that it does not provide a significant benefit for us due to the level of our
historical repatriations of cash and intercompany loans.



Nine Months
Ended June 30, 2005 Compared to the Nine Months Ended June 30, 2004



Net Sales



|                    |  |                |         |            |   |        
|------------------- |  | -------------- | ------- | ---------- | - | -------
|Net Sales           |  | Fiscal2005     |         | Fiscal2004
|                    |  | (in thousands)
|Professional Dental |  | $              | 250,353 |            | $ | 235,991
|Specialty Products  |  |                | 228,917 |            |   | 192,305
|                    |  |                |         |            |   |        
|Total Net Sales     |  | $              | 479,270 |            | $ | 428,296
|                    |  |                |         |            |   |        



Overall Company.Net sales for the nine months ended June 30, 2005 increased by $51.0 million, or 11.9%, from the corresponding fiscal 2004 period.



Professional Dental.In the nine months ended June 30, 2005 net sales in the Professional Dental segment increased by $14.4 million, or 6.1% from
the corresponding fiscal 2004 period. Internal net sales grew 4.0% while foreign currency fluctuations increased sales 2.3% and exited product lines decreased sales by 0.2%. In addition, sales of the Professional Dental segments consumable
products grew 6.4%. Sales in the nine months ended June 30, 2005 were positively impacted by continued growth of Premise nanocomposite, and Maxcem self-adhesive cement.



Specialty Products. In the nine months ended June 30, 2005, net sales in the Specialty Products segment increased by
$36.6 million or 19.0%. Internal net sales grew 9.9% while foreign currency fluctuations increased sales 2.3% and sales from acquired companies increased sales 6.8% over the corresponding period of fiscal 2004. Sales were positively impacted by
additional account conversions to the Damon 3 self-ligating bracket. We continue to generate double-digit sales growth in our line of endodontic products, driven by strong sales of the Elements Obturation device and nickel-titanium files, as well as
in our Inspire Ice line of brackets.



Gross
Profit



|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|------------------- |  | ---------------------------------- | ------- | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Gross Profit        |  | Fiscal2005                         |         | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                    |  | (in thousands, except percentages) |        
|Professional Dental |  | $                                  | 137,306 |                     | 54.8 | % |            | $ | 129,212             |  | 54.8 | %
|Specialty Products  |  |                                    | 133,520 |                     | 58.3 |   |            |   | 107,200             |  | 55.7 |  
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|Total Gross Profit  |  | $                                  | 270,826 |                     | 56.5 | % |            | $ | 236,412             |  | 55.2 | %
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  



Overall Company.Gross profit for the nine months ended June 30, 2005 increased by $34.4 million or 14.6% from the corresponding fiscal 2004 period.



Professional Dental. During the nine months ended June 30, 2005, gross profit as a percent of net sales in the Professional Dental segment was
54.8% versus 54.8% during the same period of the prior year. Factors that negatively impacted gross profit included the correction of prior period accounting errors, unfavorable currency fluctuations that impacted one of our international
manufacturing facilities, as well as unfavorable manufacturing variances that we capitalized in earlier periods and then recognized as we sold that inventory during the nine months ended June 30, 2005. These factors were offset by continued
manufacturing improvements, favorable changes in geographic mix and improved raw materials pricing at our infection prevention subsidiary.



Specialty Products.During the nine months ended June 30, 2005, gross profit as a percent of net sales in the Specialty Products segment was 58.3%
versus 55.7% in the same period of the prior year. The increase in gross profit as a percent of net sales in the Specialty Products segment resulted from favorable currency fluctuations, reductions in manufacturing costs



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##### Table of Contents

resulting from the segments rationalization efforts that took place in Mexico in fiscal 2004, and restructuring
costs that had been incurred in the same period of fiscal 2004. These improvements were offset by increased rebate provisions, as well as increased royalty expense that resulted from changes in our product mix. We currently pay royalties on some of
our fastest growing product lines and expect royalty expense, as a percent of net sales, to increase over the remainder of the fiscal year.



Selling, General and Administrative Expenses



|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|-------------------------------------------------- |  | ---------------------------------- | ------- | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Selling, General and Administrative Expenses       |  | Fiscal 2005                        |         | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                                                   |  | (in thousands, except percentages) |        
|Professional Dental                                |  | $                                  | 90,645  |                     | 36.2 | % |            | $ | 83,084              |  | 35.2 | %
|Specialty Products                                 |  |                                    | 86,585  |                     | 37.8 |   |            |   | 68,823              |  | 35.8 |  
|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|Total Selling, General and Administrative Expenses |  | $                                  | 177,230 |                     | 37.0 | % |            | $ | 151,907             |  | 35.5 | %
|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  



Overall Company.Selling, general and administrative expenses for the nine months ended June 30, 2005 increased by $25.3 million or 16.7% from the corresponding fiscal 2004 period. 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. Selling, general and administrative expenses for the nine months ended June 30, 2005 increased
for the Professional Dental segment by $7.6 million, or 9.1% over the same period of fiscal 2004. Selling, general and administrative expenses as a percent of net sales increased from 35.2% in the nine months ended June 30, 2004 to 36.2% in the nine
months ended June 30, 2005. The increase in selling, general and administrative expenses as a percent of sales was driven by increased selling and marketing expenses related to new product introductions as well as restructuring charges related to
the rationalization of the segments Demetron facility. These increases were partially offset by gains on foreign currency fluctuations that were greater than those of the same period of fiscal 2004.



Specialty Products. Selling, general and administrative expenses for
the nine months ended June 30, 2005, increased for the Specialty Products segment by $17.8 million or 25.8% over the same period of fiscal 2004. In the nine months ended, June 30, 2005, selling, general and administrative expenses as a percent of
net sales increased to 37.8% versus 35.8% during the same period of the prior year. The increase in selling, general and administrative expenses was driven by the acquisitions of our implantology subsidiaries, which have a higher selling, general
and administrative expense as a percent of net sales than our other operations.



Operating Income



|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|---------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|Operating Income       |  | Fiscal2005                         |        | Percent ofNet Sales |      |   | Fiscal2004 |   | Percent ofNet Sales | 
|                       |  | (in thousands, except percentages) |       
|Professional Dental    |  | $                                  | 46,661 |                     | 18.6 | % |            | $ | 46,128              |  | 19.5 | %
|Specialty Products     |  |                                    | 46,935 |                     | 20.5 |   |            |   | 38,377              |  | 20.0 |  
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Operating Income |  | $                                  | 93,596 |                     | 19.5 | % |            | $ | 84,505              |  | 19.7 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  



As a result of the
foregoing, operating income for the nine months ended June 30, 2005 increased by 10.8% or $9.1 million from operating income in the corresponding fiscal 2004 period but decreased as a percent of net sales by 0.2%.



Interest Expense



Interest expense was $14.0 million in the first nine months of fiscal 2005,
a decrease of $0.7 million from the corresponding fiscal 2004 period. The decrease resulted from a reduction in average debt balances from $255.3 million in the first nine months of fiscal 2004 to $237.8 million in the first nine months of fiscal
2005 and the decrease in the average interest rate on debt from 7.61% in fiscal 2004 to 7.57% in fiscal 2005. The debt repaid in the first nine months of fiscal 2005 was adjustable rate debt with a lower average interest rate than the remaining
debt. We expect to experience a slight increase in our average interest rate in the remaining quarter of fiscal 2005, as we anticipate continuing to pay down our adjustable rate debt, which has a lower interest rate than our fixed rate debt. Debt is
expected to decrease over the remainder of the fiscal year unless we make any significant acquisitions.



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Income Taxes



Taxes on income in the first nine months of fiscal 2005 were $23.7 million, or 30.1% of income before taxes, an increase of
$1.0 million from taxes of $22.7 million in the first nine months of fiscal 2004, or 33.0% of income before taxes. During the third quarter of fiscal 2005, it was determined that it was no longer necessary to maintain several accruals established
for potential domestic and foreign tax liabilities due to the unlikelihood of payment and expiration of the statute of limitations. As a result, the accruals, which totaled $1.5 million, were reversed.



Critical Accounting Estimates Update



Refer to our Annual Report on Form 10-K for the year ended September 30,
2004 for a discussion of critical accounting estimates. During the three months ended June 30, 2005, there were no material changes to these policies, except for the update described below.



Pensions and Other Postretirement Benefits. We have a June 30
measurement date for our pension plans. As of October 1, 2004, the discount rate was 6.25%. Based on current market conditions as of June 30, 2005 we lowered the discount rates for our pension plans. The discount rate for the Kerr UAW Union
Retirement Plan was lowered to 5.0% and the discount rate for the Retirement Security Plan was lowered to 5.25%. These discount rates will become effective October 1, 2005, but were used to determine the accumulated benefit obligation as of June 30,
2005. As a result, we made a $10.1 million contribution to our pension plans in the three months ended June 30, 2005.



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 June 30, 2005, $126.6 million of the $150.0 million revolving
credit facility was available for borrowing.



Cash provided by
operations for the nine months ended June 30, 2005 was $62.0 million, as compared to $52.6 million in the comparable prior year period. The increase in cash provided by operations was primarily the result of the increase in net income and a decrease
in inventories, partially offset by a contribution to our defined benefit plans. The defined benefit contribution was the result of a decrease in the discount rate as of the June 30, 2005 measurement date. As a result of the improved cash flow from
operations, working capital increased to $182.2 million at June 30, 2005 from $161.4 million at September 30, 2004. The current ratio increased to 3.1:1 at June 30, 2005 from 2.7:1 at September 30, 2004, primarily as a result of $62.0 million in
cash provided by operating activities, $13.2 million in net borrowings, and $16.2 million received from stock option exercises and the employee stock purchase plan; partially offset by $12.0 million in capital expenditures and $69.2 million paid for
acquisitions.



Days sales outstanding (DSO) was
58.5 days at June 30, 2005, as compared to 59.3 days at June 30, 2004, and 58.8 days at September 30, 2004. Inventory days were 121 as of June 30, 2005, as compared to 133 days at September 30, 2004.



Capital expenditures for property, plant and equipment were $12.0 million and
$8.5 million for the first nine months of fiscal 2005 and fiscal 2004, respectively. We estimate our capital expenditures for all of fiscal 2005 to total $17 to $19 million.



Net cash provided by financing activities for the nine months ended June 30, 2005 was $29.1 million, as compared to $35.0
million net cash used in financing activities for the same period in fiscal 2004. Cash received from the exercise of stock options and the employee stock purchase plan of $16.2 million contributed to the net cash provided by financing activities in
the nine month period ended June 30, 2005, as well as amounts borrowed to finance the acquisitions of Innova LifeSciences and Oraltronics.



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. One of our debt covenants allows us to pay a maximum of $65.0 million in aggregate per fiscal year for foreign acquired businesses. Since the beginning of the fiscal year, we have completed two foreign
acquisitions, Innova LifeSciences and Oraltronics, for which we paid $71.4 million in aggregate consideration. Therefore, we obtained a waiver of this covenant during the three month period ended June 30, 2005 to permit the acquisition of
Oraltronics. With that waiver, we were in compliance with all debt covenants as of June 30, 2005.



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New Accounting Pronouncements



In December 2004, the FASB replaced SFAS 123, Accounting for Stock-Based Compensation, with FASB Statement No. 123
(revised 2004), Share-Based Payment, (FAS 123R). FAS 123R requires companies to expense the estimated fair value of employee stock options and similar awards. On April 14, 2005, the U.S. Securities and Exchange Commission adopted a new rule
amending the compliance dates for FAS 123R. In accordance with the new rule, the accounting provisions of FAS 123R will be effective for us on October 1, 2005, the beginning of fiscal 2006. We will adopt the provisions of FAS 123R using a modified
prospective application. Under modified prospective application, FAS 123R, which provides certain changes to the method for valuing share-based compensation among other changes, will apply to awards made after October 1, 2005, and awards outstanding
on October 1, 2005 that are subsequently modified or cancelled. Compensation expense for outstanding awards for which the requisite service had not been rendered as of October 1, 2005 will be recognized over the remaining service period using the
compensation cost calculated for pro forma disclosure purposes under FAS 123. At June 30, 2005, unamortized compensation expense, as determined in accordance with FAS 123, that we expect to record during fiscal 2006 was approximately $8,086 before
income taxes. We may incur additional expense during fiscal 2006, which cannot currently be determined, if new awards are granted during the remainder of fiscal 2005 and fiscal 2006. We are in the process of determining how the guidance regarding
valuing share-based compensation as prescribed in FAS 123R will be applied to valuing share-based awards granted after the effective date and the impact the recognition of compensation expense related to such awards will have on our consolidated
financial statements.



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 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.



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.



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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, Align Technology, Inc., 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 June 30, 2005, we had $233.5 million in total long-term borrowings (including current portion), and $377.8 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.



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.



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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 in certain circumstances. As of June 30, 2005, goodwill and other intangible assets with indefinite lives represented approximately 42% 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.



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.



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Our ability to continue to effectively promote and sell our products is dependent upon maintaining an
experienced and qualified sales force. We experience, from time to time, the loss of sales force personnel to our competitors and distributors. If, in any short period of time, we suffer the loss of numerous sales personnel we would likely incur a
decrease in the sales of our products.



In addition, 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.



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, Germany, 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.



If 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.



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.



Failure to maintain an effective system of
internal control over financial reporting could harm our business.



Designing and maintaining effective internal control over financial reporting is expensive and requires considerable attention from management, employees, and expert outside advisers. Internal controls, however well designed and operated,
cannot provide absolute assurance that the objectives of the controls will be met. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we and our independent registered public accounting firm evaluate and assess the effectiveness of our
internal



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control over financial reporting. This requirement becomes applicable for us on September 30, 2005. At June 30, 2005, we
identified two material weaknesses in our internal controls over inventory and revenue recognition. These weaknesses, which we believe have been remediated, or any actual failure of our internal controls, could harm the financial position of our
business, reduce investor confidence in our company, cause a decline in the market price for our common stock, and subject us to costly litigation.



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 June 30, 2005.



At June 30, 2005, an unrealized gain of $1.3 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.



Zero cost
collar contracts in place as of June 30, 2005 are as follows (in thousands, except rates):



|         |  |            |  |                |  |              |  |                     |  |            |  |             
|-------- |  | ---------- |  | -------------- |  | ------------ |  | ------------------- |  | ---------- |  | ------------
|Currency |  | Trade Date |  | Effective Date |  | MaturityDate |  | LocalCurrencyAmount |  | Floor Rate |  | Ceiling Rate
|Euro     |  | 05/18/2004 |  | 04/15/2005     |  | 09/15/2005   |  | 10,500              |  | 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        
|Euro     |  | 03/18/2005 |  | 04/17/2006     |  | 06/15/2006   |  | 9,000               |  | 1.33       |  | 1.37        
|Yen      |  | 05/18/2004 |  | 04/15/2005     |  | 09/15/2005   |  | 180,000             |  | 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       
|Yen      |  | 03/18/2005 |  | 04/17/2006     |  | 06/15/2006   |  | 120,000             |  | 104.00     |  | 95.33       
|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        
|AUD      |  | 03/18/2005 |  | 04/17/2006     |  | 06/15/2006   |  | 1,800               |  | 0.75       |  | 0.80        



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 CHF$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 8.125% 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.



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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 |          | 8.125 | % |        | CHF 22.50  |          | 6.450 | %
|06/26/02   |  | 06/28/02       |  | 06/15/07 |  | $   | 15.0 |          | 8.125 | % |        | CHF 22.50  |          | 6.390 | %
|06/27/02   |  | 07/01/02       |  | 06/15/07 |  | $   | 7.5  |          | 8.125 | % |        | CHF 11.25  |          | 6.390 | %
|06/27/02   |  | 07/01/02       |  | 06/15/07 |  | $   | 7.5  |          | 8.125 | % |        | CHF 11.25  |          | 6.390 | %
|06/25/02   |  | 06/27/02       |  | 06/15/07 |  | $   | 4.0  |          | 8.125 | % |        | JPY 486.00 |          | 3.650 | %



At June 30, 2005, an
unrealized loss of $6.4 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.



The table below provides information about our
debt obligations that are sensitive to changes in interest rates as of June 30, 2005. 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. Fair value for fixed rate debt is based upon quoted market prices. Fair value for variable interest rate debt approximates the principal amount
of the debt. The information is presented in U.S. dollar equivalents.



|                      |  |                                    |       |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |            |  |   |         |   |  |   |        
|--------------------- |  | ---------------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ------ | - | ---------- | - | ----- | ---------- |  | - | ------- | - |  | - | -------
|                      |  | Twelve Months Ending June 30,      |       |   |      |   |       |     
|Liabilities           |  | 2006                               |       |   | 2007 |   |       | 2008 |  |   | 2009  |   |  | 2010 |        |   | Thereafter |   |       | Fair Value
|                      |  | (in thousands, except percentages)
|Long-Term Debt:       |  |                                    |       |   |      |   |       |      |  |   |       |   |  |      |        |   |            |   |       |            |  |   |         |   |  |   |        
|Fixed Rate Debt       |  |                                    |      |   |      |   |      |      |  |   |      |   |  |      |       |   |            |   |      |            |  | $ | 150,000 |   |  | $ | 159,937
|Average Interest Rate |  |                                    | 8.125 | % |      |   | 8.125 | %    |  |   | 8.125 | % |  |      | 8.125  | % |            |   | 8.125 | %          |  |   | 8.125   | % |  |   |        
|Variable Rate Debt    |  | $                                  | 812   |   |      | $ | 747   |      |  | $ | 766   |   |  | $    | 56,827 |   |            | $ | 563   |            |  | $ | 23,826  |   |  | $ | 83,541 
|Average Interest Rate |  |                                    | 5.416 | % |      |   | 5.491 | %    |  |   | 5.591 | % |  |      | 5.731  | % |            |   | 5.871 | %          |  |   | 6.016   | % |  |   |        



For the quarter ended
June 30, 2005, 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 $0.02 million. At June 30, 2005, an unrealized loss of
$0.3 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 June 30, 2005 (in thousands):



|        |  |                |        |      |         |       |          |           |           |          |           |                                 |   |                     |  |   |      
|------- |  | -------------- | ------ | ---- | ------- | ----- | -------- | --------- | --------- | -------- | --------- | ------------------------------- | - | ------------------- |  | - | -----
|Loan    |  | NotionalAmount |        | Term |         | Trade |          | Effective |           | Maturity |           | Three MonthsEnded June 30, 2005 |   | Fair Value(Pre-tax)
|Ormco B |  |                | 25,345 |      | 5 years |       | 1/2/2001 |           | 3/30/2001 |          | 6/30/2006 |                                 |   | 24.1                |  |   | 438.6
|        |  |                |        |      |         |       |          |           |           |          |           |                                 |   |                     |  |   |      
|Total   |  | $              | 25,345 |      |         |       |          |           |           |          |           |                                 | $ | 24.1                |  | $ | 438.6
|        |  |                |        |      |         |       |          |           |           |          |           |                                 |   |                     |  |   |      



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



Evaluation of 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 were not 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.



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We have concluded that two material weaknesses existed in the Companys internal control over
financial reporting that affected prior periods. The weaknesses resulted in a failure to correctly record a variety of inventory transactions and the improper recognition of revenue for shipments of inventory to suppliers for further processing. The
weaknesses were predominately associated with a facility in Romulus, Michigan, which is operated by the Companys Professional Dental segment.



The weakness related to the improper recording of the inventory transactions involved items such as the failure to properly account for product samples
used at trade shows and intercompany inventory in transit, the failure of an interface between a labor reporting system and the general ledger system, and the incorrect recording of several manual journal entries. The weakness was only recently
detected because the plant controller and the cost accountant at the Romulus facility had not been performing complete monthly reconciliations of the general ledger inventory account balance due to their lack of understanding of several system
modules that had been recently installed at the Romulus facility. Complete monthly reconciliations would have identified many of the transactions not recorded in accordance with generally accepted accounting principles. The Companys internal
audit department, as a part of its testing of internal controls, identified the failure by the cost accountant and plant controller to perform the reconciliations. A reconciliation of the general ledger inventory account has since been completed and
examined in detail by the Companys internal audit department and its corporate controller. In addition, a physical count of the inventory at the Romulus facility was taken.



The improper recognition of revenue was discovered during the reconciliation of the general ledger inventory account. We
learned that the Romulus facility was sending inventory to third party vendors for further processing, that the vendors were being invoiced for the value of the inventory, the invoiced amount was being recorded as revenue, and the vendors, after
performing their value-added processing to the inventory, were shipping it back to the Romulus facility for sale to third party customers. Under those circumstances, the recognition of revenue when the inventory was shipped to the vendors was
incorrect.



The Company conducted a review to determine the
extent of the practice of recording as revenue the shipment of in-process inventory to third party vendors. A listing of vendors associated with the Romulus facility was created and compared to a list of customers. In addition, inquiry was made of
personnel in the purchasing, accounts receivable, and finance departments to identity all third party vendors to whom shipments of inventory for processing were being recorded as revenue. Management believes it has identified all the vendors to whom
shipments of inventory for processing were being recorded as revenue.



The Company has taken steps to improve its internal controls over accounting for inventory. Those steps include, among others, the following items:



| |  |  | the replacement of the cost accountant and plant controller at our Romulus facility;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | an update to the physical inventory procedures to clearly indicate which system reports should be used;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the creation of a procedure requiring that all manual entries be reviewed by the cost accounting leader responsible for the general ledger affected by the entry;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the implementation of a system designed to report labor interface failures; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | the implementation of procedures designed to ensure that all inventory accounts are reconciled on a monthly basis and reviewed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



The Company has also implemented the following remedial measures related to
the shipment of inventory to suppliers for further processing to ensure that revenue is not recognized on these types of shipments:



| |  |  | the sales department and the credit department are now both required to approve the creation of any new customer accounts; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | purchasing department employees have been trained on the correct manner in which to record the inventory shipped to the vendors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



In addition to addressing the internal controls at the Romulus facility, the
Company requested its internal audit department identify those operating locations of the Company considered to either be a significant entity or have accounts which were considered significant in the aggregate and then survey the financial
personnel at those locations to determine whether those locations had any significant account reconciliation issues. The Companys Chief Financial Officer also spoke with a senior financial department representative at each location responsible
for one or more general ledger balances and asked a series of questions designed to identify, for their general ledgers, the existence of any accounting issues and any incorrect entries similar to those made at Romulus. The Company did not identify
any material weaknesses as a result of the internal audit survey or the questions posed by the Chief Financial Officer.



The Companys management has concluded that the effect of the errors was not material to any of the prior quarters in which they occurred and the
correcting entries are not material to the three month period ended June 30, 2005. The Companys Audit Committee, following an independent review conducted by outside legal counsel under the direction of the Committee, concurred with
managements conclusion.



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Changes in Internal Control Over Financial Reporting:As described above, changes in the
Companys internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f) of the Securities and Exchange Act of 1934 were implemented by the Company during the three months ended June 30, 2005, in order to remediate two
material weaknesses in the Companys internal control over financial reporting.



There were no other changes in the Companys internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.



PART II - OTHER INFORMATION



ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds



Issuer Purchases of Equity Securities



The table below sets forth information with respect to shares deemed to be repurchased from an employee in the third quarter of fiscal 2005 when the
employee delivered already owned shares by attestation to pay the exercise price and withholding taxes in connection with the exercise of stock options.



|                    |  |                                 |  |                             |        |                                                                               |   |                                                                                        |            
|------------------- |  | ------------------------------- |  | --------------------------- | ------ | ----------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------- | -----------
|Period              |  | Total Number ofShares Purchased |  | Average PricePaid per Share |        | Total Number of SharesPurchased as Part ofPublicly Announced Plans orPrograms |   | Approximate Dollar Value of SharesThat May Yet Be Purchased Underthe Plans or Programs
|04/01/2005-04/30/05 |  | 14,979                          |  | $                           | 37.195 |                                                                               |  |                                                                                        | $         
|05/01/2005-05/31/05 |  |                                |  | $                           |       |                                                                               |  |                                                                                        | $         
|06/01/2005-06/30/05 |  |                                |  | $                           |       |                                                                               |  |                                                                                        | $         
|                    |  |                                 |  |                             |        |                                                                               |   |                                                                                        |            
|Total               |  | 14,979                          |  | $                           | 37.195 |                                                                               |  |                                                                                        | $         
|                    |  |                                 |  |                             |        |                                                                               |   |                                                                                        |            



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: August 9, 2005 |  | /s/ BERNARD J. PITZ                         
|                     |  | Bernard J. Pitz, 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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##### Table of Contents

SYBRON DENTAL SPECIALTIES, INC.

(THE REGISTRANT)

(COMMISSION FILE NO. 1-16057)

EXHIBIT INDEX

TO

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2005



|               |  |                                                                                                                                                                      |  |                                                                                                                                                             |  |              
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Exhibit Number |  | Description                                                                                                                                                          |  | Incorporated Herein By Reference To                                                                                                                         |  | FiledHerewith
|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                                                                                                                          |  |              
|               |  |                                                                                                                                                                      | 
|10.1           |  | Second Amendment to Termination Agreement, effective as of November 16, 2004 between the Registrant and Gregory D. Waller                                            |  | Exhibit 10.1 to the Registrants Form 8-K dated March 31, 2005                                                                                              |  |              
|               |  |                                                                                                                                                                      | 
|10.2           |  | Form of 2005 Long-Term Incentive Plan Nonqualified Stock Option Agreement                                                                                            |  | Exhibit 10.1 to the Registrants Form 8-K dated May 4, 2005                                                                                                 |  |              
|               |  |                                                                                                                                                                      | 
|10.3           |  | Form of Indemnification Agreement for Directors                                                                                                                      |  | Exhibit 10.2 to the Registrants Form 8-K dated May 4, 2005                                                                                                 |  |              
|               |  |                                                                                                                                                                      | 
|10.4           |  | Form of Executive Employment Agreement between the Registrant and Executive Officers                                                                                 |  | Exhibit 10.1 to the Registrants Form 8-K/A dated May 10, 2005                                                                                              |  |              
|               |  |                                                                                                                                                                      | 
|10.5           |  | Form of Indemnification Agreement for Officers                                                                                                                       |  | Exhibit 10.2 to the Registrants Form 8-K/A dated May 10, 2005                                                                                              |  |              
|               |  |                                                                                                                                                                      | 
|10.6           |  | Full and Complete Release of Liability between the Registrant and Gregory D. Waller                                                                                  |  | Exhibit 10.1 to the Registrants Form 8-K dated May 12, 2005                                                                                                |  |              
|               |  |                                                                                                                                                                      | 
|10.7           |  | Consulting Agreement between the Registrant and Gregory D. Waller                                                                                                    |  | Exhibit 10.2 to the Registrants Form 8-K dated May 12, 2005                                                                                                |  |              
|               |  |                                                                                                                                                                      | 
|31.1           |  | Chief Executive Officers 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           |  | Chief Financial Officers 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            



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