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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 MARCH 31, 2006

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)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 33-0920985                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



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100 BAYVIEW CIRCLE, STE. 6000, NEWPORT BEACH, CA 92660

(Address of principal executive offices)
(Zip Code)

(949) 255-8700

(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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer  þ                 Accelerated filer ̈Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ̈No  þ

At May 5, 2006, there were 40,553,055 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 |  | 23  
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 39  
|Item 4.       |  | Controls and Procedures                                                               |  | 41  
|              |  |                                                                                      
|PART II -     |  | OTHER INFORMATION                                                                     |  |     
|              |  |                                                                                      
|Item 1.       |  | Legal Proceedings                                                                     |  | 41  
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 42  
|Item 6.       |  | Exhibits                                                                              |  | 42  
|Signature     |  | 43                                                                                   
|Exhibit Index |  | 44                                                                                   



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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)



|                                                                                                                                                                 |  |                                         |         |                   |   |        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | ----------------- | - | -------
|                                                                                                                                                                 |  | March 31,2006                           |         | September 30,2005
|                                                                                                                                                                 |  | (in thousands, except pershare amounts)
|ASSETS                                                                                                                                                           |  |                                         |         |                   |   |        
|Current assets:                                                                                                                                                  |  |                                         |         |                   |   |        
|Cash and cash equivalents                                                                                                                                        |  | $                                       | 75,796  |                   | $ | 58,572 
|Accounts receivable (less allowance for doubtful receivables of $3,154 and $3,007 at March 31, 2006 and September 30, 2005,
respectively)                        |  |                                         | 116,820 |                   |   | 112,500
|Inventories                                                                                                                                                      |  |                                         | 96,361  |                   |   | 92,840 
|Deferred income taxes                                                                                                                                            |  |                                         | 4,167   |                   |   | 7,788  
|Prepaid expenses and other current assets                                                                                                                        |  |                                         | 22,547  |                   |   | 12,261 
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total current assets                                                                                                                                             |  |                                         | 315,691 |                   |   | 283,961
|Property, plant and equipment, net of accumulated depreciation of $ 125,858 and $117,252 at March 31, 2006 and September 30, 2005,
respectively                  |  |                                         | 86,545  |                   |   | 87,762 
|Goodwill                                                                                                                                                         |  |                                         | 290,069 |                   |   | 295,306
|Intangible assets, net                                                                                                                                           |  |                                         | 63,694  |                   |   | 50,882 
|Other assets                                                                                                                                                     |  |                                         | 29,893  |                   |   | 32,507 
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total assets                                                                                                                                                     |  | $                                       | 785,892 |                   | $ | 750,418
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                             |  |                                         |         |                   |   |        
|Current liabilities:                                                                                                                                             |  |                                         |         |                   |   |        
|Accounts payable                                                                                                                                                 |  | $                                       | 19,497  |                   | $ | 20,135 
|Current portion of long-term debt                                                                                                                                |  |                                         | 143     |                   |   | 733    
|Income taxes payable                                                                                                                                             |  |                                         | 15,221  |                   |   | 11,822 
|Accrued payroll and employee benefits                                                                                                                            |  |                                         | 29,747  |                   |   | 31,537 
|Accrued rebates                                                                                                                                                  |  |                                         | 6,298   |                   |   | 9,336  
|Accrued interest                                                                                                                                                 |  |                                         | 3,661   |                   |   | 3,519  
|Other current liabilities                                                                                                                                        |  |                                         | 18,977  |                   |   | 15,412 
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total current liabilities                                                                                                                                        |  |                                         | 93,544  |                   |   | 92,494 
|Long-term debt                                                                                                                                                   |  |                                         | 52,952  |                   |   | 61,099 
|Senior subordinated notes                                                                                                                                        |  |                                         | 150,000 |                   |   | 150,000
|Deferred income taxes                                                                                                                                            |  |                                         | 22,423  |                   |   | 16,405 
|Other non-current liabilities                                                                                                                                    |  |                                         | 20,808  |                   |   | 28,267 
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total liabilities                                                                                                                                                |  |                                         | 339,727 |                   |   | 348,265
|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, 40,553 and 40,395 shares issued and outstanding at March 31, 2006 and
September 30, 2005, respectively |  |                                         | 406     |                   |   | 404    
|Additional paid-in capital                                                                                                                                       |  |                                         | 128,730 |                   |   | 118,448
|Retained earnings                                                                                                                                                |  |                                         | 298,055 |                   |   | 264,841
|Accumulated other comprehensive income                                                                                                                           |  |                                         | 18,974  |                   |   | 18,460 
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total stockholders equity                                                                                                                                       |  |                                         | 446,165 |                   |   | 402,153
|                                                                                                                                                                 |  |                                         |         |                   |   |        
|Total liabilities and stockholders equity                                                                                                                       |  | $                                       | 785,892 |                   | $ | 750,418
|                                                                                                                                                                 |  |                                         |         |                   |   |        

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.



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##### Table of Contents

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | ------------------------------------------- | ------- | - | ------------------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                   |  | Three Months EndedMarch 31,                 |         |   | Six Months EndedMarch 31,                   |  
|                                                   |  | 2006                                        |         |   | 2005                                        |   |         | 2006 |  |   | 2005    |  
|                                                   |  | (in thousands, except forper share amounts) |         |   | (in thousands, except forper share amounts) |  
|Net sales                                          |  | $                                           | 182,786 |   |                                             | $ | 165,056 |      |  | $ | 340,817 |   |  | $ | 314,096 |  
|Cost of sales                                      |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Cost of products sold                              |  |                                             | 78,141  |   |                                             |   | 71,787  |      |  |   | 146,172 |   |  |   | 135,460 |  
|Restructuring charges                              |  |                                             |        |   |                                             |   | 84      |      |  |   | 10      |   |  |   | 84      |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Total cost of sales                                |  |                                             | 78,141  |   |                                             |   | 71,871  |      |  |   | 146,182 |   |  |   | 135,544 |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                       |  |                                             | 104,645 |   |                                             |   | 93,185  |      |  |   | 194,635 |   |  |   | 178,552 |  
|Selling, general and administrative expenses       |  |                                             | 68,866  |   |                                             |   | 59,207  |      |  |   | 130,120 |   |  |   | 116,695 |  
|Restructuring charges                              |  |                                             | 1       |   |                                             |   | 488     |      |  |   | 17      |   |  |   | 488     |  
|Amortization of intangibles                        |  |                                             | 1,299   |   |                                             |   | 559     |      |  |   | 4,113   |   |  |   | 1,056   |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Total selling, general and administrative expenses |  |                                             | 70,166  |   |                                             |   | 60,254  |      |  |   | 134,250 |   |  |   | 118,239 |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                   |  |                                             | 34,479  |   |                                             |   | 32,931  |      |  |   | 60,385  |   |  |   | 60,313  |  
|Other income (expense):                            |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Interest expense, net                              |  |                                             | (4,106  | ) |                                             |   | (4,420  | )    |  |   | (7,963  | ) |  |   | (9,237  | )
|Amortization of deferred financing fees            |  |                                             | (2,346  | ) |                                             |   | (416    | )    |  |   | (2,759  | ) |  |   | (831    | )
|Other, net                                         |  |                                             | 226     |   |                                             |   | 490     |      |  |   | 273     |   |  |   | 456     |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                         |  |                                             | 28,253  |   |                                             |   | 28,585  |      |  |   | 49,936  |   |  |   | 50,701  |  
|Income taxes                                       |  |                                             | 9,567   |   |                                             |   | 9,147   |      |  |   | 16,722  |   |  |   | 16,224  |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Net income                                         |  | $                                           | 18,686  |   |                                             | $ | 19,438  |      |  | $ | 33,214  |   |  | $ | 34,477  |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Basic earnings per share                           |  | $                                           | 0.46    |   |                                             | $ | 0.49    |      |  | $ | 0.82    |   |  | $ | 0.87    |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Diluted earnings per share                         |  | $                                           | 0.44    |   |                                             | $ | 0.47    |      |  | $ | 0.79    |   |  | $ | 0.84    |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Weighted average shares outstanding:               |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Basic                                              |  |                                             | 40,518  |   |                                             |   | 39,986  |      |  |   | 40,463  |   |  |   | 39,732  |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  
|Diluted                                            |  |                                             | 42,029  |   |                                             |   | 41,485  |      |  |   | 42,029  |   |  |   | 41,276  |  
|                                                   |  |                                             |         |   |                                             |   |         |      |  |   |         |   |  |   |         |  

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 SIX MONTHS ENDED MARCH 31, 2006

(UNAUDITED)



|                                                                                                |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | --------------- |  | ------------------------ | --- | ---------------- | - | ----------------------------------- |  | - | ------------------------ |  | - | ------------------------ | - |  | - | ------- | - |  | - | ------ | -
|                                                                                                |  | Common Stock    |  | AdditionalPaid-inCapital |     | RetainedEarnings |   | AccumulatedOtherComprehensiveIncome |  |   | TotalStockholdersEquity |  |   | TotalComprehensiveIncome |  
|                                                                                                |  | Number ofShares |  | Par Value                |     |                  |   |                                     | 
|                                                                                                |  | (in thousands)  | 
|Balance at September 30, 2005                                                                   |  | 40,395          |  | $                        | 404 |                  | $ | 118,448                             |  | $ | 264,841                  |  | $ | 18,460                   |   |  | $ | 402,153 |   |  |   |        |  
|Comprehensive income:                                                                           |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  
|Net income                                                                                      |  |                |  |                          |    |                  |   |                                    |  |   | 33,214                   |  |   |                         |   |  |   | 33,214  |   |  | $ | 33,214 |  
|Translation adjustment                                                                          |  |                |  |                          |    |                  |   |                                    |  |   |                         |  |   | (637                     | ) |  |   | (637    | ) |  |   | (637   | )
|Unrealized gain on derivative instruments                                                       |  |                |  |                          |    |                  |   |                                    |  |   |                         |  |   | 1,151                    |   |  |   | 1,151   |   |  |   | 1,151  |  
|                                                                                                |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  
|Total comprehensive income                                                                      |  |                |  |                          |    |                  |   |                                    |  |   | 33,214                   |  |   | 514                      |   |  |   | 33,728  |   |  | $ | 33,728 |  
|                                                                                                |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  
|Issuance of common stock from stock options exercised                                           |  | 122             |  |                          | 2   |                  |   | 1,982                               |  |   |                         |  |   |                         |   |  |   | 1,984   |   |  |   |        |  
|Stock compensation expense                                                                      |  |                |  |                          |    |                  |   | 6,264                               |  |   |                         |  |   |                         |   |  |   | 6,264   |   |  |   |        |  
|Income tax benefit from issuance of stock under employee stock plan and stock options exercised |  |                |  |                          |    |                  |   | 887                                 |  |   |                         |  |   |                         |   |  |   | 887     |   |  |   |        |  
|Issuance of common stock from Employee Stock Purchase Plan                                      |  | 36              |  |                          |    |                  |   | 1,149                               |  |   |                         |  |   |                         |   |  |   | 1,149   |   |  |   |        |  
|                                                                                                |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  
|Balance at March 31, 2006                                                                       |  | 40,553          |  | $                        | 406 |                  | $ | 128,730                             |  | $ | 298,055                  |  | $ | 18,974                   |   |  | $ | 446,165 |   |  |   |        |  
|                                                                                                |  |                 |  |                          |     |                  |   |                                     |  |   |                          |  |   |                          |   |  |   |         |   |  |   |        |  

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)



|                                                                                                |  |                           |          |   |      |   |         |  
|----------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                                |  | Six Months EndedMarch 31, |         
|                                                                                                |  | 2006                      |          |   | 2005 |  
|                                                                                                |  | (in thousands)            |         
|Cash flows from operating activities:                                                           |  |                           |          |   |      |   |         |  
|Net income                                                                                      |  | $                         | 33,214   |   |      | $ | 34,477  |  
|Adjustments to reconcile net income to net cash provided by operating activities:               |  |                           |          |   |      |   |         |  
|Depreciation and amortization                                                                   |  |                           | 9,446    |   |      |   | 7,264   |  
|Amortization of intangible assets                                                               |  |                           | 4,113    |   |      |   | 1,056   |  
|Amortization of deferred financing fees                                                         |  |                           | 2,759    |   |      |   | 831     |  
|Loss on sales of property, plant and equipment                                                  |  |                           | 13       |   |      |   | 84      |  
|Provision for losses on doubtful receivables                                                    |  |                           | 415      |   |      |   | 431     |  
|Inventory provisions                                                                            |  |                           | 2,097    |   |      |   | 3,203   |  
|Deferred income taxes                                                                           |  |                           | (662     | ) |      |   | (557    | )
|Income tax benefit from issuance of stock under employee stock plan and stock options exercised |  |                           | 887      |   |      |   | 4,736   |  
|Changes in assets and liabilities, net of effects of businesses acquired:                       |  |                           |          |   |      |   |         |  
|Increase in accounts receivable                                                                 |  |                           | (4,467   | ) |      |   | (1,554  | )
|Increase in inventories                                                                         |  |                           | (5,082   | ) |      |   | (5,843  | )
|Increase in prepaid expenses and other current assets                                           |  |                           | (2,379   | ) |      |   | (429    | )
|Decrease in accounts payable                                                                    |  |                           | (638     | ) |      |   | (3,766  | )
|Increase/(decrease) in income taxes payable                                                     |  |                           | 2,897    |   |      |   | (2,519  | )
|Increase/(decrease) in accrued payroll and employee benefits                                    |  |                           | (1,790   | ) |      |   | 54      |  
|Decrease in accrued rebates                                                                     |  |                           | (3,038   | ) |      |   | (2,840  | )
|Increase in accrued interest                                                                    |  |                           | 142      |   |      |   | 164     |  
|Increase in other current liabilities                                                           |  |                           | 3,565    |   |      |   | 914     |  
|Net change in other assets and liabilities                                                      |  |                           | 8,101    |   |      |   | 721     |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Net cash provided by operating activities                                                       |  |                           | 49,593   |   |      |   | 36,427  |  
|Cash flows from investing activities:                                                           |  |                           |          |   |      |   |         |  
|Capital expenditures                                                                            |  |                           | (8,329   | ) |      |   | (6,342  | )
|Proceeds from sales of property, plant and equipment                                            |  |                           | 7        |   |      |   | 938     |  
|Net payments for businesses acquired                                                            |  |                           |         |   |      |   | (46,049 | )
|Acquisition escrow deposit                                                                      |  |                           | (7,907   | ) |      |   |        |  
|Payments for intangibles                                                                        |  |                           | (386     | ) |      |   | (849    | )
|                                                                                                |  |                           |          |   |      |   |         |  
|Net cash used in investing activities                                                           |  |                           | (16,615  | ) |      |   | (52,302 | )
|Cash flows from financing activities:                                                           |  |                           |          |   |      |   |         |  
|Proceeds from credit facility                                                                   |  |                           | 137,100  |   |      |   | 86,000  |  
|Principal payments on credit facility                                                           |  |                           | (145,710 | ) |      |   | (75,607 | )
|Settlement of derivative instruments                                                            |  |                           | (8,384   | ) |      |   |        |  
|Principal payments on long-term debt                                                            |  |                           | (127     | ) |      |   | (292    | )
|Payment of deferred financing fees                                                              |  |                           | (1,164   | ) |      |   |        |  
|Proceeds from exercise of stock options                                                         |  |                           | 1,984    |   |      |   | 10,254  |  
|Proceeds from employee stock purchase plan                                                      |  |                           | 1,149    |   |      |   | 771     |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Net cash provided by/(used in) financing activities                                             |  |                           | (15,152  | ) |      |   | 21,126  |  
|Effect of exchange rate changes on cash and cash equivalents                                    |  |                           | (602     | ) |      |   | 1,774   |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Net increase in cash and cash equivalents                                                       |  |                           | 17,224   |   |      |   | 7,025   |  
|Cash and cash equivalents at beginning of period                                                |  |                           | 58,572   |   |      |   | 40,602  |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Cash and cash equivalents at end of period                                                      |  | $                         | 75,796   |   |      | $ | 47,627  |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Supplemental disclosures of cash flow information:                                              |  |                           |          |   |      |   |         |  
|Cash paid during the period for interest                                                        |  | $                         | 8,732    |   |      | $ | 9,592   |  
|                                                                                                |  |                           |          |   |      |   |         |  
|Cash paid during the period for income taxes                                                    |  | $                         | 12,240   |   |      | $ | 13,567  |  
|                                                                                                |  |                           |          |   |      |   |         |  

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

We are a leading manufacturer 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 dental and medical professions. Our fiscal year ends on
September 30. The quarters ended March 31, 2006 and 2005 are the second quarters of our fiscal years 2006 and 2005, respectively.

When we use the terms SDS, we, us, Company, or our in our consolidated financial statements, unless the context requires otherwise, we are referring to Sybron Dental Specialties,
Inc. and its subsidiaries.

We have 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 in accordance with generally accepted accounting principles
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 are 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 our Annual Report on Form 10-K for the fiscal year ended September 30, 2005.

Certain amounts in the prior year condensed consolidated financial statements have been reclassified to conform to the current year presentation.

2. INVENTORIES

Inventories at March 31, 2006 and September 30, 2005 are presented below.



|                           |  |               |        |                   |   |       
|-------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                           |  | March 31,2006 |        | September 30,2005
|Raw materials and supplies |  | $             | 23,248 |                   | $ | 22,912
|Work in process            |  |               | 24,202 |                   |   | 23,412
|Finished goods             |  |               | 48,911 |                   |   | 46,516
|                           |  |               |        |                   |   |       
|                           |  | $             | 96,361 |                   | $ | 92,840
|                           |  |               |        |                   |   |       

3. GOODWILL AND INTANGIBLE ASSETS

During the first quarter of fiscal 2006, we reviewed the purchase price allocation for the acquisitions of certain assets from Surgical Acuity, Inc.
(Surgical Acuity) in fiscal 2002 and the stock of SpofaDental a.s. (SpofaDental) in fiscal 2003. We determined that a portion of the amount that was allocated to goodwill in fact related to intangible assets, some of which
require amortization. Further, upon reviewing the estimated useful life for some of the intangible assets associated with the Innova LifeSciences Corporation (Innova) acquisition in fiscal 2005, we determined that the estimated useful
life should be reduced. As a result of these determinations, we recorded in the quarter ended December 31, 2005 a non-cash charge of $2,125 to amortization of intangible assets, $1,898 of which related to prior periods. We also identified other
errors in the accounting for differences between the assigned values and tax bases of the assets and liabilities recognized in the acquisitions of Innova and Oraltronics Dental Implant Technology GmbH (Oraltronics) in fiscal 2005 and
SpofaDental in fiscal 2003, which required adjustments to increase goodwill and deferred tax liabilities. All of the above errors occurred over multiple quarters. We concluded that the effect of the errors, individually and in the aggregate, was not
material to any of the prior periods in which they occurred and that the correcting entries were not material to the first quarter of fiscal 2006.



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Goodwill

We perform an annual impairment test of goodwill in the first quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired. To perform
this assessment, we identify our reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. We then determine the
fair value of each reporting unit and compare it to the carrying amount of the reporting unit. We determined that none of our goodwill was impaired as of December 31, 2005. We were not aware of any indicators of potential impairment as of
March 31, 2006 or September 30, 2005.

The following table details the balances of the goodwill assets by business segment as of
the dates indicated:



|                    |  |               |         |                   |   |        
|------------------- |  | ------------- | ------- | ----------------- | - | -------
|                    |  | March 31,2006 |         | September 30,2005
|Professional Dental |  | $             | 176,210 |                   | $ | 187,772
|Specialty Products  |  |               | 113,859 |                   |   | 107,534
|                    |  |               |         |                   |   |        
|Total               |  | $             | 290,069 |                   | $ | 295,306
|                    |  |               |         |                   |   |        

The decrease of $5,237 in the amount of goodwill during the six months ended March 31, 2006
was due to an adjustment of $2,779 to the Oraltronics purchase price allocation; an adjustment of $1,069 to the Innova purchase price allocation; $563 of net corrections related to the aforementioned prior period accounting errors; an unfavorable
foreign currency fluctuation of $253; and other of $573. We finalized the allocation of the Oraltronics and Innova purchase prices during the six months ended March 31, 2006. The $563 of net corrections mentioned above consists of the
following: we reclassified $11,210 from goodwill to intangible assets to account for certain intangible assets that should have been recognized apart from goodwill in prior period business combinations; and we increased goodwill by $10,647 and
recognized a deferred tax liability in the same amount to account for differences between the assigned values and tax bases of the assets and liabilities recognized in prior period business combinations.

Intangible Assets

Finite 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 our intangible assets as of March 31, 2006:



|                                               |  |                      |        |                         |   |                    |  |   |       
|---------------------------------------------- |  | -------------------- | ------ | ----------------------- | - | ------------------ |  | - | ------
|                                               |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net CarryingAmount
|Intangible Assets Subject to Amortization:     |  |                      |        |                         |   |                    |  |   |       
|Proprietary technology                         |  | $                    | 32,394 |                         | $ | 3,269              |  | $ | 29,125
|Patents                                        |  |                      | 9,157  |                         |   | 3,801              |  |   | 5,356 
|Non-compete agreements                         |  |                      | 1,673  |                         |   | 1,300              |  |   | 373   
|License agreements                             |  |                      | 1,875  |                         |   | 1,846              |  |   | 29    
|Customer relationships                         |  |                      | 7,687  |                         |   | 1,739              |  |   | 5,948 
|                                               |  |                      |        |                         |   |                    |  |   |       
|Total                                          |  | $                    | 52,786 |                         | $ | 11,955             |  |   | 40,831
|                                               |  |                      |        |                         |   |                    |  |   |       
|Intangible Assets Not Subject to Amortization: |  |                      |        |                         |   |                    |  |   |       
|Trademarks                                     |  |                      |        |                         |   |                    |  |   | 22,863
|                                               |  |                      |        |                         |   |                    |  |   |       
|Total Intangible Assets                        |  |                      |        |                         |   |                    |  | $ | 63,694
|                                               |  |                      |        |                         |   |                    |  |   |       



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The following table details the balances of our intangible assets as of September 30, 2005:



|                                               |  |                      |        |                         |   |                    |  |   |       
|---------------------------------------------- |  | -------------------- | ------ | ----------------------- | - | ------------------ |  | - | ------
|                                               |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net CarryingAmount
|Intangible Assets Subject to Amortization:     |  |                      |        |                         |   |                    |  |   |       
|Proprietary technology                         |  | $                    | 28,827 |                         | $ | 1,166              |  | $ | 27,661
|Patents                                        |  |                      | 8,820  |                         |   | 3,418              |  |   | 5,402 
|Non-compete agreements                         |  |                      | 1,673  |                         |   | 1,273              |  |   | 400   
|License agreements                             |  |                      | 1,932  |                         |   | 1,886              |  |   | 46    
|Customer relationships                         |  |                      | 2,142  |                         |   | 177                |  |   | 1,965 
|                                               |  |                      |        |                         |   |                    |  |   |       
|Total                                          |  | $                    | 43,394 |                         | $ | 7,920              |  |   | 35,474
|                                               |  |                      |        |                         |   |                    |  |   |       
|Intangible Assets Not Subject to Amortization: |  |                      |        |                         |   |                    |  |   |       
|Trademarks                                     |  |                      |        |                         |   |                    |  |   | 15,408
|                                               |  |                      |        |                         |   |                    |  |   |       
|Total Intangible Assets                        |  |                      |        |                         |   |                    |  | $ | 50,882
|                                               |  |                      |        |                         |   |                    |  |   |       

The gross carrying amount of intangible assets subject to amortization increased by $9,392 during
the six months ended March 31, 2006. The increase was due to the reclassification of $6,310 from goodwill to intangible assets subject to amortization as a result of the correction of prior period accounting errors, the reclassification of
$2,594 from goodwill to intangible assets subject to amortization as a result of the finalization of the Oraltronics purchase price allocation, added patents of $358, foreign currency fluctuation of $159, and other of $574, partially offset by the
reclassification of $603 from proprietary technology to trademarks.

The gross carrying amount of our trademarks, which are not subject to
amortization, increased by $7,455 during the six months ended March 31, 2006. The increase was due to the reclassification of $4,900 from goodwill to trademarks as a result of the correction of prior period accounting errors, the
reclassification of $900 from goodwill to intangible assets subject to amortization as a result of the finalization of the Innova purchase price allocation, the reclassification of $603 from proprietary technology to trademarks, the reclassification
of $560 from goodwill to intangible assets subject to amortization as a result of the finalization of the Oraltronics purchase price allocation, foreign currency fluctuation of $111, and other of $381.

Amortization expense for the three months and six months ended March 31, 2006 was $1,299 and $4,113, respectively, as compared to $559 and $1,056
for the three months and six months ended March 31, 2005, respectively. The increase in amortization expense from 2005 to 2006 was due to the correction of prior period accounting errors, as discussed above. Amortization of intangible assets is
included as a component of total selling, general and administrative expenses. The following table displays the estimated amortization (calculated as of March 31, 2006) for each of the fiscal years indicated:



|                                  |  |                                 |       |      |   |       |  |      |       |      |   |       |  |   |      
|--------------------------------- |  | ------------------------------- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                  |  | Fiscal year ended September 30,
|                                  |  | 2006                            |       | 2007 |   | 2008  |  | 2009 |       | 2010
|Amortization of intangible assets |  | $                               | 5,756 |      | $ | 3,257 |  | $    | 3,228 |      | $ | 3,187 |  | $ | 3,148

4. EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Benefits:We sponsor various defined benefit pension plans covering substantially all of our 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, we provide 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 reached retirement age while working for
SDS. Our contributions to the cost of the postretirement health care plans for these employees are frozen at a fixed amount for each participant, except where early retirement agreements prohibit such a freeze. 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. We accrue, as current costs, the future lifetime retirement benefits for all
qualifying active and retired employees.



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##### Table of Contents

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



|                                   |  |                             |        |   |                               |   |        |                             |  |                           |        |   |  |      |        |   |      |   |      |   |  |      |     |  |   |       |   |  |   |      
|---------------------------------- |  | --------------------------- | ------ | - | ----------------------------- | - | ------ | --------------------------- |  | ------------------------- | ------ | - |  | ---- | ------ | - | ---- | - | ---- | - |  | ---- | --- |  | - | ----- | - |  | - | -----
|                                   |  | Pension Benefits            |        |   | Other Postretirement Benefits
|                                   |  | Three Months EndedMarch 31, |        |   | Six Months EndedMarch 31,     |   |        | Three Months EndedMarch 31, |  | Six Months EndedMarch 31,
|                                   |  | 2006                        |        |   | 2005                          |   |        | 2006                        |  |                           | 2005   |   |  | 2006 |        |   | 2005 |   | 2006 |   |  | 2005
|Service cost                       |  | $                           | 1,516  |   |                               | $ | 1,094  |                             |  | $                         | 3,033  |   |  | $    | 2,188  |   |      | $ | 145  |   |  | $    | 149 |  | $ | 290   |   |  | $ | 298  
|Interest cost                      |  |                             | 1,136  |   |                               |   | 972    |                             |  |                           | 2,271  |   |  |      | 1,944  |   |      |   | 233  |   |  |      | 253 |  |   | 467   |   |  |   | 506  
|Expected return on plan assets     |  |                             | (1,416 | ) |                               |   | (1,108 | )                           |  |                           | (2,832 | ) |  |      | (2,216 | ) |      |   |     |   |  |      |    |  |   |      |   |  |   |     
|Amortization of prior service cost |  |                             | 28     |   |                               |   | 24     |                             |  |                           | 56     |   |  |      | 48     |   |      |   | (86  | ) |  |      |    |  |   | (172  | ) |  |   |     
|Amortization of actuarial loss     |  |                             | 475    |   |                               |   | 241    |                             |  |                           | 950    |   |  |      | 482    |   |      |   | 240  |   |  |      | 153 |  |   | 479   |   |  |   | 306  
|                                   |  |                             |        |   |                               |   |        |                             |  |                           |        |   |  |      |        |   |      |   |      |   |  |      |     |  |   |       |   |  |   |      
|Net periodic benefit cost          |  | $                           | 1,739  |   |                               | $ | 1,223  |                             |  | $                         | 3,478  |   |  | $    | 2,446  |   |      | $ | 532  |   |  | $    | 555 |  | $ | 1,064 |   |  | $ | 1,110
|                                   |  |                             |        |   |                               |   |        |                             |  |                           |        |   |  |      |        |   |      |   |      |   |  |      |     |  |   |       |   |  |   |      

Our funding policy is to generally make annual contributions in excess of both the minimum
contributions required by applicable regulations and the amount needed in order to avoid any Pension Benefit Guarantee Corporation (PBGC) variable premium payments, and to not have any additional minimum liability under SFAS No. 87,
Employers Accounting for Pensions. We expect to contribute approximately $1,098 to our pension plan assets in fiscal 2006. We made approximately $213 in contributions in the quarter ended March 31, 2006.

5. RESTRUCTURING CHARGES

In fiscal 2005, we
implemented and completed a plan to consolidate our Demetron and Orascoptic operations into one facility. As a result of this plan, we recorded a restructuring charge of $1,204 ($819 after tax) in the fiscal year ended September 30, 2005. The
$1,204 restructuring charge was comprised of approximately $616 of cash charges related to severance and termination costs associated with the employees whose employment we terminated as a result of the consolidation; approximately $314 of cash
charges related to lease termination, storage and moving costs; and approximately $274 of cash charges related to miscellaneous consolidation costs. Approximately $588 of the costs was recorded as a component of costs of goods sold, and $616 of the
costs was recorded as selling, general and administrative expenses. A balance of $56 remains in our accrued liabilities, which is expected to be paid by the end of fiscal 2006.

In fiscal 2004, we implemented and completed a plan to close our facility in Tijuana, Mexico by the end of the first quarter of fiscal 2005. As a result
of this plan, we recorded a restructuring charge of $1,471 ($986 after tax) in the fiscal year ended September 30, 2004. The charge was comprised of severance and termination costs associated with the 246 employees whose employment we
terminated as a result of the closure and recorded as a component of cost of goods sold in the fiscal year. The 2004 restructuring was completed in the first quarter of fiscal 2005, and all severance was paid.

In September 2002, we 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 we terminated as a result of the consolidation of several of our European facilities into our 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 was for the cash payment of tax liabilities included in income taxes payable; and the balance of approximately $302 related to non-cash charges. We completed the
2002 restructuring in fiscal 2004 and made an adjustment to restructuring charges of approximately $200, primarily for over accruals for anticipated costs associated with severance and related costs. A balance of $300 will remain in our accrued tax
liability until it is remitted.

6. SEGMENT INFORMATION

We are a leading manufacturer 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 dental and medical professions. Our 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.



10



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##### Table of Contents

The following tables present the results of operations for our business segments for the three month and
six month periods ended March 31, 2006 and 2005:



|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|-------------------------------------------- |  | ------------------ | ------- | ----------------- | - | ------------ |  | - | ------ | - |  | - | -------
|Three Months Ended March 31,                 |  | ProfessionalDental |         | SpecialtyProducts |   | Eliminations |  |   | Total 
|2006                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 97,060  |                   | $ | 85,726       |  | $ |       |   |  | $ | 182,786
|Intersegment                                 |  |                    | 520     |                   |   | 848          |  |   | (1,368 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 97,580  |                   | $ | 86,574       |  | $ | (1,368 | ) |  | $ | 182,786
|                                             |  |                    |         |                  
|Gross profit                                 |  | $                  | 54,075  |                   | $ | 50,570       |  | $ |       |   |  | $ | 104,645
|Selling, general and administrative expenses |  |                    | 34,208  |                   |   | 35,958       |  |   |       |   |  |   | 70,166 
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Operating income                             |  | $                  | 19,867  |                   | $ | 14,612       |  | $ |       |   |  | $ | 34,479 
|2005                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 87,567  |                   | $ | 77,489       |  | $ |       |   |  | $ | 165,056
|Intersegment                                 |  |                    | 476     |                   |   | 923          |  |   | (1,399 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 88,043  |                   | $ | 78,412       |  | $ | (1,399 | ) |  | $ | 165,056
|                                             |  |                    |         |                  
|Gross profit                                 |  | $                  | 49,465  |                   | $ | 43,720       |  | $ |       |   |  | $ | 93,185 
|Selling, general and administrative expenses |  |                    | 30,686  |                   |   | 29,568       |  |   |       |   |  |   | 60,254 
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Operating income                             |  | $                  | 18,779  |                   | $ | 14,152       |  | $ |       |   |  | $ | 32,931 
|                                             |  |                    |         |                  
|Six Months Ended March 31,                   |  | ProfessionalDental |         | SpecialtyProducts |   | Eliminations |  |   | Total 
|2006                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 176,244 |                   | $ | 164,573      |  | $ |       |   |  | $ | 340,817
|Intersegment                                 |  |                    | 1,298   |                   |   | 1,503        |  |   | (2,801 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 177,542 |                   | $ | 166,076      |  | $ | (2,801 | ) |  | $ | 340,817
|                                             |  |                    |         |                  
|Gross profit                                 |  | $                  | 97,238  |                   | $ | 97,397       |  | $ |       |   |  | $ | 194,635
|Selling, general and administrative expenses |  |                    | 65,574  |                   |   | 68,676       |  |   |       |   |  |   | 134,250
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Operating income                             |  | $                  | 31,664  |                   | $ | 28,721       |  | $ |       |   |  | $ | 60,385 
|2005                                         |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Revenues:                                    |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|External customer                            |  | $                  | 163,454 |                   | $ | 150,642      |  | $ |       |   |  | $ | 314,096
|Intersegment                                 |  |                    | 1,321   |                   |   | 1,754        |  |   | (3,075 | ) |  |   |       
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Total revenues                               |  | $                  | 164,775 |                   | $ | 152,396      |  | $ | (3,075 | ) |  | $ | 314,096
|                                             |  |                    |         |                  
|Gross profit                                 |  | $                  | 91,023  |                   | $ | 87,529       |  | $ |       |   |  | $ | 178,552
|Selling, general and administrative expenses |  |                    | 60,672  |                   |   | 57,567       |  |   |       |   |  |   | 118,239
|                                             |  |                    |         |                   |   |              |  |   |        |   |  |   |        
|Operating income                             |  | $                  | 30,351  |                   | $ | 29,962       |  | $ |       |   |  | $ | 60,313 

The following table presents the segment assets as of March 31, 2006 compared to the prior
fiscal year end:



|                   |  |                    |         |                   |   |         |  |   |        
|------------------ |  | ------------------ | ------- | ----------------- | - | ------- |  | - | -------
|                   |  | ProfessionalDental |         | SpecialtyProducts |   | Total  
|March 31, 2006     |  | $                  | 517,272 |                   | $ | 268,620 |  | $ | 785,892
|September 30, 2005 |  | $                  | 489,278 |                   | $ | 261,140 |  | $ | 750,418



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##### Table of Contents

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 our stock-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. The table below reflects
the potential dilutive effect on shares outstanding, which is calculated using the treasury stock method, of additional common shares that are issuable upon exercise of outstanding stock options.



|                                            |  |                             |  |                           |  |        |  |       
|------------------------------------------- |  | --------------------------- |  | ------------------------- |  | ------ |  | ------
|                                            |  | Three Months EndedMarch 31, |  | Six Months EndedMarch 31,
|                                            |  | 2006                        |  | 2005                      |  | 2006   |  | 2005  
|Basic shares outstanding (weighted average) |  | 40,518                      |  | 39,986                    |  | 40,463 |  | 39,732
|Effect of dilutive securities               |  | 1,511                       |  | 1,499                     |  | 1,566  |  | 1,544 
|                                            |  |                             |  |                           |  |        |  |       
|Diluted shares outstanding                  |  | 42,029                      |  | 41,485                    |  | 42,029 |  | 41,276

During the three month and six month periods ended March 31, 2006, weighted average options
outstanding to purchase approximately 3,265 shares and 3,257 shares, respectively, of common stock were not included in the computation of dilutive securities because inclusion would be anti-dilutive, as compared to approximately 100 shares and 60
shares for the three month and six month periods ended March 31, 2005, respectively.

8. STOCK-BASED COMPENSATION

Effective October 1, 2005, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment(SFAS
No. 123R). SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans. As required by SFAS No. 123R, we recognized the cost resulting from all stock-based payment transactions
including shares issued under our stock option plans and Employee Stock Purchase Plan (ESPP) in the financial statements. As a result of adopting SFAS No. 123R, our net income for the three month and six month periods ended
March 31, 2006 was $2,461 and $4,197 lower, respectively and net of taxes, than if we had continued to account for stock-based compensation under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
and its related interpretations (APB Opinion No. 25). At March 31, 2006, there was $48,293 of total unrecognized compensation costs related to unvested stock-based compensation arrangements granted under the stock option plans
and ESPP. That cost is expected to be amortized on a straight-line basis over a weighted average period of 4.1 years less any stock options forfeited prior to vesting. During the three month and six month periods ended March 31, 2006, $99 and
$202, respectively, of stock-based compensation cost was capitalized as inventory and expensed through cost of goods sold. No stock-based compensation cost was capitalized as inventory and expensed through cost of goods sold during the three month
and six month periods ended March 31, 2005.

Prior to October 1, 2005, we accounted for stock-based employee compensation plans
(including shares issued under our stock option plans and ESPP) in accordance with APB Opinion No. 25 and followed the pro forma net income, pro forma income per share, and stock-based compensation plan disclosure requirements set forth in the
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123).



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##### Table of Contents

The following table sets forth the computation of basic and diluted income per share for the three month
and six month periods ended March 31, 2005 and illustrates the effect on net income and earnings per share as if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation (dollars in
thousands, except per share amounts):



|                                                                                                                                            |  |                                |        |   |                              |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | ------ | -
|                                                                                                                                            |  | Three MonthsEndedMarch 31,2005 |        |   | Six MonthsEndedMarch 31,2005 |  
|Net income, as reported                                                                                                                     |  | $                              | 19,438 |   |                              | $ | 34,477 |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                  |  |                                |       |   |                              |   |       |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                | (589   | ) |                              |   | (1,502 | )
|                                                                                                                                            |  |                                |        |   |                              |   |        |  
|Pro forma net income                                                                                                                        |  | $                              | 18,849 |   |                              | $ | 32,975 |  
|Earnings per share:                                                                                                                         |  |                                |        |   |                              |   |        |  
|Basic  as reported                                                                                                                         |  | $                              | 0.49   |   |                              | $ | 0.87   |  
|                                                                                                                                            |  |                                |        |   |                              |   |        |  
|pro forma                                                                                                                                   |  | $                              | 0.47   |   |                              | $ | 0.83   |  
|                                                                                                                                            |  |                                |        |   |                              |   |        |  
|Diluted  as reported                                                                                                                       |  | $                              | 0.47   |   |                              | $ | 0.84   |  
|                                                                                                                                            |  |                                |        |   |                              |   |        |  
|pro forma                                                                                                                                   |  | $                              | 0.45   |   |                              | $ | 0.80   |  
|                                                                                                                                            |  |                                |        |   |                              |   |        |  

Fair Value Disclosures

Prior to April 1, 2005, we 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 our employee stock options or purchase rights granted pursuant to the ESPP. During fiscal 2005, we conducted an evaluation of the benefits of using a binomial-lattice model rather than the Black-Scholes model. A binomial-lattice
model considers historical patterns of employee exercise behavior and stock price volatility to project an appropriate array of future exercise behaviors. As a result of the evaluation, we concluded that a binomial-lattice model provides a more
accurate estimated valuation for stock options and have adopted a binomial-lattice model to estimate the fair value of stock options granted subsequent to March 31, 2005.

The weighted average expected volatility for stock options granted prior to March 31, 2005 was based on historical experience of employees
stock option exercise behavior. The weighted average expected volatility for stock options granted subsequent to March 31, 2005 was based on several components in accordance with our modified prospective adoption of SFAS No. 123R, on
October 1, 2005. Components to the weighted average expected volatility for stock options granted subsequent to March 31, 2005 include historical volatility of the stock price, expected life of the option, and length of time shares have
been publicly traded. Implied volatility of actively traded option contracts on our common stock was excluded from the calculation. As options of our stock are not actively traded on the open market, sufficient data for an accurate measure of
implied volatility was not available.

During the periods that the Black-Scholes stock option pricing model was used to value our stock
option grants, the risk free interest rate reflected the yield on zero coupon U.S. treasuries at the date of grant, based on the median time the options granted are expected to be outstanding. During the period that the binomial-lattice model was
used to value our stock option grants, the risk-free interest rate was determined using the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option.

Expected dividend yield is based on historical dividend payments and expected future dividend payments.

We use historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar
historical exercise behavior are considered separately for valuation purposes. The expected life for each award granted is derived from the output of the valuation model and represents the median time that options granted are expected to be
outstanding.



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##### Table of Contents

Stock Options

Our employee stock option plans are part of a broad-based, long term retention program to promote success, and to enhance the value of the Company by linking personal interests of the participants to those of our
stockholders, and by providing participants with an incentive for outstanding performance.

We currently have four long-term incentive
plans including the 2000 Long-Term Incentive Plan (the 2000 Stock Plan), the 2001 Long-Term Incentive Plan (the 2001 Stock Plan), the 2005 Long-Term Incentive Plan (the 2005 Stock Plan), and the 2006 Restricted
Stock Incentive Plan (the 2006 Stock Plan). The 2006 Stock Plan was approved at the 2006 Annual Meeting of Stockholders. Under the 2006 Stock Plan restricted stock awards may be granted to employees, including employees who are members
of the Board of Directors, but excluding any director who is not an employee. Under the 2000 and 2005 Stock Plans, stock options may be granted to employees, including employees who are members of the Board of Directors, but excluding any director
who is not an employee. Under the 2001 Stock Plan, stock options may be granted to employees, other than employees who are officers (as that term is defined in Rule 16a-1(f) under the Exchange Act) or directors. Subject to the terms and provisions
of the plans, options may be granted to eligible employees selected by the Compensation Committee of the Board of Directors, which administers the plans. The Compensation Committee has the discretion to determine the number of shares subject to
options granted and the terms and conditions of the option grants. The exercise price of an option granted under the plans is determined by the Compensation Committee, but may not be less than 100% of the fair market value of our underlying common
stock on the date of grant.

The total number of shares of our common stock authorized for issuance under the 2000, 2001, 2005, and 2006
Stock Plans is 5,450, 1,000, 4,000, and 100, respectively. Shares available for an award under the 2000, 2001, 2005, and 2006 Stock Plans may be either authorized but unissued or reacquired shares. If any award cancels, terminates, expires or lapses
for any reason, any shares subject to such award shall again be available under the appropriate Stock Plan, subject to such requirements as may be promulgated by the Compensation Committee.

Restricted stock awards granted under the 2006 Stock Plan shall be subject to a minimum restriction period of two years of continuous service before a
restricted stock award shall fully vest. The restricted period shall be determined at the discretion of the Compensation Committee. At the end of the restriction period the restrictions imposed shall lapse with respect to the number of shares of
restricted stock as determined by the Compensation Committee and an unlegended certificate for the number of shares shall be delivered to the holder.

Options granted under the 2000, the 2001, and 2005 Stock Plans are exercisable for up to ten years from the date of grant. Stock options vest under the plans subject to the restrictions and conditions that the
Compensation Committee approves. Typically the vesting schedule is 25% per year based on the date of grant for the 2000 Stock Plan and the 2001 Stock Plan, and 5 year cliff vesting for the 2005 Stock Plan.

We currently have two Outside Directors plansthe 2000 Outside Directors Stock Option Plan (the 2000 Directors Plan)
and the 2005 Outside Directors Stock Plan (the 2005 Directors Plan). The 2005 Directors Plan was approved at our 2005 Annual Meeting of Stockholders. A maximum of 300 and 350 shares of our common stock may be issued
pursuant to the exercise of stock options granted under the 2000 and 2005 Directors Plans, respectively. If any award cancels, terminates, expires or lapses for any reason, any shares subject to such award shall again be available under the
appropriate Directors Plan, subject to such requirements as may be promulgated by the Compensation Committee. These options are exercisable up to ten years from date of grant and vest on the date of grant.

The granting of options is automatic under the 2000 and 2005 Directors Plans. Upon the first meeting of the Board of Directors following the Annual
Meeting of Stockholders in 2001 through 2005 under the 2000 Directors Plan and 2006 through 2010 under the 2005 Directors Plan, each person then serving as a member of the Board of Directors who is not one of our full-time employees
shall automatically be granted an option to purchase 10 shares of our common stock (subject to appropriate adjustment for stock splits and other changes affecting the common stock). If there is not a sufficient number of remaining available shares
under the 2000 or 2005 Directors Plans to grant each outside director an option to purchase the number of shares specified, each outside director shall receive an option to purchase an equal number of the remaining available shares, determined
by dividing the remaining available shares by the number of outside directors. The exercise price at which shares may be purchased under each option shall be 100% of the fair market value of our common stock on the date the option is granted.

At March 31, 2006, 1,372 shares of common stock were reserved for future stock option grants under the above plans.



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##### Table of Contents

During the three and six months ended March 31, 2006, we granted 270 stock options. During the three
and six months ended March 31, 2005, we granted 100 stock options. Stock options issued under the stock option plans during the three month and six month periods ended March 31, 2006 and 2005 were based on the following weighted average
assumptions:



|                                               |  |                             |       |   |                           |   |       |      |  |   |       |   |  |   |       |  
|---------------------------------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                               |  | Stock Options               |      
|                                               |  | Three MonthsEnded March 31, |       |   | Six Months EndedMarch 31, |  
|                                               |  | 2006                        |       |   | 2005                      |   |       | 2006 |  |   | 2005  |  
|Expected life (years)                          |  |                             | 7.67  |   |                           |   | 4.00  |      |  |   | 7.67  |   |  |   | 4.00  |  
|Weighted-average volatility                    |  |                             | 27.58 | % |                           |   | 28.62 | %    |  |   | 27.58 | % |  |   | 28.62 | %
|Risk free interest rate                        |  |                             | 4.60  | % |                           |   | 3.54  | %    |  |   | 4.60  | % |  |   | 3.54  | %
|Expected dividend yield                        |  |                             | 0.00  | % |                           |   | 0.00  | %    |  |   | 0.00  | % |  |   | 0.00  | %
|Weighted average fair value of options granted |  | $                           | 16.37 |   |                           | $ | 11.35 |      |  | $ | 16.37 |   |  | $ | 11.35 |  

Shares issued under the ESPP during the three month and six month periods ended March 31,
2006 and 2005 were based on the following weighted average assumptions:



|                                               |  |                             |       |   |      |   |       |  
|---------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | -
|                                               |  | Employee StockPurchase Plan |      
|                                               |  | Six Months EndedMarch 31,   |      
|                                               |  | 2006                        |       |   | 2005 |  
|Expected life (years)                          |  |                             | 0.5   |   |      |   | 0.5   |  
|Weighted-average volatility                    |  |                             | 24.84 | % |      |   | 19.57 | %
|Risk free interest rate                        |  |                             | 3.19  | % |      |   | 2.52  | %
|Expected dividend yield                        |  |                             | 0.00  | % |      |   | 0.00  | %
|Weighted average fair value of options granted |  | $                           | 8.46  |   |      | $ | 9.58  |  

The following is a summary of the stock option activity for the six month period ended
March 31, 2006:



|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       
|----------------------------------------- |  | ---------------- | - |  | ----------------------------- | ------ | - | ------------------------ | ---- | ------------------------ | - | ------
|                                          |  | Number ofOptions |   |  | WeightedAverage ExercisePrice |        |   | RemainingContractualTerm |      | AggregateIntrinsic Value
|Options outstanding at September 30, 2005 |  | 6,976            |   |  | $                             | 26.50  |   |                          |      |                          |   |       
|Granted                                   |  |                 |   |  |                               |       |   |                          |      |                          |   |       
|Exercised                                 |  | (59              | ) |  |                               | (17.59 | ) |                          |      |                          |   |       
|Canceled                                  |  | (42              | ) |  |                               | (34.50 | ) |                          |      |                          |   |       
|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       
|Options outstanding at December 31, 2005  |  | 6,875            |   |  | $                             | 26.52  |   |                          | 7.04 |                          | $ | 91,345
|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       
|Granted                                   |  | 270              |   |  |                               | 39.42  |   |                          |      |                          |   |       
|Exercised                                 |  | (69              | ) |  |                               | (14.85 | ) |                          |      |                          |   |       
|Canceled                                  |  | (2               | ) |  |                               | (11.29 | ) |                          |      |                          |   |       
|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       
|Options outstanding at March 31, 2006     |  | 7,074            |   |  | $                             | 27.13  |   |                          | 6.95 |                          | $ | 99,784
|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       
|Options exercisable at March 31, 2006     |  | 3,351            |   |  | $                             | 16.60  |   |                          | 4.66 |                          | $ | 82,594
|                                          |  |                  |   |  |                               |        |   |                          |      |                          |   |       

The aggregate intrinsic value is calculated as the difference between the exercise price of the
underlying awards and the quoted price of our common stock for those awards that have an exercise price currently below the quoted price. During the three month and six month periods ended March 31, 2006, the aggregate intrinsic value
(determined as of the date of exercise) of options exercised under the stock option plans was $1,705 and $3,029, respectively, as compared to $2,779 and $14,004 for the three month and six month periods ended March 31, 2005, respectively.

Cash received from option exercises under all stock-based payment arrangements for the three month and six month periods ended
March 31, 2006 was $952 and $1,984, respectively, as compared to $2,386 and $10,254 for the three month and six month periods ended March 31, 2005, respectively. The actual tax benefit realized from the tax deductions for options exercised
totaled $468 and $887, respectively, for the three month and six month periods ended March 31, 2006, as compared to $685 and $4,736 for the three month and six month periods ended March 31, 2005, respectively. For purposes of satisfying
stock option exercises, we have a policy of issuing new shares to fulfill exercises.



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##### Table of Contents

Employee Stock Purchase Plan

The ESPP was approved by stockholders at the 2003 Annual Meeting of Stockholders. Under the terms of the ESPP, 500 shares of common stock were reserved
for issuance to our employees, nearly all of whom are eligible to participate. As of March 31, 2006, 350 shares remain available for issuance to our employees. Under the terms of the ESPP, employees can choose each year to have one to ten
percent of their base pay withheld, not to exceed amounts allowed by the Internal Revenue Code, to purchase our common stock. The purchase price of the stock is 85 percent of the lower of its price at the beginning or end of each six month offering
period. During the three month and six month periods ended March 31, 2006, 36 shares of common stock were purchased at an average price of $31.91 per share, as compared to 30 shares purchased at an average price of $25.32 during the three month
and six month periods ended March 31, 2005.

9. DERIVATIVES

During the three month period ended December 31, 2005, we settled all of the five outstanding cross currency debt swap contracts used to hedge our foreign currency exposure because these instruments were getting
close to maturity. The settlement of the cross currency debt swaps generated interest income of approximately $411 and a cumulative loss of $8,948 ($5,548 net of income tax) in the currency translation adjustment account in equity during the three
month period ended December 31, 2005. At March 31, 2006, a total of $10,527 realized loss ($6,511 net of income tax), including the realized loss of $1,579 ($963 net of income tax) as a result of cash-settling a cross currency swap with
Wachovia in 2002, was included in the currency translation adjustment account in equity. This realized loss will remain in the currency translation adjustment account in equity until we dispose of the net investments.

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Our domestic subsidiaries are guarantors of our 8 1/8% Senior Subordinated Notes due 2012, on an unsecured senior subordinated basis. Except to the extent necessary to avoid a fraudulent conveyance, the note guarantees are full and
unconditional. The notes and the subsidiary guarantees are unsecured and subordinated to our and to all of our guarantor subsidiaries existing and future unsubordinated debt, including debt under the Credit Facility entered into on
June 6, 2002.

Below are the unaudited condensed consolidating balance sheets as of March 31, 2006 and September 30, 2005,
statements of operations for the three month and six month periods ended March 31, 2006 and 2005, and statements of cash flows for the six months ended March 31, 2006 and 2005, of Sybron Dental Specialties, Inc. and its subsidiaries,
reflecting the subsidiary guarantors of the Senior Subordinated Notes.

Certain general corporate expenses have been allocated to the
subsidiaries. As a matter of course, we retain 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 with other subsidiaries or with us.



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Condensed Consolidating Balance Sheets



|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|---------------------------------------------- |  | ------------------------ | ------- | - | --------------------- | - | ------- | ------------------------ |  | ------------ | ------- |  | ------------ | ---------- | - |  | - | -------
|                                               |  | As of March 31, 2006    
|                                               |  | Sybron DentalSpecialties |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  | Eliminations |         |  | Consolidated
|ASSETS                                         |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Current assets:                                |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Cash and cash equivalents                      |  | $                        | (1,028  | ) |                       | $ | (4,724  | )                        |  | $            | 81,548  |  | $            |           |   |  | $ | 75,796 
|Accounts receivable, net                       |  |                          | (8      | ) |                       |   | 62,568  |                          |  |              | 54,260  |  |              |           |   |  |   | 116,820
|Inventories                                    |  |                          |        |   |                       |   | 62,879  |                          |  |              | 33,613  |  |              | (131       | ) |  |   | 96,361 
|Other current assets                           |  |                          | 13,268  |   |                       |   | 11,032  |                          |  |              | 2,414   |  |              |           |   |  |   | 26,714 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total current assets                           |  |                          | 12,232  |   |                       |   | 131,755 |                          |  |              | 171,835 |  |              | (131       | ) |  |   | 315,691
|Property, plant and equipment, net             |  |                          | 9,892   |   |                       |   | 32,250  |                          |  |              | 44,403  |  |              |           |   |  |   | 86,545 
|Goodwill                                       |  |                          |        |   |                       |   | 193,046 |                          |  |              | 97,023  |  |              |           |   |  |   | 290,069
|Intangible assets, net                         |  |                          |        |   |                       |   | 19,174  |                          |  |              | 44,520  |  |              |           |   |  |   | 63,694 
|Investment in subsidiaries                     |  |                          | 948,343 |   |                       |   |        |                          |  |              |        |  |              | (948,343   | ) |  |   |       
|Intercompany balances                          |  |                          |        |   |                       |   | 185,872 |                          |  |              | 123,025 |  |              | (308,897   | ) |  |   |       
|Other assets                                   |  |                          | 23,344  |   |                       |   | 3,440   |                          |  |              | 3,109   |  |              |           |   |  |   | 29,893 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total assets                                   |  | $                        | 993,811 |   |                       | $ | 565,537 |                          |  | $            | 483,915 |  | $            | (1,257,371 | ) |  | $ | 785,892
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Current liabilities:                           |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Accounts payable                               |  | $                        | 622     |   |                       | $ | 12,043  |                          |  | $            | 6,832   |  | $            |           |   |  | $ | 19,497 
|Current portion of long-term debt              |  |                          |        |   |                       |   | 143     |                          |  |              |        |  |              |           |   |  |   | 143    
|Income taxes payable                           |  |                          | (4,356  | ) |                       |   | 7,863   |                          |  |              | 11,622  |  |              | 92         |   |  |   | 15,221 
|Accrued expenses and other current liabilities |  |                          | 15,755  |   |                       |   | 21,460  |                          |  |              | 21,468  |  |              |           |   |  |   | 58,683 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total current liabilities                      |  |                          | 12,021  |   |                       |   | 41,509  |                          |  |              | 39,922  |  |              | 92         |   |  |   | 93,544 
|Long-term debt                                 |  |                          | 45,500  |   |                       |   | 7,452   |                          |  |              |        |  |              |           |   |  |   | 52,952 
|Senior subordinated notes                      |  |                          | 150,000 |   |                       |   |        |                          |  |              |        |  |              |           |   |  |   | 150,000
|Deferred income taxes                          |  |                          | 16,439  |   |                       |   |        |                          |  |              | 5,984   |  |              |           |   |  |   | 22,423 
|Other liabilities                              |  |                          | 14,566  |   |                       |   | 382     |                          |  |              | 5,860   |  |              |           |   |  |   | 20,808 
|Intercompany balances                          |  |                          | 309,120 |   |                       |   |        |                          |  |              |        |  |              | (309,120   | ) |  |   |       
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total liabilities                              |  |                          | 547,646 |   |                       |   | 49,343  |                          |  |              | 51,766  |  |              | (309,028   | ) |  |   | 339,727
|Stockholders equity:                          |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Preferred stock                                |  |                          |        |   |                       |   |        |                          |  |              |        |  |              |           |   |  |   |       
|Common stock                                   |  |                          | 406     |   |                       |   | 3,080   |                          |  |              | 16,678  |  |              | (19,758    | ) |  |   | 406    
|Additional paid-in capital                     |  |                          | 128,730 |   |                       |   | 307,935 |                          |  |              | 256,281 |  |              | (564,216   | ) |  |   | 128,730
|Retained earnings                              |  |                          | 298,055 |   |                       |   | 188,794 |                          |  |              | 140,954 |  |              | (329,748   | ) |  |   | 298,055
|Accumulated other comprehensive income         |  |                          | 18,974  |   |                       |   | 16,385  |                          |  |              | 18,236  |  |              | (34,621    | ) |  |   | 18,974 
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total stockholders equity                     |  |                          | 446,165 |   |                       |   | 516,194 |                          |  |              | 432,149 |  |              | (948,343   | ) |  |   | 446,165
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        
|Total liabilities and stockholders equity     |  | $                        | 993,811 |   |                       | $ | 565,537 |                          |  | $            | 483,915 |  | $            | (1,257,371 | ) |  | $ | 785,892
|                                               |  |                          |         |   |                       |   |         |                          |  |              |         |  |              |            |   |  |   |        



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Condensed Consolidating Balance Sheets



|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|---------------------------------------------- |  | ------------------------ | ------- | - | --------------------- | - | ------- | ------------------------ |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | -------
|                                               |  | As of September 30, 2005
|                                               |  | SybronDentalSpecialties  |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated
|ASSETS                                         |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Current assets:                                |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Cash and cash equivalents                      |  | $                        | (1,494  | ) |                       | $ | (2,154  | )                        |  | $ | 62,220       |   |  | $            |           |   |  | $ | 58,572 
|Accounts receivable, net                       |  |                          | (1      | ) |                       |   | 59,412  |                          |  |   | 53,089       |   |  |              |           |   |  |   | 112,500
|Inventories                                    |  |                          |        |   |                       |   | 60,396  |                          |  |   | 32,444       |   |  |              |           |   |  |   | 92,840 
|Other current assets                           |  |                          | 11,550  |   |                       |   | 3,164   |                          |  |   | 5,335        |   |  |              |           |   |  |   | 20,049 
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total current assets                           |  |                          | 10,055  |   |                       |   | 120,818 |                          |  |   | 153,088      |   |  |              |           |   |  |   | 283,961
|Property, plant and equipment, net             |  |                          | 8,922   |   |                       |   | 32,304  |                          |  |   | 46,536       |   |  |              |           |   |  |   | 87,762 
|Goodwill                                       |  |                          |        |   |                       |   | 197,756 |                          |  |   | 97,550       |   |  |              |           |   |  |   | 295,306
|Intangible assets, net                         |  |                          |        |   |                       |   | 15,553  |                          |  |   | 35,329       |   |  |              |           |   |  |   | 50,882 
|Investment in subsidiaries                     |  |                          | 917,199 |   |                       |   |        |                          |  |   |             |   |  |              | (917,199   | ) |  |   |       
|Intercompany balances                          |  |                          |        |   |                       |   | 213,578 |                          |  |   | 123,540      |   |  |              | (337,118   | ) |  |   |       
|Other assets                                   |  |                          | 21,857  |   |                       |   | 7,930   |                          |  |   | 2,720        |   |  |              |           |   |  |   | 32,507 
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total assets                                   |  | $                        | 958,033 |   |                       | $ | 587,939 |                          |  | $ | 458,763      |   |  | $            | (1,254,317 | ) |  | $ | 750,418
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Current liabilities:                           |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Accounts payable                               |  | $                        | 659     |   |                       | $ | 11,040  |                          |  | $ | 8,436        |   |  | $            |           |   |  | $ | 20,135 
|Current portion of long-term debt              |  |                          | 51      |   |                       |   | 682     |                          |  |   |             |   |  |              |           |   |  |   | 733    
|Income taxes payable                           |  |                          | 8,727   |   |                       |   | (4,744  | )                        |  |   | 7,839        |   |  |              |           |   |  |   | 11,822 
|Accrued expenses and other current liabilities |  |                          | 13,437  |   |                       |   | 25,445  |                          |  |   | 20,922       |   |  |              |           |   |  |   | 59,804 
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total current liabilities                      |  |                          | 22,874  |   |                       |   | 32,423  |                          |  |   | 37,197       |   |  |              |           |   |  |   | 92,494 
|Long-term debt                                 |  |                          | 7,200   |   |                       |   | 53,899  |                          |  |   |             |   |  |              |           |   |  |   | 61,099 
|Senior subordinated notes                      |  |                          | 150,000 |   |                       |   |        |                          |  |   |             |   |  |              |           |   |  |   | 150,000
|Deferred income taxes                          |  |                          | 16,601  |   |                       |   |        |                          |  |   | (196         | ) |  |              |           |   |  |   | 16,405 
|Other liabilities                              |  |                          | 22,087  |   |                       |   | 345     |                          |  |   | 5,835        |   |  |              |           |   |  |   | 28,267 
|Intercompany balances                          |  |                          | 337,118 |   |                       |   |        |                          |  |   |             |   |  |              | (337,118   | ) |  |   |       
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total liabilities                              |  |                          | 555,880 |   |                       |   | 86,667  |                          |  |   | 42,836       |   |  |              | (337,118   | ) |  |   | 348,265
|Stockholders equity:                          |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Preferred stock                                |  |                          |        |   |                       |   |        |                          |  |   |             |   |  |              |           |   |  |   |       
|Common stock                                   |  |                          | 404     |   |                       |   | 3,446   |                          |  |   | 16,312       |   |  |              | (19,758    | ) |  |   | 404    
|Additional paid-in capital                     |  |                          | 118,448 |   |                       |   | 311,378 |                          |  |   | 252,837      |   |  |              | (564,215   | ) |  |   | 118,448
|Retained earnings                              |  |                          | 264,841 |   |                       |   | 170,656 |                          |  |   | 127,855      |   |  |              | (298,511   | ) |  |   | 264,841
|Accumulated other comprehensive income         |  |                          | 18,460  |   |                       |   | 15,792  |                          |  |   | 18,923       |   |  |              | (34,715    | ) |  |   | 18,460 
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total stockholders equity                     |  |                          | 402,153 |   |                       |   | 501,272 |                          |  |   | 415,927      |   |  |              | (917,199   | ) |  |   | 402,153
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        
|Total liabilities and stockholders equity     |  | $                        | 958,033 |   |                       | $ | 587,939 |                          |  | $ | 458,763      |   |  | $            | (1,254,317 | ) |  | $ | 750,418
|                                               |  |                          |         |   |                       |   |         |                          |  |   |              |   |  |              |            |   |  |   |        



18



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##### Table of Contents

Condensed Consolidating Statements of Income



|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | ----------------------------------------- | ------- | - | --------------------- | - | ------- | ------------------------ |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             |  | For The Three Months Ended March 31, 2006 |        
|                                             |  | SybronDentalSpecialties                   |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                         |        |   |                       | $ | 98,333  |                          |  | $ | 85,822       |   |  | $            | (1,369  | ) |  | $ | 182,786 |  
|Cost of sales                                |  |                                           | 319     |   |                       |   | 30,101  |                          |  |   | 48,959       |   |  |              | (1,238  | ) |  |   | 78,141  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                           | (319    | ) |                       |   | 68,232  |                          |  |   | 36,863       |   |  |              | (131    | ) |  |   | 104,645 |  
|Selling, general and administrative expenses |  |                                           | 13,665  |   |                       |   | 34,303  |                          |  |   | 22,198       |   |  |              |        |   |  |   | 70,166  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                           | (13,984 | ) |                       |   | 33,929  |                          |  |   | 14,665       |   |  |              | (131    | ) |  |   | 34,479  |  
|Other income (expense):                      |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense, net                        |  |                                           | (3,358  | ) |                       |   | (908    | )                        |  |   | 160          |   |  |              |        |   |  |   | (4,106  | )
|Amortization of deferred financing fees      |  |                                           |        |   |                       |   | (2,346  | )                        |  |   |             |   |  |              |        |   |  |   | (2,346  | )
|Income from subsidiaries                     |  |                                           | 19,966  |   |                       |   |        |                          |  |   |             |   |  |              | (19,966 | ) |  |   |        |  
|Other, net                                   |  |                                           | 15,377  |   |                       |   | (13,231 | )                        |  |   | (1,920       | ) |  |              |        |   |  |   | 226     |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                           | 18,001  |   |                       |   | 17,444  |                          |  |   | 12,905       |   |  |              | (20,097 | ) |  |   | 28,253  |  
|Income taxes                                 |  |                                           | (473    | ) |                       |   | 5,146   |                          |  |   | 4,619        |   |  |              | 275     |   |  |   | 9,567   |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                         | 18,474  |   |                       | $ | 12,298  |                          |  | $ | 8,286        |   |  | $            | (20,372 | ) |  | $ | 18,686  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|                                             | 
|                                             |  | For The Three Months Ended March 31, 2005 |        
|                                             |  | SybronDentalSpecialties                   |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                         |        |   |                       | $ | 89,169  |                          |  | $ | 77,286       |   |  | $            | (1,399  | ) |  | $ | 165,056 |  
|Cost of sales                                |  |                                           | 301     |   |                       |   | 31,216  |                          |  |   | 41,753       |   |  |              | (1,399  | ) |  |   | 71,871  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                           | (301    | ) |                       |   | 57,953  |                          |  |   | 35,533       |   |  |              |        |   |  |   | 93,185  |  
|Selling, general and administrative expenses |  |                                           | 9,012   |   |                       |   | 31,497  |                          |  |   | 19,745       |   |  |              |        |   |  |   | 60,254  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                           | (9,313  | ) |                       |   | 26,456  |                          |  |   | 15,788       |   |  |              |        |   |  |   | 32,931  |  
|Other income (expense):                      |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense, net                        |  |                                           | (3,497  | ) |                       |   | (1,113  | )                        |  |   | 190          |   |  |              |        |   |  |   | (4,420  | )
|Amortization of deferred financing fees      |  |                                           |        |   |                       |   | (416    | )                        |  |   |             |   |  |              |        |   |  |   | (416    | )
|Income from subsidiaries                     |  |                                           | 19,438  |   |                       |   |        |                          |  |   |             |   |  |              | (19,438 | ) |  |   |        |  
|Other, net                                   |  |                                           | 12,810  |   |                       |   | (10,544 | )                        |  |   | (1,776       | ) |  |              |        |   |  |   | 490     |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                           | 19,438  |   |                       |   | 14,383  |                          |  |   | 14,202       |   |  |              | (19,438 | ) |  |   | 28,585  |  
|Income taxes                                 |  |                                           |        |   |                       |   | 6,238   |                          |  |   | 2,909        |   |  |              |        |   |  |   | 9,147   |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                         | 19,438  |   |                       | $ | 8,145   |                          |  | $ | 11,293       |   |  | $            | (19,438 | ) |  | $ | 19,438  |  
|                                             |  |                                           |         |   |                       |   |         |                          |  |   |              |   |  |              |         |   |  |   |         |  



19



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##### Table of Contents

Condensed Consolidating Statements of Income



|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------- |  | --------------------------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                             |  | For The Six Months Ended March 31, 2006 |        
|                                             |  | Sybron DentalSpecialties                |         |   | GuarantorSubsidiaries |   |         | Non GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                       |        |   |                       | $ | 183,815 |                           |  | $ | 159,804      |   |  | $            | (2,802  | ) |  | $ | 340,817 |  
|Cost of sales                                |  |                                         | 597     |   |                       |   | 57,767  |                           |  |   | 90,489       |   |  |              | (2,671  | ) |  |   | 146,182 |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                         | (597    | ) |                       |   | 126,048 |                           |  |   | 69,315       |   |  |              | (131    | ) |  |   | 194,635 |  
|Selling, general and administrative expenses |  |                                         | 21,443  |   |                       |   | 66,570  |                           |  |   | 46,237       |   |  |              |        |   |  |   | 134,250 |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                         | (22,040 | ) |                       |   | 59,478  |                           |  |   | 23,078       |   |  |              | (131    | ) |  |   | 60,385  |  
|Other income (expense):                      |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense, net                        |  |                                         | (6,649  | ) |                       |   | (1,554  | )                         |  |   | 240          |   |  |              |        |   |  |   | (7,963  | )
|Amortization of deferred financing fees      |  |                                         |        |   |                       |   | (2,759  | )                         |  |   |             |   |  |              |        |   |  |   | (2,759  | )
|Income from subsidiaries                     |  |                                         | 34,493  |   |                       |   |        |                           |  |   |             |   |  |              | (34,493 | ) |  |   |        |  
|Other, net                                   |  |                                         | 26,725  |   |                       |   | (22,604 | )                         |  |   | (3,848       | ) |  |              |        |   |  |   | 273     |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                         | 32,529  |   |                       |   | 32,561  |                           |  |   | 19,470       |   |  |              | (34,624 | ) |  |   | 49,936  |  
|Income taxes                                 |  |                                         | (473    | ) |                       |   | 11,981  |                           |  |   | 5,122        |   |  |              | 92      |   |  |   | 16,722  |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                       | 33,002  |   |                       | $ | 20,580  |                           |  | $ | 14,348       |   |  | $            | (34,716 | ) |  | $ | 33,214  |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|                                             | 
|                                             |  | For The Six Months Ended March 31, 2005 |        
|                                             |  | Sybron DentalSpecialties                |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries  |  |   | Eliminations |   |  | Consolidated |        
|Net sales                                    |  | $                                       |        |   |                       | $ | 167,459 |                           |  | $ | 149,712      |   |  | $            | (3,075  | ) |  | $ | 314,096 |  
|Cost of sales                                |  |                                         | 594     |   |                       |   | 56,592  |                           |  |   | 81,433       |   |  |              | (3,075  | ) |  |   | 135,544 |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Gross profit                                 |  |                                         | (594    | ) |                       |   | 110,867 |                           |  |   | 68,279       |   |  |              |        |   |  |   | 178,552 |  
|Selling, general and administrative expenses |  |                                         | 15,745  |   |                       |   | 61,528  |                           |  |   | 40,966       |   |  |              |        |   |  |   | 118,239 |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income (loss)                      |  |                                         | (16,339 | ) |                       |   | 49,339  |                           |  |   | 27,313       |   |  |              |        |   |  |   | 60,313  |  
|Other income (expense):                      |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Interest expense, net                        |  |                                         | (7,095  | ) |                       |   | (2,462  | )                         |  |   | 320          |   |  |              |        |   |  |   | (9,237  | )
|Amortization of deferred financing fees      |  |                                         |        |   |                       |   | (831    | )                         |  |   |             |   |  |              |        |   |  |   | (831    | )
|Income from subsidiaries                     |  |                                         | 34,477  |   |                       |   |        |                           |  |   |             |   |  |              | (34,477 | ) |  |   |        |  
|Other, net                                   |  |                                         | 23,434  |   |                       |   | (19,466 | )                         |  |   | (3,512       | ) |  |              |        |   |  |   | 456     |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Income before income taxes                   |  |                                         | 34,477  |   |                       |   | 26,580  |                           |  |   | 24,121       |   |  |              | (34,477 | ) |  |   | 50,701  |  
|Income taxes                                 |  |                                         |        |   |                       |   | 11,019  |                           |  |   | 5,205        |   |  |              |        |   |  |   | 16,224  |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                   |  | $                                       | 34,477  |   |                       | $ | 15,561  |                           |  | $ | 18,916       |   |  | $            | (34,477 | ) |  | $ | 34,477  |  
|                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |  |              |         |   |  |   |         |  



20



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##### Table of Contents

Condensed Consolidating Statements of Cash Flows



|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|------------------------------------------------------------ |  | --------------------------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - | ------------ | - | - |  | - | -------- | -
|                                                             |  | For The Six Months Ended March 31, 2006 |        
|                                                             |  | Sybron DentalSpecialties                |         |   | GuarantorSubsidiaries |   |         | Non GuarantorSubsidiaries |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by/(used in) operating activities        |  | $                                       | (778    | ) |                       | $ | 21,659  |                           |  | $ | 28,712       |   |              | $ |  |  | $ | 49,593   |  
|Cash flows from investing activities:                        |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Capital expenditures                                         |  |                                         | (2,714  | ) |                       |   | (3,968  | )                         |  |   | (1,647       | ) |              |   |  |  |   | (8,329   | )
|Proceeds from sales of property, plant and equipment         |  |                                         |        |   |                       |   |        |                           |  |   | 7            |   |              |   |  |  |   | 7        |  
|Acquisition escrow deposit                                   |  |                                         |        |   |                       |   |        |                           |  |   | (7,907       | ) |              |   |  |  |   | (7,907   | )
|Payments for intangibles                                     |  |                                         |        |   |                       |   | (358    | )                         |  |   | (28          | ) |              |   |  |  |   | (386     | )
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                         | (2,714  | ) |                       |   | (4,326  | )                         |  |   | (9,575       | ) |              |   |  |  |   | (16,615  | )
|Cash flows from financing activities:                        |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Proceeds from credit facility                                |  |                                         | 137,100 |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 137,100  |  
|Principal payments on credit facility                        |  |                                         | (98,801 | ) |                       |   | (46,909 | )                         |  |   |             |   |              |   |  |  |   | (145,710 | )
|Settlement of derivative instruments                         |  |                                         | (8,384  | ) |                       |   |        |                           |  |   |             |   |              |   |  |  |   | (8,384   | )
|Principal payments on long-term debt                         |  |                                         | (21     | ) |                       |   | (106    | )                         |  |   |             |   |              |   |  |  |   | (127     | )
|Payment of deferred financing fees                           |  |                                         | (1,164  | ) |                       |   |        |                           |  |   |             |   |              |   |  |  |   | (1,164   | )
|Proceeds from exercise of stock options                      |  |                                         | 1,984   |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 1,984    |  
|Proceeds from employee stock purchase plan                   |  |                                         | 1,149   |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 1,149    |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net cash provided by/(used in) financing activities          |  |                                         | 31,863  |   |                       |   | (47,015 | )                         |  |   |             |   |              |   |  |  |   | (15,152  | )
|Effect of exchange rate changes on cash and cash equivalents |  |                                         | 317     |   |                       |   | (229    | )                         |  |   | (690         | ) |              |   |  |  |   | (602     | )
|Net change in intercompany balances                          |  |                                         | (28,222 | ) |                       |   | 27,341  |                           |  |   | 881          |   |              |   |  |  |   |         |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net increase/(decrease) in cash and cash equivalents         |  |                                         | 466     |   |                       |   | (2,570  | )                         |  |   | 19,328       |   |              |   |  |  |   | 17,224   |  
|Cash and cash equivalents at beginning of period             |  |                                         | (1,494  | ) |                       |   | (2,154  | )                         |  |   | 62,220       |   |              |   |  |  |   | 58,572   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                                       | (1,028  | ) |                       | $ | (4,724  | )                         |  | $ | 81,548       |   |              | $ |  |  | $ | 75,796   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Supplemental cash flow information:                          |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for interest                     |  | $                                       | 6,650   |   |                       | $ | 2,082   |                           |  | $ |             |   |              | $ |  |  | $ | 8,732    |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for income taxes                 |  | $                                       | 7,476   |   |                       | $ |        |                           |  | $ | 4,764        |   |              | $ |  |  | $ | 12,240   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|                                                             | 
|                                                             |  | For The Six Months Ended March 31, 2005 |        
|                                                             |  | Sybron DentalSpecialties                |         |   | GuarantorSubsidiaries |   |         | NonGuarantorSubsidiaries  |  |   | Eliminations |   | Consolidated |  
|Cash flows provided by/(used in) operating activities        |  | $                                       | (50,204 | ) |                       | $ | 52,065  |                           |  | $ | 34,566       |   |              | $ |  |  | $ | 36,427   |  
|Cash flows from investing activities:                        |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Capital expenditures                                         |  |                                         | (1,609  | ) |                       |   | (3,416  | )                         |  |   | (1,317       | ) |              |   |  |  |   | (6,342   | )
|Proceeds from sales of property, plant and equipment         |  |                                         |        |   |                       |   | 373     |                           |  |   | 565          |   |              |   |  |  |   | 938      |  
|Net payments for businesses acquired                         |  |                                         |        |   |                       |   |        |                           |  |   | (46,049      | ) |              |   |  |  |   | (46,049  | )
|Payments for intangibles                                     |  |                                         |        |   |                       |   | (849    | )                         |  |   |             |   |              |   |  |  |   | (849     | )
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                         | (1,609  | ) |                       |   | (3,892  | )                         |  |   | (46,801      | ) |              |   |  |  |   | (52,302  | )
|Cash flows from financing activities:                        |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Proceeds from credit facility                                |  |                                         | 86,000  |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 86,000   |  
|Principal payments on credit facility                        |  |                                         | (70,300 | ) |                       |   | (5,307  | )                         |  |   |             |   |              |   |  |  |   | (75,607  | )
|Principal payments on long-term debt                         |  |                                         | (40     | ) |                       |   | (252    | )                         |  |   |             |   |              |   |  |  |   | (292     | )
|Proceeds from exercise of stock options                      |  |                                         | 10,254  |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 10,254   |  
|Proceeds from employee stock purchase plan                   |  |                                         | 771     |   |                       |   |        |                           |  |   |             |   |              |   |  |  |   | 771      |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net cash provided by/(used in) financing activities          |  |                                         | 26,685  |   |                       |   | (5,559  | )                         |  |   |             |   |              |   |  |  |   | 21,126   |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                         | (1,507  | ) |                       |   | 3,070   |                           |  |   | 211          |   |              |   |  |  |   | 1,774    |  
|Net change in intercompany balances                          |  |                                         | 19,142  |   |                       |   | (47,276 | )                         |  |   | 28,134       |   |              |   |  |  |   |         |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Net increase/(decrease) in cash and cash equivalents         |  |                                         | (7,493  | ) |                       |   | (1,592  | )                         |  |   | 16,110       |   |              |   |  |  |   | 7,025    |  
|Cash and cash equivalents at beginning of period             |  |                                         | 7,402   |   |                       |   | (1,801  | )                         |  |   | 35,001       |   |              |   |  |  |   | 40,602   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                                       | (91     | ) |                       | $ | (3,393  | )                         |  | $ | 51,111       |   |              | $ |  |  | $ | 47,627   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Supplemental cash flow information:                          |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for interest                     |  | $                                       | 7,027   |   |                       | $ | 2,565   |                           |  | $ |             |   |              | $ |  |  | $ | 9,592    |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  
|Cash paid during the period for income taxes                 |  | $                                       | 8,274   |   |                       | $ |        |                           |  | $ | 5,293        |   |              | $ |  |  | $ | 13,567   |  
|                                                             |  |                                         |         |   |                       |   |         |                           |  |   |              |   |              |   |   |  |   |          |  



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11. SUBSEQUENT EVENTS

On April 12, 2006, we announced a definitive agreement to merge with a subsidiary of Danaher Corporation, a leading manufacturer of professional instrumentation, industrial technologies, and tools and components
headquartered in Washington, D.C. The transaction is structured as a cash tender offer for $47.00 per share of our stock, for an aggregate price of approximately $2.0 billion, including transaction costs and net of cash acquired, to be followed by a
second-step cash-out merger at the offer price. The transaction is expected to close in the quarter ended June 30, 2006, pending customary conditions, including tender of a majority of the outstanding shares into the offer, and the absence of a
material adverse change with respect to SDS. There can be no assurance that the transaction will be consummated.

On April 1, 2006,
Pinnacle Products, Inc., a subsidiary in our Professional Dental business segment, acquired the infection prevention product line of Dental Disposables International, Inc. (DDI) through an all-cash transaction with a purchase price of
$7.9 million, which is subject to a final working capital adjustment.



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|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 March 31, 2006 and 2005
refer to the second quarters of fiscal 2006 and 2005, respectively.

Our Business

We are a leading manufacturer 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 dental and medical professions. 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, endodontic and implant products, as well as small non-consumable dental products,
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 |  | Oraltronics Dental Implant Technology GmbH
|SpofaDental a.s.            |  |                                           

Our Business Environment

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
domestic market growing at the upper end of the range. We believe that the factors contributing most to the markets growth are, among other things:



| |  |  | Consumer Demand.Consumers increasingly desire to retain and improve the appearance of their natural teeth, which increases the demand for endodontic, periodontic,
orthodontic, cosmetic and other specialized procedures. In addition, the baby-boomer segment of the population is aging, and we think they are more likely to require repair and reconstructive dental procedures, such as root canals and the placement
of crowns or bridges.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Technological Advances. Technological advances in dental products are reducing both patient discomfort and treatment time, thereby attracting more patients and increasing
demand for dental products and services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increasing Number of Patients. The increasing worldwide population along with the expected growth in per capita discretionary incomes in emerging nations are creating more
dental patients while making healthcare, including dental services, a greater priority.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Second Quarter Fiscal 2006
Overview

In the second quarter of fiscal 2006, our net sales were $182.8 million, an increase of $17.7 million, or 10.7%, from net
sales of $165.1 million in the second quarter of fiscal 2005. Our increase in net sales during the second quarter of fiscal 2006 was comprised of internal net sales growth of 12.4% and a 1.6% increase from sales associated with acquisitions made in
the preceding twelve-month period, offset by a negative 3.3% impact from foreign currency exchange rates. We define internal net sales growth as total net sales excluding foreign currency fluctuations and including only the organic growth of
acquisitions made in the preceding twelve months.



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##### Table of Contents

Internal net sales growth is not a measure included in generally accepted accounting principles in the
United States of America (GAAP) and should not be considered a replacement for GAAP results. The following table reconciles reported net sales growth (the most comparable GAAP measure) to internal net sales growth (the non-GAAP measure)
for the quarter ended March 31, 2006:

Reconciliation of Internal Net Sales Growth for the Quarter Ended March 31, 2006

(in millions)



|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|--------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ----------------- | - | ---- | ----- |  | - | ----- | -
|                                                                                  |  | ProfessionalDental |      |   | SpecialtyProducts |   |      | Total | 
|Net sales growth                                                                  |  |                    | 10.8 | % |                   |   | 10.6 | %     |  |   | 10.7  | %
|Add: sales decrease due to currency                                               |  |                    | 3.1  | % |                   |   | 3.7  | %     |  |   | 3.3   | %
|Less: non-organic increase due to acquisitions made in the previous twelve months |  |                    | 0.0  | % |                   |   | 3.5  | %     |  |   | 1.6   | %
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Internal net sales growth                                                         |  |                    | 13.9 | % |                   |   | 10.8 | %     |  |   | 12.4  | %
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Less: impact of equipment sales on internal net sales growth                      |  |                    | 2.3  | % |                   |   | -1.4 | %     |  |   | 0.5   | %
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Internal net sales growth of consumable products                                  |  |                    | 11.6 | % |                   |   | 12.2 | %     |  |   | 11.9  | %
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Domestic and international sales by segment                                       |  |                    |      |   |                   |   |      |       |  |   |       |  
|Domestic                                                                          |  | $                  | 55.1 |   |                   | $ | 41.5 |       |  | $ | 96.6  |  
|International                                                                     |  |                    | 42.0 |   |                   |   | 44.2 |       |  |   | 86.2  |  
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Total sales                                                                       |  | $                  | 97.1 |   |                   | $ | 85.7 |       |  | $ | 182.8 |  
|                                                                                  |  |                    |      |   |                   |   |      |       |  |   |       |  
|Internal net sales growth                                                         |  |                    |      |   |                   |   |      |       |  |   |       |  
|Foreign                                                                           |  |                    |      |   |                   |   |      |       |  |   | 13.6  | %
|Domestic                                                                          |  |                    |      |   |                   |   |      |       |  |   | 11.3  | %
|Total                                                                             |  |                    |      |   |                   |   |      |       |  |   | 12.4  | %

Our management uses internal net sales growth to evaluate the underlying results and trends in the
business. We also use internal net sales growth as a metric for evaluating the performance of members of senior management in the operating units. The difference between reported net sales growth (the most comparable GAAP measure) and internal net
sales growth (the non-GAAP measure) consists of the impact of foreign currency and the non-organic growth related to acquisitions. Organic growth in acquisitions includes only the pro-forma growth which would have been realized if we had owned the
acquired business in the prior period.

Internal net sales growth is a useful measure of our performance because it excludes items that: i)
are not completely under management's control, such as the impact of foreign currency exchange; or ii) do not reflect our underlying growth, such as acquisitions. The limitation of this measure is that it excludes items that have an impact on our
sales. This limitation is best addressed by using internal net sales growth in combination with the GAAP numbers.

Our internal net sales
growth rate of 12.4% in the second quarter of fiscal 2006 was greater than the 5.1% internal net sales growth rate in the second quarter of fiscal 2005. In our Professional Dental segment, internal net sales growth was driven by sales of our
infection prevention line of products; Demetron LED® II curing light; MaxCemTM, a self-adhesive cement; and our line of dental burs. In
our Specialty Products segment, internal net sales growth was driven by sales of our Damon 3TMself-ligating bracket
system, our Inspire IceTMline of aesthetic brackets, our titanium brackets and buccal tubes, and our
nickel-titanium (Ni-Ti) endodontic files. A weaker euro versus the United States dollar was primarily responsible for currency exchange rates that decreased our net sales by approximately 3.3% from the second quarter of fiscal 2005.

Operating income in the second quarter of fiscal 2006 was $34.5 million, or 18.9% of net sales, compared to operating income of $32.9
million, or 20.0% of net sales, in the same period of the prior year.

Gross profit as a percent of net sales increased from 56.5% in the
second quarter of fiscal 2005 to 57.3% in the second quarter of fiscal 2006. The increase in gross profit as a percent of net sales is primarily attributable to leveraging our fixed costs on higher volumes; a lower percentage of sales coming from
some of our lower margin products; and increases in the average selling price of our products, which has resulted from our efforts to limit sales of our products on the gray market.



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Gross profit as a percent of net sales also increased due to the addition of Oraltronics Dental Implant Technology GmbH (Oraltronics), the dental
implant company that we acquired during the third quarter of fiscal 2005, which generates higher gross margins than our other lines of product. These factors were partially offset by unfavorable foreign currency exchange rates, which decreased gross
margin by 70 basis points when compared to the second quarter of fiscal 2005 and the absence of accounting errors disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, which positively impacted gross profit during
the second quarter of fiscal 2005.

Selling, general and administrative expenses as a percent of net sales increased from 36.5% in the
second quarter of fiscal 2005 to 38.4% in the second quarter of fiscal 2006. This increase was driven by our application of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS
No. 123R), which resulted in a $3.6 million increase in selling, general and administrative expenses, including a charge of $1.1 million related to the stock compensation expense for options granted to members of our Board of Directors.
The options granted to our directors vest immediately, which results in the fair value of the expense being recognized at the time of the grant. This expense will not recur in the last two quarters of fiscal 2006. Selling, general and administrative
expenses also increased due to a $1.0 million charitable contribution that we committed to pay over the next five years, as well as the addition of Oraltronics, which has higher selling, general and administrative expenses as a percent of revenue
than our other non-dental implant businesses. These factors were offset by continued progress in controlling our operating expenses, and the absence of certain corporate charges that we incurred in the second quarter of fiscal 2005 that related to
the write-down of fixed assets and the retirement of our former Chief Financial Officer.

Our net interest expense in the second quarter of
fiscal 2006 was $4.1 million compared to net interest expense of $4.4 million in the comparable prior year period. During the quarter, we entered into a new credit facility, which provides us with expanded borrowing capacity, reduced borrowing
costs, and less restrictive covenants.

We refinanced our credit facility during the second quarter of fiscal 2006. As a result of the
refinancing, $1.9 million of the existing unamortized deferred financing fees were immediately expensed. The remaining $1.7 million of unamortized deferred financing fees, plus $1.1 million financing fees incurred related to the new credit facility,
will be amortized over the term of the new credit facility. Refer to Liquidity and Capital Resources below for information regarding the new credit facility.

Taxes on income in the second quarter of fiscal 2006 were $9.6 million, or 33.9% of income before taxes, an increase of $0.5 million from the second quarter of fiscal 2005 when taxes on income were $9.1 million, or
32.0% of income before taxes.

Merger Announcement

On April 12, 2006, we announced a definitive agreement to merge with a subsidiary of Danaher Corporation (Danaher), a leading manufacturer of professional instrumentation, industrial technologies, and
tools and components headquartered in Washington, D.C. The transaction is structured as a cash tender offer for $47.00 per share of our stock, for an aggregate price of approximately $2.0 billion, including transaction costs and net of cash
acquired, to be followed by a second-step cash-out merger at the offer price. The transaction is expected to close in the quarter ended June 30, 2006, pending customary conditions, including tender of a majority of the outstanding shares into
the offer, and the absence of a material adverse change with respect to SDS. There can be no assurance that the transaction will be consummated.

Quarter Ended March 31, 2006 Compared to the Quarter Ended March 31, 2005

Net Sales



|                    |  |                |         |            |   |        
|------------------- |  | -------------- | ------- | ---------- | - | -------
|                    |  | Fiscal2006     |         | Fiscal2005
|                    |  | (in thousands)
|Professional Dental |  | $              | 97,060  |            | $ | 87,567 
|Specialty Products  |  |                | 85,726  |            |   | 77,489 
|                    |  |                |         |            |   |        
|Total Net Sales     |  | $              | 182,786 |            | $ | 165,056
|                    |  |                |         |            |   |        

Overall Company.Net sales for the quarter ended March 31, 2006 increased by $17.7
million, or 10.7%, from the corresponding fiscal 2005 quarter.

Professional Dental.For the second quarter of fiscal 2006, net
sales in the Professional Dental segment increased $9.5 million or 10.8% over the same period of the prior year. The increase in net sales was comprised of internal net sales growth



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##### Table of Contents

of 13.9%, offset by a negative impact from foreign currency exchange rates of 3.1%. The Professional Dental segments internal net sales growth rate
improved from 2.8% in the second quarter of fiscal 2005. In the second quarter of fiscal 2006, internal net sales growth of consumable products was 11.6%, versus 4.7% in the second quarter of fiscal 2005. Domestic internal net sales growth was 11.9%
in the second quarter of fiscal 2006, compared to 11.4% in the same period of the prior year. Internal net sales growth in the segments international markets in the second quarter of fiscal 2006 was 16.4% compared to a decrease of 7.0% in the
second quarter of fiscal 2005. The increase in internal net sales growth in international markets is partially attributable to our decision in the first and second quarters of fiscal 2005 to stop selling to certain distributors who were selling our
products on the gray market and our decision to raise prices in certain countries where prices were substantially below our worldwide averages.

The overall net sales growth of the Professional Dental segment is primarily attributable to an increase in the net sales of its infection prevention line of products; MaxCem, a self-adhesive cement; our line of dental burs; and AlgiNot, a
replacement for alginate impression material. Also contributing to the overall net sales growth of the Professional Dental segment was an increase in net sales of non-consumable products such as the Demetron LED II curing light and the new portable
Orascoptic LED light source which the segment launched during the fourth quarter of fiscal 2005 and the first quarter of fiscal 2006, respectively. These products have a life span of four to five years and generate less recurring sales than
consumable products.

Specialty Products.During the second quarter of fiscal 2006, net sales in the Specialty Products segment
increased $8.2 million or 10.6% over the same period of the prior year. The increase in net sales was comprised of internal net sales growth of 10.8% and sales from acquired companies of 3.5%, offset by a negative impact from foreign currency
exchange rates of 3.7%. The products that significantly contributed to the increase in net sales for the Specialty Product segment include the family of Damon products, the Inspire Ice line of brackets, titanium brackets and buccal tubes, and
nickel-titanium (Ni-Ti) endodontic files. Based on information available to us, we believe that unit growth in the orthodontic bracket market is flat to slightly down, while revenue growth is being driven by a shift to a higher mix of
premium products. During the second quarter of fiscal 2006 we believe that we continued to capture a greater share of the markets total revenue. We plan to continue to focus our selling efforts on the Damon self-ligating bracket system, our
Inspire Ice line of brackets, our titanium brackets and buccal tubes, 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



|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|------------------- |  | ---------------------------------- | ------- | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                    |  | Fiscal2006                         |         | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                    |  | (in thousands, except percentages) |        
|Professional Dental |  | $                                  | 54,075  |                     | 55.7 | % |            | $ | 49,465              |  | 56.5 | %
|Specialty Products  |  |                                    | 50,570  |                     | 59.0 | % |            |   | 43,720              |  | 56.4 | %
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|Total Gross Profit  |  | $                                  | 104,645 |                     | 57.3 | % |            | $ | 93,185              |  | 56.5 | %
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  

Overall Company.Gross profit for the quarter ended March 31, 2006 increased by $11.5
million or 12.3% from the corresponding fiscal 2005 quarter.

Professional Dental.During the second quarter of fiscal 2006, gross
profit as a percent of net sales in the Professional Dental segment was 55.7% versus 56.5% during the same period of the prior year. As noted in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, there were a number of
accounting errors related to prior periods. These errors positively impacted gross profit by approximately $1.5 million in the second quarter of fiscal 2005. The decline in gross profit as a percent of net sales in the Professional Dental segment
resulted from the absence of these accounting errors and unfavorable changes in currency exchange rates, which lowered gross profit as a percent of net sales by approximately 20 basis points. The impact of currency was partially offset by savings
realized from the consolidation of our Demetron and Orascoptic manufacturing facilities which was completed in the fourth quarter of fiscal 2005, continued improvements in our manufacturing processes and purchasing, and price increases related to
our efforts to limit gray market sales of our products.

Specialty Products. During the second quarter of fiscal 2006, gross profit
as a percent of net sales in the Specialty Products segment was 59.0% versus 56.4% in the same period of the prior year. Gross profit as a percent of net sales at the Specialty Products segment increased due to the leveraging of fixed costs on
higher volumes and a lower percentage of sales coming from some of our lower margin products. Gross profit as a percent of net sales also increased due to the addition of Oraltronics Dental Implant Technology GmbH (Oraltronics), the
dental implant company that we acquired during the third quarter of fiscal 2005, which generates higher gross margins than our other lines of product. These factors were partially offset by unfavorable changes in currency exchange rates, which
lowered gross profit as a percent of net sales by approximately 120 basis points.



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##### Table of Contents

Selling, General and Administrative Expenses



|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|-------------------------------------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                                                   |  | Fiscal2006                         |        | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                                                   |  | (in thousands, except percentages) |       
|Professional Dental                                |  | $                                  | 34,208 |                     | 35.2 | % |            | $ | 30,686              |  | 35.0 | %
|Specialty Products                                 |  |                                    | 35,958 |                     | 41.9 | % |            |   | 29,568              |  | 38.2 | %
|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Selling, General and Administrative Expenses |  | $                                  | 70,166 |                     | 38.4 | % |            | $ | 60,254              |  | 36.5 | %
|                                                   |  |                                    |        |                     |      |   |            |   |                     |  |      |  

Overall Company.Selling, general and administrative expenses for the quarter ended
March 31, 2006 increased by $9.9 million or 16.5% from the corresponding fiscal 2005 quarter. All corporate general and administrative expenses are allocated to our 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 second quarter of
fiscal 2006, selling, general and administrative expenses in the Professional Dental segment increased $3.5 million or 11.5% from the second quarter of fiscal 2005. As a percent of net sales, selling, general and administrative expenses in the
Professional Dental segment increased to 35.2% of net sales in the second quarter of 2006 from 35.0% in the same period of fiscal 2005. The increase in selling, general and administrative expenses as a percent of net sales was primarily attributable
to the recognition of stock compensation expense, which was recognized during the quarter in accordance with SFAS No. 123R, and our charitable contribution. The effect of these factors was partially offset by the absence of certain corporate
charges that we incurred in the second quarter of fiscal 2005 and our continued efforts to control operating expenses.

Specialty
Products. During the second quarter of fiscal 2006, selling, general and administrative expenses in the Specialty Products Segment increased $6.4 million or 21.6% from the second quarter of fiscal 2005. Selling, general and administrative
expenses increased as a percent of sales increased due to the acquisition of Oraltronics, which has higher selling, general and administrative expenses as a percent of revenue than our other non-dental implant businesses, our application of SFAS
No. 123R, and our charitable contribution. These charges were partially offset by the absence of certain corporate charges that we incurred in the second quarter of fiscal 2005 as well as reductions in advertising and promotion expenses. We
expect that as sales increase at our dental implant businesses we will be able to continue to leverage fixed selling, general and administrative expenses and that these expenses will decrease as a percent of sales.

Operating Income



|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|---------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                       |  | Fiscal2006                         |        | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                       |  | (in thousands, except percentages) |       
|Professional Dental    |  | $                                  | 19,867 |                     | 20.5 | % |            | $ | 18,779              |  | 21.4 | %
|Specialty Products     |  |                                    | 14,612 |                     | 17.0 | % |            |   | 14,152              |  | 18.3 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Operating Income |  | $                                  | 34,479 |                     | 18.9 | % |            | $ | 32,931              |  | 20.0 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  

As a result of the foregoing, operating income for the quarter ended March 31, 2006 increased
by $1.5 million or 4.7% from operating income in the corresponding quarter of fiscal 2005 and decreased as a percent of net sales by 110 basis points.

Operating income as a percent of net sales was negatively impacted by:



| |  |  | the application of SFAS No. 123R, which reduced operating income as a percent of net sales by 200 basis points;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | unfavorable currency exchange rates, which reduced operating income as percent of net sales by 130 basis points compared to the second quarter of fiscal 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Expense, Net

Net interest expense was $4.1 million in the second quarter of fiscal 2006, a decrease of $0.3 million from the corresponding 2005 period. The decrease in net interest expense resulted from the reduction of our
average debt balances from $237.9 million in the second quarter of fiscal 2005 to $200.0 million in the second quarter of fiscal 2006. We expect interest expense to continue to decline in fiscal 2006 due to a lower interest rate on our new credit
facility and our plan to continue to pay down debt. Debt is expected to decline throughout fiscal 2006 unless we make any significant acquisitions.



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Our average interest rate on our debt increased from 7.9% in the second quarter of fiscal 2005 to 8.7% in
the second quarter of fiscal 2006. The debt repaid throughout fiscal 2005 and the second quarter of fiscal 2006 was adjustable rate debt with a lower interest rate than the remaining debt. We expect the average interest rate on our debt to increase
slightly during the remainder of fiscal 2006 due to the continued repayment of our adjustable rate debt and the absence of our cross currency debt swaps, which have traditionally lowered our average interest rate.

Income Taxes

Taxes on income
in the second quarter of fiscal 2006 were $9.6 million, or 33.9% of income before taxes, an increase of $0.5 million from the second quarter of fiscal 2005 when taxes on income were $9.1 million, or 32.0% of income before taxes. The increase in our
effective tax rate was primarily driven by a greater percentage of our taxable income being generated in higher tax rate jurisdictions, nondeductible foreign stock-based compensation, and discrete adjustments. The effective tax rate during the
second quarter of fiscal 2006, excluding discrete adjustments, was determined to be at 33.1%. These discrete adjustments related to the reversal of a tax contingency reserve and an adjustment of deferred tax liabilities, which netted to a $0.2
million negative impact. The quarterly rate, excluding discrete adjustments, is calculated by taking income taxes reported for the second quarter of fiscal 2006 of $9.6 million, subtracting discrete items of $0.2 million and then dividing the
remainder by our second quarter of fiscal 2006 reported income before taxes of $28.3 million. We expect the annual effective tax rate, including any potential discrete adjustments, to be approximately 33% to 35%. Discrete adjustments could include
the reversal of tax contingency reserves due to the expiration of statutory limitations as well as certain foreign tax exposures. Further, we are evaluating the amount of foreign earnings to repatriate under the American Jobs Creation Act of 2004
(the Act), which allows companies to repatriate cash into the United States at a special, temporary effective tax rate of 5.25%. Our current analysis indicates that between $10.0 million and $60.0 million may be eligible for repatriation
with a potential tax effect between $2.0 million and $5.0 million. This expense is not included in our estimate of our annual effective tax rate. We expect to be in a position to finalize our assessment later this year.

Six Months Ended March 31, 2006 Compared to the Six Months Ended March 31, 2005

Net Sales



|                    |  |                |         |             |   |        
|------------------- |  | -------------- | ------- | ----------- | - | -------
|                    |  | Fiscal 2006    |         | Fiscal 2005
|                    |  | (in thousands)
|Professional Dental |  | $              | 176,244 |             | $ | 163,454
|Specialty Products  |  |                | 164,573 |             |   | 150,642
|                    |  |                |         |             |   |        
|Total Net Sales     |  | $              | 340,817 |             | $ | 314,096
|                    |  |                |         |             |   |        

Overall Company.Net sales for the six months ended March 31, 2006 increased by $26.7
million, or 8.5%, from the corresponding fiscal 2005 period.

Professional Dental.During the first six months of fiscal 2006, net
sales in the Professional Dental segment increased $12.8 million or 7.8% over the same period of the prior year. The increase in net sales was comprised of internal net sales growth of 10.6%, offset by a negative impact from foreign currency
exchange rates of 2.8%. The Professional Dental segments internal net sales growth rate improved from 3.0% in the first six months of fiscal 2005. In the first six months of fiscal 2006, internal net sales growth of consumable products was
8.8%, versus 5.4% in the first six months of fiscal 2005. Domestic internal net sales growth was 8.2% in the first six months of fiscal 2006, compared to 9.7% in the same period of the prior year. Internal net sales growth in the segments
international markets in the first six months of fiscal 2006 was 13.7% compared to a decrease of 5.0% in the first six months of fiscal 2005. The increase in internal net sales growth in international markets is primarily attributable to our
decision in the first and second quarters of fiscal 2005 to stop selling to distributors who were selling our products on the gray market and our decision to raise prices in certain countries where prices were substantially below the worldwide
averages.

The overall net sales growth of the Professional Dental segment is primarily attributable to an increase in the net sales of its
infection prevention line of products; MaxCem, a self-adhesive cement; and our line of dental burs. Also contributing to the overall net sales growth of the Professional Dental segment was an increase in net sales of non-consumable products such as
the Demetron LED II curing light and the new portable Orascoptic LED light source which the segment launched during the fourth quarter of fiscal 2005 and the first quarter of fiscal 2006, respectively. These products have a life span of four to five
years and generate less recurring sales than consumable products.



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Specialty Products During the first six months of fiscal 2006, net sales in the Specialty Products
segment increased $13.9 million or 9.2% over the same period of the prior year. The increase in net sales was comprised of internal net sales growth of 8.8%, and sales from acquired companies of 3.8%, offset by a negative impact from foreign
currency exchange rates of 3.4%. The products that significantly contributed to the increase in net sales for the Specialty Product segment include the family of Damon products, our Inspire Ice line of brackets, our titanium brackets and buccal
tubes and nickel-titanium (Ni-Ti) endodontic files. Based on information available to us, we believe that unit growth in the orthodontic bracket market is flat to slightly down, while revenue growth is being driven by a shift to a higher
mix of premium products. During the first six months of fiscal 2006 we believe that we continued to capture a greater share of the markets total revenue. We plan to continue to focus our selling efforts on the Damon self-ligating bracket
system, Inspire Ice line of brackets, titanium brackets and buccal tubes, 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.

Internal net sales growth is a non-GAAP measure and should not be considered a replacement for GAAP results.
The following table reconciles reported net sales growth (the most comparable GAAP measure) to internal net sales growth (the non-GAAP measure) for the six months ended March 31, 2006:

Reconciliation of Internal Net Sales Growth for the Six Months Ended March 31, 2006

(in millions)



|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|--------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ----------------- | - | ----- | ----- |  | - | ----- | -
|                                                                                  |  | ProfessionalDental |       |   | SpecialtyProducts |   |       | Total | 
|Net sales growth                                                                  |  |                    | 7.8   | % |                   |   | 9.2   | %     |  |   | 8.5   | %
|Add: sales decrease due to currency                                               |  |                    | 2.8   | % |                   |   | 3.4   | %     |  |   | 3.1   | %
|Less: non-organic increase due to acquisitions made in the previous twelve months |  |                    | 0.0   | % |                   |   | 3.8   | %     |  |   | 1.9   | %
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Internal net sales growth                                                         |  |                    | 10.6  | % |                   |   | 8.8   | %     |  |   | 9.7   | %
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Less: impact of equipment sales on internal net sales growth                      |  |                    | 1.8   | % |                   |   | -1.5  | %     |  |   | 0.2   | %
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Internal net sales growth of consumable products                                  |  |                    | 8.8   | % |                   |   | 10.3  | %     |  |   | 9.5   | %
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Domestic and international sales by segment                                       |  |                    |       |   |                   |   |       |       |  |   |       |  
|Domestic                                                                          |  | $                  | 101.4 |   |                   | $ | 77.6  |       |  | $ | 179.0 |  
|International                                                                     |  |                    | 74.8  |   |                   |   | 87.0  |       |  |   | 161.8 |  
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Total sales                                                                       |  | $                  | 176.2 |   |                   | $ | 164.6 |       |  | $ | 340.8 |  
|                                                                                  |  |                    |       |   |                   |   |       |       |  |   |       |  
|Internal net sales growth                                                         |  |                    |       |   |                   |   |       |       |  |   |       |  
|Foreign                                                                           |  |                    |       |   |                   |   |       |       |  |   | 10.7  | %
|Domestic                                                                          |  |                    |       |   |                   |   |       |       |  |   | 8.8   | %
|Total                                                                             |  |                    |       |   |                   |   |       |       |  |   | 9.7   | %

Our management uses internal net sales growth to evaluate the underlying results and trends in the
business. We also use internal net sales growth as a metric for evaluating the performance of members of senior management in the operating units. The difference between reported net sales growth (the most comparable GAAP measure) and internal net
sales growth (the non-GAAP measure) consists of the impact of foreign currency and the non-organic growth related to acquisitions. Organic growth in acquisitions includes only the pro-forma growth which would have been realized if we had owned the
acquired business in the prior period.

Internal net sales growth is a useful measure of our performance because it excludes items that: i)
are not completely under management's control, such as the impact of foreign currency exchange; or ii) do not reflect our underlying growth, such as acquisitions. The limitation of this measure is that it excludes items that have an impact on our
sales. This limitation is best addressed by using internal net sales growth in combination with the GAAP numbers.



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Gross Profit



|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|------------------- |  | ---------------------------------- | ------- | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                    |  | Fiscal2006                         |         | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                    |  | (in thousands, except percentages) |        
|Professional Dental |  | $                                  | 97,238  |                     | 55.2 | % |            | $ | 91,023              |  | 55.7 | %
|Specialty Products  |  |                                    | 97,397  |                     | 59.2 | % |            |   | 87,529              |  | 58.1 | %
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|Total Gross Profit  |  | $                                  | 194,635 |                     | 57.1 | % |            | $ | 178,552             |  | 56.8 | %
|                    |  |                                    |         |                     |      |   |            |   |                     |  |      |  

Overall Company.Gross profit for the first six months ended March 31, 2006 increased
by $16.1 million or 9.0% from the corresponding fiscal 2005 quarter.

Professional Dental.During the first six months of fiscal
2006, gross profit as a percent of net sales in the Professional Dental segment was 55.2% versus 55.7% during the same period of the prior year. As noted in our Quarterly Report for the third quarter of fiscal 2005, there were a number of accounting
errors related to prior periods. These errors positively impacted gross profit by approximately $1.5 million in the second quarter of fiscal 2005. The decline in gross profit as a percent of net sales in the Professional Dental segment resulted from
the absence of these accounting errors and unfavorable changes in currency exchange rates, which lowered gross profit as a percent of net sales by approximately 30 basis points. The impact of currency was partially offset by savings realized from
the consolidation of our Demetron and Orascoptic manufacturing facilities which was completed in the fourth quarter of fiscal 2005, continued improvements in our manufacturing processes and purchasing, and price increases related to our efforts to
limit gray market sales of our products.

Specialty Products. During the first six months of fiscal 2006, gross profit as a percent
of net sales in the Specialty Products segment was 59.2% versus 58.1% in the same period of the prior year. Gross profit as a percent of net sales at the Specialty Products segment increased due the leveraging of fixed costs on higher volumes and a
lower percentage of sales coming from some of our lower margin products. Gross profit as a percent of net sales also increased due to the addition of Oraltronics Dental Implant Technology GmbH (Oraltronics), the dental implant company
that we acquired during the third quarter of fiscal 2005, which generates higher gross margins than our other lines of product. These factors were partially offset by unfavorable changes in currency exchange rates, which lowered gross profit as a
percent of net sales by approximately 110 basis points.

Selling, General and Administrative Expenses



|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|-------------------------------------------------- |  | ---------------------------------- | ------- | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                                                   |  | Fiscal2006                         |         | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                                                   |  | (in thousands, except percentages) |        
|Professional Dental                                |  | $                                  | 65,574  |                     | 37.2 | % |            | $ | 60,672              |  | 37.1 | %
|Specialty Products                                 |  |                                    | 68,676  |                     | 41.7 | % |            |   | 57,567              |  | 38.2 | %
|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  
|Total Selling, General and Administrative Expenses |  | $                                  | 134,250 |                     | 39.4 | % |            | $ | 118,239             |  | 37.6 | %
|                                                   |  |                                    |         |                     |      |   |            |   |                     |  |      |  

Overall Company.Selling, general and administrative expenses for the first six months of
fiscal 2006 increased by $16.0 million or 13.5% from the same period of the prior year. All corporate general and administrative expenses are allocated to our 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 first six months of fiscal
2006, selling, general and administrative expenses in the Professional Dental segment increased $4.9 million or 8.1% from the same period of the prior year. As a percent of net sales, selling, general and administrative expenses in the Professional
Dental segment increased to 37.2% of net sales from 37.1% in the same period of fiscal 2005. The increase in selling, general and administrative expenses as a percent of net sales was primarily attributable to the recognition of stock compensation
expense, which was recognized in accordance with SFAS No. 123R; a $1.8 million non-cash amortization charge that resulted from the correction of the purchase price allocation for two acquisitions made in prior years; and our charitable
contribution made during the second quarter. These factors were partially offset by a decrease in promotional expenses and other cost control initiatives as well as the absence of certain corporate charges that we incurred in the second quarter of
fiscal 2005, which related to the write-down of fixed assets and the retirement of our former Chief Financial Officer. The $1.8 million charge is the aggregate amortization that should have been recorded since the date of the acquisitions. The $1.8
million charge recorded during the first six months of fiscal



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2006 includes approximately $1.6 million related to prior periods and approximately $0.2 million related to the current fiscal year.

Specialty Products. During the first six months of fiscal 2006, selling, general and administrative expenses in the Specialty Products Segment
increased $11.1 million or 19.3% from the same period of the prior year. As a percent of net sales, selling, general and administrative expenses in the Specialty Products segment increased to 41.7% of net sales from 38.2% in the same period of
fiscal 2005. The increase in selling, general and administrative expenses as a percent of net sales was due to the acquisition of Oraltronics, which has higher selling, general and administrative expenses as a percent of revenue than our other
non-dental implant businesses. We expect that as sales increase at our dental implant businesses we will be able to continue to leverage fixed selling, general and administrative expenses and that these expenses will decrease as a percent of sales.
Selling, general and administrative expenses also increased as percentage of sales due to our adoption of SFAS No. 123R during the first quarter of fiscal 2006, our charitable contribution, and $0.5 million of additional non-cash amortization
related to finalizing the purchase price accounting for Innova LifeSciences, which was acquired in October 2005. As a result of finalizing the purchase price accounting for Innova LifeSciences, we expect quarterly intangible amortization expense to
be approximately $0.1 million higher than historical amounts. These factors were partially offset by reductions in advertising and promotion expense, decreased incentive compensation expenses, and the absence of certain corporate charges that we
incurred in the second quarter of fiscal 2005, which related to the write-down of fixed assets and the retirement of our former Chief Financial Officer.

Operating Income



|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|---------------------- |  | ---------------------------------- | ------ | ------------------- | ---- | - | ---------- | - | ------------------- |  | ---- | -
|                       |  | Fiscal2006                         |        | Percent ofNet Sales |      |   | Fiscal2005 |   | Percent ofNet Sales | 
|                       |  | (in thousands, except percentages) |       
|Professional Dental    |  | $                                  | 31,664 |                     | 18.0 | % |            | $ | 30,351              |  | 18.6 | %
|Specialty Products     |  |                                    | 28,721 |                     | 17.5 | % |            |   | 29,962              |  | 19.9 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  
|Total Operating Income |  | $                                  | 60,385 |                     | 17.7 | % |            | $ | 60,313              |  | 19.2 | %
|                       |  |                                    |        |                     |      |   |            |   |                     |  |      |  

As a result of the foregoing, operating income during the first six months of fiscal 2006
increased by $0.1 million or 0.1% from operating income in the same period of the prior year and decreased as a percent of net sales by 150 basis points.

Operating income as a percent of net sales was negatively impacted by:



| |  |  | the application of SFAS No. 123R, which reduced operating income as a percent of net sales by 180 basis points;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | the cumulative amortization charge during the six months ended March 31, 2005, which reduced operating income as a percent of net sales by 80 basis points; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unfavorable currency exchange rates, which reduced operating income as percent of net sales by 120 basis points compared to the first six months of fiscal 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Expense, Net

Net interest expense was $8.0 million during the first six months of fiscal 2006, a decrease of $1.3 million from the corresponding 2005 period. The decrease in net interest expense resulted from the reduction of our
average debt balances from $243.5 million during the first six months of fiscal 2005 to $204.3 million during the first six months of fiscal 2006 and the settlement of cross currency debt swaps during the first quarter of fiscal 2006. The settlement
of the cross currency debt swaps generated interest income of approximately $0.4 million. We expect interest expense to continue to decline in fiscal 2006 due to a lower interest rate on our new credit facility and our plan to continue to pay down
debt. Debt is expected to decline throughout fiscal 2006 unless we make any significant acquisitions.

Our average interest rate on our
debt increased from 7.8% during the first six months of fiscal 2005 to 8.5% in the first six months of fiscal 2006. The debt repaid throughout fiscal 2005 and the first six months of fiscal 2006 was adjustable rate debt with a lower interest rate
than the remaining debt. We expect the average interest rate on our debt to increase slightly during the remainder of fiscal 2006 due to the continued repayment of our adjustable rate debt and the absence of our cross currency debt swaps, which have
traditionally lowered our average interest rate.

Income Taxes

Taxes on income during the first six months of fiscal 2006 were $16.7 million, or 33.5% of income before taxes, an increase of $0.5 million from the same
period in fiscal 2005 when taxes on income were $16.2 million, or 32.0% of income before taxes. The increase in our effective tax rate was primarily driven by a greater percentage of our taxable income being



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generated in higher tax rate jurisdictions, nondeductible foreign stock-based compensation, and discrete adjustments. The effective tax rate during the first
six months of fiscal 2006, excluding discrete adjustments, was determined to be at 33.1%. These discrete adjustments related to the reversal of a tax contingency reserve and an adjustment of deferred tax liabilities, which netted to a $0.2 million
negative impact. The first six months of fiscal 2006 rate, excluding discrete adjustments, is calculated by taking income taxes reported for the first six months of fiscal 2006 of $16.7 million, subtracting discrete items of $0.2 million and then
dividing the remainder by our first six months of fiscal 2006 reported income before taxes of $49.9 million. We expect the annual effective tax rate, including any potential discrete adjustments, to be approximately 33% to 35%. Discrete adjustments
could include the reversal of tax contingency reserves due to the expiration of statutory limitations as well as certain foreign tax exposures. Further, we are evaluating the amount of foreign earnings to repatriate under the American Jobs Creation
Act of 2004 (the Act), which allows companies to repatriate cash into the United States at a special, temporary effective tax rate of 5.25%. Our current analysis indicates that between $10.0 million and $60.0 million may be eligible for
repatriation with a potential tax effect between $2.0 million and $5.0 million. This expense is not included in our estimate of our annual effective tax rate. We expect to be in a position to finalize our assessment later this year.

Critical Accounting Estimates Update

Refer to our
Annual Report on Form 10-K for the year ended September 30, 2005 for a discussion of critical accounting estimates. During the six months ended March 31, 2006, there was one material change to our critical accounting estimates, as described below.

Stock-Based Compensation. We grant options to purchase common stock to our employees and directors under our stock option plans.
Eligible employees can also purchase shares of our common stock at 85% of the lower of the fair market value on the first or last day of each six-month offering period under our Employee Stock Purchase Plan (ESPP). The benefits provided
under these plans are stock-based payments subject to the provisions of SFAS No. 123R. Effective October 1, 2005, we use the fair value method to apply the provisions of SFAS No. 123R with a modified prospective method of adoption. The valuation
provisions of SFAS No. 123R apply to new awards and to awards that are outstanding on the effective date and subsequently modified or canceled. Under the modified prospective application, prior periods are not revised for comparative purposes. Total
stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects for the three month and six month periods ended March 31, 2006, was $2.5 million and $4.2 million, respectively. As of
March 31, 2006, there was $48.3 million of total unrecognized compensation costs related to unvested stock-based compensation arrangements granted under the stock option plans and ESPP. That cost is expected to be recognized net of related tax
effects over a weighted average period of 4.1 years less any stock options forfeited prior to vesting.

Prior to April 1, 2005, we 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 our employee stock options or purchase rights granted pursuant to the Employee Stock Purchase Plan. During fiscal
2005 we conducted an evaluation of the benefits of using a binomial-lattice model rather than the Black-Scholes model. A binomial-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, we concluded that a binomial-lattice model provides a more accurate
estimated valuation for stock options and have adopted a binomial-lattice model to estimate the fair value of stock options granted subsequent to March 31, 2005.

If factors change and we employ different assumptions in the application of SFAS No. 123R in future periods, the compensation expense that we record under SFAS No. 123R may differ significantly from what we have
recorded in the current period. Therefore, we believe it is important for investors to be aware of the high degree of subjectivity involved when using option pricing models to estimate stock-based compensation under SFAS No. 123R. Option pricing
models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions, are fully transferable and do not cause dilution. Because our stock-based payments have characteristics significantly different
from those of freely traded options, and because changes in the subjective input assumptions can materially affect our estimates of the fair values, in our opinion, existing valuation models, including Black-Scholes and binomial-lattice models, may
not provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual
values realized upon the exercise, expiration, early termination or forfeiture of those stock-based payments in the future. Certain stock-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic
value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that are significantly in excess of the fair values originally
estimated on the grant date and



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reported in our financial statements. Currently there is not a market-based mechanism or other practical application to verify the reliability and accuracy
of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. Although the fair value of employee stock-based awards is determined in accordance with SFAS No. 123R and the
Securities and Exchange Commission Staff Accounting Bulletin No. 107 (SAB No. 107) using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/ willing seller market
transaction.

Liquidity and Capital Resources

Our principal sources of liquidity are cash generated by operating activities, existing cash and, to a lesser extent, borrowings under our credit facility.

Working capital increased from $191.5 million at September 30, 2005 to $222.1 million at March 31, 2006. The current ratio increased from 3.1 at September 30, 2005 to 3.4 at March 31, 2006. Cash
increased from $58.6 million at September 30, 2005 to $75.8 million at March 31, 2006, an increase of $17.2 million. The increase in cash was primarily at our offshore entities. For the six months ended March 31, 2006, net cash
provided by operating activities was $49.6 million, offset by net cash used in investing activities of $16.6 million and net cash used by financing activities of $15.2 million.

Cash provided by operations was $49.6 million for the six months ended March 31, 2006 and $36.4 million for the six months ended March 31,
2005, an increase of $13.2 million. The increase in net cash provided by operations was due to increases in net income, excluding amortization of intangible assets and deferred financing fees as well as depreciation, changes in income taxes payable,
and a lower increase in inventory balances, offset by an increase in accounts receivable, a decrease in accrued payroll and employee benefits. Days sales outstanding decreased from 54.5 at September 30, 2005, to 53.5 at March 31, 2006.
Inventory days on hand increased from 118 as of September 30, 2005 to 121 as of March 31, 2006.

Capital expenditures for
property, plant and equipment were $8.3 million and $6.3 million for the six months ended March 31, 2006 and 2005, respectively. We expect capital expenditures for fiscal 2006 to be between $23.0 and $26.0 million.

Net cash used in financing activities for the six months ended March 31, 2006 was $15.2 million, as compared to net cash provided by financing
activities of $21.1 million for the same period in fiscal 2005. Net debt repayments were $8.6 million, and $8.4 million of cash was used to settle derivative instruments; which was offset by cash received from the exercise of stock options and the
Employee Stock Purchase Plan of $3.1 million in the six months ended March 31, 2006. We had net debt proceeds in the six months ended March 31, 2005 of $10.4 million, which was primarily used to fund the purchase of Innova LifeSciences,
and cash received from the exercise of stock options and the Employee Stock Purchase Plan of $11.0 million.

On March 23, 2006, we
entered into a new credit facility (the Credit Facility) and terminated our former revolving credit facility, as amended, that was scheduled to mature on June 6, 2007. The Credit Facility provides for a five year $250 million
revolving credit facility, (the Domestic Revolver) for use by Sybron Dental Specialties, Inc., Kerr Corporation, Ormco Corporation and Pinnacle Products, Inc. (the Domestic Borrowers). As a sub limit of the Domestic Revolver,
the Credit Facility has a five-year $100.0 million revolving credit facility (the Off-Shore Revolver) for use by our Swiss subsidiary, Hawe Neos Holding S.A. (Hawe Neos). The Off-Shore Revolver borrowings can be made in
euros, Swiss francs, Canadian dollars, Australian dollars or Japanese yen. The Credit Facility also provides for an incremental facility of $400 million for acquisitions and general corporate use, subject to lender approval. As part of the
refinancing of our Credit Facility, $1.9 million of the existing unamortized deferred financing fees were immediately expensed. The remaining $1.7 million of unamortized deferred financing fees, plus $1.1 million of financing fees incurred related
to the new Credit Facility, will be amortized over the term of the new Credit Facility. As of March 31, 2006, $199.9 million of the $250.0 million revolving credit facility was available for borrowing.

The Domestic Revolver bears interest, at our option, at a per annum rate equal to either (a) the LIBOR rate, plus between 50 and 125 basis points,
or (b) the Base rate, plus between zero and 25 basis points, in each case as determined on a quarterly basis according to a leverage-based pricing grid with leverage ratios from 0x to 3.0x. The per annum interest rate as of March 31, 2006
was LIBOR, plus 62.5 basis points. The annual commitment fee on the unused portion of the Domestic Revolver will vary from 0.125% to 0.25% based on the quarterly leverage ratio. As of March 31, 2006, the amount outstanding on the Domestic
Revolver was $45.5 million and the amount available was $199.9 million. The interest rate as of March 31, 2006 on the Domestic Revolver was 6.20%. The Domestic Revolver also provides for the issuance of standby letters of credit and commercial
letters of credit as required in the ordinary course of business. As of March 31, 2006, a total



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of $4.6 million in letters of credit was issued. The Credit Facility may be prepaid at any time without penalty except for LIBOR and Euro-LIBOR breakage
costs.

The Off-Shore Revolver bears interest margins identical to the LIBOR margins of the Domestic Revolver. The annual commitment fee on
the unused portion of the Off-Shore Revolver varies from 0.125% to 0.25% based on the quarterly leverage ratio. As of March 31, 2006, there was no outstanding balance under the Off-Shore Revolver, and the amount available was $100.0 million, which
is included as part of the $199.9 million available credit under the Domestic Revolver.

The Credit Facility contains certain covenants,
including, without limitation, restrictions on: (i) debt and liens, (ii) the sale of assets, (iii) mergers, acquisitions and other business combinations, (iv) transactions with affiliates, (v) capital expenditures, (vi) restricted payments,
including repurchase or redemptions of the Senior Subordinated Notes, (vii) repurchase or redemption of stock from or to payment of cash dividends to our stockholders, (viii) contingent obligations, and (ix) loans and investments. The Credit
Facility also has certain financial covenants, including, maximum leverage ratios and minimum interest coverage ratios.

The Credit
Facility is jointly and severally guaranteed by each of our present and future direct and indirect wholly-owned domestic subsidiaries of the Domestic Borrowers, and is secured by the capital stock of each domestic subsidiary, except Attachments
International Inc. In addition, the Credit Facility is secured by 65% of the capital stock of Sybron Canada Limited Partner Company. The Off-Shore Revolver is also guaranteed by certain foreign subsidiaries and is secured by a pledge of 100% of the
capital stock of certain foreign subsidiaries and our Swiss subsidiary Hawe Neos, and 35% of the capital stock of Sybron Canada Limited Partner Company.

Our ability to meet our debt service requirements and to comply with our debt covenants is dependent upon our future performance, which is subject to financial, economic, competitive and other factors affecting us,
many of which are beyond our control. We are not aware of any violations of these covenants as of March 31, 2006, nor do we anticipate any violations in light of current business conditions.

We believe that loans available under our revolving credit facility, as well as currently available cash and short term investments, will be sufficient
to meet our long-term and short-term working capital needs, as well as our commitments for capital expenditures and business development needs for the next twelve months and the foreseeable future.

New Accounting Pronouncements

There are no recently
issued accounting standards that are reasonably likely to materially affect our consolidated financial statements.

Off-Balance Sheet Arrangements

None.

Contractual Obligations

On March 23, 2006, we and certain of our subsidiaries entered into a new credit facility and terminated our former revolving credit
facility, as amended, that was scheduled to mature on June 6, 2007. Refer to Liquidity and Capital Resources above for information regarding the new credit facility.

There have been no other 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, 2005.

Cautionary Factors

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



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Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may
cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by any forward-looking statements. Although we believe the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact our business and financial
prospects and affect our future results of operations and financial condition:

We 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 (an affiliate of 3M Company), GC, Ivoclar Vivadent Group, and
Heraeus Kulzer; and in the Specialty Products business segment, our principal competitors include 3M Unitek, (an affiliate of 3M Company), GAC International (a subsidiary of Dentsply), Align Technology Inc., American Orthodontics, Micro-Mega, Tulsa
Dental, Nobel Biocare, ITA Straumann, and Orthoclear. 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.

In the United States, the Professional Dental
segments 162 hourly employees at the Romulus, Michigan facility are members of the United Auto Workers Union. Our current labor contracts relating to that facility will expire on January 31, 2008. A work stoppage could adversely affect
our ability to manufacture and ship products.

We have implemented, and will continue to implement, various cost-savings initiatives
that may not achieve the anticipated results.

We have implemented programs designed to reduce our selling, general and administrative
costs as a percentage of our net sales. We also expect that we will continue to identify opportunities for operational efficiencies and implement programs designed to achieve these efficiencies. There can be no assurance that such actions will be
accomplished as rapidly as anticipated or that the full extent of expected cost reductions will be achieved.

We rely upon others to
assist in the development, 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.

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, South America and Mexico. In fiscal 2005, our foreign facilities selling, general and administrative expenses represented approximately 36% of
our consolidated selling, general and administrative expenses while our foreign sales represented approximately 46% of our total net sales.



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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, the
indenture for the Senior Subordinated Notes limits our ability to consummate acquisitions by imposing various conditions which must be satisfied.

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.

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

On October 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires that goodwill
and intangible assets that have an indefinite useful life be tested at least annually for impairment. Goodwill and other intangible assets with indefinite lives must also be tested for impairment between the annual test if an event occurs that would
more likely than not reduce the fair value of the asset below its carrying amount. As of March 31, 2006, goodwill and other intangible assets with indefinite lives represented approximately 39.8% 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.

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.



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

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

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

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

In fiscal 2005, approximately 24.2% 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 to the Professional 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.

In addition, our largest customers in the Professional Dental segment also compete with us by selling
their branded version of products we sell to them. Our business could be adversely affected in the short term if any of our large customers abruptly discontinues selling those products we make that compete with their branded version.

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.

Our indebtedness could adversely affect our financial condition.

We presently have, and will continue to have, indebtedness which requires significant interest payments. As of March 31, 2006, we had $203.1 million in total long-term borrowings (including current portion) and
$446.2 million in stockholders equity. In addition, subject to restrictions in the indenture for our Senior Subordinated Notes and our Credit Facility, we may incur additional indebtedness.

Our 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 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

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

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

We 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.

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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



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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 Technologies Inc. (Apogent), or may not be able to collect on indemnification rights from Apogent.

Prior to December of 2000 we were a wholly owned subsidiary of Apogent. We became an independent, publicly traded company when Apogent distributed to its shareholders, by a means of a pro rata distribution, all of our
outstanding common stock together with related preferred stock purchase rights (the spin-off). In order to effect the spin-off, we entered into a number of interrelated agreements with Apogent. Pursuant to the terms of the agreements, we
and our U.S. subsidiaries, in general, indemnify Apogent and its subsidiaries and affiliates against liabilities, litigation and claims actually or allegedly arising out of the dental business, including discontinued operations relating to our
business. Similarly, Apogent and its U.S. subsidiaries indemnify us and our subsidiaries and affiliates against liabilities, litigation and claims actually or allegedly arising out of Apogents business, including discontinued operations
related to the laboratory business, and other operations and assets not transferred to us. These indemnification obligations could be significant. The availability of these indemnities will depend upon the future financial strength of each of the
companies. We cannot determine whether we will have substantial indemnification obligations to Apogent and its affiliates in the future. We also cannot assure you that, if Apogent has substantial indemnification obligations to us and our affiliates,
Apogent will have the ability to satisfy those obligations.

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



|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

Foreign Exchange Currency Risk Management

We operate internationally; therefore, our earnings, cash flows, and financial
position are exposed to foreign currency risk from foreign currency denominated receivables and payables, 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, British pound, Mexican peso, Canadian dollar, Czech koruna and the Australian dollar.

For fiscal year 2006, our projected total foreign currency exposure is estimated to be approximately 73.1 million euros, 916.8 million Japanese yen, 18.1 million Swiss francs, 1.2 million British pounds,
70.0 million Mexican pesos, 32.7 million Canadian dollars, 49.9 million Czech koruna, and 18.1 million Australian dollars. We have put in place a strategy to manage our forecasted euro, Swiss franc, Japanese yen, and Australian
dollar denominated intercompany cash flow exposures



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through the use of zero cost collar contracts. There were no such contracts in place for the Canadian dollar, British pound, Mexican peso, and Czech koruna
at March 31, 2006.

At March 31, 2006, an unrealized gain of $1.0 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 March 31, 2006 are as follows (in thousands, except rates):



|         |  |            |  |            |  |            |  |                     |  |            |  |            
|-------- |  | ---------- |  | ---------- |  | ---------- |  | ------------------- |  | ---------- |  | -----------
|Currency |  | Trade Date |  | Effective  |  | Maturity   |  | LocalCurrencyAmount |  | Floor Rate |  | CeilingRate
|Euro     |  | 3/18/2005  |  | 4/17/2006  |  | 6/15/2006  |  | 9,000               |  | 1.3300     |  | 1.3720     
|Euro     |  | 9/9/2005   |  | 7/14/2006  |  | 9/15/2006  |  | 7,500               |  | 1.2400     |  | 1.2880     
|Euro     |  | 1/11/2006  |  | 10/16/2006 |  | 12/15/2006 |  | 8,250               |  | 1.1800     |  | 1.2845     
|Euro     |  | 3/23/2006  |  | 1/16/2007  |  | 3/14/2007  |  | 7,200               |  | 1.1800     |  | 1.2671     
|CHF      |  | 3/23/2006  |  | 1/16/2007  |  | 3/14/2007  |  | 2,100               |  | 1.3300     |  | 1.2185     
|Yen      |  | 3/18/2005  |  | 4/17/2006  |  | 6/15/2006  |  | 120,000             |  | 104.0000   |  | 95.3300    
|Yen      |  | 9/9/2005   |  | 7/14/2006  |  | 9/15/2006  |  | 135,000             |  | 107.0000   |  | 104.5500   
|Yen      |  | 1/11/2006  |  | 10/16/2006 |  | 12/15/2006 |  | 150,000             |  | 118.0000   |  | 99.9500    
|Yen      |  | 3/23/2006  |  | 1/16/2007  |  | 3/14/2007  |  | 141,000             |  | 119.0000   |  | 104.8000   
|Aud      |  | 3/18/2005  |  | 4/17/2006  |  | 6/15/2006  |  | 1,800               |  | 0.7500     |  | 0.7950     
|Aud      |  | 9/9/2005   |  | 7/14/2006  |  | 9/15/2006  |  | 2,100               |  | 0.7400     |  | 0.7861     
|Aud      |  | 1/11/2006  |  | 10/16/2006 |  | 12/15/2006 |  | 3,000               |  | 0.7100     |  | 0.7803     
|Aud      |  | 3/23/2006  |  | 1/16/2007  |  | 3/14/2007  |  | 1,800               |  | 0.6900     |  | 0.7323     

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 had effective dates of June 27, 2002, June 28, 2002, and July 1, 2002, and were contracts to exchange
U.S. dollar principal aggregating a total amount of $45.0 million in exchange for a Swiss franc principal aggregating a total amount of 67.5 million and U.S. dollar principal amount of $4.0 million in exchange for a Japanese yen amount of 486.0
million. Both the Swiss franc contracts and the Japanese yen contract had maturity dates of 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 was a rate equal to the Senior Subordinated Notes rate of 8 1/8%; the fixed interest rate to be paid by us on the Swiss franc leg of the agreements ranged from 6.39% to 6.45%;
and the Japanese yen leg of the agreements was 3.65%, with the interest payments due semi-annually.

During the three month period ended
December 31, 2005, we settled all of the five outstanding cross currency debt swap contracts used to hedge our foreign currency exposure because these instruments were getting close to maturity. The settlement of the cross currency debt swaps
generated interest income of approximately $0.4 million and a cumulative loss of $8.9 million ($5.5 million net of income tax) in the currency translation adjustment account in equity as of December 31, 2005. At March 31, 2006, a total of
$10.5 million realized loss ($6.5 million net of income tax), including the realized loss of $1.5 million ($1.0 million net of income tax) as a result of cash-settling a cross currency swap with Wachovia in 2002, was included in the currency
translation adjustment account in equity. This realized loss will remain in the currency translation adjustment account in equity until we dispose of the net investments.

Interest Rate Exposure - Interest Rate Risk Management

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



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The table below provides information about our debt obligations that are sensitive to changes in interest
rates as of March 31, 2006. 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 the current implied forward
3-month LIBOR rates in the yield curve. The information is presented in U.S. dollar equivalents.



|                      |  |                                    |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |            |  |   |         |   |  |   |        
|--------------------- |  | ---------------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ----- | ---------- |  | - | ------- | - |  | - | -------
|                      |  | Twelve Months Ending March 31,     |       |   |      |   |       |     
|Liabilities           |  | 2007                               |       |   | 2008 |   |       | 2009 |  |   | 2010  |   |  | 2011 |       |   | Thereafter |   |       | Fair Value
|                      |  | (in thousands, except percentages) |       |   |      |   |       |     
|Long-Term Debt:       |  |                                    |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |            |  |   |         |   |  |   |        
|Fixed Rate Debt       |  | $                                  |      |   |      | $ |      |      |  | $ |      |   |  | $    |      |   |            | $ |      |            |  | $ | 150,000 |   |  | $ | 158,250
|Average Interest Rate |  |                                    | 8.125 | % |      |   | 8.125 | %    |  |   | 8.125 | % |  |      | 8.125 | % |            |   | 8.125 | %          |  |   | 8.125   | % |  |   |        
|Variable Rate Debt    |  | $                                  | 226   |   |      | $ | 248   |      |  | $ | 287   |   |  | $    | 334   |   |            | $ | 393   |            |  | $ | 51,607  |   |  | $ | 53,095 
|Average Interest Rate |  |                                    | 5.875 | % |      |   | 5.845 | %    |  |   | 5.945 | % |  |      | 6.055 | % |            |   | 6.125 | %          |  |   | 6.155   | % |  |   |        

For the quarter ended March 31, 2006, 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 less than $0.1 million. During the three month period ended March 31, 2006, we settled the interest rate swap. The settlement
generated a loss of $0.1 million for the three month period ended March 31, 2006.



|ITEM 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures: Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our 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, our Chief Executive Officer and
Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.

Changes in Internal
Control Over Financial Reporting:There were no changes in 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 1. | Legal Proceedings
|------- | -----------------

On
April 24, 2006, Dolphin Limited Partnership I, L.P. and City of Pontiac General Employees Retirement System, purported holders of shares of common stock of the Company, filed a class action complaint in the Superior Court of the State of
California, County of Orange, purportedly on behalf of themselves and all others similarly situated, against the Company, the Companys directors, Danaher and an indirect wholly-owned subsidiary of Danaher, Smile Acquisition Corp. (the
Purchaser). The complaint alleges breach of fiduciary duties of loyalty, due care, independence, good faith, and fair dealing; failure to maximize shareholder value; impermissibly locking up the proposed acquisition through allegedly
improper defensive measures; and failing to disclose material information to shareholders in connection with the proposed acquisition. According to the complaint, the plaintiffs were seeking, among other things, preliminary and permanent equitable
relief, including an injunction against consummation of the proposed acquisition and an unspecified amount for the costs and disbursements of the lawsuit, including reasonable attorneys and experts fees.

On May 5, 2006, an agreement in principle was reached to settle the class action law suit. The settlement resolves allegations by the plaintiffs
against Danaher, the Purchaser, the Company and the Companys directors, in connection with the tender offer, and includes no admission of wrongdoing. Under the terms of the settlement, the parties have agreed to reduce the termination fees
associated with the transaction to an aggregate amount of $45 million in fees and expenses. In addition, the parties have agreed that the Companys shareholders rights plan and other contractual restrictions will not be applicable to tender
offers offering the Companys shareholders above $47 in cash by third parties who sign and deliver the same form of merger agreement that Danaher has signed and comply with certain other conditions. While the provisions of the agreement in
principle are effective immediately, certain other provisions of the settlement are, as is customary, subject to court approval.



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##### Table of Contents

|ITEM 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

We held our Annual Meeting of Stockholders on February 8, 2006. A quorum was present at the Annual Meeting, with 37,363,487 shares out of a total of 40,405,156 shares entitled to cast votes represented in person
or by proxy at the meeting.

PROPOSAL 1: To elect two directors to serve as Class III Directors until the 2009 Annual Meeting of
Stockholders and until their respective successors are duly elected and qualified.

The stockholders voted to elect Donald N. Ecker and
Robert W. Klemme to serve as Class III Directors until the 2009 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified. The results of the vote were as follows:



|              |  |            |  |           
|------------- |  | ---------- |  | ----------
|              |  | Mr. Ecker  |  | Mr. Klemme
|For           |  | 32,758,720 |  | 33,153,686
|Withheld From |  | 4,604,767  |  | 4,209,801 

PROPOSAL 2: To consider and vote upon a proposal to approve our Executive Officer Annual
Performance Bonus Plan.

The stockholders voted to approve our Executive Officer Annual Performance Bonus Plan. The results of the vote
were as follows:



|                 |  |           
|---------------- |  | ----------
|For              |  | 35,578,641
|Against          |  | 190,821   
|Abstentions      |  | 1,594,025 
|Broker Non-Votes |  |          

PROPOSAL 3: To consider and vote upon a proposal to approve our 2006 Restricted
Stock Incentive Plan.

The stockholders voted to approve our 2006 Restricted Stock Incentive Plan. The results of the vote
were as follows:



|                 |  |           
|---------------- |  | ----------
|For              |  | 24,433,346
|Against          |  | 10,460,546
|Abstentions      |  | 562,819   
|Broker Non-Votes |  | 1,906,776 



|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: May 10, 2006 |  |  |  | /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 MARCH 31, 2006



|              |  |                                                                                                                                                                                                                                  |  |                                                                                                                                                              |  |              
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|ExhibitNumber |  | 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, as amended                                                                                                                                                                                             |  |                                                                                                                                                              |  | X            
|              |  |                                                                                                                                                                                                                                  | 
|4.2(a)        |  | Amendment No. 1 to Rights Agreement between the Registrant and Computershare Trust Company, N.A. (formerly known as EquiServe Trust Company, N.A.), a national banking association, as Rights
Agent, dated as of April 12, 2006. |  | Exhibit 4.1(a) to the Registrants Form 8-K dated April 10, 2006 and filed on April 12, 2006                                                                 |  |              
|              |  |                                                                                                                                                                                                                                  | 
|10.1          |  | Credit Agreement, dated as of March 23, 2006 between Registrant and certain of its subsidiaries and Credit Suisse, Cayman Islands Branch and other lenders                                                                       |  | Exhibit 10.1 to the Registrants Form 8-K dated March 23, 2006 and filed on March 29, 2006                                                                   |  |              
|              |  |                                                                                                                                                                                                                                  | 
|10.2          |  | Executive Officer Annual Performance Bonus Plan                                                                                                                                                                                  |  | Exhibit A to Sybron Dental Specialties, Inc.s Proxy Statement dated January 9, 2006 for the 2006 Annual Meeting of Stockholders                             |  |              
|              |  |                                                                                                                                                                                                                                  | 
|10.3          |  | 2006 Restricted Stock Incentive Plan                                                                                                                                                                                             |  | Exhibit B to Sybron Dental Specialties, Inc.s Proxy Statement dated January 9, 2006 for the 2006 Annual Meeting of Stockholders                             |  |              
|              |  |                                                                                                                                                                                                                                  | 
|10.4          |  | Agreement and Plan of Merger                                                                                                                                                                                                     |  | Exhibit 2.1 to the Registrants Form 8-K dated April 10, 2006 and filed on April 12, 2006                                                                    |  |              
|              |  |                                                                                                                                                                                                                                  | 
|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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