##### 









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended September 30,
    2003                                                
|          
|or        
|          
|o          |  | 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

Sybron Dental Specialties, Inc.

(Exact name of registrant as specified in
charter)


|                                                                   |  |                                                |  |            |  |                                     
|------------------------------------------------------------------ |  | ---------------------------------------------- |  | ---------- |  | ------------------------------------
|Delaware                                                           |  | 1717 West Collins Ave., Orange,
    California |  | 92867      |  | 33-0920985                          
|(State or other jurisdiction of incorporation
    or organization) |  | (Address of principal executive
    offices)   |  | (Zip Code) |  | (I.R.S. Employer Identification No.)

Registrants telephone number, including
area code:

(714) 516-7400


Securities registered pursuant to
Section 12(b) of the Act:

|                                                                                                                  |  |                                                    
|----------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------
|                                                                                                                  |  | Name of Each Exchange                              
|Title of Each Class                                                                                               |  | on Which Each Class Registered                     
|                                                                                                                  |  |                                                    
|Common Stock, par value $.01 per share
    Preferred Stock Purchase Rights
    (associated with the Common Stock) |  | New York Stock Exchange
    New York Stock Exchange

Securities registered pursuant to
Section 12(g) of the Act: None

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 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 o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate market value of the Common Stock
held by non-affiliates of the registrant, based upon the closing
sale price of the registrants Common Stock on
March 31, 2003, the last business day of our most recently
completed second fiscal quarter, as reported on the New York
Stock Exchange, was approximately $484,881,000. Shares of Common
Stock held by each executive officer and director and by each
person known to beneficially own more than 5% of the outstanding
Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

At December 10, 2003, there were 38,336,554
shares of the registrants Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrants Proxy
Statement for its Annual Meeting of Stockholders to be held on
February 6, 2004 have been incorporated by reference into
Part III of this Form 10-K.



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SYBRON DENTAL SPECIALTIES, INC.

TABLE OF CONTENTS

TO


2003 ANNUAL REPORT ON FORM 10-K


|         |    |  |  |                                                                                                    |  |  |    | 
|-------- | -- |  |  | -------------------------------------------------------------------------------------------------- |  |  | -- | 
|Item     |    |  |  | Page                                                                                              
|         |    |  |  |                                                                                                   
|PART I  
|         | 1  |  |  | Business                                                                                           |  |  | 2  | 
|         | 2  |  |  | Properties                                                                                         |  |  | 12 | 
|         | 3  |  |  | Legal Proceedings                                                                                  |  |  | 12 | 
|         | 4  |  |  | Submission of Matters to a Vote of Security
    Holders                                            |  |  | 13 | 
|         |    |  |  | Executive Officers of the Registrant                                                               |  |  | 13 | 
|PART II 
|         | 5  |  |  | Market for Registrants Common Equity and
    Related Stockholder Matters                          |  |  | 14 | 
|         | 6  |  |  | Selected Financial Data                                                                            |  |  | 15 | 
|         | 7  |  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |  |  | 16 | 
|         | 7A |  |  | Quantitative and Qualitative Disclosures About
    Market Risk                                     |  |  | 36 | 
|         | 8  |  |  | Financial Statements and Supplementary Data                                                        |  |  | 40 | 
|         | 9  |  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |  |  | 87 | 
|         | 9A |  |  | Controls and Procedures                                                                            |  |  | 87 | 
|PART III
|         | 10 |  |  | Directors and Executive Officers of the Registrant                                                 |  |  | 87 | 
|         | 11 |  |  | Executive Compensation                                                                             |  |  | 87 | 
|         | 12 |  |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |  |  | 87 | 
|         | 13 |  |  | Certain Relationships and Related Transactions                                                     |  |  | 87 | 
|         | 14 |  |  | Principal Accounting Fees and Services                                                             |  |  | 88 | 
|PART IV 
|         | 15 |  |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  |  | 89 | 
|         |    |  |  | Signatures                                                                                         |  |  | 90 | 
|         |    |  |  | Independent Auditors Report                                                                       |  |  | 92 | 
|         |    |  |  | Financial Statement Schedule                                                                       |  |  | 93 | 
|         |    |  |  | Exhibit Index                                                                                      |  |  | 94 | 

1



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PART I



|        |         
|------- | --------
|ITEM 1. | Business

General

Business and Products

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



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

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

|                            |  |                                     
|--------------------------- |  | ------------------------------------
|Professional Dental         |  | Orthodontics                        
|                            |  |                                     
|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.               |  |                                     
|Metrex Research Corporation |  |                                     
|SpofaDental a.s.            |  |                                     

We market our products in the United States and
abroad under brand names such as Kerr®, Ormco®,
Metrex®, Pinnacle®, Demetron®, KerrHawe®,
AOATM, and SybronEndoTM, which are well
recognized in the dental and orthodontics industries.

History

Sybron Dental Specialties, Inc. was incorporated
in Delaware on July 17, 2000. At the time of our
incorporation we were a wholly-owned subsidiary of Sybron
International Corporation, which is now known as Apogent
Technologies Inc. (Apogent). We were created to
effect the spin-off by Apogent of its dental business. As a part
of the spin-off, which occurred on December 11, 2000,
Apogent transferred to us, along with certain other assets, all
of the capital stock of Sybron Dental Management, Inc.
(SDM), which owned, directly or indirectly, the
stock or other equity interests in the subsidiaries that held
substantially all of the assets and liabilities of
Apogents then dental business. Apogent then distributed to
its shareholders, by means of a pro rata distribution, all of
our outstanding common stock together with related preferred
stock purchase rights (the spin-off). As a result,
we became an independent, publicly traded company.

Terms; Year References

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 and their respective predecessors that
comprised Apogents dental business prior to the spin-off.
Our fiscal year ends September 30. All references to a
particular year mean the fiscal year ended September 30 of
that year, unless we indicate otherwise.

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Business Strategy

The key elements of our strategy to become a
premier global supplier of high quality dental, infection
prevention, orthodontic and endodontic products are:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Develop Innovative Products.We strive to consistently develop and
    introduce innovative products. We believe that product
    innovation allows us to maintain our competitive position and
    helps fuel our internal growth. We also believe that our
    emphasis on new product development enables our sales force to
    remain effective in creating demand among dentists and
    orthodontists. Our dedicated research and development team
    regularly interacts with practicing dentists and orthodontists
    to understand and assess new product opportunities in the
    marketplace.                                                                                                                   
|
| | Consistently Improve Our Efficiency.We continuously pursue opportunities
    to maximize cost savings. As a result, we regularly evaluate our
    manufacturing processes to determine optimal production
    strategies, and we will transfer production from one facility to
    another or rationalize higher-cost facilities when necessary. In
    addition, we consistently seek to rationalize manufacturing,
    warehousing and customer service operations to centralized
    facilities wherever possible. In Eastern Europe, we plan to
    consolidate three of SpofaDentals facilities in fiscal
    2004, and handle all of their manufacturing and distribution in
    Jicin, located in the Czech Republic.
|
| | Increase Revenue Opportunities Within Existing
    Marketplace.We continuously seek to
    broaden our portfolio of product offerings to maximize the
    opportunities within our existing customer base. For example,
    through acquisitions, we acquired products such as chair covers,
    barrier products, infection prevention products and disposable
    air/water syringes and through our research and development
    efforts, we added products such as our new LEDemetron 1
    curing light.                                                                                                                                                                                                                
|
| | Expand the Marketplace.We seek to expand the market for our
    products through product innovation. We believe that our
    technological leadership enables us to increase the number of
    uses and users of our products. For example, we believe our
    aesthetic brackets have increased the number of adults who are
    willing to undergo orthodontic treatment for functional or
    cosmetic reasons.                                                                                                                                                                                                                                                                                                           
|
| | Pursue Strategic Acquisitions.Although debt reduction is an
    important priority, we will continue to pursue selective
    strategic acquisitions. We have significant experience in
    acquiring and integrating companies. We pursue acquisition
    opportunities that:                                                                                                                                                                                                                                                                                                                                                                                                                                                



| |   |                                   
| | - | ----------------------------------
| |  | enhance our sales growth;         
|
| |  | offer complementary product lines;
|
| |  | expand our geographic reach; or   
|
| |  | offer us access to new markets.   

Since 1993, we have made 28 acquisitions in
the United States and abroad. Since the beginning of fiscal
2001, we have completed six acquisitions, the largest of which
was the acquisition in May 2001 of Hawe Neos Holdings S.A.
(Hawe Neos), a Swiss manufacturer and wholesaler of
consumable dental products in the areas of prevention,
restoration, and pharmaceuticals. In August 2003, we acquired
SpofaDental a.s., a leading manufacturer of consumable
dental supplies in Central and Eastern Europe.

We have been able to use our existing
distribution channels to market many of the product lines we
have acquired and we have achieved other synergies, such as the
elimination of duplicative administrative or other functions or
the combining of manufacturing operations with some of these
acquisitions.

Business Segments

As of October 1, 2002, we consolidated our
Infection Prevention business segment into our Professional
Dental business segment to reduce costs and coordinate marketing
efforts for our infection prevention products. As a result, we
reduced the number of our business segments from three to two.
Our two business

3



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segments are named Professional Dental and
Orthodontics. All historical financial information for the
periods presented in this report has been restated to reflect
this change.


Professional Dental.Products in our Professional Dental
business segment include light cured composite filling materials
and bonding agents, amalgam alloy filling materials, dental
burs, impression materials, magnification lenses, and curing
lights used in general dentistry; waxes, specialty burs,
investment and casting materials, equipment and accessories used
in dental laboratories; and disposable infection prevention
products for dental equipment and offices.

Our Professional Dental products are primarily
manufactured by Kerr Corporation and its affiliates, such as
Sybron Canada Limited and KerrHawe. Kerrs products, which
are generally sold through independent dental distributors, are
designed to help dentists deliver more effective and efficient
treatment to their patients. Kerr has expanded its product line
through new product development and through acquisitions.

Expansion of products in this segment through
acquisitions include the 1994 purchase of Demetron Research
Corp., a manufacturer of lights used by dentists to cure
composite filling materials applied to teeth. These products
complemented Kerrs line of composite filling materials,
which it enhanced by acquiring E&D Dental Products,
Inc. and its line of composites in 1996. Kerr added to its
offering of dental lab products with the acquisition of belle
de st.claire inc. in 1996. In 1997, it added diamond dental
burs to the considerable line of dental burs manufactured by
Sybron Canada Limited, with the acquisition of the assets of
Precision Rotary Instruments, Inc. In 1999, Pinnacle Products,
Inc. became a part of our organization, which enabled us to add
dental disposable infection prevention products such as plastic
coverings (barriers) for dental equipment and filters for
evacuation units to this business segment. In the second quarter
of 2000, we added Safe-Wave Products, Inc., a manufacturer of
disposable tips and adapters for air/water syringes used in
dental operatories. In the first quarter of 2001, we acquired
certain assets of the dental division of Special Metals
Corporation, a contract manufacturer and supplier of alloy
powders used in Kerrs Tytin® and Tytin® FC
dental amalgams, assuring continued access to this technology.
In the third quarter of 2001, we acquired all of the capital
stock of Hawe Neos, a Swiss manufacturer and wholesaler of
consumable dental products in the areas of prevention,
restoration and pharmaceutical. In February 2002, we acquired
certain assets of Surgical Acuity, Inc., a Wisconsin
manufacturer of magnification lenses and fiberoptic lighting
systems. In the fourth quarter of 2003, we acquired all of the
capital stock of SpofaDental a.s., a leading manufacturer of
consumable dental supplies in Central and Eastern Europe. For a
more complete description of our acquisitions during fiscal
years 2003, 2002 and 2001, please see Note 16 to our
consolidated financial statements in Item 8 of this Annual
Report.

Products in the Professional Dental business
segment, including dental related infection prevention products,
are sold both domestically and internationally through dental
distributors. Kerr has 85 sales personnel in the United
States and 105 abroad dedicated to the Professional Dental
business segment sales.

Our Professional Dental companies are committed
to increasing their market share through new product development
and promotional activities. Their promotional activities create
demand for their new products. The sales growth resulting from
this demand is augmented by modest growth in the domestic market
for traditional dental consumables. We believe opportunities for
growth exist in international markets. As economies in the
emerging markets of Eastern Europe, South America and the Far
East continue to develop, the demand in those regions for dental
products should grow. We also believe our Professional Dental
companies are positioned to take advantage of such development
due to their extensive experience in selling internationally and
the quality of their existing international dealer network.

The Professional Dental business segment
accounted for approximately 58.4%, 61.2% and 59.4% of our
consolidated net sales in 2003, 2002 and 2001, respectively.

Orthodontics.Products in our Orthodontics business
segment include a broad range of orthodontic appliances such as
brackets, bands and buccal tubes, wires and elastomeric products
as well as endodontic products. Brackets, bands, buccal tubes
and wires are manufactured from a variety of metals to exacting
specifications for standard use or to meet the custom
specifications of a particular orthodontist. Elastomeric
orthodontic products include rubber bands and power chains to
consolidate space. Products in this area also

4



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include orthodontic instruments and general
orthodontic supply products. These products have historically
been manufactured and marketed by Ormco, which sells its
products directly to orthodontists. Ormco expanded its
orthodontics product line through the acquisition of E.T.M.
Corporation (a manufacturer of orthodontic hand instruments) and
Allesee Orthodontic Appliances, Inc. (a manufacturer of
custom-made positioners, retainers and other accessories) in
1994. In 1998, we significantly enhanced the orthodontics line
through a merger with LRS Acquisition Corp., the parent of
A Company Orthodontics, which is a manufacturer and
developer of brackets, archwires and related products. We also
expanded our direct business in France by acquiring the Ormodent
group of companies, Ormcos French distributor. In 2000, we
again expanded our product line with the acquisition of
Professional Positioners, Inc., a manufacturer of orthodontic
retainers and positioners and LPI Ormco, the former distributor
of Ormco products in Austria. In the first quarter of 2001, we
completed the acquisition of certain assets of Optident, Ltd.,
the former exclusive authorized distributor of Ormco
A Company products in the United Kingdom. In 2002,
we began marketing our Ormco branded orthodontic products in
Spain directly through our local sales force, which previously
had been associated with our distributor in Spain. For a more
complete description of our acquisitions during fiscal years
2003, 2002 and 2001, please see Note 16 to our consolidated
financial statements in Item 8 of this Annual Report.


In 1995, we added endodontic products to the
Orthodontics segment, which has a separate endodontic direct
sales force, with the acquisition of Excellence in Endodontics,
Inc., a manufacturer of products for endodontic procedures. We
expanded our endodontic product offerings in this segment in
1996 when we acquired the assets of Analytic Technology
Corporation, a manufacturer of endodontic equipment. In 1998, we
added a line of nickel-titanium endodontic instruments with the
acquisition of the dental business of Tycom Corporation. In
1999, we vertically integrated our Tycom product line in Europe
with the purchase of Endo Direct Ltd., the exclusive European
importer of Tycoms endodontic products.

Products in the Orthodontics business segment are
marketed by 100 direct salespersons in the United States,
Austria, Belgium, Canada, Australia, Germany, France, Ireland,
Japan, Mexico, New Zealand, the Netherlands, Portugal, Spain,
Switzerland and the United Kingdom, and by dealers and
distributors in other parts of the world. Ormcos direct
sales force, dealers and distributors are supported by trade
journal advertising, trade shows, seminars and telemarketing.

The market for traditional orthodontics products
is relatively mature domestically, and is experiencing modest
growth. We expect the international market for orthodontics
products to grow opportunity as interest in orthodontics for
cosmetic reasons grows worldwide. We believe Ormco is well
positioned to compete both domestically and internationally
because its marketing philosophy is geared toward making
orthodontic practices more efficient through product innovation
and customer service.

Ormcos endodontic sales team sells our
endodontic products both directly to end-users and through
distributors (which had previously been handled primarily by our
Professional Dental business segment). The endodontic team has
19 direct salespersons in the United States. The sales force
markets our endodontic products directly to endodontic
specialists in the United States and Canada and provides support
to our dealers and helps sell products to the general dental
community through a dealer network in those countries. In other
parts of the world, our endodontic products are sold by dealers
and distributors.

The Orthodontics business segment accounted for
approximately 41.6%, 38.8% and 40.6% of our consolidated net
sales in 2003, 2002 and 2001, respectively.

Financial information about our business segments
is presented in Note 19 to our consolidated financial
statements in Item 8 of this Annual Report.

We believe we are well positioned to take
advantage of the opportunities that exist to grow our business,
such as the opportunities that we think will arise from the
trends of an increasing worldwide population, growth in the
population of people 65 and older, natural teeth being retained
longer, and increased spending on dental health in developing
nations.

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International

In addition to the United States, products in our
Professional Dental business segment are manufactured at
facilities in Canada, Switzerland, Czech Republic, Italy and
Mexico. These products are sold internationally through dealers,
and supported by sales offices in Europe (including a major
office in Switzerland), Japan and Australia.

Domestic and international sales of our products
by business segment are as follows:

|                     |               |                                 |         |         |         |      |         |         |         |   |         |         |         | 
|-------------------- | ------------- | ------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                     |               |                                
|                     |               | Years Ended September 30,      
|                     |               |                                
|                     |               | 2003                            |         | 2002    |         | 2001
|                     |               |                                 |         |         |         |     
|                     |               |                                
|                     |               | (in thousands)                 
|Professional Dental: |               |                                 |         |         |         |      |         |         |         |   |         |        
|                     | Domestic      |                                 | $       | 182,093 |         |      | $       | 171,328 |         |   | $       | 165,439 |        
|                     | International |                                 |         | 125,515 |         |      |         | 108,195 |         |   |         | 95,525  |        
|                     |               |                                 |         |         |         |      |         |         |         |   |         |        
|                     |               | Total Professional Dental Sales |         | $       | 307,608 |      |         | $       | 279,523 |   |         | $       | 260,964 | 
|                     |               |                                 |         |         |         |      |         |         |         |   |         |        
|Orthodontics:        |               |                                 |         |         |         |      |         |         |         |   |         |        
|                     | Domestic      |                                 | $       | 117,425 |         |      | $       | 96,699  |         |   | $       | 102,940 |        
|                     | International |                                 |         | 101,358 |         |      |         | 80,444  |         |   |         | 75,643  |        
|                     |               |                                 |         |         |         |      |         |         |         |   |         |        
|                     |               | Total Orthodontics Sales        |         | $       | 218,783 |      |         | $       | 177,143 |   |         | $       | 178,583 | 
|                     |               |                                 |         |         |         |      |         |         |         |   |         |        
|Total Net Sales      |               | $                               | 526,391 |         |         | $    | 456,666 |         |         | $ | 439,547 |        
|                     |               |                                 |         |         |         |      |         |         |         |   |         |        

Our international businesses is subject to the
risk of fluctuations in the exchange rates of various foreign
currencies and other risks associated with foreign trade. For
the years 2003, 2002 and 2001, our net sales outside the United
States accounted for approximately 43%, 41%, and 39%,
respectively, of consolidated net sales. See
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations
International Operationsand
Item 7A  Quantitative and Qualitative
Disclosures About Market Riskfor further information
concerning the possible effects of foreign currency fluctuations
and currency hedges intended to mitigate their impact.

We have included other financial information
about our business segments and foreign operations in
Note 19 to our consolidated financial statements in
Item 8 of this Annual Report.

Competition

We compete against numerous other companies in
our business segments, some of which have substantially greater
financial and other resources than us. We believe the breadth of
our product lines and the strength of our long established
brands provide us with a competitive advantage. Our widely
recognized Kerr and Ormco brand names have been used for more
than 100 years and 40 years, respectively. We believe
these strong brands, our leading market positions and our
programs to educate dental practitioners about techniques and
products provide us with an excellent platform to pursue our
growth initiatives. There can be no assurance, however, that we
will maintain our competitive advantages or that we will not
encounter increased competition in the future.

Our principal competitors in the Professional
Dental business segment are Dentsply International Inc.,
3M ESPE, and Ivoclar Vivadent Group. In the Orthodontics
business segment, we compete with more than 25 companies in the
United States. We compete primarily on the basis of product
quality, the level of customer service, price and new product
offerings. Our competitors include 3M Unitek (a subsidiary
of 3M Corporation), GAC International (a subsidiary of
Dentsply) and American Orthodontics.

6



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Research and Development

We have a number of research and development
programs in our business segments, which we consider to be of
importance in maintaining our market positions. We spent
approximately $10.2 million, $10.4 million and
$9.0 million on research and development in 2003, 2002 and
2001, respectively.

Our research and development expenditures by
business segment are as follows:

|                    |       |                           |       |        |  |      |       |        |  |   |       |       | 
|------------------- | ----- | ------------------------- | ----- | ------ |  | ---- | ----- | ------ |  | - | ----- | ----- | 
|                    |       |                          
|                    |       | Years Ended September 30,
|                    |       |                          
|                    |       | 2003                      |       | 2002   |  | 2001
|                    |       |                           |       |        |  |     
|                    |       |                          
|                    |       | (in thousands)           
|Professional Dental |       | $                         | 5,837 |        |  | $    | 5,827 |        |  | $ | 4,649 |      
|Orthodontics        |       |                           | 4,381 |        |  |      | 4,572 |        |  |   | 4,328 |      
|                    |       |                           |       |        |  |      |       |        |  |   |       |      
|                    | Total |                           | $     | 10,218 |  |      | $     | 10,399 |  |   | $     | 8,977 | 
|                    |       |                           |       |        |  |      |       |        |  |   |       |      

Our business segments devote resources to the
development and introduction of new products. These efforts are
critical to meeting the needs of todays dentists,
endodontists and orthodontists. In the Professional Dental
segment, product development requires diverse technical
expertise and knowledge of various market trends, which we
possess. Kerr takes advantage of its expertise and knowledge by
working closely with dentists to develop new and improved
products. The sales from recently introduced products, such as
the LEDemetron 1 curing light, the OptiDisc polishing disc,
CaviWipes disinfecting towelettes, and Toothprints dental ID for
children, have contributed to Kerrs total net sales. In
the Orthodontics segment, Ormcos sales force maintains
direct contact with orthodontists to identify market trends.
Ormco works closely with orthodontists to improve existing
products and develop new products primarily through programs
such as its Insider program in which selected orthodontists
assist Ormco in designing, developing and ultimately educating
users on new product and technique innovations. In recent years,
Ormco has introduced a number of new products, which have
contributed significantly to its sales. Examples of those
products include the DamonTM 2 brand
self-ligating bracket, the Synthesis brand straight wire
appliance, the Titanium Orthos® brand orthodontic bracket,
and in the endodontic area, K-3 NiTi rotary files and
Elements equipment series.

Employees

Our companies employed approximately 4,200 people
at September 30, 2003. In the United States, the
Professional Dental segments 163 hourly employees at the
Romulus, Michigan facility are members of the United Auto
Workers Union. Our current labor contracts continue through
January 31, 2005. 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 employees council. Once national
contracts are set, further negotiation can take place at the
local level. Such negotiations can affect local operations. We
have had no work stoppages related to national contracts. We
believe our relations with employees are generally good.

Patents, Trademarks and Licenses

Our subsidiaries products are sold under a
variety of trademarks and trade names. We own all of the
trademarks and trade names we believe to be material to the
operation of their businesses, including the Kerr®,
Hawe®, HerculiteTM, Prodigy®, Tytin®,
Demetron®, Ormco®, Straight-Wire®,
inspire!®, AOA®, DamonTM, Diamond®,
Metrex® and MetricideTM trademarks, each of
which we believe to have widespread name brand recognition in
their respective field and all of which we intend to continue to
protect. Our subsidiaries also own various patents, employ
various patented processes, and from time to time acquire
licenses from owners of patents to apply patented processes to
their operations or to sell patented products. Except for the
trademarks referred to above, we do not believe any single
patent, trademark or license is material to the operations of
our business as a whole.

7



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##### 



Regulation



| |                
| | ---------------
| | Medical Devices

Certain of our products are medical devices that
are subject to regulation by the United States Food and Drug
Administration (the FDA) and by the counterpart
agencies of the foreign countries where our products are sold.
Some of the regulatory requirements of these foreign countries
are more stringent than those applicable in the United States.
Our medical devices distributed in the European countries are CE
marked per the European Medical Device Directives, 93/42/EEC.
Products that are CE marked may move freely in the fifteen
European Union States and the three European Economic Area
States. Our worldwide facilities that are engaged in the
manufacturing of Class IIa and Class IIb medical
devices as defined by the European Medical Device Directives are
ISO 13485 certified. Additionally, our medical devices
distributed in Canada are licensed according to the Canadian
Medical Device Regulations. Each facility manufacturing or
distributing Class II and Class III medical devices
holds a Certificate of Registration for a Quality Management
System as defined in the Canadian Medical Devices Regulations.
Pursuant to the Federal Food, Drug, and Cosmetic Act (the
FDCA), the FDA regulates virtually all phases of the
manufacture, sale, and distribution of medical devices,
including their introduction into interstate commerce,
manufacture, advertising, labeling, packaging, marketing,
distribution and record keeping. Pursuant to the FDCA and FDA
regulations, certain facilities of our operating subsidiaries
are registered with the FDA as medical device manufacturing
establishments. The FDA and our ISO Notified Bodies regularly
inspect our registered and/or certified facilities.

The FDA classifies medical devices into
Class I, II, or III. Pursuant to section 510(k) of the
FDCA, the manufacturer or initial distributor of a Class I
or II device that is initially introduced commercially on or
after May 28, 1976 must notify the FDA of its intent to
commercially introduce the device through the submission of a
premarket notification (a 510(k)). Before commercial
distribution can begin, the FDA must review the 510(k) and clear
the device for commercial distribution. The FDA normally has
90 days to review the 510(k) and grant or deny clearance to
market on the basis that it is or is not substantially
equivalent to a device marketed before May 28, 1976.
Alternatively, the FDA may postpone a final decision and require
the submission of additional information, which may include
clinical data. If additional information is required, review and
clearance of a 510(k) may be significantly delayed. In order to
clear a Class I or II device for marketing, the FDA must
determine, from the information contained in the 510(k) and any
additional information that is submitted, that the device is
substantially equivalent to one or more Class I or II
devices that are legally marketed in the United States. Certain
Class I devices are exempt from the 510(k) premarket
notification requirement and manufacturers of such products may
proceed to market without any submission to the FDA. If a device
is not considered substantially equivalent, it is
regulated as a Class III medical device. In general, a
Class III medical device must be expressly approved by the
FDA for commercial distribution pursuant to the submission of a
premarket approval application (PMA). A PMA must
contain, among other information, substantial information about
the manufacture of the device and data from adequate and
well-controlled clinical trials that demonstrate that the device
is both safe and effective. The PMA approval process is
substantially more complex and lengthy than the 510(k) premarket
notification process.

A medical device, whether exempt from premarket
notification, cleared for marketing under the 510(k) pathway, or
cleared pursuant to a PMA approval, is subject to ongoing
regulatory oversight by the FDA to ensure compliance with
regulatory requirements, including, but not limited to, product
labeling requirements and limitations, including those related
to promotion and marketing efforts, current good manufacturing
practices and quality system requirements, record keeping, and
medical device (adverse event) reporting.

All of our dental and orthodontic treatment
products and high level disinfectants and sterilants, sold in
the United States, are regulated as Class I or
Class II medical devices by the FDA. In Canada, our high
level disinfectants and sterilants, hard surface disinfectants
and topical anti microbial infection prevention products, are
regulated as drug products and are required to hold a Drug
Identification Number (DIN) prior to sale. Our manufacturing
facilities for these products are required to comply with the
Good Manufacturing Practices for drug products as defined in
Part C of the Canadian Food and Drug Regulations.

8



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##### 



Dental mercury is currently regulated by the FDA
as a Class I device (not exempt from the 510(k) premarket
notification requirement), and amalgam alloy is regulated as a
Class II device. On February 20, 2002, the FDA
published for comment a guidance in which it proposes to
regulate encapsulated mercury and amalgam alloy, like those sold
by Kerr, as a single Class II device. It also proposed the
reclassification of dental mercury as a Class II device, so
as to conform to the Class II designation for amalgam alloy
and to the proposed Class II designation for encapsulated
mercury and amalgam alloy. As Class II devices,
encapsulated mercury and amalgam alloy will be subject to
special controls. The special controls may include, among other
things, recommendations and guidance for the form and content of
product labeling. The guidance document contains proposed
recommendations regarding the handling and storage of
encapsulated mercury and amalgam alloy, as well as warnings to
be added to the labeling.

All dental amalgam filling materials, including
Kerrs dental amalgam products, contain mercury. The use of
mercury in various products, including dental amalgams, is being
examined by various groups and U.S. and foreign governmental
agencies as a part of an effort to reduce the amount of mercury
to which individuals are exposed and that is discharged into the
environment. We are aware of at least one foreign government
agency that, as a result of a study it conducted, has proposed a
plan that would discontinue the use of amalgams once a suitable
alternative is found.

Various groups, who have expressed concerns about
the health effects allegedly caused by the mercury in amalgams,
are active in lobbying state, federal and foreign lawmakers and
regulators to pass laws or adopt regulatory changes or
recommendations regarding the use of dental amalgams. To date,
these efforts have resulted in restrictions on or
recommendations against the use of amalgams in certain clinical
situations in some states and countries. The actions have
generally been taken to reduce human exposure to mercury where
other safe and practical alternatives to dental amalgam exist.

In the United States, the FDAs Dental
Devices Panel, the National Institute of Health and the United
States Public Health Service have indicated that the use of
amalgams does not cause verifiable adverse effects in patients
who have amalgam fillings. All of these agencies have
recommended further research on the subject and, in large part
because of their initiatives, research with respect to potential
health effects of dental amalgams is ongoing at various places
around the world.



| |                                   
| | ----------------------------------
| | Over-the-Counter Drug
    Products

Certain of our products, namely our topical
antimicrobial infection prevention products, are subject to
regulation by the FDA as over-the-counter drug products. In
order to market a product as an over-the-counter drug, we are
required to comply with current Good Manufacturing Practice
regulations for drug products, which includes certain
requirements relating to testing and labeling of these products.
Each new product is listed with the FDA; however, there is no
requirement for premarket submissions or approvals as long as
the product is recognized as safe and effective by the FDA.



| |                                                       
| | ------------------------------------------------------
| | Federal Insecticide, Fungicide and
    Rodenticide Act

Certain of our infection prevention products are
classified as pesticides and are subject to regulation by the
United States Environmental Protection Agency (EPA)
under the Federal Insecticide, Fungicide and Rodenticide Act
(FIFRA) and by various state environmental agencies
under the laws of those states. Under FIFRA, no one may sell,
distribute or use a pesticide unless it is registered with the
EPA. Registration includes approval by the EPA of the
products label, including the claims and instructions for
use. The producer of a pesticide must provide data from tests
performed according to EPA guidelines. These tests are designed
to determine whether a pesticide has the potential to cause
adverse effects on humans, wildlife, plants and possible ground
or surface water contamination. Testing must also be submitted
to support the claims on the product labeling. Separate
registrations must be obtained from the EPA and each state in
which the product is sold. Registrations must be renewed
annually. The regulations also require producers to report
adverse events associated with their products to the EPA.
Failure to pay registration fees or provide necessary testing
data, or evidence that the product is the cause of an adverse
effect on humans or the environment, could result in fines
and/or the cancellation of a FIFRA registration.

9



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##### 





| |                                             
| | --------------------------------------------
| | Environmental, Health and Safety
    Matters

Our operations entail a number of environmentally
sensitive production processes. Compliance with environmental
laws and regulations, along with regulations relating to
workplace safety, is a significant factor in our businesses. Our
domestic facilities are subject to federal, state and local laws
and regulations concerning, among other things, solid and
hazardous waste disposal, air emissions and waste water
discharge, and our foreign facilities are subject to their
respective local laws and regulations regarding the environment.
Our operations are also subject to regulation relating to
workplace safety, both in the United States and abroad.
Violations of any of these laws and regulations or the release
of toxic or hazardous materials used in our operations into the
environment could expose us to significant liability. Similarly,
third party lawsuits relating to environmental and workplace
safety issues could result in substantial liability.

Raw Materials

We purchase a wide range of raw materials and
supplies from a number of suppliers and do not rely on sole
sources to any material extent. We do not foresee any
significant difficulty in obtaining necessary materials or
supplies.

Reliance on Key Distributors

A substantial portion of our sales is made
through major independent distributors. While one distributor,
Henry Schein, Inc., accounted for more than 10% of our sales in
2003, we believe that the loss of either one of our top two
distributors, the only distributors who account for more than 5%
of our consolidated net sales and who sell primarily into the
dental segment, could have a material adverse effect on our
results of operations or financial condition until we find
alternative means to distribute our products.

Transactions and Agreements Between Apogent
and SDS

In order to effect the spin-off, Apogent and SDS
entered into a number of interrelated agreements. Certain of
these agreements define the ongoing relationship between the
parties after the spin-off and are briefly described below.
Because these agreements were negotiated while we were a wholly
owned subsidiary of Apogent, they are not the result of
negotiations between independent parties. In the future,
additional or modified agreements, arrangements and transactions
may be entered into and such agreements and transactions will be
determined through arms-length negotiations.



| |                                        
| | ---------------------------------------
| | Assignment and Assumption
    Agreement

Pursuant to the General Assignment, Assumption
and Agreement Regarding Litigation, Claims and Other
Liabilities, in general, we and our U.S. subsidiaries
indemnify Apogent and its subsidiaries and affiliates against
liabilities, litigation and claims actually or allegedly arising
out of the dental business, including discontinued operations
within those business segments. 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 laboratory business,
including discontinued operations within those business
segments, and other items not transferred to us. In
circumstances in which any liability of Apogent and SDS is
joint, the parties will share responsibility for such liability
on a mutually agreed basis consistent with the allocation of the
business segments.



| |                            
| | ---------------------------
| | Insurance Matters Agreement

An Insurance Matters Agreement governs the rights
and obligations of Apogent and us with respect to various
pre-existing contracts insuring Apogent and covering risks
associated with, or arising out of, the dental business. The
types of policies covered by the Insurance Matters Agreement
include, without limitation, automobile liability, comprehensive
and general liability. The Insurance Matters Agreement also
establishes certain procedures for dealing with pending
litigation, new litigation and the resolution of disputes
between the parties concerning that agreement.

10



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##### 



Available Information

Our Internet address is www.sybrondental.com.
There we make available, free of charge, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to those reports, as
soon as reasonable practicable after we electronically file such
material with, or furnish it to, the SEC. The information found
on our website is not part of this or any other report we file
with or furnish to the SEC.

Forward-Looking Statements

All statements other than statements of
historical facts included in this Annual Report, including
without limitation, statements in Item 1 
Business,Item 3  Legal Proceedingsand Item 7  Managements Discussion
and Analysis of Financial Condition and Results of Operationsof this Annual Report, and other statements located
elsewhere in this Annual Report, in each case regarding the
prospects of our industry and our prospects, plans, financial
position, and business strategy, may constitute forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements
generally can be identified by the use of forward-looking
terminology 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. 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 condition; or
|
| |  | state other forward-looking information.                                                  

We believe it is important to communicate
expectations to our investors. However, 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. These factors include, among other
things, those listed in Item 7 
Managements Discussion and Analysis of Financial
Condition and Results of Operations Cautionary
Factors.Although we believe the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results. Those statements, such as the
one made in the immediately preceding section, Business
Strategy regarding our intent to pursue our acquisition
strategy, concern, among other things, our intent, belief or
current expectations with respect to our operating and growth
strategies, our capital expenditures, financing or other
matters, regulatory matters pertaining to us specifically and
the industry in general, industry trends, competition, risks
attendant to foreign operations, reliance on key distributors,
litigation, environmental matters, and other factors affecting
our financial condition or results of operations. Such
forward-looking statements involve certain risks and
uncertainties, many of which are beyond our control, that could
cause actual results to differ materially from those
contemplated in the forward-looking statements.

All subsequent forward-looking statements
attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements
included in this document. These forward-looking statements
speak only as of the date of this Annual Report. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise and do not intend to update these statements
unless the securities laws require us to do so.

11



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##### 



ITEM 2.     Properties

We operate manufacturing facilities in the United
States and certain foreign countries. The following table sets
forth information regarding our principal properties by business
segment. Properties with less than 20,000 square feet of
building space have been omitted from this table.

|                      |  |                                                               |  |          |        | 
|--------------------- |  | ------------------------------------------------------------- |  | -------- | ------ | 
|                      |  |                                                               |  | Owned or
|Location of Facility  |  | Building Space and Primary Use                                |  | Leased  
|                      |  |                                                               |  |         
|Headquarters          |  |                                                               |  |          |        | 
|Orange, California    |  | 118,000 sq. ft./headquarters, manufacturing and
    warehouse |  |          | leased | 
|                     
|Professional Dental   |  |                                                               |  |          |        | 
|Romulus, Michigan     |  | 220,000 sq. ft./manufacturing                                 |  |          | leased | 
|Bioggio, Switzerland  |  | 85,000 sq. ft./manufacturing                                  |  |          | owned  | 
|Romulus, Michigan     |  | 85,000 sq. ft./manufacturing                                  |  |          | leased | 
|Morrisburg, Ontario   |  | 60,000 sq. ft./manufacturing                                  |  |          | owned  | 
|Scafati, Italy        |  | 58,000 sq. ft./manufacturing                                  |  |          | owned  | 
|Lakeville, Minnesota  |  | 38,000 sq. ft./assembly                                       |  |          | owned  | 
|Morrisburg, Ontario   |  | 30,000 sq. ft./manufacturing                                  |  |          | leased | 
|Danbury, Connecticut  |  | 30,000 sq. ft./manufacturing                                  |  |          | leased | 
|Jicin, Czech Republic |  | 92,000 sq. ft./manufacturing                                  |  |          | owned  | 
|                     
|Orthodontics          |  |                                                               |  |          |        | 
|Glendora, California  |  | 111,000 sq. ft./manufacturing                                 |  |          | leased | 
|Mexicali, Mexico      |  | 57,000 sq. ft./manufacturing                                  |  |          | leased | 
|San Dimas, California |  | 39,000 sq. ft./distribution                                   |  |          | leased | 
|Uman, Yucatan, Mexico |  | 35,000 sq. ft./manufacturing                                  |  |          | owned  | 
|Tijuana, Mexico       |  | 32,000 sq. ft./manufacturing                                  |  |          | owned  | 
|Uman, Yucatan, Mexico |  | 30,000 sq. ft./manufacturing                                  |  |          | leased | 
|Sturtevant, Wisconsin |  | 21,000 sq. ft./manufacturing                                  |  |          | leased | 

We consider our plants and equipment to be well
maintained and suitable for their purposes. We review our
manufacturing capacity periodically and make the determination
as to our need to expand or, conversely, rationalize our
facilities. We anticipate consolidating four of our Eastern
European facilities into one site in fiscal 2004. In the event
that we determine a need to expand our facilities, we expect to
fund such expansions through internally generated funds or
borrowings under our credit facility, which is described in
Note 7 to our consolidated financial statements in
Item 8 of this Annual Report. All of our owned domestic
properties are encumbered under our credit facility. Our
facility in Bioggio, Switzerland is encumbered by a mortgage
given to the former shareholder of Hawe Neos as security for
certain indemnification obligations we gave to the former
shareholder of Hawe Neos.

ITEM 3.     Legal
Proceedings

We or our subsidiaries are at any one time
parties to a number of lawsuits or subject to claims arising out
of our respective operations, including products liability,
patent and trademark, or other intellectual property
infringement, contractual liability, workplace safety and
environmental claims and cases, some of which involve claims for
substantial damages. We or our subsidiaries are vigorously
defending lawsuits and other claims against us. Pursuant to the
agreements described above between Apogent and us relating to
the spin-off, we will indemnify Apogent and its subsidiaries
against costs and liabilities associated with past or future
operations of the dental business, and Apogent will indemnify us
and our subsidiaries against costs and liabilities associated
with past or future operations of the laboratory business. See
Note 18 to our consolidated financial statements in
Item 8 of this Annual Report and Item 1 
Business Transactions and Agreements Between Apogent
and SDS.We believe that any liabilities which might
be reasonably expected to result from

12



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##### 



any of our or our subsidiaries pending
cases and claims would not have a material adverse effect on our
results of operations or financial condition, even if we are
unable to recover amounts that we expect to recover with respect
to those pending cases and claims through insurance,
indemnification arrangements, or other sources. There can be no
assurance as to this, however, or that litigation having such a
material adverse effect will not arise in the future.




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

None.

Executive Officers of the Registrant

Set forth below are the names, ages, positions
and experience of our executive officers. All executive officers
hold office at the pleasure of the Board of Directors.

|                       |  |     |    |                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------- |  | --- | -- | ------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                   |  | Age |    | Positions and Experience
|                       |  |     |    |                         
|Floyd W. Pickrell, Jr. |  |     | 58 |                          |  | President and Chief Executive Officer of Sybron
    Dental Specialties, Inc. since August 1993; served as Chairman
    of the Board of our subsidiary Kerr Corporation from August 1993
    to December 2000, and Chairman of the Board of our subsidiary
    Ormco from February 1993 to December 2000; served as President
    of Kerr from August 1993 until November 1998; joined Ormco in
    1978 and served as Ormcos President from March 1983 until
    November 1998; previously served as Ormcos Vice President
    of Marketing and as its National Sales Manager.
|Daniel E. Even         |  |     | 51 |                          |  | President of Ormco since April 1998; Executive
    Vice President and General Manager of Ormco from 1993 until
    November 1998; Director of Allesee Orthodontic Appliances since
    July 1994; joined Ormco in 1979 and held various management
    positions at Ormco including Vice President of Marketing and
    Research & Development.                                                                                                                                                                                                                                 
|Steven J. Semmelmayer  |  |     | 46 |                          |  | President of Kerr Corporation since November
    1998; Executive Vice President and General Manager of Kerr from
    1993 until November 1998 and Director and Chief Executive
    Officer of Pinnacle Products since October 1998; joined Ormco in
    1979 and held various management positions with Ormco including
    National Sales Director prior to being transferred to Kerr.                                                                                                                                                                                         
|Stephen J. Tomassi     |  |     | 51 |                          |  | Vice President-General Counsel and Secretary of
    Sybron Dental Specialties, Inc. since October 2000; joined
    Apogent in 1988 as Corporate Counsel, becoming Assistant General
    Counsel in June 1992, and continued to serve in that role until
    the spin-off; previously in private practice from 1984 to 1988
    with the law firm of Halling & Cayo.                                                                                                                                                                                                             
|John A. Trapani        |  |     | 58 |                          |  | Vice President of Human Resources of Sybron
    Dental Specialties, Inc. since October 2000; joined Ormco in
    October 1983 as Vice President of Human Resources; served, at
    various times, as Vice President of Human Resources for Kerr and
    Ormco; previously served as Manager of Employee Relations and
    Manager of Administration for Rockwell International B-1
    Division; and Manager of Disney University and Manager of
    Employment for Walt Disney Productions Studios and WED
    Enterprises.                                                    

13



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##### 



|                  |  |     |    |                          |  |                                                                                                                                                                                                                                                                                                                                                                                 
|----------------- |  | --- | -- | ------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name              |  | Age |    | Positions and Experience
|                  |  |     |    |                         
|Gregory D. Waller |  |     | 54 |                          |  | Vice President-Finance, Chief Financial Officer
    and Treasurer of Sybron Dental Specialties, Inc. since August
    1993; formerly the Vice President and Treasurer of Kerr, Ormco
    and Metrex; joined Ormco in December 1980 as Vice President and
    Controller; served as Vice President of Kerr European Operations
    from July 1989 to August 1993.                
|Frances B. L. Zee |  |     | 53 |                          |  | Vice President of Regulatory Affairs and Quality
    Assurance of Sybron Dental Specialties, Inc. since October 2000;
    served, at various times, as Vice President of Regulatory
    Affairs and Quality Assurance of Kerr and Ormco; joined Ormco in
    May 1983 as Manager of Quality Assurance and later became
    Director of Regulatory Affairs and Quality Assurance.

PART II



|        |                                                                          
|------- | -------------------------------------------------------------------------
|ITEM 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Shares of our common stock are traded on the New
York Stock Exchange (NYSE) under the symbol
SYD. The following table sets fourth the range of
high and low sales prices per share of common stock as reported
by the NYSE for each quarter of the two most recent fiscal years.

|                 |                |              |   |       |  |  |   |       | 
|---------------- | -------------- | ------------ | - | ----- |  |  | - | ----- | 
|                 |                | High         |   | Low  
|                 |                |              |   |      
|                 |                |             
|                 |                | (in dollars)
|Fiscal year 2003 |                |              |   |       |  |  |   |      
|                 | First Quarter  |              | $ | 15.70 |  |  | $ | 11.41 | 
|                 | Second Quarter |              |   | 18.06 |  |  |   | 14.50 | 
|                 | Third Quarter  |              |   | 24.00 |  |  |   | 16.90 | 
|                 | Fourth Quarter |              |   | 26.40 |  |  |   | 22.76 | 
|Fiscal year 2002 |                |              |   |       |  |  |   |      
|                 | First Quarter  |              | $ | 21.80 |  |  | $ | 18.00 | 
|                 | Second Quarter |              |   | 22.39 |  |  |   | 18.00 | 
|                 | Third Quarter  |              |   | 22.60 |  |  |   | 17.69 | 
|                 | Fourth Quarter |              |   | 18.50 |  |  |   | 12.30 | 

Since our inception, we have not paid any
dividends on our Common Stock and have no current intention to
pay cash dividends on our Common Stock. See
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources,and Note 7
to our consolidated financial statements contained in
Item 8 of this Annual Report, for a description of certain
restrictions on our ability to pay dividends. Subject to such
limitations, any future dividends will be at the discretion of
our Board of Directors and will depend upon, among other
factors, our earnings, financial condition and other
requirements.

As of December 4, 2003, there were 634
record holders of our common stock (excluding participants in
securities position listings).

14



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##### 





|        |                        
|------- | -----------------------
|ITEM 6. | Selected Financial Data

The following table sets forth our selected
consolidated financial information for each of the five years in
the period ended September 30, 2003. This selected
financial information should be read in conjunction with
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and our consolidated financial statements and the notes thereto
contained in Item 8 of this Annual Report.

|                                       |                                                 |                                           |   |         |  |         |   |         |  |         |   |         |  |  |   |         |  |  |   |         | 
|-------------------------------------- | ----------------------------------------------- | ----------------------------------------- | - | ------- |  | ------- | - | ------- |  | ------- | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                       |                                                 |                                          
|                                       |                                                 | Year Ended September 30,                 
|                                       |                                                 |                                          
|                                       |                                                 | 2003                                      |   | 2002    |  | 2001(a) |   | 2000(a) |  | 1999(a)
|                                       |                                                 |                                           |   |         |  |         |   |         |  |        
|                                       |                                                 |                                          
|                                       |                                                 | (in thousands, except for per share data)
|Statement of Income Data:              |                                                 |                                           |   |         |  |         |   |         |  |         |   |         |  |  |   |         |  |  |   |        
|                                       | Net sales                                       |                                           | $ | 526,391 |  |         | $ | 456,666 |  |         | $ | 439,547 |  |  | $ | 423,140 |  |  | $ | 392,249 | 
|                                       | Apogent charges(b)                              |                                           |   |        |  |         |   |        |  |         |   | 730     |  |  |   | 2,979   |  |  |   | 4,228   | 
|                                       | Net income(c)                                   |                                           |   | 57,452  |  |         |   | 31,599  |  |         |   | 37,631  |  |  |   | 42,056  |  |  |   | 46,754  | 
|                                       | Basic earnings per share(d)                     |                                           | $ | 1.51    |  |         | $ | 0.83    |  |         | $ | 1.05    |  |  | $ | 1.20    |  |  | $ | 1.33    | 
|                                       | Diluted earnings per share(d)                   |                                           | $ | 1.46    |  |         | $ | 0.81    |  |         | $ | 1.01    |  |  | $ |        |  |  | $ |        | 
|Balance Sheet Data (at end of period): |                                                 |                                           |   |         |  |         |   |         |  |         |   |         |  |  |   |         |  |  |   |        
|                                       | Advances and loans to Apogent                   |                                           | $ |        |  |         | $ |        |  |         | $ |        |  |  | $ | 77,762  |  |  | $ | 56,777  | 
|                                       | Total assets                                    |                                           |   | 611,659 |  |         |   | 561,457 |  |         |   | 525,327 |  |  |   | 532,934 |  |  |   | 500,044 | 
|                                       | Long-term borrowings, excluding current portion |                                           |   | 274,008 |  |         |   | 337,644 |  |         |   | 321,536 |  |  |   | 298,482 |  |  |   | 283,477 | 
|                                       | Stockholders equity(e)                         |                                           |   | 207,985 |  |         |   | 131,143 |  |         |   | 93,526  |  |  |   | 148,368 |  |  |   | 150,534 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Prior to our December 11, 2000 spin-off from
    Sybron International Corporation, which is now known as Apogent
    Technologies Inc., we were a wholly-owned subsidiary of Sybron
    International. Our results of operations prior to that time may
    not be indicative of the results we would have experienced had
    we been a stand alone company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(b) | Represents an allocation of Apogents
    corporate office, general and administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) | On October 1, 2002, we adopted the
    provisions of the Statement of Accounting Financial Standards
    No. 142, and accordingly, discontinued amortizing goodwill
    and certain other intangible assets in fiscal 2003. Our fiscal
    2003 results also include a $0.5 million (after tax) gain
    on the sale of our San Diego facility and a $0.9 million
    one-time benefit of a tax settlement in Canada. Includes
    refinancing expenses of approximately $13.0 million
    ($7.9 million after tax) associated with the refinancing of
    our credit facility and restructuring charges of approximately
    $3.7 million ($2.4 million after tax) in 2002 for the
    consolidation of our Professional Dental segments European
    operations into our Bioggio, Switzerland facility; a
    $2.4 million ($1.5 million after tax) restructuring
    charge related to the closing of Ormcos San Diego,
    California facility in fiscal 2001; a restructuring charge of
    $9.3 million ($5.8 million after tax) in 2000 for the
    closing of Metrexs Parker, Colorado facility, and the
    restructuring of Ormcos operation in San Diego and
    Amersfort, as well as inventory and related charges for product
    exits in 2000 in all three of our then existing business
    segments; and a charge of $1.4 million ($0.9 million
    after tax) in 1999 for merger, transaction and integration
    expenses associated with the mergers with Pinnacle Products of
    Wisconsin, Inc. and LRS Acquisition Corp.
|   
|(d) | Earnings per share data for the years ended
    September 30, 1999 and 2000 was computed using 35,108,649
    shares, the number of shares we had outstanding on
    December 11, 2000, the date of our spin-off, as the
    outstanding average number of shares for each year. Diluted
    earnings per share for the years ended September 30, 1999
    and 2000 have been omitted, as no Sybron Dental Specialties,
    Inc. stock options existed prior to the date of the spin-off,
    making any calculation of diluted earnings per share for the
    years ended September 30, 1999 and 2000 meaningless.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(e) | The reduction in stockholders equity as of
    September 30, 2001 primarily reflects the payment of
    $67.9 million in cash dividends to Apogent as a result of
    the spin-off, and the settlement of all intercompany loans and
    advances with Apogent by way of a non-cash dividend of
    approximately $78.2 million as a result of the spin-off,
    partially offset by the net proceeds from the June 8, 2001
    underwritten stock offering of approximately $50.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

15



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

General

We are a leading global manufacturer and marketer
of a broad range of consumable dental products and related small
equipment, and a manufacturer and distributor of products for
use in infection prevention in both the medical and dental
markets. Prior to December 11, 2000, we were a wholly-owned
subsidiary of Sybron International Corporation, which is now
known as Apogent Technologies Inc. On December 11, 2000,
Sybron International spun off its dental business by way of a
pro rata distribution to its shareholders of all of our
outstanding common stock together with related preferred stock
purchase rights. As a result of the spin-off, we became an
independent, publicly traded company.

On October 1, 2002, we consolidated our
Infection Prevention business segment into our Professional
Dental business segment to reduce costs and coordinate marketing
efforts for our infection prevention products thereby reducing
the number of our business segments from three to two. Our two
business segments are named Professional Dental and
Orthodontics. In addition to re-aligning our business segments,
at the commencement of the 2003 fiscal year we transferred the
net sales of our stainless steel endodontic product line from
the Professional Dental segment to the Orthodontics segment.
While the costs for the sales and marketing of those products
were handled during fiscal year 2002 by the Orthodontics
segment, the net sales were reported in our Professional Dental
business segment. As a result of this transfer, the operating
results of the Professional Dental segment for fiscal year 2003
reflects the decrease of the sales of the endodontic product
line from the prior year fiscal period, while the operating
results of the Orthodontic segment reflects the increase in net
sales in fiscal year 2003 from the prior year fiscal period.
While the transfer impacted the respective results of operations
we reported for the Professional Dental and Orthodontics
segments for fiscal 2003, there was no impact on our reported
consolidated results of operations for the fiscal year.

All financial information presented in this
annual report combines the historical information of the
Infection Prevention and Professional Dental business segments
into the Professional Dental reporting segment. We did not
adjust the prior period information reported for our
Professional Dental and Orthodontics segments to reflect the
transfer of the endodontic product line.

The following discussion should be read in
conjunction with our consolidated financial statements and the
accompanying notes contained in Item 8 of this Annual
Report.

Results of Operations



| |         
| | --------
| | Overview

Net sales in 2003 and 2002 increased by 15.3% and
3.9%, respectively, from the corresponding prior year period.
Included in the 15.3% increase in net sales for the year ended
September 30, 2003 is internal growth of 8.4%, a favorable
foreign currency translation of 4.7%, with the remaining sales
increase predominately attributed to acquisitions. Included in
the 3.9% net sales increase for the year ended
September 30, 2002 was a 5.2% increase related to
acquisitions, and a 0.1% increase due to favorable foreign
currency fluctuations. The increase was partially offset by a
negative 1.4% internal growth in fiscal 2002.

Our domestic sales for the fiscal year ended
September 30, 2003 were $299.5 million, representing
an increase of $31.5 million or 11.8% over the comparable
prior year period. International sales increased by
$38.2 million, or 20.3%, to $226.9 million for the
year ended September 30, 2003 compared to the same period
in the prior year. Foreign currency fluctuations in the year
ended September 30, 2003 represented $21.5 million of
the increase in international sales over the comparable prior
year period.

We believe that our increase in revenue is a
result, in part, of the changes we made throughout our
organization in the second half of fiscal 2002, the introduction
of our new LED curing light, the increase in our endodontic
sales force and the increased average tenure of the sales force
in the United States of our Orthodontics segment. We expect to
see continued revenue growth in fiscal 2004; although we
anticipate the revenue related to sales of our new LED curing
light will decrease and we anticipate the weakening economy in
Latin America and Asia, as well as reductions to regulatory
health reimbursement programs in Germany, to

16



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##### 



have a somewhat negative impact on the
Orthodontic segment sales for fiscal 2004. Additionally, we
expect to see continued pricing pressures in a competitive
environment. Lastly, we are continuing to incur expenses in
association with Sarbanes-Oxley compliance efforts, both in
terms of one-time costs as well as ongoing expenses.




| |                                                                                
| | -------------------------------------------------------------------------------
| | Year Ended September 30, 2003 Compared
    to the Year Ended September 30, 2002



| |          
| | ---------
| | Net Sales

|                    |                 |                |         |         |  |   |         |         | 
|------------------- | --------------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|Net Sales           |                 | 2003           |         | 2002   
|                    |                 |                |         |        
|                    |                 |               
|                    |                 | (in thousands)
|Professional Dental |                 | $              | 307,608 |         |  | $ | 279,523 |        
|Orthodontics        |                 |                | 218,783 |         |  |   | 177,143 |        
|                    |                 |                |         |         |  |   |         |        
|                    | Total Net Sales |                | $       | 526,391 |  |   | $       | 456,666 | 
|                    |                 |                |         |         |  |   |         |        

Overall Company.Net
sales for the twelve months ended September 30, 2003
increased by $69.7 million, or 15.3%, from the
corresponding 2002 fiscal year.

Professional Dental.Increased net sales in the
Professional Dental segment resulted primarily from:
(a) net sales of new products (approximately
$16.2 million), (b) favorable foreign currency
fluctuations (approximately $12.6 million), (c) the
net sales of products from acquired companies (approximately
$6.9 million), (d) increased net sales of existing
products (approximately $4.2 million) and (e) reduced
rebate expense (approximately $0.7 million). The increase
in net sales was offset by a decrease in net sales due to the
transfer of the endodontic product sales to the Orthodontics
segment, which contributed approximately $12.5 million in
net sales to the Professional Dental segment in the comparable
prior year period.

Orthodontics.Increased net sales in the Orthodontics segment resulted
primarily from: (a) increased net sales of existing
products (approximately $22.6 million), (b) an
increase in net sales due to the transfer of the endodontic
product sales from the Professional Dental segment, which
contributed approximately $11.1 million in net sales to the
Orthodontics segment in fiscal 2003, (c) favorable foreign
currency fluctuations (approximately $8.9 million) and
(d) net sales of new products (approximately
$4.6 million). The increase in net sales was offset by
increased rebate expense (approximately $5.6 million).





| |             
| | ------------
| | Gross Profit

|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |      |  
|------------------- | ------------------ | ---------------------------------- | ------- | ---------- |  | ---- | ---- | ---------- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                    |                    |                                    |         | Percent of |  |      |      | Percent of
|Gross Profit        |                    | 2003                               |         | Net Sales  |  | 2002 |      | Net Sales 
|                    |                    |                                    |         |            |  |      |      |           
|                    |                    |                                   
|                    |                    | (in thousands, except percentages)
|Professional Dental |                    | $                                  | 168,705 |            |  |      | 54.8 | %          |   | $ | 157,932 |         |  |  | 56.5 | %   
|Orthodontics        |                    |                                    | 122,084 |            |  |      | 55.8 |            |   |   | 97,891  |         |  |  | 55.3 |     
|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |     
|                    | Total Gross Profit |                                    | $       | 290,789    |  |      |      | 55.2       | % |   | $       | 255,823 |  |  |      | 56.0 | %
|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |     

Overall Company.Gross profit for the twelve months
ended September 30, 2003 increased by $35.0 million or
13.7% from the corresponding fiscal 2002 period.

Professional Dental.Increased gross profit in the
Professional Dental segment resulted primarily from:
(a) unit volume relating to new products (approximately
$9.0 million), (b) favorable foreign currency
fluctuations (approximately $6.3 million), (c) margins
relating to the net sales of products from acquired companies
(approximately $4.2 million), (d) increased net sales
of existing products (approximately $2.7 million) and
(e) decreased rebate expense (approximately
$0.7 million). The increase in gross profit was partially
offset by: (a) decreased gross profit due to the transfer
of the endodontic product line to the Orthodontics segment,
which contributed approximately $7.8 million in gross
profit to the Professional Dental segment in the comparable
prior year period, (b) unfavorable manufacturing variances
(approximately $2.2 million), (c) a change in product
mix (approximately $1.2 million), (d) increased
royalty expense

17



---



##### 



(approximately $0.8 million) and
(e) inventory adjustments (approximately $0.1 million,
of which approximately $0.2 million is due to standard cost
revisions, an increase in obsolescence of approximately
$0.1 million, partially offset by physical inventory
adjustments of approximately $0.2 million). The decrease in
gross margin percent is attributable to the transfer of the
endodontic product sales to the Orthodontics segment, product
mix and unfavorable manufacturing variances from decreased
manufacturing volumes in certain facilities due to our increased
focus on inventory management.


Orthodontics.Increased gross profit in the
Orthodontics segment resulted primarily from: (a) increased
net sales of existing products (approximately
$12.0 million), (b) favorable foreign currency
fluctuations (approximately $8.8 million),
(c) increased gross profit due to the transfer of the
endodontic product line from the Professional Dental segment,
which contributed approximately $6.5 million in gross
profit to the Orthodontics segment in fiscal 2003,
(d) favorable manufacturing variances (approximately
$2.8 million) and (e) unit volume relating to new
products (approximately $2.8 million). The increase in
gross profit was partially offset by: (a) increased rebate
expense (approximately $5.6 million), (b) increased
royalty expense (approximately $1.6 million),
(c) inventory adjustments (approximately $1.1 million,
of which approximately $0.5 million is due to physical
inventory adjustments, an increase in obsolescence of
approximately $0.4 million and standard cost revisions of
approximately $0.2 million) and (d) a change in
product mix (approximately $0.4 million).



| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

|                                             |                                                    |                                    |         |            |  |      |      |            |   |   |        |         |  |  |      |      |  
|-------------------------------------------- | -------------------------------------------------- | ---------------------------------- | ------- | ---------- |  | ---- | ---- | ---------- | - | - | ------ | ------- |  |  | ---- | ---- | -
|                                             |                                                    |                                    |         | Percent of |  |      |      | Percent of
|Selling, General and Administrative Expenses |                                                    | 2003                               |         | Net Sales  |  | 2002 |      | Net Sales 
|                                             |                                                    |                                    |         |            |  |      |      |           
|                                             |                                                    |                                   
|                                             |                                                    | (in thousands, except percentages)
|Professional Dental                          |                                                    | $                                  | 100,497 |            |  |      | 32.7 | %          |   | $ | 96,736 |         |  |  | 34.6 | %   
|Orthodontics                                 |                                                    |                                    | 78,322  |            |  |      | 35.8 |            |   |   | 66,881 |         |  |  | 37.8 |     
|                                             |                                                    |                                    |         |            |  |      |      |            |   |   |        |         |  |  |      |     
|                                             | Total Selling, General and Administrative Expenses |                                    | $       | 178,819    |  |      |      | 34.0       | % |   | $      | 163,617 |  |  |      | 35.8 | %
|                                             |                                                    |                                    |         |            |  |      |      |            |   |   |        |         |  |  |      |     

Overall Company.Selling, general and administrative
expenses for the fiscal year ended September 30, 2003
increased by $15.2 million or 9.3% from the corresponding
fiscal 2002 period.

Professional Dental.Increased selling, general and
administrative expenses in the Professional Dental segment
resulted primarily from: (a) increased general and
administrative expenses of approximately $6.9 million
primarily attributable to higher incentive compensation related
to the improved performance in fiscal 2003 over fiscal 2002,
(b) an increase in expenses relating to foreign currency
fluctuations (approximately $3.9 million) and
(c) expenses of acquired companies (approximately
$3.0 million). The increase in selling, general and
administrative expenses was partially offset by:
(a)  decreased amortization expense of goodwill and other
intangible assets (approximately $6.3 million),
(b) the absence of restructuring charges in fiscal 2003
(approximately $3.3 million), (c) decreased research
and development expenses (approximately $0.3 million) and
(d) decreased selling and marketing expenses (approximately
$0.1 million).

Orthodontics.Increased selling, general and
administrative expenses in the Orthodontics segment resulted
primarily from: (a) increased selling and marketing
expenses (approximately $6.2 million), consistent with the
increase in sales, (b) increased general and administrative
expenses of approximately $6.0 million primarily
attributable to higher incentive compensation related to the
improved performance in fiscal 2003 over fiscal 2002 and
(c) increased expenses related to foreign currency
fluctuations (approximately $2.0 million). The increase in
selling, general and administrative expenses was partially
offset by: (a) a decrease in amortization expense of
goodwill and other intangible assets (approximately
$2.6 million) and (b) decreased research and
development expenses (approximately $0.2 million).



| |           
| | ----------
| | Other, Net

Included in other, net for the fiscal year ended
September 30, 2003 is a gain from the sale of our San Diego
facility for approximately $0.8 million.

18



---



##### 





| |                              
| | -----------------------------
| | Depreciation and Amortization

Depreciation and amortization of goodwill (prior
to October 1, 2002) and other intangible assets is
allocated among the cost of sales, selling, general and
administrative expenses and other expense. Amortization of
goodwill and certain other intangible assets decreased
$8.9 million in fiscal 2003 compared to the same period in
the prior year primarily due to our discontinuing the
amortization of goodwill and certain other intangible assets in
accordance with SFAS No. 142. Depreciation increased by
$0.6 million compared to the same period in the prior year.



| |                 
| | ----------------
| | Operating Income

|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |      |  
|------------------- | ---------------------- | ---------------------------------- | ------ | ---------- |  | ---- | ---- | ---------- | - | - | ------ | ------ |  |  | ---- | ---- | -
|                    |                        |                                    |        | Percent of |  |      |      | Percent of
|Operating Income    |                        | 2003                               |        | Net Sales  |  | 2002 |      | Net Sales 
|                    |                        |                                    |        |            |  |      |      |           
|                    |                        |                                   
|                    |                        | (in thousands, except percentages)
|Professional Dental |                        | $                                  | 68,208 |            |  |      | 22.2 | %          |   | $ | 61,196 |        |  |  | 21.9 | %   
|Orthodontics        |                        |                                    | 43,762 |            |  |      | 20.0 |            |   |   | 31,010 |        |  |  | 17.5 |     
|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |     
|                    | Total Operating Income |                                    | $      | 111,970    |  |      |      | 21.3       | % |   | $      | 92,206 |  |  |      | 20.2 | %
|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |     

As a result of the foregoing, operating income
for the fiscal year ended September 30, 2003 increased by
21.4% or $19.8 million from operating income for the
corresponding 2002 period.



| |                 
| | ----------------
| | Interest Expense

Interest expense was $21.6 million in 2003,
a decrease of $4.3 million from the corresponding 2002
period. The decrease resulted from reduced average debt balances
from $334.8 million in fiscal 2002 to $300.9 million
in fiscal 2003, and reduced average interest rates from 7.0% in
fiscal 2002 to 6.4% in fiscal 2003 on our credit facility.



| |             
| | ------------
| | Income Taxes

Taxes on income in 2003 were $32.1 million,
or 35.9% of income before taxes, an increase of
$11.4 million from the prior year taxes on income of
$20.7 million, or 39.0% of income before taxes. Excluding a
one-time benefit of a tax settlement in Canada of
$0.9 million, the taxes on income were $33.0 million
in 2003. The increase in taxes was primarily due to higher
taxable earnings, partially offset by the decrease in our
effective tax rate due to lower foreign tax rates. We expect our
tax rate to decrease in fiscal year 2004, due to our European
restructuring.



| |           
| | ----------
| | Net Income

As a result of the foregoing, we had net income
of $57.5 million in 2003, as compared to net income of
$31.6 million in the corresponding 2002 period.



| |                   
| | ------------------
| | Earnings Per Share

Basic earnings per share for 2003 were $1.51 per
share, while diluted earnings per share were $1.46 per share.
For 2002, basic earnings per share were $0.83, while diluted
earnings per share were $0.81 per share.

Year Ended September 30, 2002 Compared
to the Year Ended September 30, 2001



| |          
| | ---------
| | Net Sales

|                    |                 |                |         |         |  |   |         |         | 
|------------------- | --------------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|Net Sales           |                 | 2002           |         | 2001   
|                    |                 |                |         |        
|                    |                 |               
|                    |                 | (in thousands)
|Professional Dental |                 | $              | 279,523 |         |  | $ | 260,964 |        
|Orthodontics        |                 |                | 177,143 |         |  |   | 178,583 |        
|                    |                 |                |         |         |  |   |         |        
|                    | Total Net Sales |                | $       | 456,666 |  |   | $       | 439,547 | 
|                    |                 |                |         |         |  |   |         |        

19



---



##### 



Overall Company.Net
sales for the twelve months ended September 30, 2002
increased by $17.1 million or 3.9% from the corresponding
2001 fiscal year.

Professional Dental.Increased net sales in the
Professional Dental segment resulted primarily from:
(a) the net sales of products from acquired companies
(approximately $22.7 million), (b) net sales of new
products (approximately $4.3 million), (c) favorable
foreign currency fluctuations (approximately $1.7 million)
and (d) reduced rebate expense (approximately
$1.1 million). The increase in net sales was partially
offset by: (a) decreased net sales of existing products
(approximately $10.5 million) and (b) the loss of the
net sales of the prior years exited product lines
(approximately $0.8 million).

Orthodontics.Decreased net sales in the
Orthodontics segment resulted primarily from: (a) decreased
net sales of existing products (approximately
$2.9 million), (b) the loss of the net sales of the
prior years exited product lines (approximately
$1.3 million) and (c) increased rebate expense
(approximately $1.3 million). The decrease in net sales was
partially offset by: (a) net sales of new products
(approximately $3.1 million), (b) favorable foreign
currency fluctuations (approximately $0.9 million) and
(c) the net sales of products from an acquired company
(approximately $0.1 million).



| |             
| | ------------
| | Gross Profit

|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |      |  
|------------------- | ------------------ | ---------------------------------- | ------- | ---------- |  | ---- | ---- | ---------- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                    |                    |                                    |         | Percent of |  |      |      | Percent of
|Gross Profit        |                    | 2002                               |         | Net Sales  |  | 2001 |      | Net Sales 
|                    |                    |                                    |         |            |  |      |      |           
|                    |                    |                                   
|                    |                    | (in thousands, except percentages)
|Professional Dental |                    | $                                  | 157,932 |            |  |      | 56.5 | %          |   | $ | 146,137 |         |  |  | 56.0 | %   
|Orthodontics        |                    |                                    | 97,891  |            |  |      | 55.3 |            |   |   | 103,249 |         |  |  | 57.8 |     
|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |     
|                    | Total Gross Profit |                                    | $       | 255,823    |  |      |      | 56.0       | % |   | $       | 249,386 |  |  |      | 56.7 | %
|                    |                    |                                    |         |            |  |      |      |            |   |   |         |         |  |  |      |     

Overall Company.Gross profit for the twelve months
ended September 30, 2002 increased by $6.4 million or
2.6% from the corresponding fiscal 2001 period.

Professional Dental.Increased gross profit in the
Professional Dental segment resulted primarily from:
(a) margins relating to the net sales of products from
acquired companies (approximately $11.5 million),
(b) unit volume relating to new products (approximately
$2.6 million), (c) favorable manufacturing variances
(approximately $1.8 million), (d) favorable foreign
currency fluctuations (approximately $1.6 million),
(e) decreased rebate expense (approximately
$1.1 million), (f) a favorable product mix
(approximately $0.6 million) and (g) decreased royalty
expense (approximately $0.2 million). The increase in gross
profit was partially offset by: (a) a decrease in the net
sales of existing products (approximately $6.0 million),
(b) inventory adjustments (approximately $1.2 million,
of which approximately $0.8 million due to physical
inventory adjustments and approximately $0.4 million is related
to standard cost revisions) and (c) margins lost from the
prior years exited products lines (approximately
$0.4 million).

Orthodontics.Decreased gross profit in the
Orthodontics segment resulted primarily from:
(a) unfavorable manufacturing variances (approximately
$4.4 million), (b) decreased net sales of existing
products (approximately $1.8 million), (c) increased
rebate expense (approximately $1.3 million),
(d) margins lost from the prior years exited products
(approximately $0.8 million) and (e) increased royalty
expense (approximately $0.5 million). The decrease in gross
profit margins were partially offset by: (a) unit volume
relating to new products (approximately $1.9 million),
(b) favorable foreign currency fluctuations (approximately
$0.9 million), (c) a favorable product mix
(approximately $0.4 million), (d) margins relating to
net sales of products from an acquired company (approximately
$0.1 million) and (e) inventory adjustments
(approximately $0.1 million, of which approximately
$0.7 million is related to physical inventory adjustments,
partially offset by an decrease in obsolescence of approximately
$0.7 million and approximately $0.1 million decrease
in standard cost revisions).

20



---



##### 







| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

|                                             |                                                    |                                    |        |            |  |      |      |            |   |   |        |         |  |  |      |      |  
|-------------------------------------------- | -------------------------------------------------- | ---------------------------------- | ------ | ---------- |  | ---- | ---- | ---------- | - | - | ------ | ------- |  |  | ---- | ---- | -
|                                             |                                                    |                                    |        | Percent of |  |      |      | Percent of
|Selling, General and Administrative Expenses |                                                    | 2002                               |        | Net Sales  |  | 2001 |      | Net Sales 
|                                             |                                                    |                                    |        |            |  |      |      |           
|                                             |                                                    |                                   
|                                             |                                                    | (in thousands, except percentages)
|Professional Dental                          |                                                    | $                                  | 96,736 |            |  |      | 34.6 | %          |   | $ | 82,610 |         |  |  | 31.7 | %   
|Orthodontics                                 |                                                    |                                    | 66,881 |            |  |      | 37.8 |            |   |   | 67,225 |         |  |  | 37.6 |     
|                                             |                                                    |                                    |        |            |  |      |      |            |   |   |        |         |  |  |      |     
|                                             | Total Selling, General and Administrative Expenses |                                    | $      | 163,617    |  |      |      | 35.8       | % |   | $      | 149,835 |  |  |      | 34.1 | %
|                                             |                                                    |                                    |        |            |  |      |      |            |   |   |        |         |  |  |      |     

Overall Company.Selling, general and administrative
expenses for the fiscal year ended September 30, 2002
increased by $13.8 million or 9.2% from the corresponding
fiscal 2001 period.

Professional Dental.Increased selling, general and
administrative expenses in the Professional Dental segment
resulted primarily from: (a) expenses related to
acquisitions (approximately $8.5 million),
(b) increased restructuring charges (approximately
$3.3 million), (c) increased selling and marketing
expenses (approximately $1.9 million), (d) increased
amortization expense of goodwill and other intangible assets
(approximately $1.1 million) and (e) increased
research and development expenses (approximately $0.4 million).
The increase in selling, general and administrative expenses
was partially offset by: (a) a decrease in general and
administrative expenses (approximately $1.0 million) and
favorable foreign currency fluctuations (approximately
$0.1 million).

Orthodontics.Decreased selling, general and
administrative expenses in the Orthodontics segment resulted
primarily from: (a) a decrease in general and
administrative expenses (approximately $2.7 million),
(b) favorable foreign currency fluctuations (approximately
$0.7 million) and (c) decreased amortization expense
of goodwill and other intangible assets (approximately
$0.1 million). The decrease in selling, general and
administrative expenses was partially offset by:
(a) increased selling and marketing expenses (approximately
$2.9 million), (b) increased research and development
expenses (approximately $0.2 million) and (c) expenses
related to an acquisition (approximately $0.1 million).



| |                              
| | -----------------------------
| | Depreciation and Amortization

Depreciation and amortization expense of goodwill
and other intangible assets is allocated among cost of sales,
selling, general and administrative expenses and other expense.
Depreciation and amortization expense of goodwill and other
intangible assets increased $2.0 million in 2002 from the
prior year period due to additional amortization from the
step-up of assets, goodwill and intangibles recorded from the
various acquisitions, as well as routine capital expenditures.



| |                 
| | ----------------
| | Operating Income

|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |      |  
|------------------- | ---------------------- | ---------------------------------- | ------ | ---------- |  | ---- | ---- | ---------- | - | - | ------ | ------ |  |  | ---- | ---- | -
|                    |                        |                                    |        | Percent of |  |      |      | Percent of
|Operating Income    |                        | 2002                               |        | Net Sales  |  | 2001 |      | Net Sales 
|                    |                        |                                    |        |            |  |      |      |           
|                    |                        |                                   
|                    |                        | (in thousands, except percentages)
|Professional Dental |                        | $                                  | 61,196 |            |  |      | 21.9 | %          |   | $ | 63,527 |        |  |  | 24.3 | %   
|Orthodontics        |                        |                                    | 31,010 |            |  |      | 17.5 |            |   |   | 36,024 |        |  |  | 20.2 |     
|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |     
|                    | Total Operating Income |                                    | $      | 92,206     |  |      |      | 20.2       | % |   | $      | 99,551 |  |  |      | 22.6 | %
|                    |                        |                                    |        |            |  |      |      |            |   |   |        |        |  |  |      |     

As a result of the foregoing, operating income
for the fiscal year ended September 30, 2002 decreased by
7.4% or $7.3 million from operating income for the
corresponding 2001 period.



| |                 
| | ----------------
| | Interest Expense

Interest expense was $25.8 million in 2002,
a decrease of $7.6 million from the corresponding 2001
period. The decrease resulted from reduced average debt balances
and reduced average interest rates on our credit facility.

21



---



##### 





| |                    
| | -------------------
| | Refinancing Expense

In the third quarter of 2002, we terminated our
prior credit agreement and entered into a new syndicated credit
facility. As a result of the refinancing activity, we recorded
the following refinancing expenses; (a) an expense of
approximately $4.5 million related to the write-off of the
deferred financing fees related to our prior credit agreement,
(b) a loss on the terminated interest rate swaps that could
not be re-assigned to our new credit facility of approximately
$3.8 million (representing the fair value of the swaps at
the termination date), (c) a non-cash loss on the remaining
interest rate swaps that were re-assigned to the new credit
facility of approximately $3.2 million (representing the
fair value of the remaining swaps at the date of the refinancing
that were reclassified from accumulated other comprehensive
income (loss), and (d) a prepayment penalty primarily due
to a penalty related to our terminated tranche B term loan
of approximately $1.5 million. The refinancing expense of
approximately $0.8 million in fiscal year 2001 represents
the write-off of the associated deferred financing fees as a
result of the termination of Apogents credit agreement due
to the spin-off of SDS.



| |             
| | ------------
| | Income Taxes

Taxes on income in 2002 were $20.7 million,
or 39.5% of income before taxes, a decrease of $4.5 million
from the prior year taxes on income of $25.2 million, or
40.1% of income before taxes. Excluding a one-time
$0.3 million tax charge related to the 2002 restructuring,
the taxes on income were $20.4 million in 2002.



| |           
| | ----------
| | Net Income

As a result of the foregoing, we had net income
of $31.6 million in 2002, as compared to net income of
$37.6 million in the corresponding 2001 period.



| |                   
| | ------------------
| | Earnings Per Share

Basic earnings per share for 2002 was $0.83 per
share, while diluted earnings per share was $0.81 per share. For
2001, basic earnings per share was $1.05, while diluted earnings
per share was $1.01 per share.



| |                             
| | ----------------------------
| | Critical Accounting Policies

We believe the following critical accounting
policies, among others, affect significant judgments and
estimates used in the preparation of our consolidated financial
statements. We base our estimates and judgments on historical
experience and on various other factors that we believe to be
reasonable under the circumstances, the results of which form
the basis for determining the carrying values of assets and
liabilities that are not readily apparent from other sources and
are inherently uncertain. As a result, changes in estimates,
assumptions and general market conditions on which our judgments
and estimates are based, could cause actual results to differ
materially from future expected results.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Inventories
    Inventories are stated at the lower of cost or market using the
    first-in, first-out method. We estimate customer demand, prices
    for products and future inventory usage in evaluating the
    adequacy of inventory reserves. Increases in inventory reserves
    are charged to cost of goods sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Intangible and Long-Lived
    Assets Our business
    acquisitions typically result in goodwill and other intangible
    assets. We assess the impairment of identifiable intangibles,
    long-lived assets and related goodwill annually, or whenever
    events or changes in circumstances indicate that the carrying
    value may not be recoverable. Our judgments regarding the
    existence of impairment indicators and future cash flows related
    to intangible assets are based on operational performance of our
    acquired businesses, market conditions and other factors. Future
    events could cause us to conclude that impairment indicators
    exist and that goodwill associated with our acquired businesses
    is impaired. Any resulting impairment loss could have an adverse
    impact on our results of operations.
|
| |  | Pension and Other Postretirement
    Benefits We have two
    non-contributory defined benefit pension plans that cover all
    regular United States based employees with more than five years
    of service. Our accumulated benefit obligation, the fair value
    of plan assets and the amount of annual pension cost are                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

22



---



##### 



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | calculated based on a number of actuarial
    assumptions including an expected long-term return on plan
    assets, assumed rates of compensation increase and the discount
    rate used to calculate the actuarial present value of benefit
    obligations to be paid in the future. In developing these
    assumptions, we evaluate input from our actuaries as well as
    information available from the securities markets. The
    assumptions and factors used by us may differ materially from
    actual results due to changing market conditions, earlier or
    later retirement ages or longer or shorter life spans of
    participants. These differences may result in a significant
    impact to the amount of pension obligation or expense recorded
    by us. The actuarial assumptions are evaluated annually as of
    the beginning of each fiscal year.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At October 1, 2003, the discount rate was
    6.0%. To the extent the discount rate increases or decreases,
    the projected pension obligation is decreased or increased,
    accordingly. The estimated effect of a 0.25 percent
    decrease in the discount rate would increase the projected
    pension obligation by $2.5 million and increase annual
    pension expense by $0.4 million.                                                                                                                                                                                                   
|
| | The expected long-term rate of return on the plan
    assets is the weighted average rate of the long-term investment
    return expected on those assets. To the extent the actual rate
    of return on assets realized over the course of a year is
    greater than the assumed rate, that years annual pension
    expense is not affected. Rather, the gain would reduce future
    pension expense over a period of approximately 12 to 18 years.
    As of October 1, 2003, we utilized 8.75% as the expected
    long-term rate of return on plan assets.                                  
|
| | The assumed average rate of compensation increase
    is the average annual compensation increase expected over the
    remaining employment periods for the participating employees. At
    October 1, 2003, we utilized a rate of 4.0 percent.
    This rate is utilized principally in calculating the pension
    obligation and annual pension expense. The estimated effect of a
    0.25 percent increase in the assumed rate of compensation
    increase would increase the projected pension obligation by
    $0.4 million and increase annual pension expense by
    $0.1 million.       
|
| | Based on market conditions, and based on
    information from our actuaries and investment advisors, we
    reduced, during the quarter ended June 30, 2003, our
    discount rate from 7.25% to 6.0% and the expected return on plan
    assets from 10.00% to 8.75%. We maintained our expected rate of
    compensation increase at 4.00%. To compensate for the lowered
    assumptions, we made a $10.3 million contribution to our
    pension fund during the quarter ended June 30, 2003. The
    change in assumptions will result in an increase in our pension
    expense in fiscal 2004.

Acquisitions

As discussed in Item 1 
Business Research and Development, we have
maintained an active program of development and introduction of
new products. We believe that introducing new products is
important to maintain our competitive position. We have also
pursued numerous acquisition opportunities, completing 28
acquisitions between 1993 and 2003. Acquisitions completed since
the beginning of fiscal 2002 are as follows:

|                     |  |             |      |             |  |                                                                                                                             
|-------------------- |  | ----------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------
|                     |  | Acquisition |      |            
|Company              |  | Date        |      | Description
|                     |  |             |      |            
|SpofaDental a.s      |  |             | 8/03 |             |  | Manufacturer of consumable dental supplies                                                                                  
|Surgical Acuity, Inc |  |             | 2/02 |             |  | Manufacturer of magnification lenses and
    fiberoptic lighting systems used for illumination during
    dental procedures

These acquisitions included in our Professional
Dental segment are consistent with our strategy of acquiring
product lines that can be manufactured in existing facilities,
sold through existing sales and distribution networks or that
expand our geographic reach. We intend to continue to seek out
acquisition candidates consistent with our strategy. However,
there can be no assurance of the number or size of future
acquisitions.

23



---



##### 



Restructuring Charges

In September 2002, we recorded a restructuring
charge of approximately $3.7 million ($2.4 million
after tax). The charge was primarily composed of severance and
termination costs associated with the 71 employees whose
employment we have either terminated or plan to terminate as a
result of the consolidation of several of our European
facilities into our Hawe Neos facility in Switzerland. Of the
$3.7 million in restructuring charges, approximately
$3.1 million was a cash charge related to severance and
contractual obligations, $0.3 million was a cash charge for
tax liabilities included in income taxes payable and the balance
of approximately $0.3 million related to non-cash charges.
As of September 30, 2003, 61 of the 71 planned terminations
have been completed. We expect to complete the balance of the
2002 restructuring plan by the end of fiscal 2004.

The 2002 restructuring charge activity since
September 2002 and its components are as follows (in thousands):

|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|---------------------------- |  | --------- | ----- | -------- |  | --------- | --- | --------- |  | ------ | - | --- |  | ----------- | --- | ----- |  | ----- | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                             |  |           |       | Lease    |  | Shut-Down |     | Inventory |  | Fixed  |   |     |  | Contractual |     |       |  |      
|                             |  | Severance |       | Payments |  | Costs     |     | Write-Off |  | Assets |   | Tax |  | Obligations |     | Other |  | Total
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |      
|                             |  | (a)       |       | (b)      |  | (b)       |     | (c)       |  | (c)    |   | (d) |  | (e)         |     |       |  |      
|2002 Restructuring Charge    |  | $         | 2,347 |          |  | $         | 332 |           |  | $      |  |     |  | $           | 106 |       |  | $     | 196 |  |  | $ | 300 |  |  | $ | 229 |  |  | $ | 156 |  |  | $ | 3,666 | 
|Fiscal 2002 Non-Cash Charges |  |           | 70    |          |  |           |    |           |  |        |  |     |  |             |    |       |  |       |    |  |  |   |    |  |  |   |    |  |  |   | 43  |  |  |   | 113   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2002 Balance   |  |           | 2,277 |          |  |           | 332 |           |  |        |  |     |  |             | 106 |       |  |       | 196 |  |  |   | 300 |  |  |   | 229 |  |  |   | 113 |  |  |   | 3,553 | 
|Fiscal 2003 Cash Payments    |  |           | 1,761 |          |  |           | 278 |           |  |        |  |     |  |             |    |       |  |       |    |  |  |   |    |  |  |   | 229 |  |  |   | 80  |  |  |   | 2,348 | 
|Fiscal 2003 Non-Cash Charges |  |           |      |          |  |           |    |           |  |        |  |     |  |             | 106 |       |  |       | 196 |  |  |   |    |  |  |   |    |  |  |   |    |  |  |   | 302   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2003 Balance   |  | $         | 516   |          |  | $         | 54  |           |  | $      |  |     |  | $           |    |       |  | $     |    |  |  | $ | 300 |  |  | $ |    |  |  | $ | 33  |  |  | $ | 903   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The amount primarily represents the charges for
    severance and termination costs associated with the
    71 employees primarily located at several facilities
    throughout Europe whose employment we have either terminated or
    plan to terminate as a result of the 2002 European restructuring
    plan. As of September 30, 2003, the employment of 61 of
    those 71 employees has been terminated.
|   
|(b) |  | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                    
|   
|(c) |  | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                       
|   
|(d) |  | The 2002 charge represents $0.3 million for
    tax liabilities included in income taxes payable.                                                                                                                                                                                                                                                                                                                
|   
|(e) |  | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                

In September 2001, we recorded a restructuring
charge of approximately $2.4 million ($1.5 million
after tax) consisting primarily of the severance and termination
costs associated with the termination of the employment of 63
employees that were employed at Ormcos San Diego,
California manufacturing facility. Their employment was
terminated as a result of the closing of the facility. We
completed the closing of the facility as of June 30, 2002
and finalized all remaining costs. Work previously performed at
the facility was absorbed into Ormcos Glendora, California
facility.

The 2001 restructuring charge activity since
September 30, 2001 and its components are as follows (in
thousands):

|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|----------------------------------- |  | --------- | ----- | -------- |  | --------- | - | --------- |  | ------ | - | --- |  | ----------- | - | ----- |  | ----- | --- | - |  | - | - |  |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                                    |  |           |       | Lease    |  | Shut-Down |   | Inventory |  | Fixed  |   |     |  | Contractual |   |       |  |      
|                                    |  | Severance |       | Payments |  | Costs     |   | Write-Off |  | Assets |   | Tax |  | Obligations |   | Other |  | Total
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |      
|                                    |  | (a)       |       | (b)      |  | (b)       |   | (c)       |  | (c)    |   |     |  | (d)         |   |       |  |      
|2001 Restructuring Charge           |  | $         | 1,050 |          |  | $         |  |           |  | $      |  |     |  | $           |  |       |  | $     | 250 |   |  | $ |  |  |  | $ | 775 |  |  | $ | 325 |  |  | $ | 2,400 | 
|Fiscal 2001 Non-Cash Charges        |  |           |      |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | 250 |   |  |   |  |  |  |   | 100 |  |  |   | 300 |  |  |   | 650   | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2001 Balance          |  |           | 1,050 |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       |    |   |  |   |  |  |  |   | 675 |  |  |   | 25  |  |  |   | 1,750 | 
|Fiscal 2002 Cash Payments           |  |           | 875   |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       |    |   |  |   |  |  |  |   | 600 |  |  |   |    |  |  |   | 1,475 | 
|Fiscal 2002 Non-Cash Payments       |  |           |      |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | 50  |   |  |   |  |  |  |   | 75  |  |  |   | 25  |  |  |   | 150   | 
|Adjustments                         |  |           | 175   |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | (50 | ) |  |   |  |  |  |   |    |  |  |   |    |  |  |   | 125   | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2002 and 2003 Balance |  | $         |      |          |  | $         |  |           |  | $      |  |     |  | $           |  |       |  | $     |    |   |  | $ |  |  |  | $ |    |  |  | $ |    |  |  | $ |      | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 

24



---



##### 





---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The amount primarily represents severance and
    termination costs associated with the 63 employees located at
    the Ormco San Diego facility whose employment Ormco terminated
    because of the 2001 restructuring plan. The closing of the
    facility was completed by June 30, 2002. The net proceeds
    (approximately $5.3 million) from the sale of the Ormco San
    Diego facility on January 31, 2003 offset the costs of
    closing the facility
|   
|(b) |  | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(c) |  | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                                                                         
|   
|(d) |  | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                                                                  

Our results for fiscal 2000 include charges of
approximately $9.3 million ($5.8 million after tax)
consisting primarily of exited product lines (approximately
$5.3 million and $2.3 million in the Orthodontics and
Professional Dental business segments, respectively) and
severance and termination costs associated with the termination
of the employment of 65 employees (56 located at the Metrex
Research Corporation facility in Parker, Colorado, eight located
at the Ormco facility in San Diego, California, and one located
at the Ormco facility in Amersfort/ Europe) as a result of the
2000 restructuring plan. Of the $9.3 million in
restructuring charges, approximately $7.8 million
represented non-cash charges related to the exited products and
capital, while the balance of approximately $1.5 million
were cash related charges for severance and contractual
obligations. We completed the 2000 restructuring plan in the
first quarter of 2002 and paid the remainder of the cash charges.

The 2000 restructuring charge activity since
September 30, 2000 and its components are as follows (in
thousands):

|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |  |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|----------------------------------- |  | --------- | ----- | -------- |  | --------- | - | --------- |  | ------ | - | --- |  | ----------- | ----- | ----- |  | ----- | --- |  |  | - | - |  |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                                    |  |           |       | Lease    |  | Shut-Down |   | Inventory |  | Fixed  |   |     |  | Contractual |       |       |  |      
|                                    |  | Severance |       | Payments |  | Costs     |   | Write-Off |  | Assets |   | Tax |  | Obligations |       | Other |  | Total
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |      
|                                    |  | (a)       |       | (b)      |  | (b)       |   | (c)       |  | (c)    |   |     |  | (d)         |       |       |  |      
|2000 Restructuring Charge           |  | $         | 1,300 |          |  | $         |  |           |  | $      |  |     |  | $           | 7,600 |       |  | $     | 200 |  |  | $ |  |  |  | $ | 100 |  |  | $ | 100 |  |  | $ | 9,300 | 
|Fiscal 2000 Non-Cash Charges        |  |           |      |          |  |           |  |           |  |        |  |     |  |             | 7,600 |       |  |       | 200 |  |  |   |  |  |  |   |    |  |  |   |    |  |  |   | 7,800 | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |  |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2000 Balance          |  |           | 1,300 |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |  |  |   |  |  |  |   | 100 |  |  |   | 100 |  |  |   | 1,500 | 
|Fiscal 2001 Cash Payments           |  |           | 1,175 |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |  |  |   |  |  |  |   | 75  |  |  |   | 100 |  |  |   | 1,350 | 
|September 30, 2001 Balance          |  |           | 125   |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |  |  |   |  |  |  |   | 25  |  |  |   |    |  |  |   | 150   | 
|Fiscal 2002 Cash Payments           |  |           |      |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |  |  |   |  |  |  |   |    |  |  |   |    |  |  |   |      | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |  |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2002 and 2003 Balance |  | $         |      |          |  | $         |  |           |  | $      |  |     |  | $           |      |       |  | $     |    |  |  | $ |  |  |  | $ |    |  |  | $ |    |  |  | $ |      | 
|                                    |  |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |  |  |   |   |  |  |   |     |  |  |   |     |  |  |   |       | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The amount represents severance and termination
    costs for the 65 employees whose employment was terminated
    (primarily at the Metrex facility in Parker, Colorado) as a
    result of the 2000 restructuring plan. As of September 30,
    2002, all employment terminations were completed under the 2000
    restructuring plan.
|   
|(b) |  | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                            
|   
|(c) |  | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                               
|   
|(d) |  | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                        

In June 1998, we recorded a restructuring charge
of approximately $14.6 million (approximately
$10.7 million after tax) for the rationalization of certain
acquired companies, combination of certain duplicate production
facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines.

25



---



##### 



The 1998 restructuring charge activity since
June 30, 1998 and its components are as follows (in
thousands):

|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|----------------------------------------------------- |  | --------- | ----- | -------- |  | --------- | --- | --------- |  | ------ | --- | --- |  | ----------- | ----- | ----- |  | ----- | ----- |  |  | - | --- |  |  | - | --- |  |  | - | ----- | - |  | - | ------ | -
|                                                      |  |           |       | Lease    |  | Shut-Down |     | Inventory |  | Fixed  |     |     |  | Contractual |       |       |  |      
|                                                      |  | Severance |       | Payments |  | Costs     |     | Write-Off |  | Assets |     | Tax |  | Obligations |       | Other |  | Total
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |      
|                                                      |  | (a)       |       | (b)      |  | (b)       |     | (c)       |  | (c)    |     | (d) |  | (e)         |       |       |  |      
|1998 Restructuring Charge                             |  | $         | 4,300 |          |  | $         | 300 |           |  | $      | 400 |     |  | $           | 4,600 |       |  | $     | 1,300 |  |  | $ | 700 |  |  | $ | 900 |  |  | $ | 2,100 |   |  | $ | 14,600 |  
|Fiscal 1998 Cash Payments                             |  |           | 1,800 |          |  |           |    |           |  |        | 100 |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 1,400 |   |  |   | 3,600  |  
|Fiscal 1998 Non-Cash Charges                          |  |           |      |          |  |           |    |           |  |        |    |     |  |             | 4,600 |       |  |       | 1,300 |  |  |   |    |  |  |   |    |  |  |   |      |   |  |   | 5,900  |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 1998 Balance                            |  |           | 2,500 |          |  |           | 300 |           |  |        | 300 |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   | 600 |  |  |   | 700   |   |  |   | 5,100  |  
|Fiscal 1999 Cash Payments                             |  |           | 1,300 |          |  |           | 300 |           |  |        | 300 |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 400   |   |  |   | 2,600  |  
|Adjustments (a)                                       |  |           | 1,200 |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   |      |   |  |   | 1,200  |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 1999 Balance                            |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   | 300 |  |  |   | 300   |   |  |   | 1,300  |  
|Fiscal 2000 Cash Payments                             |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 100   |   |  |   | 400    |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2000 and September 30,
    2001 Balance |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   |    |  |  |   | 200   |   |  |   | 900    |  
|Fiscal 2002 Cash Payments                             |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | 16    |   |  |   | 16     |  
|Fiscal 2002 Non-Cash Payments                         |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | 7     |   |  |   | 7      |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2002 Balance                            |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   |    |  |  |   | 177   |   |  |   | 877    |  
|Fiscal 2003 Non-Cash Payments                         |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | (6    | ) |  |   | (6     | )
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2003 Balance                            |  | $         |      |          |  | $         |    |           |  | $      |    |     |  | $           |      |       |  | $     |      |  |  | $ | 700 |  |  | $ |    |  |  | $ | 183   |   |  | $ | 883    |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The amount primarily represents severance and
    termination costs related to the 154 employees whose employment
    was terminated as a result of the 1998 restructuring plan. An
    adjustment of approximately $1.2 million was made in fiscal
    1999 to adjust the accrual primarily representing over accruals
    for anticipated costs associated with outplacement services,
    accrued fringe benefits, and severance associated with employees
    who were previously notified of termination and subsequently
    filled other company positions.
|   
|(b) |  | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) |  | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(d) |  | The charge of $0.7 million represents a
    statutory tax relating to assets transferred from an exited
    sales facility in Switzerland.                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(e) |  | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

International Operations

A substantial portion of our sales, income and
cash flows is derived internationally. The financial position
and the results of operations from substantially all of our
international operations, other than most U.S. export sales, are
measured using the local currency of the countries in which such
operations are conducted and are then translated into U.S.
dollars. While the reported income of foreign subsidiaries will
be impacted by a weakening or strengthening of the U.S. dollar
in relation to a particular local currency, the effects of
foreign currency fluctuations are mitigated by the fact that our
subsidiaries operations are conducted in numerous foreign
countries and, therefore, in numerous foreign currencies. In
addition, our U.S. export sales may be impacted by foreign
currency fluctuations relative to the value of the U.S. dollar,
as foreign customers may adjust their level of purchases upward
or downward according to the weakness or strength of their
respective currencies versus the U.S. dollar.

From time to time we employ currency hedges to
mitigate the impact of foreign currency fluctuations. In
January, March, April, and May 2003, we hedged our foreign
currency exposure to protect against currency fluctuations in
fiscal 2004 by securing monthly zero cost collar contracts with
a notional amount of approximately $49.0 million for the
euro and a notional amount of approximately $6.5 million
for the Japanese yen. No currency gain or loss on currency
hedges was recognized in the consolidated statement of income for

26



---



##### 



the year ended September 2003; however, a
currency loss of $2.0 million (net of income tax),
representing the fair value of the zero cost collars, was
recorded in accumulated other comprehensive income (loss), a
component of stockholders equity (see Note 10 to the
consolidated financial statements in Item 8 of this Annual
Report). Additionally, in June 2002, we entered into cross
currency debt swap transactions to hedge our net investment in
Hawe Neos and Sybron Dental Specialties Japan. The agreements
were contracts to exchange a U.S. dollar principal amount of
$45.0 million in exchange for a Swiss franc principal
amount of 67.5 million at the termination date of
June 15, 2007 and a U.S. dollar principal amount of
$4.0 million in exchange for a Japanese yen principal
amount of 486 million at the termination date of
June 15, 2007. For fiscal year 2003, the fair value of the
cross currency debt swap transaction loss (net of income tax)
included in the cumulative translation adjustments was
$4.2 million. For additional information regarding foreign
currency risk management please refer to
Item 7A  Quantitative and Qualitative
Disclosures About Market Risk.


In June, July, and November 2002, we hedged our
foreign currency exposure to protect against currency
fluctuations in fiscal 2003 by securing monthly zero cost collar
contracts with a notional amount of approximately
$40.5 million for the euro and a notional amount of
approximately $5.9 million for the Japanese yen. No
currency gain or loss was recognized in the consolidated
statement of income for the year ended September 2002. We expect
to continue to employ measures to protect our earnings from
currency volatility through the use of currency options, forward
contracts or similar instruments beyond fiscal year 2004.

The following table sets forth our domestic sales
and sales outside the United States in 2003, 2002 and 2001. See
also Note 19 to our consolidated financial statements
contained in Item 8 of this Annual Report.

|                        |                 |                          |         |         |  |      |         |         |  |   |         |         | 
|----------------------- | --------------- | ------------------------ | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                        |                 |                         
|                        |                 | Year Ended September 30,
|                        |                 |                         
|                        |                 | 2003                     |         | 2002    |  | 2001
|                        |                 |                          |         |         |  |     
|                        |                 |                         
|                        |                 | (in thousands)          
|Domestic net sales      |                 | $                        | 299,518 |         |  | $    | 268,027 |         |  | $ | 268,379 |        
|International net sales |                 |                          | 226,873 |         |  |      | 188,639 |         |  |   | 171,168 |        
|                        |                 |                          |         |         |  |      |         |         |  |   |         |        
|                        | Total net sales |                          | $       | 526,391 |  |      | $       | 456,666 |  |   | $       | 439,547 | 
|                        |                 |                          |         |         |  |      |         |         |  |   |         |        

Inflation

We do not believe that inflation has had a
material impact on net sales or income during any of the periods
presented above. There can be no assurance, however, that our
business will not be affected by inflation in the future.

Liquidity and Capital Resources



| |        
| | -------
| | General

We intend to fund our working capital
requirements (primarily related to inventory and accounts
receivable), capital expenditure requirements (primarily related
to the purchase of machinery & equipment),
acquisitions, principal and interest payments on our Credit
Facility (defined below), obligations under the Sale/ Leaseback
(defined below), restructuring expenditures, other liabilities
and periodic expansion of facilities, to the extent available,
with funds provided by operations and short-term borrowings
under the Revolver (defined below). While cash provided from
operating activities may be impacted by a variety of factors,
such as lower revenues, an increase in expenses, and the
continued risk of a competitive market and changes in demand for
our products, we believe that our cash flow from operations,
unused amounts available under our Revolver (defined below) and
access to capital markets will be sufficient to satisfy our
working capital, capital investment, acquisition and other
financing requirements for the foreseeable future. However,
there can be no assurance that will be the case. To the extent
that funds are not available from these sources, we would have
to raise additional capital in another manner.

It is currently our intent to reduce total debt
and to continue to pursue our acquisition strategy when those
acquisitions appear to be in the best interest of the
stockholders, taking into account our level of debt and interest
expense. If significant acquisition opportunities become
available, of which there can be no assurance, we may require
financing beyond the capacity of our Credit Facility (defined
below). In addition,

27



---



##### 



certain acquisitions previously completed contain
earnout provisions requiring further payments in the
future if certain financial results are achieved by the acquired
companies.


The statements contained in the immediately
preceding paragraph concerning our intent to continue to pursue
our acquisition strategy are forward-looking statements. Our
ability to continue our acquisition strategy is subject to a
number of uncertainties, including, but not limited to, our
ability to raise capital beyond the capacity of our Credit
Facility and the availability of suitable acquisitions
candidates at reasonable prices.



| |                                  
| | ---------------------------------
| | Year Ended September 30,
    2003

Working capital decreased from
$135.2 million at September 30, 2002 to $132.7 at
September 30, 2003. The current ratio decreased from 3.0 at
September 30, 2002 to 2.4 at September 30, 2003. The
current ratio decreased as a result of increases in accrued
payroll as well as employee benefits and income taxes payable,
both of which were the result of the improved performance in
fiscal 2003 as compared to fiscal 2002. During the same period
cash increased from $12.7 million to $22.9 million,
primarily due to $87.2 million provided by operating
activities and $12.2 million of other cash inflows, offset
by $16.2 million of cash used for acquisitions,
$9.2 million of capital expenditures, and
$63.8 million of net debt reduction.

Cash provided by operations was
$87.2 million in fiscal 2003 and $54.7 million in
fiscal 2002, an increase of $32.5 million. The primary
causes of the increase in cash provided by operations were the
increases in net income of $25.9 million ($9.0 million
of which was the result of ceasing goodwill amortization),
income taxes payable of $12.7 million and accrued payroll
and employee benefits of $8.8 million, as well as a
decrease in inventory of $7.7 million. These factors were
partially offset by an increase in accounts receivable of
$21.5 million. Accounts receivable increased by
$21.5 million from September 30, 2002 to
September 30, 2003, consistent with the increase in sales
from the fourth fiscal quarter of 2002 to the fourth fiscal
quarter of 2003. Days sales outstanding increased slightly, from
59.0 at September 30, 2002, to 60.1 at September 30,
2003. Inventory decreased $7.7 million from
September 30, 2002 to September 30, 2003 as a result
of our increased focus on supply chain and inventory management.
Inventory turns increased to 2.8 at September 30, 2003 from
2.3 at September 30, 2002.



| |                                                    
| | ---------------------------------------------------
| | Credit Facilities and Senior Subordinated
    Notes

On June 6, 2002, we terminated our then
existing $450.0 million credit facility and entered into a
$350.0 million syndicated credit facility for which Credit
Suisse First Boston is the administrative agent. The credit
facility (the Credit Facility), provides for a
five-year $120.0 million revolving credit facility (the
Revolver), a seven-year $200.0 million term
loan (the Term Loan B) and a five-year
$30.0 million revolving credit facility (the Euro
Tranche). Sybron Dental Specialties, Inc., Kerr
Corporation, Ormco Corporation and Pinnacle Products, Inc. (the
Domestic Borrowers) are joint and several borrowers
under the Revolver and the Term Loan B, and Hawe Neos
Holdings S.A. (Hawe Neos) is the borrower under the
Euro Tranche. Sybron Dental Specialties became a borrower under
the Revolver and Term Loan B as a result of the merger of
Sybron Dental Management into Sybron Dental Specialties
effective January 1, 2003. In addition to the Credit
Facility, we also completed on June 6, 2002, the sale of
$150.0 million of 8 1/8% senior subordinated notes due
2012 (the Senior Subordinated Notes) in a private
offering. We used the proceeds of the Term Loan B, together
with proceeds from the issuance of the Senior Subordinated
Notes, to repay all of the $332.9 million of borrowings
outstanding as of June 6, 2002 under our previous credit
facility.

The Credit Facility is jointly and severally
guaranteed by Sybron Dental Specialties, Inc., the other
Domestic Borrowers and each of our present and future direct and
indirect wholly-owned domestic subsidiaries, and is secured by
substantially all assets of each such entity, including the
capital stock of each domestic subsidiary. In addition, the
Credit Facility is secured by a pledge of 65% of the capital
stock of each of our first-tier material foreign subsidiaries.
The Euro Tranche is also guaranteed by certain foreign
subsidiaries and is secured by a pledge of 100% of the capital
stock of certain foreign subsidiaries and by some of the assets
of our Swiss subsidiary, Hawe Neos, certain direct subsidiaries
of Hawe Neos and certain of our other indirect foreign
subsidiaries.

28



---



##### 



The Credit Facility may be prepaid at any time
without penalty except for LIBOR and Euro-LIBOR breakage costs.
Under the Credit Facility, subject to certain exceptions, we are
required to apply all of the proceeds from any issuance of debt,
half of the proceeds from any issuance of equity, half of our
excess annual cash flow and, subject to permitted reinvestments,
all amounts received in connection with any sale of our assets
and casualty insurance and condemnation or eminent domain
proceedings, in each case to repay the outstanding amounts under
the facility.

The Term B Loan amortizes 1% annually for
the first six years, payable quarterly, with the balance to be
paid in the seventh year in equal quarterly installments. The
Term B Loan bears interest, at our option, at either
(a) the LIBOR rate, plus between 225 and 275 basis points,
or (b) the Base rate, plus between 125 and 175 basis
points, in each case as determined according to the rating of
the Credit Facility by Standard and Poors and
Moodys. The per annum initial interest rate until the
delivery of the Pricing Certificate for the Fiscal Quarter
ending December 31, 2002 was LIBOR, plus 250 basis points.
The per annum interest rate ending September 30, 2003 was
LIBOR, plus 250 basis points. As of September 30, 2003, the
amount outstanding on the Term B Loan was $113.2 million.
The average interest rate at September 30, 2003 on the Term
B Loan was 4.71% after giving effect to the interest rate swap
agreements we had in effect as of that date.

The Revolver bears interest, at our option, at a
per annum rate equal to either (a) the LIBOR rate, plus
between 175 and 250 basis points, or (b) the Base rate,
plus between 75 and 150 basis points, in each case as determined
on a quarterly basis according to a leveraged-based pricing grid
with leverage ratios from 1.75x to 3.0x. The per annum initial
interest rate until the delivery of the first Pricing
Certificate for the Fiscal Quarter ending December 31, 2002
was LIBOR, plus 225 basis points. The per annum interest rate
ending September 30, 2003 was LIBOR, plus 225 basis points.
The annual commitment fee on the unused portion of the Revolver
will vary between 0.375% to 0.5% based on the quarterly leverage
ratio. As of September 30, 2003, there was no outstanding
balance on the Revolver and the amount available was
$117.1 million. The 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
September 30, 2003, a total of $2.9 million in letters
of credit was issued.

The Euro Tranche bears interest, at our option,
at Euro-LIBOR or at Base rate with margins identical to those of
the Revolver. The annual commitment fee on the unused portion of
the Euro Tranche varies between 0.375% to 0.5% based on the
quarterly leverage ratio. As of September 30, 2003, there
was no outstanding balance under the Euro Tranche and the amount
available was $30.0 million.

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 notes, (vii) the
repurchase or redemption of more than $25.0 million of our
stock from stockholders and (viii) loans and investments,
as well as prohibitions on the payment of cash dividends. The
Credit Facility also has certain financial covenants, including,
without limitation, maximum leverage ratios, minimum fixed
charge coverage ratios, minimum net worth and maximum capital
expenditures.

Our ability to meet our debt service requirements
and to comply with such covenants is dependent upon our future
performance, which is subject to financial, economic,
competitive and other factors affecting us, many of which are
beyond our control. We were in compliance with all such
covenants at September 30, 2003.

In connection with entering into our Credit
Facility on June 6, 2002, we issued $150.0 million of
Senior Subordinated Notes bearing interest at 8 1/8%,
maturing on June 15, 2012. The Senior Subordinated Notes
are our unsecured obligations, subordinated in right of payment
to all our existing and future senior debt in accordance with
the subordination provisions of the indenture.

Prior to January 1, 2003, Sybron Dental
Management, Inc. (SDM) was a guarantor subsidiary of
Sybron Dental Specialties, Inc. (SDS) for our Senior
Subordinated Notes. Effective January 1, 2003, SDM was
merged into SDS.

29



---



##### 



The Senior Subordinated Notes are generally not
redeemable at our option before June 15, 2005. Some limited
redemption is allowed if we receive cash from an equity
offering. At any time, and from time to time on or after
June 15, 2007, we may redeem the Senior Subordinated Notes,
in whole or in part, at a redemption price equal to the
percentage of principal amount set forth below plus accrued and
unpaid interest to the redemption date.

|                                        |  |            |          | 
|--------------------------------------- |  | ---------- | -------- | 
|Twelve-Month Period Commencing June 15; |  | Percentage
|                                        |  |           
|2007                                    |  |            | 104.063% | 
|2008                                    |  |            | 102.708% | 
|2009                                    |  |            | 101.354% | 
|2010 and thereafter                     |  |            | 100.000% | 

As a result of the terms of our Credit Facility,
we are sensitive to a rise in interest rates. A rise in interest
rates would result in increased interest expense on our
outstanding debt with variable interest rates. In order to
reduce our sensitivity to interest rate increases, from time to
time we enter into interest rate swap agreements. As of
September 30, 2003, we had two interest rate swap
agreements outstanding aggregating a notional amount of
approximately $45.3 million. On February 11, 2003, we
assigned an interest rate swap agreement with a notional amount
of $10.0 million and incorporated the fair value to an
existing amended interest rate swap agreement. Under the terms
of the swap agreements, we are required to pay fixed rate
amounts equal to the swap agreement rates listed below. In
exchange for the payment of the fixed rate amounts, we receive
floating rate amounts equal to the three-month LIBOR rate in
effect on the date of the swap agreements and the subsequent
reset dates. For each of the swap agreements, the rate resets on
the quarterly anniversary of the swap agreements effective
date until the agreements expiration date. The net
interest rate paid by us on the indicated notional amount is
approximately equal to the sum of the relevant swap agreement
rate plus the applicable Eurodollar rate margin. The rates and
durations as of September 30, 2003 are as follows:

|                |  |                 |              |                     |  |                     |                 |                     |  |  |      |   |  |  |                | 
|--------------- |  | --------------- | ------------ | ------------------- |  | ------------------- | --------------- | ------------------- |  |  | ---- | - |  |  | -------------- | 
|Expiration Date |  | Notional Amount |              | Swap Agreement Date |  | Swap Agreement Rate |                 | Swap Effective Date
|                |  |                 |              |                     |  |                     |                 |                    
|March 31, 2005  |  | $               | 19.9 million |                     |  |                     | January 2, 2001 |                     |  |  | 5.65 | % |  |  | March 30, 2001 | 
|June 30, 2006   |  | $               | 25.4 million |                     |  |                     | January 2, 2001 |                     |  |  | 5.58 | % |  |  | March 30, 2001 | 



| |               
| | --------------
| | Sale/Leaseback

In 1988, we completed the sale and leaseback (the
Sale/Leaseback) of our then principal domestic
manufacturing and office facilities with an unaffiliated third
party. The transaction has been accounted for as a financing for
financial statement purposes, thus the facilities remain in
property, plant and equipment. The transaction was treated as a
sale for income tax purposes. The financing obligation is being
amortized over the initial 25-year lease term.

The initial term of each lease is 25 years
with five five-year renewal options. On the fifth anniversary of
the leases and every five years thereafter (including renewal
terms), the rent is increased by the percentage equal to 75% of
the percentage increase in the Consumer Price Index over the
preceding five years. The percentage increase to the rent in any
five-year period is capped at 15%. Beginning January 1,
1999, the annual rent payments increased to $1.5 million.
The next adjustment will occur January 1, 2004. As a result
of the spin-off, the Sale/Leaseback was amended to extend the
leases an additional 5 years, increase the basic rent by
$0.15 million per year, and provides us the option to
purchase the leased premises at fair market value from
June 1, 2008 to May 31, 2009. We pay all costs of
maintenance and repair, insurance, taxes and all other expenses
associated with the properties.

We have the option to purchase the facilities
according to the terms of any bona fide offer received by the
lessor from a third party at any time during the term of the
leases. We may be obligated to repurchase the property upon the
event of a breach of certain covenants or occurrence of certain
other events.

Off-Balance Sheet Arrangements

None.

30



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##### 



Contractual Obligations

The following table represents a list of our
contractual obligations for the indicated periods (calculated as
of September 30, 2003);

|                              |  |                       |         |           |  |       |        |       |  |           |        |  |  |   |       |  |  |   |         | 
|----------------------------- |  | --------------------- | ------- | --------- |  | ----- | ------ | ----- |  | --------- | ------ |  |  | - | ----- |  |  | - | ------- | 
|                              |  |                      
|                              |  | Payment Due by Period
|                              |  |                      
|                              |  |                       |         | Less Than |  | 1-3   |        | 3-5   |  | More Than
|                              |  | Total                 |         | 1 Year    |  | Years |        | Years |  | 5 Years  
|                              |  |                       |         |           |  |       |        |       |  |          
|                              |  |                      
|                              |  | (in thousands)       
|Long-term debt(a)             |  | $                     | 127,768 |           |  | $     | 3,755  |       |  | $         | 3,612  |  |  | $ | 3,665 |  |  | $ | 116,736 | 
|Senior subordinated notes     |  |                       | 150,000 |           |  |       |       |       |  |           |       |  |  |   |      |  |  |   | 150,000 | 
|Standby letters of credit     |  |                       | 2,928   |           |  |       | 2,928  |       |  |           |       |  |  |   |      |  |  |   |        | 
|Operating leases              |  |                       | 22,594  |           |  |       | 5,670  |       |  |           | 7,634  |  |  |   | 3,926 |  |  |   | 5,364   | 
|                              |  |                       |         |           |  |       |        |       |  |           |        |  |  |   |       |  |  |   |         | 
|Total contractual obligations |  | $                     | 303,290 |           |  | $     | 12,353 |       |  | $         | 11,246 |  |  | $ | 7,591 |  |  | $ | 272,100 | 
|                              |  |                       |         |           |  |       |        |       |  |           |        |  |  |   |       |  |  |   |         | 



---



|    |                                                                               
|--- | ------------------------------------------------------------------------------
|(a) | Includes capital lease obligations in total of
    approximately $0.1 million.

For a more complete description of our Credit
Facilities and our Senior Subordinated Notes, please see
Note 7 to the consolidated financial statements in
Item 8 of this Annual Report.

Cautionary Factors

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

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

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

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

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 Corporation and its affiliate ESPE
GmbH & Co., Ivoclar Vivadent Group, Johnson &
Johnson, Steris Corporation, and Ecolab, Inc.; and in the
Orthodontics business

31



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##### 



segment, our principal competitors include
Unitek, a subsidiary of 3M Corporation, GAC Orthodontics, a
subsidiary of Dentsply, and American Orthodontics. 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.

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

We presently have, and will continue to have, a
substantial amount of indebtedness which require significant
interest payments. As of September 30, 2003, we had
$277.7 million in total long-term borrowings (including
current portion), and $208.0 million in stockholders
equity. In addition, subject to restrictions in the indenture
for our Senior Subordinated Notes and our Credit Facility, we
may incur additional indebtedness.

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



| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to obtain additional financing for
    working capital, capital expenditures, acquisitions, or general
    corporate purposes may be impaired;                                                                                                                    
|
| |  | we must use a substantial portion of our cash
    flow from operations to service on our Senior Subordinated Notes
    and other indebtedness, which will reduce the funds available to
    us for other purposes such as potential acquisitions and capital
    expenditures;
|
| |  | we are exposed to fluctuations in interest rates,
    to the extent our borrowings bear variable rates of interest,
    including through interest rate swap agreements;                                                                                                      
|
| |  | we have a higher level of indebtedness than some
    of our competitors, which may put us at a competitive
    disadvantage and reduce our flexibility in planning for, or
    responding to, changing conditions in our industry, including
    increased competition; and   
|
| |  | we are more vulnerable to general economic
    downturns and adverse developments in our business.                                                                                                                                                                            

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

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

32



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##### 



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

On October 1, 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets,
which requires that goodwill and intangible assets that have an
indefinite useful life be tested at least annually for
impairment. Goodwill and other intangible assets with indefinite
lives must also be tested for impairment between the annual test
if an event occurs that would more likely than not reduce the
fair value of the asset below its carrying amount. As of
September 30, 2003, goodwill and other intangible assets
with indefinite lives represented approximately 42% of our
total assets. If during the testing an impairment is determined,
our financial results for the relevant period will be reduced by
the amount of the impairment, net of income tax effects, if any.

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

We manufacture many of our products, including
those in our Professional Dental business segment, in our
facilities in Mexico, Canada, Switzerland, Czech Republic and
Italy. These products are supported by our sales offices in
Europe, Japan, Australia, Czech Republic, South America and
Mexico. In fiscal 2003, our foreign facilities selling,
general and administrative expenses represented approximately
31.7% of our consolidated selling, general and administrative
expenses while our foreign sales represented approximately 43.1%
of our total net sales.

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

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

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

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

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

Our profitability may be affected by factors
outside our control.

Our ability to increase sales, and to profitably
distribute and sell our products, is subject to a number of
risks, including changes in our business relationships with our
principal distributors, competitive risks such as the entrance
of additional competitors into our markets, pricing and
technological competition, risks associated with the development
and marketing of new products in order to remain competitive and
risks associated with changes in demand for dental services
which can be affected by economic conditions, health

33



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##### 



care reform, government regulation, and more
stringent limits on expenditures by dental insurance providers
or governmental programs.


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

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

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

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

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

In fiscal 2003, approximately 25% of our sales
were made through our top five independent distributors. Mergers
and consolidation of our distributors have temporarily slowed
sales of our products in the past and may do so in the future.
We believe that the loss of either one of our top two
distributors, the only distributors who account for more than 5%
of our consolidated net sales and who sell primarily into the
dental segment, could have a material adverse effect on our
results of operations or financial condition until we find
alternative means to distribute our products.

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

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

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

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

34



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##### 



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



| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in international trade laws, such as the
    North American Free Trade Agreement, or NAFTA, affecting our
    activities in Mexico and Canada;
|
| |  | changes in local labor laws and regulations
    affecting our ability to hire and retain local employees;                                             
|
| |  | currency exchange restrictions and fluctuations
    in the value of foreign currency;                                                                 
|
| |  | potentially adverse tax consequences;                                                                                                                 
|
| |  | longer payment cycles;                                                                                                                                
|
| |  | greater difficulties in collecting accounts
    receivable;                                                                                           
|
| |  | political conditions in countries where we have
    operations;                                                                                       
|
| |  | unexpected changes in the regulatory environment;
    and                                                                                             
|
| |  | changes in general economic conditions in
    countries, such as Italy and Mexico, that have historically been
    less stable than the United States.

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

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

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

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

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

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

Pursuant to the terms of the agreements executed
in connection with our spin-off from Apogent, 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

35



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##### 



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 7A. | Quantitative and Qualitative Disclosures
    About Market Risk.

Foreign Exchange Currency Risk
Management

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

We believe it is prudent to minimize the
variability caused by foreign currency risk. We attempt to
minimize foreign currency risk by using derivative instruments
when prudent. We do not use derivative instruments for purposes
other than hedging.

Although we have a U.S. dollar functional
currency, a substantial portion of our sales, income, and cash
flow is derived from foreign currencies. Our foreign currency
exposure exists primarily in the euro, Japanese yen, Canadian
dollar, Swiss franc, Mexican peso and Australian dollar versus
the U.S. dollar. With the acquisition of SpofaDental a.s.
on August 4, 2003, we now consider the Czech koruna a
currency exposure.

For fiscal year 2004, our projected total foreign
currency exposure is estimated to be approximately
88.3 million euros, 938.0 million Japanese yen,
11.5 million Canadian dollars, 17.8 million Australian
dollars and 29.8 million Swiss francs. We have put in place
a strategy to manage our euro and Japanese yen cash flow
exposure through the use of zero cost collar contracts. There
were no such contracts in place for the Canadian dollar,
Australian dollar, Mexican peso, Czech koruna and Swiss franc at
September 30, 2003.

In January, March, April, and May 2003, we
entered into a series of zero cost collar contracts to hedge
intercompany transactions with a total notional amount of
42.0 million euros and 720.0 million Japanese yen for
fiscal year 2004.

For fiscal year 2003, approximately
$2.0 million of loss (net of income tax) representing the
fair value of the zero cost collars, is included in accumulated
other comprehensive income (loss), related to the foreign
currency zero cost collar transactions. In addition, none of the
foreign currency cash flow hedges has been discontinued.

36



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##### 



Zero cost collar contracts in place as of
September 30, 2003 are as follows (in thousands, except
rates):

|         |  |            |            |                |  |          |            |          |  |            |            |              |  |  |         |  |  |  |        |  |  |  |        | 
|-------- |  | ---------- | ---------- | -------------- |  | -------- | ---------- | -------- |  | ---------- | ---------- | ------------ |  |  | ------- |  |  |  | ------ |  |  |  | ------ | 
|         |  |            |            |                |  |          |            | Local    |  |            |            |             
|         |  |            |            |                |  | Maturity |            | Currency |  |            |            |             
|Currency |  | Trade Date |            | Effective Date |  | Date     |            | Amount   |  | Floor Rate |            | Ceiling Rate
|         |  |            |            |                |  |          |            |          |  |            |            |             
|Euro     |  |            | 01/13/2003 |                |  |          | 10/15/2003 |          |  |            | 12/15/2003 |              |  |  | 10,500  |  |  |  | 1.01   |  |  |  | 1.08   | 
|Euro     |  |            | 03/06/2003 |                |  |          | 01/15/2004 |          |  |            | 03/15/2004 |              |  |  | 10,500  |  |  |  | 1.06   |  |  |  | 1.11   | 
|Euro     |  |            | 04/14/2003 |                |  |          | 04/15/2004 |          |  |            | 06/15/2004 |              |  |  | 10,500  |  |  |  | 1.04   |  |  |  | 1.08   | 
|Euro     |  |            | 05/02/2003 |                |  |          | 07/15/2004 |          |  |            | 09/15/2004 |              |  |  | 10,500  |  |  |  | 1.09   |  |  |  | 1.13   | 
|Yen      |  |            | 03/06/2003 |                |  |          | 10/15/2003 |          |  |            | 03/15/2004 |              |  |  | 360,000 |  |  |  | 117.00 |  |  |  | 115.37 | 
|Yen      |  |            | 04/14/2003 |                |  |          | 04/15/2004 |          |  |            | 06/15/2004 |              |  |  | 180,000 |  |  |  | 121.00 |  |  |  | 116.75 | 
|Yen      |  |            | 05/01/2003 |                |  |          | 07/15/2004 |          |  |            | 09/15/2004 |              |  |  | 180,000 |  |  |  | 119.50 |  |  |  | 116.75 | 

In July and November 2002, we entered into a
series of zero cost collar contracts to hedge our intercompany
transactions with a total notional amount of 40.5 euros for
fiscal year 2003. Also, in June 2002, we entered into a zero
cost collar contract to hedge a total notional amount of
720.0 Japanese yen for fiscal year 2003. Both the euro zero
cost collar contracts and the Japanese yen zero cost collar
contract for fiscal year 2003 matured on September 30, 2003.

During the year ending September 30, 2004,
we expect to reclassify approximately $3.1 million of loss
in accumulated other comprehensive income (loss) related to
the zero cost collars into foreign exchange loss/gain as a yield
adjustment of the hedged foreign currency representing the fair
value of the zero cost collars.

As of September 30, 2003, the maximum length
of time over which we are hedging our exposure to the
variability in future cash flows associated with foreign
currency forecasted transactions is twelve months for the
Japanese yen and twelve months for the euro.

In September 2001, we entered into a cross
currency debt swap transaction to hedge our net investment in
Hawe Neos. The agreement had an effective date of
October 16, 2001, and was a contract to exchange a
U.S. dollar principal amount of $45.0 million in
exchange for a Swiss franc principal amount of 71.7 million
at the termination date of October 16, 2006. On
June 6, 2002, we terminated this cross currency debt swap
transaction to satisfy requirements under our Credit Facility.
In June 2002, we entered into four cross currency debt swap
transactions to hedge our net investment in Hawe Neos and one
cross currency debt swap transaction to hedge our net investment
in SDS Japan. The agreements have effective dates of
June 27, June 28, and July 1, 2002, and are
contracts to exchange U.S. dollar principal aggregating a
total amount of $45.0 million in exchange for a Swiss franc
principal aggregating a total amount of 67.5 million and
U.S. dollar principal amount of $4.0 million in
exchange for a Japanese yen amount of 486.0 million. Both
the Swiss franc contracts and the Japanese yen contract matures
on June 15, 2007. The mechanics of the agreements are
similar to the original cross currency debt swap terminated on
June 6, 2002. However, the fixed interest rate to be paid
to us on the U.S. dollar leg of the agreements is a rate
equal to the Senior Subordinated Notes rate of 8 1/8% while
the fixed interest rate to be paid by us on the Swiss franc leg
of the agreements ranges from 6.39% to 6.45% and the Japanese
yen leg of the agreements is 3.65%, with the interest payments
due semi-annually.

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

|           |  |                |          |          |  |     |          |          |  |        |      |          |  |  |        |  |  |  |            |  |  |  |        | 
|---------- |  | -------------- | -------- | -------- |  | --- | -------- | -------- |  | ------ | ---- | -------- |  |  | ------ |  |  |  | ---------- |  |  |  | ------ | 
|Trade Date |  | Effective Date |          | Maturity |  | US$ |          | Interest |  | FX Amt |      | Interest
|           |  |                |          |          |  |     |          |          |  |        |      |         
|06/25/02   |  |                | 06/27/02 |          |  |     | 06/15/07 |          |  | $      | 15.0 |          |  |  | 8 1/8% |  |  |  | CHF 22.50  |  |  |  | 6.450% | 
|06/26/02   |  |                | 06/28/02 |          |  |     | 06/15/07 |          |  | $      | 15.0 |          |  |  | 8 1/8% |  |  |  | CHF 22.50  |  |  |  | 6.390% | 
|06/27/02   |  |                | 07/01/02 |          |  |     | 06/15/07 |          |  | $      | 7.5  |          |  |  | 8 1/8% |  |  |  | CHF 11.25  |  |  |  | 6.390% | 
|06/27/02   |  |                | 07/01/02 |          |  |     | 06/15/07 |          |  | $      | 7.5  |          |  |  | 8 1/8% |  |  |  | CHF 11.25  |  |  |  | 6.390% | 
|06/25/02   |  |                | 06/27/02 |          |  |     | 06/15/07 |          |  | $      | 4.0  |          |  |  | 8 1/8% |  |  |  | JPY 486.00 |  |  |  | 3.650% | 

For fiscal 2003, the fair value of the cross
currency debt swap transaction loss included in translation
adjustments is approximately $4.2 million (net of income
tax).

37



---



##### 



As a result of terminating the cross currency
debt swap transaction in fiscal 2002 to hedge our net investment
in Hawe Neos, we recognized a loss to the translation
adjustment, a component of other comprehensive income
(loss) in the amount of approximately $0.9 million
(net of income tax). This amount will remain in translation
adjustment, a component of other comprehensive income (loss)
until sale or upon complete or substantially complete
liquidation of the Companys net investment in Hawe Neos.

Interest Rate Exposure  Interest
Rate Risk Management

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

We continue to assess our exposure to interest
rate risk on an ongoing basis.

The table below provides information about our
debt obligations that are sensitive to changes in interest rates
as of September 30, 2003. For these debt obligations, the
table presents principal cash flows and related weighted average
interest rates by expected maturity dates. Weighted average
variable rates are based on implied forward 3-month LIBOR rates
in the yield curve at the reporting date. The information is
presented in U.S. dollar equivalents.

|                |                       |                                    |   |       |   |      |   |       |   |      |   |            |   |            |   |       |   |  |   |       |   |  |   |         |   |  |   |         | 
|--------------- | --------------------- | ---------------------------------- | - | ----- | - | ---- | - | ----- | - | ---- | - | ---------- | - | ---------- | - | ----- | - |  | - | ----- | - |  | - | ------- | - |  | - | ------- | 
|                |                       |                                    |   |       |   |     
|                |                       | Fiscal Years Ending September 30,  |   |       |   |     
|                |                       |                                    |   |       |   |     
|Liabilities     |                       | 2004                               |   | 2005  |   | 2006 |   | 2007  |   | 2008 |   | Thereafter |   | Fair Value
|                |                       |                                    |   |       |   |      |   |       |   |      |   |            |   |           
|                |                       |                                    |   |      
|                |                       | (in thousands, except percentages) |   |      
|Long-Term Debt: |                       |                                    |   |       |   |      |   |       |   |      |   |            |   |            |   |       |   |  |   |       |   |  |   |         |   |  |   |        
|                | Fixed Rate Debt       |                                    |   |      |   |      |   |      |   |      |   |           |   |            |   |      |   |  |   |      |   |  | $ | 150,000 |   |  | $ | 160,875 | 
|                | Average Interest Rate |                                    |   | 8.125 | % |      |   | 8.125 | % |      |   | 8.125      | % |            |   | 8.125 | % |  |   | 8.125 | % |  |   | 8.125   | % |  |   |         | 
|                | Variable Rate Debt    |                                    | $ | 3,714 |   |      | $ | 1,796 |   |      | $ | 1,811      |   |            | $ | 1,819 |   |  | $ | 1,846 |   |  | $ | 116,736 |   |  | $ | 127,722 | 
|                | Average Interest Rate |                                    |   | 4.125 | % |      |   | 5.645 | % |      |   | 6.635      | % |            |   | 7.365 | % |  |   | 7.885 | % |  |   | 8.240   | % |  |   |         | 

For fiscal year ended 2003, the total net cost of
converting from floating rate (3-month LIBOR) to fixed rate from
a portion of the interest payments under our long-term debt
obligations was approximately $1.2 million. At
September 30, 2003, approximately $2.1 million loss
(net of income tax) is included in accumulated other
comprehensive income (loss). Below is a table listing the
interest expense exposure detail and the fair value of the
interest rate swap agreements as of September 30, 2003 (in
thousands):

|                    |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 
|------------------- |  | -------- | ------ | ---- |  | ----- | ------- | --------- |  | -------- | --------- | ------------- |  | ---------- | --------- |  |  |  | --------- |  |  | - | ------- |  |  | - | ------- | 
|                    |  |          |        |      |  |       |         |           |  |          |           | Twelve Months |  |           
|                    |  |          |        |      |  |       |         |           |  |          |           | Ended         |  |           
|                    |  | Notional |        |      |  |       |         |           |  |          |           | September 30, |  | Fair Value
|Loan                |  | Amount   |        | Term |  | Trade |         | Effective |  | Maturity |           | 2003          |  | (Pre-tax) 
|                    |  |          |        |      |  |       |         |           |  |          |           |               |  |           
|Revolver (assigned) |  | $        |       |      |  |       | 4 years |           |  |          | 1/24/2001 |               |  |            | 2/16/2001 |  |  |  | 2/16/2005 |  |  | $ | 23.5    |  |  | $ |        | 
|Kerr B              |  |          | 19,914 |      |  |       | 4 years |           |  |          | 1/2/2001  |               |  |            | 3/30/2001 |  |  |  | 3/31/2005 |  |  |   | 504.1   |  |  |   | 963.5   | 
|Ormco B             |  |          | 25,345 |      |  |       | 5 years |           |  |          | 1/2/2001  |               |  |            | 3/30/2001 |  |  |  | 6/30/2006 |  |  |   | 692.4   |  |  |   | 2,343.2 | 
|                    |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 
|Total               |  | $        | 45,259 |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  | $ | 1,220.0 |  |  | $ | 3,306.7 | 
|                    |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 

38



---



##### 



For fiscal year ended 2002, the total net cost of
converting from floating rate (3-month LIBOR) to fixed rate from
a portion of the interest payments of the debt obligation was
$4.5 million. Below is a table listing the interest expense
exposure detail (in thousands), including the notional amount as
of September 30, 2002:

|                       |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 
|---------------------- |  | -------- | ------ | ---- |  | ----- | ------- | --------- |  | -------- | --------- | ------------- |  | ---------- | --------- |  |  |  | --------- |  |  | - | ------- |  |  | - | ------- | 
|                       |  |          |        |      |  |       |         |           |  |          |           | Twelve Months |  |           
|                       |  |          |        |      |  |       |         |           |  |          |           | Ended         |  |           
|                       |  | Notional |        |      |  |       |         |           |  |          |           | September 30, |  | Fair Value
|Loan                   |  | Amount   |        | Term |  | Trade |         | Effective |  | Maturity |           | 2002          |  | (Pre-tax) 
|                       |  |          |        |      |  |       |         |           |  |          |           |               |  |           
|Kerr B (terminated)    |  | $        |       |      |  |       |        |           |  |          |          |               |  |            |          |  |  |  |          |  |  | $ | 872.5   |  |  | $ |        | 
|Ormco B (terminated)   |  |          |       |      |  |       |        |           |  |          |          |               |  |            |          |  |  |  |          |  |  |   | 872.5   |  |  |   |        | 
|SDM Revolver           |  |          | 10,000 |      |  |       | 4 years |           |  |          | 1/24/2001 |               |  |            | 2/16/2001 |  |  |  | 2/16/2005 |  |  |   | 233.3   |  |  |   | 861.0   | 
|SDM Revolver (matured) |  |          |       |      |  |       |        |           |  |          |          |               |  |            |          |  |  |  |          |  |  |   | 470.8   |  |  |   |        | 
|Kerr B                 |  |          | 26,853 |      |  |       | 4 years |           |  |          | 1/2/2001  |               |  |            | 3/30/2001 |  |  |  | 3/31/2005 |  |  |   | 726.6   |  |  |   | 1,636.8 | 
|Ormco B                |  |          | 26,853 |      |  |       | 4 years |           |  |          | 1/2/2001  |               |  |            | 3/30/2001 |  |  |  | 3/31/2005 |  |  |   | 707.1   |  |  |   | 1,598.2 | 
|Ormco B (matured)      |  |          |       |      |  |       |        |           |  |          |          |               |  |            |          |  |  |  |          |  |  |   | 659.1   |  |  |   |        | 
|                       |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 
|Total                  |  | $        | 63,706 |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  | $ | 4,541.9 |  |  | $ | 4,096.0 | 
|                       |  |          |        |      |  |       |         |           |  |          |           |               |  |            |           |  |  |  |           |  |  |   |         |  |  |   |         | 

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

39



---



##### 



Item 8.     Financial
Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

SYBRON DENTAL SPECIALTIES, INC.

|                                                                                                                                       |  |      |    | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                       |  | Page
|                                                                                                                                       |  |     
|Independent Auditors Report                                                                                                           |  |      | 41 | 
|Consolidated Balance Sheets as of
    September 30, 2003 and 2002                                                                      |  |      | 42 | 
|Consolidated Statements of Income for the years
    ended September 30, 2003, 2002 and 2001                                            |  |      | 43 | 
|Consolidated Statements of Stockholders
    Equity and Comprehensive Income for the years ended
    September 30, 2003, 2002 and 2001 |  |      | 44 | 
|Consolidated Statements of Cash Flows for the
    years ended September 30, 2003, 2002 and 2001                                        |  |      | 45 | 
|Notes to Consolidated Financial Statements                                                                                             |  |      | 47 | 

40



---



##### 



Independent Auditors Report

The Board of Directors and Stockholders

Sybron Dental Specialties, Inc.:


We have audited the accompanying consolidated
balance sheets of Sybron Dental Specialties, Inc. and
Subsidiaries as of September 30, 2003 and 2002, and the
related consolidated statements of income, stockholders
equity and comprehensive income, and cash flows for each of the
years in the three-year period ended September 30, 2003.
These consolidated financial statements are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Sybron Dental Specialties,
Inc. and Subsidiaries as of September 30, 2003 and 2002,
and the results of their operations and their cash flows for
each of the years in the three-year period ended
September 30, 2003, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Notes 1 and 6 to the consolidated
financial statements, the Company changed its method of
accounting for goodwill and intangible assets as of
October 1, 2002.



| |             
| | ------------
| | /s/ KPMG LLP
| |             
| | KPMG LLP    

Costa Mesa, California

November 17, 2003


41



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2003 and 2002


|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |        |         | 
|------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ------- | ------- |  | ------- | ------ | ------- | 
|                                                                                                                                           |                                                                                                                                                                    | 2003                                       |         | 2002   
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |        
|                                                                                                                                           |                                                                                                                                                                    |                                           
|                                                                                                                                           |                                                                                                                                                                    | (in thousands, except                     
|                                                                                                                                           |                                                                                                                                                                    | share and per                             
|                                                                                                                                           |                                                                                                                                                                    | share amounts)                            
|ASSETS                                                                                                                                    
|Current assets:                                                                                                                            |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           | Cash and cash equivalents                                                                                                                                          |                                            | $       | 22,868  |         |  | $       | 12,652 |        
|                                                                                                                                           | Accounts receivable, less allowance for doubtful
    receivables of $2,247 and $1,400 at September 30, 2003 and
    2002, respectively                             |                                            |         | 103,565 |         |  |         | 80,479 |        
|                                                                                                                                           | Inventories                                                                                                                                                        |                                            |         | 84,239  |         |  |         | 89,685 |        
|                                                                                                                                           | Deferred income taxes                                                                                                                                              |                                            |         | 4,896   |         |  |         | 7,427  |        
|                                                                                                                                           | Prepaid expenses and other current assets                                                                                                                          |                                            |         | 11,624  |         |  |         | 14,163 |        
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           |                                                                                                                                                                    | Total current assets                       |         |         | 227,192 |  |         |        | 204,406 | 
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|Property, plant and equipment, net of accumulated
    depreciation of $92,273 and $85,906 at September 30, 2003
    and 2002, respectively |                                                                                                                                                                    |                                            | 80,750  |         |         |  | 75,502  |       
|Goodwill                                                                                                                                   |                                                                                                                                                                    |                                            | 258,590 |         |         |  | 241,405 |       
|Intangible assets, net of accumulated
    amortization of $23,957 and $22,681 at September 30, 2003
    and 2002, respectively             |                                                                                                                                                                    |                                            | 16,455  |         |         |  | 17,711  |       
|Other assets                                                                                                                               |                                                                                                                                                                    |                                            | 28,672  |         |         |  | 22,433  |       
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           |                                                                                                                                                                    | Total assets                               |         | $       | 611,659 |  |         | $      | 561,457 | 
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                                  
|Current liabilities:                                                                                                                       |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           | Accounts payable                                                                                                                                                   |                                            | $       | 19,620  |         |  | $       | 14,927 |        
|                                                                                                                                           | Current portion of long-term debt                                                                                                                                  |                                            |         | 3,714   |         |  |         | 3,193  |        
|                                                                                                                                           | Income taxes payable                                                                                                                                               |                                            |         | 16,274  |         |  |         | 3,389  |        
|                                                                                                                                           | Accrued payroll and employee benefits                                                                                                                              |                                            |         | 28,712  |         |  |         | 24,367 |        
|                                                                                                                                           | Restructuring reserve                                                                                                                                              |                                            |         | 1,486   |         |  |         | 4,130  |        
|                                                                                                                                           | Accrued rebates                                                                                                                                                    |                                            |         | 9,872   |         |  |         | 5,626  |        
|                                                                                                                                           | Accrued interest                                                                                                                                                   |                                            |         | 3,901   |         |  |         | 4,605  |        
|                                                                                                                                           | Other current liabilities                                                                                                                                          |                                            |         | 10,917  |         |  |         | 9,018  |        
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           |                                                                                                                                                                    | Total current liabilities                  |         |         | 94,496  |  |         |        | 69,255  | 
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|Long-term debt                                                                                                                             |                                                                                                                                                                    |                                            | 124,008 |         |         |  | 187,644 |       
|Senior subordinated notes                                                                                                                  |                                                                                                                                                                    |                                            | 150,000 |         |         |  | 150,000 |       
|Deferred income taxes                                                                                                                      |                                                                                                                                                                    |                                            | 13,748  |         |         |  | 11,444  |       
|Other liabilities                                                                                                                          |                                                                                                                                                                    |                                            | 21,422  |         |         |  | 11,971  |       
|Commitments and contingent liabilities
    (notes 8, 15 and 16)                                                                            |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|Stockholders equity:                                                                                                                      |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           | Preferred stock, $.01 par value; authorized
    20,000,000 shares, none outstanding                                                                                |                                            |         |        |         |  |         |       |        
|                                                                                                                                           | Common stock, $.01 par value; authorized
    250,000,000 shares, 38,285,224 and 37,989,202 issued and
    outstanding at September 30, 2003 and 2002, respectively |                                            |         | 383     |         |  |         | 380    |        
|Additional paid-in capital                                                                                                                 |                                                                                                                                                                    |                                            | 74,934  |         |         |  | 70,329  |       
|Retained earnings                                                                                                                          |                                                                                                                                                                    |                                            | 126,044 |         |         |  | 68,592  |       
|Accumulated other comprehensive income (loss)                                                                                              |                                                                                                                                                                    |                                            | 6,624   |         |         |  | (8,158  | )     
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|Total stockholders equity                                                                                                                 |                                                                                                                                                                    |                                            | 207,985 |         |         |  | 131,143 |       
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       
|                                                                                                                                           |                                                                                                                                                                    | Total liabilities and stockholders equity |         | $       | 611,659 |  |         | $      | 561,457 | 
|                                                                                                                                           |                                                                                                                                                                    |                                            |         |         |         |  |         |       

See accompanying notes to consolidated financial
statements.

42



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended September 30, 2003,
2002 and 2001


|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |         |         | 
|-------------------------------------------------------- | --------------------------------------- | -------------------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                         |                                         | 2003                                               |         | 2002    |         | 2001
|                                                         |                                         |                                                    |         |         |         |     
|                                                         |                                         |                                                   
|                                                         |                                         | (in thousands, except                             
|                                                         |                                         | per share amounts)                                
|Net sales                                                |                                         | $                                                  | 526,391 |         |         | $    | 456,666 |         |         | $ | 439,547 |        
|Cost of sales:                                           |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         | Cost of product sold                    |                                                    |         | 235,602 |         |      |         | 200,737 |         |   |         | 188,870 |        
|                                                         | Restructuring charges                   |                                                    |         |        |         |      |         | 106     |         |   |         | 1,291   |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         |                                         | Total cost of sales                                |         |         | 235,602 |      |         |         | 200,843 |   |         |         | 190,161 | 
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|Gross profit                                             |                                         |                                                    | 290,789 |         |         |      | 255,823 |         |         |   | 249,386 |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|Selling, general and administrative expenses             |                                         |                                                    | 177,545 |         |         |      | 150,326 |         |         |   | 140,006 |        
|Apogent charges                                          |                                         |                                                    |        |         |         |      |        |         |         |   | 730     |        
|Restructuring charges                                    |                                         |                                                    |        |         |         |      | 3,141   |         |         |   |        |        
|Amortization of goodwill and other intangible
    assets |                                         |                                                    | 1,274   |         |         |      | 10,150  |         |         |   | 9,099   |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         |                                         | Total selling, general and administrative expenses |         |         | 178,819 |      |         |         | 163,617 |   |         |         | 149,835 | 
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|Operating income                                         |                                         |                                                    | 111,970 |         |         |      | 92,206  |         |         |   | 99,551  |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|Other income (expense):                                  |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         | Interest expense                        |                                                    |         | (21,554 | )       |      |         | (25,815 | )       |   |         | (33,458 | )      
|                                                         | Amortization of deferred financing fees |                                                    |         | (1,645  | )       |      |         | (1,070  | )       |   |         | (714    | )      
|                                                         | Refinancing expenses                    |                                                    |         |        |         |      |         | (12,998 | )       |   |         | (837    | )      
|                                                         | Restructuring charges                   |                                                    |         |        |         |      |         |        |         |   |         | (1,088  | )      
|                                                         | Other, net                              |                                                    |         | 804     |         |      |         | (30     | )       |   |         | (652    | )      
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|Income before income taxes                               |                                         |                                                    | 89,575  |         |         |      | 52,293  |         |         |   | 62,802  |        
|Income taxes                                             |                                         |                                                    | 32,123  |         |         |      | 20,694  |         |         |   | 25,171  |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         |                                         | Net income                                         |         | $       | 57,452  |      |         | $       | 31,599  |   |         | $       | 37,631  | 
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         | Basic earnings per share (note 14)      |                                                    | $       | 1.51    |         |      | $       | 0.83    |         |   | $       | 1.05    |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        
|                                                         | Diluted earnings per share (note 14)    |                                                    | $       | 1.46    |         |      | $       | 0.81    |         |   | $       | 1.01    |        
|                                                         |                                         |                                                    |         |         |         |      |         |         |         |   |         |        

See accompanying notes to consolidated financial
statements.

43



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

AND COMPREHENSIVE INCOME


For the Years Ended September 30, 2003,
2002 and 2001


|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |        |        | 
|-------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------ | ---------- | ---------- | - | ------- | --- | ------------- | - | ------ | ------- | ------------- | --- | ------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | - |  | - | ------ | ------ | 
|                                                                           |                                           |                                      |            |            |   |         |     | Accumulated   |   |        |         |              
|                                                                           |                                           | Common Stock                         |            |            |   |         |     | Other         |   |        |         |              
|                                                                           |                                           |                                      |            | Additional |   |         |     | Comprehensive |   | Total  |         | Total        
|                                                                           |                                           | Number of                            |            | Par        |   | Paid-in |     | Retained      |   | Income |         | Stockholders |     | Comprehensive
|                                                                           |                                           | Shares                               |            | Value      |   | Capital |     | Earnings      |   | (Loss) |         | Equity        |     | Income       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |              
|                                                                           |                                           |                                     
|                                                                           |                                           | (in thousands, except share amounts)
|Balance at September 30, 2000                                              |                                           |                                      |           |            |   | $       |    |               |   | $      | 160,046 |               |     | $             |        |        |        | $ | (11,678 | )      |        | $ | 148,368 |        |   |  |   |       
|Comprehensive income (loss):                                               |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           | Net income                                |                                      |            |           |   |         |     |              |   |        |         | 638           |     |               |         | 36,993 |        |   |         |       |        |   |         | 37,631 |   |  | $ | 37,631 |       
|                                                                           | Translation adjustment                    |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | 3,238  |        |   |         | 3,238  |   |  |   | 3,238  |       
|                                                                           | Unrealized loss on derivative instruments |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | (5,465 | )      |   |         | (5,465 | ) |  |   | (5,465 | )     
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           |                                           | Total comprehensive income           |            |            |  |         |     |               |  |        |         |               | 638 |               |         |        | 36,993 |   |         |        | (2,227 | ) |         |        |   |  |   | $      | 35,404 | 
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Capital contribution from Apogent (note 18)                                |                                           |                                      |           |            |   |         |    |               |   |        | 4,612   |               |     |               |        |        |        |   |        |        |        |   | 4,612   |        |   |  |   |       
|Issuance of common stock in connection with the
    Apogent spin-off       |                                           |                                      | 35,108,649 |            |   |         | 351 |               |   |        | (351    | )             |     |               |        |        |        |   |        |        |        |   |        |        |   |  |   |       
|Dividends paid to Apogent (note 18)                                        |                                           |                                      |           |            |   |         |    |               |   |        | (67,927 | )             |     |               |        |        |        |   |        |        |        |   | (67,927 | )      |   |  |   |       
|Non-cash dividends to Apogent (note 18)                                    |                                           |                                      |           |            |   |         |    |               |   |        | (78,167 | )             |     |               |        |        |        |   |        |        |        |   | (78,167 | )      |   |  |   |       
|Issuance of common stock from options exercised                            |                                           |                                      | 132,809    |            |   |         | 1   |               |   |        | 1,282   |               |     |               |        |        |        |   |        |        |        |   | 1,283   |        |   |  |   |       
|Proceeds from stock offering, net of offering
    costs                    |                                           |                                      | 2,650,000  |            |   |         | 27  |               |   |        | 49,926  |               |     |               |        |        |        |   |        |        |        |   | 49,953  |        |   |  |   |       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Balance at September 30, 2001                                              |                                           |                                      | 37,891,458 |            |   |         | 379 |               |   |        | 70,059  |               |     |               | 36,993  |        |        |   | (13,905 | )      |        |   | 93,526  |        |   |  |   |       
|Comprehensive income (loss):                                               |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           | Net income                                |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         | 31,599 |        |   |         |       |        |   |         | 31,599 |   |  | $ | 31,599 |       
|                                                                           | Translation adjustment                    |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | 7,142  |        |   |         | 7,142  |   |  |   | 7,142  |       
|                                                                           | Minimum pension liability adjustment      |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | (4,766 | )      |   |         | (4,766 | ) |  |   | (4,766 | )     
|                                                                           | Unrealized gain on derivative instruments |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | 3,371  |        |   |         | 3,371  |   |  |   | 3,371  |       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           |                                           | Total comprehensive income           |            |            |  |         |     |               |  |        |         |               |    |               |         |        | 31,599 |   |         |        | 5,747  |   |         |        |   |  |   | $      | 37,346 | 
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Issuance of common stock from options exercised,
    including tax benefit |                                           |                                      | 97,671     |            |   |         | 1   |               |   |        | 1,485   |               |     |               |        |        |        |   |        |        |        |   | 1,486   |        |   |  |   |       
|Other                                                                      |                                           |                                      | 73         |            |   |         |    |               |   |        | (1,215  | )             |     |               |        |        |        |   |        |        |        |   | (1,215  | )      |   |  |   |       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Balance at September 30, 2002                                              |                                           |                                      | 37,989,202 |            |   |         | 380 |               |   |        | 70,329  |               |     |               | 68,592  |        |        |   | (8,158  | )      |        |   | 131,143 |        |   |  |   |       
|Comprehensive income (loss):                                               |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           | Net income                                |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         | 57,452 |        |   |         |       |        |   |         | 57,452 |   |  | $ | 57,452 |       
|                                                                           | Translation adjustment                    |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | 14,960 |        |   |         | 14,960 |   |  |   | 14,960 |       
|                                                                           | Minimum pension liability adjustment      |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | 2,175  |        |   |         | 2,175  |   |  |   | 2,175  |       
|                                                                           | Unrealized loss on derivative instruments |                                      |            |           |   |         |     |              |   |        |         |              |     |               |         |       |        |   |         | (2,353 | )      |   |         | (2,353 | ) |  |   | (2,353 | )     
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|                                                                           |                                           | Total comprehensive income           |            |            |  |         |     |               |  |        |         |               |    |               |         |        | 57,452 |   |         |        | 14,782 |   |         |        |   |  |   | $      | 72,234 | 
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Issuance of common stock from options exercised,
    including tax benefit |                                           |                                      | 296,022    |            |   |         | 3   |               |   |        | 4,605   |               |     |               |        |        |        |   |        |        |        |   | 4,608   |        |   |  |   |       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       
|Balance at September 30, 2003                                              |                                           |                                      | 38,285,224 |            |   | $       | 383 |               |   | $      | 74,934  |               |     | $             | 126,044 |        |        | $ | 6,624   |        |        | $ | 207,985 |        |   |  |   |       
|                                                                           |                                           |                                      |            |            |   |         |     |               |   |        |         |               |     |               |         |        |        |   |         |        |        |   |         |        |   |  |   |       

See accompanying notes to consolidated financial
statements.

44



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended September 30, 2003,
2002 and 2001


|                                          |                                                                                       |                                                                         |                                           |         |         |         |   |         |         |         |   |         |        |         |  
|----------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------ | ------- | -
|                                          |                                                                                       | 2003                                                                    |                                           | 2002    |         | 2001   
|                                          |                                                                                       |                                                                         |                                           |         |         |        
|                                          |                                                                                       |                                                                        
|                                          |                                                                                       | (in thousands)                                                         
|Cash flows from operating
    activities: |                                                                                       |                                                                         |                                           |         |         |         |   |         |         |         |   |        
|                                          | Net income                                                                            |                                                                         | $                                         | 57,452  |         |         | $ | 31,599  |         |         | $ | 37,631  |       
|                                          | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                         |                                           |         |         |         |   |         |         |         |   |         |       
|                                          |                                                                                       | Depreciation                                                            |                                           |         | 11,336  |         |   |         | 10,712  |         |   |         | 9,772  |        
|                                          |                                                                                       | Amortization of goodwill and other intangible
    assets                |                                           |         | 1,274   |         |   |         | 10,258  |         |   |         | 9,207  |        
|                                          |                                                                                       | Amortization of deferred financing fees                                 |                                           |         | 1,645   |         |   |         | 1,070   |         |   |         | 714    |        
|                                          |                                                                                       | Non-cash charges related to termination of
    previous credit facility |                                           |         |        |         |   |         | 7,694   |         |   |         | 837    |        
|                                          |                                                                                       | Loss (gain) on sales of property, plant and
    equipment               |                                           |         | (365    | )       |   |         | (243    | )       |   |         | 233    |        
|                                          |                                                                                       | Provision for losses on doubtful receivables                            |                                           |         | 400     |         |   |         | 600     |         |   |         | 1,260  |        
|                                          |                                                                                       | Inventory provisions                                                    |                                           |         | 3,776   |         |   |         | 2,573   |         |   |         | 1,443  |        
|                                          |                                                                                       | Deferred income taxes                                                   |                                           |         | 3,232   |         |   |         | 2,919   |         |   |         | 207    |        
|                                          |                                                                                       | Tax benefit from issuance of stock under employee
    stock plan        |                                           |         | 604     |         |   |         | 283     |         |   |         |       |        
|                                          | Changes in assets and liabilities, net of effects
    of businesses acquired:         |                                                                         |                                           |         |         |         |   |         |         |         |   |         |       
|                                          |                                                                                       | (Increase)/decrease in accounts receivable                              |                                           |         | (21,548 | )       |   |         | 12,521  |         |   |         | (1,096 | )      
|                                          |                                                                                       | (Increase)/decrease in inventories                                      |                                           |         | 7,737   |         |   |         | (13,964 | )       |   |         | (1,461 | )      
|                                          |                                                                                       | (Increase)/decrease in prepaid expenses and other
    current assets    |                                           |         | 2,997   |         |   |         | (1,068  | )       |   |         | (6,499 | )      
|                                          |                                                                                       | Increase/(decrease) in accounts payable                                 |                                           |         | 4,110   |         |   |         | (2,801  | )       |   |         | 4,926  |        
|                                          |                                                                                       | Increase/(decrease) in income taxes payable                             |                                           |         | 12,701  |         |   |         | (3,955  | )       |   |         | 588    |        
|                                          |                                                                                       | Increase/(decrease) in accrued payroll and
    employee benefits        |                                           |         | 8,804   |         |   |         | (5,606  | )       |   |         | 6,105  |        
|                                          |                                                                                       | Increase in accrued rebates                                             |                                           |         | 4,246   |         |   |         | 205     |         |   |         | 284    |        
|                                          |                                                                                       | Increase/(decrease) in restructuring reserve                            |                                           |         | (2,644  | )       |   |         | 1,355   |         |   |         | 372    |        
|                                          |                                                                                       | Increase/(decrease) in accrued interest                                 |                                           |         | (704    | )       |   |         | 2,619   |         |   |         | 1,952  |        
|                                          |                                                                                       | Increase in other current liabilities                                   |                                           |         | 1,226   |         |   |         | 1,393   |         |   |         | 1,244  |        
|                                          |                                                                                       | Net change in other assets and liabilities                              |                                           |         | (9,114  | )       |   |         | (3,487  | )       |   |         | (1,009 | )      
|                                          |                                                                                       |                                                                         |                                           |         |         |         |   |         |         |         |   |        
|                                          |                                                                                       |                                                                         | Net cash provided by operating activities |         |         | 87,165  |   |         |         | 54,677  |   |         |        | 66,710  |  
|Cash flows from investing
    activities: |                                                                                       |                                                                         |                                           |         |         |         |   |         |         |         |   |        
|                                          | Capital expenditures                                                                  |                                                                         |                                           | (9,153  | )       |         |   | (15,694 | )       |         |   | (14,416 | )     
|                                          | Proceeds from sales of property, plant and
    equipment                              |                                                                         |                                           | 5,359   |         |         |   | 1,227   |         |         |   | 124     |       
|                                          | Net payments for business acquired                                                    |                                                                         |                                           | (16,237 | )       |         |   | (8,315  | )       |         |   | (51,498 | )     
|                                          | Payments for intangibles                                                              |                                                                         |                                           | (1,418  | )       |         |   | (5,838  | )       |         |   | (2,877  | )     
|                                          |                                                                                       |                                                                         |                                           |         |         |         |   |         |         |         |   |        
|                                          |                                                                                       |                                                                         | Net cash used in investing activities     |         |         | (21,449 | ) |         |         | (28,620 | ) |         |        | (68,667 | )



See accompanying notes to consolidated financial
statements.


45



---



##### 



|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |          |       | 
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | -------- | ------- | ---- | ------ | -------- | ------- | - | ----- | -------- | ----- | 
|                                                                             |                                                                                             | 2003                                                    |        | 2002     |         | 2001
|                                                                             |                                                                                             |                                                         |        |          |         |     
|                                                                             |                                                                                             |                                                        
|                                                                             |                                                                                             | (in thousands)                                         
|Cash flows from financing
    activities:                                    |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Proceeds from credit facility                                                               |                                                         | $      | 163,000  |         |      | $      | 453,500  |         |   | $     | 562,160  |      
|                                                                             | Principal payments on credit facility                                                       |                                                         |        | (226,361 | )       |      |        | (611,823 | )       |   |       | (539,021 | )    
|                                                                             | Proceeds from long-term debt                                                                |                                                         |        | 4,063    |         |      |        | 1,855    |         |   |       | 937      |      
|                                                                             | Principal payments on long-term debt                                                        |                                                         |        | (4,477   | )       |      |        | (677     | )       |   |       | (1,593   | )    
|                                                                             | Payment of deferred financing fees                                                          |                                                         |        | (473     | )       |      |        | (11,993  | )       |   |       | (5,494   | )    
|                                                                             | Proceeds from sale of senior subordinated notes                                             |                                                         |        |         |         |      |        | 150,000  |         |   |       |         |      
|                                                                             | Payments of prepayment penalty and terminated
    interest rate swap related to refinancing |                                                         |        |         |         |      |        | (5,305   | )       |   |       |         |      
|                                                                             | Payment of Apogent dividends                                                                |                                                         |        |         |         |      |        |         |         |   |       | (67,927  | )    
|                                                                             | Proceeds from stock offering, net of offering
    costs                                     |                                                         |        |         |         |      |        |         |         |   |       | 49,953   |      
|                                                                             | Capital contributions from Apogent                                                          |                                                         |        |         |         |      |        |         |         |   |       | 4,612    |      
|                                                                             | Cash received from exercise of stock options                                                |                                                         |        | 4,004    |         |      |        | 1,203    |         |   |       | 1,283    |      
|                                                                             | Payment of terminated cross currency debt swap                                              |                                                         |        |         |         |      |        | (1,497   | )       |   |       |         |      
|                                                                             | Net change in advances and loans to Apogent                                                 |                                                         |        |         |         |      |        |         |         |   |       | (404     | )    
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             |                                                                                             | Net cash provided by (used in) financing
    activities |        |          | (60,244 | )    |        |          | (24,737 | ) |       |          | 4,506 | 
|Effect of exchange rate changes on cash and cash
    equivalents             |                                                                                             |                                                         | 4,744  |          |         |      | 3,013  |          |         |   | (13   | )       
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|Net increase in cash and cash equivalents                                    |                                                                                             |                                                         | 10,216 |          |         |      | 4,333  |          |         |   | 2,536 |         
|Cash and cash equivalents at beginning of period                             |                                                                                             |                                                         | 12,652 |          |         |      | 8,319  |          |         |   | 5,783 |         
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|Cash and cash equivalents at end of period                                   |                                                                                             | $                                                       | 22,868 |          |         | $    | 12,652 |          |         | $ | 8,319 |         
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|Supplemental disclosures of cash flow
    information:                       |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Cash paid during the year for interest                                                      |                                                         | $      | 23,235   |         |      | $      | 24,274   |         |   | $     | 24,779   |      
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Cash paid during the year for income taxes                                                  |                                                         | $      | 12,999   |         |      | $      | 25,905   |         |   | $     | 20,132   |      
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|Supplemental disclosures of non-cash investing
    and financing activities: |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Non-cash dividend to Apogent                                                                |                                                         | $      |         |         |      | $      |         |         |   | $     | 78,167   |      
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Non-cash charge for the de-designation of
    interest rate swaps                           |                                                         | $      |         |         |      | $      | 3,223    |         |   | $     |         |      
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         
|                                                                             | Non-cash charge for the write-off of deferred
    financing fees                            |                                                         | $      |         |         |      | $      | 4,471    |         |   | $     | 837      |      
|                                                                             |                                                                                             |                                                         |        |          |         |      |        |          |         |   |       |         



See accompanying notes to consolidated financial
statements.


46



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

For the Years Ended September 30, 2003,
2002 and 2001


(In thousands, except share and per share
amounts)


(1) Summary of Significant Accounting
Policies

On November 8, 2000, Sybron International
Corporation, which is now known as Apogent Technologies Inc.
(Apogent), announced that it had declared a pro rata
distribution to its shareholders of the common stock and related
preferred stock purchase rights of Sybron Dental Specialties,
Inc. (formerly known as SDS Holding Co.). Shareholders of record
as of November 30, 2000 received one share of Sybron Dental
Specialties, Inc. (SDS) common stock for every three
shares of Apogent common stock they owned as of the record date.
SDS merged with its wholly owned subsidiary Sybron Dental
Management, Inc. (SDM) on January 1, 2003, now
and formerly named Sybron Dental Specialties, Inc. Prior to the
distribution (spin-off), Sybron Dental Management,
Inc. was a direct wholly-owned subsidiary of Apogent.
Immediately prior to the spin-off, Apogent contributed all of
the stock of Sybron Dental Management, Inc. to Sybron Dental
Specialties, Inc. As used in these Notes to the Consolidated
Financial Statements, the term SDS or the
Company means Sybron Dental Management, Inc. for the
periods prior to the spin-off and Sybron Dental Specialties,
Inc. (formerly known as SDS Holding Co.) for periods after the
spin-off. The spin-off was effective on December 11, 2000.

SDS has presented in these consolidated financial
statements its assets and liabilities at the same amounts
previously presented in the consolidated financial statements of
Apogent prior to the spin-off, except as noted in Note 1(c)
below.

The subsidiaries of SDS are leading manufacturers
of value-added products for the professional dental, including
infection prevention, and orthodontic markets in the United
States and abroad (see Note 19).

(a) Principles
of Consolidation and Fiscal Year End

The consolidated financial statements reflect the
operations of SDS and its wholly owned subsidiaries. The term
Apogent as used herein refers to Apogent and its
subsidiaries. The Companys fiscal year ends on
September 30. All significant intercompany balances and
transactions have been eliminated. The fiscal years ended
September 30, 2003, 2002 and 2001 are hereinafter referred
to as 2003, 2002, and 2001,
respectively.

(b) Cash
Equivalents

For purposes of reporting cash flows, cash and
cash equivalents include investments in debt obligations with
original maturities of three months or less.

(c) Inventories

Inventories are stated at the lower of cost or
market value. Elements of cost included in inventories are: raw
materials, direct labor, manufacturing overhead (which includes
indirect labor, fringe benefits, consumable supplies,
depreciation of production equipment and tooling) and retained
costs representing the excess of manufacturing or production
costs over amounts charged to cost of sales.

(d) Property,
Plant and Equipment

Property, plant and equipment are stated at cost
less accumulated depreciation. Depreciation is calculated over
the estimated useful lives of depreciable assets (5 to
45 years for land improvements, buildings and building
improvements, and 3 to 20 years for machinery and
equipment) using the straight-line method. The Company assesses
the recoverability of assets by comparing the carrying amount of
an asset to future net cash flows expected to be generated by
that asset. If such assets are considered impaired, the
impairment to be

47



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

recognized is measured by the amount by which the
carrying amounts of the assets exceed the fair value of the
assets.

(e) Goodwill
and Intangible Assets

Beginning in fiscal 2003 with the adoption of
Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets,
goodwill is no longer amortized, but tested for impairment at
least annually. Before fiscal 2003, goodwill was amortized over
5 to 40 years.

Intangible assets are recorded at cost and are
amortized using the straight-line method, over their estimated
useful lives.

(f) Revenue
Recognition

The Company recognizes revenue upon shipment of
products, when the risks and rewards of ownership are passed,
and when persuasive evidence of a sales arrangement exists, the
price to the buyer is fixed and determinable and the Company is
reasonably assured of its ability to collect the sales price. A
large portion of the Companys sales of Professional Dental
products is sold through distributors. Revenues associated with
sales to distributors are also recognized upon shipment of
products when all risks and rewards of ownership of the product
are passed.

The Company accrues rebates based upon its
various pricing programs. These rebates are accounted for as a
reduction of revenue.

(g) Shipping
and Handling Costs

The shipping and handling costs included in
selling, general and administrative expense for the years ended
September 30, 2003, 2002 and 2001 are approximately
$12,060, $10,804 and $9,775, respectively.

(h) Income
Taxes

Income taxes are accounted for under the asset
and liability method wherein deferred tax assets and liabilities
are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.

The Company was included in the consolidated
income tax return filed by Apogent through December 11,
2000, but has been responsible for its own filings since the
spin-off. U.S. income tax payments, refunds, credits,
provisions and deferred income tax components prior to the
spin-off were allocated to SDS in accordance with Apogents
tax allocation policy. Such policy allocated income tax
components included in the consolidated income tax return of
Apogent to SDS to the extent such components were generated by
or related to SDS.

(i) Research
and Development Costs

Research and development costs are charged to
selling, general and administrative expenses in the period they
are incurred. Research and development costs for 2003, 2002 and
2001 were approximately $10,218, $10,399 and $8,977,
respectively.

48



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(j) Foreign
Currency Translation

The functional currency for the Companys
foreign operations is the applicable local currency. The
translation from the applicable foreign currencies to
U.S. dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average
exchange rate during the period. The gains or losses, net of
applicable deferred income taxes, resulting from such
translations are included in accumulated comprehensive income
(loss), a component of stockholders equity. Gains and
losses resulting from foreign currency transactions are included
in net income. Foreign currency transaction gains for 2003 were
approximately $561, while foreign currency transaction losses
for 2002 and 2001 were approximately $123 and $1,974,
respectively.

(k) Pensions

The Company and its subsidiaries participate in
various pension plans covering substantially all employees. U.S.
and Canadian pension obligations are funded by payments to
pension fund trustees. Other foreign pensions are funded as
expenses are incurred. The Companys policy is generally to
fund at least the minimum amount required under the Employee
Retirement Income Security Act of 1974, as amended, for plans
subject thereto.

(l) Deferred
Financing Fees

Deferred financing fees are capitalized in other
assets in the accompanying consolidated balance sheets and
amortized as a separate component of other income
(expense) over the life of the related debt agreements.

(m) Advertising
Costs

Advertising costs included in selling, general
and administrative expenses are expensed as incurred and were
$4,211, $5,062 and $4,574 in 2003, 2002 and 2001, respectively.

(n) Use
of Estimates

The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.

(o) Derivative
Financial Instruments

The Company uses derivative financial instruments
to manage its foreign currency, interest rate exposures, and
certain net investments. The Company does not hold or issue
financial instruments for trading purposes. The notional amounts
of these contracts do not represent amounts exchanged by the
parties and, thus, are not a measure of the Companys risk.
The net amounts exchanged are calculated on the basis of the
notional amounts and other terms of the contracts, such as
interest rates or exchange rates, and only represent a small
portion of the notional amounts. The credit and market risk
under these agreements is minimized through diversification
among counter parties with high credit ratings. Depending on the
item being hedged, gains and losses on derivative financial
instruments are either recognized in the results of operations
as they occur or are deferred until the hedged transaction
occurs. Derivatives used as hedges are effective at reducing the
risk associated with the exposure being hedged and are
designated as a hedge at the inception of the derivative
contract. Accordingly, changes in the fair value of the
derivative are highly correlated with changes in the fair value
of the underlying hedged item at the inception of the hedge and
over the life of the hedge

49



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

contract. The fair value of interest rate swaps
that are terminated or required to be de-designated due to an
event that negates the probability of the hedged forecasted
transaction from taking place (as may be required by a
refinancing), is removed from the unrealized loss or gain on
derivative instruments recorded in accumulated other
comprehensive income and the fair value is reclassified into
earnings immediately. For cross currency debt swaps, the fair
value remains in currency translation adjustment, a component of
accumulated other comprehensive income, until sale or upon
complete or substantially complete liquidation of our net
investment.

(p) Environmental
Expenditures

Environmental expenditures that relate to current
ongoing operations or to conditions caused by past operations
are expensed. The Company determines its liability on a site by
site basis and records a liability at the time when the
liability is probable and can be reasonably estimated. The
estimated liability is not reduced for possible recoveries from
insurance carriers.

(q) Comprehensive
Income (Loss)

The components of accumulated other comprehensive
income (loss) consist of translation adjustments, minimum
pension liability adjustments, and unrealized gains
(losses) on derivative instruments and are included on the
accompanying consolidated statements of stockholders
equity and comprehensive income.

(r) Stock-Based
Compensation

The Company applies the provisions of SFAS
No. 123, Accounting for Stock-Based
Compensation. As permitted by SFAS No. 123, the
Company continues to follow the guidance of APB Opinion
No. 25, Accounting for Stock Issued to
Employees. Consequently, compensation related to stock
options reflects the difference between the grant price and the
fair value of the underlying common shares at the grant date.
The Company issues stock options to employees with a grant price
equal to the market value of common stock on the grant date. As
required by SFAS No. 123, the Company discloses in
Note 13 Stock-Based Compensation the pro forma
effect on operations, as if compensation costs were recorded at
the estimated fair value of the stock options granted.

If the Company had elected to recognize
compensation cost based on the fair value at the date of grant,
consistent with the method as prescribed by SFAS No. 123,
net income would have changed to the pro forma amounts indicated
below:

|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                    |                       | 2003 |        | 2002 |  | 2001
|                                                                                                                                                    |                       |      |        |      |  |     
|Net income  as reported                                                                                                                            |                       | $    | 57,452 |      |  | $    | 31,599 |      |  | $ | 37,631 |     
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |                       |      | 2,769  |      |  |      | 2,704  |      |  |   | 1,788  |     
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|Pro forma net income                                                                                                                                |                       | $    | 54,683 |      |  | $    | 28,895 |      |  | $ | 35,843 |     
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|Earnings per share:                                                                                                                                 |                       |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                                                                    | Basic  as reported   |      | $      | 1.51 |  |      | $      | 0.83 |  |   | $      | 1.05 | 
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                                                                    | Basic  pro forma     |      | $      | 1.44 |  |      | $      | 0.76 |  |   | $      | 1.00 | 
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                                                                    | Diluted  as reported |      | $      | 1.46 |  |      | $      | 0.81 |  |   | $      | 1.01 | 
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                                                                    | Diluted  pro forma   |      | $      | 1.39 |  |      | $      | 0.74 |  |   | $      | 0.97 | 
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     

50



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

Pro forma information regarding net income and
earnings per common share has been estimated at the date of
grant using the Black-Scholes option-pricing model based on the
following assumptions:

|                        |  |                        |       |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---------------------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                        |  |                       
|                        |  | Employee Stock Options
|                        |  |                       
|                        |  | 2003                   |       | 2002 |  | 2001
|                        |  |                        |       |      |  |     
|Expected life (years)   |  |                        | 4.0   |      |  |      | 4.0   |   |  |  | 4.0   |  
|Expected volatility     |  |                        | 30.74 | %    |  |      | 30.25 | % |  |  | 31.32 | %
|Risk free interest rate |  |                        | 2.54  | %    |  |      | 3.99  | % |  |  | 5.17  | %
|Expected dividend yield |  |                        | 0.00  | %    |  |      | 0.00  | % |  |  | 0.00  | %

The Black-Scholes option-pricing model was
developed for use in estimating the fair value of traded options
that have no vesting restrictions and are fully transferable and
negotiable in a free trading market. In addition, option
valuation models require the input of highly subjective
assumptions, including the expected stock price volatility.
Because the Companys options have characteristics
significantly different from those of traded options, and
because changes in the subjective input assumptions can
materially affect the fair value estimate, in the opinion of
management, the existing models do not necessarily provide a
reliable single measure of the fair value of its options. The
weighted average estimated fair values of stock options granted
during 2003, 2002 and 2001 were $5.43, $5.92 and $5.11 per
share, respectively.

(s) Earnings
Per Share

Basic earnings per share are calculated by
dividing net income available to common stockholders by the
weighted average of common shares outstanding during the year.
Diluted earnings per share are calculated by using the weighted
average of common shares outstanding adjusted to include the
potentially dilutive effect of outstanding stock options.

(t) Reclassification

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

In April 2002, the Financial Accounting Standards
Board (FASB) issued SFAS No. 145,
Rescission of the FASB statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates the requirements
to classify gains and losses from the extinguishment of
indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback
transaction, and makes other non-substantive technical
corrections to existing pronouncements. SFAS No. 145 is
effective for fiscal years beginning after May 15, 2002.
Accordingly, the Company has reclassified the extraordinary item
as the result of a loss from the extinguishment of indebtedness
reported in fiscal year 2002 to refinancing expenses in
accordance with SFAS No. 145.

(2) Business and Credit
Concentrations

Certain of the Companys Professional Dental
products are sold through major distributors, one of which has
exceeded 10% of the Companys consolidated net sales in
2003, selling into primarily the dental segment. No customer
accounted for more than 10% of consolidated net sales for 2002
or 2001. Accounts receivable from each of these distributors was
less than 10% of the outstanding consolidated accounts
receivable balances at September 30, 2003 and 2002.

51



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(3) Inventories

Inventories at September 30, 2003 and 2002
consist of the following:

|                           |  |      |        |      |  |   |        |  
|-------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                           |  | 2003 |        | 2002
|                           |  |      |        |     
|Raw materials and supplies |  | $    | 21,851 |      |  | $ | 23,169 |  
|Work in process            |  |      | 19,211 |      |  |   | 23,888 |  
|Finished goods             |  |      | 47,544 |      |  |   | 47,102 |  
|Inventory reserves         |  |      | (4,367 | )    |  |   | (4,474 | )
|                           |  |      |        |      |  |   |        |  
|                           |  | $    | 84,239 |      |  | $ | 89,685 |  
|                           |  |      |        |      |  |   |        |  

(4) Income Taxes

Total income tax expense (benefit) for the
years ended September 30, 2003, 2002 and 2001 is allocated
as follows:

|                               |                       |         |        |          |  |       |       |       |   |   |        |        | 
|------------------------------ | --------------------- | ------- | ------ | -------- |  | ----- | ----- | ----- | - | - | ------ | ------ | 
|                               |                       | Current |        | Deferred |  | Total
|                               |                       |         |        |          |  |      
|Year ended September 30, 2003: |                       |         |        |          |  |       |       |       |   |   |        |       
|                               | U.S., state and local |         | $      | 14,430   |  |       | $     | 7,079 |   |   | $      | 21,509 | 
|                               | Foreign               |         |        | 10,679   |  |       |       | (65   | ) |   |        | 10,614 | 
|                               |                       |         |        |          |  |       |       |       |   |   |        |       
|                               |                       | $       | 25,109 |          |  | $     | 7,014 |       |   | $ | 32,123 |       
|                               |                       |         |        |          |  |       |       |       |   |   |        |       
|Year ended September 30, 2002: |                       |         |        |          |  |       |       |       |   |   |        |       
|                               | U.S., state and local |         | $      | 10,290   |  |       | $     | (684  | ) |   | $      | 9,606  | 
|                               | Foreign               |         |        | 11,143   |  |       |       | (55   | ) |   |        | 11,088 | 
|                               |                       |         |        |          |  |       |       |       |   |   |        |       
|                               |                       | $       | 21,433 |          |  | $     | (739  | )     |   | $ | 20,694 |       
|                               |                       |         |        |          |  |       |       |       |   |   |        |       
|Year ended September 30, 2001: |                       |         |        |          |  |       |       |       |   |   |        |       
|                               | U.S., state and local |         | $      | 14,638   |  |       | $     | 1,005 |   |   | $      | 15,643 | 
|                               | Foreign               |         |        | 9,359    |  |       |       | 169   |   |   |        | 9,528  | 
|                               |                       |         |        |          |  |       |       |       |   |   |        |       
|                               |                       | $       | 23,997 |          |  | $     | 1,174 |       |   | $ | 25,171 |       
|                               |                       |         |        |          |  |       |       |       |   |   |        |       

The domestic and foreign components of income
before income taxes are as follows:

|                           |  |      |        |      |  |      |        |  |  |   |        | 
|-------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                           |  | 2003 |        | 2002 |  | 2001
|                           |  |      |        |      |  |     
|United States              |  | $    | 55,116 |      |  | $    | 18,764 |  |  | $ | 36,892 | 
|Foreign                    |  |      | 34,459 |      |  |      | 33,529 |  |  |   | 25,910 | 
|                           |  |      |        |      |  |      |        |  |  |   |        | 
|Income before income taxes |  | $    | 89,575 |      |  | $    | 52,293 |  |  | $ | 62,802 | 
|                           |  |      |        |      |  |      |        |  |  |   |        | 

52



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Income tax expense differed from the amounts
computed by applying the U.S. Federal income tax rate of
35 percent to income before income taxes in 2003, 2002 and
2001 as a result of the following:



|                                                                                                            |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                            |  | 2003 |        | 2002 |  | 2001
|                                                                                                            |  |      |        |      |  |     
|Computed expected tax expense                                                                             |  | $    | 31,351 |      |  | $    | 18,303 |   |  | $ | 21,981 |  
|Increase (reduction) in income taxes
    resulting from:                                                    |  |      |        |      |  |      |        |   |  |   |        |  
|Change in beginning of year valuation allowance
    for deferred tax assets allocated to income tax expense |  |      | (41    | )    |  |      | (323   | ) |  |   | (418   | )
|Amortization of goodwill                                                                                    |  |      |       |      |  |      | 1,624  |   |  |   | 1,624  |  
|State and local income taxes, net of Federal
    income tax benefit                                         |  |      | 1,995  |      |  |      | 815    |   |  |   | 1,624  |  
|Foreign income taxed at rates (lower)/higher than
    U.S. Federal income                                   |  |      | (1,447 | )    |  |      | (324   | ) |  |   | 877    |  
|Foreign tax credits utilized in excess of U.S.
    tax on foreign earnings                                  |  |      | 1,018  |      |  |      | 468    |   |  |   | (723   | )
|Net foreign sales corporation benefit                                                                       |  |      | (1,965 | )    |  |      | (1,900 | ) |  |   | (1,493 | )
|Other, net                                                                                                  |  |      | 1,212  |      |  |      | 2,031  |   |  |   | 1,699  |  
|                                                                                                            |  |      |        |      |  |      |        |   |  |   |        |  
|                                                                                                            |  | $    | 32,123 |      |  | $    | 20,694 |   |  | $ | 25,171 |  
|                                                                                                            |  |      |        |      |  |      |        |   |  |   |        |  

The significant components of deferred income tax
expense (benefit) for 2003, 2002 and 2001 are as follows:

|                                                                                               |  |      |       |      |  |      |      |   |  |   |       |  
|---------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                                                                                               |  | 2003 |       | 2002 |  | 2001
|                                                                                               |  |      |       |      |  |     
|Deferred tax (benefit)/expense (exclusive of the
    effects of other components listed below) |  | $    | 7,055 |      |  | $    | (416 | ) |  | $ | 1,592 |  
|Increase/(decrease) in the valuation allowance
    for deferred tax assets                     |  |      | (41   | )    |  |      | (323 | ) |  |   | (418  | )
|                                                                                               |  |      |       |      |  |      |      |   |  |   |       |  
|                                                                                               |  | $    | 7,014 |      |  | $    | (739 | ) |  | $ | 1,174 |  
|                                                                                               |  |      |       |      |  |      |      |   |  |   |       |  

53



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and
deferred tax liabilities at September 30, 2003 and 2002 are
presented below.

|                                 |                          |                                      |         |        |         |   |         |        |         |  
|-------------------------------- | ------------------------ | ------------------------------------ | ------- | ------ | ------- | - | ------- | ------ | ------- | -
|                                 |                          | 2003                                 |         | 2002  
|                                 |                          |                                      |         |       
|Deferred tax assets:             |                          |                                      |         |        |         |   |         |       
|Inventories                      |                          | $                                    | 1,609   |        |         | $ | 2,036   |       
|Compensation                     |                          |                                      | 1,822   |        |         |   | 1,870   |       
|Sale/ Leaseback                  |                          |                                      | 2,967   |        |         |   | 2,997   |       
|Employee benefits                |                          |                                      | 2,007   |        |         |   | 1,386   |       
|Net operating loss carryforwards |                          |                                      | 611     |        |         |   | 652     |       
|Foreign tax credit carryforwards |                          |                                      |        |        |         |   | 2,012   |       
|Other accruals                   |                          |                                      | 6,887   |        |         |   | 5,126   |       
|                                 |                          |                                      |         |        |         |   |         |       
|                                 |                          | Total gross deferred tax assets      |         |        | 15,903  |   |         |        | 16,079  |  
|                                 | Less valuation allowance |                                      |         | (611   | )       |   |         | (652   | )      
|                                 |                          |                                      |         |        |         |   |         |       
|                                 | Net deferred tax assets  |                                      |         | 15,292 |         |   |         | 15,427 |        
|                                 |                          |                                      |         |        |         |   |         |       
|Deferred tax liabilities:        |                          |                                      |         |        |         |   |         |       
|Depreciation                     |                          |                                      | (3,082  | )      |         |   | (1,830  | )     
|Purchase accounting              |                          |                                      | (13,318 | )      |         |   | (10,863 | )     
|Other                            |                          |                                      | (7,744  | )      |         |   | (6,751  | )     
|                                 |                          |                                      |         |        |         |   |         |       
|                                 |                          | Total gross deferred tax liabilities |         |        | (24,144 | ) |         |        | (19,444 | )
|                                 |                          |                                      |         |        |         |   |         |       
|                                 |                          | Net deferred tax liabilities         |         | $      | (8,852  | ) |         | $      | (4,017  | )
|                                 |                          |                                      |         |        |         |   |         |       

The change in the net deferred tax liabilities
contains $3,770 of deferred tax assets and $1,590 of deferred
tax liabilities related to the fair values of the Companys
derivative financial instruments and pensions, respectively. The
net change in the total valuation allowance for the years ended
September 30, 2003 and 2002 was a decrease of $41 and $323,
respectively. The valuation allowance for deferred tax assets as
of the beginning of fiscal 2003 was $652. The valuation
allowance relates primarily to net operating loss carryforwards
in certain foreign jurisdictions, in which there is a history of
pre-tax accounting losses. Management is unable to conclude that
there will be pre-tax accounting income in those jurisdictions
in the near term. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment.

At September 30, 2003, the Company has an
aggregate of $1,747 of foreign net operating loss carry forwards
from certain foreign jurisdictions, the majority of which expire
between 2004 and 2010.

Accumulated earnings of foreign subsidiaries at
September 30, 2003, 2002 and 2001 of approximately $71,000,
$51,000, and $48,000 respectively, have been reinvested in the
business and no provision for income taxes has been made for the
repatriation of these earnings.

54



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(5) Property, Plant and
Equipment

Major classifications of property, plant and
equipment at September 30, 2003 and 2002 are as follows:

|                                                |  |      |         |      |  |   |         |  
|----------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                |  | 2003 |         | 2002
|                                                |  |      |         |     
|Land and land improvements                      |  | $    | 7,151   |      |  | $ | 6,408   |  
|Buildings and building improvements             |  |      | 41,524  |      |  |   | 28,726  |  
|Machinery and equipment                         |  |      | 117,996 |      |  |   | 108,244 |  
|Construction in progress                        |  |      | 6,352   |      |  |   | 18,030  |  
|                                                |  |      |         |      |  |   |         |  
|                                                |  |      | 173,023 |      |  |   | 161,408 |  
|Less: Accumulated depreciation and amortization |  |      | (92,273 | )    |  |   | (85,906 | )
|                                                |  |      |         |      |  |   |         |  
|                                                |  | $    | 80,750  |      |  | $ | 75,502  |  
|                                                |  |      |         |      |  |   |         |  

(6) Goodwill and Intangible
Assets

In June 2001, the FASB issued SFAS No. 141,
Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 141 requires that the purchase method of accounting be
used for all business combinations. SFAS No. 141 specifies
criteria that intangible assets acquired in a business
combination must meet to be recognized and reported separately
from goodwill. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be
amortized to earnings, but instead tested for impairment at
least annually in accordance with the provisions of SFAS
No. 142. SFAS No. 142 also requires that intangible
assets with estimable useful lives be amortized over their
respective estimated useful lives to their estimated residual
values, and reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.

The Company adopted the provisions of SFAS
No. 141 as of July 1, 2001, and SFAS No. 142 as
of October 1, 2002. Upon adoption of SFAS No. 142, the
Company was required to evaluate its existing intangible assets
and goodwill that were acquired in purchase business
combinations, and make any necessary reclassifications in order
to conform with the new classification criteria in SFAS
No. 141 for recognition separate from goodwill.



| |                  
| | -----------------
| | Intangible Assets

The Company was required to reassess the useful
lives and residual values of all intangible assets acquired, and
make any necessary amortization period adjustments by the end of
the first interim period after adoption. If an intangible asset
was identified as having an indefinite useful life, the Company
was required to test the intangible asset for impairment in
accordance with the provisions of SFAS No. 142 within the
first interim period. Impairment is measured as the excess of
carrying value over the fair value of an intangible asset with
an indefinite life. Any impairment loss is to be measured as of
the date of adoption and recognized as the cumulative effect of
a change in accounting principle in the first interim period.
The Company did not record any impairment charge upon the
adoption of SFAS No. 142.



| |         
| | --------
| | Goodwill

In connection with the SFAS No. 142
transitional goodwill impairment evaluation, SFAS No. 142
required the Company to perform an assessment of whether there
was an indication that goodwill was impaired as of the date of
adoption, October 1, 2002. To accomplish this, the Company
identified its reporting units and determined the carrying value
of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those
reporting units as of October 1, 2002. The Company then

55



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

determined the fair value of each reporting unit
and compared it to the carrying amount of the reporting unit.
The Company has determined that no goodwill impairment was
indicated as of October 1, 2002.

The Company recorded amortization expense of
goodwill and certain other intangible assets in the amount of
$8,859 and $7,827 for the fiscal years ended September 30,
2002 and 2001, respectively. No amortization expense was
recorded for goodwill or those certain other intangible assets
deemed to have indefinite lives for the 2003 fiscal year because
those items are no longer being amortized under the provisions
of SFAS No. 142.

The following table reconciles previously
reported net income as if the provisions of SFAS No. 142
were in effect in fiscal 2002 and 2001:

|                                                                                |                                     |                    |        |                    |  |   |        |        | 
|------------------------------------------------------------------------------- | ----------------------------------- | ------------------ | ------ | ------------------ |  | - | ------ | ------ | 
|                                                                                |                                     | For the Year Ended |        | For the Year Ended
|                                                                                |                                     | September 30, 2002 |        | September 30, 2001
|                                                                                |                                     |                    |        |                   
|Reported net income                                                             |                                     | $                  | 31,599 |                    |  | $ | 37,631 |       
|Add back: goodwill and certain other intangibles
    amortization, net of taxes |                                     |                    | 5,404  |                    |  |   | 4,696  |       
|                                                                                |                                     |                    |        |                    |  |   |        |       
|                                                                                | Adjusted net income                 |                    | $      | 37,003             |  |   | $      | 42,327 | 
|Reported basic earnings per share                                               |                                     | $                  | 0.83   |                    |  | $ | 1.05   |       
|Add back: goodwill and certain other intangibles
    amortization, net of taxes |                                     |                    | 0.14   |                    |  |   | 0.13   |       
|                                                                                |                                     |                    |        |                    |  |   |        |       
|                                                                                | Adjusted basic earnings per share   |                    | $      | 0.97               |  |   | $      | 1.18   | 
|                                                                                |                                     |                    |        |                    |  |   |        |       
|Reported diluted earnings per share                                             |                                     | $                  | 0.81   |                    |  | $ | 1.01   |       
|Add back: goodwill and certain other intangibles
    amortization, net of taxes |                                     |                    | 0.14   |                    |  |   | 0.13   |       
|                                                                                |                                     |                    |        |                    |  |   |        |       
|                                                                                | Adjusted diluted earnings per share |                    | $      | 0.95               |  |   | $      | 1.14   | 
|                                                                                |                                     |                    |        |                    |  |   |        |       

SFAS No. 141 and SFAS No. 142 also
require the Company to disclose the following information
related to its goodwill by segment and intangible assets still
subject to amortization.

The following table details the balances of the
goodwill assets by reporting segment as of September 30:

|                    |  |      |         |      |  |   |         | 
|------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                    |  | 2003 |         | 2002
|                    |  |      |         |     
|Professional Dental |  | $    | 180,362 |      |  | $ | 164,675 | 
|Orthodontic         |  |      | 78,228  |      |  |   | 76,730  | 
|                    |  |      |         |      |  |   |         | 
|Total               |  | $    | 258,590 |      |  | $ | 241,405 | 
|                    |  |      |         |      |  |   |         | 

The following table details the balances of the
amortizable intangible assets as of September 30, 2003:

|                       |  |                |        |              |  |              |        |  |  |   |       | 
|---------------------- |  | -------------- | ------ | ------------ |  | ------------ | ------ |  |  | - | ----- | 
|                       |  | Gross Carrying |        | Accumulated  |  | Net Carrying
|                       |  | Amount         |        | Amortization |  | Amount      
|                       |  |                |        |              |  |             
|Proprietary technology |  | $              | 15,430 |              |  | $            | 9,142  |  |  | $ | 6,288 | 
|Other                  |  | $              | 15,272 |              |  | $            | 14,815 |  |  | $ | 457   | 

Additionally, SFAS No. 142 requires the
Company to disclose the estimated intangible asset amortization
for each of the five twelve-month periods subsequent to
September 30, 2003. The following table represents the
estimated amortization (calculated as of September 30,
2003) for each of the five twelve-month periods indicated:

|                                  |  |      |       |      |  |      |     |      |  |      |     |  |  |   |     |  |  |   |     | 
|--------------------------------- |  | ---- | ----- | ---- |  | ---- | --- | ---- |  | ---- | --- |  |  | - | --- |  |  | - | --- | 
|                                  |  | 2004 |       | 2005 |  | 2006 |     | 2007 |  | 2008
|                                  |  |      |       |      |  |      |     |      |  |     
|Amortization of intangible assets |  | $    | 1,125 |      |  | $    | 923 |      |  | $    | 798 |  |  | $ | 748 |  |  | $ | 718 | 

56



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(7) Long-Term Debt

Credit Facilities and Senior Subordinated
Notes:On June 6, 2002, the
Company terminated its then existing $450,000 credit facility
and entered into a new $350,000 syndicated credit facility for
which Credit Suisse First Boston is the administrative agent.
The credit facility (the Credit Facility), provides
for a five-year $120,000 revolving credit facility (the
Revolver), a seven-year $200,000 term loan (the
Term Loan B) and a five-year $30,000 revolving
credit facility (the Euro Tranche). Sybron Dental
Specialties, Inc., Kerr Corporation, Ormco Corporation and
Pinnacle Products, Inc. (the Domestic Borrowers) are
joint and several borrowers under the Revolver and the Term
Loan B, and Hawe Neos Holding S.A. (Hawe Neos)
is the borrower under the Euro Tranche. Sybron Dental
Specialties became a borrower under the Revolver and Term
Loan B as a result of the merger of Sybron Dental
Management into Sybron Dental Specialties effective
January 1, 2003. In addition to the Credit Facility, the
Company also completed on June 6, 2002, the sale of
$150,000 of 8 1/8% senior subordinated notes due 2012 (the
Senior Subordinated Notes) in a private offering.
The Company used the proceeds of the Term Loan B, together with
the net proceeds from the issuance of the Senior Subordinated
Notes, to repay all of the $332,853 of borrowings outstanding as
of June 6, 2002 under its previous credit facility.

The Credit Facility is jointly and severally
guaranteed by Sybron Dental Specialties, Inc., and the other
Domestic Borrowers and each of the Companys present and
future direct and indirect wholly-owned domestic subsidiaries,
and is secured by substantially all assets of each such entity,
including the capital stock of each domestic subsidiary. In
addition, the Credit Facility is secured by a pledge of 65% of
the capital stock of each of the Companys first-tier
material foreign subsidiaries. The Euro Tranche is also
guaranteed by certain foreign subsidiaries and is secured by a
pledge of 100% of the capital stock of certain foreign
subsidiaries and by some of the assets of the Companys
Swiss subsidiary, Hawe Neos, certain direct subsidiaries of Hawe
Neos and certain of the Companys other indirect foreign
subsidiaries.

The Credit Facility may be prepaid at any time
without penalty except for LIBOR and Euro-LIBOR breakage costs.
Under the Credit Facility, subject to certain exceptions, the
Company is required to apply all of the proceeds from any
issuance of debt, half of the proceeds from any issuance of
equity, half of its excess annual cash flow and, subject to
permitted reinvestments, all amounts received in connection with
any sale of its assets and casualty insurance and condemnation
or eminent domain proceedings, in each case to repay the
outstanding amounts under the facility.

The Term Loan B amortizes 1% annually for
the first six years, payable quarterly, with the balance to be
paid in the seventh year in equal quarterly installments. The
Term Loan B bears interest, at the Companys option,
at either (a) the LIBOR rate, plus between 225 and 275
basis points, or (b) the Base rate, plus between 125 and
175 basis points, in each case as determined according to
the rating of the Credit Facility by Standard and Poors
and Moodys. The per annum initial interest rate until the
delivery of the Pricing Certificate for the Fiscal Quarter
ending December 31, 2002 was LIBOR, plus 250 basis
points. The per annum interest rate ending September 30,
2003 was LIBOR, plus 250 basis points. As of
September 30, 2003, the amount outstanding on the Term
Loan B was $113,226. The average interest rate at
September 30, 2003 on the Term Loan B was 4.71% after
giving effect to the interest rate swap agreements the Company
had in effect as of that date.

The Revolver bears interest, at the
Companys option, at a per annum rate equal to either
(a) the LIBOR rate, plus between 175 and 250 basis points,
or (b) the Base rate, plus between 75 and 150 basis
points, in each case as determined on a quarterly basis
according to a leveraged-based pricing grid with leverage ratios
from 1.75x to 3.0x. The per annum initial interest rate until
the delivery of the first Pricing Certificate for the Fiscal
Quarter ending December 31, 2002 was LIBOR, plus 225 basis
points. The per annum interest rate ending September 30,
2003 was LIBOR, plus 225 basis points. The annual commitment fee
on the unused portion of the Revolver will vary between 0.375%
to 0.5% based on the quarterly leverage ratio. As of
September 30, 2003 there was no outstanding balance on the
Revolver and the amount available was $117,072. The Revolver

57



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 September 30, 2003, a
total of $2,928 in letters of credit were issued.

The Euro Tranche bears interest, at the
Companys option, at Euro-LIBOR or at Base rates with
margins identical to those of the Revolver. The annual
commitment fee on the unused portion of the Euro Tranche varies
between 0.375% to 0.5% based on the quarterly leverage ratio. As
of September 30, 2003, there was no outstanding balance
under the Euro Tranche and the amount available was $30,000.

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 notes, (vii) the
repurchase or redemption of more than $25.0 million of our
stock from stockholders, and (viii) loans and investments,
as well as prohibitions on the payment of cash dividends. The
Credit Facility also has certain financial covenants, including,
without limitation, maximum leverage ratios, minimum fixed
charge coverage ratios, minimum net worth and maximum capital
expenditures.

The Company was in compliance with all such
covenants at September 30, 2003.

Long-term borrowings at September 30, 2003
and 2002 consists of the following:

|                                        |  |      |         |      |  |   |         |  
|--------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                        |  | 2003 |         | 2002
|                                        |  |      |         |     
|Term Loan Facility                      |  | $    | 113,226 |      |  | $ | 164,587 |  
|Revolving Credit Facility               |  |      |        |      |  |   | 12,000  |  
|Senior Subordinated Notes               |  |      | 150,000 |      |  |   | 150,000 |  
|Sale/ Leaseback obligation              |  |      | 7,807   |      |  |   | 7,886   |  
|Capital leases and other (see note 8)   |  |      | 6,689   |      |  |   | 6,364   |  
|                                        |  |      |         |      |  |   |         |  
|                                        |  |      | 277,722 |      |  |   | 340,837 |  
|Less: current portion of long-term debt |  |      | (3,714  | )    |  |   | (3,193  | )
|                                        |  |      |         |      |  |   |         |  
|                                        |  | $    | 274,008 |      |  | $ | 337,644 |  
|                                        |  |      |         |      |  |   |         |  

Sale/ Leaseback:In
1988, the Company completed the sale and leaseback (the
Sale/ Leaseback) of its then principal domestic
manufacturing and office facilities with an unaffiliated third
party. The transaction has been accounted for as a financing for
financial statement purposes, thus the facilities remain in
property, plant and equipment. The transaction was a sale for
income tax purposes. The financing obligation is being amortized
over the initial 25-year lease term.

The initial term of each lease is 25 years
with five five-year renewal options. On the fifth anniversary of
the leases and every five years thereafter (including renewal
terms), the rent is increased by the percentage equal to 75% of
the percentage increase in the Consumer Price Index over the
preceding five years. The percentage increase to the rent in any
five-year period is capped at 15%. Beginning January 1,
1999, the annual rent payments increased to $1,463. The next
adjustment will occur January 1, 2004. As a result of the
spin-off, the Sale/ Leaseback has been amended to extend the
leases an additional 5 years, increase the basic rent by
$150 per year, and provide the option to purchase the leased
premises at fair market value from June 1, 2008 to
May 31, 2009.

The Company pays all costs of maintenance and
repair, insurance, taxes and all other expenses associated with
the properties. In addition, each of the leases is
unconditionally guaranteed by the Company.

The Company has the option to purchase the
facilities according to the terms of any bona fide offer
received by the lessor from a third party at any time during the
term of the leases. The Company may be

58



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

obligated to repurchase the property upon the
event of a breach of certain covenants or occurrence of certain
other events.

Maturities of long-term borrowings reflect the
Credit Facility, Senior Subordinated Notes, Sale/ Leaseback, and
other long-term debt as of September 30, 2003 as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|Fiscal     |  |  
|           |  |  
|2004       |  | $ | 3,714   | 
|2005       |  |   | 1,796   | 
|2006       |  |   | 1,811   | 
|2007       |  |   | 1,819   | 
|2008       |  |   | 1,846   | 
|Thereafter |  |   | 266,736 | 
|           |  |   |         | 
|           |  | $ | 277,722 | 
|           |  |   |         | 

(8) Lease Commitments

As of September 30, 2003, minimum rentals,
excluding rent payments under the Sale/ Leaseback described in
Note 7, under capital and noncancellable operating leases
consisting primarily of machinery and equipment, and building
leases are:

|                                            |  |         |    |           |  |   |        | 
|------------------------------------------- |  | ------- | -- | --------- |  | - | ------ | 
|Fiscal                                      |  | Capital |    | Operating
|                                            |  |         |    |          
|2004                                        |  | $       | 62 |           |  | $ | 5,670  | 
|2005                                        |  |         | 16 |           |  |   | 4,510  | 
|2006                                        |  |         |   |           |  |   | 3,124  | 
|2007                                        |  |         |   |           |  |   | 2,299  | 
|2008                                        |  |         |   |           |  |   | 1,627  | 
|Thereafter                                  |  |         |   |           |  |   | 5,364  | 
|                                            |  |         |    |           |  |   |        | 
|                                            |  | $       | 78 |           |  | $ | 22,594 | 
|                                            |  |         |    |           |  |   |        | 
|Less amounts representing interest          |  |         | 8  |           |  |   |        | 
|                                            |  |         |    |           |  |   |        | 
|Present value of net minimum lease payments |  |         | 70 |           |  |   |        | 
|Less current portion                        |  |         | 55 |           |  |   |        | 
|                                            |  |         |    |           |  |   |        | 
|Long-term obligations under capital leases  |  | $       | 15 |           |  |   |        | 
|                                            |  |         |    |           |  |   |        | 

Amortization of assets held under capital leases
is included with depreciation expense.

Rental expense under operating leases was $6,930,
$5,754 and $6,056 in 2003, 2002 and 2001, respectively.

(9) Fair Value of Financial
Instruments

The carrying amounts of financial instruments
approximate fair value due to the short maturity of those
instruments except as follows:



| |                     
| | --------------------
| | Long-Term Borrowings

Credit Facility:The
fair value of the Credit Facility as of September 30, 2003
approximates the carrying amount, as the interest rates are
variable and approximate rates that the Company could obtain
under similar

59



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

terms at the balance sheet date. The fair value
of the Companys Senior Subordinated Notes is based on
quoted market prices.

Derivatives:The
Company had interest rate swaps, cross currency debt swaps and
foreign exchange zero cost collars in place at
September 30, 2003 (see Note 10). The fair values of
these instruments were provided by third party broker/bankers.

|                                                 |                  |                    |         |                    |  |          |         |            |  |   |         |         |  |   |         |         | 
|------------------------------------------------ | ---------------- | ------------------ | ------- | ------------------ |  | -------- | ------- | ---------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                 |                  |                    |         |                   
|                                                 |                  | September 30, 2003 |         | September 30, 2002
|                                                 |                  |                    |         |                   
|                                                 |                  | Reported           |         | Estimated          |  | Reported |         | Estimated 
|                                                 |                  | Amount             |         | Fair Value         |  | Amount   |         | Fair Value
|                                                 |                  |                    |         |                    |  |          |         |           
|Long-term borrowings (including current portion) |                  | $                  | 277,722 |                    |  | $        | 288,597 |            |  | $ | 340,837 |         |  | $ | 337,837 |        
|Derivatives instruments                          |                  |                    | 12,989  |                    |  |          | 12,989  |            |  |   | 3,423   |         |  |   | 3,423   |        
|                                                 |                  |                    |         |                    |  |          |         |            |  |   |         |         |  |   |         |        
|                                                 | Total fair value |                    | $       | 290,711            |  |          | $       | 301,586    |  |   | $       | 344,260 |  |   | $       | 341,260 | 
|                                                 |                  |                    |         |                    |  |          |         |            |  |   |         |         |  |   |         |        

The estimated fair values of the Companys
financial instruments have been determined using available
market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market
data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts that could be realized in a current market exchange. The
use of different market assumptions or estimation methodologies
may have a material impact on the estimated fair value amounts.

(10) Derivatives



| |                                              
| | ---------------------------------------------
| | Foreign Exchange Currency Risk
    Management

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

The Company believes it is prudent to minimize
the variability caused by foreign currency risk. Management
attempts to minimize foreign currency risk by using derivative
instruments when prudent. The Company does not use derivative
instruments for purposes other than hedging.

Although the Company has U.S. dollar
functional currency, a substantial portion of its sales, income,
and cash flow is derived from foreign currencies. The
Companys foreign currency exposure exists primarily in the
euro, Japanese yen, Canadian dollar, Swiss franc, Mexican peso
and Australian dollar versus the U.S. dollar. With the
acquisition of SpofaDental a.s. on August 4, 2003, the
company now considers the Czech koruna a currency exposure.

For fiscal year 2004, the Companys
projected total foreign currency exposure is approximately
88,312 euros, 938,043 Japanese yen, 11,486 Canadian
dollars, 17,782 Australian dollars and 29,830 Swiss francs.
The Company has put in place a strategy to manage its euro and
Japanese yen cash flow exposure through the use of zero cost
collar contracts. There were no such contracts in place for the
Canadian dollar, Australian dollar, Mexican peso, Czech koruna
and Swiss franc at September 30, 2003.

In January, March, April, and May 2003, the
Company entered into a series of zero cost collar contracts to
hedge intercompany transactions with a total notional amount of
42,000 euros and 720,000 Japanese yen for fiscal year 2004.

60



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

For fiscal year 2003, approximately $1,961 of
loss (net of income tax) representing the fair value of the zero
cost collars, is included in accumulated other comprehensive
income (loss), related to the foreign currency zero cost collar
transactions. In addition, none of the foreign currency cash
flow hedges has been discontinued.

Zero cost collar contracts in place as of
September 30, 2003 are as follows:

|         |  |            |            |                |  |               |            |          |  |            |            |              |  |  |         |  |  |  |        |  |  |  |        | 
|-------- |  | ---------- | ---------- | -------------- |  | ------------- | ---------- | -------- |  | ---------- | ---------- | ------------ |  |  | ------- |  |  |  | ------ |  |  |  | ------ | 
|         |  |            |            |                |  |               |            | Local    |  |            |            |             
|         |  |            |            |                |  |               |            | Currency |  |            |            |             
|Currency |  | Trade Date |            | Effective Date |  | Maturity Date |            | Amount   |  | Floor Rate |            | Ceiling Rate
|         |  |            |            |                |  |               |            |          |  |            |            |             
|Euro     |  |            | 01/13/2003 |                |  |               | 10/15/2003 |          |  |            | 12/15/2003 |              |  |  | 10,500  |  |  |  | 1.01   |  |  |  | 1.08   | 
|Euro     |  |            | 03/06/2003 |                |  |               | 01/15/2004 |          |  |            | 03/15/2004 |              |  |  | 10,500  |  |  |  | 1.06   |  |  |  | 1.11   | 
|Euro     |  |            | 04/14/2003 |                |  |               | 04/15/2004 |          |  |            | 06/15/2004 |              |  |  | 10,500  |  |  |  | 1.04   |  |  |  | 1.08   | 
|Euro     |  |            | 05/02/2003 |                |  |               | 07/15/2004 |          |  |            | 09/15/2004 |              |  |  | 10,500  |  |  |  | 1.09   |  |  |  | 1.13   | 
|Yen      |  |            | 03/06/2003 |                |  |               | 10/15/2003 |          |  |            | 03/15/2004 |              |  |  | 360,000 |  |  |  | 117.00 |  |  |  | 115.37 | 
|Yen      |  |            | 04/14/2003 |                |  |               | 04/15/2004 |          |  |            | 06/15/2004 |              |  |  | 180,000 |  |  |  | 121.00 |  |  |  | 116.75 | 
|Yen      |  |            | 05/01/2003 |                |  |               | 07/15/2004 |          |  |            | 09/15/2004 |              |  |  | 180,000 |  |  |  | 119.50 |  |  |  | 116.75 | 

In July and November 2002, the Company entered
into a series of zero cost collar contracts to hedge its
intercompany transactions with a total notional amount of
40,500 euros for fiscal year 2003. Also, in June 2002, the
Company entered into a zero cost collar contract to hedge a
total notional amount of 720,000 Japanese yen for fiscal
year 2003. Both the euro zero cost collar contracts and the yen
zero cost collar contract for fiscal year 2003 matured on
September 30, 2003.

During the year ending September 30, 2004,
approximately $3,064 of loss in accumulated other comprehensive
income (loss) related to the zero cost collars are expected
to be reclassified into foreign exchange loss/gain as a yield
adjustment of the hedged foreign currency representing the fair
value of the zero cost collars.

As of September 30, 2003, the maximum length
of time over which the Company is hedging its exposure to the
variability in future cash flows associated with foreign
currency forecasted transactions is twelve months for the
Japanese yen and twelve months for the euro.

In September 2001, the Company entered into a
cross currency debt swap transaction to hedge its net investment
in Hawe Neos. The agreement had an effective date of
October 16, 2001, and was a contract to exchange a
U.S. dollar principal amount of $45,000 in exchange for a
Swiss franc principal amount of 71,730 at the termination date
of October 16, 2006. On June 6, 2002, the Company
terminated this cross currency debt swap transaction to satisfy
requirements under its Credit Facility. In June 2002, the
Company entered into four cross currency debt swap transactions
to hedge the Companys net investment in Hawe Neos and one
cross currency debt swap transaction to hedge the Companys
net investment in SDS Japan. The agreements have effective dates
of June 27, June 28, and July 1, 2002, and are
contracts to exchange U.S. dollar principal aggregating a
total amount of $45,000 in exchange for a Swiss franc principal
aggregating a total amount of 67,500 and U.S. dollar
principal amount of $4,000 in exchange for a Japanese yen amount
of 486,000. Both the Swiss franc contracts and the Japanese yen
contract matures on June 15, 2007. The mechanics of the
agreements are similar to the original cross currency debt swap
terminated on June 6, 2002. However, the fixed interest
rate to be paid to the Company on the U.S. dollar leg of
the agreements is a rate equal to the Senior Subordinated Notes
rate of 8 1/8% while the fixed interest rate to be paid by
the Company on the Swiss franc leg of the agreements ranges from
6.39% to 6.45% and the Japanese yen leg of the agreements is
3.65%, with the interest payments due semi-annually.

61



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following are the details of the cross
currency debt swaps:

|           |          |                |  |          |          |     |  |          |          |        |  |          |        |  |  |  |        |  |  |  |             |  |  |  |        | 
|---------- | -------- | -------------- |  | -------- | -------- | --- |  | -------- | -------- | ------ |  | -------- | ------ |  |  |  | ------ |  |  |  | ----------- |  |  |  | ------ | 
|Trade Date |          | Effective Date |  | Maturity |          | US$ |  | Interest |          | FX Amt |  | Interest
|           |          |                |  |          |          |     |  |          |          |        |  |         
|           | 06/25/02 |                |  |          | 06/27/02 |     |  |          | 06/15/07 |        |  | $        | 15,000 |  |  |  | 8 1/8% |  |  |  | CHF 22,500  |  |  |  | 6.450% | 
|           | 06/26/02 |                |  |          | 06/28/02 |     |  |          | 06/15/07 |        |  | $        | 15,000 |  |  |  | 8 1/8% |  |  |  | CHF 22,500  |  |  |  | 6.390% | 
|           | 06/27/02 |                |  |          | 07/01/02 |     |  |          | 06/15/07 |        |  | $        | 7,500  |  |  |  | 8 1/8% |  |  |  | CHF 11,250  |  |  |  | 6.390% | 
|           | 06/27/02 |                |  |          | 07/01/02 |     |  |          | 06/15/07 |        |  | $        | 7,500  |  |  |  | 8 1/8% |  |  |  | CHF 11,250  |  |  |  | 6.390% | 
|           | 06/25/02 |                |  |          | 06/27/02 |     |  |          | 06/15/07 |        |  | $        | 4,000  |  |  |  | 8 1/8% |  |  |  | JPY 486,000 |  |  |  | 3.650% | 

For fiscal 2003, the fair value of the cross
currency debt swap transaction loss included in translation
adjustments is approximately $4,236 (net of income tax).

As a result of terminating the cross currency
debt swap transaction in fiscal 2002 to hedge the Companys
net investment in Hawe Neos, the Company recognized a loss to
the translation adjustment, a component of other comprehensive
income (loss) in the amount of approximately $913 (net of
income tax). This amount will remain in translation adjustment,
a component of other comprehensive income (loss) until sale
or upon complete or substantially complete liquidation of the
Companys net investment in Hawe Neos.



| |                                                           
| | ----------------------------------------------------------
| | Interest Rate Exposure  Interest
    Rate Risk Management

The Company uses the Credit Facility and Senior
Subordinated Notes to finance its operations. The Credit
Facility exposes the Company to variability in interest payments
due to changes in interest rates. If the Companys interest
rates increase, interest expense increases. Conversely, if the
Companys interest rates decrease, interest expense also
decreases. The Company 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 the Companys variable-rate cash flow exposure to
fixed-rate cash flows.

The Company continues to assess its exposure to
interest rate risk on an ongoing basis.

The table below provides information about the
Companys debt obligations that are sensitive to changes in
interest rates as of September 30, 2003. For these debt
obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.
Weighted average variable rates are based on implied forward
3-month LIBOR rates in the yield curve at the reporting date.
The information is presented in U.S. dollar equivalents.

|                |                       |                                  |   |       |   |      |   |       |   |      |   |            |   |            |   |       |   |  |   |       |   |  |   |         |   |  |   |         | 
|--------------- | --------------------- | -------------------------------- | - | ----- | - | ---- | - | ----- | - | ---- | - | ---------- | - | ---------- | - | ----- | - |  | - | ----- | - |  | - | ------- | - |  | - | ------- | 
|                |                       |                                 
|                |                       | Fiscal Years Ending September 30
|                |                       |                                 
|Liabilities     |                       | 2004                             |   | 2005  |   | 2006 |   | 2007  |   | 2008 |   | Thereafter |   | Fair Value
|                |                       |                                  |   |       |   |      |   |       |   |      |   |            |   |           
|Long-Term Debt: |                       |                                  |   |       |   |      |   |       |   |      |   |            |   |            |   |       |   |  |   |       |   |  |   |         |   |  |   |        
|                | Fixed Rate Debt       |                                  |   |      |   |      |   |      |   |      |   |           |   |            |   |      |   |  |   |      |   |  | $ | 150,000 |   |  | $ | 160,875 | 
|                | Average Interest Rate |                                  |   | 8.125 | % |      |   | 8.125 | % |      |   | 8.125      | % |            |   | 8.125 | % |  |   | 8.125 | % |  |   | 8.125   | % |  |   |         | 
|                | Variable Rate Debt    |                                  | $ | 3,714 |   |      | $ | 1,796 |   |      | $ | 1,811      |   |            | $ | 1,819 |   |  | $ | 1,846 |   |  | $ | 116,736 |   |  | $ | 127,722 | 
|                | Average Interest Rate |                                  |   | 4.125 | % |      |   | 5.645 | % |      |   | 6.635      | % |            |   | 7.365 | % |  |   | 7.885 | % |  |   | 8.240   | % |  |   |         | 

62



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

For fiscal year ended 2003, the total net cost of
converting from floating rate (3-month LIBOR) to fixed rate from
a portion of the interest payments of the debt obligations was
$1,220. Below is a table listing the interest expense exposure
detail, including the notional amount as of September 30,
2003:

|                    |  |          |        |       |  |           |           |          |  |             |          |  |  |  |           |  |  |   |         | 
|------------------- |  | -------- | ------ | ----- |  | --------- | --------- | -------- |  | ----------- | -------- |  |  |  | --------- |  |  | - | ------- | 
|                    |  | Notional |        |       |  |           |           |          |  | Fiscal 2003
|Loan                |  | Amount   |        | Trade |  | Effective |           | Maturity |  | Cost       
|                    |  |          |        |       |  |           |           |          |  |            
|Revolver (assigned) |  | $        |       |       |  |           | 1/24/2001 |          |  |             | 02/16/01 |  |  |  | 2/16/2005 |  |  | $ | 23.5    | 
|Kerr B              |  |          | 19,914 |       |  |           | 1/2/2001  |          |  |             | 03/30/01 |  |  |  | 3/31/2005 |  |  |   | 504.1   | 
|Ormco B             |  |          | 25,345 |       |  |           | 1/2/2001  |          |  |             | 03/30/01 |  |  |  | 6/30/2006 |  |  |   | 692.4   | 
|                    |  |          |        |       |  |           |           |          |  |             |          |  |  |  |           |  |  |   |         | 
|Total               |  | $        | 45,259 |       |  |           |           |          |  |             |          |  |  |  |           |  |  | $ | 1,220.0 | 
|                    |  |          |        |       |  |           |           |          |  |             |          |  |  |  |           |  |  |   |         | 

For fiscal year ended 2002, the total net cost of
converting from floating rate (3-month LIBOR) to fixed rate from
a portion of the interest payments of the debt obligation was
$4,542. Below is a table listing the interest expense exposure
detail, including the notional amount as of September 30,
2002:

|                       |  |          |        |       |  |           |            |          |  |             |          |  |  |  |           |  |  |   |         | 
|---------------------- |  | -------- | ------ | ----- |  | --------- | ---------- | -------- |  | ----------- | -------- |  |  |  | --------- |  |  | - | ------- | 
|                       |  | Notional |        |       |  |           |            |          |  | Fiscal 2002
|Loan                   |  | Amount   |        | Trade |  | Effective |            | Maturity |  | Cost       
|                       |  |          |        |       |  |           |            |          |  |            
|Kerr B (terminated)    |  | $        |       |       |  |           | 12/22/2000 |          |  |             | 01/16/01 |  |  |  | 1/18/2005 |  |  | $ | 872.5   | 
|Ormco B (terminated)   |  |          |       |       |  |           | 12/22/2000 |          |  |             | 01/16/01 |  |  |  | 1/18/2005 |  |  |   | 872.5   | 
|SDM Revolver           |  |          | 10,000 |       |  |           | 1/24/2001  |          |  |             | 02/16/01 |  |  |  | 2/16/2005 |  |  |   | 233.3   | 
|SDM Revolver (matured) |  |          |       |       |  |           | 2/23/2001  |          |  |             | 03/15/01 |  |  |  | 9/15/2002 |  |  |   | 470.8   | 
|Kerr B                 |  |          | 26,853 |       |  |           | 1/2/2001   |          |  |             | 03/30/01 |  |  |  | 3/31/2005 |  |  |   | 726.6   | 
|Ormco B                |  |          | 26,853 |       |  |           | 1/2/2001   |          |  |             | 03/30/01 |  |  |  | 3/31/2005 |  |  |   | 707.1   | 
|Ormco B (matured)      |  |          |       |       |  |           | 2/23/2001  |          |  |             | 06/15/01 |  |  |  | 9/15/2002 |  |  |   | 659.1   | 
|                       |  |          |        |       |  |           |            |          |  |             |          |  |  |  |           |  |  |   |         | 
|Total                  |  | $        | 63,706 |       |  |           |            |          |  |             |          |  |  |  |           |  |  | $ | 4,541.9 | 
|                       |  |          |        |       |  |           |            |          |  |             |          |  |  |  |           |  |  |   |         | 

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

During the year ended September 30, 2003, an
approximate $2,116 loss (net of income tax) was recorded in
accumulated other comprehensive income (loss). Fair value of the
interest rate swap agreements as of September 30, 2003 are
as follows:

|        |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 
|------- |  | -------- | ------ | ----- |  | --------- | --------- | -------- |  | ---------- | -------- |  |  |  | --------- |  |  | - | ------- | 
|        |  | Notional |        |       |  |           |           |          |  | Fair Value
|Loan    |  | Amount   |        | Trade |  | Effective |           | Maturity |  | (pre-tax) 
|        |  |          |        |       |  |           |           |          |  |           
|Kerr B  |  | $        | 19,914 |       |  |           | 1/02/2001 |          |  |            | 03/30/01 |  |  |  | 3/31/2005 |  |  | $ | 963.6   | 
|Ormco B |  |          | 25,345 |       |  |           | 1/02/2001 |          |  |            | 03/30/01 |  |  |  | 6/30/2006 |  |  |   | 2,343.1 | 
|        |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 
|Total   |  | $        | 45,259 |       |  |           |           |          |  |            |          |  |  |  |           |  |  | $ | 3,306.7 | 
|        |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 

63



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the year ended September 30, 2002, an
approximate $2,499 loss (net of income tax) was recorded in
accumulated other comprehensive income (loss). Fair value of the
interest rate swap agreements as of September 30, 2002 are
as follows:

|             |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 
|------------ |  | -------- | ------ | ----- |  | --------- | --------- | -------- |  | ---------- | -------- |  |  |  | --------- |  |  | - | ------- | 
|             |  | Notional |        |       |  |           |           |          |  | Fair Value
|Loan         |  | Amount   |        | Trade |  | Effective |           | Maturity |  | (pre-tax) 
|             |  |          |        |       |  |           |           |          |  |           
|SDM Revolver |  | $        | 10,000 |       |  |           | 1/24/2001 |          |  |            | 02/16/01 |  |  |  | 2/15/2005 |  |  | $ | 861.0   | 
|Kerr B       |  |          | 26,853 |       |  |           | 1/02/2001 |          |  |            | 03/30/01 |  |  |  | 3/31/2005 |  |  |   | 1,636.8 | 
|Ormco B      |  |          | 26,853 |       |  |           | 1/02/2001 |          |  |            | 03/30/01 |  |  |  | 3/31/2005 |  |  |   | 1,598.2 | 
|             |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 
|Total        |  | $        | 63,706 |       |  |           |           |          |  |            |          |  |  |  |           |  |  | $ | 4,096.0 | 
|             |  |          |        |       |  |           |           |          |  |            |          |  |  |  |           |  |  |   |         | 

(11) Employee Benefit Plans

Pension and Other Postretirement Benefits:The Company participates in various
defined benefit pension plans covering substantially all of its
U.S. and Canadian employees. The benefits are generally based on
various formulas, the principal factors of which are years of
service and compensation. The Companys funding policy is
to generally make annual contributions in excess of both the
minimum required contributions required by applicable
regulations and the amount needed in order to avoid any Pension
Benefit Guarantee Corporation (PBGC) variable
premium payments. Plan assets are invested primarily in U.S.
stocks, bonds and international stocks. In addition to the
defined benefit plans, the Company provides certain health care
benefits for certain US employees, which are funded as costs are
incurred. Eligible salaried employees who reached age 55 prior
to January 1, 1996 became eligible for postretirement
health care benefits only if they reach retirement age while
working for SDS. However, all eligible union employees qualify
for postretirement health care benefits. The Company accrues, as
current costs, the future lifetime retirement benefits for
qualifying active employees. The postretirement health care
plans currently follow a policy instituted by the predecessor of
Apogent in 1986 where the Companys contributions were
frozen at the levels equal to the Corporations
contributions on December 31, 1988, except where collective
bargaining agreements prohibited such a freeze.

The following assumptions were used in
determining the funded status of the Companys defined
benefit pension plans:

|                                            |  |      |       |      |  |  |       | 
|------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                            |  | 2003 |       | 2002
|                                            |  |      |       |     
|Discount rate                               |  |      | 6.0%  |      |  |  | 7.25% | 
|Rate of increase in compensation levels     |  |      | 4.0%  |      |  |  | 4.0%  | 
|Expected long-term rate of return on assets |  |      | 8.75% |      |  |  | 10.0% | 

The following assumptions were used in
determining the accumulated postretirement benefit obligation of
the Companys postretirement healthcare plans.

|                                 |  |      |      |      |  |  |       | 
|-------------------------------- |  | ---- | ---- | ---- |  |  | ----- | 
|                                 |  | 2003 |      | 2002
|                                 |  |      |      |     
|Discount rate                    |  |      | 6.0% |      |  |  | 7.25% | 
|Annual increase in medical costs |  |      | 5.5% |      |  |  | 5.5%  | 

64



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |        |  
|------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ------ | -------------- | - | ---- | ----- | ------- | - | - | ------ | ------- | - | - | ------ | ------ | -
|                                                  |                                                                                                                                                                |                  |        |               
|                                                  |                                                                                                                                                                | Pension Benefits |        | Other Benefits
|                                                  |                                                                                                                                                                |                  |        |               
|                                                  |                                                                                                                                                                | 2003             |        | 2002           |   | 2003 |       | 2002   
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |        
|Change in benefit obligations:                    |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|                                                  | Obligations at beginning of year                                                                                                                               |                  | $      | 40,535         |   |      | $     | 35,976  |   |   | $      | 9,644   |   |   | $      | 6,408  |  
|                                                  | Service cost                                                                                                                                                   |                  |        | 3,143          |   |      |       | 2,407   |   |   |        | 291     |   |   |        | 172    |  
|                                                  | Interest cost                                                                                                                                                  |                  |        | 2,905          |   |      |       | 2,671   |   |   |        | 684     |   |   |        | 474    |  
|                                                  | Plan amendments                                                                                                                                                |                  |        |               |   |      |       | 148     |   |   |        |        |   |   |        |       |  
|                                                  | Actuarial loss                                                                                                                                                 |                  |        | 7,310          |   |      |       | 399     |   |   |        | 4,031   |   |   |        | 3,260  |  
|                                                  | Benefit payments                                                                                                                                               |                  |        | (1,015         | ) |      |       | (791    | ) |   |        | (754    | ) |   |        | (670   | )
|                                                  | Foreign exchange rates                                                                                                                                         |                  |        | 1,197          |   |      |       | (275    | ) |   |        |        |   |   |        |       |  
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|                                                  | Obligations at end of year                                                                                                                                     |                  | $      | 54,075         |   |      | $     | 40,535  |   |   | $      | 13,896  |   |   | $      | 9,644  |  
|Change in fair value of plan assets:              |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|                                                  | Fair value of plan assets at beginning of year                                                                                                                 |                  | $      | 28,045         |   |      | $     | 25,608  |   |   | $      |        |   |   | $      |       |  
|                                                  | Actual return on plan assets                                                                                                                                   |                  |        | 1,171          |   |      |       | (1,526  | ) |   |        |        |   |   |        |       |  
|                                                  | Employer contributions                                                                                                                                         |                  |        | 14,625         |   |      |       | 5,001   |   |   |        | 754     |   |   |        | 670    |  
|                                                  | Benefit payments                                                                                                                                               |                  |        | (1,015         | ) |      |       | (791    | ) |   |        | (754    | ) |   |        | (670   | )
|                                                  | Foreign exchange rates                                                                                                                                         |                  |        | 875            |   |      |       | (247    | ) |   |        |        |   |   |        |       |  
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|                                                  | Fair value of plan assets at end of year                                                                                                                       |                  | $      | 43,701         |   |      | $     | 28,045  |   |   | $      |        |   |   | $      |       |  
|Funded status:                                    |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|                                                  | Funded status at end of year                                                                                                                                   |                  | $      | (10,374        | ) |      | $     | (12,490 | ) |   | $      | (13,896 | ) |   | $      | (9,644 | )
|                                                  | Unrecognized prior service cost                                                                                                                                |                  |        | 609            |   |      |       | 741     |   |   |        |        |   |   |        |       |  
|                                                  | Unrecognized loss                                                                                                                                              |                  |        | 23,380         |   |      |       | 14,298  |   |   |        | 8,615   |   |   |        | 4,845  |  
|                                                  | Remaining excess of fair value of plan assets
    over projected benefit obligation recognized as a result of the
    1987 acquisition of Sybron International |                  |        | 1,030          |   |      |       | 1,140   |   |   |        |        |   |   |        |       |  
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|Net amount recognized at measurement date         |                                                                                                                                                                |                  | 14,645 |                |   |      | 3,689 |         |   |   | (5,281 | )       |   |   | (4,799 | )     
|Employer contribution paid after measurement date |                                                                                                                                                                |                  |       |                |   |      | 4,099 |         |   |   |       |         |   |   |       |       
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       
|Net amount recognized at end of year              |                                                                                                                                                                | $                | 14,645 |                |   | $    | 7,788 |         |   | $ | (5,281 | )       |   | $ | (4,799 | )     
|                                                  |                                                                                                                                                                |                  |        |                |   |      |       |         |   |   |        |         |   |   |        |       

65



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table provides the amounts
recognized in the Companys consolidated balance sheets:

|                                                                                                                                                               |  |                  |        |                |  |      |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | -------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                                               |  |                  |        |               
|                                                                                                                                                               |  | Pension Benefits |        | Other Benefits
|                                                                                                                                                               |  |                  |        |               
|                                                                                                                                                               |  | 2003             |        | 2002           |  | 2003 |        | 2002
|                                                                                                                                                               |  |                  |        |                |  |      |        |     
|Prepaid benefit cost                                                                                                                                           |  | $                | 12,911 |                |  | $    |       |      |  | $ |       |   |  | $ |       |  
|Accrued benefit liability                                                                                                                                      |  |                  | (2,313 | )              |  |      | (5,125 | )    |  |   | (5,281 | ) |  |   | (4,799 | )
|Intangible asset                                                                                                                                               |  |                  |       |                |  |      | 1,004  |      |  |   |       |   |  |   |       |  
|Remaining excess of fair value of plan assets
    over projected benefit obligation recognized as a result of the
    1987 acquisition of Sybron International |  |                  | 1,030  |                |  |      | 1,140  |      |  |   |       |   |  |   |       |  
|Other                                                                                                                                                          |  |                  | 3,017  |                |  |      | 6,670  |      |  |   |       |   |  |   |       |  
|                                                                                                                                                               |  |                  |        |                |  |      |        |      |  |   |        |   |  |   |        |  
|Net amount recognized at measurement date                                                                                                                      |  |                  | 14,645 |                |  |      | 3,689  |      |  |   | (5,281 | ) |  |   | (4,799 | )
|Employer contributions paid after measurement date                                                                                                             |  |                  |       |                |  |      | 4,099  |      |  |   |       |   |  |   |       |  
|                                                                                                                                                               |  |                  |        |                |  |      |        |      |  |   |        |   |  |   |        |  
|Net amount recognized in other non-current assets
    or (liabilities) at September 30                                                                         |  | $                | 14,645 |                |  | $    | 7,788  |      |  | $ | (5,281 | ) |  | $ | (4,799 | )
|                                                                                                                                                               |  |                  |        |                |  |      |        |      |  |   |        |   |  |   |        |  

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

|                                   |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |  |  |   |     |  |  |   |     | 
|---------------------------------- |  | ---------------- | ------ | -------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ----- |  |  | - | --- |  |  | - | --- | 
|                                   |  |                  |        |               
|                                   |  | Pension Benefits |        | Other Benefits
|                                   |  |                  |        |               
|                                   |  | 2003             |        | 2002           |  | 2001 |        | 2003 |  | 2002 |        | 2001
|                                   |  |                  |        |                |  |      |        |      |  |      |        |     
|Service cost                       |  | $                | 3,143  |                |  | $    | 2,407  |      |  | $    | 1,848  |      |  | $ | 291   |  |  | $ | 172 |  |  | $ | 152 | 
|Interest cost                      |  |                  | 2,905  |                |  |      | 2,671  |      |  |      | 2,134  |      |  |   | 684   |  |  |   | 474 |  |  |   | 359 | 
|Expected return on plan assets     |  |                  | (3,072 | )              |  |      | (2,724 | )    |  |      | (2,894 | )    |  |   |      |  |  |   |    |  |  |   |    | 
|Amortization of transition asset   |  |                  |       |                |  |      | (56    | )    |  |      | (71    | )    |  |   |      |  |  |   |    |  |  |   |    | 
|Amortization of prior service cost |  |                  | 99     |                |  |      | 92     |      |  |      | 72     |      |  |   |      |  |  |   |    |  |  |   |    | 
|Amortization of net loss           |  |                  | 692    |                |  |      | 452    |      |  |      | (21    | )    |  |   | 260   |  |  |   | 76  |  |  |   |    | 
|                                   |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |  |  |   |     |  |  |   |     | 
|Net periodic benefit cost          |  | $                | 3,767  |                |  | $    | 2,842  |      |  | $    | 1,068  |      |  | $ | 1,235 |  |  | $ | 722 |  |  | $ | 511 | 
|                                   |  |                  |        |                |  |      |        |      |  |      |        |      |  |   |       |  |  |   |     |  |  |   |     | 

At September 30, 2003 and 2002, all plans
had benefit obligations in excess of fair value. At
September 30, 2003 the Companys U.S. pension plans,
except the Supplemental Executive Retirement Program, had
pension assets in excess of their accumulated benefit
obligations. All plans are funded above required funding levels.

An increase of one percentage point in the per
capita cost of health care costs associated with the plans for
which the Companys contributions are not frozen would
increase the accumulated postretirement benefit obligation and
service and interest cost components as of September 30,
2003 by approximately $2,394 and $283, respectively. Similarly,
a decrease of one percentage point in the per capita cost of
health care costs would decrease the accumulated postretirement
benefit obligation and service and interest cost components as
of September 30, 2003 by approximately $1,899 and $218,
respectively.

Savings Plans:Employees in the United States are
eligible to participate in contributory savings plans maintained
by the Company under Section 401(k) of the Internal Revenue
Code of 1986, as amended (the Code). Company
matching contributions under the plans, net of forfeitures, were
approximately $1,497, $1,482 and $1,467 for 2003, 2002 and 2001,
respectively.

(12) Restructuring and Merger and
Integration Charges

In September 2002, the Company recorded a
restructuring charge of approximately $3,666 ($2,353 after tax).
The charge was primarily composed of severance and termination
costs associated with the 71 employees

66



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

whose employment the Company has either
terminated or plans to terminate as a result of the
consolidation of several of the Companys European
facilities into its Hawe Neos facility in Switzerland. Of the
$3,666 in restructuring charges, approximately $3,064 was a cash
charge related to severance and contractual obligations, $300
was a cash charge for tax liabilities included in income taxes
payable and the balance of approximately $302 related to
non-cash charges. As of September 30, 2003, 61 of the 71
planned terminations have been completed. The Company expects to
complete the balance of the 2002 restructuring plan by the end
of fiscal 2004.

The 2002 restructuring charge activity since
September 30, 2002 and its components are as follows:

|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|---------------------------- |  | --------- | ----- | -------- |  | --------- | --- | --------- |  | ------ | - | --- |  | ----------- | --- | ----- |  | ----- | --- |  |  | - | --- |  |  | - | --- |  |  | - | --- |  |  | - | ----- | 
|                             |  |           |       | Lease    |  | Shut-Down |     | Inventory |  | Fixed  |   |     |  | Contractual |     |       |  |      
|                             |  | Severance |       | Payments |  | Costs     |     | Write-Off |  | Assets |   | Tax |  | Obligations |     | Other |  | Total
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |      
|                             |  | (a)       |       | (b)      |  | (b)       |     | (c)       |  | (c)    |   | (d) |  | (e)         |     |       |  |      
|2002 Restructuring Charge    |  | $         | 2,347 |          |  | $         | 332 |           |  | $      |  |     |  | $           | 106 |       |  | $     | 196 |  |  | $ | 300 |  |  | $ | 229 |  |  | $ | 156 |  |  | $ | 3,666 | 
|Fiscal 2002 Non-Cash Charges |  |           | 70    |          |  |           |    |           |  |        |  |     |  |             |    |       |  |       |    |  |  |   |    |  |  |   |    |  |  |   | 43  |  |  |   | 113   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2002 Balance   |  |           | 2,277 |          |  |           | 332 |           |  |        |  |     |  |             | 106 |       |  |       | 196 |  |  |   | 300 |  |  |   | 229 |  |  |   | 113 |  |  |   | 3,553 | 
|Fiscal 2003 Cash Payments    |  |           | 1,761 |          |  |           | 278 |           |  |        |  |     |  |             |    |       |  |       |    |  |  |   |    |  |  |   | 229 |  |  |   | 80  |  |  |   | 2,348 | 
|Fiscal 2003 Non-Cash Charges |  |           |      |          |  |           |    |           |  |        |  |     |  |             | 106 |       |  |       | 196 |  |  |   |    |  |  |   |    |  |  |   |    |  |  |   | 302   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 
|September 30, 2003 Balance   |  | $         | 516   |          |  | $         | 54  |           |  | $      |  |     |  | $           |    |       |  | $     |    |  |  | $ | 300 |  |  | $ |    |  |  | $ | 33  |  |  | $ | 903   | 
|                             |  |           |       |          |  |           |     |           |  |        |   |     |  |             |     |       |  |       |     |  |  |   |     |  |  |   |     |  |  |   |     |  |  |   |       | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amount primarily represents the charges for
    severance and termination costs associated with the 71 employees
    primarily located at several facilities throughout Europe whose
    employment the Company has either terminated or plans to
    terminate as a result of the 2002 European restructuring plan.
    As of September 30, 2003 the employment of 61 of those
    71 employees has been terminated.
|   
|(b) | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                            
|   
|(c) | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                               
|   
|(d) | The 2002 charge represents $300 for tax
    liabilities included in income taxes payable.                                                                                                                                                                                                                                                                                                                                
|   
|(e) | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                        

In September 2001, the Company recorded a
restructuring charge of approximately $2,400 ($1,500 after tax)
consisting primarily of the severance and termination costs
associated with the termination of the employment of 63
employees that were employed at Ormcos San Diego,
California manufacturing facility. Their employment was
terminated as a result of the closing of the facility. The
Company completed the closing of the facility as of
June 30, 2002 and finalized all remaining costs. Work
previously performed at the facility was absorbed into the
Glendora, California facility.

The 2001 restructuring charge activity since
September 30, 2001 and its components are as follows:

|                              |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |   | 
|----------------------------- | ------- | --------- | ----- | -------- |  | --------- | - | --------- |  | ------ | - | --- |  | ----------- | - | ----- |  | ----- | --- | - |  | - | - | - |  | - | --- | - |  | - | --- | - |  | - | ----- | - | 
|                              |         |           |       | Lease    |  | Shut-Down |   | Inventory |  | Fixed  |   |     |  | Contractual |   |       |  |      
|                              |         | Severance |       | Payments |  | Costs     |   | Write-Off |  | Assets |   | Tax |  | Obligations |   | Other |  | Total
|                              |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |      
|                              |         | (a)       |       | (b)      |  | (b)       |   | (c)       |  | (c)    |   |     |  | (d)         |   |       |  |      
|2001 Restructuring Charge     |         | $         | 1,050 |          |  | $         |  |           |  | $      |  |     |  | $           |  |       |  | $     | 250 |   |  | $ |  |   |  | $ | 775 |   |  | $ | 325 |   |  | $ | 2,400 |  
|Fiscal 2001 Non-Cash Charges  |         |           |      |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | 250 |   |  |   |  |   |  |   | 100 |   |  |   | 300 |   |  |   | 650   |  
|                              |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|September 30, 2001 Balance    |         |           | 1,050 |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       |    |   |  |   |  |   |  |   | 675 |   |  |   | 25  |   |  |   | 1,750 |  
|Fiscal 2002 Cash Payments     |         |           | 875   |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       |    |   |  |   |  |   |  |   | 600 |   |  |   |    |   |  |   | 1,475 |  
|Fiscal 2002 Non-Cash Payments |         |           |      |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | 50  |   |  |   |  |   |  |   | 75  |   |  |   | 25  |   |  |   | 150   |  
|Adjustments                   |         |           | 175   |          |  |           |  |           |  |        |  |     |  |             |  |       |  |       | (50 | ) |  |   |  |   |  |   |    |   |  |   |    |   |  |   | 125   |  
|                              |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|September 30, 2002 and 2003   |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|                              | Balance |           | $     |         |  |           | $ |          |  |        | $ |    |  |             | $ |      |  |       | $   |  |  |   | $ |  |  |   | $   |  |  |   | $   |  |  |   | $     |  | 
|                              |         |           |       |          |  |           |   |           |  |        |   |     |  |             |   |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  

67



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amount primarily represents severance and
    termination costs associated with the 63 employees located at
    the Ormco San Diego facility whose employment Ormco terminated
    because of the 2001 restructuring plan. The closing of the
    facility was completed by June 30, 2002. The net proceeds
    (approximately $5,265) from the sale of the Ormco San Diego
    facility on January 31, 2003 offset the costs of closing
    the facility.
|   
|(b) | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(c) | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                                                                    
|   
|(d) | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                                                             

The Companys results for fiscal 2000
include charges of approximately $9.3 million
($5.8 million after tax) consisting primarily of exited
product lines (approximately $5.3 million and
$2.3 million in the Orthodontics and Professional Dental
business segments, respectively) and severance and termination
costs associated with the termination of the employment of
65 employees (56 located at the Metrex Research Corporation
facility in Parker, Colorado, eight located at the Ormco
facility in San Diego, California, and one located at the Ormco
facility in Amersfort/ Europe) as a result of the 2000
restructuring plan. Of the $9.3 million in restructuring
charges, approximately $7.8 million represented non-cash
charges related to the exited products and capital, while the
balance of approximately $1.5 million were cash related
charges for severance and contractual obligations. The completed
the 2000 restructuring plan in the first quarter of 2002 and
paid the remainder of the cash charges.

The 2000 restructuring charge activity since
September 30, 2000 and its components are as follows:

|                             |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |   | 
|---------------------------- | ------- | --------- | ----- | -------- |  | --------- | - | --------- |  | ------ | - | --- |  | ----------- | ----- | ----- |  | ----- | --- | - |  | - | - | - |  | - | --- | - |  | - | --- | - |  | - | ----- | - | 
|                             |         |           |       | Lease    |  | Shut-Down |   | Inventory |  | Fixed  |   |     |  | Contractual |       |       |  |      
|                             |         | Severance |       | Payments |  | Costs     |   | Write-Off |  | Assets |   | Tax |  | Obligations |       | Other |  | Total
|                             |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |      
|                             |         | (a)       |       | (b)      |  | (b)       |   | (c)       |  | (c)    |   |     |  | (d)         |       |       |  |      
|2000 Restructuring Charge    |         | $         | 1,300 |          |  | $         |  |           |  | $      |  |     |  | $           | 7,600 |       |  | $     | 200 |   |  | $ |  |   |  | $ | 100 |   |  | $ | 100 |   |  | $ | 9,300 |  
|Fiscal 2000 Non-Cash Charges |         |           |      |          |  |           |  |           |  |        |  |     |  |             | 7,600 |       |  |       | 200 |   |  |   |  |   |  |   |    |   |  |   |    |   |  |   | 7,800 |  
|                             |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|September 30, 2000 Balance   |         |           | 1,300 |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |   |  |   |  |   |  |   | 100 |   |  |   | 100 |   |  |   | 1,500 |  
|Fiscal 2001 Cash Payments    |         |           | 1,175 |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |   |  |   |  |   |  |   | 75  |   |  |   | 100 |   |  |   | 1,350 |  
|September 30, 2001 Balance   |         |           | 125   |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |   |  |   |  |   |  |   | 25  |   |  |   |    |   |  |   | 150   |  
|Fiscal 2002 Cash Payments    |         |           |      |          |  |           |  |           |  |        |  |     |  |             |      |       |  |       |    |   |  |   |  |   |  |   |    |   |  |   |    |   |  |   |      |  
|                             |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|September 30, 2002 and 2003  |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  
|                             | Balance |           | $     |         |  |           | $ |          |  |        | $ |    |  |             | $     |      |  |       | $   |  |  |   | $ |  |  |   | $   |  |  |   | $   |  |  |   | $     |  | 
|                             |         |           |       |          |  |           |   |           |  |        |   |     |  |             |       |       |  |       |     |   |  |   |   |   |  |   |     |   |  |   |     |   |  |   |       |  



---



|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amount represents severance and termination
    costs for the 65 employees whose employment was terminated
    (primarily at the Metrex facility in Parker, Colorado) as a
    result of the 2000 restructuring plan. As of September 30,
    2002, all employment terminations were completed under the 2000
    restructuring plan.



|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(b) | Amount represents lease payments and shutdown
    costs on exited facilities.



|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(c) | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.



|    |                                                                  
|--- | -----------------------------------------------------------------
|(d) | Amount represents certain terminated contractual
    obligations.

In June 1998, SDS recorded a restructuring charge
of approximately $14,600 (approximately $10,700 after tax) for
the rationalization of certain acquired companies, combination
of certain duplicate production facilities, movement of certain
customer service and marketing functions, and the exiting of
several product lines.

68



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The 1998 restructuring charge activity since
June 30, 1998 and its components are as follows:

|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|----------------------------------------------------- |  | --------- | ----- | -------- |  | --------- | --- | --------- |  | ------ | --- | --- |  | ----------- | ----- | ----- |  | ----- | ----- |  |  | - | --- |  |  | - | --- |  |  | - | ----- | - |  | - | ------ | -
|                                                      |  |           |       | Lease    |  | Shut-Down |     | Inventory |  | Fixed  |     |     |  | Contractual |       |       |  |      
|                                                      |  | Severance |       | Payments |  | Costs     |     | Write-Off |  | Assets |     | Tax |  | Obligations |       | Other |  | Total
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |      
|                                                      |  | (a)       |       | (b)      |  | (b)       |     | (c)       |  | (c)    |     | (d) |  | (e)         |       |       |  |      
|1998 Restructuring Charge                             |  | $         | 4,300 |          |  | $         | 300 |           |  | $      | 400 |     |  | $           | 4,600 |       |  | $     | 1,300 |  |  | $ | 700 |  |  | $ | 900 |  |  | $ | 2,100 |   |  | $ | 14,600 |  
|Fiscal 1998 Cash Payments                             |  |           | 1,800 |          |  |           |    |           |  |        | 100 |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 1,400 |   |  |   | 3,600  |  
|Fiscal 1998 Non-Cash Charges                          |  |           |      |          |  |           |    |           |  |        |    |     |  |             | 4,600 |       |  |       | 1,300 |  |  |   |    |  |  |   |    |  |  |   |      |   |  |   | 5,900  |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 1998 Balance                            |  |           | 2,500 |          |  |           | 300 |           |  |        | 300 |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   | 600 |  |  |   | 700   |   |  |   | 5,100  |  
|Fiscal 1999 Cash Payments                             |  |           | 1,300 |          |  |           | 300 |           |  |        | 300 |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 400   |   |  |   | 2,600  |  
|Adjustments(a)                                        |  |           | 1,200 |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   |      |   |  |   | 1,200  |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 1999 Balance                            |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   | 300 |  |  |   | 300   |   |  |   | 1,300  |  
|Fiscal 2000 Cash Payments                             |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   | 300 |  |  |   | 100   |   |  |   | 400    |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2000 and September 30,
    2001 Balance |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   |    |  |  |   | 200   |   |  |   | 900    |  
|Fiscal 2002 Cash Payments                             |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | 16    |   |  |   | 16     |  
|Fiscal 2002 Non-Cash Payments                         |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | 7     |   |  |   | 7      |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2002 Balance                            |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   | 700 |  |  |   |    |  |  |   | 177   |   |  |   | 877    |  
|Fiscal 2003 Non-Cash Payments                         |  |           |      |          |  |           |    |           |  |        |    |     |  |             |      |       |  |       |      |  |  |   |    |  |  |   |    |  |  |   | (6    | ) |  |   | (6     | )
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  
|September 30, 2003 Balance                            |  | $         |      |          |  | $         |    |           |  | $      |    |     |  | $           |      |       |  | $     |      |  |  | $ | 700 |  |  | $ |    |  |  | $ | 183   |   |  | $ | 883    |  
|                                                      |  |           |       |          |  |           |     |           |  |        |     |     |  |             |       |       |  |       |       |  |  |   |     |  |  |   |     |  |  |   |       |   |  |   |        |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amount primarily represents severance and
    termination costs related to the 154 employees whose employment
    was terminated as a result of the 1998 restructuring plan. An
    adjustment of approximately $1,200 was made in fiscal 1999 to
    adjust the accrual primarily representing over accruals for
    anticipated costs associated with outplacement services, accrued
    fringe benefits, and severance associated with employees who
    were previously notified of termination and subsequently filled
    other company positions.
|   
|(b) | Amount represents lease payments and shutdown
    costs on exited facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(c) | Amount represents write-offs of inventory and
    fixed assets associated with discontinued product lines.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(d) | The charge of $700 represents a statutory tax
    relating to assets transferred from an exited sales facility in
    Switzerland.                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(e) | Amount represents certain terminated contractual
    obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

(13) Stock-Based Compensation

In connection with the spin-off, officers and
employees were allowed to exchange their Apogent stock options
for SDS stock options having an aggregate intrinsic value (the
spread between the market value and exercise price of the option
shares) equal to the aggregate intrinsic value of the Apogent
stock options exchanged immediately prior to the spin-off and an
exercise price that maintained the ratio of the exercise price
per share to the market value per share of the Apogent stock
options exchanged immediately prior to the spin-off. For these
SDS stock options, the exercise price and the number of shares
of SDS common stock subject to each option were determined by
adjusting the exercise price and the number of shares subject to
the corresponding Apogent stock option exchanged under an
adjustment formula, designed to preserve the aggregate intrinsic
value and exercise price to market value relationship referred
to above, based on the relationship between the trading prices
on the New York Stock Exchange of Apogent common stock and SDS
common stock trading on a when issued basis, during
the period of when issued trading ending on the date
of the spin-off. Other than the adjustment of the exercise price
and the number of shares subject to each option, the terms of
the SDS stock options received in exchange for Apogent stock
options were the same as

69



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the terms of the Apogent stock options for which
they were exchanged. The SDS stock options issued in exchange
for Apogent stock options were issued under SDSs 2000
Long-Term Incentive Plan.

Under SDSs 2000 Long-Term Incentive Plan
(the 2000 Stock Plan), incentive stock options and
nonqualified stock options may be granted to any full-time,
non-union employee of SDS or any of its subsidiaries, including
any employee who is a member of the Board of Directors, but
excluding any director who is not an employee of SDS or any of
its subsidiaries. Subject to the terms and provisions of the
plan, options may be granted to eligible employees selected by
the compensation committee of the Board of Directors, which
administers the plan. The committee has the discretion to
determine the number of shares subject to options granted and
the terms and conditions of the options. The exercise price of
an option granted under the plan is determined by the committee,
but may not be less than 100% of the fair market value of the
underlying SDS common stock on the date of grant.

The total number of shares of SDS common stock
authorized for issuance under the 2000 Stock Plan is 5,450,000.
Shares available for an award under the 2000 Stock Plan may be
either authorized but unissued or reacquired shares. If any
award is canceled, terminates, expires or lapses for any reason,
any shares subject to such award shall again be available under
the plan, subject to such requirements as may be promulgated by
the compensation committee. The number of options that may be
awarded to any employee during any fiscal year is limited to
1,000,000.

On September 25, 2001, SDS established the
Sybron Dental Specialties, Inc. 2001 Long-Term Incentive Plan
(the 2001 Stock Plan). The 2001 Stock Plan permits
the granting of nonqualified stock options to any full-time,
non-union employee of SDS or any of its subsidiaries, excluding
officers or directors of SDS. Subject to the terms and
provisions of the 2001 Stock Plan, options may be granted to
eligible employees selected by the compensation committee of the
Board of Directors, which administers the 2001 Stock Plan. The
committee has the discretion to determine the number of shares
subject to options granted and the terms and conditions of the
options. The exercise price of an option granted under the 2001
Stock Plan is determined by the committee, but may not be less
than 100% of the fair market value of the underlying SDS common
stock on the date of grant.

The total number of shares of SDS common stock
authorized for issuance under the 2001 Stock Plan is 1,000,000.
Shares available for an award under the 2001 Stock Plan may be
either authorized but unissued or reacquired shares. If any
award is canceled, terminates, expires or lapses for any reason,
any shares subject to such award shall again be available under
the 2001 Stock Plan, subject to such requirements as may be
promulgated by the compensation committee.

Options granted under the 2000 Stock Plan and the
2001 Stock Plan are exercisable up to ten years from 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. The Apogent options that were exchanged
under the 2000 Stock Plan maintained their original vesting
schedule, which typically also vest at 25% per year based on the
date of grant.

The 2000 Outside Directors Stock Option
Plan (the Directors Plan) is administered by
the compensation committee of the Board of Directors. A maximum
of 300,000 shares of SDS common stock may be issued pursuant to
the exercise of nonqualified stock options granted under the
Directors Plan. Shares subject to and not issued under an
option which expires, terminates or is canceled for any reason
shall again become available for the granting of options under
the Directors Plan. 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
Directors Plan. Upon the first meeting of the Board of
Directors following the annual meeting of stockholders in 2001
through 2005, each person then serving SDS as a member of the
Board of Directors who is not a full-time employee of SDS or its
subsidiaries shall automatically be granted an option to
purchase 10,000 shares of SDS common stock (subject to
appropriate

70



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

adjustment for stock splits and other changes
affecting the common stock). If there is not a sufficient number
of remaining available shares under the Directors Plan 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 SDS common stock on the date the option is
granted.

At September 30, 2003, 471,600 shares of
common stock were reserved for future stock option grants under
the above plans.

The following is a summary of the stock option
activity since December 11, 2000 (spin-off):

|                                          |  |           |           |                  |  |   |        |  
|----------------------------------------- |  | --------- | --------- | ---------------- |  | - | ------ | -
|                                          |  | Number of |           | Weighted Average
|                                          |  | Options   |           | Exercise Price  
|                                          |  |           |           |                 
|Outstanding at September 30, 2000         |  |           |          |                  |  | $ |       |  
|Conversions of Apogent options            |  |           | 2,329,593 |                  |  |   | 12.33  |  
|Granted                                   |  |           | 3,057,617 |                  |  |   | 15.57  |  
|Exercised                                 |  |           | (132,809  | )                |  |   | (9.66  | )
|Canceled                                  |  |           | (58,474   | )                |  |   | (14.59 | )
|                                          |  |           |           |                  |  |   |        |  
|Options outstanding at September 30, 2001 |  |           | 5,195,927 |                  |  |   | 14.28  |  
|Options exercisable at September 30, 2001 |  |           | 1,559,109 |                  |  |   | 12.16  |  
|                                          |  |           |           |                  |  |   |        |  
|Outstanding at September 30, 2001         |  |           | 5,195,927 |                  |  |   | 14.28  |  
|Granted                                   |  |           | 329,903   |                  |  |   | 19.10  |  
|Exercised                                 |  |           | (97,671   | )                |  |   | (12.57 | )
|Canceled                                  |  |           | (40,475   | )                |  |   | (16.00 | )
|                                          |  |           |           |                  |  |   |        |  
|Options outstanding at September 30, 2002 |  |           | 5,387,684 |                  |  |   | 14.60  |  
|Options exercisable at September 30, 2002 |  |           | 2,728,850 |                  |  |   | 13.50  |  
|                                          |  |           |           |                  |  |   |        |  
|Options outstanding at September 30, 2002 |  |           | 5,387,684 |                  |  |   | 14.60  |  
|Granted                                   |  |           | 968,583   |                  |  |   | 18.97  |  
|Exercised                                 |  |           | (303,669  | )                |  |   | (13.36 | )
|Canceled                                  |  |           | (300,700  | )                |  |   | (15.94 | )
|                                          |  |           |           |                  |  |   |        |  
|Options outstanding at September 30, 2003 |  |           | 5,751,898 |                  |  | $ | 15.33  |  
|                                          |  |           |           |                  |  |   |        |  
|Options exercisable at September 30, 2003 |  |           | 3,365,640 |                  |  | $ | 14.07  |  
|                                          |  |           |           |                  |  |   |        |  

71



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information
regarding options outstanding and options exercisable at
September 30, 2003:

|                         |                 |                     |           |                     |         |                |     |                |     |                |       |      |      |  |           |        |         |  |       |      |      | 
|------------------------ | --------------- | ------------------- | --------- | ------------------- | ------- | -------------- | --- | -------------- | --- | -------------- | ----- | ---- | ---- |  | --------- | ------ | ------- |  | ----- | ---- | ---- | 
|                         |                 |                     |           |                     |         |               
|                         |                 | Options outstanding |           |                    
|                         |                 |                     |           | Options exercisable
|                         |                 |                     |           | Weighted-           |         |                |     |               
|                         |                 | Outstanding at      |           | average             |         | Weighted-      |     | Exercisable at |     | Weighted-     
|                         |                 | September 30,       |           | remaining           |         | average        |     | September 30,  |     | average       
|Range of exercise prices |                 | 2003                |           | contractual life    |         | exercise price |     | 2003           |     | exercise price
|                         |                 |                     |           |                     |         |                |     |                |     |               
|                         |                 | $2.58 to $5.16      |           |                     | 170,989 |                |     |                | 1.1 |                |       | $    | 4.87 |  |           |        | 170,989 |  |       | $    | 4.87 | 
|                         |                 | $5.17 to $7.75      |           |                     | 51,028  |                |     |                | 2.3 |                |       |      | 6.54 |  |           |        | 51,028  |  |       |      | 6.54 | 
|                         | $7.76 to $10.33 |                     |           | 96,367              |         |                |     | 3.2            |     |                |       | 8.50 |      |  |           | 96,367 |         |  |       | 8.50 |     
|$12.92 to $15.49         |                 |                     | 4,543,184 |                     |         |                | 6.5 |                |     |                | 14.83 |      |      |  | 2,792,038 |        |         |  | 14.59 |     
|$15.50 to $18.07         |                 |                     | 102,461   |                     |         |                | 8.8 |                |     |                | 16.50 |      |      |  | 81,230    |        |         |  | 16.20 |     
|$18.08 to $20.66         |                 |                     | 340,448   |                     |         |                | 8.0 |                |     |                | 19.12 |      |      |  | 173,988   |        |         |  | 19.14 |     
|$23.24 to $25.83         |                 |                     | 447,421   |                     |         |                | 9.8 |                |     |                | 23.64 |      |      |  |          |        |         |  |      |     
|                         |                 |                     |           |                     |         |                |     |                |     |                |       |      |      |  |           |        |         |  |       |     
|                         |                 |                     | 5,751,898 |                     |         |                | 6.7 |                |     |                | 15.33 |      |      |  | 3,365,640 |        |         |  | 14.07 |     
|                         |                 |                     |           |                     |         |                |     |                |     |                |       |      |      |  |           |        |         |  |       |     

The Employee Stock Purchase Plan
(ESPP) was approved by stockholders at the 2003
Annual Meeting of Stockholders. Under the terms of the ESPP, the
Company is authorized to issue up to 500,000 shares of common
stock to its employees, nearly all of whom are eligible to
participate. Under the terms of the plan, 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 the Companys 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. As of
September 30, 2003, 500,000 shares of common stock were
authorized and available for issuance. The initial offering
period of the ESPP ends on December 31, 2003. No fair value
has yet been estimated for the initial purchase.

(14) Earnings per Share

The following table sets forth the computation of
basic and diluted earnings per common share:

|                                                              |  |      |        |      |  |      |        |  |  |   |        | 
|------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                              |  | 2003 |        | 2002 |  | 2001
|                                                              |  |      |        |      |  |     
|Numerator for basic and diluted earnings per
    common share |  | $    | 57,452 |      |  | $    | 31,599 |  |  | $ | 37,631 | 
|Denominator:                                                  |  |      |        |      |  |      |        |  |  |   |        | 
|Weighted average common shares outstanding 
    basic        |  |      | 38,106 |      |  |      | 37,941 |  |  |   | 35,995 | 
|Effect of dilutive securities:                                |  |      |        |      |  |      |        |  |  |   |        | 
|Employee stock options                                        |  |      | 1,222  |      |  |      | 1,208  |  |  |   | 1,084  | 
|                                                              |  |      |        |      |  |      |        |  |  |   |        | 
|Denominator for diluted earnings per common share             |  |      | 39,328 |      |  |      | 39,149 |  |  |   | 37,079 | 
|Basic earnings per common share                               |  | $    | 1.51   |      |  | $    | 0.83   |  |  | $ | 1.05   | 
|                                                              |  |      |        |      |  |      |        |  |  |   |        | 
|Diluted earnings per common share                             |  | $    | 1.46   |      |  | $    | 0.81   |  |  | $ | 1.01   | 
|                                                              |  |      |        |      |  |      |        |  |  |   |        | 

Weighted average shares issuable upon the
exercise of stock options, which were not included in the
calculation, were 787,869, 7,477, and 2,391 in fiscal 2003, 2002
and 2001, respectively, because they were antidilutive.

(15) Commitments and Contingent
Liabilities

The Company or its subsidiaries are at any one
time parties to a number of lawsuits or subject to claims
arising out of their respective operations, including products
liability, patent and trademark or other

72



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##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

intellectual property infringement, contractual
liability, workplace safety and environmental claims and cases,
some of which involve claims for substantial damages. The
Company and its subsidiaries are vigorously defending lawsuits
and other claims against them. The Company believes that any
liabilities which might reasonably be expected to result from
any of the pending cases and claims would not have a material
adverse effect on the results of operations or financial
condition of the Company, even if it is unable to recover
amounts that it expects to recover with respect to those pending
cases and claims through insurance, indemnification
arrangements, or other sources. There can be no assurance as to
this, however, or that litigation having such a material adverse
effect will not arise in the future.

The Company utilizes third-party insurance for
losses and liabilities associated with its operations, including
workers compensation. The liability claims are subject to
established deductible levels on a per occurrence basis. Losses
up to these deductible levels are accrued based upon the
Companys estimates of the aggregate liability for claims
incurred based on Company experience.

(16) Acquisitions

The Company has completed six acquisitions since
the beginning of 2001. The Company is subject to future purchase
price adjustments, based upon earnout provisions, under two of
the purchase agreements. The earnout provisions are subject to
the achievement of certain financial goals. The acquired
companies are all engaged in businesses related to the Company
(see Note 19 for a description of business segments).

2003



| |            
| | -----------
| | Acquisition

During fiscal 2003, the Company completed one
stock acquisition in the Professional Dental segment in August
2003. The Company acquired SpofaDental a.s. in order to expand
its presence in key Central and Eastern European markets. The
purchase price of the stock the Company paid for the acquisition
of SpofaDental a.s., including acquisition related expenses, and
net of cash acquired, was approximately $16,237. The preliminary
allocation of the purchase price, based on the estimated fair
values of acquired net assets and liabilities assumed, reflects
acquired goodwill of approximately $10,251, with the remaining
acquisition cost allocated to the acquired net assets. The
results of this acquisition are included in the Companys
results of operations as of the date it was acquired.

2002



| |            
| | -----------
| | Acquisition

During fiscal 2002, the Company completed one
asset acquisition in the Professional Dental segment in February
2002. The purchase price of the assets the Company purchased
from Surgical Acuity, Inc., net of cash acquired, was
approximately $8,315. The results of this acquisition are
included in the Companys results of operations as of the
date it was acquired.

2001



| |             
| | ------------
| | Acquisitions

During 2001, the Company completed four
acquisitions for cash. The aggregate purchase price of the
acquisitions (which are not significant, individually or in the
aggregate), net of cash acquired, was approximately $51,498. The
results of these acquisitions are included in the Companys
results of operations as of the date they were acquired. The
total goodwill and intangibles for these acquired companies was
approximately $37,409 and was being amortized over 5 to
30 years until October 1, 2002, the date the

73



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company adopted SFAS No. 142 (see
Note 6). The following unaudited table outlines acquisition
information and the total assets prior to each acquisition.

|                     |                            |      |  |               |  |             |   |        |  |  |  |       | 
|-------------------- | -------------------------- | ---- |  | ------------- |  | ----------- | - | ------ |  |  |  | ----- | 
|                     |                            |      |  | Total         |  | Type of    
|Business Segment     |                            | Date |  | Assets        |  | Acquisition
|                     |                            |      |  |               |  |            
|Professional Dental: |                            |      |  |               |  |             |   |        |  |  |  |      
|                     | Hawe Neos Holdings S.A.    |      |  | May 2001      |  |             | $ | 23,431 |  |  |  | Stock | 
|                     | OBF Technologies, Inc.     |      |  | June 2001     |  |             | $ | 482    |  |  |  | Asset | 
|                     | Special Metals Corporation |      |  | December 2000 |  |             | $ | 1,042  |  |  |  | Asset | 
|Orthodontics:        |                            |      |  |               |  |             |   |        |  |  |  |      
|                     | Optident, Ltd.             |      |  | December 2000 |  |             |   | N/A    |  |  |  | Asset | 

The following unaudited pro forma financial
information presents the consolidated results of the operations
of the Company and the purchased businesses referred to above as
if the 2003, 2002, and 2001 acquisitions had occurred as of the
beginning of 2001 after giving effect to certain adjustments,
including additional depreciation expense, increased interest
expense on debt related to the acquisitions and related tax
effects. The pro forma information does not necessarily reflect
the results of operations that would have occurred had the
Company and the acquired companies constituted a single entity
during such periods.

|                             |  |               |         |               |  |               |         |  |  |   |         | 
|---------------------------- |  | ------------- | ------- | ------------- |  | ------------- | ------- |  |  | - | ------- | 
|                             |  | Year Ended    |         | Year Ended    |  | Year Ended   
|                             |  | September 30, |         | September 30, |  | September 30,
|                             |  | 2003          |         | 2002          |  | 2001         
|                             |  |               |         |               |  |              
|Net sales                    |  | $             | 534,993 |               |  | $             | 471,895 |  |  | $ | 479,547 | 
|Net income                   |  | $             | 57,576  |               |  | $             | 32,589  |  |  | $ | 40,933  | 
|Earnings per share  basic   |  | $             | 1.51    |               |  | $             | 0.86    |  |  | $ | 1.14    | 
|Earnings per share  diluted |  | $             | 1.46    |               |  | $             | 0.83    |  |  | $ | 1.10    | 

(17) Stockholders Equity

Stock Offering:On
June 8, 2001, the Company sold 2,650,000 shares of common
stock in an underwritten public offering generating net proceeds
of approximately $49,953, which were primarily used to repay
funds borrowed to finance the acquisitions of Hawe Neos and OBF.

Shareholder Rights Plan:On December 8, 2000, the Board of
Directors adopted a Rights Agreement pursuant to which Rights
are distributed as a dividend at the rate of one Right for each
share of common stock, par value $.01 per share, of the Company
outstanding upon consummation of the spin-off on
December 11, 2000, or issued thereafter. Each Right
initially will entitle stockholders to buy one one-hundredth of
a share of a series of preferred stock for sixty-five dollars.
The Rights generally will be exercisable if a person or group
acquires beneficial ownership of 15 percent or more of the
Companys common stock or commences a tender or exchange
offer upon consummation of which such person or group would
beneficially own 15 percent or more of the Companys
common stock. Thereafter, or if thereafter the Company is
involved in a merger or certain other business combinations not
approved by the Board of Directors, each Right will entitle its
holder, other than the acquiring person or group, to purchase
common stock of either the Company or the acquirer having a
value of twice the exercise price of the Right. The Rights are
attached to the common stock unless and until they become
exercisable and will expire on December 11, 2010, unless
earlier redeemed by the Company for $.01 each, or exchanged by
the Company as provided in the Rights Agreement.

74



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                      
| | -------------------------------------
| | Other Comprehensive Income
    (Loss)

|                                                 |  |                           |        |             |  |        |        |         |  |             |        |        |  |         |        |             |  |        |        |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------ |  | ------------------------- | ------ | ----------- |  | ------ | ------ | ------- |  | ----------- | ------ | ------ |  | ------- | ------ | ----------- |  | ------ | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                 |  |                          
|                                                 |  | Years Ended September 30,
|                                                 |  |                          
|                                                 |  |                           |        |             |  |       
|                                                 |  | 2003                      |        | 2002        |  | 2001  
|                                                 |  |                           |        |             |  |       
|                                                 |  | Pre-tax                   |        | Tax Expense |  | Net    |        | Pre-tax |  | Tax Expense |        | Net    |  | Pre-tax |        | Tax Expense |  | Net   
|                                                 |  | Amount                    |        | (Credit)    |  | Amount |        | Amount  |  | (Credit)    |        | Amount |  | Amount  |        | (Credit)    |  | Amount
|                                                 |  |                           |        |             |  |        |        |         |  |             |        |        |  |         |        |             |  |       
|Foreign currency translation adjustments         |  | $                         | 23,720 |             |  | $      | 8,760  |         |  | $           | 14,960 |        |  | $       | 11,805 |             |  | $      | 4,663  |   |  | $ | 7,142  |   |  | $ | 5,405  |   |  | $ | 2,167  |   |  | $ | 3,238  |  
|Unrealized (gain) loss on derivative instruments |  |                           | (3,558 | )           |  |        | (1,205 | )       |  |             | (2,353 | )      |  |         | 7,086  |             |  |        | 3,715  |   |  |   | 3,371  |   |  |   | (9,108 | ) |  |   | (3,643 | ) |  |   | (5,465 | )
|Minimum pension liability adjustment             |  |                           | 3,765  |             |  |        | 1,590  |         |  |             | 2,175  |        |  |         | (7,812 | )           |  |        | (3,046 | ) |  |   | (4,766 | ) |  |   |       |   |  |   |       |   |  |   |       |  
|                                                 |  |                           |        |             |  |        |        |         |  |             |        |        |  |         |        |             |  |        |        |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  
|Other comprehensive income (loss)                |  | $                         | 23,927 |             |  | $      | 9,145  |         |  | $           | 14,782 |        |  | $       | 11,079 |             |  | $      | 5,332  |   |  | $ | 5,747  |   |  | $ | (3,703 | ) |  | $ | (1,476 | ) |  | $ | (2,227 | )
|                                                 |  |                           |        |             |  |        |        |         |  |             |        |        |  |         |        |             |  |        |        |   |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        |  

(18) Related Party Transactions



| |                          
| | -------------------------
| | Transactions with Apogent

Cash management and advances:Prior to the spin-off, Apogent managed
the cash not considered necessary for current operating
requirements of its subsidiaries, including the operations of
SDS. Cash collected from and cash payments to the operations of
SDS were collected or funded from a centralized treasury
operation and were either credited or charged to SDS in the
normal course of business. Advances to and collections from SDS
were indirectly charged or credited with interest as such
advances to or collections from SDS were applied to borrowings
or repayments under the Apogent credit facilities. On an annual
basis and on the date of spin-off, outstanding balances were
cleared via an intercompany dividend to or capital contribution
from Apogent.

Dividends paid to and capital contributions
from Apogent:On December 11,
2000, Apogent completed the spin-off of SDS. Just prior to the
spin-off, SDM paid Apogent a cash dividend of $67,927
representing the difference between $375,000 and the actual
allocation of Apogent bank debt to SDM as of the spin-off, and
SDM settled all intercompany loans and advances made to Apogent
by SDM by way of a non-cash dividend to Apogent of $78,167,
resulting in the settlement of the intercompany operating
account. In addition, SDS paid $307,073 to Chase Manhattan Bank
to satisfy the obligations attributable to it under
Apogents credit facilities.

To accomplish the above transactions, on
December 11, 2000, the date of the spin-off, SDS borrowed
approximately $375,000 under the Companys
December 11, 2000 credit facility with ABN AMRO Bank N.V.

Apogent Charges:Apogent performed certain functions
for the Company (legal, tax, treasury, consolidation accounting,
financial reporting and insurance) and therefore charged its
corporate office, general and administrative expenses to its
subsidiaries. SDSs share of such costs amounted to $730 in
2001. Services performed at the corporate office generally
benefited the domestic operations, and therefore Apogent
corporate office, general and administrative expenses were
generally charged based on SDSs domestic revenues as a
percentage of total Apogent domestic revenues. Because general
and administrative expenses at Apogent generally benefited
domestic operations, Apogent considered this method to be a
reasonable basis for allocation.

75



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                    
| | -----------------------------------
| | Other Related Party
    Transaction

On September 1, 2000, one of SDSs
subsidiaries provided an executive officer of the Company with a
three-year, unsecured interest-free loan in the amount of $400.
The loan is payable in three annual installments of $100, $100
and $200, respectively, on September 1, 2001, 2002, and
2003. The loan was paid in full as of September 2003. The loan
was included in other current assets in the September 30,
2002 consolidated balance sheet.

(19) Segment Information

The Companys operating subsidiaries are
engaged in the manufacture and sale of dental products in the
United States and other countries. Dental products were
categorized in the business segments of Professional Dental and
Orthodontics. A description of the business segments follows:

Products in the Professional Dental business
segment include light cured composite filling materials and
bonding agents, amalgam alloy filling materials, dental burs,
impression materials, and curing lights used in general
dentistry, filling materials, instruments and sealers used in
endodontics, waxes, specialty burs, investment and casting
materials, equipment and accessories used in dental
laboratories, disposable infection prevention products for
dental equipment, high level disinfectants and sterilants, and
enzymatic cleaners and instruments care solutions for medial and
dental instruments, surface disinfectant products and
antimicrobial skincare products for medical and dental use.

Products in the Orthodontics business segment
include a broad range of orthodontic appliances such as
brackets, bands and buccal tubes, wires and elastomeric
products. Brackets, bands, buccal tubes and wires are
manufactured from a variety of metals to exacting specifications
for standard use or to meet the custom specifications of a
particular orthodontist. Elastomeric orthodontic products
include rubber bands and power chains to consolidate space.
Products in this area also include orthodontic instruments and
general orthodontic supply products. Orthodontics also includes
certain endodontic products.

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

Information on these business segments is
summarized as follows:

|                                                             |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |         |         | 
|------------------------------------------------------------ | ----------------- | -------------- | ------- | ------------ | ------- | ------------ | ------- | ------- | ------- |  | - | ------- | ------- | - | ------- | ------- | ------- | 
|                                                             |                   | Professional   |         |              |         |              |         | Total  
|                                                             |                   | Dental         |         | Orthodontics |         | Eliminations |         | SDS    
|                                                             |                   |                |         |              |         |              |         |        
|2003                                                         |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Revenues:                                                    |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                             | External customer |                | $       | 307,608      |         |              | $       | 218,783 |         |  | $ |        |         |   | $       | 526,391 |        
|                                                             | Intersegment      |                |         | 4,726        |         |              |         | 8,371   |         |  |   | (13,097 | )       |   |         |        |        
|                                                             |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                             |                   | Total revenues |         | $            | 312,334 |              |         | $       | 227,154 |  |   | $       | (13,097 | ) |         | $       | 526,391 | 
|                                                             |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Gross profit                                                 |                   |                | 168,705 |              |         |              | 122,084 |         |         |  |  |         |         |   | 290,789 |        
|Selling, general and administrative expenses                 |                   |                | 100,497 |              |         |              | 78,322  |         |         |  |  |         |         |   | 178,819 |        
|Operating income                                             |                   |                | 68,208  |              |         |              | 43,762  |         |         |  |  |         |         |   | 111,970 |        
|Depreciation and amortization of other intangible
    assets |                   |                | 8,102   |              |         |              | 4,508   |         |         |  |  |         |         |   | 12,610  |        
|Interest expense                                             |                   |                | 12,010  |              |         |              | 9,544   |         |         |  |  |         |         |   | 21,554  |        
|Segment assets                                               |                   |                | 431,212 |              |         |              | 180,447 |         |         |  |  |         |         |   | 611,659 |        
|Expenditures for property, plant and equipment               |                   |                | 4,906   |              |         |              | 4,247   |         |         |  |  |         |         |   | 9,153   |        

76



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                          |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |         |         | 
|------------------------------------------------------------------------- | ----------------- | -------------- | ------- | ------------ | ------- | ------------ | ------- | ------- | ------- |  | - | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                          |                   | Professional   |         |              |         |              |         | Total  
|                                                                          |                   | Dental         |         | Orthodontics |         | Eliminations |         | SDS    
|                                                                          |                   |                |         |              |         |              |         |        
|2002                                                                      |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Revenues:                                                                 |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                                          | External customer |                | $       | 279,523      |         |              | $       | 177,143 |         |  | $ |        |         |   | $       | 456,666 |        
|                                                                          | Intersegment      |                |         | 1,331        |         |              |         | 8,797   |         |  |   | (10,128 | )       |   |         |        |        
|                                                                          |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                                          |                   | Total revenues |         | $            | 280,854 |              |         | $       | 185,940 |  |   | $       | (10,128 | ) |         | $       | 456,666 | 
|                                                                          |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Gross profit                                                              |                   |                | 157,932 |              |         |              | 97,891  |         |         |  |  |         |         |   | 255,823 |        
|Selling, general and administrative expenses                              |                   |                | 96,736  |              |         |              | 66,881  |         |         |  |  |         |         |   | 163,617 |        
|Operating income                                                          |                   |                | 61,196  |              |         |              | 31,010  |         |         |  |  |         |         |   | 92,206  |        
|Depreciation and amortization of goodwill and
    other intangible assets |                   |                | 14,278  |              |         |              | 6,584   |         |         |  |  |         |         |   | 20,862  |        
|Interest expense                                                          |                   |                | 13,342  |              |         |              | 12,473  |         |         |  |  |         |         |   | 25,815  |        
|Segment assets                                                            |                   |                | 390,563 |              |         |              | 170,894 |         |         |  |  |         |         |   | 561,457 |        
|Expenditures for property, plant and equipment                            |                   |                | 9,901   |              |         |              | 5,793   |         |         |  |  |         |         |   | 15,694  |        
|                                                                         
|2001                                                                      |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Revenues:                                                                 |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                                          | External customer |                | $       | 260,964      |         |              | $       | 178,583 |         |  | $ |        |         |   | $       | 439,547 |        
|                                                                          | Intersegment      |                |         | 2,014        |         |              |         | 7,345   |         |  |   | (9,359  | )       |   |         |        |        
|                                                                          |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|                                                                          |                   | Total revenues |         | $            | 262,978 |              |         | $       | 185,928 |  |   | $       | (9,359  | ) |         | $       | 439,547 | 
|                                                                          |                   |                |         |              |         |              |         |         |         |  |   |         |         |   |         |        
|Gross profit                                                              |                   |                | 146,137 |              |         |              | 103,249 |         |         |  |  |         |         |   | 249,386 |        
|Selling, general and administrative expenses                              |                   |                | 82,610  |              |         |              | 67,225  |         |         |  |  |         |         |   | 149,835 |        
|Operating income                                                          |                   |                | 63,527  |              |         |              | 36,024  |         |         |  |  |         |         |   | 99,551  |        
|Depreciation and amortization of goodwill and
    other intangible assets |                   |                | 11,515  |              |         |              | 7,464   |         |         |  |  |         |         |   | 18,979  |        
|Interest expense                                                          |                   |                | 17,739  |              |         |              | 15,719  |         |         |  |  |         |         |   | 33,458  |        
|Segment assets                                                            |                   |                | 361,631 |              |         |              | 163,696 |         |         |  |  |         |         |   | 525,327 |        
|Expenditures for property, plant and equipment                            |                   |                | 9,790   |              |         |              | 4,626   |         |         |  |  |         |         |   | 14,416  |        

In fiscal 2003, one distributor accounted for
more than 10% of the Companys consolidated net sales,
selling primarily into the dental segment. No one customer
accounted for more than 10% of consolidated net sales for fiscal
2002 or 2001.

77



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Companys international operations are
conducted principally in Europe. Inter-geographic sales are made
at prices approximating market.

|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |         |         | 
|---------------------------------- | ---------------- | --------------------------------------- | -------- | ------- | ------- | ---- | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                                   |                  | 2003                                    |          | 2002    |         | 2001
|                                   |                  |                                         |          |         |         |     
|Net Sales:                         |                  |                                         |          |         |         |      |         |         |         |  |         |        
|United States:                     |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   | Customers        |                                         | $        | 299,518 |         |      | $       | 268,027 |         |  | $       | 268,379 |        
|                                   | Inter-geographic |                                         |          | 30,891  |         |      |         | 27,137  |         |  |         | 25,027  |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   |                  |                                         | 330,409  |         |         |      | 295,164 |         |         |  | 293,406 |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|Europe:                            |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   | Customers        |                                         |          | 132,923 |         |      |         | 106,029 |         |  |         | 87,398  |        
|                                   | Inter-geographic |                                         |          | 61,135  |         |      |         | 42,985  |         |  |         | 46,088  |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   |                  |                                         | 194,058  |         |         |      | 149,014 |         |         |  | 133,486 |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|All other areas:                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   | Customers        |                                         |          | 93,950  |         |      |         | 82,610  |         |  |         | 83,770  |        
|                                   | Inter-geographic |                                         |          | 19,533  |         |      |         | 13,942  |         |  |         | 13,872  |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   |                  |                                         | 113,483  |         |         |      | 96,552  |         |         |  | 97,642  |        
|Inter-geographic sales             |                  |                                         | (111,559 | )       |         |      | (84,064 | )       |         |  | (84,987 | )      
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   |                  | Total net sales                         |          | $       | 526,391 |      |         | $       | 456,666 |  |         | $       | 439,547 | 
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|Net property, plant and equipment: |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   | United States    |                                         | $        | 34,228  |         |      | $       | 35,597  |         |  | $       | 35,434  |        
|                                   | Europe           |                                         |          | 28,456  |         |      |         | 22,514  |         |  |         | 17,577  |        
|                                   | All other areas  |                                         |          | 18,066  |         |      |         | 17,391  |         |  |         | 15,908  |        
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        
|                                   |                  | Total net property, plant and equipment |          | $       | 80,750  |      |         | $       | 75,502  |  |         | $       | 68,919  | 
|                                   |                  |                                         |          |         |         |      |         |         |         |  |         |        



|     |                                                
|---- | -----------------------------------------------
|(20) | Quarterly Financial Information
    (unaudited)

|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|-------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ---------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                           |  | First   |         | Second  |  | Third   |         | Fourth  |  |           
|                           |  | Quarter |         | Quarter |  | Quarter |         | Quarter |  | Total Year
|                           |  |         |         |         |  |         |         |         |  |           
|2003                       |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net sales                  |  | $       | 120,149 |         |  | $       | 134,267 |         |  | $          | 134,232 |  |  | $ | 137,743 |  |  | $ | 526,391 | 
|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Gross profit               |  | $       | 64,575  |         |  | $       | 74,350  |         |  | $          | 74,382  |  |  | $ | 77,482  |  |  | $ | 290,789 | 
|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net income(a)              |  | $       | 9,565   |         |  | $       | 15,607  |         |  | $          | 14,979  |  |  | $ | 17,301  |  |  | $ | 57,452  | 
|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Basic earnings per share   |  | $       | 0.25    |         |  | $       | 0.41    |         |  | $          | 0.39    |  |  | $ | 0.45    |  |  | $ | 1.51    | 
|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Diluted earnings per share |  | $       | 0.25    |         |  | $       | 0.40    |         |  | $          | 0.38    |  |  | $ | 0.43    |  |  | $ | 1.46    | 
|                           |  |         |         |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 

78



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|-------------------------- |  | ------- | ------ | ------- |  | ------- | ------- | ------- |  | ---------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                           |  | First   |        | Second  |  | Third   |         | Fourth  |  |           
|                           |  | Quarter |        | Quarter |  | Quarter |         | Quarter |  | Total Year
|                           |  |         |        |         |  |         |         |         |  |           
|2002                       |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net sales                  |  | $       | 97,765 |         |  | $       | 124,694 |         |  | $          | 119,303 |  |  | $ | 114,904 |  |  | $ | 456,666 | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Gross profit               |  | $       | 54,693 |         |  | $       | 70,562  |         |  | $          | 67,326  |  |  | $ | 63,242  |  |  | $ | 255,823 | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net income(b)              |  | $       | 7,503  |         |  | $       | 13,227  |         |  | $          | 3,931   |  |  | $ | 6,938   |  |  | $ | 31,599  | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Basic earnings per share   |  | $       | 0.20   |         |  | $       | 0.35    |         |  | $          | 0.10    |  |  | $ | 0.18    |  |  | $ | 0.83    | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Diluted earnings per share |  | $       | 0.19   |         |  | $       | 0.34    |         |  | $          | 0.10    |  |  | $ | 0.18    |  |  | $ | 0.81    | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|2001                       |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net sales                  |  | $       | 98,458 |         |  | $       | 112,843 |         |  | $          | 107,257 |  |  | $ | 120,989 |  |  | $ | 439,547 | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Gross profit               |  | $       | 56,319 |         |  | $       | 64,463  |         |  | $          | 61,498  |  |  | $ | 67,106  |  |  | $ | 249,386 | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Net income(b)              |  | $       | 7,410  |         |  | $       | 11,429  |         |  | $          | 9,388   |  |  | $ | 9,404   |  |  | $ | 37,631  | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Basic earnings per share   |  | $       | 0.21   |         |  | $       | 0.33    |         |  | $          | 0.26    |  |  | $ | 0.25    |  |  | $ | 1.05    | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 
|Diluted earnings per share |  | $       | 0.21   |         |  | $       | 0.32    |         |  | $          | 0.25    |  |  | $ | 0.23    |  |  | $ | 1.01    | 
|                           |  |         |        |         |  |         |         |         |  |            |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On October 1, 2002, the Company adopted the
    provisions of the Statement of Accounting Financial Standards
    No. 142, and accordingly, discontinued amortizing goodwill
    and certain other intangible assets in fiscal 2003. The
    Companys fiscal 2003 results also include a
    $0.5 million gain, net of tax, on the sale of the San Diego
    facility in the second quarter and a $0.9 million one-time
    tax benefit of a settlement in Canada in the fourth quarter.



|    |                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------
|(b) | Restructuring charges were recorded in the amount
    of $3,666 and $2,379 in the fourth quarter of 2002 and 2001,
    respectively.



|     |                                                  
|---- | -------------------------------------------------
|(21) | Condensed Consolidating Financial
    Information

The Companys domestic subsidiaries are
guarantors of the Companys 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 all
of the Companys and the Companys guarantor
subsidiaries existing and future unsubordinated debt,
including debt under the Credit Facility entered into on
June 6, 2002.

Prior to January 1, 2003, SDM was a
guarantor subsidiary of the Companys Senior Subordinated
Notes. Effective January 1, 2003, SDM was merged into SDS.
Prior period condensed consolidating financial information has
been adjusted to reflect this merger.

Below are the unaudited condensed consolidating
balance sheets as of September 30, 2003, and 2002,
statements of operations for the years ended September 30,
2003, 2002 and 2001, and statement of cash flows for the years
ended September 30, 2003, 2002, and 2001, of Sybron Dental
Specialties, Inc. and its subsidiaries, reflecting the
subsidiary guarantors of the Senior Subordinated Notes.

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

79



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Balance
Sheets

|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |         |         | 
|-------------------------------------------------- | ---------------------------------------------- | -------------------------------------------------------- | -------- | ------------ | -------- | ------------ | ------- | ------------ | ------- | ------------ | ------- | ------ | ------- |  | -------- | ---- | -------- | - | ------- | ------- | ------- | 
|                                                   |                                                |                                                         
|                                                   |                                                | As of September 30, 2003                                
|                                                   |                                                |                                                         
|                                                   |                                                |                                                          |          | Non          |          |             
|                                                   |                                                | Sybron Dental                                            |          | Guarantor    |          | Guarantor    |         |             
|                                                   |                                                | Specialties                                              |          | Subsidiaries |          | Subsidiaries |         | Eliminations |         | Consolidated
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |             
|ASSETS                                            
|Current assets:                                    |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   | Cash and equivalents                           |                                                          | $        | 3,817        |          |              | $       | 1,164        |         |              | $       | 17,887 |         |  | $        |     |          |   | $       | 22,868  |        
|                                                   | Account receivable, net                        |                                                          |          | 108          |          |              |         | 55,242       |         |              |         | 48,215 |         |  |          |     |          |   |         | 103,565 |        
|                                                   | Inventories, net                               |                                                          |          |             |          |              |         | 56,561       |         |              |         | 27,678 |         |  |          |     |          |   |         | 84,239  |        
|                                                   | Other current assets                           |                                                          |          | 7,845        |          |              |         | 2,695        |         |              |         | 5,980  |         |  |          |     |          |   |         | 16,520  |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Total current assets                                     |          |              | 11,770   |              |         |              | 115,662 |              |         |        | 99,760  |  |          |      |         |   |         |         | 227,192 | 
|Property, plant and equipment, net                 |                                                |                                                          | 8,684    |              |          |              | 25,544  |              |         |              | 46,522  |        |         |  |         |      |          |   | 80,750  |        
|Goodwill                                           |                                                |                                                          |         |              |          |              | 192,976 |              |         |              | 65,614  |        |         |  |         |      |          |   | 258,590 |        
|Intangible assets, net                             |                                                |                                                          |         |              |          |              | 16,277  |              |         |              | 178     |        |         |  |         |      |          |   | 16,455  |        
|Intercompany balances                              |                                                |                                                          |         |              |          |              | 186,371 |              |         |              | 75,946  |        |         |  | (262,317 | )    |          |   |        |        
|Other assets                                       |                                                |                                                          | 15,395   |              |          |              | 10,897  |              |         |              | 2,380   |        |         |  |         |      |          |   | 28,672  |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Total assets                                             |          | $            | 35,849   |              |         | $            | 547,727 |              |         | $      | 290,400 |  |          | $    | (262,317 | ) |         | $       | 611,659 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|Current liabilities:                               |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   | Account payable                                |                                                          | $        | 768          |          |              | $       | 13,665       |         |              | $       | 5,187  |         |  | $        |     |          |   | $       | 19,620  |        
|                                                   | Current portion of long-term debt              |                                                          |          |             |          |              |         | 1,285        |         |              |         | 2,429  |         |  |          |     |          |   |         | 3,714   |        
|                                                   | Income taxes payable                           |                                                          |          | 10,929       |          |              |         | (1,183       | )       |              |         | 6,735  |         |  |          | (207 | )        |   |         | 16,274  |        
|                                                   | Accrued expenses and other current liabilities |                                                          |          | 11,496       |          |              |         | 23,502       |         |              |         | 19,890 |         |  |          |     |          |   |         | 54,888  |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Total current liabilities                                |          |              | 23,193   |              |         |              | 37,269  |              |         |        | 34,241  |  |          |      | (207     | ) |         |         | 94,496  | 
|Long-term debt                                     |                                                |                                                          | 10,000   |              |          |              | 109,871 |              |         |              | 4,137   |        |         |  |         |      |          |   | 124,008 |        
|Senior subordinated notes                          |                                                |                                                          | 150,000  |              |          |              |        |              |         |              |        |        |         |  |         |      |          |   | 150,000 |        
|Deferred income taxes                              |                                                |                                                          | 13,036   |              |          |              |        |              |         |              | 712     |        |         |  |         |      |          |   | 13,748  |        
|Other liabilities                                  |                                                |                                                          | 20,528   |              |          |              | 94      |              |         |              | 800     |        |         |  |         |      |          |   | 21,422  |        
|Intercompany balances                              |                                                |                                                          | 178,414  |              |          |              |        |              |         |              |        |        |         |  | (178,414 | )    |          |   |        |        
|Commitments and contingent liabilities             |                                                |                                                          |         |              |          |              |        |              |         |              |        |        |         |  |         |      |          |   |        |        
|Stockholders equity (deficit):                    |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Preferred stock                                          |          |              |         |              |         |              |        |              |         |        |        |  |          |      |         |   |         |         |        | 
|                                                   |                                                | Common stock                                             |          |              | 4,274    |              |         |              | 53      |              |         |        | 7,081   |  |          |      | (11,025  | ) |         |         | 383     | 
|Additional paid-in capital                         |                                                |                                                          | (275,815 | )            |          |              | 281,295 |              |         |              | 139,535 |        |         |  | (70,081  | )    |          |   | 74,934  |        
|Retained earnings (accumulated deficit)            |                                                |                                                          | (70,045  | )            |          |              | 113,330 |              |         |              | 85,349  |        |         |  | (2,590   | )    |          |   | 126,044 |        
|Accumulated other comprehensive income (loss)      |                                                |                                                          | (17,736  | )            |          |              | 5,815   |              |         |              | 18,545  |        |         |  |         |      |          |   | 6,624   |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Total stockholders equity (deficit)                     |          |              | (359,322 | )            |         |              | 400,493 |              |         |        | 250,510 |  |          |      | (83,696  | ) |         |         | 207,985 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        
|                                                   |                                                | Total liabilities and stockholders equity
    (deficit) |          | $            | 35,849   |              |         | $            | 547,727 |              |         | $      | 290,400 |  |          | $    | (262,317 | ) |         | $       | 611,659 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |      |          |   |         |        

80



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Balance
Sheets

|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |        |         | 
|-------------------------------------------------- | ---------------------------------------------- | -------------------------------------------------------- | -------- | ------------ | -------- | ------------ | ------- | ------------ | ------- | ------------ | ------- | ------ | ------- |  | -------- | ------- | -------- | - | ------- | ------ | ------- | 
|                                                   |                                                |                                                         
|                                                   |                                                | As of September 30, 2002                                
|                                                   |                                                |                                                         
|                                                   |                                                |                                                          |          | Non          |          |             
|                                                   |                                                | Sybron Dental                                            |          | Guarantor    |          | Guarantor    |         |             
|                                                   |                                                | Specialties                                              |          | Subsidiaries |          | Subsidiaries |         | Eliminations |         | Consolidated
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |             
|ASSETS                                            
|Current assets:                                    |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   | Cash and equivalents                           |                                                          | $        | (4           | )        |              | $       | (3,928       | )       |              | $       | 16,584 |         |  | $        |        |          |   | $       | 12,652 |        
|                                                   | Account receivable, net                        |                                                          |          | 298          |          |              |         | 46,881       |         |              |         | 33,300 |         |  |          |        |          |   |         | 80,479 |        
|                                                   | Inventories, net                               |                                                          |          |             |          |              |         | 64,416       |         |              |         | 25,269 |         |  |          |        |          |   |         | 89,685 |        
|                                                   | Other current assets                           |                                                          |          | 10,833       |          |              |         | 6,907        |         |              |         | 3,850  |         |  |          |        |          |   |         | 21,590 |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   |                                                | Total current assets                                     |          |              | 11,127   |              |         |              | 114,276 |              |         |        | 79,003  |  |          |         |         |   |         |        | 204,406 | 
|Property, plant and equipment, net                 |                                                |                                                          | 9,408    |              |          |              | 26,189  |              |         |              | 39,905  |        |         |  |         |         |          |   | 75,502  |       
|Goodwill                                           |                                                |                                                          |         |              |          |              | 192,611 |              |         |              | 48,794  |        |         |  |         |         |          |   | 241,405 |       
|Intangible assets, net                             |                                                |                                                          | 1,004    |              |          |              | 16,527  |              |         |              | 180     |        |         |  |         |         |          |   | 17,711  |       
|Intercompany balances                              |                                                |                                                          |         |              |          |              | 185,948 |              |         |              | 88,935  |        |         |  | (274,883 | )       |          |   |        |       
|Other assets                                       |                                                |                                                          | 8,552    |              |          |              | 11,749  |              |         |              | 2,132   |        |         |  |         |         |          |   | 22,433  |       
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   |                                                | Total assets                                             |          | $            | 30,091   |              |         | $            | 547,300 |              |         | $      | 258,949 |  |          | $       | (274,883 | ) |         | $      | 561,457 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|Current liabilities:                               |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   | Account payable                                |                                                          | $        | 873          |          |              | $       | 8,476        |         |              | $       | 5,578  |         |  | $        |        |          |   | $       | 14,927 |        
|                                                   | Current portion of long-term debt              |                                                          |          |             |          |              |         | 1,833        |         |              |         | 1,360  |         |  |          |        |          |   |         | 3,193  |        
|                                                   | Income taxes payable                           |                                                          |          | (2,304       | )        |              |         | 35           |         |              |         | 5,281  |         |  |          | 377     |          |   |         | 3,389  |        
|                                                   | Accrued expenses and other current liabilities |                                                          |          | 14,073       |          |              |         | 18,855       |         |              |         | 14,818 |         |  |          |        |          |   |         | 47,746 |        
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   |                                                | Total current liabilities                                |          |              | 12,642   |              |         |              | 29,199  |              |         |        | 27,037  |  |          |         | 377      |   |         |        | 69,255  | 
|Long-term debt                                     |                                                |                                                          | 47,000   |              |          |              | 135,806 |              |         |              | 4,838   |        |         |  |         |         |          |   | 187,644 |       
|Senior subordinated notes                          |                                                |                                                          | 150,000  |              |          |              |        |              |         |              |        |        |         |  |         |         |          |   | 150,000 |       
|Deferred income taxes                              |                                                |                                                          | 10,838   |              |          |              |        |              |         |              | 606     |        |         |  |         |         |          |   | 11,444  |       
|Other liabilities                                  |                                                |                                                          | 11,183   |              |          |              | 173     |              |         |              | 615     |        |         |  |         |         |          |   | 11,971  |       
|Intercompany balances                              |                                                |                                                          | 186,932  |              |          |              |        |              |         |              |        |        |         |  | (186,932 | )       |          |   |        |       
|Commitments and contingent liabilities             |                                                |                                                          |         |              |          |              |        |              |         |              |        |        |         |  |         |         |          |   |        |       
|Stockholders equity (deficit):                    |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   | Preferred stock                                |                                                          |          |             |          |              |         |             |         |              |         |       |         |  |          |        |          |   |         |       |        
|                                                   | Common stock                                   |                                                          |          | 4,271        |          |              |         | 53           |         |              |         | 7,081  |         |  |          | (11,025 | )        |   |         | 380    |        
|Additional paid-in capital                         |                                                |                                                          | (280,420 | )            |          |              | 289,091 |              |         |              | 135,787 |        |         |  | (74,129  | )       |          |   | 70,329  |       
|Retained earnings (accumulated deficit)            |                                                |                                                          | (99,873  | )            |          |              | 94,242  |              |         |              | 77,510  |        |         |  | (3,287   | )       |          |   | 68,592  |       
|Accumulated other comprehensive income (loss)      |                                                |                                                          | (12,482  | )            |          |              | (1,264  | )            |         |              | 5,475   |        |         |  | 113      |         |          |   | (8,158  | )     
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   |                                                | Total stockholders equity (deficit)                     |          |              | (388,504 | )            |         |              | 382,122 |              |         |        | 225,853 |  |          |         | (88,328  | ) |         |        | 131,143 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       
|                                                   |                                                | Total liabilities and stockholders equity
    (deficit) |          | $            | 30,091   |              |         | $            | 547,300 |              |         | $      | 258,949 |  |          | $       | (274,883 | ) |         | $      | 561,457 | 
|                                                   |                                                |                                                          |          |              |          |              |         |              |         |              |         |        |         |  |          |         |          |   |         |       

81



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Statements of
Operations

|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |         |  
|-------------------------------------------- | ---------------- | ------------------------------------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | ------------ | ------- | ------ | - | - | ------- | - |  | - | ------- | ------- | -
|                                             |                  |                                      
|                                             |                  | For The Year Ended September 30, 2003
|                                             |                  |                                      
|                                             |                  |                                       |         | Non          |   |             
|                                             |                  | Sybron Dental                         |         | Guarantor    |   | Guarantor    |         |             
|                                             |                  | Specialties                           |         | Subsidiaries |   | Subsidiaries |         | Eliminations |   | Consolidated
|                                             |                  |                                       |         |              |   |              |         |              |   |             
|Net sales                                    |                  | $                                     |        |              |   | $            | 312,065 |              |   | $            | 227,423 |        |   | $ | (13,097 | ) |  | $ | 526,391 |        
|Cost of sales                                |                  |                                       | 1,024   |              |   |              | 111,937 |              |   |              | 135,738 |        |   |   | (13,097 | ) |  |   | 235,602 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        
|Gross profit                                 |                  |                                       | (1,024  | )            |   |              | 200,128 |              |   |              | 91,685  |        |   |   |        |   |  |   | 290,789 |        
|Selling, general and administrative expenses |                  |                                       | 21,615  |              |   |              | 100,500 |              |   |              | 56,704  |        |   |   |        |   |  |   | 178,819 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        
|Operating income (loss)                      |                  |                                       | (22,639 | )            |   |              | 99,628  |              |   |              | 34,981  |        |   |   |        |   |  |   | 111,970 |        
|Other income (expense):                      |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        
|                                             | Interest expense |                                       |         | (13,992      | ) |              |         | (7,233       | ) |              |         | (329   | ) |   |         |  |  |   |         | (21,554 | )
|                                             | Other, net       |                                       |         | 36,631       |   |              |         | (33,660      | ) |              |         | (3,812 | ) |   |         |  |  |   |         | (841    | )
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        
|Income before income taxes                   |                  |                                       |        |              |   |              | 58,735  |              |   |              | 30,840  |        |   |   |        |   |  |   | 89,575  |        
|Income taxes                                 |                  |                                       |        |              |   |              | 22,660  |              |   |              | 9,670   |        |   |   | (207    | ) |  |   | 32,123  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        
|Net income                                   |                  | $                                     |        |              |   | $            | 36,075  |              |   | $            | 21,170  |        |   | $ | 207     |   |  | $ | 57,452  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |         |   |  |   |         |        

|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |         |  
|-------------------------------------------- | ---------------- | ------------------------------------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | ------------ | ------- | ------- | - | - | ------- | - |  | - | ------- | ------- | -
|                                             |                  |                                      
|                                             |                  | For The Year Ended September 30, 2002
|                                             |                  |                                      
|                                             |                  |                                       |         | Non          |   |             
|                                             |                  | Sybron Dental                         |         | Guarantor    |   | Guarantor    |         |             
|                                             |                  | Specialties                           |         | Subsidiaries |   | Subsidiaries |         | Eliminations |   | Consolidated
|                                             |                  |                                       |         |              |   |              |         |              |   |             
|Net sales                                    |                  | $                                     |        |              |   | $            | 277,259 |              |   | $            | 189,535 |         |   | $ | (10,128 | ) |  | $ | 456,666 |        
|Cost of sales                                |                  |                                       | 879     |              |   |              | 99,926  |              |   |              | 110,058 |         |   |   | (10,020 | ) |  |   | 200,843 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        
|Gross profit                                 |                  |                                       | (879    | )            |   |              | 177,333 |              |   |              | 79,477  |         |   |   | (108    | ) |  |   | 255,823 |        
|Selling, general and administrative expenses |                  |                                       | 16,197  |              |   |              | 102,085 |              |   |              | 45,419  |         |   |   | (84     | ) |  |   | 163,617 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        
|Operating income (loss)                      |                  |                                       | (17,076 | )            |   |              | 75,248  |              |   |              | 34,058  |         |   |   | (24     | ) |  |   | 92,206  |        
|Other income (expense):                      |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        
|                                             | Interest expense |                                       |         | (8,754       | ) |              |         | (16,694      | ) |              |         | (367    | ) |   |         |  |  |   |         | (25,815 | )
|                                             | Other, net       |                                       |         | 30,516       |   |              |         | (32,798      | ) |              |         | (11,816 | ) |   |         |  |  |   |         | (14,098 | )
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        
|Income before income taxes                   |                  |                                       | 4,686   |              |   |              | 25,756  |              |   |              | 21,875  |         |   |   | (24     | ) |  |   | 52,293  |        
|Income taxes                                 |                  |                                       |        |              |   |              | 10,329  |              |   |              | 10,313  |         |   |   | 52      |   |  |   | 20,694  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        
|Net income                                   |                  | $                                     | 4,686   |              |   | $            | 15,427  |              |   | $            | 11,562  |         |   | $ | (76     | ) |  | $ | 31,599  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |         |   |   |         |   |  |   |         |        

82



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Statements of
Operations

|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |         |  
|-------------------------------------------- | ---------------- | ------------------------------------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | ------------ | ------- | ------ | - | - | ------ | ---- | - | - | ------- | ------- | -
|                                             |                  |                                      
|                                             |                  | For The Year Ended September 30, 2001
|                                             |                  |                                      
|                                             |                  |                                       |         | Non          |   |             
|                                             |                  | Sybron Dental                         |         | Guarantor    |   | Guarantor    |         |             
|                                             |                  | Specialties                           |         | Subsidiaries |   | Subsidiaries |         | Eliminations |   | Consolidated
|                                             |                  |                                       |         |              |   |              |         |              |   |             
|Net sales                                    |                  | $                                     |        |              |   | $            | 283,996 |              |   | $            | 164,910 |        |   | $ | (9,359 | )    |   | $ | 439,547 |        
|Cost of sales                                |                  |                                       | 1,051   |              |   |              | 101,724 |              |   |              | 96,637  |        |   |   | (9,251 | )    |   |   | 190,161 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        
|Gross profit                                 |                  |                                       | (1,051  | )            |   |              | 182,272 |              |   |              | 68,273  |        |   |   | (108   | )    |   |   | 249,386 |        
|Selling, general and administrative expenses |                  |                                       | 17,000  |              |   |              | 89,306  |              |   |              | 41,965  |        |   |   | 1,564  |      |   |   | 149,835 |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        
|Operating income (loss)                      |                  |                                       | (18,051 | )            |   |              | 92,966  |              |   |              | 26,308  |        |   |   | (1,672 | )    |   |   | 99,551  |        
|Other income (expense):                      |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        
|                                             | Interest expense |                                       |         | (10,371      | ) |              |         | (22,854      | ) |              |         | (233   | ) |   |        |     |   |   |         | (33,458 | )
|                                             | Other, net       |                                       |         | 19,940       |   |              |         | (21,253      | ) |              |         | (1,122 | ) |   |        | (856 | ) |   |         | (3,291  | )
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        
|Income (loss) before income taxes            |                  |                                       | (8,482  | )            |   |              | 48,859  |              |   |              | 24,953  |        |   |   | (2,528 | )    |   |   | 62,802  |        
|Income taxes                                 |                  |                                       | (303    | )            |   |              | 19,172  |              |   |              | 9,507   |        |   |   | (3,205 | )    |   |   | 25,171  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        
|Net income (loss)                            |                  | $                                     | (8,179  | )            |   | $            | 29,687  |              |   | $            | 15,446  |        |   | $ | 677    |      |   | $ | 37,631  |        
|                                             |                  |                                       |         |              |   |              |         |              |   |              |         |        |   |   |        |      |   |   |         |        

83



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Statement of Cash
Flows

|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |          |         |  
|---------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------- | ------- | - | ---- | - | - | - | ------ | -------- | ------- | -
|                                                                 |                                                           |                                      
|                                                                 |                                                           | For The Year Ended September 30, 2003
|                                                                 |                                                           |                                      
|                                                                 |                                                           |                                       |        | Non          |         |             
|                                                                 |                                                           | Sybron Dental                         |        | Guarantor    |         | Guarantor    |         |             
|                                                                 |                                                           | Specialties                           |        | Subsidiaries |         | Subsidiaries |         | Eliminations |         | Consolidated
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |             
|Cash flows provided by operating activities                      |                                                           | $                                     | 44,804 |              |         | $            | 36,698  |              |         | $            | 5,550  |         |         | $ | 113  |   |   | $ | 87,165 |         
|Cash flow from investing activities:                             |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 | Capital expenditures                                      |                                       |        | (1,008       | )       |              |         | (4,501       | )       |              |        | (3,644  | )       |   |      |  |   |   |        | (9,153   | )      
|                                                                 | Proceeds from sales of property, plant, and
    equipment |                                       |        |             |         |              |         | 5,261        |         |              |        | 98      |         |   |      |  |   |   |        | 5,359    |        
|                                                                 | Net payments for business acquired                        |                                       |        |             |         |              |         |             |         |              |        | (16,237 | )       |   |      |  |   |   |        | (16,237  | )      
|                                                                 | Payments for intangibles                                  |                                       |        |             |         |              |         | (1,192       | )       |              |        | (226    | )       |   |      |  |   |   |        | (1,418   | )      
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 |                                                           | Net cash used in investing activities |        |              | (1,008  | )            |         |              | (432    | )            |        |         | (20,009 | ) |      |   |  |   |        |          | (21,449 | )
|Cash flows from financing activities:                            |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 | Proceeds from credit facility                             |                                       |        | 138,000      |         |              |         | 25,000       |         |              |        |        |         |   |      |  |   |   |        | 163,000  |        
|                                                                 | Principal payments on credit facility                     |                                       |        | (175,000     | )       |              |         | (51,361      | )       |              |        |        |         |   |      |  |   |   |        | (226,361 | )      
|                                                                 | Proceed from long-term debt                               |                                       |        |             |         |              |         |             |         |              |        | 4,063   |         |   |      |  |   |   |        | 4,063    |        
|                                                                 | Principal payments on long-term debt                      |                                       |        |             |         |              |         | (173         | )       |              |        | (4,304  | )       |   |      |  |   |   |        | (4,477   | )      
|                                                                 | Payment of deferred financing fees                        |                                       |        |             |         |              |         | (473         | )       |              |        |        |         |   |      |  |   |   |        | (473     | )      
|Cash received from exercise of stock options                     |                                                           |                                       | 4,004  |              |         |              |        |              |         |              |       |         |         |   |     |   |   |   | 4,004  |         
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 |                                                           | Net cash used in financing activities |        |              | (32,996 | )            |         |              | (27,007 | )            |        |         | (241    | ) |      |   |  |   |        |          | (60,244 | )
|Effect of exchange rate changes on cash and cash
    equivalents |                                                           |                                       | (5,076 | )            |         |              | 7,079   |              |         |              | 2,854  |         |         |   | (113 | ) |   |   | 4,744  |         
|Net change in intercompany balances                              |                                                           |                                       | (1,903 | )            |         |              | (11,246 | )            |         |              | 13,149 |         |         |   |     |   |   |   |       |         
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|Net increase in cash and cash equivalents                        |                                                           |                                       | 3,821  |              |         |              | 5,092   |              |         |              | 1,303  |         |         |   |     |   |   |   | 10,216 |         
|Cash and cash equivalents at beginning of period                 |                                                           |                                       | (4     | )            |         |              | (3,928  | )            |         |              | 16,584 |         |         |   |     |   |   |   | 12,652 |         
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|Cash and cash equivalents at end of period                       |                                                           | $                                     | 3,817  |              |         | $            | 1,164   |              |         | $            | 17,887 |         |         | $ |     |   |   | $ | 22,868 |         
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|Supplemental disclosures of cash flow
    information:           |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 | Cash paid during the year for interest                    |                                       | $      | 14,565       |         |              | $       | 8,341        |         |              | $      | 329     |         |   | $    |  |   |   | $      | 23,235   |        
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         
|                                                                 | Cash paid during the year for income taxes                |                                       | $      | 2,371        |         |              | $       |             |         |              | $      | 10,628  |         |   | $    |  |   |   | $      | 12,999   |        
|                                                                 |                                                           |                                       |        |              |         |              |         |              |         |              |        |         |         |   |      |   |   |   |        |         

84



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Statement of Cash
Flows

|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |          |         |  
|---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------- | -------- | ------------ | ------- | ------------ | ------- | ------------ | -------- | ------------ | ------ | ------ | ------- | - | --- | - | - | - | ------ | -------- | ------- | -
|                                                                             |                                                                                            |                                                        
|                                                                             |                                                                                            | For The Year Ended September 30, 2002                  
|                                                                             |                                                                                            |                                                        
|                                                                             |                                                                                            |                                                         |          | Non          |         |             
|                                                                             |                                                                                            | Sybron Dental                                           |          | Guarantor    |         | Guarantor    |         |             
|                                                                             |                                                                                            | Specialties                                             |          | Subsidiaries |         | Subsidiaries |         | Eliminations |          | Consolidated
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |             
|Cash flows provided by (used in) operating
    activities                    |                                                                                            | $                                                       | (1,686   | )            |         | $            | 36,620  |              |          | $            | 19,766 |        |         | $ | (23 | ) |   | $ | 54,677 |         
|Cash flow from investing activities:                                         |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Capital expenditures                                                                       |                                                         |          | (1,781       | )       |              |         | (5,362       | )        |              |        | (8,551 | )       |   |     |  |   |   |        | (15,694  | )      
|                                                                             | Proceeds from sales of property, plant, and
    equipment                                  |                                                         |          |             |         |              |         | 1,204        |          |              |        | 23     |         |   |     |  |   |   |        | 1,227    |        
|                                                                             | Net payments for business acquired                                                         |                                                         |          |             |         |              |         | (8,315       | )        |              |        |       |         |   |     |  |   |   |        | (8,315   | )      
|                                                                             | Payments for intangibles                                                                   |                                                         |          | (1,004       | )       |              |         | (1,518       | )        |              |        | (3,316 | )       |   |     |  |   |   |        | (5,838   | )      
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             |                                                                                            | Net cash used in investing activities                   |          |              | (2,785  | )            |         |              | (13,991  | )            |        |        | (11,844 | ) |     |   |  |   |        |          | (28,620 | )
|Cash flows from financing activities:                                        |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Proceeds from credit facility                                                              |                                                         |          | 323,500      |         |              |         | 130,000      |          |              |        |       |         |   |     |  |   |   |        | 453,500  |        
|                                                                             | Principal payments on credit facility                                                      |                                                         |          | (328,000     | )       |              |         | (283,823     | )        |              |        |       |         |   |     |  |   |   |        | (611,823 | )      
|                                                                             | Proceed from long-term debt                                                                |                                                         |          |             |         |              |         |             |          |              |        | 1,855  |         |   |     |  |   |   |        | 1,855    |        
|                                                                             | Principal payments on long-term debt                                                       |                                                         |          |             |         |              |         | (427         | )        |              |        | (250   | )       |   |     |  |   |   |        | (677     | )      
|                                                                             | Payment of deferred financing fees                                                         |                                                         |          |             |         |              |         | (11,993      | )        |              |        |       |         |   |     |  |   |   |        | (11,993  | )      
|                                                                             | Proceed from sale of senior subordinated notes                                             |                                                         |          | 150,000      |         |              |         |             |          |              |        |       |         |   |     |  |   |   |        | 150,000  |        
|                                                                             | Payment of prepayment penalty and terminated
    interest rate swap related to refinancing |                                                         |          |             |         |              |         | (5,305       | )        |              |        |       |         |   |     |  |   |   |        | (5,305   | )      
|                                                                             | Cash received from exercise of stock options                                               |                                                         |          | 1,203        |         |              |         |             |          |              |        |       |         |   |     |  |   |   |        | 1,203    |        
|                                                                             | Payment of terminated cross currency debt swap                                             |                                                         |          |             |         |              |         | (1,497       | )        |              |        |       |         |   |     |  |   |   |        | (1,497   | )      
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             |                                                                                            | Net cash provided by (used in) financing
    activities |          |              | 146,703 |              |         |              | (173,045 | )            |        |        | 1,605   |   |     |   |  |   |        |          | (24,737 | )
|Effect of exchange rate changes on cash and cash
    equivalents             |                                                                                            |                                                         | (1,255   | )            |         |              | 1,268   |              |          |              | 2,977  |        |         |   | 23  |   |   |   | 3,013  |         
|Net change in intercompany balances                                          |                                                                                            |                                                         | (141,471 | )            |         |              | 143,494 |              |          |              | (2,023 | )      |         |   |    |   |   |   |       |         
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|Net increase (decrease) in cash and cash
    equivalents                     |                                                                                            |                                                         | (494     | )            |         |              | (5,654  | )            |          |              | 10,481 |        |         |   |    |   |   |   | 4,333  |         
|Cash and cash equivalents at beginning of period                             |                                                                                            |                                                         | 490      |              |         |              | 1,726   |              |          |              | 6,103  |        |         |   |    |   |   |   | 8,319  |         
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|Cash and cash equivalents at end of period                                   |                                                                                            | $                                                       | (4       | )            |         | $            | (3,928  | )            |          | $            | 16,584 |        |         | $ |    |   |   | $ | 12,652 |         
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|Supplemental disclosures of cash flow
    information:                       |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Cash paid during the year for interest                                                     |                                                         | $        | 5,243        |         |              | $       | 18,856       |          |              | $      | 175    |         |   | $   |  |   |   | $      | 24,274   |        
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Cash paid during the year for income taxes                                                 |                                                         | $        | 15,856       |         |              | $       |             |          |              | $      | 10,049 |         |   | $   |  |   |   | $      | 25,905   |        
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|Supplemental disclosures of non-cash investing
    and financing activities: |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Non-cash charge for the de-designation of
    interest rate swaps                          |                                                         | $        |             |         |              | $       | 3,223        |          |              | $      |       |         |   | $   |  |   |   | $      | 3,223    |        
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         
|                                                                             | Non-cash charges for the write-off of deferred
    financing fees                          |                                                         | $        | 1,281        |         |              | $       | 3,190        |          |              | $      |       |         |   | $   |  |   |   | $      | 4,471    |        
|                                                                             |                                                                                            |                                                         |          |              |         |              |         |              |          |              |        |        |         |   |     |   |   |   |        |         

85



---



##### 



SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Condensed Consolidating Statement of Cash
Flows

|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |          |         |  
|---------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | ------- | ------------ | ------ | ------------ | ------- | ------------ | ------- | ------------ | ------- | ------- | ------- | - | --- | - | - | - | ------ | -------- | ------- | -
|                                                                             |                                                                   |                                      
|                                                                             |                                                                   | For The Year Ended September 30, 2001
|                                                                             |                                                                   |                                      
|                                                                             |                                                                   |                                       |         | Non          |        |             
|                                                                             |                                                                   | Sybron Dental                         |         | Guarantor    |        | Guarantor    |         |             
|                                                                             |                                                                   | Specialties                           |         | Subsidiaries |        | Subsidiaries |         | Eliminations |         | Consolidated
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |             
|Cash flows provided by (used in) operating
    activities                    |                                                                   | $                                     | (36,509 | )            |        | $            | 140,175 |              |         | $            | (36,867 | )       |         | $ | (89 | ) |   | $ | 66,710 |         
|Cash flow from investing activities:                                         |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Capital expenditures                                              |                                       |         | (1,466       | )      |              |         | (9,489       | )       |              |         | (3,461  | )       |   |     |  |   |   |        | (14,416  | )      
|                                                                             | Proceeds from sales of property, plant, and
    equipment         |                                       |         | 4            |        |              |         | 24           |         |              |         | 96      |         |   |     |  |   |   |        | 124      |        
|                                                                             | Net payments for business acquired                                |                                       |         |             |        |              |         | (6,500       | )       |              |         | (44,998 | )       |   |     |  |   |   |        | (51,498  | )      
|                                                                             | Payments for intangibles                                          |                                       |         |             |        |              |         | (2,240       | )       |              |         | (637    | )       |   |     |  |   |   |        | (2,877   | )      
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             |                                                                   | Net cash used in investing activities |         |              | (1,462 | )            |         |              | (18,205 | )            |         |         | (49,000 | ) |     |   |  |   |        |          | (68,667 | )
|Cash flows from financing activities:                                        |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Proceeds from credit facility                                     |                                       |         | 249,000      |        |              |         | 313,160      |         |              |         |        |         |   |     |  |   |   |        | 562,160  |        
|                                                                             | Principal payments on credit facility                             |                                       |         | (197,500     | )      |              |         | (341,521     | )       |              |         |        |         |   |     |  |   |   |        | (539,021 | )      
|                                                                             | Proceed from long-term debt                                       |                                       |         |             |        |              |         |             |         |              |         | 937     |         |   |     |  |   |   |        | 937      |        
|                                                                             | Principal payments on long-term debt                              |                                       |         | (4           | )      |              |         | (117         | )       |              |         | (1,472  | )       |   |     |  |   |   |        | (1,593   | )      
|                                                                             | Payment of deferred financing fees                                |                                       |         | (1,607       | )      |              |         | (3,887       | )       |              |         |        |         |   |     |  |   |   |        | (5,494   | )      
|                                                                             | Payment of Apogent dividend                                       |                                       |         | (67,927      | )      |              |         |             |         |              |         |        |         |   |     |  |   |   |        | (67,927  | )      
|                                                                             | Proceeds from stock offering, net of offering
    costs           |                                       |         | 49,953       |        |              |         |             |         |              |         |        |         |   |     |  |   |   |        | 49,953   |        
|                                                                             | Capital contribution from Apogent                                 |                                       |         | 4,612        |        |              |         |             |         |              |         |        |         |   |     |  |   |   |        | 4,612    |        
|                                                                             | Cash received from exercise of stock options                      |                                       |         | 1,283        |        |              |         |             |         |              |         |        |         |   |     |  |   |   |        | 1,283    |        
|                                                                             | Net change in advances and loans to Apogent                       |                                       |         | (404         | )      |              |         |             |         |              |         |        |         |   |     |  |   |   |        | (404     | )      
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|Net cash provided by (used in) financing
    activities                      |                                                                   |                                       | 37,406  |              |        |              | (32,365 | )            |         |              | (535    | )       |         |   |    |   |   |   | 4,506  |         
|Effect of exchange rate changes on cash and cash
    equivalents             |                                                                   |                                       | (4,282  | )            |        |              | 168     |              |         |              | 4,012   |         |         |   | 89  |   |   |   | (13    | )       
|Net change in intercompany balances                                          |                                                                   |                                       | 6,268   |              |        |              | (89,416 | )            |         |              | 83,148  |         |         |   |    |   |   |   |       |         
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|Net increase in cash and cash equivalents                                    |                                                                   |                                       | 1,421   |              |        |              | 357     |              |         |              | 758     |         |         |   |    |   |   |   | 2,536  |         
|Cash and cash equivalents at beginning of period                             |                                                                   |                                       | (931    | )            |        |              | 1,369   |              |         |              | 5,345   |         |         |   |    |   |   |   | 5,783  |         
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|Cash and cash equivalents at end of period                                   |                                                                   | $                                     | 490     |              |        | $            | 1,726   |              |         | $            | 6,103   |         |         | $ |    |   |   | $ | 8,319  |         
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|Supplemental disclosures of cash flow
    information:                       |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Cash paid during the year for interest                            |                                       | $       | 3,744        |        |              | $       | 20,693       |         |              | $       | 342     |         |   | $   |  |   |   | $      | 24,779   |        
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Cash paid during the year for income taxes                        |                                       | $       | 10,372       |        |              | $       | 711          |         |              | $       | 9,049   |         |   | $   |  |   |   | $      | 20,132   |        
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|Supplemental disclosures of non-cash investing
    and financing activities: |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Non-cash dividend to Apogent                                      |                                       | $       | 78,167       |        |              | $       |             |         |              | $       |        |         |   | $   |  |   |   | $      | 78,167   |        
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         
|                                                                             | Non-cash charges for the write-off of deferred
    financing fees |                                       | $       | 837          |        |              | $       |             |         |              | $       |        |         |   | $   |  |   |   | $      | 837      |        
|                                                                             |                                                                   |                                       |         |              |        |              |         |              |         |              |         |         |         |   |     |   |   |   |        |         

86



---



##### 





|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None



|         |                        
|-------- | -----------------------
|ITEM 9A. | Controls and Procedures

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

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

PART III



|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 10. | Directors and Executive Officers of the
    Registrant

The information called for by Item 10 of
Form 10-K with respect to directors, executive officers and
the audit committee is incorporated herein by reference to such
information included in the Companys Proxy Statement for
the Annual Meeting of Stockholders to be held February 6,
2004 (the 2004 Annual Meeting Proxy Statement),
under the captions Election of Directors and
Section 16(a) Beneficial Ownership Reporting
Compliance, and to the information under the caption
Executive Officers of the Registrant in Part I
hereof. Additionally, the information included in our 2004
Annual Meeting Proxy Statement under the caption Corporate
Governance is incorporated herein by reference.

The information regarding the Companys
audit committee financial expert[s] set forth under the caption
Audit Committee in the 2004 Annual Meeting Proxy
Statement is incorporated herein by reference.



|         |                       
|-------- | ----------------------
|ITEM 11. | Executive Compensation

The information called for by Item 11 of
Form 10-K is incorporated herein by reference to such
information included in the 2004 Annual Meeting Proxy Statement
under the captions Executive Compensation and
Election of Directors  Directors
Compensation.



|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|ITEM 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

The information called for by Item 12 of
Form 10-K is incorporated herein by reference to such
information included in the 2004 Annual Meeting Proxy Statement
under the captions Security Ownership of Certain
Beneficial Owners and Management and Equity
Compensation Plan Information.



|         |                                                   
|-------- | --------------------------------------------------
|ITEM 13. | Certain Relationships and Related
    Transactions

Any information called for by Item 13 of
Form 10-K is incorporated herein by reference to such
information included in the 2004 Annual Meeting Proxy Statement
under the captions Election of Directors and
Certain Relationships and Related Transactions.

87



---



##### 





|         |                                           
|-------- | ------------------------------------------
|ITEM 14. | Principal Accounting Fees and
    Services

The information called for by Item 14 is
incorporated herein by reference to such information included in
the 2004 Annual Meeting Proxy Statement under the captions
Audit Committee  Independent Auditors
Fees and Audit Committee  Pre-Approval
Policy.

88



---



##### 



PART IV



|         |                                                                    
|-------- | -------------------------------------------------------------------
|ITEM 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a) Documents Filed.The following
documents are filed as part of this Annual Report or
incorporated by reference as indicated:

1.     The consolidated
financial statements of Sybron Dental Specialties, Inc. and its
subsidiaries filed under Item 8:

|                                                                                                                                       |  |      |    | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                       |  | Page
|                                                                                                                                       |  |     
|Independent Auditors Report                                                                                                           |  |      | 40 | 
|Consolidated Balance Sheets as of
    September 30, 2003 and 2002                                                                      |  |      | 41 | 
|Consolidated Statements of Income for the years
    ended September 30, 2003, 2002 and 2001                                            |  |      | 42 | 
|Consolidated Statements of Stockholders
    Equity and Comprehensive Income for the years ended
    September 30, 2003, 2002 and 2001 |  |      | 43 | 
|Consolidated Statements of Cash Flows for the
    years ended September 30, 2003, 2002 and 2001                                        |  |      | 44 | 
|Notes to Consolidated Financial Statements                                                                                             |  |      | 46 | 

2.     Financial
Statement Schedules.

The following report and financial statement
schedule should be read in conjunction with the consolidated
financial statements set forth in Item 8:

|                                                    |  |      |    | 
|--------------------------------------------------- |  | ---- | -- | 
|                                                    |  | Page
|                                                    |  |     
|Independent Auditors Report                        |  |      | 90 | 
|Schedule II  Valuation and
    Qualifying Accounts |  |      | 91 | 

Schedules other than those listed above are
omitted because they are not applicable or because the required
information is given in the consolidated financial statements
and notes thereto.

3.     Exhibits and
Exhibit Index.

See the Exhibit Index included as the last
part of this report, which is incorporated herein by reference.
Each management contract and compensatory plan or arrangement
required to be filed as an exhibit to this report is identified
in the Exhibit Index by an asterisk following its exhibit number.

(b) Reports on Form 8-K.

On July 29, 2003, the Company furnished a
Current Report on Form 8-K furnishing the Companys
press release announcing the Companys financial results
for the quarter and nine-month period ended June 30, 2003.

On August 5, 2003, the Company furnished a
Current Report on Form 8-K furnishing the transcript of the
Companys July 29, 2003 conference call, in which the
Company reported on the results of its operations for the
quarter and nine-month period ended June 30, 2003.

On November 18, 2003 the Company furnished a
Current Report on Form 8-K furnishing the Companys
press release announcing the Companys financial results
for the quarter and twelve-month period ended September 30,
2003.

89



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) 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.

December 19, 2003



| |                                
| | -------------------------------
| | SYBRON DENTAL SPECIALTIES, INC.



| |     |                           
| | --- | --------------------------
| | By: | /s/ FLOYD W. PICKRELL, JR.

| |                                          
| | -----------------------------------------
| |                                          
| | Floyd W. Pickrell, Jr.,                  
| | President and Chief Executive
    Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|                                                                  |  |                                                                     |  |                  
|----------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | -----------------
|Signature                                                         |  | Title                                                               |  | Date             
|                                                                  |  |                                                                     |  |                  
|Principal Executive Officer:                                      |  |                                                                     |  |                  
|/s/ FLOYD W. PICKRELL, JR.Floyd W. Pickrell, Jr.                  |  | President and Chief Executive Officer                               |  | December 19, 2003
|                                                                 
|Principal Financial Officer and Principal
    Accounting Officer: |  |                                                                     |  |                  
|                                                                 
|/s/ GREGORY D. WALLERGregory D. Waller                            |  | Vice President  Finance, Chief
    Financial Officer and Treasurer |  | December 19, 2003
|                                                                 
|All of the members of the Board of Directors:                     |  |                                                                     |  |                  
|                                                                 
|DENNIS B. BROWN*Dennis B. Brown                                   |  |                                                                     |  |                  
|                                                                 
|DONALD N. ECKER*Donald N. Ecker                                   |  |                                                                     |  |                  
|                                                                 
|ROBERT W. KLEMME*Robert W. Klemme                                 |  |                                                                     |  |                  
|                                                                 
|JAMES R. PARKS*James R. Parks                                     |  |                                                                     |  |                  
|                                                                 
|FLOYD W. PICKRELL, JR.*Floyd W. Pickrell, Jr.                     |  |                                                                     |  |                  
|                                                                 
|WILLIAM E.B. SIART*William E.B. Siart                             |  |                                                                     |  |                  

90



---



##### 



|                                                                                                                                                                                                    |  |       |  |                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | -----------------
|Signature                                                                                                                                                                                           |  | Title |  | Date             
|                                                                                                                                                                                                    |  |       |  |                  
|KENNETH F. YONTZ*Kenneth F. Yontz                                                                                                                                                                   |  |       |  |                  
|                                                                                                                                                                                                   
|*By: /s/ GREGORY D. WALLERGregory D. WallerAttorney and Agent for each member of the Board of Directors
    of Sybron Dental Specialties, Inc. under Powers of Attorney
    dated December 15, 2003 |  |       |  | December 19, 2003

91



---



##### 



Independent Auditors Report

The Board of Directors and Stockholders 
 Sybron Dental Specialties, Inc.:

On November 17, 2003, we reported on the
consolidated balance sheets of Sybron Dental Specialties, Inc.
and Subsidiaries as of September 30, 2003 and 2002, and the
related consolidated statements of income, stockholders
equity and comprehensive income, and cash flows for each of the
years in the three-year period ended September 30, 2003,
which are included in this Annual Report on Form 10-K. In
connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial
statement schedule as listed in Item 8. This financial
statement schedule is the responsibility of the Companys
management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.

In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.



| |                 
| | ----------------
| | /s/     KPMG LLP
| |                 
| | KPMG
    LLP    

Costa Mesa, California 
 November 17, 2003

92



---



##### 



SCHEDULE II

SYBRON DENTAL SPECIALTIES, INC. AND
SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended September 30, 2003,
2002 and 2001


|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |       | 
|----------------------------- | ---------------------------------- | -------------- | ----- | ---------- |  | ---------- | ----- | ---------- |  | ----------- | - | --- | --- | - | ----- | ----- | ---- | - | ----- | ----- | 
|                              |                                    |                |       |            |  |            |       |           
|                              |                                    |                |       | Additions  |  |            |       |           
|                              |                                    |                |       |            |  |            |       |           
|                              |                                    | Balance at     |       | Charged to |  | Charged to |       |            |  |            
|                              |                                    | Beginning      |       | Cost And   |  | Other      |       |            |  | Balance at 
|Description                   |                                    | of Year        |       | Expenses   |  | Accounts   |       | Deductions |  | End of Year
|                              |                                    |                |       |            |  |            |       |            |  |            
|                              |                                    |               
|                              |                                    | (in thousands)
|Year ended September 30, 2003 |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Deducted from asset accounts: |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|                              | Allowance for doubtful receivables |                | $     | 1,400      |  |            | $     | 400        |  |             | $ | 857 | (d) |   | $     | 410   | (a)  |   | $     | 2,247 | 
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|                              | Inventory reserves                 |                | $     | 4,474      |  |            | $     | 3,776      |  |             | $ | 305 | (d) |   | $     | 4,188 | (b)  |   | $     | 4,367 | 
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Legal reserves                |                                    | $              | 743   |            |  | $          | 2,826 |            |  | $           |  |     |     | $ | 2,677 | (c)   |      | $ | 892   |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Restructuring reserve         |                                    | $              | 4,130 |            |  | $          |      |            |  | $           |  |     |     | $ | 2,644 |       |      | $ | 1,486 |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Year ended September 30, 2002 |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Deducted from asset accounts: |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|                              | Allowance for doubtful receivables |                | $     | 1,657      |  |            | $     | 600        |  |             | $ | 130 | (d) |   | $     | 987   | (a)  |   | $     | 1,400 | 
|                              | Inventory reserves                 |                | $     | 1,544      |  |            | $     | 2,573      |  |             | $ | 93  | (d) |   | $     | (264  | )(b) |   | $     | 4,474 | 
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Legal reserves                |                                    | $              | 663   |            |  | $          | 1,576 |            |  | $           |  |     |     | $ | 1,496 | (c)   |      | $ | 743   |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Restructuring reserve         |                                    | $              | 2,775 |            |  | $          | 3,666 |            |  | $           |  |     |     | $ | 2,311 |       |      | $ | 4,130 |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Year ended September 30, 2001 |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Deducted from asset accounts: |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|                              | Allowance for doubtful receivables |                | $     | 2,056      |  |            | $     | 1,259      |  |             | $ | 381 | (d) |   | $     | 2,039 | (a)  |   | $     | 1,657 | 
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|                              | Inventory reserves                 |                | $     | 4,347      |  |            | $     | 1,442      |  |             | $ | 578 | (d) |   | $     | 4,823 | (b)  |   | $     | 1,544 | 
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Legal reserves                |                                    | $              | 224   |            |  | $          | 1,023 |            |  | $           |  |     |     | $ | 584   | (c)   |      | $ | 663   |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      
|Restructuring reserve         |                                    | $              | 2,403 |            |  | $          | 2,379 |            |  | $           |  |     |     | $ | 2,007 | (e)   |      | $ | 2,775 |      
|                              |                                    |                |       |            |  |            |       |            |  |             |   |     |     |   |       |       |      |   |       |      



---

Note: Above additions and deductions include the
effects of foreign currency rate changes.



|    |                                                                      
|--- | ---------------------------------------------------------------------
|(a) | Non-collectable accounts written off, net of
    recoveries.         
|   
|(b) | Inventory written off.                                               
|   
|(c) | Net disbursements.                                                   
|   
|(d) | Includes reserves of acquired businesses.                            
|   
|(e) | Net disbursements include the write-off of $250
    for fixed assets.

93



---



##### 



SYBRON DENTAL SPECIALTIES, INC.

(THE REGISTRANT)


(COMMISSION FILE NO. 1-16057)




EXHIBIT INDEX


TO


2003 ANNUAL REPORT ON FORM 10-K


|        |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                           |  |  |  | 
|------- | --- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |     |             |  | Incorporated Herein                                                                                                                                                                                                                                                                                                                                                                                               |  | Filed                                                                                                                                                                    
|Number  |     | Description |  | By Reference To                                                                                                                                                                                                                                                                                                                                                                                                   |  | Herewith                                                                                                                                                                 
|        |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                          
|        | 2.1 |             |  | Contribution Agreement, Plan and Agreement of
    Reorganization and Distribution, dated as of November 28,
    2000, between Sybron International Corporation (Sybron
    International), the Registrant and Sybron Dental
    Management, Inc. (excluding the forms of the ancillary
    agreements attached thereto as exhibits, definitive copies of
    which are filed as Exhibits 2.2 through 2.8 below) |  | Exhibit 2.1 to the Registrants
    Form 10-K for the fiscal year ended September 30, 2000
    (the 2000 10-K)                                                          |  |  |  | 
|        | 2.2 |             |  | General Assignment, Assumption and Agreement
    Regarding Litigation, Claims and Other Liabilities, dated as of
    December 11, 2000, between Sybron International and the
    Registrant                                                                                                                                                                                                                       |  | Exhibit 2.2 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 2.3 |             |  | Trade Name Assignment and Transitional Trade Name
    Use and License Agreement, dated as of December 11, 2000,
    between Sybron International and the Registrant                                                                                                                                                                                                                                               |  | Exhibit 2.3 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 2.4 |             |  | Insurance Matters Agreement, dated as of
    December 11, 2000, between Sybron International and the
    Registrant                                                                                                                                                                                                                                                                                               |  | Exhibit 2.4 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 2.5 |             |  | Employee Benefits Agreement, dated as of
    December 11, 2000, between Sybron International and the
    Registrant                                                                                                                                                                                                                                                                                               |  | Exhibit 2.5 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 2.6 |             |  | Tax Sharing and Indemnification Agreement, dated
    as of December 11, 2000, between Sybron International and
    the Registrant                                                                                                                                                                                                                                                                                 |  | Exhibit 2.6 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 2.8 |             |  | Confidentiality and Nondisclosure Agreement,
    dated as of December 11, 2000, between Sybron International
    and the Registrant                                                                                                                                                                                                                                                                               |  | Exhibit 2.8 to the 2000 10-K                                                                                                                                              |  |  |  | 
|        | 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 2000 10-K                                                                                                                                           |  |  |  | 
|        | 3.2 |             |  | Bylaws of the Registrant                                                                                                                                                                                                                                                                                                                                                                                          |  | Exhibit 3.2 to the Form 10/ A No. 2                                                                                                                                       |  |  |  | 
|        | 4.1 |             |  | Restated Certificate of Incorporation and Bylaws
    of Registrant                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 3.1 and 3.2 hereto                                                                                                                                                |  |  |  | 

94



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##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                        |  |  |  | 
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |       |             |  | Incorporated Herein                                                                                                                                                                                                                                                                                                                          |  | Filed                                                                                                                 
|Number  |       | Description |  | By Reference To                                                                                                                                                                                                                                                                                                                              |  | Herewith                                                                                                              
|        |       |             |  |                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                       
|        | 4.2   |             |  | Rights Agreement, dated as of December 8,
    2000, between Registrant and Equiserve Trust Company, N.A. as
    Rights Agent, including the Form of Certificate of Designation,
    Preferences and Rights of Series A Preferred Stock
    (Exhibit A), Form of Rights Certificate (Exhibit B)
    and Form of Summary of Rights (Exhibit C) |  | Exhibit 4 to the Registrants Current
    Report on Form 8-K dated December 8, 2000 and filed on
    December 12, 2000 |  |  |  | 
|        | 4.3   |             |  | Indenture dated as of June 6, 2002, between
    Registrant, its subsidiary guarantors, and Wilmington Trust
    Company providing for Registrants 8 1/8% Senior
    Subordinated Notes due 2012                                                                                                                                             |  | Exhibit 4.2 to the Registrants
    Form 10-Q for the quarter ended June 30, 2002
    (Third Quarter 2002 10-Q)      |  |  |  | 
|        | 4.4   |             |  | Credit Agreement, dated as of June 6, 2002,
    between Registrant and certain of its subsidiaries and Credit
    Suisse First Boston and other lenders                                                                                                                                                                                      |  | Exhibit 4.4 to the Third Quarter 2002 10-Q                                                                             |  |  |  | 
|        | 4.5   |             |  | Amendment to Credit Agreement dated as of
    December 20, 2002                                                                                                                                                                                                                                                                              |  | Exhibit 4.2 to the First Quarter 2003 10-Q                                                                             |  |  |  | 
|        | 10.1* |             |  | 2000 Long-Term Incentive Plan (As amended by the
    Board of Directors on February 8, 2002)                                                                                                                                                                                                                                                 |  | Exhibit 10.1 to the Registrants
    Form 10-Q for the quarter ended December 31, 2001
    (First Quarter 2002 10-Q) |  |  |  | 
|        | 10.2* |             |  | Form of Nonqualified Stock Option Agreement under
    the 2000 Long-Term Incentive Plan                                                                                                                                                                                                                                                      |  | Exhibit 10.2 to the 2000 10-K                                                                                          |  |  |  | 
|        | 10.3* |             |  | 2000 Outside Directors Stock Option Plan
    (As amended by the Board of Directors on February 8, 2002)                                                                                                                                                                                                                                     |  | Exhibit 10.3 to the First Quarter 2002 10-Q                                                                            |  |  |  | 
|        | 10.4* |             |  | Form of Director Nonqualified Stock Option
    Agreement under the 2000 Outside Directors Stock Option
    Plan                                                                                                                                                                                                                             |  | Exhibit 10.4 to the 2000 10-K                                                                                          |  |  |  | 
|        | 10.5* |             |  | Senior Executive Incentive Compensation Plan                                                                                                                                                                                                                                                                                                 |  | Exhibit A to the Registrants Proxy
    Statement dated Dec. 28, 2001 for the 2002 Annual Meeting
    of Stockholders  |  |  |  | 
|        | 10.6* |             |  | Form of Executive Employment Agreement with
    executive officers                                                                                                                                                                                                                                                                           |  | Exhibit 10.4 to the Form 10/ A No. 2                                                                                   |  |  |  | 
|        | 10.7* |             |  | Form of Indemnification Agreement for directors
    and executive officers                                                                                                                                                                                                                                                                   |  | Exhibit 10.5 to the Form 10/ A No. 2                                                                                   |  |  |  | 
|        | 10.8* |             |  | Promissory Note in favor of Sybron Dental
    Specialties, Inc. from Stephen J. Tomassi                                                                                                                                                                                                                                                      |  | Exhibit 10.8 to the 2000 10-K                                                                                          |  |  |  | 
|        | 10.9  |             |  | Lease Agreement dated December 21, 1988
    between CPA:7 and CPA:8, as landlord, and Ormco Corporation; as
    tenant                                                                                                                                                                                                                       |  | Exhibit 10(bb) to Sybron Corporations
    Registration Statement on Form S-1 (No. 33-24640)                           |  |  |  | 
|        | 10.10 |             |  | Lease Agreement dated December 21, 1988
    between CPA:7 and CPA:8, as landlord, and Kerr Manufacturing
    Company, as tenant                                                                                                                                                                                                              |  | Exhibit 10(dd) to Sybron Corporations
    Registration Statement on Form S-1 (No. 33-24640)                           |  |  |  | 

95



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##### 



|        |        |             |  |                                                                                                                                                                                                                                         |  |                                                                                                                           |  |  |   | 
|------- | ------ | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  |  | - | 
|Exhibit |        |             |  | Incorporated Herein                                                                                                                                                                                                                     |  | Filed                                                                                                                    
|Number  |        | Description |  | By Reference To                                                                                                                                                                                                                         |  | Herewith                                                                                                                 
|        |        |             |  |                                                                                                                                                                                                                                         |  |                                                                                                                          
|        | 10.11  |             |  | Tenant Agreement dated December 21, 1988
    between New England Mutual Life Insurance Company, as lender,
    and CPA:7 and CPA:8, as landlord, and Ormco Corporation, as
    tenant                                                   |  | Exhibit 10(rr) to Sybron Corporations
    Registration Statement on Form S-1 (No. 33-24640)                              |  |  |   | 
|        | 10.12  |             |  | Environmental Risk Agreement dated
    December 21, 1988 from Sybron Corporation and Ormco
    Corporation, as indemnitors, to New England Mutual Life
    Insurance Company, as lender, and CPA:7 and CPA:8, as Borrowers              |  | Exhibit 10(xx) to Sybron Corporations
    Registration Statement on Form S-1 (No. 33-24640)                              |  |  |   | 
|        | 10.13  |             |  | Environmental Risk Agreement dated
    December 21, 1988 from Sybron Corporation and Kerr
    Manufacturing Company, as indemnitors, to New England Mutual
    Life Insurance Company, as lender, and CPA:7 and CPA:8, as
    Borrowers |  | Exhibit 10(zz) to Sybron Corporations
    Registration Statement on Form S-1 (No. 33-24640)                              |  |  |   | 
|        | 10.14* |             |  | 2001 Long-Term Incentive Plan (As amended by the
    Board of Directors on February 8, 2002)                                                                                                                                            |  | Exhibit 10.14 to the First Quarter 2002 10-Q                                                                              |  |  |   | 
|        | 10.15* |             |  | Form of Nonqualified Stock Option Agreement under
    the 2001 Long-Term Incentive Plan                                                                                                                                                 |  | Exhibit 10.15 to the Registrants 10-K for
    the fiscal year ended September 30, 2002                                    |  |  |   | 
|        | 10.16* |             |  | Employee Stock Purchase Plan                                                                                                                                                                                                            |  | Exhibit A to the Registrants Proxy
    Statement dated December 30, 2002 for the 2003 Annual
    Meeting of Stockholders |  |  |   | 
|        | 18     |             |  | Letter of KPMG LLP Regarding Change in Accounting
    Principle                                                                                                                                                                         |  | Exhibit 18.1 to the Third Quarter 2002 10-Q                                                                               |  |  |   | 
|        | 21     |             |  | Subsidiaries of the Registrant                                                                                                                                                                                                          |  |                                                                                                                           |  |  | X | 
|        | 23     |             |  | Consent of KPMG LLP                                                                                                                                                                                                                     |  |                                                                                                                           |  |  | X | 
|        | 24     |             |  | Powers of Attorney of Directors of the Registrant                                                                                                                                                                                       |  |                                                                                                                           |  |  | X | 
|        | 31.1   |             |  | Certification pursuant to Rule 13a-14(a) or
    Rule 15d-14(a), as adopted pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002                                                                                                |  |                                                                                                                           |  |  | X | 
|        | 31.2   |             |  | Certification pursuant to Rule 13a-14(a) or
    Rule 15d-14(a), as adopted pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002                                                                                                |  |                                                                                                                           |  |  | X | 
|        | 32     |             |  | Chief Executive and Chief Financial
    Officers certification pursuant to 18 U.S.C. section 1350,
    as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
    2002                                                        |  |                                                                                                                           |  |  | X | 



---



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Denotes management contract or executive
    compensation plan or arrangement required to be filed as an
    exhibit pursuant to Item 15(c) of Form 10-K



|   |                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Pursuant to Item 601(b)(4)(iii)(A) of
    Regulation S-K, the Registrant has omitted certain
    agreements with respect to long-term debt not exceeding 10% of
    consolidated total assets. The Registrant agrees to furnish a
    copy of any such agreements to the Securities and Exchange
    Commission upon request.

96