SYBRON DENTAL SPECIALTIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-16057

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 (Address of principal executive offices) (Zip Code) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(714) 516-7400

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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 [X] No [ ]

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. [X]

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 December 16, 2002 as reported on the New York Stock Exchange, was
approximately $345,996,000. 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 16, 2002, there were 37,989,650 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 7, 2003 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
2002 ANNUAL REPORT ON FORM 10-K

1

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, as well as a manufacturer and distributor of products for use in
infection prevention in both the medical and dental markets. For the time period
covered by this report, we were organized into three operating segments:

- Professional Dental. We develop and manufacture a comprehensive line of
branded consumable products sold through independent distributors to the
dental industry worldwide;

- Orthodontics. We develop, manufacture and market an array of consumable
orthodontic products, and endodontic products to orthodontic and
endodontic specialists worldwide; and

- Infection Prevention. We develop and manufacture consumable infection
prevention products sold through independent distributors to the medical
and dental markets, principally in the United States and Canada.

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. Financial
information about our business segments is presented in Note 19 to our
consolidated financial statements in Item 8 of this Annual Report both on a
historical basis and to reflect the combination of the Infection Prevention and
the Professional Dental segments as if the combination had occurred as of
October 1, 1999. Through September 30, 2002, after which Metrex became a part of
the Professional Dental segment, our primary subsidiaries in each of our
business segments were as follows:

We market our products in the United States and abroad under brand names
such as Kerr(R), Ormco(R), Metrex(R), Pinnacle(R), Demetron(R), Hawe(R),
AOA(TM), and SybronEndo(TM), which are well recognized in the dental,
orthodontics and infection prevention 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.

2

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.

BUSINESS STRATEGY

The key elements of our strategy to become a premier global supplier of
high quality dental products are:

Develop Innovative Products. We strive to consistently develop and
introduce innovative products. For example, our Demetron(R) 501 Curing
Light was named "Product of the Year" in 2002 and 2001 by Reality
Publishing Company. We also received a Reality award for having the most
products garnering the highest possible rating. 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 educating and
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. Since 1981, we have successfully
relocated much of our labor intensive manufacturing functions to our three
low-cost Mexican manufacturing facilities and today over half of all our
manufacturing labor hours are performed at our Mexican facilities. In
addition, we consistently seek to rationalize manufacturing, warehousing
and customer service operations to centralized facilities wherever
possible. For example, we are proceeding with our previously announced plan
to centralize our European Professional Dental segment operations at our
Hawe Neos facility in Bioggio, Switzerland.

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. We regularly evaluate
the incremental business opportunities inherent in dental and orthodontic
visits, and we have continuously expanded our product offerings. For
example, through acquisitions, we have introduced chair covers, barrier
products, infection prevention products and disposable air/water syringes
in an effort to expand the breadth of products that we sell to dentists and
orthodontists.

Expand the Marketplace. We seek to expand the marketplace through
product innovation. We believe that our technological leadership enables us
to introduce new opportunities into the dental and orthodontic markets. Our
focused sales and marketing effort educates the dental community and
cultivates a foundation for demand based on the benefits derived from new
products. For example, we believe our aesthetic brackets have increased the
acceptability among adults seeking realignment of teeth for function 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 and follow a well established and disciplined approach. We pursue
acquisition opportunities that:

- enhance our sales growth;

- offer complementary product lines;

- expand our geographic reach; and

- offer us access to new markets.

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Since 1993, we have made 27 acquisitions in the United States and abroad.
Since the beginning of fiscal 2001, we have completed five 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.

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.

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 Proceedings and Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations of 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
conditions; 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.

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. Through
September 30, 2002 our business segments were Professional Dental, Orthodontics
and Infection Prevention.

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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, 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; and disposable infection prevention
products for dental equipment.

Our Professional Dental products are primarily manufactured by Kerr
Corporation and its affiliates such as Sybron Canada Limited and Hawe Neos.
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(R)and Tytin(R) 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. Most recently, we acquired, in February 2002,
certain assets of Surgical Acuity, Inc., a Wisconsin manufacturer of
magnification lenses and fiberoptic lighting systems. For a more complete
description of our acquisitions during fiscal years 2002, 2001 and 2000, please
see Note 16 to our consolidated financial statements in Item 8 of this Annual
Report.

The Professional Dental business segment accounted for approximately 54.6%,
52.5% and 50.8% of our consolidated net sales in 2002, 2001 and 2000,
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 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 the first
quarter of 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 2002, 2001 and 2000, please see Note 16 to our
consolidated financial statements in Item 8 of this Annual Report.

5

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 microscopic 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.

The Orthodontics business segment accounted for approximately 38.8%, 40.6%
and 42.6% of our consolidated net sales in 2002, 2001 and 2000, respectively.

Infection Prevention. Products in our Infection Prevention business
segment include high level disinfectants and sterilants, enzymatic cleaners and
instrument care solutions for medical and dental instruments, surface
disinfectant products and antimicrobial skincare products for medical and dental
use. These products are manufactured or supplied by our Metrex Research
Corporation subsidiary, which we created in 1995 in connection with the
acquisition of the high level disinfectant business of Strice Ltd. Metrex
expanded its product line through the acquisition of the businesses of
Micro-Aseptic Products, Inc. (a supplier of surface disinfectants) in 1996 and
Viro Research International, Inc. (a supplier of skin antisepsis products) in
1998, and through the acquisition of the high level disinfectant/sterilant
business of Cottrell Ltd. in 1998. In 1999, we acquired the business of Alden
Scientific, Inc. and its sister corporation Gulfstream Medical, Inc., both
manufacturers of reagents and related infection prevention products used to
disinfect kidney dialysis machines. Alden also manufactures chemical detecting
reagents. In the third quarter of 2001, Metrex acquired from OBF Technologies,
Inc. ("OBF"), a product line used in the management of biohazardous and
hazardous liquid medical waste. For a more complete description of our
acquisitions during fiscal years 2002, 2001 and 2000, please see Note 16 to our
consolidated financial statements in Item 8 of this Annual Report.

The Infection Prevention business segment accounted for approximately 6.6%,
6.9% and 6.6% of our consolidated net sales in 2002, 2001 and 2000,
respectively.

NEW PRODUCTS

Our business segments devote considerable 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 Take
1(R) Bite brand registration material, Point 4(TM) Flowable brand composite,
Solo Plus self etch primer, Demetron LC brand low cost curing light, 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 Damon(TM) 2
brand self-ligating bracket, the Synthesis brand straight wire appliance and the
Titanium Orthos(R) brand orthodontic bracket. Metrex consistently looks for new
products to add to its line of infection prevention products. In 2001, Metrex
added the Clearline(R) brand water line filtration system and VioNexus(TM) brand
hand wash.

END MARKETS AND DISTRIBUTION

Products in the Professional Dental business segment, including dental
related infection prevention products, are sold both domestically and
internationally through dental distributors. Kerr has 70 sales personnel in the
United States and 82 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
activities create demand for our new products that make
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dentists more efficient. The sales growth resulting from this demand for new
products is augmented by modest growth in the domestic market for traditional
dental consumables. We also 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. Our Professional Dental companies are well
positioned to take advantage of such development due to their extensive
experience in selling internationally and the quality of their existing
international dealer network.

Products in the Orthodontics business segment are marketed by approximately
101 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 believe that the
international market for orthodontics products presents a growth opportunity as
interest in orthodontics for cosmetic reasons grows worldwide. As with other
health care markets, over the past few years the orthodontics market has
experienced a consolidation of provider practices and the expansion of
management organizations and buying groups, which are intended to bring
administrative efficiencies and buying power to orthodontic practices. We
believe Ormco is well positioned to compete in this environment 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 to end-users
and through distributors (which had previously been handled primarily by our
Professional Dental business segment). The endodontic team has approximately 18
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.

Through September 30, 2002, products in the Infection Prevention business
segment were marketed primarily to the alternate health care market in the
United States and Canada by 22 direct sales and independent sales personnel
(including two in Canada) and by independent manufacturers representatives and
distributors. The Infection Prevention business segment also used the
Professional Dental sales force to penetrate the dental market. The sales and
marketing focus for the Infection Prevention business is on core product growth
and product development. We believe revenue growth will come primarily from
dental offices, clinics and teaching hospitals. By integrating this segment into
our Professional Dental segment in 2003, we will be able to utilize our combined
sales force to compete more efficiently.

We believe we are well positioned to take advantage of the opportunities
that exist to grow our business. Opportunities that apply to all of our business
segments 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.

INTERNATIONAL

In addition to the United States, products in our Professional Dental
business segment are manufactured at facilities in Canada, Switzerland, 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.

Prior to 1998, products in our Orthodontics business segment were sold
directly to end-users by Ormco's sales force in Australia, New Zealand, Canada,
Germany, Switzerland, Japan and Mexico and by exclusive distributors in key
European markets such as Italy, France and Spain. Since 1998, Ormco acquired its
distributor in France, the Ormodent group of companies, and now services the
French market directly, and has also reacquired its distribution rights in the
U.K., Spain, Austria and Belgium markets, which markets it also now services
directly.

7

Products in our Infection Prevention business segment are manufactured in
the United States and are distributed internationally, primarily in Canada,
where they are sold by independent sales representatives. These products are
sold in other countries primarily through distributors and agents.

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

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 ours. 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 Corporation and its affiliate ESPE GmbH & Co.,
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 Unitek (a subsidiary of 3M Corporation), GAC
Orthodontics (a subsidiary of Dentsply) and American Orthodontics. In the
Infection Prevention business segment, our principal competitive advantages
include the breadth of our product lines, price and our product quality. Our
competitors include Johnson and Johnson, Steris Corporation and Ecolab, Inc.

RESEARCH AND DEVELOPMENT

We have a number of research and development programs in our various
business segments, which we consider to be of importance in maintaining our
market positions. We spent approximately $10.4 million, $9.0 million and $8.8
million on research and development in 2002, 2001 and 2000, respectively.

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

EMPLOYEES

Our companies employed approximately 3,900 people at September 30 2002,
approximately 173 of whom are covered by collective bargaining agreements. We
believe our employee relations are generally good. In the United States, Kerr's
and Metrex's 173 hourly employees at the Romulus, Michigan facility are members
of the UAW. Our current labor contract for both Kerr and Metrex continues
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.

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(R), Hawe(R),
Herculite(TM), Prodigy(R), Tytin(R), Demetron(R), Ormco(R), Straight-Wire(R),
inspire!(R), AOA(TM), Damon(TM), Diamond(R), Metrex(R)and Metricide(R)
trademarks, each of which we believe to have widespread name brand recognition
in its 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.

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, other than custom manufacturing facilities, that are engaged in the
manufacturing of Class II medical devices as defined by the European Medical
Device Directives, are ISO 9000 certified. 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 the
British Standards Institute, our ISO certifying body, 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

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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 reaction) reporting.

All of our dental and orthodontic treatment products and our high level
disinfectants and sterilants sold in the United States are regulated as Class I
or Class II medical devices by the FDA.

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. Certain groups
opposed to the use of amalgams have filed a lawsuit against the American Dental
Association ("ADA") and the California Dental Association ("CDA") alleging,
among other things, the ADA and CDA have issued rules preventing dentists from
discussing mercury with their patients.

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
10

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 anti-microbial 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 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.

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 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.

RISKS ATTENDANT TO FOREIGN OPERATIONS

We conduct our businesses in numerous foreign countries and as a result are
subject to risks of fluctuations in exchange rates of various foreign currencies
and other risks associated with foreign trade. For the years 2002, 2001 and
2000, our net sales outside the United States accounted for approximately 41%,
39%, 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 Risk for further information concerning the
possible effects of foreign currency fluctuations and currency hedges intended
to mitigate their impact.

11

RELIANCE ON KEY DISTRIBUTORS

A substantial portion of our sales is made through major independent
distributors. While no single distributor accounted for more than 10% of our
sales, we believe that the loss of either Henry Schein, Inc. or Patterson Dental
Co., the only distributors who account for more than 5% of our professional
dental and infection prevention sales, 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 continue to 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.

CONTRIBUTION AGREEMENT

Pursuant to the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution providing for the spin-off, immediately prior to
the spin-off, all of the capital stock of 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 the dental business, was
transferred by Apogent to us along with certain other assets relating to the
dental business. Under this agreement, prior to such transfer, SDM settled all
intercompany loans and advances with Apogent by way of a non-cash dividend of
$78.2 million, and a cash dividend to Apogent of $67.9 million, representing the
difference between $375 million and the actual allocation of Apogent bank debt
to SDM as of the spin-off.

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 its 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.

TAX INDEMNIFICATION AGREEMENT

The Tax Sharing and Indemnification Agreement governs the allocation of
certain tax responsibilities between Apogent and its subsidiaries on the one
hand and us and our subsidiaries on the other hand after the spin-off. The Tax
Indemnification Agreement defines each company's rights and obligations with
respect to deficiencies and refunds of federal, state and other taxes relating
to the business operations for tax years (or portions thereof) ending on or
prior to the spin-off and with respect to certain tax attributes of the
companies
12

after the spin-off. The Tax Indemnification Agreement also specifies the
parties' respective obligations in connection with any audit or investigation
concerning any federal, state or other taxes or in the event the spin-off is
subsequently determined not to qualify as tax-free for U.S. federal income tax
purposes.

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.

We consider our plants and equipment to be well maintained and suitable for
their purposes. We have, from time to time, expanded and will continue to expand
facilities as the need arises. 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.

Our 76,000 square foot San Diego, California facility is scheduled to be
sold in January of 2003. See Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations "Restructuring Charges."

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

13

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 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.

15

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since our inception, we have not paid any 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. We have no current intention to pay cash
dividends on our Common Stock.

Based upon record ownership as of December 2, 2002, the number of record
holders of our Common Stock (excluding participants in securities position
listings) is 649.

Our Common Stock trades on the New York Stock Exchange ("NYSE") under the
symbol "SYD." The market information set forth below for our two most recent
fiscal years is based on NYSE sales prices. Prior to the spin-off there was no
public trading market for our stock. Commencing November 28, 2000, our Common
Stock began to trade on the New York Stock Exchange on a "when issued" basis
under the symbol "SYD." "Regular way" trading began on December 12, 2000, the
day after the spin-off was effected. The market information set forth below for
fiscal year 2001 is for the period from November 28, 2000 through September 30,
2001.

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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, 2002.
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.

- ---------------

(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) In the third quarter of fiscal 2002, we changed our inventory costing method
from the LIFO method to the FIFO method. Previously reported results have
been restated to reflect the retroactive application of this accounting
change.

(c) Represents an allocation of Apogent's corporate office, general and
administrative expenses.

(d) The extraordinary item in our fiscal year ended 2002 represents the write
off of the associated deferred financing fees of $2.7 million (net of tax)
related to the termination of our prior credit agreement and termination
costs of approximately $1.0 million (net of tax) primarily due to a
prepayment penalty on our terminated tranche B loan. The extraordinary item
of approximately $0.5 million (net of tax) in the prior fiscal year ended
2001 represents the write off of the unamortized financing fees as a result
of the termination of Apogent's credit agreement due to our spin-off from
Apogent.

(e) Includes restructuring charges of approximately $3.7 million ($2.4 million
after tax) in 2002 for the consolidation of our European Professional Dental
segment 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 business segments; a
$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., and certain adjustments to the
1998 restructuring; and restructuring reserve charges (relating to a
restructuring charge and merger, transaction and integration expenses
associated with the merger with LRS Acquisition Corp.) of $25.1 million
($17.1 million after tax) in 1998.

17

(f) Earnings per share data for the three years ended September 30, 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. This number of outstanding shares was
presumed to be outstanding for each fiscal year 1998 to 2000. Diluted
earnings per share for the years ended September 30, 1998 to 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, 1998 to 2000 meaningless.

(g) The reduction in paid-in capital since September 30, 2000 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.

18

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.

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. Through
September 30, 2002 our business segments were Professional Dental, Orthodontics
and Infection Prevention.

During the quarter ended June 30, 2002, we changed our method of accounting
for our domestic inventories from the last-in, first-out (LIFO) method to the
first-in, first-out (FIFO) method. Our historical financial statements have been
adjusted for all relevant prior periods in accordance with Accounting Principles
Board ("APB") Opinion No. 20, "Accounting Changes" to reflect this change in
method of inventory accounting. See Note 1(c) to our consolidated financial
statements contained in Item 8 of this Annual Report.

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 2002 and 2001 increased by 3.9% in both years from
corresponding prior year periods. Including restructuring charges, operating
income decreased in 2002 by 7.4% from the prior year period, and increased by
3.9% in 2001 over the prior year period. Excluding the restructuring charges,
operating income in 2002 and 2001 decreased by 5.3% and 4.1%, respectively, from
the prior year periods.

For the fiscal year ended September 30, 2002, domestic sales remained
relatively flat over the prior fiscal year while international sales grew 10.2%
over the prior fiscal year. International sales were positively impacted by the
weakening of the U.S. dollar. Without currency effects, international sales
would have increased by 8.7%.

Net sales and operating income in 2002 were negatively impacted by our
decision to discontinue our tradition of quarterly incentives to our dental and
medical distribution partners. Historically, our quarterly promotions provided
incentives for dealers to make larger purchases at the end of each quarter. We
elected in the fourth quarter of 2002 to discontinue those promotions in an
effort to more closely align the end-user demand for our products with our
dealer purchases. We believe these actions addressed a number of issues that
were negatively impacting our performance and will enable us to profitably grow
the business going forward.

19

YEAR ENDED SEPTEMBER 30, 2002 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 2001

NET SALES

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 $20.6 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 $8.5 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).

Infection Prevention. Increased net sales in the Infection Prevention
segment resulted primarily from the net sales of products from an acquired
company (approximately $2.1 million) and was partially offset by decreased net
sales of existing products (approximately $2.0 million).

GROSS PROFIT

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 $10.5 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) and (f) a favorable product mix (approximately $0.6
million). The increase in gross profit was partially offset by: (a) a decrease
in the net sales of existing products (approximately $5.1 million), (b)
inventory reserve adjustments (approximately $0.4 million, of which
approximately $0.3 million is related to a standard cost adjustment, and an
increase in obsolescence of approximately $0.3 million, partially offset by
approximately $0.1 million due to physical inventory adjustments, and a decrease
in royalty expense of approximately $0.1 million) and (c) margins lost from the
prior year's exited products lines (approximately $0.4 million).
20

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)
inventory adjustments (approximately $0.4 million, of which approximately $0.7
million is related to physical inventory adjustments, approximately $0.5 million
due to an increase in royalty expense, partially offset by an decrease in
obsolescence of approximately $0.7 million, and approximately $0.1 million
decrease in standard cost revisions). 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) and (d)
margins relating to net sales of products from an acquired company
(approximately $0.1 million).

Infection Prevention. Decreased gross profit in the Infection Prevention
segment resulted primarily from: (a) decreased net sales of existing products
(approximately $0.9 million) and (b) inventory adjustments (approximately $0.6
million, of which approximately $0.9 million is due to an unfavorable physical
inventory adjustment, an increase in standard cost of approximately $0.1
million, partially offset by decrease of approximately $0.3 million obsolescence
adjustment, and a decrease in royalty expense of approximately $0.1 million).
The decrease in gross profit was offset by margins relating to the net sales of
products from an acquired company (approximately $1.0 million).

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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 $8.4 million), (b) increased
restructuring charges (approximately $3.3 million), (c) increased selling and
marketing expenses (approximately $1.1 million), (d) increased amortization
expense of goodwill and other intangible assets (approximately $0.8 million) and
(e) increased research and development expenses (approximately $0.3 million).
The increase in selling, general and administrative expenses was partially
offset by a decrease in general and administrative expenses (approximately $1.0
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). Partially offsetting the decreased selling, general and administrative
expenses were: (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).

Infection Prevention. Increased selling, general and administrative
expenses in the Infection Prevention segment resulted primarily from: (a)
increased selling and marketing expenses (approximately $0.8 million), (b)
increased amortization expense of goodwill and other intangible assets
(approximately $0.3 million), (c) expenses related to an acquisition
(approximately $0.1 million) and (d) increased research and

21

development expenses (approximately $0.1 million). The increase in selling,
general and administrative expenses was offset by favorable foreign currency
fluctuations (approximately $0.1 million).

OPERATING INCOME

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.

LOSS ON DERIVATIVE INSTRUMENTS

Approximately $70.0 million of our then-existing interest rate swaps could
not be re-assigned to our new credit facility entered into on June 6, 2002 and
thus were terminated. Accordingly, we recorded a loss on derivative instruments
of approximately $3.8 million (or approximately $2.3 million, net of tax) in
other income (expense), which represents the fair value of the swaps at the
termination date. Additionally, we had to re-assign the remaining interest rate
swaps as a result of the specificity of our hedge documentation relating to the
hedged item. Accordingly, a non-cash loss on derivative instruments of
approximately $3.2 million (or approximately $2.0 million, net of tax),
representing the fair value of the remaining swaps at the date of the
refinancing, was reclassified from accumulated other comprehensive income (loss)
and recorded in other income (expense) to recognize the loss. However, these
swaps were continued and were simultaneously re-assigned to the new credit
facility. The change in the fair value of these re-assigned swaps from the
refinancing date to September 30, 2002 has been recorded in accumulated other
comprehensive income (loss).

INCOME TAXES

Taxes on income in 2002 were $23.0 million, a decrease of $2.5 million from
the corresponding 2001 period. The decrease resulted primarily from lower
taxable income, as well as a decrease in the effective tax rate to 39.0% for
2002 (before a one time $0.3 million tax charge related to the 2002
restructuring), as compared to 40.1% for the corresponding 2001 period. The 2002
effective tax rate including the one time charge was 39.5%.

INCOME BEFORE EXTRAORDINARY ITEM

As a result of the foregoing, we had income before extraordinary item of
$35.3 million in 2002, as compared to income before extraordinary item of $38.1
million in the corresponding 2001 period.

EXTRAORDINARY ITEM

In the third quarter of 2002, we terminated our prior credit agreement and
wrote off the associated deferred financing fees of $2.7 million (net of tax)
and had termination costs of approximately $1.0 million (net of tax) primarily
due to a prepayment penalty on our terminated tranche B term loan. The
extraordinary

22

item of approximately $0.5 million (net of tax) in the prior fiscal year
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.

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.

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.

YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 2000

NET SALES

Overall Company. Net sales for the twelve months ended September 30, 2001
increased by $16.4 million or 3.9% from the corresponding 2000 period. After
adjusting for the impact of the strengthening U.S. dollar, sales would have
increased by $26.7 million or 6.3% from the corresponding 2000 period.

Professional Dental. Increased net sales in the Professional Dental
segment resulted primarily from: (a) the net sales of products from acquired
companies (approximately $10.1 million), (b) net sales of new products
(approximately $8.5 million), (c) increased net sales of existing products
(approximately $4.1 million) and (d) reduced rebate expense (approximately $0.7
million). The increase in net sales was partially offset by: (a) unfavorable
foreign currency fluctuations (approximately $4.9 million), (b) the loss of the
net sales of the prior year's exited product lines (approximately $2.4 million)
and (c) decreased shipping and handling fees (approximately $0.2 million).

Orthodontics. Decreased net sales in the Orthodontics segment resulted
primarily from: (a) decreased net sales of existing products (approximately $7.8
million), (b) unfavorable foreign currency fluctuations (approximately $5.3
million) and (c) the loss of the net sales of the prior year's exited product
lines (approximately $2.9 million). The decrease in net sales was partially
offset by: (a) net sales of new products (approximately $13.0 million) and (b)
the net sales of products from acquired companies (approximately $1.1 million).

Infection Prevention. Increased net sales in the Infection Prevention
segment was due primarily to: (a) increased net sales of existing products
(approximately $1.3 million) and (b) the net sales of products from an acquired
company (approximately $1.1 million).

23

GROSS PROFIT

Overall Company. Gross profit for the twelve months ended September 30,
2001 increased by $9.3 million or 3.9% from the corresponding fiscal 2000
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 $6.1 million), (b) unit volume
relating to new products (approximately $5.0 million), (c) increased net sales
of existing products (approximately $2.4 million), (d) a decrease in
restructuring charge (approximately $1.8 million), (e) reduced rebate expense
(approximately $0.7 million) and (f) inventory reserve adjustments
(approximately $0.7 million of which approximately $0.6 million is related to a
standard cost adjustment, and approximately $0.4 million is due to physical
inventory adjustments, partially offset by an increase in obsolescence of
approximately $0.2 million and an increase in royalty expense of approximately
$0.1 million). The increase in gross profit was partially offset by: (a)
unfavorable manufacturing variances (approximately $4.4 million), (b)
unfavorable foreign currency fluctuations (approximately $2.6 million), (c)
margins lost from the prior year's exited products lines (approximately $1.2
million) and (d) an unfavorable product mix (approximately $0.3 million).

Orthodontics. Decreased gross profit margins in the Orthodontics segment
were primarily due to: (a) unfavorable foreign currency fluctuations
(approximately $5.3 million), (b) decreased sales volume of existing products
(approximately $4.4 million), (c) inventory adjustments (approximately $2.8
million, due to an increase in royalty expense of approximately $1.7 million, an
increase in obsolescence of approximately $1.5 million, and approximately $0.3
million increase in standard cost revisions partially offset by approximately
$0.7 million related to physical inventory adjustments, (d) an unfavorable
product mix margins (approximately $1.9 million) and (e) margins lost from the
prior year's exited products (approximately $1.6 million). The decreased gross
profits were partially offset by: (a) unit volume relating to new products
(approximately $7.8 million), (b) a decrease in restructuring charge
(approximately $4.0 million), (c) favorable manufacturing variances
(approximately $1.0 million) and (d) margins relating to net sales of products
from acquired companies (approximately $0.5 million).

Infection Prevention. Gross profit in the Infection Prevention segment
increased due to: (a) a decrease in restructuring charge (approximately $1.5
million), (b) increased volume relating to existing products (approximately $1.0
million), (c) the margins relating to the net sales of products from an acquired
company (approximately $0.6 million), (d) inventory adjustments (approximately
$0.4 million, of which approximately $0.5 million is due to a favorable physical
inventory adjustment and a decrease in standard cost of approximately $0.2
million, partially offset by a $0.3 million obsolescence adjustment), (e)
reduced manufacturing variance costs (approximately $0.2 million) and (f) volume
related to new product sales (approximately $0.1 million).

24

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Overall Company. Selling, general and administrative expenses for the
fiscal year ended September 30, 2001 increased by $5.6 million or 3.9% from the
corresponding fiscal 2000 period.

Professional Dental. Increased selling, general and administrative
expenses in the Professional Dental segment resulted primarily from: (a)
increased general and administrative expenses (approximately $3.0 million), (b)
expenses related to acquisitions (approximately $2.3 million) and (c) increased
amortization expense of goodwill and other intangible assets (approximately $1.1
million). These increases were partially offset by: (a) favorable foreign
currency fluctuations (approximately $2.7 million), (b) decreased selling and
marketing expenses (approximately $0.1 million) and (c) decreased research and
development expenses and other 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 $2.6 million), (b) increased general and
administrative expenses (approximately $1.3 million) and (c) expenses related to
acquisitions (approximately $0.1 million). Partially offsetting these increases
were: (a) favorable foreign currency fluctuations (approximately $2.6 million),
(b) decreased amortization expense of goodwill and other intangible assets
(approximately $0.5 million) and (c) a decrease in restructuring charges
(approximately $0.4 million).

Infection Prevention. Increased selling, general and administrative
expenses in the Infection Prevention segment resulted primarily from: (a)
increased general and administrative expenses (approximately $1.0 million), (b)
increased selling and marketing expenses (approximately $0.7 million) and (c)
increased amortization expense of goodwill and other intangible assets
(approximately $0.1 million). Partially offsetting these increases was a
decrease in restructuring charges (approximately $0.3 million).

OPERATING INCOME

As a result of the foregoing, operating income for 2001 increased by 3.9%
or $3.7 million over operating income for the corresponding 2000 fiscal period.

INTEREST EXPENSE

Interest expense was $33.5 million in 2001, an increase of $7.6 million
from the corresponding 2000 period. The increase resulted from a higher average
debt balance and higher average interest rates on our credit facility, primarily
due to the December 11, 2000 spin-off. See Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations "Liquidity and Capital
Resources" below.

25

INCOME TAXES

Income taxes in 2001 were $25.5 million, a decrease of $3.1 million from
the corresponding 2000 period. The decrease resulted primarily from lower
taxable income, as well as a decrease in the effective tax rate to 40.1% for
2001 as compared to 40.5% for the corresponding prior year period.

INCOME BEFORE EXTRAORDINARY ITEM

As a result of the foregoing, we had income before extraordinary item of
$38.1 million in 2001, as compared to net income of $42.1 million in the
corresponding prior year period.

EXTRAORDINARY ITEM

Due to the spin-off of SDS, Apogent terminated its credit agreement and
wrote off the associated deferred financing fees. This resulted in an after tax
write-off of $0.5 million that was allocated to us.

NET INCOME

As a result of the foregoing, we had net income of $37.6 million in 2001,
as compared to net income of $42.1 million in the corresponding prior year
period.

EARNINGS PER SHARE

Basic earnings per share for the year ended September 30, 2001 was $1.05
per share, while diluted earnings per share was $1.01 per share. For the year
ended September 30, 2000, basic earnings per share of $1.20 was computed using
the 35,108,649 shares outstanding as of the date of the spin-off on December 11,
2000. Diluted earnings per share for the year ended September 30, 2000 has been
omitted as none of our stock options existed prior to the date of the spin-off
and any calculation of diluted earnings per share would not be meaningful.

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 $0.5 million in 2001 due to additional
amortization from the step-up of assets, goodwill and intangibles recorded from
the various acquisitions, as well as routine capital expenditures.

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.

- Intangible Assets -- Intangible assets, other than goodwill, are recorded
at cost and are amortized, using the straight-line method, over their
estimated useful lives. Goodwill (excess of cost over the net asset value
of acquired businesses) recorded prior to June 30, 2001, is amortized
over 5 to 40 years; proprietary technology, trademarks, and other
intangibles are amortized over 7 to 40 years, 9 years, and 3 to 17 years,
respectively. Goodwill recorded subsequent to June 30, 2001 is not being
amortized to earnings, but is to be reviewed for impairment on an annual
basis in accordance with the implementation of the Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 142 "Goodwill and Other Intangible Assets".

26

- Revenue Recognition -- We recognize revenue upon shipment of products,
when the risks and rewards of ownership are passed, when persuasive
evidence of a sales arrangement exists, the price to the buyer is fixed
and determinable and collectability of the sales price is reasonably
assured. A large portion of our sales of Professional Dental products and
Infection Prevention 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. Additionally, we accrue rebates based upon our various pricing
programs. These rebates are accounted for as a reduction of revenue. The
allowance for doubtful receivables is reviewed and adjusted periodically.
Accounts that are judged to have a collection uncertainty are reserved
for, in part or in total, based on management's estimate of the
collectable balance.

- Inventories -- Periodically we review our inventory for potentially
excess and/or obsolete items by comparing the historical demand to the
expected future demand and adjust our obsolescence reserves accordingly.
In addition, standard costs are updated annually to reflect changes in
our inventory costs. If circumstances change (e.g., unexpected shifts in
market demand) there could be a material impact on the net realizable
value of the inventory.

- Pension and Other Postretirement Benefits -- Various assumptions
including, but not limited to, discount rates, average medical and
compensation percentage increases and the expected long-term rate of
return on assets are used in the determination of pension liabilities and
assets. We use professional actuaries to assist in calculating our
pension and postretirement healthcare assets, liabilities and benefit
expense.

- Derivative Financial Instruments -- We use derivative financial
instruments to manage our foreign currency, interest rate exposures, and
certain net investments. We do 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 our 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 counterparties 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 inversely 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 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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," and SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS
No. 142 requires that goodwill no longer be amortized to earnings, but instead
reviewed for impairment. Under SFAS No. 142, the amortization of goodwill ceases
upon adoption of the statement and is effective for fiscal years beginning after
December 15, 2001. In all cases, the provisions of SFAS No. 142 shall be
initially applied at the beginning of a fiscal year.

We have historically amortized our goodwill and other intangible assets
over their estimated useful lives. Beginning with the adoption of SFAS No. 142,
we will cease amortizing our goodwill and certain intangible assets as defined
in SFAS No. 142. We will adopt SFAS No. 142 as of the beginning of fiscal year
2003 (i.e.

27

October 1, 2002). We recorded amortization expense of goodwill in the amount of
$9.5 million and $8.4 million for the years ended September 30, 2002 and 2001,
respectively. Upon adoption of SFAS No. 142, amortization of goodwill and
certain intangible assets will not be recorded in future periods.

Further, to the extent an intangible asset is identified as having an
indefinite useful life, we will be required to test the intangible asset and
goodwill for impairment in accordance with the provisions of SFAS No. 142 within
the first interim period. Any impairment loss will be measured as of the date of
the adoption and recognized as the cumulative effect of a change in accounting
principle. Impairment will first be assessed by identifying our reporting units
and determining the carrying value of each reporting unit by assigning the
assets and liabilities, including the existing goodwill and intangible assets to
those reporting units, and comparing the fair value of each reporting unit to
the reporting unit's carrying amount. To the extent that the carrying amount of
each reporting unit exceeds its fair value, impairment will be measured as the
amount by which the reporting unit's net assets and liabilities (recorded and
unrecorded) exceed its fair value. We have not fully determined the effect of
adopting SFAS No. 142.

SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. We are required and plan to adopt
the provisions of SFAS No. 143 in the quarter ending December 31, 2002. We
believe the adoption of SFAS No. 143 will not have a material impact on our
financial position, results of operations, or cash flows.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes both SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a segment of a business
(as previously defined in that Opinion). SFAS No. 144 retains the fundamental
provisions in SFAS No. 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with SFAS No.
121. SFAS No. 144 retains the basic provisions of Opinion 30 on how to present
discontinued operations in the income statement but broadens that presentation
to include a component of an entity (rather than a segment of a business).
Unlike SFAS No. 121, an impairment assessment under SFAS No. 144 will never
result in a write-down of goodwill. Rather, goodwill is evaluated for impairment
under SFAS No. 142.

We are required to adopt SFAS No. 144 no later than our first fiscal year
beginning after December 15, 2001, and will adopt its provisions in the quarter
ending December 31, 2002. We do not expect the adoption of SFAS No. 144 for
long-lived assets held for use to have a material impact on our consolidated
financial statements because the impairment assessment under SFAS No. 144 is
largely unchanged from SFAS No. 121. The provisions of SFAS No. 144 for assets
held for sale or other disposal generally are required to be applied
prospectively after the adoption date to newly initiated disposal activities.
Therefore, we cannot determine the potential effects that adoption of SFAS No.
144 will have on our consolidated financial statements.

In April 2002, the 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 requirement 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, with earlier adoption encouraged. We expect the only impact of
adopting SFAS No. 145 to be the reclassification of current year and prior year
extraordinary losses to interest expense and income taxes.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are
28

associated with a restructuring, discontinued operations, plant closing, or
other exit or disposal activities. SFAS No. 146 is effective prospectively for
exit or disposal activities initiated after December 31, 2002, with earlier
adoption encouraged. As the provisions of SFAS No. 146 are required to be
applied prospectively after the adoption date, we cannot determine the potential
effects that adoption of SFAS No. 146 will have on our consolidated financial
statements.

ACQUISITIONS

As discussed in Item 1 -- Business "New Products," 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 27 acquisitions
between 1993 and 2002. Acquisitions completed since the beginning of fiscal 2001
are as follows:

These acquisitions are consistent with our strategy of acquiring product
lines that can be manufactured in existing facilities, sold through existing
sales and distribution networks, or both. 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

RESTRUCTURING CHARGES

Our results for fiscal 2002 include restructuring charges of approximately
$3.7 million ($2.4 million after tax) consisting primarily of severance and
termination costs associated with the termination of the employment of 71
employees that were employed at certain of our European facilities, as a result
of the consolidation of those European facilities into our Hawe Neos facility in
Switzerland. Of the $3.7 million restructuring charges, approximately $3.1
million are cash charges related to severance and contractual obligations, $0.3
million is a cash charge for an additional potential tax liability included in
income taxes payable, while the balance of approximately $0.3 million are
non-cash charges. We expect to complete the majority of the 2002 restructuring
plan by the 2003 fiscal year end.

Our results for fiscal 2001 include restructuring charges 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, as a result of the closing of this 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 our Glendora, California
facility. The proceeds from the planned sale (January 2003) of the San Diego
manufacturing facility are expected to offset the amount of the restructuring
charge. We will use the proceeds from the sale to pay down debt and reduce
interest charges.

29

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, $1.7 million and $0.6 million in the Orthodontics,
Professional Dental and Infection Prevention 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.

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.

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

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

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

30

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

- ---------------

(a) Amount represents the 2002 restructuring charge for severance and
termination costs associated with the 71 employees primarily located at
several facilities throughout Europe whose employment we plan to terminate
as a result of the 2002 European restructuring plan. The 2001 restructuring
charge represents severance and termination costs associated with the 63
employees located at the Ormco San Diego facility whose employment Ormco
terminated as a result of the 2001 restructuring plan. As of September 30,
2002, all of the employment terminations were completed under the 2001
restructuring plan. The closing of the facility was completed by June 30,
2002. The proceeds from the planned sale of the Ormco San Diego facility
are expected to offset the costs of closing the facility. The 2000
restructuring charge 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. The 1998 restructuring charge 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) Amount represents $0.3 million in additional potential tax liability
included in income taxes payable in 2002. The 1998 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

Substantial portions of our sales, income and cash flows are 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 the
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.

31

From time to time we employ currency hedges to mitigate the impact of
foreign currency fluctuations. 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 collars 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; however,
a currency gain of $0.1 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 2002, the fair value of the cross
currency debt swap transaction gain (net of income tax) included in the
cumulative translation adjustments was $0.3 million.

In September 2001, our foreign currency exposure was hedged to protect
against currency fluctuations in fiscal 2002 by securing monthly zero cost
collars with a notional amount of approximately $36.6 million for the euro and a
notional amount of approximately $5.5 million for the Japanese yen. No currency
gain or loss was recognized in the consolidated statement of income for the year
ended September 2001; however, a currency loss of $0.03 million (net of income
tax), representing the fair market value of the zero cost collars, was recorded
in accumulated other comprehensive income (loss), a component of stockholders'
equity. Additionally, in September 2001, we entered into a cross currency debt
swap transaction to hedge our net investment in Hawe Neos. The agreement entered
into on September 20, 2001, with an effective date of October 16, 2001, is a
contract to exchange a U.S. dollar principal amount of $45 million in exchange
for a Swiss franc principal amount of 71.7 million at the termination date of
October 16, 2006. For fiscal year 2001, the fair value of the cross currency
debt swap transaction gain (net of income tax) included in the cumulative
translation adjustments was $0.6 million.

As a result of terminating the cross currency debt swap transaction to
hedge our net investment in Hawe Neos we recognized a loss to the translation
adjustment, a component of accumulated 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 accumulated other comprehensive
income (loss) until sale or upon complete or substantially complete liquidation
of our net investment in Hawe Neos.

Apogent, prior to the spin-off, had also employed currency hedges on our
behalf. In November 1999, Apogent decided to employ a series of foreign currency
options with a U.S. dollar notional amount of approximately $38.2 million at a
cost of approximately $0.9 million. These options were designed to protect SDS
from potential detrimental effects of currency movements associated with the
U.S. dollar versus the euro and Japanese yen in the second, third and fourth
quarters of fiscal 2000. In fiscal year 2000, euro options expiring on March 29,
2000 and June 28, 2000 were sold at a gain of $1.2 million and the Japanese yen
options expiring on March 29, 2000 and June 28, 2000 expired worthless.
Approximately $1.1 million of the euro options gain was allocated to SDS.
Options expiring September 26, 2000 were sold at a profit with a gain for SDS of
approximately $1.4 million. Allocations of gains and losses were based upon
SDS's exposure to the currencies hedged, relative to the consolidated Apogent
exposure. 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 for fiscal year 2003.

32

The following table sets forth our domestic sales and sales outside the
United States in 2002, 2001 and 2000. See also Note 19 to our consolidated
financial statements contained in Item 8 of this Annual Report.

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

Prior to the spin-off, our capital requirements arose principally from our
allocation of indebtedness incurred in connection with the permanent financing
for the 1987 acquisition of the predecessor to Apogent and subsequent
refinancings, obligations to pay rent under the Sale/Leaseback facility (as
defined herein), working capital needs, primarily related to inventory and
accounts receivable, capital expenditures, primarily related to purchases of
machinery, the purchase of various businesses and product lines in execution of
our acquisition strategy, payments to be made in connection with our
restructuring in 1998, and the periodic expansion of physical facilities.

We expect our future capital requirements to be similar to those prior to
the spin-off. We intend to fund our capital expenditure requirements, working
capital requirements, acquisitions, principal and interest payments, 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 lower revenues due to the slowing economy 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 New Credit
Facility (defined below), and access to capital markets will be sufficient to
satisfy our future 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, particularly with respect to our acquisition strategy, we would
have to raise additional capital in another manner or curtail our acquisition
strategy.

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 acquisitions continue at our historical pace, of which there can be
no assurance, we may require financing beyond the capacity of our New Credit
Facility (defined below). In addition, 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 facilities and the availability of
suitable acquisitions candidates at reasonable prices.

YEAR ENDED SEPTEMBER 30, 2002

Approximately $54.7 million of cash was generated from operating activities
in 2002, as compared to approximately $66.7 million from the same period of the
prior year. The approximate $12.0 million decrease in

33

cash flows from operations was primarily due to: (a) an increase in the net
change in inventories from the prior year period of approximately $12.5 million,
(b) a decrease in the net change in accrued payroll and employee benefits from
the prior year period of approximately $11.7 million, (c) a decrease in the net
change in accounts payable from the prior year period of approximately $7.7
million, (d) decreased earnings from the prior year period of approximately $6.0
million, (e) a decrease in the net change of income taxes payable from the prior
year period of approximately $4.5 million, (f) a decrease in the net change in
other assets and liabilities of approximately $2.5 million from the prior year
period, (g) a decrease in the provision for losses on doubtful receivables from
the prior year period of approximately $0.7 million, and (h) a decrease in the
net change in the loss (gain) on sales of property, plant and equipment from the
prior year period of approximately $0.5 million. The decrease in cash flows from
operations were partially offset by the following: (a) a decrease in the net
change in accounts receivable from the prior year period of approximately $13.6
million, (b) an increase in non-cash charges of approximately $6.9 million,
related to the termination of the previous credit facility, (c) a decrease in
the net change in prepaid expenses and other current assets from the prior year
period of approximately $5.4 million, (d) an increase in the net change in
deferred income taxes from the prior year period of approximately $2.7 million,
(e) an increase in inventory provisions from the prior year period of
approximately $1.1 million, (f) an increase in amortization expense of goodwill
and other intangible assets from the prior year period of approximately $1.1
million, (g) an increase in the net change in the restructuring reserve from the
prior year of approximately $1.1 million, (h) an increase in depreciation
expense from the prior year period of approximately $0.9 million, (i) an
increase in the net change in accrued interest of approximately $0.7 million
from the prior year period, (j) a tax benefit from issuance of our common stock
under our employee stock option plan of approximately $0.3 million recorded in
the fiscal 2002 period, and (k) an increase in amortization of deferred
financing fees from the prior year period of approximately $0.3 million.

Approximately $28.6 million of cash was used in investing activities in
2002, a decrease of approximately $40.0 million from the same period of the
prior year. The decrease was primarily due to: (a) the decrease in payments for
acquisitions from the prior year period of approximately $43.2 million and (b)
increased proceeds from the sales of property, plant and equipment from the
prior year of approximately $1.1 million, partially offset by: (a) an increase
in net payments for intangibles from the prior year period of approximately $3.0
million and (b) an increase in capital expenditures of approximately $1.3
million from the prior year period. In 2001, approximately $68.7 million of cash
was used in investing activities, an increase of approximately $28.7 million
from the same period in the prior year (primarily due to additional payments for
acquisitions from the prior year period of approximately $30.1 million,
increased capital expenditures from the prior year period of approximately $2.4
million, and lower proceeds from sales of property, plant and equipment from the
prior year period of approximately $0.5 million, partially offset by a decrease
in net payments for intangibles from the prior year period of approximately $4.3
million).

Approximately $24.7 million of cash was used in financing activities in
2002, a decrease of approximately $29.2 million from the approximately $4.5
million cash provided by financing activities in the prior year. The decrease
was primarily due to: (a) a decrease in the net loan proceeds of approximately
$179.6 million from the prior year period, (b) a decrease in net proceeds from
our underwritten stock offering of approximately $50.0 million from the prior
year period, (c) the increase in deferred financing fees from the prior year
period of approximately $6.5 million, (d) a prepayment penalty and termination
costs of approximately $5.3 million related to the refinancing, (e) the decrease
in capital contributions from Apogent from the prior year period of
approximately $4.6 million (as a result of the spin-off), and (f) a payment
related to the terminated cross-currency debt swap of approximately $1.5
million. The decrease in cash provided by financing activities was partially
offset by: (a) net proceeds from the sale of the senior subordinated notes of
$150.0 million, (b) the elimination of cash dividend payments to Apogent in
fiscal 2002 from the prior year period of approximately $67.9 million (as a
result of the spin-off) and (c) the net change in advances and loans to Apogent
from the prior year period of approximately $0.4 million (also as a result of
the spin-off). In 2001, the approximate $27.5 million increase in cash provided
by financing activities from the prior year period was primarily attributed to:
(a) the net proceeds from our underwritten stock offering of approximately $50.0
million, (b) the net change in advances and loans to Apogent from the prior year
period of approximately $20.6 million, (c) a net change in other financing
activities from the prior year period of approximately
34

$3.4 million and (d) an increase in cash received from the exercise of stock
options of approximately $1.3 million. The cash provided by financing activities
in 2001 were partially offset by: (a) a decrease in the capital contributions
from Apogent from the prior year period of approximately $16.8 million, (b) an
increase in loan activity from the prior year period of approximately $16.1
million, (c) an increase in the cash dividend payment to Apogent from the prior
year period of approximately $9.4 million and (d) the payment of deferred
financing fees related to the SDS Credit Facility of approximately $5.5 million.

CREDIT FACILITIES AND SENIOR SUBORDINATED NOTES

On June 6, 2002, we terminated our existing $450.0 million credit facility
and entered into a new $350.0 million syndicated credit facility for which
Credit Suisse First Boston is the administrative agent. The new credit facility
(the "New 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 Management, 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 is the
borrower under the Euro Tranche. In addition to the New Credit Facility, we
completed 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 the net 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 New Credit Facility is jointly and severally guaranteed by Sybron
Dental Specialties, Inc., the 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 New 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.

The New Credit Facility may be prepaid at any time without penalty except
for LIBOR and Euro-LIBOR breakage costs. Under the New 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 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 B Loan bears interest, at our option, at either (a) the
LIBOR rate, plus between 225 and 275 basis points, or (b) between 125 and 175
basis points plus the higher of (i) the rate from time to time publicly
announced by Credit Suisse First Boston as its prime rate, or (ii) the rate
which is 1/2 of 1% in excess of the federal funds rate, in each case as
determined on a quarterly basis according to the rating of the New Credit
Facility by Standard and Poor's and Moody's. The per annum initial interest rate
for the first six months was LIBOR, plus 250 basis points. As of September 30,
2002 the amount outstanding on the Term Loan B was $164.6 million. The average
interest rate at September 30, 2002 on the Term Loan B was 5.16% 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) between
75 and 150 basis points plus the higher of (i) the rate from time to time
publicly announced by Credit Suisse First Boston as its prime rate, or (ii) the
rate which is 1/2 of 1% in excess of the federal funds rate, 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 on the
Revolver for the first six months was LIBOR plus 225 basis points. The annual
commitment fee on the unused portion of the Revolver will very between 0.375% to
0.5% based on the quarterly leverage ratio. As of

35

September 30, 2002 the amount outstanding on the Revolver was $12.0 million. The
average interest rate at September 30, 2002 on the Revolver was 4.78%. 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, 2002, a total of $1.8 million in letters of credit was issued.
As of September 30, 2002 the amount available under the Revolver was $106.2
million.

The Euro Tranche bears interest, at our 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 will vary between 0.375% to 0.5% based
on the quarterly leverage ratio. As of September 30, 2002, there was no
outstanding balance under the Euro Tranche and the amount available was $30.0
million.

The New 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, and (vii) loans and investments, as well
as prohibitions on the payment of cash dividends to or the repurchase or
redemption of stock from stockholders. The New 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, 2002.

Prior to June 6, 2002, we had a credit facility that we entered into in
connection with the spin-off on December 11, 2000, which allowed for borrowings
up to $450.0 million from ABN AMRO Bank N.V. and certain other lenders. This
credit facility was composed of a $150.0 million five year tranche A term loan,
a $150.0 million seven year tranche B term loan, under which Kerr and Ormco were
borrowers, and a five year revolving credit facility up to $150.0 million, under
which Sybron Dental Management, Inc., was the borrower.

The tranche A term loan bore interest primarily at the adjusted interbank
offered rate for Eurodollar deposits plus 275 basis points. The tranche B term
loan bore interest primarily at the adjusted interbank offered rate for
Eurodollar deposits plus 375 basis points. Borrowings under the previous
revolving credit facility generally bore interest on the same terms as those
under the tranche A term loan, plus we paid a commitment fee on the average
unused portion of the revolving credit facility of 0.5%.

In connection with entering into our New 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.

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.

As a result of the terms of our New 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, 2002, we had three
interest rate swaps outstanding aggregating a notional

36

amount of $63.7 million. 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 the swap agreements, the rate
resets on the quarterly anniversary of the swap agreement dates until the swaps'
expiration dates. 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 swap agreement rates and
durations as of September 30, 2002 are as follows:

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 annual 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 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 properties upon the
event of a breach of certain covenants or occurrence of certain other events.

STOCK OFFERING

On June 8, 2001, we sold 2,650,000 shares of common stock in an
underwritten public offering generating net proceeds of approximately $50.0
million, which were primarily used to repay money borrowed to finance the
acquisitions of Hawe Neos and OBF Technologies, Inc.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table represents a list of our contractual obligations and
other commercial commitments for the indicated periods (calculated as of
September 30, 2002);

37

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:

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 required significant interest payments. As of September 30,
2002, we had $340.8 million in total long-term borrowings (including current
portion), and $131.1 million in stockholders' equity. In addition, subject to
restrictions in the indenture for our Senior Subordinated Notes and our New
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 pay
interest and principal 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 facilities contain 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.

38

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.

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 and
Italy. These products are supported by our sales offices in Europe, Japan,
Australia, South America and Mexico. In fiscal 2002, our foreign facilities'
selling, general and administrative expenses represented approximately 27.7% of
our consolidated selling, general and administrative expenses while our foreign
sales represented approximately 41.5% 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 appreciate 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 New 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

39

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 2002, approximately 22% of our sales were made through our top
five independent distributors. Mergers and consolidation of our distributors
have temporarily slowed sales of our products in the past and may do so in the
future. We believe that the loss of either Henry Schein, Inc. or Patterson
Dental Co., the only distributors who account for more than 5% of our sales,
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.

40

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 New 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.

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.,
and Ivoclar Vivadent Group; in the Orthodontics business segment, our principal
competitors include Unitek, a subsidiary of 3M Corporation, GAC Orthodontics, a
subsidiary of Dentsply, and American Orthodontics; and in the Infection
Prevention business segment, our principal competitors include Johnson &
Johnson, Steris Corporation, and Ecolab, Inc. We may face increased competition
from these or other companies in the future and we may not be able to achieve or
maintain adequate market share or margins, or compete effectively, in any of our
markets. Any of the foregoing factors could adversely affect our revenues and
operating profits and hinder our future expansion.

41

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 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.

We could be adversely affected if the spin-off is not tax free; we have
agreed to indemnify Apogent if we experience a change in control that causes the
spin-off to be taxable.

In connection with the spin-off, Apogent received rulings from the Internal
Revenue Service that, for federal income tax purposes, the transactions
undertaken in connection with the spin-off, and the spin-off itself, would be
tax free to Apogent and its shareholders. These rulings are subject to the
validity of factual representations made to the IRS and assumptions and
conditions set out in the ruling request. In order to assure that the
representations made in connection with the ruling request are true, we have
agreed with Apogent to certain restrictions on future actions for a period of
time following the spin-off. In particular, we have agreed to continue the
active conduct of our historic business for a minimum of two years, and we have
agreed not to issue stock, merge with another corporation, or dispose of our
assets in a manner that would cause the spin-off to be treated as part of a plan
pursuant to which one or more persons acquire a 50% or greater interest in our
stock. We have agreed to indemnify Apogent if the spin-off is treated as having
been taxable by reason of any breach of these agreements. Our indemnification of
Apogent for these liabilities would have a material adverse effect on our
financial condition and results of operations.

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.

42

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 are 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.

For fiscal year 2003, our projected total foreign currency exposure is
estimated to be approximately 52.7 million euros, 897.1 million Japanese yen,
13.5 million Canadian dollars, 15.4 million Australian dollars, and 3.1 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, and Swiss
franc at September 30, 2002.

In July 2002, we entered into a zero cost collar contract to hedge
intercompany transactions with a notional amount of 24.0 million euros for
fiscal year 2003. Also, in June 2002, we entered into a zero cost collar
contract to hedge a notional amount of 720.0 million Japanese yen for fiscal
year 2003.

At September 30, 2002, approximately $0.1 million of gain (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 have been discontinued.

Zero cost collar contracts in place as of September 30, 2002 are as follows
(in thousands, except rates):

In August 2001, we entered into a series of zero cost collar contracts to
hedge intercompany transactions with a total notional amount of 40.2 million
euros for fiscal year 2002. In addition, we entered into a zero cost collar
contract to hedge a total notional amount of 660.0 million Japanese yen for
fiscal year 2002.

For fiscal year 2001, approximately $0.03 million of loss, net of income
tax, was recorded 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 have been discontinued.

As of September 30, 2002, the maximum length of time over which we are
hedging our exposure to the variability in future cash flows associated with
foreign currency forecasted transaction 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 71.73 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 New
Credit Facility. As of June 30, 2002, we entered into four cross currency debt
swap transactions to hedge our net investment in Hawe Neos and one cross
currency debt swap to hedge our net investment in SDS Japan. The agreements to
hedge our net investment in Hawe Neos have a total aggregate notional amount of
$45.0 million and in the agreement relating to SDS Japan has a notional amount
of $4.0 million. The mechanics of the new 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 in the U.S. dollar leg of the agreements is the rate equal
to the Senior Subordinated Notes rate of 8 1/8% while the fixed interest rate to
be paid by us in 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.

43

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

At September 30, 2002, the fair value of the cross currency debt swap
transaction gain included in translation adjustments was approximately $0.3
million (net of income tax).

As a result of terminating the cross currency debt swap transaction to
hedge our net investment in Hawe Neos we recognized a loss to the translation
adjustment, a component of accumulated 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 accumulated other comprehensive
income (loss) until sale or upon complete or substantially complete liquidation
of our net investment in Hawe Neos.

INTEREST RATE EXPOSURE -- INTEREST RATE RISK MANAGEMENT

We use our New Credit Facility and Senior Subordinated Notes to finance our
operations. The New Credit Facility exposes us to variability in interest
payments due to changes in interest rates. If interest rates increase, interest
expense increases. Conversely, if interest rates decrease, interest expense also
decreases. Under our prior credit facility, we were required to have interest
rate protection for a specified portion of the outstanding balances for a
specified period of time. Although we paid off and terminated that prior credit
facility, we retained certain of the interest rate swap agreements we had
entered into 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 the Company's debt obligations
that are sensitive to changes in interest rates. 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, which is the Company's
reporting currency.

For the year ended September 30, 2002, the total net cost of converting
from floating rate (3-month LIBOR) to fixed rate for a portion of the interest
payments under our long-term debt obligations was approximately $4.5 million. At
September 30, 2002, approximately $2.5 million loss (net of income tax) is
included in accumulated other comprehensive income (loss). Below is a table
listing the interest expense

44

exposure detail and the fair value of the interest rate swap agreements as of
September 30, 2002 (dollars in thousands):

For fiscal year 2001, the total net cost of converting from floating rate
(3-month LIBOR) to fixed rate from a portion of the principal amount of the debt
obligation was $0.6 million. Below is a table listing the interest expense
exposure detail (in thousands):

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.

On June 6, 2002 we entered into a new $350.0 million syndicated credit
facility for which Credit Suisse First Boston is the administrative agent. This
New Credit Facility provides for a five-year $120.0 million Revolver, a
seven-year $200.0 million Term Loan B and a five-year $30.0 million Euro Tranche
revolving credit facility. In addition to the New Credit Facility, we completed
the sale of $150.0 million of Senior Subordinated Notes at 8 1/8% interest, due
2012, 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.

Approximately $70.0 million of our then-existing interest rate swaps could
not be re-assigned to our New Credit Facility entered into on June 6, 2002 and
thus were terminated. Accordingly, we recorded a loss on derivative instruments
of approximately $3.8 million (or approximately $2.3 million, net of tax) in
other income (expense), which represents the fair value of the swaps at the
termination date. Additionally, we had to de-designate the remaining interest
rate swaps as a result of the specificity of our hedge documentation relating to
the hedged item. Accordingly, a non-cash loss on derivative instruments of
approximately $3.2 million (or approximately $2.0 million, net of tax),
representing the fair value of the remaining swaps at the date of the
refinancing, was reclassified from accumulated other comprehensive income (loss)
and recorded in other income (expense) to recognize the loss. However, these
swaps were continued and were

45

simultaneously re-assigned to the New Credit Facility. The change in the fair
value of these re-assigned swaps from the refinancing date to September 30, 2002
has been recorded in accumulated other comprehensive income (loss).

The re-assigned interest rate swap agreements are expected to be highly
effective as we expect the hedging relationship to meet the relevant hedge
accounting criteria of SFAS No. 133. The re-assigned interest rate swap
agreements showed no recognizable ineffectiveness during the year ended
September 30, 2002.

46

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

SYBRON DENTAL SPECIALTIES, INC.

47

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, 2002 and 2001, 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, 2002. 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, 2002 and 2001, and
the results of their operations and their cash flows for each of the years in
the three-year period ended September 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.

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

Orange County, California
November 15, 2002

48

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 AND 2001

See accompanying notes to consolidated financial statements.
49

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000

See accompanying notes to consolidated financial statements.
50

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000

See accompanying notes to consolidated financial statements.
51

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000

See accompanying notes to consolidated financial statements.
52

See accompanying notes to consolidated financial statements.

53

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS)

(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 owns all of the
outstanding stock of Sybron Dental Management, Inc. ("SDM"), 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, orthodontics, and infection prevention 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, 2002, 2001 and 2000 are hereinafter referred to
as "2002", "2001" and "2000", 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

During the quarter ended June 30, 2002, the Company changed its method of
accounting for its domestic inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. The Company believes the change
to FIFO is preferable in the circumstance because in the current environment of
low inflation it will result in a better measurement of operating results. In
addition, the Company believes that the change in the method of accounting for
domestic inventory costs is preferable because it provides a better measure of
the current value of its inventory, provides a more accurate reflection of the
Company's financial position and liquidity, and provides a better matching of
manufacturing costs with revenues. It will also allow for the valuing of
inventory consistently throughout the Company. The Company's historical
financial statements have been adjusted for all relevant prior periods in
accordance with Accounting Principles Board ("APB") Opinion No. 20, "Accounting
Changes" to reflect this change in the method of inventory accounting.

54

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories are stated at the lower of cost or market. 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 provided 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 recognized is measured by the amount by which the carrying
amounts of the assets exceed the fair value of the assets.

The manufacturing previously conducted at the Company's former San Diego,
California facility is now being performed at the Ormco Glendora, California
facility as a part of the Company's 2001 restructuring plan for the orthodontic
segment. The San Diego facility is scheduled to be sold in January 2003.

(E) INTANGIBLE ASSETS

Intangible assets are recorded at cost and are amortized, using the
straight-line method, over their estimated useful lives. Excess costs over net
asset values of acquired businesses (goodwill) are amortized over 5 to 40 years,
proprietary technology, trademarks, and other intangibles are amortized over 7
to 40, 9 years, and 3 to 17 years, respectively. The Company assesses the
recoverability of its goodwill by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through projected
undiscounted future cash flows of the acquired businesses. If projected future
cash flows indicate that unamortized goodwill will not be recovered, an
adjustment would be made to reduce the net goodwill to an amount equal to
projected future cash flows discounted at the Company's incremental borrowing
rate. Cash flow projections are based on trends of historical performance and
management's estimate of future performance, giving consideration to existing
and anticipated competitive and economic conditions. No adjustments to goodwill
were made in 2002, 2001 and 2000.

(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
collectability of the sales price is reasonably assured. 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, 2002, 2001 and 2000
were approximately $10,804, $9,775 and $9,679, 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

55

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 have been 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 2002, 2001 and 2000 were approximately $10,399, $8,977 and
$8,753, respectively.

(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
losses for 2002, 2001 and 2000 were approximately $123, $1,974 and $4,134,
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 $5,062, $4,574 and $4,117 in 2002, 2001 and
2000, 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

56

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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 Statement of Financial Accounting
Standards ("SFAS") 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.

57

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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.

Basic earnings per share data for the year ended September 30, 2000 is
based on the 35,108,649 shares outstanding as of the date of the spin-off on
December 11, 2000. Diluted earnings per share for the year ended September 30,
2000 has been omitted as no SDS stock options existed prior to the date of the
spin-off and any calculation of diluted earnings per share would not be
meaningful.

(T) RECLASSIFICATION

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

(2) BUSINESS AND CREDIT CONCENTRATIONS

Certain of the Company's Professional Dental and Infection Prevention
products are sold through major distributors, none of which has exceeded 10% of
the Company's consolidated net sales in 2002, 2001 or 2000. Accounts receivable
from each of these distributors was less than 10% of the outstanding
consolidated accounts receivable balances at September 30, 2002 and 2001.

(3) INVENTORIES

Inventories at September 30, 2002 and 2001 consist of the following:

(4) INCOME TAXES

Total income tax expense (benefit) for the years ended September 30, 2002,
2001 and 2000 is allocated as follows:

58

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax expense (benefit) attributable to income from operations
consists of:

The domestic and foreign components of income from continuing operations
before income taxes and extraordinary items are as follows:

Income tax expense attributable to income from operations was $23,034,
$25,510 and $28,652 in 2002, 2001 and 2000 respectively, and differed from the
amounts computed by applying the U.S. Federal income tax rate of 35 percent to
income from continuing operations before income taxes and extraordinary item in
2002, 2001 and 2000 as a result of the following:

59

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant components of deferred income tax expense (benefit)
attributable to income from operations for 2002, 2001 and 2000 are as follows:

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 2002 and 2001 are presented below.

The change in the net deferred tax liabilities contains $123 and $3,534 of
deferred tax liabilities and $3,047 of deferred tax assets related to
acquisitions, 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, 2002 and 2001 was a decrease of $323 and $418,
respectively. The valuation allowance for deferred tax assets as of October 1,
2000 was $1,393. 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.

60

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At September 30, 2002, the Company has an aggregate of $1,863 of foreign
net operating loss carry forwards from certain foreign jurisdictions, the
majority of which expire between 2004 and 2009.

Accumulated earnings of foreign subsidiaries at September 30, 2002, 2001
and 2000 of approximately $51,000, $48,000, and $38,000 respectively, have been
reinvested in the business and no provision for income taxes has been made for
the repatriation of these earnings.

(5) PROPERTY, PLANT AND EQUIPMENT

Major classifications of property, plant and equipment at September 30,
2002 and 2001 are as follows:

(6) INTANGIBLE ASSETS

Intangible assets at September 30, 2002 and 2001 are as follows:

(7) LONG-TERM DEBT

Credit Facilities and Senior Subordinated Notes: On June 6, 2002, the
Company terminated its 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 new credit facility (the "New 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 Management, 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. In addition to the New Credit Facility, the Company completed 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

61

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 New Credit Facility is jointly and severally guaranteed by Sybron
Dental Specialties, Inc., the 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 New 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 New Credit Facility may be prepaid at any time without penalty except
for LIBOR and Euro-LIBOR breakage costs. Under the New 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) between 125
and 175 basis points plus the higher of (i) the rate from time to time publicly
announced by Credit Suisse First Boston as its prime rate, or (ii) the rate
which is 1/2 of 1% in excess of the federal funds rate, in each case as
determined on a quarterly basis according to the rating of the New Credit
Facility by Standard and Poor's and Moody's. The per annum initial interest rate
for the first six months was LIBOR, plus 250 basis points. As of September 30,
2002 the amount outstanding on the Term Loan B was $164,588. The average
interest rate at September 30, 2002 on the Term Loan B was 5.16% 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) between 75 and 150 basis points plus the higher of (i) the rate from time to
time publicly announced by Credit Suisse First Boston as its prime rate, or (ii)
the rate which is 1/2 of 1% in excess of the federal funds rate, 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 on the
Revolver for the first six months 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, 2002 the amount
outstanding on the Revolver was $12,000. The average interest rate at September
30, 2002 on the Revolver was 4.78%. 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, 2002, a total of $1,853 in
letters of credit were issued. As of September 30, 2002 the amount available
under the Revolver was $106,147.

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 will vary between
0.375% to 0.5% based on the quarterly leverage ratio. As of September 30, 2002,
there was no outstanding balance under the Euro Tranche and the amount available
was $30,000.

The New 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, and (vii) loans and investments, as well
as prohibitions on the payment of cash

62

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dividends to or the repurchase or redemption of stock from stockholders. The New
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's ability to meet its debt service requirements and to comply
with such covenants is dependent upon its future performance, which is subject
to financial, economic, competitive and other factors affecting the Company,
many of which are beyond its control. The Company was in compliance with all
such covenants at September 30, 2002.

Prior to June 6, 2002, the Company had a credit facility that it entered
into in connection with the spin-off on December 11, 2000, which allowed for
borrowings up to $450,000 from ABN AMRO Bank N.V. and certain other lenders.
This credit facility was composed of a $150,000 five year tranche A term loan, a
$150,000 seven year tranche B term loan, under which Kerr and Ormco were
borrowers, and a five year revolving credit facility up to $150,000, under which
Sybron Dental Management, Inc., was the borrower.

The tranche A term loan bore interest primarily at the adjusted interbank
offered rate for Eurodollar deposits plus 275 basis points. The tranche B term
loan bore interest primarily at the adjusted interbank offered rate for
Eurodollar deposits plus 375 basis points. Borrowings under the previous
revolving credit facility generally bore interest on the same terms as those
under the tranche A term loan, plus the Company paid a commitment fee on the
average unused portion of the revolving credit facility of 0.5%.

Long-term borrowings at September 30, 2002 and 2001 consists of the
following:

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 annual 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.

63

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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: In connection with the spin-off on
December 11, 2000, the Company settled all intercompany loans and advances with
Apogent by way of a non-cash dividend of $78,167, and paid a cash dividend of
$67,927 to Apogent. Additionally, the Company borrowed $375,000 under the
previous credit facility, which was subsequently paid-off through the
refinancing on June 6, 2002.

Maturities of long-term borrowings reflect the New Credit Facility, Senior
Subordinated Notes, Sale/ Leaseback, and other long-term debt as of September
30, 2002 as follows:

(8) LEASE COMMITMENTS

As of September 30, 2002, 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:

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

Rental expense under operating leases was $5,754, $6,056 and $4,904 in
2002, 2001 and 2000, respectively.

64

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(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 Facilities: The fair value of the New Credit Facility as of
September 30, 2002 approximates the carrying amount, as the interest rates are
variable and approximate rates that the Company could obtain under similar 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, 2002 (see
Note 10). The fair values of these instruments were provided by third party
broker/bankers.

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 a U.S. dollar functional currency, a substantial
portion of its sales, income, and cash flow are 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.

For fiscal year 2003, the Company's projected total foreign currency
exposure is expected to be approximately 52,684 euros, 897,090 Japanese yen,
13,483 Canadian dollars, 15,354 Australian dollars, and 3,118 Swiss francs. The
Company has put in place a strategy to manage its euro and Japanese yen cash
flow

65

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exposure through the use of zero cost collar contracts. There were no such
contracts in place for the Canadian dollar, Australian dollar, and Swiss franc
of September 30, 2002.

In July 2002, the Company entered into a zero cost collar contract to hedge
intercompany transactions with a total notional amount of 24,000 euros for
fiscal year 2003. In addition, 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.

For fiscal year 2002, approximately $125 of gain, net of income tax,
representing the fair value of the zero cost collars, was recorded 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 have been discontinued.

Zero cost collar contracts in place as of September 30, 2002 are as follows
(in thousands, except rates):

In August 2001, the Company entered into a series of zero cost collar
contracts to hedge intercompany transactions with a total notional amount of
40,200 euros for fiscal year 2002. In addition, the Company entered into a zero
cost collar contract to hedge a total notional amount of 660,000 Japanese yen
for fiscal year 2002.

For fiscal year 2001, approximately $29 of loss, net of income tax, was
recorded in accumulated other comprehensive income (loss), related to the
foreign currency zero cost collar transactions. Both the euro zero cost collar
contracts and the yen zero cost collar contract for fiscal year 2002 have
matured.

During the year ended September 30, 2002, approximately $323 of gain 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, 2002, 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 transaction is twelve months.

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
notional amount of $45,000 in exchange for a Swiss franc notional 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 as a result of the Company
entering into its New Credit Facility. As of June 30, 2002, the Company entered
into four new cross currency debt swap transactions to hedge the Company's net
investment in Hawe Neos and one new cross currency debt swap to hedge the
Company's net investment in SDS Japan. The agreements to hedge the Company's net
investment in Hawe Neos has a total aggregate notional amount of $45,000 and in
SDS Japan has a notional amount of $4,000. The mechanics of the new 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 in the U.S. dollar
leg of the agreements is the rate equal to the Senior Subordinated Notes rate of
8 1/8% while the fixed interest rate to be paid by the Company in 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.

66

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For fiscal year 2002, the fair value of the cross currency debt swap
transaction gain (net of income tax) included in translation adjustments was
$285.

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

INTEREST RATE EXPOSURE -- INTEREST RATE RISK MANAGEMENT

The Company uses the New Credit Facility and Senior Subordinated Notes to
finance its operations. The New Credit Facility exposes the Company to
variability in interest payments due to changes in interest rates. If interest
rates increase, interest expense increases. Conversely, if interest rates
decrease, interest expense also decreases. Under the Company's previous credit
facility, the Company was required to have interest rate protection for a
specified portion of the outstanding balances for a specified period of time.
Although the Company paid off and terminated that prior credit facility, the
Company retained certain of the interest rate swap agreements it entered into 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 does not enter into speculative contracts and continues to
assess its exposure to interest rate risk on an ongoing basis.

Approximately $70,000 of the Company's current interest rate swaps could
not be re-assigned to the New Credit Facility and thus were terminated.
Accordingly, the Company recorded a loss on derivative instruments of
approximately $3,774 (or approximately $2,302, net of tax) in other income
(expense), which represents the fair value of the swaps at the termination date.
Additionally, the Company had to de-designate the remaining interest rate swaps
as a result of the specificity of the Company's hedge documentation relating to
the hedged item. Accordingly, a non-cash loss on derivative instruments of
approximately $3,223 (or approximately $1,996, net of tax), representing the
fair value of the remaining swaps at the date of the refinancing, was
reclassified from accumulated other comprehensive income (loss) and recorded in
other income (expense) to recognize the loss. However, these swaps were
continued and were simultaneously re-assigned to the new credit facility. The
change in the fair value of these re-assigned swaps from the refinancing date to
September 30, 2002 has been recorded in accumulated other comprehensive income
(loss).

The re-assigned interest rate swap agreements are expected to be highly
effective as the Company expects the hedging relationship to meet the relevant
hedge accounting criteria of SFAS No. 133. The re-assigned interest rate swap
agreements showed no recognizable ineffectiveness during the year ended
September 30, 2002.

67

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 (in thousands), including the notional amount as of September
30, 2002:

For fiscal year ended 2001, 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 $575. Below is a table listing the interest expense
exposure detail (in thousands), including the notional amount as of September
30, 2001:

The fair value of interest rate swap agreements designated as hedging
instruments of 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, 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 (in thousands):

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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the year ended September 30, 2001, an approximate $5,436 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, 2001 are as
follows (in thousands):

(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.
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 Kerr Corporation 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 for Kerr
Corporation, a subsidiary of SDS, currently follow a policy instituted by the
predecessor of Apogent in 1986 where the Company's contributions were frozen at
the levels equal to Kerr Corporation's contributions on December 31, 1988,
except where collective bargaining agreements prohibited such a freeze.
Employees of SDS are also part of a retirement security pension plan. This plan
covers all qualifying active SDS employees as of the date of the spin-off, and
employees retiring after the spin-off and their dependents.

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

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

69

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

70

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:

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

At September 30, 2002 all plans had benefit obligations in excess of fair
value. Employer contributions made after the measurement date in 2002 were not
credited for this calculation. Had the Company's September contributions been
taken into account, all plans except the Sybron Canada Pension Plan and the
Supplemental Executive Retirement Program would have had fair value of plan
assets in excess of their accumulated benefit obligations. There were no plans
except the Supplemental Executive Retirement Program with accumulated benefit
obligations in excess of fair value of plan assets at September 30, 2001.

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, 2002 by approximately
$1,527 and $121, 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, 2002 by approximately $1,225 and $105, respectively.

Because more than 60% of the 2002, 2001 and 2000 net periodic
postretirement benefit costs relate to interest costs, the Company has
classified such interest costs as interest expense. This resulted in a non-cash
increase in interest expense of approximately $474, $359, and $367 in 2002, 2001
and 2000, 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

71

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"Code"). Company matching contributions under the plans, net of forfeitures,
were approximately $1,482, $1,467 and $1,354 for 2002, 2001 and 2000,
respectively.

(12) RESTRUCTURING AND MERGER AND INTEGRATION CHARGES

The Company's results for fiscal 2002 include restructuring charges of
approximately $3,666 ($2,353 after tax) consisting primarily of severance and
termination costs associated with the termination of the employment of 71
employees that were employed at certain of the Company's European facilities, as
a result of the consolidation of those European facilities into its Hawe Neos
facility in Switzerland. Of the $3,666 restructuring charges, approximately
$3,064 are cash charges related to severance and contractual obligations, $300
is a cash charge for an additional potential tax liability included in income
taxes payable, while the balance of approximately $302 are non-cash charges. The
Company expects to complete the majority of the 2002 restructuring plan by the
2003 fiscal year end.

The Company's results for fiscal 2001 include restructuring charges 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, as a result of the closing of this 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 Company's
Glendora, California facility. The proceeds from the planned sale (January 2003)
of the San Diego manufacturing facility are expected to offset the amount of the
restructuring charge. The Company will use the proceeds from the sale to pay
down debt and reduce interest charges.

The Company's results for fiscal 2000 include charges of approximately
$9,300 ($5,800 after tax) consisting primarily of exited product lines
(approximately $5,300, $1,700 and $600 in the Orthodontics, Professional Dental
and Infection Prevention 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 $9,300 in restructuring charges, approximately $7,800
represented non-cash charges related to the exited products and capital, while
the balance of approximately $1,500 were cash related charges for severance and
contractual obligations. The Company completed the 2000 restructuring plan in
the first quarter of 2002 and paid the remainder of the cash charges.

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

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

72

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(a) Amount represents the 2002 restructuring charge for severance and
termination costs associated with the 71 employees primarily located at
several facilities throughout Europe whose employment the Company plans to
terminate as a result of the 2002 European restructuring plan. The 2001
restructuring charge represents severance and termination costs associated
with the 63 employees located at the Ormco San Diego facility whose
employment Ormco terminated as a result of the 2001 restructuring plan. As
of September 30, 2002, all of the employment terminations were completed
under the 2001 restructuring plan. The closing of the facility was completed
by June 30, 2002. The proceeds from the planned sale of the Ormco San Diego
facility are expected to offset the costs of closing the facility. The 2000
restructuring charge 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. The 1998 restructuring charge 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) Amount represents $300 in additional potential tax liability included in
income taxes payable in 2002. The 1998 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 the 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 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 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, 2002, 1,131,836 shares of common stock were reserved for
future stock option grants under the above plans.

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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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 (in
thousands, except per share data):

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. For fiscal years ended prior to September 30, 2001,
the pro forma net income would be the same as the actual income reported, as
there were no SDS options in existence prior to the spin-off.

The fair value of options granted during 2002 was determined using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rate based on an average 4-year United States treasury note yield at the date of
grant (3.99% average rate), an expected life of 4 years, stock price volatility
of 30.25% and no dividend yield.

The fair value of options granted during 2001 was determined using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rate based on an average 4-year United States treasury note yield at the date of
grant (5.17% average rate), an expected life of 4 years, stock price volatility
of 31.32% and no dividend yield.

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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, 2002:

(14) EARNINGS PER SHARE

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

Earnings per share data for the year ended September 30, 2000 is computed
based on the 35,108,649 shares outstanding at December 11, 2000, the date of the
spin-off, as the outstanding average number of

77

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares for the year. This number of shares is presumed to be outstanding for the
fiscal year ended 2000. Diluted earnings per share for the year ended September
30, 2000 have been omitted as no SDS stock options existed prior to the date of
the spin-off and any calculation of diluted earnings per share would not be
meaningful.

Weighted average shares issuable upon the exercise of stock options, which
were not included in the calculation, were 7,477 in fiscal 2002 and 2,391 in
fiscal 2001 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 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 eight acquisitions since the beginning of 2000.
The acquired companies are all engaged in businesses related to the Company (see
Note 19 for a description of business segments).

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 are being
amortized over 5 to 30 years. The following unaudited table outlines acquisition
information and the total assets prior to each acquisition.

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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2000

ACQUISITIONS

During 2000, the Company completed three 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
$16,800. The results of these acquisitions were 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 $15,800 and will be
amortized over 5 to 20 years. The following unaudited table outlines acquisition
information and the total assets prior to each acquisition.

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 2002 and 2001 acquisitions had occurred
as of the beginning of 2001, after giving effect to certain adjustments,
including amortization of goodwill, 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.

(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.

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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

OTHER COMPREHENSIVE INCOME (LOSS)

(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

80

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 Credit Facilities: Apogent historically recorded a portion of its
outstanding debt (and associated interest expense) under its credit facilities
to certain of its subsidiaries, including the operations of SDS. SDS's
historical debt outstanding under Apogent's credit facilities at September 30,
2000 was $311,772 and SDS's historical interest expense was $24,443 in 2000. As
part of the spin-off, the Company entered into a new credit facility and
Apogent's credit facilities were paid off.

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 and $2,979 in 2001 and 2000, respectively. 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.

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 first two
installment payments have been made. Interest accrues on any past due amounts at
the rate of 10% per annum until paid. The loan is included in other current
assets in the accompanying consolidated balance sheets.

(19) SEGMENT INFORMATION

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which is effective for financial statements for periods
beginning after December 15, 1997. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual and interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.

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 a) Professional Dental, b)
Orthodontics and c) Infection Prevention. 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 and disposable infection prevention products for dental equipment.

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SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

Products in the Infection Prevention business segment include high level
disinfectants and sterilants, and enzymatic cleaners and instrument care
solutions for medical and dental instruments, surface disinfectant products and
antimicrobial skincare products for medical and dental use.

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:

82

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

83

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective October 1, 2002, the Company combined the Infection Prevention
segment into the Professional Dental segment. Had these segments been combined
as of October 1, 1999, the information on the business segments would have been
summarized as follows:

84

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

No customer accounted for more than 10% of net sales for the three reported
periods.

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

85

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(20) QUARTERLY FINANCIAL INFORMATION

- ---------------

(a) In the third quarter of fiscal 2002, the Company terminated its prior
credit agreement and wrote off the associated deferred financing fees of
$2,727 (net of tax) and had termination costs of approximately $934 (net of
tax) primarily due to a prepayment penalty on its terminated tranche B term
loan. The 2001 extraordinary item of approximately $498 (net of tax)
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.

86

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Restructuring charges were recorded in the amount of $3,666, $2,379 and
$9,326 in the fourth quarter of 2002, 2001 and 2000, respectively.

(c) Earnings per share data for quarters in the fiscal year ended September 30,
2000 were calculated using the 35,108,649 shares outstanding as of the date
of the spin-off on December 11, 2000. Diluted earnings per share for
quarters in the fiscal year ended September 30, 2000 have been omitted as
no SDS stock options existed prior to the date of the spin-off and any
calculation of diluted earnings per share would not be meaningful.

(21) EXTRAORDINARY ITEM

The extraordinary charge recorded in the third quarter of fiscal 2002 is a
result of the termination of the Company's previous credit facility on June 6,
2002. The charge consists of a pre-payment penalty on the term B loan of
approximately $934, net of tax, and the amortization of approximately $2,727,
net of tax, of the remainder of the deferred financing fees related to the
previous credit facility.

The extraordinary item for fiscal 2001 represents the SDS allocation of the
write-off of Apogent's deferred financing fees associated with the termination
of Apogent's credit agreement due to the spin-off.

(22) 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 New Credit Facility entered into on June 6, 2002.

Below are the unaudited condensed consolidating balance sheets as of
September 30, 2002, and 2001, statements of operations for the years ended
September 30, 2002, 2001 and 2000, and statement of cash flows for the years
ended September 30, 2002, 2001, and 2000, of Sybron Dental Specialties, Inc. and
its subsidiaries, reflecting the subsidiary guarantors of the 8 1/8% senior
subordinated notes.

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.

87

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEETS

88

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEETS

89

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

90

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

91

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

92

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

93

SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

94

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

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 and executive officers 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 7, 2003 (the "2003 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.

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 2003 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 2003 Annual Meeting Proxy
Statement under the captions "Security Ownership of Certain Beneficial Owners
and Management" and "Proposal to Approve the Sybron Dental Specialties, Inc.
Employee Stock Purchase Plan -- 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 2003 Annual Meeting Proxy
Statement under the captions "Election of Directors" or "Certain Relationships
and Related Transactions."

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We have disclosure controls and procedures in place, which are designed to
ensure that material information related to SDS, including our consolidated
subsidiaries, is made known to our management, including our Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"). We review our disclosure
controls and procedures regularly and when necessary and make changes to ensure
they are effective.

Within the 90 day period prior the date of this report, an evaluation was
carried out under the supervision and with the participation of our management,
including the CEO and the CFO, of the effectiveness of our disclosure controls
and procedures. Based upon that evaluation, the CEO and CFO have concluded that
SDS's disclosure controls and procedures are effective in causing material
information to be collected and evaluated by the management of the Company on a
timely basis and to ensure that the quality and timeliness of our public
disclosures complies with our SEC disclosure obligations.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in our internal controls or in other
factors that could significantly affect those controls after the date of our
most recent evaluation.

95

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:

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:

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.

No reports on Form 8-K were filed during the last quarter of the year for
which this report is filed.

96

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 18, 2002

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.

98

CERTIFICATIONS

I, Floyd W. Pickrell, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Sybron Dental
Specialties, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and to the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management of
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

/s/ FLOYD W. PICKRELL, JR.

--------------------------------------
Chief Executive Officer

Dated: December 18, 2002

99

I, Gregory D. Waller, certify that:

1. I have reviewed this annual report on Form 10-K of Sybron Dental
Specialties, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and to the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management of
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

/s/ GREGORY D. WALLER

--------------------------------------
Chief Financial Officer

Dated: December 18, 2002

100

INDEPENDENT AUDITORS' REPORT

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

On November 15, 2002, we reported on the consolidated balance sheets of
Sybron Dental Specialties, Inc. and Subsidiaries as of September 30, 2002 and
2001, 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, 2002, 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

Orange County, California
November 15, 2002

101

SCHEDULE II
SYBRON DENTAL SPECIALTIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000

- ---------------

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.

(f) Net disbursements, including write-off of $7,600 and $200 for inventory and
fixed assets, respectively.

102

SYBRON DENTAL SPECIALTIES, INC.
(THE "REGISTRANT")
(COMMISSION FILE NO. 1-16057)

EXHIBIT INDEX
TO
2002 ANNUAL REPORT ON FORM 10-K

103

104

- ---------------

* 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.

105