Executives
John Sweeney - Director of Investor Relations
Jost Fischer - Chairman, President and CEO
Simone Blank - Executive Vice President and Chief Financial Officer
Jeffrey Slovin - Executive Vice President and COO of US Operations
Analysts
Jon Wood – Bank of America Securities
Steven Postal – Lehman Brothers
Jeff Johnson – Robert W. Baird
John Putnam – Dawson James Securities
John Kreger – William Blair
David [Cadigan] – JP Morgan
Sirona Dental Systems Inc. (SIRO) F1Q08 Earnings Call February 8, 2008 9:00 AM ET
Operator
Good day ladies and gentlemen and welcome to the First Quarter 2008 Sirona Dental Systems Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. John Sweeney, Director of Investor Relations of Sirona Dental Systems.
John Sweeney
Good morning everyone. Before I turn the call over to Jost Fischer, Chairman, President and CEO of Sirona Dental Systems I need to inform you that information in this conference call contains forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements and information of a non-historical nature are subject to risks and uncertainties that are beyond the company’s ability to control.
The matters discussed in this conference call are subject to various factors which could cause actual events and results to differ materially from such statements. Such factors include uncertainties as to future sales volumes of the company’s products, the possibility of changing economic market and competitive conditions, dependence on products, dependence on key personnel, technological developments, intense competition, market uncertainties, dependence on distributor’s abilities to manage growth, dependence on key suppliers. Risks and uncertainties including those detailed on the company’s filings the Securities and Exchange Commission.
The company undertakes no obligation and does not intend to update these forward looking statements or affect events or circumstances occurring after this conference call. You are cautioned not to place undue reliance on these forward looking statements which speak only as of the date of this conference call. Please note that today’s conference call you were presented with additional financial information including non-GAAP financial measures under section 101 of Regulation G of the 1934 Exchange Act.
In addition, during today’s conference call managements comments and guidance for fiscal year 2008, please note that all statements made in connection with the guidance are based on current expectations and actual results will differ materially from such forward looking statements. Now I would like to turn the call over to Jost Fischer, Chairman, President and CEO of Sirona Dental Systems.
Jost Fischer
It is my pleasure to welcome all of you to our fiscal 2008 first quarter conference call. Joining me today are Simone Blank, Executive Vice President and Chief Financial Officer and Jeffrey Slovin, Executive Vice President and COO of US Operations.
Let me begin by saying that we are pleased with our results for the first quarter of fiscal 2008. Given the challenging comparison we face we had solid performance across all of our business segments. Revenues reached $200.1 million or up 14.5% versus the prior year quarter. This marks the first time that Sirona has achieved quarterly revenues in excess of the $200 million mark. Our revenue growth was led by healthy performance in our International markets.
We saw encouraging performance from both our European and Other International markets underscoring the advantages of our geographic diversification. Let me remind you non-US markets account for two thirds of our overall business. I will now outline highlights from each of our business segments.
Revenues in our CAD/CAM segments include 18% benefiting from continued strong interest in our MC XL milling machine and pilot generic software. Sales growth was particularly robust in our European markets. The program that was implemented in the US for existing CEREC users helped contribute to these results. We are encouraged by the positive reaction to the MC XL milling machine from our dealers, current users and from marketplace.
The MC XL mills are quality precisely to the restoration in as fast as four minutes approximately twice as fast as the compact milling unit. The MC XL’s fine tolerances are appreciated by doctors who demand the most precise restoration possible. As the leader in the CAD/CAM industry we recently announced the launch of CEREC Connect a web based communication platform that allows dentists to transmit digital impressions from the dental office to the laboratory of their choice. CEREC Connect brings together the largest installed based of in office dental CAD/CAM machines with the largest network of in lab CAD/CAM systems.
With CEREC Connect dentists and labs no longer need to make physical impressions to create restorations. In the future Sirona will offer labs the ability to create a physical model from the CEREC digital impression. CAD/CAM segment gross profit margin declined to 66.5% down from 73.4% in the first quarter of 2007. However, CAD/CAM margins increased one percentage point compared to the fourth quarter of 2007. The year over year margin decline was due to foreign currency fluctuations, the impact of our traded program and product mix.
Imaging segment revenues increased 16% with particular strength coming from outside of the US market. Our first quarter 2008 imaging systems revenue growth was driven the continued adoption of digital radiography and sales of our GALILEOS 3D imaging unit. In addition to our success with intra-oral sensors Sirona Panoramic products are well positioned to take advantage of the continuing trend toward digital radiography.
Recently we added a new digital panoramic unit the Pan Elite which broadens are shift product line. In December Sirona rolled out its new software that expands and enhances the capabilities of the GALILEOS 3D system. The software improves image quality reduces storage requirements, shortens reconstruction times and provides an interface to other implant planning software tools. We believe that we have an excellent competitive offering in the 3D dental imaging market.
We still see signs that industry is tracking slower than our initial expectations. The introduction of many new products in the category continues to cause dentists to take longer than expected to evaluate their options. Imaging systems segment gross profit margin was 60.2% in the first quarter versus 59.7% in the prior year’s quarter.
First quarter Treatment Center revenues increased 10% with solid performance in the Asia/Pacific region and Russia. Treatment Center segment gross profit margin was 42.6% up one percentage point compared to prior year as we sold a higher proportion of high end treatment centers in this year’s quarter. Instrument revenues increased 12% with strong performance in our non-US markets. Instrument segment gross profit margin was 46% down 2.3% from the prior year mainly due to product mix.
The Instrument and Treatment Center segments faced the most difficulty in comparison due to strong sales in Germany in the three months ended December 31, 2006. Let me remind you that last year both Treatment Centers and Instrument decreased 38% year over year the first quarter which benefited from sales in anticipation of the January 2007 VAP increase in Germany. Now let me give you some details on our first quarter regional development.
The German market showed solid performance although not matching up to the excellent quarter the prior year. CAD/CAM and Imaging sales in Germany demonstrated robust growth during the quarter. Other European markets performed well with double digit growth in each business segment and particularly strong growth in our CAD/CAM business. Other world markets that is non-European international markets demonstrated good performance with imaging sales showing the highest growth rate.
We continue to benefit from our strategy to decrease our local sales and service infrastructure in selected markets. While this course increased SG&A expense these investments continue to show positive results. The US market increased 4% driven by our CAD/CAM and Imaging segment performance. On a sequential basis our first quarter revenues increased 28% compared to the fourth quarter fiscal 2007. Let me remind you that last quarter we saw particularly strong growth in the US market up 32% year over year.
However, this growth was against a relatively low level of sales in the prior year quarter. Our first quarter 2008 US revenue growth was against somewhat stronger than prior year period. We remain confident at the prospects for the US market as we move through this year. Like all of you we have seen a lot of information regarding the state of the US economy. What we are seeing and hearing from our distribution partners and the field is that US census continue to spend on dental equipment and that the demand for dental services is in tact.
Additionally, there are some factors that could benefit our US business including the anticipated small business tech centers and the low interest rate environment. Overall our results demonstrate that Sirona is well positioned in the marketplace in terms our leading high tech products. Our quality sales and service infrastructure and strong relationships with our dealers including our largest partners, Patterson and Henry Schein.
I will now turn the call over to Simone who will give you more details on our financial results.
Simone Blank
Revenues for the first quarter were $200.1 million an increase of $25.3 million up 14.5% or up 6% constant currency compared to last year. With CAD/CAM systems up 18% up 11% constant currency, Imaging systems up 16% up 10% constant currency, Instruments up 12% up 1% constant currency and Treatment Centers up 10% down 2% constant currency. Revenues increased 4% in the United States; International revenues increased 20% up 7% constant currency with particularly encouraging performance in Japan, Australia, Italy, Russia and France.
Cost of sales was $105.7 million for the quarter an increase of $15 million or 16.5%. Cost of sales included amortization expense amounting to $20.6 million compared with $19.2 million for the same period last year. Excluding amortization expense was profit margin decline 160 basis points to 57.6%. The gross profit margin decline was driven by the continued weakness of the US Dollar and the trading program for MC XL unit. These factors were somewhat offset by sales of our 3D imaging unit GALILEOS and by a favorable product mix in the Treatment Center segment.
Now I will review some of the components of our operating expenses in the first quarter. SG&A expense was $55.9 million an increase of $8.4 million. As a percentage of sales SG&A expense increased 27.9% from 27.2% in the prior year quarter. The increase in SG&A was mainly driven by a strengthening US Dollar Euro exchange rate as most of the expenses are originated and our extended sales and service in selected markets including Japan, Italy and Australia.
R&D was $13.7 million an increase of $3.4 million a result of the variations in the US Dollar Euro exchange rate and continued investment in new products and product enhancement. Operating income amortization expense was $49.5 million comprised of operating income of $27.2 million plus amortization expense of $22.3 million. This compares to first quarter 2007 operating income plus amortization expense of $46.1 million.
The increase in operating income plus amortization was due to increased gross profit and deferred income from the [inaudible] fee partially offset by higher SG&A and R&D expenses. SG&A on foreign currency transactions in the quarter amount to $5.9 million compared to $7.1 million in the prior year period. First quarter 2008 results include a $3.6 million non-cash gain on the revaluation on the carrying value of the dollar denominated [inaudible] fee and a $2.1 million cash gain the revaluation of the dollar denominated short term in trouble blown to German entities.
The non-cash loss on derivative on instruments amounted to $2.2 million compared to a gain of $0.5 million in the prior year period. The first quarter 2008 loss includes the $1.7 million unrealized non-cash loss on interest rate derivative. Net interest expense was $6.7 million compared to $9 million. The decrease was mainly driven by lower interest rates resulting from the November 2006 refinancing of our senior credit facility.
The income tax provision for the first quarter of fiscal 2008 was $7.2 million compared to $1.2 million for the prior year period. The effective tax rate for the quarter and for fiscal 2008 is estimated at 30%. This compared to an effective tax rate of 35% for fiscal 2007. This improvement was caused by a reduction in the German tax rate and tax signing initiative.
The company’s net income was $17 million an increase of $14.7 million compared to the prior year. In addition to the non-cash foreign currency gains mentioned above first quarter 2008 net income included amortization expense relating to the step up to shared values of intangible assets related to the [Shig] acquisition and a [inaudible] transaction of $21.7 million $15.2 million net of tax and stock option expense of $3.7 million, $2.6 million net of tax.
Operating cash flow during the quarter was $2.6 million mainly driven by the increased operating results. Investing cash flow consisted of capital expenditure of $5.2 million. On December 31, 2007, the company had cash and cash equivalent of $89.8 million in total debt of $560.7 million without the net debt of $470.9 million. This compared to net debt of $463.3 million at September 30, 2007. The increase in net debt was primarily attributable to fluctuations in the Dollar Euro exchange rate.
Our first quarter results were solid; accordingly we are reaffirming our 2008 fiscal guidance. We expect revenue from the fiscal year September 30, 2008, to be in the range of $705 to $725 million. Operating income plus amortization is anticipated to be in the range of $145 to $155 million including the $10 million penalty fee.
Now that concludes my review of the first quarter guidance. I will now turn the call back to Jost.
Jost Fischer
We had an encouraging start to the 2008 fiscal year with particular strength in our International markets. We are confident that we will be able to deliver on our guidance. Looking forward to the rest of the year we believe that together with our world class distribution partners led by Patterson and Henry Schein we will continue to grow our business. I look forward to updating you on our next quarterly conference call.
Simone, Jeffrey and I will now address your questions.
Question & Answer Session
Operator
[Operator Instructions] Your first question comes from the line Jon Wood with Bank of America Securities.
Jon Wood – Bank of America Securities
Jost, could you give us a feel if new user interest in CEREC in the United States is picking up and then specifically did the price increase at the end of January catalyze new orders ahead of that event?
Jost Fischer
First of all we are encouraged from what we hear from our distributors and what we see in the field about interest in our CAD/CAM offerings. While we don’t talk about our January at this point in time we have not announced any pricing increase before January. We saw encouraging updates also in orders in the quarter that we are talking about but at the time when the price increase was not known in the market. Certainly as we do follow price increases frequently once a year there is usually some up tick ahead of our price increase on a general basis.
Jon Wood – Bank of America Securities
Has the reception towards to Compact milling unit the CEREC three has that changed at all in the US over the last few months?
Jost Fischer
Last summer when we took down our guidance we saw reasons because we didn’t sell a lot of those compact units as we thought we would that has now changed. As we have offered or Patterson has offered a discount of pricing to the Compact milling unit after a while it gained traction and as you know we wanted to give an offering to dentists that do not want to pay the sticker price of a regular CEREC in office system and we want to give him the opportunity to enter the market at a lower price range and I think this policy is gaining more and more traction.
Jeffrey Slovin
I would just add, Jost, you are exactly right in December and as well as January we are seeing the Compact pick up. I think there was slowness and I think the dual product strategy is working much better now as we see a differential in the price increase.
Jon Wood – Bank of America Securities
Just to make sure, the price on the Compact milling unit hasn’t been lowered, it’s just that the price on the new milling unit the MC XL has gone up, correct? There is a bigger differential in the price at this point.
Jeffrey Slovin
That’s right.
Jost Fischer
When you look at the pricing to the US market we are talking about $109,900 for MC XL system and slightly below $80,000 for CEREC system with Compact milling unit.
Jon Wood – Bank of America Securities
If you go back to 2001, can you at least qualitatively discuss the benefit you saw in the US equipment side when that last tax stimulus bill was put into place?
Jost Fischer
Certainly we don’t have to go back to 2001, we can go back to 2003, 2004 when there was a down turn in the German economy. What usually happens is; a) in an environment that is not so friendly from the economy side, doctors turn around and think where can we going forward and when you look at digital radiography doctors have clear savings when they get into digital radiography, b) CAD/CAM offerings offers them more profitability going forward and that’s something that is encouraging for them to spend money.
Don’t forget that in the US last year dentists have on average more than 7% increase in their income and therefore we are now happy to pull people in this one. If you have doctors that think about investing of course tax incentives is something they look at when they make their decision. We have seen a positive reaction in the past and I think a stimulus package will certainly help when it’s put in place.
Operator
Your next question comes from the line of Steven Postal with Lehman Brothers.
Steven Postal – Lehman Brothers
Jost you mentioned lead times and decisions being extended on GALILEOS, can you talk about the time frames for the decisions for your other products, mainly CAD/CAM, have you seen a change in how customers are looking at that?
Jost Fischer
Basically no, I think the process certainly is a question that Patterson or Henry Schein can answer easier than we can do it but usually there is a lead time of several months before a doctor decides to purchase after he has his first introduction to the product. We are not seeing a change in our general attitude in the markets.
Steven Postal – Lehman Brothers
In that context with the competitor product in CAD/CAM to the extent you can, can you talk about how your perspectives on if that’s changed demand or how customers are looking at CEREC, anything you can provide along those lines.
Jost Fischer
From our point of view what hear and what we see, I mentioned that earlier in the call is a very positive sentiment in the field towards CAD/CAM that certainly will help going forward. That has nothing to do with, in my mind, with the competitive offering at this point in time. We have not seen that product so it is difficult for us to discredit anything here. On the other hand, we remain at the position that we said it certainly helps the category when a two thirds of dental reps will talk positively about in office CAD/CAM systems versus one third in the past. I think that will overall help CEREC to grow.
Do not forget we are out there for 20 years and we have the best product with excellent restorations out there. I think we can be very confident on the comments of our products and I think that shows in the field at this point in time.
Steven Postal – Lehman Brothers
I’m not sure you mentioned it but can you update us on how the SIROLaser and the Perio Scanner doing?
Jost Fischer
We launched the Perio Scan end of September in Germany and since then we have launched it in other European counties and we are starting to launch it worldwide. It has had a very positive response from the market from dentists that were the first to buy it. We are very happy about the deployments of this product. We have not launched it in the US, we are currently in the process of applying for the 5-10-K, it is with the FDA at this moment and we are waiting for approval.
When we talk about our SIROLaser, sales are down versus last year plus we are still contributing significantly to our Instrument division and we have a great product but since last year we have a number of competitors coming on stream and divides the pie.
Steven Postal – Lehman Brothers
You are still confident in terms of positioning of the Laser?
Jost Fischer
Absolutely.
Steven Postal – Lehman Brothers
Was there a difficult comp in for the Laser related to what went on with…
Jost Fischer
It was a difficult comp, yes. We have more competitors, the market is growing and when you had one provider in the past and now you have five or six notable ones and I think that is certainly playing a role in this.
Steven Postal – Lehman Brothers
Two final quick financial clarification questions. The revenue guidance is that inclusive or excluding currency?
Simone Blank
That is including currency.
Steven Postal – Lehman Brothers
On the cash flow I think you may have briefly mentioned it but I didn’t catch it. Can you clarify the moving parts on the cash flow, it looked like accounts receivable impacted the operating cash on the quarter but can you clarify what went on there?
Simone Blank
Our cash flow as you have seen varies throughout the quarter and the first quarter is not normally a quarter where the cash flow is a relatively low and picking up normally towards the end of the year. If you look at the revenues and how they impact the cash flow the revenues are normally impacted as we have explained during our last conference call by the regional split of sales and its also impacted the progression throughout the quarter and in the first quarter December is normally our strongest month so that is what shows in the cash flow.
Operator
Your next question comes from the line of Jeff Johnson with Robert W. Baird.
Jeff Johnson – Robert W. Baird
Going back to the CEREC price increase and understanding obviously that it was just announced here at the beginning of January. When should we expect that to start flowing through the gross margin line in helping margins in CAD/CAM? Would there be a three to six month lagging effect for you or would it be somewhat immediate?
Jost Fischer
There are a number of factors of course when we announce it for February 1st so that means it will come after February 1st, but I want to draw your attention that there are still upgrades that we signed last July that have not been fully converted into sales at this point in time. As you know this is controlled by Patterson. Those upgrades will be fulfilled at the old pricing. There are some parts that will not be affected by the price increase other than everything we will deliver from February onwards will carry the increase.
Jeff Johnson – Robert W. Baird
From an upgrade standpoint on the MC XL do you expect that to continue beyond the next quarter too? Where do we think, I know might be a question for Patterson, additional upgrades beyond the 20% or so that have been signed up at this point?
Jost Fischer
Exactly, that’s a question for Patterson. Patterson controls the upgrade cycle but as far as we know it has not been finalized but there are still upgrades that need to be installed during the next month. I have no visibility whether this will be finalized this or next month or it takes another quarter.
Jeff Johnson – Robert W. Baird
Simone, a couple questions, I think going back to Steven’s question on cash flow, accounts receivable were up pretty significantly in the quarter, is there anything beyond currency impacting that or how should we think about that? Within your guidance for the year could you put any color around where you believe organic growth will trend for the year versus the currency impact for the year?
Simone Blank
First on your cash flow question, clearly receivable are always impacted by the Euro but by the revaluation to the US Dollar. Also it depends on the revenues throughout the quarter, in the first quarter we normally have a strong December and this was also the case this year. You have more receivables sitting there at the end of the quarter than you might see in other quarters, that’s one of the reasons.
The DSO is [inaudible] it remains in tact so there is no change to that. With regard to your guidance question, in general when the US Dollar declines it forces the Euro to touch our revenue line as about 50% of our revenues are based in Euros and more than 75% of our cost side is Euro. Accordingly, if the US Dollar declines it benefits our revenue line, increases our expenses and our operating income is relatively un-impacted.
Jeff Johnson – Robert W. Baird
Any expectations on organic growth for the year versus the top line impact from currency? How should we think about splitting those two up?
Simone Blank
As we said we reiterated our guidance and that’s it.
Jeff Johnson – Robert W. Baird
Last question, just a bigger picture question. We’ve been hearing in the field some talk about potentially coming out with a 2D and 3D combination system that would be a panoramic but also offer a smaller field cone beam. Anything like that in the pipeline and do you think that would have broader appeal instead of the specialist to maybe more general practitioners out there.
Jost Fischer
The first point is I think I mentioned it a number of times, we will not launch a new product during a quarterly conference call. Shows are usually for launches. Number two I want to draw your attention to our R&D expenses as you see our R&D expense remains at healthy levels over 6% that tells you we are working on new products and we are working on upgrades of existing products but we cannot detail this at this point in time. Sorry for that Jeff.
Jeff Johnson – Robert W. Baird
I understand Jost, I guess bigger picture, not asking exactly when something like that could launch but do you think a product like that, whether you would come out with one or a competitors would, would have an impact or would broaden the appeal of these products away from the specialists and more to the general practitioner where you’d have a much larger addressable market.
Jost Fischer
I would rather not answer this question at this point in time.
Operator
Your next question comes from the line of John Putnam with Dawson James Securities.
John Putnam – Dawson James Securities
CAD/CAM and Imaging get a lot of attention; maybe you could give us a little color, at least geographically, on Instruments and Treatment Centers if you could?
Jost Fischer
I think when you look at our Instruments division we are strong in the European field especially in Germany and I think that is where we saw good growth this year. We are expanding our market share in the Asia/Pacific which really is the focus at this point in time. These were the areas of good performance in the last quarter when you try to give a little more color.
John Putnam – Dawson James Securities
Is the US market just weak for those products?
Jost Fischer
No, I think when we look at our market shares or size of raw business in those market in the US we have relatively small size of raw business versus other. Whereas Europe we have a large size and we have a larger relatively in the Asia/Pacific as well.
John Putnam – Dawson James Securities
With respect to gross margin I know there are a lot of moving parts to it but can you give us a little guidance as to what you think might occur over the next quarter or two?
Jost Fischer
Certainly we do not give guidance on those factors here but there are a number of things; price increase usually helps the margin, US Dollar weakness certainly does not help margins in total when you look at the way we go to market. Product mix is a factor in our going forward and the factors are more towards the high end products we have a better margin than the low end products. Trading program in CEREC in office system surely has a negative effect on our gross margins.
Operator
Your next question comes from the line of John Kreger with William Blair.
John Kreger – William Blair
Could you give us an update on how you view your manufacturing efficiency both for the MC XL milling machine and also for GALILEOS, are you getting the contribution from those products now that you were hoping for?
Jost Fischer
When you look at the improvement of our CEREC margin sequentially one percentage point that is basically most of the effect comes from more efficient production as we go down the curve of more volume and more experience with the product. I think that is helping here and from a GALILEOS point of view we’ve never had that same issue because the GALILEOS is about 80% of the parts are coming from XG lines so we were starting down the line already when we started manufacturing so there is no impact because we already started. We had a head start with costs on the GALILEOS side.
Jeffrey Slovin
I would just add I think we are pleased at where our cost structure is on the GALILEOS and we are seeing the benefits in our margins today and that’s why you saw the gross profit increase on the Imaging side.
John Kreger – William Blair
I believe you guys talked about the CEREC Connect service that was launched a few months ago. Are there some economics behind that or that just a free service that you are offering your customers?
Jost Fischer
There is nothing built in our guidance or in our plans for this year, certainly I would encourage everyone to come to our show mid-winter in Chicago middle of February where we will show our system in operation. There is nothing planned at this point in time for fiscal ’08 in our plan.
John Kreger – William Blair
On last question on the consumable side of your business. Can you give us an update on how the usage is trending for your ceramic blocks that can be used for CEREC versus the third party blocks?
Jost Fischer
Yes, very positive as we launched it a year ago in January we have been full circle. Let me remind you that we do not want to take the largest market share yet, we just want to have a competitive offering by ourselves but we want to keep our material partners on the growth path here but we also want our fair share. I think given those two factors we’ve been very successful with our plans and with the execution of them.
Operator
[Operator Instructions] Your next question comes from the line of David [Cadigan] with JP Morgan.
David [Cadigan] – JP Morgan
First question, can we get a little more color, I might have missed it when you talked about the price increase for CAD/CAM was the $109,900 MC XL was that inclusive of that increase?
Jost Fischer
Yes, Patterson had a price on the market of $102,900 and that has been increased to $110,000. That price increase is actually a price increase to the market so it includes Patterson margin.
David [Cadigan] – JP Morgan
The trade in would presumably go up a little bit but still be kind of a difference between what you are giving the old customer.
Jeff Slovin
The trade in took effect on the old price and is other than implementation of actually installing it that’s over. It would take effect if we were to ever have another trade in that would occur in pricing.
David [Cadigan] – JP Morgan
It sounds like from an economy stand point you guys have a pretty positive outlook within the dental market, have you seen any issues for dentists as far as getting financing, receiving financing for the equipment and have you seen any possible delays in going from an order to an install based on financing?
Jost Fischer
No, but this is a question that our distribution partners would certainly be in a better position to answer. Let me draw your attention to the low interest environment that is out there on the one hand to take advantage of, dealers usually offer financing to doctors so they do that, it’s not a bank financing. We have adopted in the dental world they have had a great year in 2007 with an average of more than 7% increase in their net income. They are in a best position to take advantage of these factors out there in the market.
David [Cadigan] – JP Morgan
On GALILEOS are you able to update us on the ballpark number of installs. I think you gave us a number last quarter.
Jost Fischer
As you know last quarter we updated you on a number and that was a one time shot to just avoid confusion in the market. Generally we do not talk about volume installs or numbers here. I think we have a system of reporting and we want to stick to that.
David [Cadigan] – JP Morgan
Finally for Simone a quick question on the guidance are you still expecting amortization of about $85 million the adjusted operating income?
Simone Blank
If you are talking about amortization you know you can take the quarterly number and that’s a good ballpark for the rest of the year.
Operator
At this time there are no additional questions in the queue. I would now like to turn the call back over to Mr. Jost Fischer for the final remarks.
Jost Fischer
Thank you very much; we appreciate you joining us today for our first quarter conference call. We are happy with the quarter’s performance and we feel good about our outlook for the full year 2008. We look forward to updating you on our next quarterly conference call. Have a great weekend.
Operator
Thank you for joining in today’s conference this concludes the presentation you may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!