WAKEFIELD, MA announced financial results today for the quarter
and year ended December 31, 2007. The Company's financial results
reflect non-cash charges required by generally accepted accounting
principles as a result of the previously announced settlement of
the litigation among PDG, P.A., PDHC, Ltd., one of the Company's
subsidiaries, and the Company effective February 29, 2008.
Comparing the fourth quarter of 2007 with the fourth quarter of
2006:
-- Net revenue was $79,583,000 as compared to $54,931,000, an increase of
45%.
-- Earnings (losses) from operations were $(27,016,000) as compared to
$4,930,000. Excluding expenses related to the PDG litigation (discussed
below), earnings from operations were $7,544,000 as compared to $5,527,000,
an increase of 36%.
-- Net earnings (losses) were $(18,824,000) as compared to $2,746,000.
Excluding expenses related to the PDG litigation and deferred financing
costs (discussed below), net earnings were $3,056,000 as compared to
$3,117,000, a decrease of 2%.
-- Diluted net earnings (losses) per share were $(1.41) as compared to
$0.21. Excluding expenses related to the PDG litigation and deferred
financing costs (discussed below), diluted net earnings per share were
$0.23 as compared to $0.24, a decrease of 4%.
-- Diluted cash net earnings (losses) per share were $(1.31) as compared
to $0.28. Excluding expenses related to the PDG litigation and deferred
financing costs (discussed below), diluted cash net earnings per share were
$0.33 as compared to $0.30, an increase of 10%.
Comparing the twelve months of 2007 with the same period in
2006:
-- Net revenue was $278,755,000 as compared to $217,917,000, an increase
of 28%.
-- Earnings (losses) from operations were $(6,354,000) as compared to
$20,182,000. Excluding expenses related to the PDG litigation (discussed
below), earnings from operations were $30,380,000 as compared to
$21,752,000, an increase of 40%.
-- Net earnings (losses) were $(7,716,000) as compared to $11,134,000.
Excluding expenses related to the PDG litigation and deferred financing
costs (discussed below), net earnings were $15,506,000 as compared to
$12,089,000, an increase of 28%.
-- Diluted net earnings (losses) per share were $(0.58) as compared to
$0.86. Excluding expenses related to the PDG litigation and deferred
financing costs (discussed below), diluted net earnings per share were
$1.16 as compared to $0.94, an increase of 23%.
-- Diluted cash net earnings (losses) per share were $(0.26) as compared
to $1.11. Excluding expenses related to the PDG litigation and deferred
financing costs (discussed below), diluted cash net earnings per share were
$1.47 as compared to $1.19, an increase of 24%.
PDG Litigation Accounting - 2007 Impact
Pursuant to Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies, the Company recognized non-cash
litigation settlement expense of $30,968,000 in the quarter
comprised of $39,968,000 as the estimated fair value of the assets
transferred to PDG in the settlement offset by $9,000,000 of the
$19,000,000 due to the Company under the transition services
agreement which is deemed to be the amount in excess of the fair
market value of the services to be provided under the transition
services agreement. The Company also recognized professional fees
associated with the litigation of $1,557,000 and $3,731,000 for the
quarter and year ended December 31, 2007, respectively, as compared
to $597,000 and $1,570,000 for the quarter and year ended December
31, 2006, respectively.
Pursuant to Emerging Issues Task Force Issue No. 98-14, Debtor's
Accounting for Changes in Line-of-Credit or Revolving-Debt
Arrangements, as a result of the previously announced forbearance
agreements with its lenders, the Company was required to expense
$851,000 of previously capitalized deferred financing costs.
Pro forma disclosures of these expenses are included in the
Supplemental Operating Data of this press release.
PDG Litigation Accounting - Expected 2008 Impact
Pursuant to Statement of Financial Accounting Standards No. 144
("SFAS 144"), Accounting for the Impairment or Disposal of
Long-Lived Assets, the Company will recognize the transfer of the
assets to PDG in the first quarter of 2008. The fair value of the
assets transferred to PDG as part of the litigation settlement is
in excess of the book value of the assets. At December 31, 2007,
the book value of the assets transferred to PDG was approximately
$7,300,000. As a result, the Company will recognize a gain of
approximately $32,000,000 which will be adjusted for the book value
of the assets transferred on February 29, 2008. The Company will
recognize net revenue of $10,000,000 for the transition management
services to be provided to PDG over the period from January 1, 2008
to September 30, 2008. Pursuant to SFAS 144, the Company has tested
and determined, based on the six dental facilities and service
agreement it has entered into with the doctor group in these
locations, that the intangible asset related to service agreements
of $3,466,000 as of December 31, 2007 is recoverable and therefore
no impairment expense is necessary.
Operating Information - Quarter and Year 2007
Patient revenue of the Company's affiliated dental group
practices increased 38% to $118,025,000 for the quarter, which
includes $112,845,000 from dental group practices which are
affiliated with the Company by means of service agreements and
$5,180,000 from Arizona's Tooth Doctor for Kids. Same market
patient revenue growth was 11% for the quarter. Patient revenue of
the Company's affiliated dental group practices increased 24% to
$418,471,000 for the year, which includes $396,045,000 from dental
group practices which are affiliated with the Company by means of
service agreements and $22,426,000 from Arizona's Tooth Doctor for
Kids. Same market patient revenue growth was 10% for the year.
Cash flow from operations was $5,982,000 for the quarter and
$25,574,000 for the year. Capital expenditures were $3,987,000 for
the quarter and $11,276,000 for the year. The Company completed two
de novo facilities and expanded and/or relocated four dental
facilities during the quarter. During the year, the Company
completed five de novo facilities and expanded and/or relocated 16
dental facilities.
Amounts paid for acquisitions and affiliations, including
affiliation costs and deferred and contingent payments, were
$1,094,000 for the quarter and $121,576,000 for the year. During
the quarter, the Company completed two in-market affiliations,
which were combined with an existing platform affiliated practice
in Texas. During the year, the Company completed four platform
affiliations and ten in-market affiliations which were combined
with existing platform affiliated practices in Maryland, Missouri,
New York, Texas and Wisconsin. Affiliations and acquisitions
completed during 2007 generated approximately $36,000,000 of
patient revenue from date of affiliation and generate patient
revenue of approximately $109,000,000 on an annualized basis.
For the year ended December 31, 2007, the former Park Dental
business, comprising 31 dental facilities, generated approximately
$89,000,000 in patient revenue and generated approximately
$64,000,000 of net revenue, $15,000,000 of earnings before
interest, taxes, depreciation and amortization and $13,000,000 of
earnings from operations to the Company. As part of the settlement
of the PDG litigation, the Company transferred 25 of 31 dental
facilities to PDG and retained six of the dental facilities as well
as its Minneapolis-based management team.
Operating Information - 2008 Expectations
As part of the settlement of litigation with PDG, the Company
has entered into a transition services agreement with PDG in which
PDG will pay the Company $19,000,000 for continuing interim
management services through September 30, 2008. Of this amount,
$10,000,000 will be recognized as net revenue in 2008 from January
to September 2008. The remainder was recognized in the fourth
quarter of 2007 as an offset to the non-cash settlement charge. PDG
is obligated to pay this transition management services fee in 12
equal monthly installments in 2008 irrespective of whether it
utilizes such services.
The Company's amended revolving credit facility and term loan
became effective concurrent with settlement of the PDG litigation,
and as a result, the Company has a $75,000,000 revolving credit
facility with $46,374,000 drawn, including outstanding letters of
credit, at March 4, 2008 and a $100,000,000 term loan, both of
which will mature in June 2009. The amended facilities permit the
Company to borrow up to $15,000,000 annually for capital
expenditures, $15,000,000 annually for acquisitions and up to
$13,000,000 for earnout and contingent payments on previously
completed acquisitions, subject to various covenant
limitations.
The Company anticipates that cash flow from operations and
borrowing availability under its revolving credit facility will
provide sufficient capital to continue reinvestment in its
affiliated dental groups in 2008. The Company expects capital
expenditures of approximately $10,000,000 for the year which will
include eight de novo and relocated dental facilities. While the
Company does not expect affiliation activities to be at the level
experienced in 2007, its pipeline of potential affiliations remains
active. Implementation of the Company's proprietary practice
management system, Improvis, will continue in 2008. At year end
2007, 93 of its dental facilities were operational on Improvis, and
the Company expects to implement Improvis at up to an additional
100 dental facilities in 2008.
A conference call will be held on Wednesday, March 5, 2008 at
1:00 p.m. EST, which will be broadcast live over the Internet at
www.amdpi.com. The call will be hosted by Gregory A. Serrao,
Chairman, President and Chief Executive Officer. To access the
webcast, participants should visit the Investor Relations section
of the website at least fifteen minutes prior to the start of the
conference call to download and install any necessary audio
software. The webcast will be available on the website for seven
days.
Cash net earnings and pro forma adjustments for litigation
contingencies and debtor accounting are non-GAAP financial
measures. In accordance with the requirement of SEC Regulation G,
please see the attached financial tables for a presentation of the
most comparable GAAP measures and the reconciliation to the nearest
GAAP measure and all additional reconciliations required by
Regulation G. Management believes these non-GAAP financial measures
are useful to an investor in assessing the Company's on-going
operations.
American Dental Partners is one of the nation's leading business
partners to dental group practices. The Company is affiliated with
26 dental group practices which have 241 dental facilities with
approximately 2,101 operatories located in 18 states.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: With the exception of the historical
information contained in this news release, the matters described
herein contain "forward-looking" statements that involve risk and
uncertainties that may individually or collectively impact the
matters herein described, including but not limited to the
possibility that we may not realize the benefits expected from our
acquisition and affiliation strategy, economic, regulatory and/or
other factors outside the control of the Company, which are
detailed from time to time in the "Risk Factors" section of the
Company's SEC reports, including the annual report on Form 10-K for
the year ended December 31, 2006.
AMERICAN DENTAL PARTNERS, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
--------- ---------- --------- ----------
Net revenue $ 79,583 $ 54,931 $ 278,755 $ 217,917
Operating expenses:
Salaries and benefits 35,516 23,460 119,411 91,282
Lab fees and dental
supplies 11,979 8,455 43,209 35,066
Office occupancy expenses 9,163 6,663 31,457 26,404
Other operating expenses 6,533 4,703 23,400 19,084
General corporate expenses(1) 3,560 2,724 14,427 11,126
Depreciation expense 2,887 2,030 9,422 7,845
Amortization of intangible
assets 2,401 1,369 7,049 5,358
Litigation expense(1) 34,560 597 36,734 1,570
--------- ---------- --------- ----------
Total operating
expenses 106,599 50,001 285,109 197,735
--------- ---------- --------- ----------
Earnings from operations (27,016) 4,930 (6,354) 20,182
Interest expense, net 3,227 445 5,253 1,848
Minority interest 41 54 390 54
--------- ---------- --------- ----------
Earnings before income taxes (30,284) 4,431 (11,997) 18,280
Income taxes (11,460) 1,685 (4,281) 7,146
--------- ---------- --------- ----------
Net earnings $ (18,824) $ 2,746 $ (7,716) $ 11,134
========= ========== ========= ==========
Net earnings per common share:
Basic $ (1.47) $ 0.22 $ (0.61) $ 0.91
========= ========== ========= ==========
Diluted $ (1.41) $ 0.21 $ (0.58) $ 0.86
========= ========== ========= ==========
Weighted average common shares
outstanding:
Basic 12,812 12,345 12,681 12,301
========= ========== ========= ==========
Diluted 13,337 13,022 13,312 12,916
========= ========== ========= ==========
AMERICAN DENTAL PARTNERS, INC.
FINANCIAL HIGHLIGHTS
(in thousands)
(unaudited)
December 31, December 31,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,376 $ 1,386
Accounts receivable, net (2) 23,621 16,939
Other current assets 22,284 6,860
------------ ------------
Total current assets 52,281 25,185
------------ ------------
Property and equipment, net 60,445 46,460
------------ ------------
Other non-current assets:
Goodwill 70,602 23,091
Intangible assets, net 179,969 101,113
Other assets 3,845 537
------------ ------------
Total non-current assets 254,416 124,741
------------ ------------
Total assets $ 367,142 $ 196,386
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (2) $ 40,524 $ 29,917
Accrued litigation expense 30,968 -
Other current liabilities 63 -
Current maturities of debt 188 81
------------ ------------
Total current liabilities 71,743 29,998
------------ ------------
Non-current liabilities:
Long-term debt 140,986 33,807
Other liabilities 38,616 16,216
------------ ------------
Total non-current liabilities 179,602 50,023
------------ ------------
Total liabilities 251,345 80,021
------------ ------------
Minority Interest 894 54
Commitments and contingencies
Stockholders' equity 114,903 116,311
------------ ------------
Total liabilities and stockholders'
equity $ 367,142 $ 196,386
============ ============
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts and selected statistical data)
(unaudited)
Pro forma consolidated statement of income
for the three months ended December 31, 2007 and 2006
Three Months Ended December 31,
------------------------------------------
Pro forma Pro forma
2007 adjustments* 2007 2006
--------- --------- ---------- ----------
Net revenue $ 79,583 $ - $ 79,583 $ 54,931
Operating expenses:
Salaries and benefits 35,516 - 35,516 23,460
Lab fees and dental supplies 11,979 - 11,979 8,455
Office occupancy expenses 9,163 - 9,163 6,663
Other operating expenses 6,533 - 6,533 4,703
General corporate expenses 3,560 - 3,560 2,724
Depreciation expense 2,887 - 2,887 2,030
Amortization of intangible
assets 2,401 - 2,401 1,369
Litigation expense 34,560 34,560 - 597
--------- --------- ---------- ----------
Total operating
expenses 106,599 34,560 72,039 50,001
--------- --------- ---------- ----------
Earnings from operations (27,016) (34,560) 7,544 4,930
Interest expense, net 3,227 851 2,376 445
Minority interest 41 - 41 54
--------- --------- ---------- ----------
Earnings before income taxes (30,284) (35,411) 5,127 4,431
Income taxes (11,460) 2,071 1,685
--------- ---------- ----------
Net earnings (18,824) 3,056 2,746
Amortization of service
agreements, net of tax 1,370 1,312 846
--------- ---------- ----------
Cash net earnings $ (17,454) $ 4,368 $ 3,592
========= ========== ==========
Diluted net earnings per common
share: $ (1.41) $ 0.23 $ 0.21
========= ========== ==========
Diluted cash net earnings per
common share: $ (1.31) $ 0.33 $ 0.28
========= ========== ==========
* Pro forma adjustments include
the following:
PDG litigation expenses:
Estimated fair value of
assets to be
transferred $ 39,968
Interim management fee
in excess of fair value (9,000)
Forgiveness of outstanding
accounts receivable 2,035
Professional fees
associated with litigation 1,557
---------
Total litigation expense $ 34,560
=========
Expense of capitalized
deferred financing costs: $ 851
=========
Three Months Ended December 31,
---------------------
Change in
Pro forma Pro forma pro forma
adjustments* 2006 results
--------- ---------- ---------
Net revenue $ - $ 54,931 45%
Operating expenses:
Salaries and benefits - 23,460 51%
Lab fees and dental
supplies - 8,455 42%
Office occupancy expenses - 6,663 38%
Other operating expenses - 4,703 39%
General corporate expenses - 2,724 31%
Depreciation expense - 2,030 42%
Amortization of intangible
assets - 1,369 75%
Litigation expense 597 - -
--------- ----------
Total operating
expenses 597 49,404 46%
--------- ----------
Earnings from operations (597) 5,527 36%
Interest expense, net - 445 434%
Minority interest - 54 -24%
--------- ----------
Earnings before income taxes (597) 5,028 2%
Income taxes 1,911 8%
----------
Net earnings 3,117 -2%
Amortization of service
agreements, net of tax 846 55%
----------
Cash net earnings $ 3,963 10%
==========
Diluted net earnings per common
share: $ 0.24 -4%
==========
Diluted cash net earnings per
common share: $ 0.30 10%
==========
* Pro forma adjustments include
the following:
PDG litigation expenses:
Estimated fair value of
assets to be
transferred $ -
Interim management fee
in excess of fair value -
Forgiveness of
outstanding accounts
receivable -
Professional fees
associated with
litigation 597
---------
Total litigation expense $ 597
=========
Expense of capitalized
deferred financing costs: $ -
=========
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts and selected statistical data)
(unaudited)
Pro forma consolidated statement of income
for the twelve months ended December 31, 2007 and 2006
Twelve Months Ended December 31,
------------------------------------------
Pro forma Pro forma
2007 adjustments* 2007 2006
--------- --------- ---------- ----------
Net revenue $ 278,755 $ - $ 278,755 $ 217,917
Operating expenses:
Salaries and benefits 119,411 - 119,411 91,282
Lab fees and dental
supplies 43,209 - 43,209 35,066
Office occupancy expenses 31,457 - 31,457 26,404
Other operating expenses 23,400 - 23,400 19,084
General corporate expenses 14,427 - 14,427 11,126
Depreciation expense 9,422 - 9,422 7,845
Amortization of intangible
assets 7,049 - 7,049 5,358
Litigation expense 36,734 36,734 - 1,570
--------- --------- ---------- ----------
Total operating
expenses 285,109 36,734 248,375 197,735
--------- --------- ---------- ----------
Earnings from operations (6,354) (36,734) 30,380 20,182
Interest expense, net 5,253 851 4,402 1,848
Minority interest 390 - 390 54
--------- --------- ---------- ----------
Earnings before income taxes (11,997) (37,585) 25,588 18,280
Income taxes (4,281) 10,082 7,146
--------- ---------- ----------
Net earnings (7,716) 15,506 11,134
Amortization of service
agreements, net of tax 4,280 4,034 3,255
--------- ---------- ----------
Cash net earnings $ (3,436) $ 19,540 $ 14,389
========= ========== ==========
Diluted net earnings per common
share: $ (0.58) $ 1.16 $ 0.86
========= ========== ==========
Diluted cash net earnings per
common share: $ (0.26) $ 1.47 $ 1.11
========= ========== ==========
* Pro forma adjustments include
the following:
PDG litigation expenses:
Estimated fair value of
assets to be
transferred $ 39,968
Interim management fee
in excess of fair value (9,000)
Forgiveness of outstanding
accounts receivable 2,035
Professional fees
associated with
litigation 3,731
---------
Total litigation expense $ 36,734
=========
Expense of capitalized
deferred financing costs: $ 851
=========
Twelve Months Ended December 31,
---------------------
Change in
Pro forma Pro forma pro forma
adjustments* 2006 results
--------- ---------- ---------
Net revenue $ - $ 217,917 28%
Operating expenses:
Salaries and benefits - 91,282 31%
Lab fees and dental supplies - 35,066 23%
Office occupancy expenses - 26,404 19%
Other operating expenses - 19,084 23%
General corporate expenses - 11,126 30%
Depreciation expense - 7,845 20%
Amortization of intangible
assets - 5,358 32%
Litigation expense 1,570 - -
--------- ----------
Total operating
expenses 1,570 196,165 27%
--------- ----------
Earnings from operations (1,570) 21,752 40%
Interest expense, net - 1,848 138%
Minority interest - 54 622%
--------- ----------
Earnings before income taxes (1,570) 19,850 29%
Income taxes 7,761 30%
----------
Net earnings 12,089 28%
Amortization of service
agreements, net of tax 3,255 24%
----------
Cash net earnings $ 15,344 27%
==========
Diluted net earnings per common
share: $ 0.94 23%
==========
Diluted cash net earnings per
common share: $ 1.19 24%
==========
* Pro forma adjustments include
the following:
PDG litigation expenses:
Estimated fair value of
assets to be
transferred $ -
Interim management fee
in excess of fair value -
Forgiveness of
outstanding accounts
receivable -
Professional fees
associated with
litigation 1,570
---------
Total litigation expense $ 1,570
=========
Expense of capitalized
deferred financing costs: $ -
=========
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts and selected statistical data)
(unaudited)
Selected statistical data
December 31,
--------------------------
Pro forma
2007 2007 (3) 2006
-------- -------- --------
Number of dental facilities 266 241 209
Number of operatories (4) 2,357 2,101 1,944
Number of affiliated dentists (5) 611 534 470
Patient revenue and same market patient revenue growth (6)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------- % ----------------- %
2007 2006 Change 2007 2006 Change
-------- -------- ----- -------- -------- -----
Patient revenue of
affiliated practices:
Platform dental group
practices affiliated
with us in both periods
of comparison $ 93,099 $ 83,909 11% $363,508 $331,434 10%
Platform dental group
practices that affiliated
with us during periods
of comparison 24,926 1,609 1449% 54,963 5,967 821%
-------- -------- ----- -------- -------- -----
Total patient revenue 118,025 85,518 38% 418,471 337,401 24%
Patient revenue of
Arizona's Tooth Doctor
for Kids 5,180 1,539 237% 22,426 1,539 1357%
-------- -------- ----- -------- -------- -----
Patient revenue of platform
dental group practices
affiliated with us by
means of service
agreements 112,845 83,979 34% 396,045 335,862 18%
Amounts due to us under
service agreements 73,008 52,365 39% 251,241 211,877 19%
-------- -------- ----- -------- -------- -----
Amounts retained by
platform dental group
practices affiliated
with us by means of
service agreements $ 39,837 $ 31,614 26% $144,804 $123,985 17%
======== ======== ===== ======== ======== =====
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(1) Professional fees associated with the litigation among PDG,
P.A., PDHC, Ltd., one of the Company's subsidiaries, and the
Company of $597,000 for the three months ended December 31, 2006
and $1,570,000 for the twelve months ended December 31, 2006, has
been reclassified from general corporate expense to litigation
expense to conform to the 2007 presentation.
(2) Amounts due to the affiliated practices of $566,000 as of
December 31, 2006 has been reclassified from accounts receivable,
net to accounts payable to conform to the 2007 presentation.
(3) On February 29, 2008, the Company completed the previously
announced settlement agreement with PDG, P.A., related to the
litigation among PDG, P.A., PDHC, Ltd., one of the Company's
subsidiaries, and the Company. These statistics reflect the assets
transferred as part of the settlement.
(4) An operatory is an area where dental care is performed and
generally contains a dental chair, a hand piece delivery system and
other essential equipment.
(5) Includes full-time equivalent general or specialty dentists
employed by or contracted with the affiliated practices, including
Arizona's Tooth Doctor for Kids.
(6) Includes patient revenue of affiliated dental group
practices which are not consolidated with the Company's financial
results and patient revenue of Arizona's Tooth Doctor for Kids
which is consolidated with the Company's financial results.
Contacts: Gregory A. Serrao Chairman, President and Chief
Executive Officer 781-224-0880 Breht T. Feigh Executive Vice
President, Chief Financial Officer and Treasurer 781-224-0880
American Dental Partners, Inc. 401 Edgewater Place, Suite 430
Wakefield, MA 01880 Phone: 781/224-0880 Fax: 781/224-4216
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