WAKEFIELD, MA announced financial results today for the quarter
ended March 31, 2008.
The Company's financial results reflect income and expenses,
including non-cash items, required by generally accepted accounting
principles as a result of the previously announced settlement of
litigation among PDG, P.A. ("PDG"), PDHC, Ltd., one of the
Company's subsidiaries, and the Company effective February 29,
2008. In addition to its actual results, the Company has provided a
pro forma financial presentation that excludes the operating
results of 25 dental facilities transferred to PDG and the
accounting impact associated with the litigation settlement from
both periods of comparison (see "PDG Litigation Settlement
Accounting" and "Supplemental Operating Data" tables).
Comparing actual results and pro forma results for the first
quarter of 2008 with the first quarter of 2007:
-- Net revenue was $79,811,000 as compared to $65,458,000. Pro forma net
revenue was $70,055,000 as compared to $52,748,000.
-- Earnings from operations were $37,880,000 as compared to $7,223,000.
Pro forma earnings from operations were $5,454,000 as compared to
$4,958,000.
-- Net earnings were $21,525,000 as compared to $3,879,000. Pro forma
net earnings were $1,744,000 as compared to $2,515,000.
-- Diluted net earnings per share were $1.65 as compared to $0.30. Pro
forma diluted net earnings per share were $0.13 as compared to $0.19.
-- Diluted cash net earnings per share were $1.75 as compared to $0.36.
Pro forma diluted cash net earnings per share were $0.24 as compared to
$0.26.
PDG Litigation Settlement Accounting
As previously reported, the Company completed the settlement of
the litigation with PDG effective February 29, 2008. As part of
this settlement, the Company transferred the operating assets of 25
dental facilities to PDG. Pursuant to Statement of Financial
Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long Lived Assets, the Company recognized a non-cash
gain of $30,127,000 which represents the fair market value of the
assets transferred to PDG of $39,968,000 less the book value of the
net assets transferred of $9,205,000 and litigation expenses of
approximately $636,000.
Prior to the transfer of the 25 facilities to PDG, the Company
recognized as net revenue expense reimbursement of $6,423,000 from
PDG for the operating expenses of these facilities through February
29, 2008, along with operating expenses of the PDG dentists who
remain, on a temporary basis, in the dental facilities retained by
the Company.
As part of the settlement of the litigation with PDG, the
Company 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. 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 will recognize $10,000,000 of this amount as
net revenue from January to September 2008, and the remainder,
which was deemed to be in excess of fair market value for providing
such management services, was recognized in the fourth quarter of
2007 as an offset to the non-cash litigation settlement
expense.
Operating Results
Patient revenue of the Company's affiliated dental group
practices increased 9% to $107,374,000 for the quarter, which
includes $101,252,000 from dental group practices which are
affiliated with the Company by means of service agreements and
$6,122,000 from Arizona's Tooth Doctor for Kids. Same market
patient revenue growth was 9.8% for the quarter and 2.3% excluding
in-market affiliations.
Cash flow from operations was $971,000 for the quarter. Capital
expenditures were $3,929,000 for the quarter. The Company completed
two de novo facilities and expanded and/or relocated three dental
facilities during the quarter. Amounts paid for acquisitions and
affiliations, including affiliation costs and deferred and
contingent payments, were $2,376,000 for the quarter. During the
quarter, the Company completed one affiliation which generates
approximately $1,700,000 of patient revenue on an annualized
basis.
Cash net earnings and pro forma adjustments related to disposed
assets 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.
For further discussion of these events and a comprehensive
review of the first quarter ended March 31, 2008, the Company will
host its previously announced conference call on Tuesday, April 29,
2008 at 10:00 a.m. EDT, 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. A replay of the webcast will be available at
www.amdpi.com approximately two hours after the call through 6:00
p.m. EDT Tuesday, May 6, 2008.
American Dental Partners is one of the nation's leading business
partners to dental group practices. The Company is affiliated with
27 dental group practices which have 244 dental facilities with
approximately 2,099 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, 2007.
AMERICAN DENTAL PARTNERS, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
------------------------
2008 2007
----------- ------------
Net revenue $ 79,811 $ 65,458
Operating expenses:
Salaries and benefits 35,501 27,971
Lab fees and dental supplies 11,981 10,174
Office occupancy expenses 9,013 7,136
Other operating expenses 6,772 5,501
General corporate expenses 3,630 3,381
Depreciation expense 2,774 2,104
Amortization of intangible assets 2,387 1,442
Litigation settlement (gain) expense (30,127) 526
----------- ------------
Total operating expenses 41,931 58,235
----------- ------------
Earnings from operations 37,880 7,223
Interest expense, net 2,455 625
Minority interest 140 157
----------- ------------
Earnings before income taxes 35,285 6,441
Income taxes 13,760 2,562
----------- ------------
Net earnings $ 21,525 $ 3,879
=========== ============
Net earnings per common share:
Basic $ 1.68 $ 0.31
=========== ============
Diluted $ 1.65 $ 0.30
=========== ============
Weighted average common shares outstanding:
Basic 12,839 12,456
=========== ============
Diluted 13,084 13,145
=========== ============
AMERICAN DENTAL PARTNERS, INC.
FINANCIAL HIGHLIGHTS
(in thousands)
(unaudited)
March 31, December 31,
2008 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,118 $ 6,376
Accounts receivable, net 39,419 32,621
Other current assets 7,978 25,261
------------ ------------
Total current assets 53,515 64,258
------------ ------------
Property and equipment, net 52,313 60,445
------------ ------------
Other non-current assets:
Goodwill 70,622 70,602
Intangible assets, net 179,774 179,969
Other assets 2,863 2,232
------------ ------------
Total non-current assets 253,259 252,803
------------ ------------
Total assets $ 359,087 $ 377,506
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 37,868 $ 40,524
Accrued litigation expense - 39,968
Other current liabilities - 3,475
Current maturities of debt 190 188
------------ ------------
Total current liabilities 38,058 84,155
------------ ------------
Non-current liabilities:
Long-term debt 146,302 140,986
Other liabilities 37,759 36,568
------------ ------------
Total non-current liabilities 184,061 177,554
------------ ------------
Total liabilities 222,119 261,709
------------ ------------
Minority Interest 541 894
Commitments and contingencies
Stockholders' equity 136,427 114,903
------------ ------------
Total liabilities and stockholders' equity $ 359,087 $ 377,506
============ ============
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts)
(unaudited)
Pro forma consolidated statement of income
for the three months ended March 31, 2008
Three Months Ended March 31, 2008
Pro Forma Adjustments
-----------------------
Settlement Management Pro Forma
2008 Assets(a) Services(b) 2008
-------- --------- ---------- ---------
Net revenue $ 79,811 $ 6,423 $ 3,333 $ 70,055
Operating expenses
Salaries and benefits 35,501 3,755 852 30,894
Lab fees and dental supplies 11,981 1,301 - 10,680
Office occupancy expenses 9,013 863 60 8,090
Other operating expenses 6,772 252 108 6,412
General corporate expenses 3,630 - - 3,630
Litigation expenses (30,127) (30,127)(c) - -
-------- --------- ---------- ---------
EBITDA 43,041 30,379 2,313 10,349
Depreciation 2,774 252 14 2,508
Amortization 2,387 - - 2,387
-------- --------- ---------- ---------
Earnings from operations 37,880 30,127 2,299 5,454
Interest expense, net 2,455 - - 2,455
Minority interest 140 - - 140
-------- --------- ---------- ---------
Earnings before income taxes 35,285 30,127 2,299 2,859
Income taxes 13,760 1,115
-------- ---------
Net earnings 21,525 1,744
Amortization of service
agreements, net of tax 1,351 1,351
-------- ---------
Cash net earnings (d) $ 22,876 $ 3,095
======== =========
Diluted net earnings per common
share $ 1.65 $ 0.13
======== =========
Diluted cash net earnings per
common share (d) $ 1.75 $ 0.24
======== =========
(a) Includes expense reimbursement associated with (i) 25 dental facilities
transferred to PDG as part of the litigation settlement and (ii) PDG
doctors currently practicing in six dental facilities retained by the
Company.
(b) The Company has agreed to provide interim management services to PDG
through September 30, 2008. Includes interim management fee revenue,
expenses associated with providing such services, and salaries and
benefits expense, including severance, of management staff who have
been terminated as a result of realigning the Company's Minnesota-based
management team.
(c) Includes gain on disposal of assets of $30,763,000 and professional
fees associated with PDG litigation of $636,000.
(d) Cash net earnings and diluted cash net earnings per share are not
measures of financial performance under GAAP. Cash net earnings
excludes amortization expense related to intangible assets, net of tax.
The Company incurs significant amortization expense related to its
service agreements while many companies, both in the same industry and
other industries, no longer amortize a significant portion of their
intangible assets pursuant to Statement of Financial Accounting
Standards No. 142 - Goodwill and Other Intangible Assets. The Company
believes that cash net earnings and diluted cash net earnings per share
are important financial measures for understanding its relative
financial performance.
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts)
(unaudited)
Pro forma consolidated statement of income
for the three months ended March 31, 2007
Three Months Ended March 31, 2007
Pro Forma Adjustments
-----------------------
Settlement Management Pro Forma
2007 Assets(e) Services(f) 2007
-------- --------- ---------- ---------
Net revenue $ 65,458 $ 9,220 $ 3,490 $ 52,748
Operating expenses
Salaries and benefits 27,971 5,154 520 22,297
Lab fees and dental supplies 10,174 1,805 - 8,369
Office occupancy expenses 7,136 1,135 49 5,952
Other operating expenses 5,501 781 113 4,607
General corporate expenses 3,381 - - 3,381
Litigation expenses 526 526 (g) - -
--------- --------- ---------- ---------
EBITDA 10,769 (181) 2,808 8,142
Depreciation 2,104 345 17 1,742
Amortization 1,442 - - 1,442
--------- --------- ---------- ---------
Earnings from operations 7,223 (526) 2,791 4,958
Interest expense, net 625 - - 625
Minority interest 157 - - 157
--------- --------- ---------- ---------
Earnings before income taxes 6,441 (526) 2,791 4,176
Income taxes 2,562 1,661
--------- ---------
Net earnings 3,879 2,515
Amortization of service
agreements, net of tax 867 867
--------- ---------
Cash net earnings (h) $ 4,746 $ 3,382
========= =========
Diluted net earnings per common
share $ 0.30 $ 0.19
========= =========
Diluted cash net earnings per
common share (h) $ 0.36 $ 0.26
========= =========
(e) Includes expense reimbursement associated with 25 dental facilities
transferred to PDG as part of litigation settlement.
(f) The Company provided management services pursuant to a Service
Agreement with PDG through December 31, 2007. Includes estimated
proportion of service fee revenue and associated expenses for 25 of the
31 dental facilities transferred to PDG.
(g) Includes professional fees associated with PDG litigation.
(h) Cash net earnings and diluted cash net earnings per share are not
measures of financial performance under GAAP. Cash net earnings
excludes amortization expense related to intangible assets, net of tax.
The Company incurs significant amortization expense related to its
service agreements while many companies, both in the same industry and
other industries, no longer amortize a significant portion of their
intangible assets pursuant to Statement of Financial Accounting
Standards No. 142 - Goodwill and Other Intangible Assets. The Company
believes that cash net earnings and diluted cash net earnings per
share are important financial measures for understanding its relative
financial performance.
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except per share amounts)
(unaudited)
Pro forma consolidated statement of income
for the three months ended March 31, 2008 and 2007
Change in
Pro Forma Pro Forma Pro Forma
2008 2007 Results
---------- ---------- ---------
Net revenue $ 70,055 $ 52,748 33%
Operating expenses
Salaries and benefits 30,894 22,297 39%
Lab fees and dental supplies 10,680 8,369 28%
Office occupancy expenses 8,090 5,952 36%
Other operating expenses 6,412 4,607 39%
General corporate expenses 3,630 3,381 7%
---------- ---------- ---------
EBITDA 10,349 8,142 27%
Depreciation 2,508 1,742 44%
Amortization 2,387 1,442 66%
---------- ---------- ---------
Earnings from operations 5,454 4,958 10%
Interest expense, net 2,455 625 293%
Minority interest 140 157 -11%
---------- ---------- ---------
Earnings before income taxes 2,859 4,176 -32%
Income taxes 1,115 1,661 -33%
---------- ---------- ---------
Net earnings 1,744 2,515 -31%
Amortization of service agreements, net of
tax 1,351 867 56%
---------- ---------- ---------
Cash net earnings $ 3,095 $ 3,382 -8%
========== ========== =========
Diluted net earnings per common share $ 0.13 $ 0.19 -32%
========== ========== =========
Diluted cash net earnings per common share $ 0.24 $ 0.26 -8%
========== ========== =========
AMERICAN DENTAL PARTNERS, INC.
SUPPLEMENTAL OPERATING DATA
(in thousands, except selected statistical data)
(unaudited)
Selected statistical data
March 31, December 31,
2008 2007
------------ ------------
Number of dental facilities 244 266
Number of operatories (i) 2,099 2,357
Number of affiliated dentists (j) 550 611
(i) 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.
(j) Includes full-time equivalent general or specialty dentists employed by
or contracted with the affiliated practices, including Arizona's Tooth
Doctor for Kids.
Patient revenue and same market patient revenue growth (k)
Three Months Ended
March 31,
--------------------- %
2008 2007 Change
---------- ---------- ---------
Patient revenue of affiliated practices:
Platform dental group practices
affiliated with us in both periods of
comparison $ 83,082 $ 75,640 9.8%
Platform dental group practices that
affiliated with us during periods of
comparison (l) 24,292 22,899 6.1%
---------- ---------- ---------
Total patient revenue 107,374 98,539 9.0%
Patient revenue of Arizona's Tooth Doctor
for Kids 6,122 5,803 5.5%
---------- ---------- ---------
Patient revenue of platform dental group
practices affiliated with us by means of
service agreements 101,252 92,736 9.2%
Amounts due to us under service agreements 62,795 58,480 7.4%
---------- ---------- ---------
Amounts retained by platform dental group
practices affiliated with us by means of
service agreements $ 38,457 $ 34,256 12.3%
========== ========== =========
(k) 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.
(l) In addition to platform affiliations completed since January 1, 2007,
also includes patient revenue of the 31 dental facilities comprising
Park Dental for the three months ended March 31, 2007 and the six
dental facilities retained by the Company for the three months ended
March 31, 2008.
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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