UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004
Commission File Number: 0-23363
AMERICAN DENTAL PARTNERS, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 04-3297858 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
American Dental Partners, Inc.
201 Edgewater Drive, Suite 285
Wakefield, Massachusetts 01880
(Address of principal executive offices, including zip code)
(781) 224-0880
(781) 224-4216 (fax)
(Registrant’s telephone number, including area code)
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 for 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. x YES ¨ NO
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) ¨ YES x NO
Indicate the number of shares outstanding of each of the issurer’s classes of common stock as of the latest practicable date.
The number of shares of Common Stock, $0.01 par value, outstanding as of August 9, 2004 was 7,624,193.
AMERICAN DENTAL PARTNERS, INC.
INDEX
2
AMERICAN DENTAL PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,812 | $ | 1,895 | ||||
| Receivables due from affiliated dental group practices |
14,743 | 16,611 | ||||||
| Inventories |
1,904 | 1,901 | ||||||
| Prepaid expenses and other receivables |
2,920 | 2,488 | ||||||
| Deferred income taxes |
931 | 987 | ||||||
| Total current assets |
22,310 | 23,882 | ||||||
| Property and equipment, net |
35,199 | 35,216 | ||||||
| Non-current assets: |
||||||||
| Goodwill, net |
5,095 | 5,095 | ||||||
| Intangible assets, net |
83,727 | 83,843 | ||||||
| Other assets |
915 | 1,036 | ||||||
| Total non-current assets |
89,737 | 89,974 | ||||||
| Total assets |
$ | 147,246 | $ | 149,072 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 8,232 | $ | 8,203 | ||||
| Accrued compensation and benefits |
5,492 | 5,672 | ||||||
| Accrued expenses |
5,288 | 4,684 | ||||||
| Current maturities of debt |
1,302 | 1,407 | ||||||
| Total current liabilities |
20,314 | 19,966 | ||||||
| Non-current liabilities: |
||||||||
| Long-term debt |
33,357 | 42,319 | ||||||
| Deferred income taxes |
12,693 | 12,692 | ||||||
| Other liabilities |
236 | 203 | ||||||
| Total non-current liabilities |
46,286 | 55,214 | ||||||
| Total liabilities |
66,600 | 75,180 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, par value $0.01 per share, 1,000,000 shares authorized, no shares issued or outstanding |
— | — | ||||||
| Common stock, par value $0.01 per share, 25,000,000 shares authorized, 8,191,345 and 7,934,940 shares issued and 7,608,845 and 7,352,440 shares outstanding at June 30, 2004 and December 31, 2003, respectively |
82 | 79 | ||||||
| Additional paid-in capital |
51,201 | 48,833 | ||||||
| Treasury stock, at cost, 582,500 shares |
(3,874 | ) | (3,874 | ) | ||||
| Retained earnings |
33,237 | 28,854 | ||||||
| Total stockholders’ equity |
80,646 | 73,892 | ||||||
| Total liabilities and stockholders’ equity |
$ | 147,246 | $ | 149,072 | ||||
See accompanying notes to interim consolidated financial statements.
3
AMERICAN DENTAL PARTNERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net revenue |
$ | 45,044 | $ | 41,012 | $ | 89,108 | $ | 80,044 | ||||
| Operating expenses: |
||||||||||||
| Salaries and benefits |
19,189 | 17,886 | 38,462 | 35,428 | ||||||||
| Lab fees and dental supplies |
7,205 | 6,875 | 14,360 | 13,386 | ||||||||
| Office occupancy expenses |
5,181 | 5,027 | 10,345 | 9,957 | ||||||||
| Other operating expenses |
4,165 | 3,714 | 8,324 | 7,336 | ||||||||
| General corporate expenses |
2,480 | 1,773 | 4,400 | 3,353 | ||||||||
| Depreciation expense |
1,479 | 1,360 | 2,915 | 2,640 | ||||||||
| Amortization of intangible assets |
1,103 | 1,056 | 2,185 | 2,096 | ||||||||
| Total operating expenses |
40,802 | 37,691 | 80,991 | 74,196 | ||||||||
| Earnings from operations |
4,242 | 3,321 | 8,117 | 5,848 | ||||||||
| Interest expense, net |
392 | 628 | 857 | 1,261 | ||||||||
| Earnings before income taxes |
3,850 | 2,693 | 7,260 | 4,587 | ||||||||
| Income taxes |
1,531 | 1,029 | 2,877 | 1,752 | ||||||||
| Net earnings |
$ | 2,319 | $ | 1,664 | $ | 4,383 | $ | 2,835 | ||||
| Net earnings per common share: |
||||||||||||
| Basic |
$ | 0.31 | $ | 0.23 | $ | 0.59 | $ | 0.39 | ||||
| Diluted |
$ | 0.29 | $ | 0.22 | $ | 0.55 | $ | 0.38 | ||||
| Weighted average common shares outstanding: |
||||||||||||
| Basic |
7,537 | 7,312 | 7,464 | 7,289 | ||||||||
| Diluted |
8,057 | 7,557 | 7,961 | 7,538 | ||||||||
See accompanying notes to interim consolidated financial statements.
4
AMERICAN DENTAL PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net earnings |
$ | 4,383 | $ | 2,835 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
| Depreciation |
2,915 | 2,640 | ||||||
| Amortization of intangible assets |
2,185 | 2,096 | ||||||
| Tax benefit on issuance of common stock for exercise of stock options |
1,188 | 28 | ||||||
| Other amortization |
113 | 114 | ||||||
| Deferred income taxes |
— | 2 | ||||||
| (Gain) loss on disposal of property and equipment |
(15 | ) | 7 | |||||
| Changes in assets and liabilities, net of acquisitions and affiliations: |
||||||||
| Receivables due from affiliated dental group practices |
1,849 | (489 | ) | |||||
| Other current assets |
(343 | ) | (459 | ) | ||||
| Accounts payable and accrued expenses |
853 | 1,065 | ||||||
| Accrued compensation and benefits |
(201 | ) | 167 | |||||
| Income taxes payable and receivable, net |
35 | (182 | ) | |||||
| Other |
89 | (1 | ) | |||||
| Net cash provided by operating activities |
13,051 | 7,823 | ||||||
| Cash flows from investing activities: |
||||||||
| Acquisitions and affiliations, net of cash acquired |
(2,238 | ) | (4,425 | ) | ||||
| Capital expenditures, net |
(2,797 | ) | (2,162 | ) | ||||
| Contingent and deferred payments |
(130 | ) | (131 | ) | ||||
| Proceeds from the sale of property and equipment |
15 | — | ||||||
| Payment of acquisition costs |
(81 | ) | (191 | ) | ||||
| Net cash used for investing activities |
(5,231 | ) | (6,909 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayments under revolving line of credit, net |
(8,425 | ) | (880 | ) | ||||
| Principal repayments of debt |
(642 | ) | (507 | ) | ||||
| Common stock issued for the employee stock purchase plan |
115 | 115 | ||||||
| Proceeds from issuance of common stock for exercise of stock options |
1,068 | 510 | ||||||
| Payment of debt issuance costs |
(19 | ) | — | |||||
| Net cash used for financing activities |
(7,903 | ) | (762 | ) | ||||
| (Decrease) increase in cash and cash equivalents |
(83 | ) | 152 | |||||
| Cash and cash equivalents at beginning of period |
1,895 | 844 | ||||||
| Cash and cash equivalents at end of period |
$ | 1,812 | $ | 996 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid during the period for interest, net |
$ | 802 | $ | 1,103 | ||||
| Cash paid during the period for income taxes, net |
$ | 1,655 | $ | 1,921 | ||||
| Acquisitions and affiliations: |
||||||||
| Assets acquired |
$ | 2,389 | $ | 5,688 | ||||
| Liabilities assumed and issued |
(151 | ) | (1,263 | ) | ||||