Attached files
| file | filename |
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| 8-K - FORM 8-K - AMERICAN DENTAL PARTNERS INC | d8k.htm |
| EX-99.1 - PRESS RELEASE - AMERICAN DENTAL PARTNERS INC | dex991.htm |
    Fourth
Quarter 2010 Earnings Conference Call
March 3, 2011
Exhibit 99.2 |
 2
Introductory Comments
“Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: With the exception of the historical information contained in this
press release, the matters described herein contain
"forward-looking" statements that involve risk and uncertainties
that may individually or collectively affect the matters herein described,
including but not limited to the Company's risks associated with overall or
regional economic conditions, dependence upon affiliated dental practices,
contracts the affiliated practices have with third-party payors,
government regulation of the dental industry, impact of health care reform,
dependence upon service agreements and the impact of any terminations or
potential terminations of such contracts, business interruptions, the
outcome of pending litigation and the Company's acquisition and affiliation
strategy, which are detailed from time to time in the "Risk Factors"
section of the Company's filings with the Securities and Exchange
Commission, including its annual report on Form 10-K and quarterly reports
on Form 10-Q.
Certain financial measures that are not in accordance with Generally Accepted
Accounting Principles are included in these slides. Please see our
press release, which is available on our website,
www.amdpi.com, for a presentation of the most comparable
GAAP measures and a reconciliation of these non-GAAP measures.
|
 3
Highlights
•
Financial results for 4Q10 vs. 4Q09:
Net revenue +6%
Earnings from operations -4%
Net earnings +16%
•
Completed one in-market acquisition
•
Completed two pediatric Medicaid
de novos |
 4
$109.9 million vs. $101.4 million +8.4%
•
+1.0% same market growth
•
+0.3% same market excluding
acquisitions growth
•
-0.4% same facility growth
Components of same market growth
•
+0.5% hours
•
+2.9% productivity per hour
•
-2.4% effectivity
(b)
Revenue mix
•
12% fee for service
•
77% PPO
•
6% managed care
•
5% Medicaid/CHIPS
Patient Revenue of Affiliated Practices (a)
Components of Same Market
-6%
-4%
-2%
0%
2%
4%
6%
4Q09
1Q10
2Q10
3Q10
4Q10
Hours
PPH
Effectivity
Same Market Growth
-4%
-2%
0%
2%
4%
4Q09
1Q10
2Q10
3Q10
4Q10
Same Practice
Development
Acquisitions
Revenue Mix
0%
25%
50%
75%
100%
4Q09
1Q10
2Q10
3Q10
4Q10
FFS
PPO
MC
Medicaid
(a)
See appendix for discussion of patient revenue of affiliated practices.
(b)
Effectivity
is the difference between full fee increases and the net fee increases actually
realized from patients and insurance companies.
|
 5
Income Statement (thousands, except per share amts)
2010
2009
Change
Comments
Net revenue
70,306
$
66,593
$
6%
Christie Dental (12/09) and Cincinnati Dental (6/10) platform acquisitions
Operating expenses:
Salaries and benefits
28,709
28,068
(131)
b.p.
Christie Dental and Cincinnati Dental (81 b.p.) // Arizona Tooth Doctor (69 b.p.)
Lab fees and dental supplies
10,352
9,550
38
b.p.
Office occupancy expenses
9,510
8,638
56
b.p.
Other operating expenses
6,938
5,734
126
b.p.
4Q10 higher insurance loss reserves of $400
General corporate expenses
3,867
3,471
29
b.p.
4Q10 bonus adjustment of $350 and 4Q09 lower professional fees of $250
4Q09 Christie Dental acquisition expenses of $560
EBITDA
10,930
11,132
-2%
EBITDA margin
15.5%
16.7%
(117)
b.p.
Depreciation expense
2,821
3,034
4Q09 facility closure of $294
Amortization of intangible assets
2,549
2,325
Earnings from operations
5,560
5,773
-4%
4Q10 Texas Tooth Doctor loss of $530 / 4Q09 Texas Tooth Doctor loss of
$153 4Q10 Arizona Tooth Doctor decreased $99
EFO margin
7.9%
8.7%
(76)
b.p.
Interest expense, net
1,666
2,571
Earnings before income taxes
3,894
3,202
22%
Income taxes
1,709
1,272
Effective tax rate
43.9%
39.7%
YTD effective tax rate of 39.8%
Consolidated net earnings
2,185
1,930
13%
Noncontrolling interest
18
65
Net earnings
2,167
$
1,865
$
16%
Diluted EPS
0.14
$
0.12
$
18%
Diluted weighted shares outstanding
15,754
16,009
-2%
Q4 |
 6
Cash Flow (thousands)
Operating activities
Patient receivable DSO @ 12/31/10
of 26 vs
DSO @ 12/31/09 of 28
Maintenance capital expenditures
Includes 7 Improvis EDR
implementations
Growth capital expenditures
Includes 2 pediatric Medicaid de
novos
in Texas
Acquisitions
Completed one in-market acquisition
$164,000 patient revenue in quarter
$0.6MM patient revenue annualized
4Q10
4Q09
Cash flow from operating activities
Net income and non-cash items
10,657
$
7,041
$
Working capital items
(1,705)
765
Cash flow from operating activities
8,952
7,806
Maintenance capital expenditures
(1,925)
(778)
Free cash flow before growth investments
7,027
7,028
Growth capital expenditures
(1,689)
(1,168)
Acquisitions
(535)
(27,899)
Cash flow before financing activities
4,803
$
(22,039)
$ |
 7
Capitalization ($ millions)
$0
$100
$200
$300
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Equity
Debt
Debt to Total Capitalization
34%
36%
36%
35%
Leverage
•
$102 million debt
•
2.0x debt/EBITDA (bank
compliance calculation)
•
$51 million available for borrowing
under credit facility (bank
compliance calculation)
4Q 2010 Share Repurchases
•
$2.2 million
•
185,000 shares
•
$12.09 per share
2010 Share Repurchases Recap
•
$4.7 million
•
407,000 shares (2.6% shares
outstanding)
•
$11.56 per share
34% |
 8
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
2009
2010
Reported EPS
After-tax Amortization Expense
(a) See Appendix for reconciliation of non-GAAP items.
(b) Calculated at $13 share price and twelve months ended December 31, 2010
financial results. Diluted Earnings per Share (a)
}+64%
}+56%
2010
PE(b)
Diluted Reported EPS
$0.68
19x
Diluted non-GAAP EPS (a)
$1.06
12x
+56%
-37% |
 9
Return on Market Value (millions, except per share amount)
2008
2009
2010
Cash flow from operations
38.6
$
(a)
40.4
$
36.3
$
Maintenance capital expenditures
2.8
2.3
4.7
$
Free cash flow
35.8
$
38.1
$
31.6
$
Diluted shares outstanding
15.8
Share price
13.00
$
Market value of equity
205.4
$
Cash flow from operations/market value equity
17.7%
Free cash flow/market value equity
15.4%
(a) Includes $9.9 million from the transition services agreement with PDG, P.A.
|
 10
•
Maintenance capital expenditures ~$12 million
•
On-going facility maintenance
•
92 facility Improvis EDR implementations
•
Growth capital expenditures of ~$17 million
•
7-9 pediatric Medicaid de novo facilities
•
6 private pay de novo facilities
•
7 relocation and expansion facilities
•
Four signed letters of intent for in-market acquisitions
•
Arizona
Medicaid
reimbursement
decrease
of
5%
scheduled
for
April
1
st
•
2 of 6 major medical health plans in Arizona will not pass decrease to us
•
Reinstitute compensation increases in April 2011, except for senior
management team, at a cost of $1.6 million on an annualized basis
2011 Commentary |
 11
•
Same market growth rate benefited from increases in both hours and
production
per
hour
(PPH).
First
quarter
since
3Q08
same
market
growth
rate excluding in-market acquisitions was positive.
•
Opened two de novo facilities for Texas Tooth Doctor during the quarter and
six de novo facilities during the year.
•
Completed one in-market acquisition during the quarter and three in-market
acquisitions and one platform acquisition during the year. These
transactions will generate approximately $21 million of patient revenue
annually.
Operating Comments |
 12
•
Improvis accomplishments:
–
EDR was implemented at 7 facilities during the quarter and at year end 57
facilities were using the EDR
–
Digital radiography functionality received FDA 510(k) clearance
–
Time keeping functionality being used by 70% of employees
–
Management dashboard system successfully being piloted at Metro Dentalcare
–
Orthodontic functionality will enter clinical testing in 2011
–
Preparation for EDR certification in 2011
•
Accreditation Association for Ambulatory Health Care:
–
ForwardDental
reaccredited January 2010
–
Carus Dental reaccredited March 2010
–
Western New York Dental Group reaccredited May 2010
–
Texas Tooth Doctor for Kids accredited December 2010
–
Cumberland Dental reaccredited January 2011
Operating Comments |
 13
Operating Comments
•
Employment picture and dental benefit enrollment presents internal growth
challenges.
(Percentage of U.S. population with a dental benefit)
Source: 2010 NADP/DDPA Joint Dental Benefits Report; U.S. Census Bureau
American FactFinder, Population Estimates Program; Bureau of Labor
Statistics, Seasonally Adjusted Non-farm Employees 100
125
150
175
200
2001
2002
2003
2004
2005
2006
2007
2008
2009
Dental Benefit Enrollment
Total Non-farm Employees
54%
58%
54%
54%
54%
54%
55%
57%
58% |
 14
Appendix |
 15
Non-GAAP Financial Measures
•
This
presentation
includes
non-GAAP
financial
measures.
In
accordance
with
the
requirements
of
Regulation
G
of
the
Securities and Exchange Commission, please see the attached financial tables for a
presentation of the most comparable GAAP measures, the reconciliation to
the nearest GAAP measure and all additional reconciliations required by Regulation G.
•
The Company believes non-GAAP financial measures, such as adjusted net
earnings and adjusted net earnings excluding service
agreement
amortization,
are
important
financial
measures
for
understanding
its
financial
performance.
The
Company
incurs significant amortization expense related to its service agreements in
contrast to many companies, in the same and other industries, that do not
amortize intangibles based on authoritative literature for goodwill and other intangible assets.
Expenses related to the Company’s debt refinancing and professional fees
related to the Company’s acquisitions have also been
excluded
from
the
Company’s
non-GAAP
financial
measures.
The
Company
believes
these
items
should
be
presented
separately
due
to
their
magnitude
and
non-recurring
impact
to
the
Company’s
ongoing
operations.
The
primary
limitations
associated with the Company’s use of non-GAAP measures are that these
measures may not be directly comparable to the amounts reported by other
companies. Management compensates for these limitations by providing a
detailed reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP measures in this presentation. Patient Revenue of the
Affiliated Practices •
The
Company
does
not
consolidate
the
financial
statements
of
the
practices
affiliated
with
the
Company
by
means
of
service
agreements with its financial statements. Patient revenue of the affiliated
practices is, however, a financial measure used by the Company’s
management to monitor operating performance and to help identify and analyze trends of the affiliated
practices that may affect the Company’s business. Most of the operating
expenses incurred by the Company, pursuant to the service agreements, are
on behalf of the affiliated practices in the operation of dental facilities.
These expenses are significantly affected by the patient revenue of the
affiliated practices. Appendix |
 16
Non-GAAP EPS Reconciliation (thousands, except per share
amt) 2010
2009
Net earnings (as reported)
10,339
$
7,729
$
Add: Write-off of expenses associated with debt refinancing, net of tax (a)
370
596
Add: Expenses associated with Christie Dental acquisition, net of tax (a)
-
338
Add: Expenses associated with Cincinnati Dental Services acquisition, net of tax (a)
203
-
Adjusted net earnings
10,912
8,663
Add: Amortization related to service agreements, net of tax (a)
5,960
5,509
Adjusted net earnings excluding service agreement amortization
16,872
$
14,172
$
Weighted average diluted shares outstanding
15,965
14,155
Diluted adjusted net earnings per share
0.68
$
0.61
$
Diluted adjusted net earnings excluding service agreement amortization per share
1.06
$
1.00
$
(a) Tax effected at effective tax rate in the period reported. |
 17 |