SOURCE: American Dental Partners, Inc.

October 30, 2006 16:05 ET

American Dental Partners Reports Third Quarter and Nine Months 2006 Financial Results

WAKEFIELD, MA -- (MARKET WIRE) -- October 30, 2006 -- American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter and nine month period ended September 30, 2006.

Comparing the third quarter of 2006 with the third quarter of 2005:

--  Net revenue was $53,842,000 as compared to $49,573,000, an increase of
    9%.
--  Earnings from operations were $4,441,000 as compared to $4,102,000, an
    increase of 8%.  Excluding stock-based compensation expense from 2006
    results (discussed below), earnings from operations increased 17%.
--  Net earnings were $2,414,000 as compared to $2,188,000, an increase of
    10%.  Excluding stock-based compensation expense from 2006 results
    (discussed below), net earnings increased 20%.
--  Diluted net earnings per share were $0.19, as compared to $0.17, an
    increase of 12%.  Excluding stock-based compensation expense from 2006
    results (discussed below), diluted net earnings per share increased 18%.
--  Diluted cash net earnings per share were $0.25 as compared to $0.23,
    an increase of 9%. Excluding stock-based compensation expense from 2006
    results (discussed below), diluted cash net earnings per share increased
    17%.
    
Comparing the first nine months of 2006 with the first nine months of 2005:
--  Net revenue was $162,986,000 as compared to $147,145,000, an increase
    of 11%.
--  Earnings from operations were $15,252,000 as compared to $13,967,000,
    an increase of 9%.  Excluding stock-based compensation expense from 2006
    results (discussed below), earnings from operations increased 17%.
--  Net earnings were $8,388,000 as compared to $7,651,000, an increase of
    10%.  Excluding stock-based compensation expense from 2006 results
    (discussed below), net earnings increased 18%.
--  Diluted net earnings per share were $0.65 as compared to $0.60, an
    increase of 8%.  Excluding stock-based compensation expense from 2006
    (discussed below), diluted net earnings per share increased 17%.
--  Diluted cash net earnings per share were $0.84 as compared to $0.78,
    an increase of 8%.  Excluding stock-based compensation expense from 2006
    (discussed below), diluted cash net earnings per share increased 14%.
    
Patient revenue of the Company's affiliated dental group practices, which is not consolidated with the Company's financial results, was $83,550,000 for the quarter as compared to $76,743,000 for the prior year's same quarter, an increase of 9%. Same market revenue growth for the Company's affiliated dental group practices as measured by patient revenue was 8% for the quarter.

For the quarter, cash flow from operations was $6,671,000, capital expenditures were $506,000 and amounts paid for affiliations, including contingent payments and affiliation costs, amounted to $1,309,000. The Company expanded two dental facilities and completed one practice affiliation which was combined with Associated Dental Care Providers, the Company's existing affiliated dental group practice in Arizona. Subsequent to the end of the third quarter, the Company completed the first of two de novo facilities for Assure Dental, its previously announced newly formed affiliate in Minnesota. Also, subsequent to the end of the quarter and as previously announced, the Company signed a definitive agreement to acquire the assets of Arizona's Tooth Doctor for Kids and expects this transaction to close during the fourth quarter of 2006.

The Company adopted Statement of Financial Accounting Standards No. 123 (R) "Share-Based Payment," effective January 1, 2006. As a result, the Company recognized $341,000 in stock-based compensation expense, $207,000 net of tax or $.02 per diluted share, during the third quarter and $1,019,000 in stock-based compensation expense, $618,000 net of tax or $.05 per diluted share, during the nine months ended September 30, 2006.

During the third quarter, the Company incurred approximately $298,000 in professional fees related to the previously announced litigation between the Company's Minnesota subsidiary, PDHC, Ltd., and PDG, P.A., the affiliated practice at Park Dental.

The Company's debt to total capitalization stood at 16% at September 30, 2006, compared to 24% at December 31, 2005. The Company achieved an annualized cash return on committed capital of 17% for the quarter and cash return on equity of 12% for the quarter. Excluding stock-based compensation expense and the PDG litigation expense, the Company's cash return on committed capital and cash return on equity would have been 19% and 13%, respectively.

Cash net earnings and cash earnings from operations 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.

For further discussion of these events and a comprehensive review of the third quarter ended September 30, 2006, the Company will host its previously announced conference call on Tuesday, October, 31, 2006 at 10:00 a.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. A replay of the webcast will be available at www.amdpi.com and www.streetevents.com approximately two hours after the call through 5:00 p.m. EST Tuesday, November 7.

American Dental Partners is one of the nation's leading business partners to dental group practices. The Company is affiliated with 21 dental group practices which have 201 dental facilities with approximately 1,876 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, 2005.

                      AMERICAN DENTAL PARTNERS, INC.
                           FINANCIAL HIGHLIGHTS
                 (in thousands, except per share amounts)
                                (unaudited)

                                    Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------- -------------------
                                      2006      2005      2006      2005
                                    --------- --------- --------- ---------

Net revenue                         $  53,842 $  49,573 $ 162,986 $ 147,145
Operating expenses:
   Salaries and benefits               22,886    21,496    67,822    62,473
   Lab fees and dental supplies         8,929     7,957    26,611    23,567
   Office occupancy expenses            6,924     5,962    19,741    16,990
   Other operating expenses             4,713     4,808    14,381    13,935
   General corporate expenses           2,645     2,137     9,375     7,337
   Depreciation expense                 1,964     1,805     5,815     5,119
   Amortization of intangible
    assets                              1,340     1,306     3,989     3,757
                                    --------- --------- --------- ---------
        Total operating expenses       49,401    45,471   147,734   133,178
                                    --------- --------- --------- ---------
Earnings from operations                4,441     4,102    15,252    13,967
   Interest expense, net                  449       477     1,403     1,299
                                    --------- --------- --------- ---------
Earnings before income taxes            3,992     3,625    13,849    12,668
   Income taxes                         1,578     1,437     5,461     5,017
                                    --------- --------- --------- ---------
Net earnings                        $   2,414 $   2,188 $   8,388 $   7,651
                                    ========= ========= ========= =========

Net earnings per common share:
   Basic                            $    0.20 $    0.18 $    0.68 $    0.64
                                    ========= ========= ========= =========
   Diluted                          $    0.19 $    0.17 $    0.65 $    0.60
                                    ========= ========= ========= =========
Weighted average common shares
 outstanding:
   Basic                               12,308    12,021    12,286    11,951
                                    ========= ========= ========= =========
   Diluted                             12,934    12,784    12,879    12,654
                                    ========= ========= ========= =========


                      AMERICAN DENTAL PARTNERS, INC.
                           FINANCIAL HIGHLIGHTS
                              (in thousands)
                                (unaudited)

                                                September 30, December 31,
                                                    2006          2005
                                                ------------- -------------

ASSETS
Current assets:
     Cash and cash equivalents                  $       1,750 $         592
     Receivables due from affiliated dental
      group practices                                  14,839        14,751
     Other current assets                               7,336         6,966
                                                ------------- -------------
          Total current assets                         23,925        22,309
                                                ------------- -------------

Property and equipment, net                            43,592        45,184
                                                ------------- -------------
Other non-current assets:
     Goodwill                                           5,095         5,095
     Intangible assets, net                            98,494        97,260
     Other assets                                         576           798
                                                ------------- -------------
          Total non-current assets                    104,165       103,153
                                                ------------- -------------
          Total assets                          $     171,682 $     170,646
                                                ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses      $      22,720 $      20,131
     Current maturities of debt                            81           123
                                                ------------- -------------
          Total current liabilities                    22,801        20,254
                                                ------------- -------------
Non-current liabilities:
     Long-term debt                                    20,558        32,039
     Other liabilities                                 16,258        16,458
                                                ------------- -------------
          Total non-current liabilities                36,816        48,497
                                                ------------- -------------
          Total liabilities                            59,617        68,751
                                                ------------- -------------

Commitments and contingencies
Stockholders' equity                                  112,065       101,895
                                                ------------- -------------
          Total liabilities and stockholders'
           equity                               $     171,682 $     170,646
                                                ============= =============



                      AMERICAN DENTAL PARTNERS, INC.
                       Supplemental Operating Data
                             (in thousands)
                               (unaudited)

    Reconciliation of GAAP earnings, as reported, to cash net earnings

                                 Three Months Ended     Nine Months Ended
                                   September 30,          September 30,
                                --------------------- ---------------------
                                  2006       2005       2006       2005
                                ---------- ---------- ---------- ----------


Net earnings (as reported)      $    2,414 $    2,188 $    8,388 $    7,651
Add: Amortization of intangible
 assets, net of tax                    812        789      2,417      2,269
                                ---------- ---------- ---------- ----------
Cash net earnings (1)           $    3,226 $    2,977 $   10,805 $    9,920
                                ========== ========== ========== ==========


Weighted average common shares
 outstanding                        12,934     12,784     12,879     12,654
                                ========== ========== ========== ==========
Diluted net earnings per share  $     0.19 $     0.17 $     0.65 $     0.60
                                ========== ========== ========== ==========
Diluted cash net earnings per
 share (1)                      $     0.25 $     0.23 $     0.84 $     0.78
                                ========== ========== ========== ==========


          Calculation of cash return on committed capital and cash
            return on equity for the three and nine months ended
                          September 30, 2006 and 2005


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

Earnings from operations        $   4,441  $   4,102  $  15,252  $  13,967
Add back:  Amortization of
 intangible assets                  1,340      1,306      3,989      3,757
                                ---------  ---------  ---------  ---------
Cash earnings from operations
 (2)                            $   5,781  $   5,408  $  19,241  $  17,724
                                =========  =========  =========  =========
Annualized cash earnings from
 operations                     $  23,124  $  21,632  $  25,655  $  23,632
                                =========  =========  =========  =========

Average committed capital (3)   $ 133,920  $ 128,586  $ 133,381  $ 124,203

Cash return on committed
 capital (2)                           17%        17%        19%        19%

Net earnings                    $   2,414  $   2,188  $   8,388  $   7,651
Add back:  Amortization of
 intangible assets, net of
 taxes                                812        789      2,417      2,269
                                ---------  ---------  ---------  ---------
Cash net earnings (1)           $   3,226  $   2,977  $  10,805  $   9,920
                                =========  =========  =========  =========
Annualized cash net earnings    $  12,904  $  11,908  $  14,407  $  13,227
                                =========  =========  =========  =========

Average stockholders' equity
 (3)                            $ 110,485  $  95,419  $ 106,980  $  92,002

Cash return on equity (2)              12%        12%        13%        14%


                    AMERICAN DENTAL PARTNERS, INC.
                     Supplemental Operating Data
                           (in thousands)
                            (unaudited)

      Patient revenue of the affiliated dental group practices (4)


                Three Months Ended            Nine Months Ended
                  September 30,                September 30,
                -------------------    %      -------------------    %
                  2006      2005     Change     2006      2005     Change
                --------- --------- --------  --------- --------- --------
Patient revenue
 - affiliated
 practices:
  Platform
   dental groups
   affiliated
   with the
   Company in
   both periods
   of comparison
   (5)          $  82,984 $  76,743        8% $ 242,172 $ 220,009       10%
  Platform
   dental groups
   that affiliated
   with the
   Company during
   periods of
   comparison         566         -      N/A      9,711     6,097       59%
                --------- --------- --------  --------- --------- --------
Total patient
 revenue           83,550    76,743        9%   251,883   226,106       11%
Amounts due to
 the Company
 under service
 agreements        52,704    48,363        9%   159,512   143,426       11%
                --------- --------- --------  --------- --------- --------
Amounts
 retained by
 affiliated
 practices      $  30,846 $  28,380        9% $  92,371 $  82,680       12%
                ========= ========= ========  ========= ========= ========


(1) 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.

(2) Cash earnings from operations is not a measure of financial performance
    under GAAP. The Company believes that cash return on committed capital
    and cash return on equity are useful financial measures for
    understanding its financial performance.

(3) Average committed capital calculated as average of beginning of quarter
    and end of quarter debt, including current portion, plus stockholders'
    equity.  Average stockholders' equity calculated as average of
    beginning of quarter and end of quarter stockholders' equity.

(4) Patient revenue of the affiliated dental group practices is not
    consolidated with the Company's financial statements.

(5) Same market patient revenue excludes new platform affiliations that
    occurred during the periods of comparison in which a new service
    agreement was entered into.

Contact Information

  • 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.
    201 Edgewater Drive, Suite 285
    Wakefield, MA 01880
    Phone: 781/224-0880
    Fax: 781/224-4216