SOURCE: American Dental Partners, Inc.

October 29, 2007 18:18 ET

American Dental Partners Reports Third Quarter and Nine Months 2007 Financial Results

WAKEFIELD, MA--(Marketwire - October 29, 2007) - American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter and nine months ended September 30, 2007.

Comparing the third quarter of 2007 with the third quarter of 2006:

--  Net revenue was $67,162,000 as compared to $53,842,000, an increase of
    25%.
--  Earnings from operations were $5,252,000 as compared to $4,441,000, an
    increase of 18%.
--  Net earnings were $2,701,000 as compared to $2,414,000, an increase of
    12%.
--  Diluted net earnings per share were $0.20 as compared to $0.19, an
    increase of 5%.
--  Diluted cash net earnings per share were $0.28 as compared to $0.25,
    an increase of 12%.
    

Comparing the first nine months of 2007 with the first nine months of 2006:

--  Net revenue was $199,172,000 as compared to $162,986,000, an increase
    of 22%.
--  Earnings from operations were $20,662,000 as compared to $15,252,000,
    an increase of 35%.
--  Net earnings were $11,108,000 as compared to $8,388,000, an increase
    of 32%.
--  Diluted net earnings per share were $0.84 as compared to $0.65, an
    increase of 29%.
--  Diluted cash net earnings per share were $1.04 as compared to $0.84,
    an increase of 24%.
    

Patient revenue of the Company's affiliated dental group practices increased 22% to $101,781,000 for the quarter, which includes $96,090,000 from dental group practices which are affiliated with the Company by means of service agreements and $5,691,000 from Arizona's Tooth Doctor for Kids. Same market patient revenue growth was 9.5% for the quarter.

Cash flow from operations was $6,212,000 for the quarter. Capital expenditures were $1,590,000 for the quarter. The Company expanded and/or relocated four dental facilities during the quarter. Amounts paid for affiliations and acquisitions, including contingent payments and affiliation costs, amounted to $103,628,000 for the quarter. During the quarter the Company completed four in-market affiliations, which were combined with existing platform affiliated practices in Missouri, New York and Wisconsin. The Company, as previously announced, also completed the acquisition of Metropolitan Dental Holdings, Inc., effective September 25, 2007. Affiliations and acquisitions completed during the first nine months generate approximately $107 million in annualized patient revenue.

The Company incurred professional fees of approximately $830,000 during the quarter as compared to $298,000 for the prior year's same quarter 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 recognized $490,000 in stock-based compensation expense, $324,000 net of tax or $0.02 per diluted share, during the quarter as compared to $341,000, $224,000 net of tax or $0.02 per diluted share, for the prior year's same quarter.

Based on litigation developments subsequent to September 30, 2007, the Company is proceeding on the basis that PDHC, Ltd. will no longer be providing dental facilities and business services after December 31, 2007 to PDG, P.A. pursuant to the Service Agreement between the two parties. Accordingly, the Company is assessing the potential impairment of the intangible asset associated with the Service Agreement between PDHC and PDG. At September 30, 2007, the book value of this intangible asset was approximately $3,500,000. At September 30, 2007, the Company also had accounts receivable due from PDG, P.A. of approximately $3,000,000. The Company has entered into a new affiliation with a Minnesota professional limited liability company. The Company intends to continue to operate its Park Dental business with this Minnesota affiliated practice effective January 1, 2008.

Debt to capitalization was 52% at September 30, 2007, reflecting the acquisition of Metropolitan Dental Holdings, Inc. and the affiliation with Barzman, Kasimov & Vieth. Excluding these transactions, pro forma debt to capitalization was 22%, compared to 23% at December 31, 2006, and the Company achieved a pro forma annualized cash return on committed capital and cash return on equity for the quarter of 16% and 11%, respectively, compared to the prior year's annualized cash return on committed capital and cash return on equity for the quarter of 17% and 12%, respectively.

Cash net earnings, cash earnings from operations, pro forma cash return on committed capital and pro forma cash return on equity 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, 2007, the Company will host its previously announced conference call on Tuesday, October 30, 2007 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, November 6, 2007.

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 261 dental facilities with approximately 2,301 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  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------- -------------------
                                      2007      2006      2007      2006
                                    --------- --------- --------- ---------

Net revenue                         $  67,162 $  53,842 $ 199,172 $ 162,986
Operating expenses:
   Salaries and benefits               28,730    22,886    83,895    67,822
   Lab fees and dental supplies        10,550     8,929    31,230    26,611
   Office occupancy expenses            7,885     6,924    22,294    19,741
   Other operating expenses             5,807     4,713    16,867    14,381
   General corporate expenses           4,990     2,645    13,041     9,375
   Depreciation expense                 2,225     1,964     6,535     5,815
   Amortization of intangible
    assets                              1,723     1,340     4,648     3,989
                                    --------- --------- --------- ---------
      Total operating expenses         61,910    49,401   178,510   147,734
                                    --------- --------- --------- ---------
Earnings from operations                5,252     4,441    20,662    15,252
   Interest expense, net                  823       449     2,026     1,403
   Minority interest                      102         -       349         -
                                    --------- --------- --------- ---------
Earnings before income taxes            4,327     3,992    18,287    13,849
   Income taxes                         1,626     1,578     7,179     5,461
                                    --------- --------- --------- ---------
Net earnings                        $   2,701 $   2,414 $  11,108 $   8,388
                                    ========= ========= ========= =========

Net earnings per common share:
   Basic                            $    0.21 $    0.20 $    0.88 $    0.68
                                    ========= ========= ========= =========
   Diluted                          $    0.20 $    0.19 $    0.84 $    0.65
                                    ========= ========= ========= =========
Weighted average common shares
 outstanding:
   Basic                               12,779    12,308    12,636    12,286
                                    ========= ========= ========= =========
   Diluted                             13,395    12,934    13,267    12,879
                                    ========= ========= ========= =========





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


                                                 September 30, December 31,
                                                      2007         2006
                                                  ------------ ------------
ASSETS
Current assets:
   Cash and cash equivalents                      $      7,410 $      1,386
   Accounts receivable, net                             24,640       16,373
   Other current assets                                  9,741        6,860
                                                  ------------ ------------
      Total current assets                              41,791       24,619
                                                  ------------ ------------

Property and equipment, net                             57,866       46,460
                                                  ------------ ------------
Other non-current assets:
   Goodwill                                             65,585       23,091
   Intangible assets, net                              181,481      101,113
   Other assets                                          4,734          537
                                                  ------------ ------------
      Total non-current assets                         251,800      124,741
                                                  ------------ ------------
      Total assets                                $    351,457 $    195,820
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses          $     35,730 $     29,351
   Current maturities of debt                              186           81
                                                  ------------ ------------
      Total current liabilities                         35,916       29,432
                                                  ------------ ------------
Non-current liabilities:
   Long-term debt                                      143,070       33,807
   Other liabilities                                    37,941       16,216
                                                  ------------ ------------
      Total non-current liabilities                    181,011       50,023
                                                  ------------ ------------
      Total liabilities                                216,927       79,455
                                                  ------------ ------------

Minority interest                                          853           54

Commitments and contingencies
Stockholders' equity                                   133,677      116,311
                                                  ------------ ------------
      Total liabilities and stockholders' equity  $    351,457 $    195,820
                                                  ============ ============





                        AMERICAN DENTAL PARTNERS, INC.
                         Supplemental Operating Data
      (in thousands, except per share amounts and statistical data)
                                (unaudited)

                         Selected statistical data



                                        September 30, September 30,   %
                                            2007          2006      Change
                                        ------------- ------------- ------

Number of dental facilities                       261           201     30%
Number of operatories (1)                       2,301         1,876     23%
Number of affiliated dentists (2)                 609           461     32%





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


                                 Three Months Ended    Three Months Ended
                                 September 30, 2007    September 30, 2006
                                --------------------- ---------------------
                                            Diluted               Diluted
                                    $      Per Share      $      Per Share
                                ---------- ---------- ---------- ----------

Net earnings, as reported       $    2,701 $     0.20 $    2,414 $     0.19
Service agreement amortization
 expense, net of tax                 1,031       0.08        810       0.06
                                ---------- ---------- ---------- ----------
Cash net earnings (3)                3,732       0.28      3,224       0.25
FAS123R stock option expense,
 net of tax                            324       0.02        224       0.02
PDG litigation expense, net of
 tax                                   516       0.04        180       0.01
                                ---------- ---------- ---------- ----------
Adjusted cash net earnings      $    4,572 $     0.34 $    3,628 $     0.28
                                ========== ========== ========== ==========
Diluted weighted average shares
 outstanding                        13,395                12,934
                                ==========            ==========


                                  Nine Months Ended    Nine Months Ended
                                 September 30, 2007    September 30, 2006
                                --------------------- ---------------------
                                            Diluted               Diluted
                                    $      Per Share      $      Per Share
                                ---------- ---------- ---------- ----------
Net earnings, as reported       $   11,108 $     0.84 $    8,388 $     0.65
Service agreement amortization
 expense, net of tax                 2,702       0.20      2,411       0.19
                                ---------- ---------- ---------- ----------
Cash net earnings (3)               13,810       1.04     10,799       0.84
FAS123R stock option expense,
 net of tax                            928       0.07        674       0.05
PDG litigation expense, net of
 tax                                 1,320       0.10        598       0.05
                                ---------- ---------- ---------- ----------
Adjusted cash net earnings      $   16,058 $     1.21 $   12,071 $     0.94
                                ========== ========== ========== ==========
Diluted weighted average shares
 outstanding                        13,267                12,879
                                ==========            ==========





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


Calculation of cash return on committed capital and cash return on equity
for the three and nine months ended September 30, 2007 and 2006, excluding
certain acquisitions and affiliations (6)


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

Earnings from operations        $   5,121  $   4,441  $  20,531  $  15,252
Add back:  Amortization of
 intangible assets                  1,625      1,340      4,550      3,989
                                ---------  ---------  ---------  ---------
Cash earnings from operations
 (4)                            $   6,746  $   5,781  $  25,081  $  19,241
                                =========  =========  =========  =========
Annualized cash earnings from
 operations                     $  26,984  $  23,124  $  33,441  $  25,655
                                =========  =========  =========  =========

Average committed capital (5)   $ 172,258  $ 133,920  $ 160,913  $ 133,381

Cash return on committed
 capital (4)                           16%        17%        21%        19%

Net earnings (6)                $   2,776  $   2,414  $  11,181  $   8,388
Add back:  Amortization of
 intangible assets, net of
 taxes                              1,016        812      2,762      2,417
                                ---------  ---------  ---------  ---------
Cash net earnings (3)           $   3,792  $   3,226  $  13,943  $  10,805
                                =========  =========  =========  =========
Annualized cash net earnings    $  15,168  $  12,904  $  18,590  $  14,407
                                =========  =========  =========  =========

Average stockholders' equity(5) $ 131,955  $ 110,485  $ 124,994  $ 106,980

Cash return on equity (4)              11%        12%        15%        13%






                        Patient revenue and same market
                           patient revenue growth (7)



                            Three Months Ended     Nine Months Ended
                              September 30,           September 30,
                             ---------------       -----------------
                                               %                       %
                              2007    2006  Change   2007     2006   Change
                             ------- ------- ----  -------- -------- -----
Patient revenue of affiliated
 practices:
   Platform dental group
    practices affiliated
    with us in both periods
    of comparison            $91,467 $83,550  9.5% $271,987 $248,945   9.3%
   Platform dental group
    practices that affiliated
    with us during periods of
    comparison                10,314       -    -    28,459    2,938 868.7%
                             ------- ------- ----  -------- -------- -----
Total patient revenue        101,781  83,550 21.8%  300,446  251,883  19.3%
Patient revenue of Arizona's
 Tooth Doctor for Kids         5,691       -    -    17,246        -     -
                             ------- ------- ----  -------- -------- -----
Patient revenue of platform
 dental group practices
 affiliated with us by means
 of service agreements        96,090  83,550 15.0%  283,200  251,883  12.4%
Amounts due to us under
 service agreements           60,195  52,704 14.2%  178,234  159,512  11.7%
                             ------- ------- ----  -------- -------- -----
Amounts retained by platform
 dental group practices
 affiliated with us by means
 of service agreements       $35,895 $30,846 16.4% $104,966 $ 92,371  13.6%
                             ======= ======= ====  ======== ======== =====





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


(1) 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.

(2) Includes full-time equivalent general or specialty dentists employed by
    or contracted with the affiliated practices, including Arizona's Tooth
     Doctor for Kids.

(3) 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.

(4) 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.

(5) 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.

(6) Excludes the effects of the acquisition of Metropolitan Dental
    Holdings, Inc. and the affiliation with Barzman, Kasimov & Vieth.

(7) 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 as of December 1, 2006.

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.
    401 Edgewater Place, Suite 430
    Wakefield, MA 01880
    Phone: 781/224-0880
    Fax: 781/224-4216