SOURCE: American Dental Partners, Inc.

April 28, 2008 18:55 ET

American Dental Partners Reports First Quarter 2008 Financial Results and Provides Detail on Litigation Settlement Accounting

WAKEFIELD, MA--(Marketwire - April 28, 2008) - American Dental Partners, Inc. (NASDAQ: ADPI) 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.

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