SOURCE: American Dental Partners, Inc.

American Dental Partners, Inc.

February 24, 2010 16:44 ET

American Dental Partners Reports Fourth Quarter and Full Year 2009 Financial Results

WAKEFIELD, MA--(Marketwire - February 24, 2010) - American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter and year ended December 31, 2009.

Comparing results for the fourth quarter of 2009 with results for the fourth quarter of 2008:

-- Net revenue was $66,593,000 for the fourth quarter of 2009 as compared
   to $65,110,000 for the fourth quarter of 2008.
-- Earnings from operations were $5,773,000 for the fourth quarter of 2009
   as compared to $5,270,000 for the fourth quarter of 2008.
-- Net earnings were $1,865,000 for the fourth quarter of 2009 as compared
   to $1,310,000 for the fourth quarter of 2008.
-- Diluted net earnings per share were $0.12 for the fourth quarter of 2009
   as compared to $0.10 for the fourth quarter of 2008.
-- Diluted cash net earnings per share were $0.20 for the fourth quarter of
   2009 as compared to $0.21 for the fourth quarter of 2008.

Comparing results for the year 2009 with actual and pro forma results for the year 2008 (see "Supplemental Operating Data" for an explanation of the pro forma results):

-- Net revenue was $274,342,000 for 2009 as compared to $291,108,000 and
   pro forma $273,411,000 for 2008.
-- Earnings from operations were $24,848,000 for 2009 as compared to
   $60,190,000 and pro forma $21,526,000 for 2008.
-- Net earnings were $7,729,000 for 2009 as compared to $30,118,000 and pro
   forma $6,528,000 for 2008.
-- Diluted net earnings per share were $0.55 for 2009 as compared to $2.29
   and pro forma $0.50 for 2008.
-- Diluted cash net earnings per share were $0.94 for 2009 as compared to
   $2.71 and pro forma $0.91 for 2008.

Patient revenue of the Company's affiliated dental group practices was $101,376,000 for the quarter, which includes $95,831,000 from dental group practices that are affiliated with the Company by means of service agreements and $5,545,000 from Arizona's Tooth Doctor for Kids. Same market patient revenue growth was .1% for the quarter and (.3%) excluding in-market affiliations. For the full year, patient revenue of the Company's affiliated dental group practices was $418,405,000, which includes $393,697,000 from dental group practices that are affiliated with the Company by means of service agreements and $24,708,000 from Arizona's Tooth Doctor for Kids. Same market revenue growth was (.1%) for the year and (.8%) excluding in-market affiliations.

Cash flow from operations was $7,806,000 for the quarter and $40,445,000 for the year. Amounts paid for affiliations and acquisitions, including contingent amounts and affiliation costs, amounted to $27,899,000 during the quarter and $28,393,000 for the year. The Company completed one platform affiliation and two in-market practice acquisitions during the quarter. During the year, the Company completed one platform affiliation and four in-market practice acquisitions, which were combined with existing platform affiliates. Affiliations and acquisitions completed during the quarter generated approximately $1,900,000 of patient revenue and are expected to generate patient revenue of approximately $27,100,000 on an annualized basis. Capital expenditures were $1,946,000 for the quarter and $6,401,000 for the year. The Company completed two de novo dental facilities during the quarter. During the year, the Company completed five de novo dental facilities and expanded and/or relocated two dental facilities.

The Company recognized during the quarter $561,000 of professional fees, $338,000 net of tax or $0.02 per diluted share, which has been included in general corporate expenses, associated with its acquisition of Christie Dental Partners.

The Company recognized $436,000 of stock-based compensation expense, which has been included in general corporate expenses, $263,000 net of tax or $0.02 per diluted share, during the quarter as compared to $450,000, $275,000 net of tax or $0.02 per diluted share, for the same quarter last year.

In December 2009, all of the parties to the lawsuit entitled "In re American Dental Partners, Inc. Securities Litigation," filed in the United States District Court for the District of Massachusetts under civil action number 1:08-CV-10119-RGS, entered into a settlement agreement. The Court has preliminarily approved the settlement, and a final hearing on the settlement will be held in March 2010. The settlement is being funded entirely by the Company's insurance carrier with no out-of-pocket contribution being made by the Company or any of its executive officers. The Company recorded a liability of $6,000,000 and a corresponding receivable in the fourth quarter. These amounts are recorded in accrued expenses and other current assets on the balance sheet.

Cash net earnings, cash earnings from operations and the pro forma 2008 financial results are 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 and the reconciliation to the nearest GAAP measure and all additional reconciliations required by Regulation G.

The Company uses non-GAAP financial measures such as cash net earnings and cash earnings from operations as important financial measures for understanding its relative financial performance. These measures exclude amortization expense, 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, do not amortize based on changes in authoritative literature for goodwill and other intangibles. In addition, the Company believes it is useful to provide non-GAAP pro forma financial presentation to exclude temporary and non-recurring items such that investors may better understand future trends of our underlying and 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 press release.

For further discussion of these events and a comprehensive review of the fourth quarter ended December 31, 2009, the Company will host its previously announced conference call on Thursday, February 25, 2010 at 9:00 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 approximately two hours after the call through 6:00 pm EST, Thursday, March 4, 2010.

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 268 dental facilities with approximately 2,259 operatories located in 19 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 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 the annual report on Form 10-K and quarterly reports on Form 10-Q.

                     AMERICAN DENTAL PARTNERS, INC.

                         FINANCIAL HIGHLIGHTS
               (in thousands, except per share amounts)
                             (unaudited)

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------- --------------------
                                   2009       2008       2009       2008
                                ---------- ---------- ---------- ---------

Net revenue                     $   66,593 $   65,110 $  274,342 $ 291,108
Operating expenses:
   Salaries and benefits            28,068     28,890    117,429   127,272
   Lab fees and dental
    supplies                         9,550      9,745     39,691    42,836
   Office occupancy expenses         8,638      8,094     34,326    33,878
   Other operating expenses          5,734      5,368     23,739    24,540
   General corporate expenses        3,471      2,216     13,709    12,366
   Depreciation expense              3,034      2,939     11,137    11,054
   Amortization of intangible
    assets                           2,325      2,429      9,463     9,634
   Litigation settlement
    (gain) expense                       -        159          -   (30,662)
                                ---------- ---------- ---------- ---------
      Total operating expenses      60,820     59,840    249,494   230,918
                                ---------- ---------- ---------- ---------
Earnings from operations             5,773      5,270     24,848    60,190
   Interest expense, net             2,571      2,929     11,055    10,193
                                ---------- ---------- ---------- ---------
Earnings before income taxes         3,202      2,341     13,793    49,997
   Income taxes                      1,272        828      5,475    19,245
                                ---------- ---------- ---------- ---------
Consolidated net earnings            1,930      1,513      8,318    30,752
   Noncontrolling interest              65        203        589       634
                                ---------- ---------- ---------- ---------
Net earnings                    $    1,865 $    1,310 $    7,729 $  30,118
                                ========== ========== ========== =========

Net earnings per common share:
   Basic                        $     0.12 $     0.10 $     0.55 $    2.34
                                ========== ========== ========== =========
   Diluted                      $     0.12 $     0.10 $     0.55 $    2.29
                                ========== ========== ========== =========
Weighted average common shares
 outstanding:
   Basic                            15,682     12,902     13,946    12,876
                                ========== ========== ========== =========
   Diluted                          16,009     13,057     14,155    13,150
                                ========== ========== ========== =========




                     AMERICAN DENTAL PARTNERS, INC.

                         FINANCIAL HIGHLIGHTS
                            (in thousands)
                              (unaudited)


                                                  December 31, December 31,
                                                      2009         2008
                                                  ------------ ------------
ASSETS
Current assets:
   Cash and cash equivalents                      $      6,807 $      6,626
   Accounts receivable, net                             20,811       25,875
   Other current assets                                 15,368       12,183
                                                  ------------ ------------
      Total current assets                              42,986       44,684
                                                  ------------ ------------

Property and equipment, net                             53,766       54,542
                                                  ------------ ------------
Other non-current assets:
   Goodwill                                             86,852       76,122
   Intangible assets, net                              180,573      175,527
   Other assets                                          7,824        2,378
                                                  ------------ ------------
      Total non-current assets                         275,249      254,027
                                                  ------------ ------------
      Total assets                                $    372,001 $    353,253
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses          $     27,211 $     21,383
   Other current liabilities                            11,891        9,517
   Current maturities of debt                            8,685          196
                                                  ------------ ------------
      Total current liabilities                         47,787       31,096
                                                  ------------ ------------
Non-current liabilities:
   Long-term debt                                       93,506      131,441
   Other liabilities                                    43,392       43,634
                                                  ------------ ------------
      Total non-current liabilities                    136,898      175,075
                                                  ------------ ------------
      Total liabilities                                184,685      206,171
                                                  ------------ ------------

Noncontrolling Interest                                  1,857          584

Commitments and contingencies
Stockholders' equity                                   185,459      146,498
                                                  ------------ ------------
      Total liabilities and stockholders' equity  $    372,001 $    353,253
                                                  ============ ============




                     AMERICAN DENTAL PARTNERS, INC.
                      SUPPLEMENTAL OPERATING DATA
   (in thousands, except per share amounts and selected statistical data)
                             (unaudited)

               Pro forma consolidated statement of income
              for the twelve months ended December 31, 2008

                                         Pro Forma Adjustments
                                       -------------------------
                                                      Management
                                       Settlement      Services   Pro Forma
                              Actual   Assets (a)        (b)        2008
                            ---------  ---------      ---------- ----------

Net revenue                 $ 291,108  $   7,697      $   10,000 $  273,411
Operating expenses
   Salaries and benefits      127,272      4,717           1,453    121,102
   Lab fees and dental
    supplies                   42,836      1,436               -     41,400
   Office occupancy
    expenses                   33,878      1,092             180     32,606
   Other operating expenses    24,540        135             323     24,082
   General corporate
    expenses                   12,366          -               -     12,366
   Litigation expenses        (30,662)   (30,662) (c)          -          -
                            ---------  ---------      ---------- ----------
EBITDA                         80,878     30,979           8,044     41,855
   Depreciation                11,054        317              42     10,695
   Amortization                 9,634          -               -      9,634
                            ---------  ---------      ---------- ----------
Earnings from operations       60,190     30,662           8,002     21,526
   Interest expense, net       10,193          -               -     10,193
                            ---------  ---------      ---------- ----------
Earnings before income
 taxes                         49,997     30,662           8,002     11,333
   Income taxes                19,245                                 4,171
                            ---------                            ----------
Consolidated earnings          30,752                                 7,162
   Noncontrolling interest        634                                   634
                            ---------                            ----------
Net earnings                   30,118                                 6,528
Amortization of service
 agreements, net of tax         5,456                                 5,456
                            ---------                            ----------
Cash net earnings (d)       $  35,574                            $   11,984
                            =========                            ==========

Diluted net earnings per
 common share               $    2.29                            $     0.50
                            =========                            ==========
Diluted cash net earnings
 per common share (d)       $    2.71                            $     0.91
                            =========                            ==========

(a) Includes expense reimbursement associated with (i) 25 dental facilities
    transferred on February 29, 2008 to PDG, P.A. as part of litigation
    settlement and (ii) the PDG doctors who practiced temporarily in the
    six dental facilities retained by the Company.
(b) The Company 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 of  management staff, including severance, who were
    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 insurance
    proceeds of $1,002,000 for professional fees associated with the PDG
    litigation which were partially reimbursable pursuant to insurance
    coverage offset by professional fees and other expenses associated
    with the litigation of $1,103,000.
(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 service agreement 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 accounting
    for intangible assets, goodwill and other.  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 and selected statistical data)
                             (unaudited)

                       Selected statistical data

                                                  December 31, December 31,
                                                      2009         2008
                                                  ------------ ------------

Number of dental facilities                                268          241
Number of operatories (e)                                2,259        2,107
Number of affiliated dentists (f)                          533          545

(e) 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.
(f) 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 (g)

                     Three Months Ended         Twelve Months Ended
                         December 31,              December  31,
                      -----------------   %     -------------------   %
                        2009     2008   Change    2009      2008    Change
                      -------- -------- ------  --------- --------- ------
Patient revenue of
 affiliated
 practices:
  Platform dental
   group practices
   affiliated with
   us in both periods
   of comparison      $ 99,217 $ 99,073    0.1% $ 413,742 $ 414,197   -0.1%
  Platform dental
   group practices
   that affiliated
   with us during
   periods of
   comparison            2,159        -  100.0%     4,663     1,761  164.8%
                      -------- -------- ------  --------- --------- ------
Total patient revenue  101,376   99,073    2.3%   418,405   415,958    0.6%
Patient revenue of
 Arizona's Tooth
 Doctor for Kids         5,545    5,846   -5.1%    24,708    24,438    1.1%
                      -------- -------- ------  --------- --------- ------
Patient revenue of
 platform dental
 group practices
 affiliated with
 us by means of
 service agreements     95,831   93,227    2.8%   393,697   391,520    0.6%
Amounts due to us
 under service
 agreements             60,482   58,518    3.4%   247,103   245,471    0.7%
                      -------- -------- ------  --------- --------- ------
Amounts retained by
 platform dental
 group practices
 affiliated with
 us by means of
 service agreements   $ 35,349 $ 34,709    1.8% $ 146,594 $ 146,049    0.4%
                      ======== ======== ======  ========= ========= ======

(g) 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.

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