SOURCE: American Dental Partners, Inc.

February 21, 2007 16:05 ET

American Dental Partners Reports Fourth Quarter and Year-End 2006 Financial Results and Announces Amended Credit Facility

WAKEFIELD, MA -- (MARKET WIRE) -- February 21, 2007 -- American Dental Partners, Inc. (NASDAQ: ADPI) announced financial results today for the quarter and the year ended December 31, 2006.

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

--  Net revenue was $54,931,000 as compared to $49,783,000, an increase of
    10%.
--  Earnings from operations were $4,930,000 as compared to $4,722,000, an
    increase of 4%.  Excluding stock-based compensation expense from 2006
    results (discussed below), earnings from operations increased 12%.
--  Net earnings were $2,746,000 as compared to $2,640,000, an increase of
    4%.  Excluding stock-based compensation expense from 2006 results
    (discussed below), net earnings increased 13%.
--  Diluted net earnings per share were $0.21, as compared to $0.21.
    Excluding stock-based compensation expense from 2006 results (discussed
    below), diluted net earnings per share increased 10%.
--  Diluted cash net earnings per share were $0.28 as compared to $0.27,
    an increase of 4%. Excluding stock-based compensation expense from 2006
    results (discussed below), diluted cash net earnings per share increased
    7%.
    
Comparing the twelve months of 2006 with the same period in 2005:
--  Net revenue was $217,917,000 as compared to $196,928,000, an increase
    of 11%.
--  Earnings from operations were $20,182,000 as compared to $18,689,000,
    an increase of 8%.  Excluding stock-based compensation expense from 2006
    results (discussed below), earnings from operations increased 15%.
--  Net earnings were $11,134,000 as compared to $10,291,000, an increase
    of 8%.  Excluding stock-based compensation expense from 2006 results
    (discussed below), net earnings increased 17%.
--  Diluted net earnings per share were $0.86 as compared to $0.81, an
    increase of 6%.  Excluding stock-based compensation expense from 2006
    (discussed below), diluted net earnings per share increased 15%.
--  Diluted cash net earnings per share were $1.11 as compared to $1.05,
    an increase of 6%.  Excluding stock-based compensation expense from 2006
    (discussed below), diluted cash net earnings per share increased 12%.
    
Patient revenue of the Company's affiliated dental group practices which are not consolidated with the Company's financial results was $83,979,000 for the quarter as compared to $76,876,000 for the prior year's same quarter, an increase of 9.2%. Including Arizona's Tooth Doctor for Kids, which is consolidated with the Company's financial results, patient revenue for the quarter was $85,518,000, an increase of 11.2%. Same market revenue growth for the Company's affiliated dental group practices as measured by patient revenue was 8.5% for the quarter. For the year, patient revenue of the Company's affiliated dental group practices which are not consolidated with the Company's financial results was $335,862,000 as compared to $302,982,000 for the prior year, an increase of 10.9%. Including Arizona's Tooth Doctor for Kids patient revenue for the year was $337,401,000, an increase of 11.4%. Same market revenue growth for the Company's affiliated dental group practices as measured by patient revenue was 9.6% for the year.

Cash flow from operations was $9,725,000 for the quarter and $31,050,000 for the year. Capital expenditures were $3,880,000 for the quarter and $7,243,000 for the year. The Company completed two de novo facilities during the quarter. During the year the company expanded nine dental facilities and completed three de novo facilities. Amounts paid for affiliations and acquisitions, including contingent payments and affiliation costs, amounted to $20,615,000 for the quarter and $26,659,000 for the year. During the quarter, the Company completed two in-market affiliations which were combined with existing platform affiliated practices. The Company also completed the acquisition of 85% of the assets of Arizona's Tooth Doctor for Kids during the quarter. During the year, the Company completed one platform acquisition, two platform affiliations and ten in-market affiliations. Affiliations and acquisitions completed during the year generate approximately $38 million in annualized patient revenue.

The Company adopted Statement of Financial Accounting Standards No. 123 (R) "Share-Based Payment," effective January 1, 2006. As a result, the Company recognized $344,000 in stock-based compensation expense, $230,000 net of tax or $0.02 per diluted share, during the fourth quarter and $1,363,000 in stock-based compensation expense, $900,000 net of tax or $0.07 per diluted share, during the year ended December 31, 2006.

The Company incurred professional fees of approximately $600,000 during the quarter and $1,570,000 for the year 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 23% at December 31, 2006, compared to 24% at December 31, 2005. The Company achieved an annualized cash return on committed capital and cash return on equity for the quarter of 18% and 13%, respectively. Excluding stock-based compensation expense, the Company's cash return on committed capital for the quarter would have been 19%. The Company achieved a cash return on committed capital and cash return on equity for the year of 18% and 13%, respectively. Excluding stock-based compensation expense, the Company's cash return on committed capital and cash return on equity for the year would have been 19% and 14%, respectively.

On February 21, 2007 the Company successfully renegotiated its revolving credit facility. The amended credit facility was arranged by KeyBank and other participating banks include JPMorgan, TD Banknorth and Citizens Bank. The Company chose to renegotiate its credit facility to take advantage of the currently favorable credit markets and as a result of the Company's improved financial position. The renegotiated facility matures in February 2012 has an increased capacity of $75 million and includes improved borrowing rates and other financial covenants.

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 fourth quarter ended December 31, 2006, the Company will host its previously announced conference call on Thursday, February 22, 2007 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 6:00 p.m. EST Thursday, March 1.

American Dental Partners is one of the nation's leading business partners to dental group practices. The Company is affiliated with 22 dental group practices which have 209 dental facilities with approximately 1,944 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  Twelve Months Ended
                                       December 31,        December 31,
                                    ------------------- -------------------
                                      2006      2005      2006      2005
                                    --------- --------- --------- ---------

Net revenue                         $  54,931 $  49,783 $ 217,917 $ 196,928
Operating expenses:
  Salaries and benefits                23,460    21,165    91,282    83,638
  Lab fees and dental supplies          8,455     8,071    35,066    31,638
  Office occupancy expenses             6,663     6,023    26,404    23,013
  Other operating expenses              4,703     4,437    19,084    18,372
  General corporate expenses            3,321     2,233    12,696     9,570
  Depreciation expense                  2,030     1,882     7,845     7,001
  Amortization of intangible assets     1,369     1,250     5,358     5,007
                                    --------- --------- --------- ---------
     Total operating expenses          50,001    45,061   197,735   178,239
                                    --------- --------- --------- ---------
Earnings from operations                4,930     4,722    20,182    18,689
  Interest expense, net                   445       505     1,848     1,804
  Minority interest                        54         -        54         -
                                    --------- --------- --------- ---------
Earnings before income taxes            4,431     4,217    18,280    16,885
  Income taxes                          1,685     1,577     7,146     6,594
                                    --------- --------- --------- ---------
Net earnings                        $   2,746 $   2,640 $  11,134 $  10,291
                                    ========= ========= ========= =========

Net earnings per common share:
  Basic                             $    0.22 $    0.22 $    0.91 $    0.86
                                    ========= ========= ========= =========
  Diluted                           $    0.21 $    0.21 $    0.86 $    0.81
                                    ========= ========= ========= =========
Weighted average common shares
 outstanding:
  Basic                                12,345    12,181    12,301    12,006
                                    ========= ========= ========= =========
  Diluted                              13,022    12,876    12,916    12,716
                                    ========= ========= ========= =========




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

                                                December 31,  December 31,
                                                    2006          2005
                                                ------------- -------------
ASSETS
Current assets:
     Cash and cash equivalents                  $       1,386 $         592
     Accounts receivable, net                          16,373        15,155
     Other current assets                               6,860         6,562
                                                ------------- -------------
          Total current assets                         24,619        22,309
                                                ------------- -------------

Property and equipment, net                            46,460        45,184
                                                ------------- -------------
Other non-current assets:
     Goodwill                                          23,091         5,095
     Intangible assets, net                           101,113        97,260
     Other assets                                         537           798
                                                ------------- -------------
          Total non-current assets                    124,741       103,153
                                                ------------- -------------
          Total assets                          $     195,820 $     170,646
                                                ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses      $      29,351 $      20,131
     Current maturities of debt                            81           123
                                                ------------- -------------
          Total current liabilities                    29,432        20,254
                                                ------------- -------------
Non-current liabilities:
     Long-term debt                                    33,807        32,039
     Other liabilities                                 16,216        16,458
                                                ------------- -------------
          Total non-current liabilities                50,023        48,497
                                                ------------- -------------
          Total liabilities                            79,455        68,751
                                                ------------- -------------

Minority Interest                                          54             -

Commitments and contingencies
Stockholders' equity                                  116,311       101,895
                                                ------------- -------------
          Total liabilities and stockholders'
           equity                               $     195,820 $     170,646
                                                ============= =============




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


                       Selected statistical data

                                                   December 31,
                                                 -----------------    %
                                                   2006     2005   Change
                                                 -------- -------- -------

Number of dental facilities                           209      187    11.8%
Number of operatories (1)                           1,944    1,761    10.4%
Number of affiliated dentists (2)                     470      435     8.0%




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


                                          Three Months      Twelve Months
                                             Ended              Ended
                                           December 31,      December 31,
                                        ----------------- -----------------
                                          2006     2005     2006     2005
                                        -------- -------- -------- --------


Net earnings (as reported)              $  2,746 $  2,640 $ 11,134 $ 10,291
Add: Amortization of intangible assets,
 net of tax                                  849      783    3,263    3,049
                                        -------- -------- -------- --------
Cash net earnings (3)                   $  3,595 $  3,423 $ 14,397 $ 13,340
                                        ======== ======== ======== ========


Weighted average common shares
 outstanding                              13,022   12,876   12,916   12,716
                                        ======== ======== ======== ========
Diluted net earnings per share          $   0.21 $   0.21 $   0.86 $   0.81
                                        ======== ======== ======== ========
Diluted cash net earnings per share (3) $   0.28 $   0.27 $   1.11 $   1.05
                                        ======== ======== ======== ========


                          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 months and year ended December 31, 2006 and 2005

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

Earnings from operations        $   4,930  $   4,722  $  20,182  $  18,689
Add back:  Amortization of
 intangible assets                  1,369      1,250      5,358      5,007
                                ---------  ---------  ---------  ---------
Cash earnings from
operations (4)                  $   6,299  $   5,972  $  25,540  $  23,696
                                =========  =========  =========  =========
Annualized cash earnings from
 operations                     $  25,196  $  23,888
                                =========  =========

Average committed capital (5)   $ 141,452  $ 133,448  $ 142,128  $ 124,902

Cash return on committed
 capital (4)                           18%        18%        18%        19%

Net earnings                    $   2,746  $   2,640  $  11,134  $  10,291
Add back:  Amortization of
 intangible assets, net of
 taxes                                849        783      3,263      3,049
                                ---------  ---------  ---------  ---------
Cash net earnings (3)           $   3,595  $   3,423  $  14,397  $  13,340
                                =========  =========  =========  =========
Annualized cash net earnings    $  14,380  $  13,692
                                =========  =========

Average stockholders'
 equity (5)                     $ 114,188  $  99,436  $ 109,103  $  94,551

Cash return on equity (4)              13%        14%        13%        14%



           Patient revenue and same market patient revenue growth (6)



                       Three Months Ended        Twelve Months Ended
                          December 31,               December  31,
                        -----------------   %    -------------------   %
                          2006     2005   Change     2006      2005  Change
                        -------- -------- -----  --------- --------- -----
Patient revenue -
 affiliated practices:
     Same market (7)    $ 83,375 $ 76,876   8.5% $ 322,897 $ 294,560   9.6%
     Platform dental
      groups that
      affiliated with
      the Company
      during periods of
      comparison           2,143        -     -     14,504     8,422  72.2%
                        -------- -------- -----  --------- --------- -----
Total patient revenue   $ 85,518 $ 76,876  11.2% $ 337,401 $ 302,982  11.4%
                        ======== ======== =====  ========= ========= =====



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

(7) Same market patient revenue includes platform dental group practices
    that were affiliated with the Company in both periods of comparison.

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