American Dental Partners, Inc. (Nasdaq:ADPI) announced financial results today for the quarter ended September 30, 2011. The Company also issued a separate press release today announcing that it has entered into a definitive agreement to be acquired by funds affiliated with JLL Partners. 

Comparing results for the third quarter of 2011 with results for the third quarter of 2010:

  • Net revenue was $70,241,000 for the third quarter of 2011 as compared to $71,116,000 for the third quarter of 2010.
  • Earnings from operations were $5,339,000 for the third quarter of 2011 as compared to $6,073,000 for the third quarter of 2010. 
  • Net earnings were $2,679,000 for the third quarter of 2011 as compared to $2,715,000 for the third quarter of 2010.
  • Diluted net earnings per share were $0.17 for the third quarter of 2011 as compared to $0.17 for the third quarter of 2010.
  • Non-GAAP diluted adjusted net earnings per share were $0.27 for the third quarter of 2011 as compared to $0.27 for the third quarter of 2010. Please see the attached Reconciliation of GAAP Net Earnings, as Reported, to Non-GAAP Diluted Adjusted Net Earnings.

Comparing results for the nine months ending September 30, 2011 with results for the nine months ending September 30, 2010:

  • Net revenue was $219,016,000 for the nine months ending September 30, 2011 as compared to $215,336,000 for the nine months ending September 30, 2010.
  • Earnings from operations were $19,333,000 for the nine months ending September 30, 2011 as compared to $20,646,000 for the nine months ending September 30, 2010. 
  • Net earnings were $9,106,000 for the nine months ending September 30, 2011 as compared to $8,172,000 for the nine months ending September 30, 2010.
  • Diluted net earnings per share were $0.58 for the nine months ending September 30, 2011 as compared to $0.51 for the nine months ending September 30, 2010.
  • Non-GAAP diluted adjusted net earnings per share were $0.89 for the nine months ending September 30, 2011 as compared to $0.83 for the nine months ending September 30, 2010. Please see the attached Reconciliation of GAAP Net Earnings, as Reported, to Non-GAAP Diluted Adjusted Net Earnings. 

For the quarter ending September 30, 2011, patient revenue of the Company's affiliated dental group practices and Arizona's Tooth Doctor for Kids was $110,321,000 and same market patient revenue decreased 0.9% year-over-year. For the nine months ending September 30, 2011, patient revenue of the Company's affiliated dental group practices and Arizona's Tooth Doctor for Kids was $343,862,000 and same market patient revenue increased 0.7% year-over-year.  

Cash flow from operations was $12,080,000 for the quarter and $37,521,000 for the nine months ending September 30, 2011. The Company did not complete any acquisitions during the quarter and completed nine in-market acquisitions during the nine months ending September 30, 2011. Amounts paid for acquisitions amounted to $2,713,000 for the nine months ending September 30, 2011. Capital expenditures were $7,671,000 for the quarter and $14,516,000 for the nine months ending September 30, 2011. The Company completed three de novo facilities during the quarter and completed four de novo facilities during the nine months ending September 30, 2011.

The Company recognized $535,000, $336,000 net of tax or $0.02 per diluted share, of stock-based compensation expense during the quarter, as compared to $450,000, $284,000 net of tax or $0.02 per diluted share, for the same quarter last year. 

Patient Revenue of the Affiliated Practices

The Company does not consolidate the financial statements of the practices affiliated with the Company by means of service agreements with its financial statements. Patient revenue of the affiliated practices is, however, a financial measure used by the Company's management to monitor operating performance and to help identify and analyze trends of the affiliated practices that may affect the Company's business. Most of the operating expenses incurred by the Company, pursuant to the service agreements, are on behalf of the affiliated practices in the operation of dental facilities. These expenses are significantly affected by the patient revenue of the affiliated practices.

Use of Non-GAAP Financial Measures

Adjusted net earnings and adjusted net earnings excluding service agreement amortization 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, the reconciliation to those GAAP measures and all additional reconciliations required by Regulation G.

The Company believes non-GAAP financial measures, such as adjusted net earnings and adjusted net earnings excluding service agreement amortization, are important financial measures for understanding its financial performance.  Amortization expense of intangible assets related to service agreements with the affiliated practices is presented separately and excluded from the Company's adjusted net earnings excluding service agreement amortization, a non-GAAP financial measure, due to its magnitude and non-cash impact on the Company's ongoing operations and because, unlike depreciation of the Company's dental facilities, it requires no recurring capital investment. 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.

About American Dental Partners, Inc.

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 282 dental facilities with approximately 2,404 operatories located in 21 states. 

Use of Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of the historical information contained in this press 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 its 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 Nine Months Ended
  September 30, September 30,
  2011 2010 2011 2010
         
Net revenue  $ 70,241  $ 71,116  $ 219,016  $ 215,336
Operating expenses:        
 Salaries and benefits  28,294  29,242  86,738  87,579
 Lab fees and dental supplies  10,776  10,759  34,145  32,495
 Office occupancy expenses  9,655  9,611  28,638  27,867
 Other operating expenses  7,453  6,932  22,455  20,357
 General corporate expenses   3,023  3,054  10,972  10,370
 Depreciation expense  3,125  2,903  9,060  8,610
 Amortization of intangible assets  2,576  2,542  7,675  7,412
 Total operating expenses  64,902  65,043  199,683  194,690
Earnings from operations  5,339  6,073  19,333  20,646
 Interest expense, net  1,028  1,710  4,136  7,088
Earnings before income taxes  4,311  4,363  15,197  13,558
 Income taxes  1,602  1,605  6,007  5,237
Consolidated net earnings  2,709  2,758  9,190  8,321
 Noncontrolling interest  30  43  84  149
Net earnings   $ 2,679  $ 2,715  $ 9,106  $ 8,172
         
Net earnings per common share:        
 Basic  $ 0.17  $ 0.17  $ 0.59  $ 0.52
 Diluted  $ 0.17  $ 0.17  $ 0.58  $ 0.51
Weighted average common shares outstanding:        
 Basic  15,451 15,695  15,432 15,712
 Diluted  15,700 15,991  15,726 16,032
 
AMERICAN DENTAL PARTNERS, INC. 
     
FINANCIAL HIGHLIGHTS 
(in thousands) 
(unaudited)
     
  September 30, December 31,
  2011 2010
ASSETS    
Current assets:    
 Cash and cash equivalents  $ 3,507  $ 4,798
 Short-term investments  2,215  --
 Accounts receivable, net  19,061  19,403
 Other current assets  13,301  13,085
 Total current assets  38,084  37,286
     
Property and equipment, net  59,308  53,095
Other non-current assets:    
 Goodwill  90,750  90,750
 Intangible assets, net  180,005  185,669
 Other assets  5,118  5,556
 Total non-current assets  275,873  281,975
 Total assets  $ 373,265  $ 372,356
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
 Accounts payable and accrued expenses  $ 27,969  $ 22,664
 Other current liabilities  9,153  9,943
 Current maturities of debt  8,038  8,156
 Total current liabilities  45,160  40,763
Non-current liabilities:    
 Long-term debt  73,350  92,250
 Other liabilities  47,575  43,909
 Total non-current liabilities  120,925  136,159
 Total liabilities  166,085  176,922
     
Noncontrolling interest  562  462
     
Commitments and contingencies    
Stockholders' equity  206,618  194,972
 Total liabilities and stockholders' equity  $ 373,265  $ 372,356
 
AMERICAN DENTAL PARTNERS, INC.
     
SUPPLEMENTAL OPERATING DATA
 (unaudited)
     
Selected Statistical Data
     
  September 30,
  2011 2010
     
Number of dental facilities  282  275
Number of operatories (a)  2,404  2,378
Number of affiliated dentists (b)  566  574
     
(a) 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.
(b) Includes full-time equivalent general or specialty dentists employed by or
contracted with the affiliated practices and Arizona's Tooth Doctor for Kids.
 
Patient Revenue and Same Market Patient Revenue Growth (c)
(in thousands)
             
  Three Months Ended   Nine Months Ended  
  September 30, % September 30, %
  2011 2010 Change 2011 2010 Change
Total patient revenue (c):            
 Platform dental group practices affiliated with             
the Company in both periods of comparison  $ 110,313  $ 111,318 -0.9%  $ 329,907  $ 327,494 0.7%
 Platform dental group practices that affiliated with             
the Company during periods of comparison   8  --   --   13,955  6,516 114.2%
Total patient revenue  110,321  111,318 -0.9%  343,862  334,010 2.9%
Patient revenue of Arizona's Tooth Doctor for Kids  4,848  5,645 -14.1%  14,492  17,050 -15.0%
Patient revenue of practices affiliated with the Company             
by means of service agreements  105,473  105,673 -0.2%  329,370  316,960 3.9%
Net revenue due to the Company under service agreements  64,978  64,958 0.0%  203,349  196,594 3.4%
Amounts retained by practices affiliated with the Company             
by means of service agreements  $ 40,495  $ 40,715 -0.5%  $ 126,021  $ 120,366 4.7%
             
(c) Includes patient revenue of Arizona's Tooth Doctor for Kids, which is consolidated with the Company's financial
results, and patient revenue of affiliated practices that are not consolidated with the Company's financial results. 
 
AMERICAN DENTAL PARTNERS, INC.
             
SUPPLEMENTAL OPERATING DATA
(in thousands)
(unaudited)
             
Components of Same Market Patient Revenue Growth (in thousands)
             
  Three Months Ended   Nine Months Ended  
  September 30, % September 30, %
  2011 2010 Change 2011 2010 Change
Existing facilities (d)  $ 107,414  $ 110,375 -2.7%  $ 321,039  $ 324,006 -0.9%
De novo facilities (e)  1,213  494 145.5%  4,928  2,357 109.1%
Expanded/relocated facilities (e)  352  334 5.4%  998  1,016 -1.8%
Same market growth excluding acquisitions  108,979  111,203 -2.0%  326,965  327,379 -0.1%
Acquired facilities (e)  1,334  115 1060.0%  2,942  115 2458.3%
Same market patient revenue growth  $ 110,313  $ 111,318 -0.9%  $ 329,907  $ 327,494 0.7%
             
(d) Includes facilities in both periods of comparison.
(e) Includes facilities completed or acquired in either period of comparison.
 
Reconciliation of GAAP Net Earnings, as Reported, to Non-GAAP Diluted Adjusted Net Earnings
(in thousands, except per share amounts)
         
  Three Months Ended, September 30, Nine Months Ended, September 30,
  2011 2010 2011 2010
         
GAAP net earnings (as reported)  $ 2,679  $ 2,715  $ 9,106  $ 8,172
Add: Write-off of expenses associated with debt refinancing, net of tax (f)  --   --   219  377
Add: Expenses associated with Cincinnati Dental Services affiliation, net of tax (f)  --   32  --   207
Adjusted net earnings  2,679  2,747  9,325  8,756
Add: Amortization of service agreements, net of tax (f)  1,597  1,597  4,601  4,520
Adjusted net earnings excluding service agreement amortization  $ 4,276 $4,344  $ 13,926  $ 13,276
         
Weighted average diluted shares outstanding  15,700  15,991  15,726  16,032
Diluted adjusted net earnings per share  $ 0.17  $ 0.17  $ 0.59  $ 0.55
Diluted adjusted net earnings excluding service agreement amortization per share  $ 0.27  $ 0.27  $ 0.89  $ 0.83
         
(f) Tax effected at effective tax rate in the period reported.
CONTACT: American Dental Partners, Inc.
         401 Edgewater Place, Suite 430
         Wakefield, MA 01880
         Phone: 781/224-0880
         Fax: 781/224-4216

         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
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