<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------- ----------
COMMISSION FILE NUMBER: 0-22835
MONARCH DENTAL CORPORATION.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0363560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
MONARCH DENTAL CORPORATION
4201 SPRING VALLEY ROAD, SUITE 320
DALLAS, TX 75244
(Address of principal executive offices)
(972) 702-7446
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No | |
Indicate the number of shares outstanding of each of the issue's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 13, 1998
----- ---------------------------------
Common Stock, $.01 par value 10,367,782
<PAGE> 2
MONARCH DENTAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Report of Independent Public Accountants 3
Item 2. Financial Statements 4
Item 3. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 16
Item 4. Submission of Matters to Vote of Security-Holders 17
Item 6. Exhibits and Reports Filed on Form 8-K 17
Signatures 18
Exhibit Index 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTS
We have reviewed the accompanying consolidated balance sheet of Monarch Dental
Corporation (a Delaware corporation) as of June 30, 1998 and the related
consolidated statements of income and cash flows for the three-month and
six-month periods ended June 30, 1998 and 1997. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
August 11, 1998
3
<PAGE> 4
MONARCH DENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,009,635 $ 2,975,142
Accounts receivable, net of allowances of
approximately $3,398,000 and
$2,865,000, respectively 7,341,160 5,855,694
Prepaid expenses 663,570 255,773
-------------- --------------
Total current assets 12,014,365 9,086,609
Property and equipment, net of accumulated depreciation
of approximately $5,773,000 and
$4,381,000, respectively 11,607,829 8,665,758
Intangible assets, net of accumulated amortization
of approximately $2,581,000 and
$1,677,000, respectively 54,148,288 46,261,511
Other assets 459,702 577,794
-------------- --------------
Total assets $ 78,230,184 $ 64,591,672
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,618,048 $ 1,898,118
Accrued payroll 1,991,701 1,798,487
Accrued liabilities 1,336,154 1,066,454
Taxes payable 1,093,780 297,380
Payable to affiliated dental group practices 2,518,817 2,071,564
Current maturities of notes payable and capital lease obligations 653,452 617,582
-------------- --------------
Total current liabilities 10,211,952 7,749,585
Deferred income taxes 2,264,312 2,264,312
Notes payable 17,047,534 10,350,512
Capital lease obligations 570,643 849,425
Other liabilities 1,669,632 1,241,666
-------------- --------------
Total liabilities 31,764,073 22,455,500
Minority interest in combined subsidiaries 179,214 170,653
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value, 2,000,000 shares
authorized; no shares issued or outstanding -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized; 10,358,173 and 10,228,473 shares
issued and outstanding, respectively 103,582 102,285
Additional paid-in capital 49,399,068 47,534,874
Retained earnings (deficit) (3,215,753) (5,671,640)
-------------- --------------
Total stockholders' equity 46,286,897 41,965,519
-------------- --------------
Total liabilities and stockholders' equity $ 78,230,184 $ 64,591,672
============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE> 5
MONARCH DENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Dental group practices revenue, net $ 25,852,996 $ 16,245,297 $ 50,132,522 $ 30,720,858
Less - Amounts retained by dental group practices 7,964,969 5,457,794 15,883,787 10,486,259
------------ ------------ ------------ ------------
Net revenue 17,888,027 10,787,503 34,248,735 20,234,599
Operating expenses:
Clinical salaries and benefits 4,735,923 2,851,725 8,981,280 5,300,034
Other salaries and benefits 2,229,025 1,626,407 4,449,316 3,013,434
Dental supplies 1,461,961 1,005,725 2,901,691 1,917,593
Laboratory fees 1,230,699 661,129 2,288,612 1,251,859
Occupancy 1,343,091 861,836 2,672,360 1,662,011
Advertising 578,554 421,289 1,093,510 746,298
Depreciation and amortization 1,240,899 669,077 2,327,841 1,233,329
General and administrative 2,605,823 1,514,543 4,928,945 2,972,079
------------ ------------ ------------ ------------
15,425,975 9,611,731 29,643,555 18,096,637
------------ ------------ ------------ ------------
Operating income 2,462,052 1,175,772 4,605,180 2,137,962
Interest expense, net 231,274 645,465 513,915 1,224,849
Minority interest in combined subsidiaries 14,438 -- 64,378 --
------------ ------------ ------------ ------------
Income before income taxes 2,216,340 530,307 4,026,887 913,113
Income taxes 864,000 205,000 1,571,000 355,283
------------ ------------ ------------ ------------
Net income $ 1,352,340 $ 325,307 $ 2,455,887 $ 557,830
============ ============ ============ ============
Net income per common share $ 0.13 $ 0.10 $ 0.24 $ 0.17
============ ============ ============ ============
Net income per common share - assuming dilution $ 0.13 $ 0.05 $ 0.24 $ 0.08
============ ============ ============ ============
Weighted average number of common shares
outstanding 10,324,303 3,281,458 10,279,761 3,249,209
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 10,466,000 6,743,626 10,396,833 6,593,488
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE> 6
MONARCH DENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,455,887 $ 557,830
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,327,841 1,233,329
Minority interest in combined subsidiaries 64,378 --
Changes in assets and liabilities, net of effects from
acquisitions -
Accounts receivable, net (872,507) 5,859
Prepaid expenses (407,797) 86,670
Other noncurrent assets (71,908) (53,331)
Accounts payable and accrued expenses 196,898 285,388
Other liabilities 53,228 (131,831)
Deferred income taxes 786,207 --
-------------- --------------
Net cash provided by operating activities 4,532,227 1,983,914
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,687,357) (752,021)
Cash paid for dental group practices, including
related costs, net of cash acquired (6,291,711) (5,495,959)
-------------- --------------
Net cash used in investing activities (9,979,068) (6,247,980)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable, net of issuance costs 6,800,000 4,985,000
Payments on notes payable and capital lease obligations (298,267) (2,083,997)
Distribution to stockholders/partners (66,454) --
Repurchase of common stock -- (1,811)
Issuance of common stock 46,055 1,705,992
-------------- --------------
Net cash provided by financing 6,481,334 4,605,184
-------------- --------------
NET INCREASE IN CASH 1,034,493 341,118
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,975,142 1,059,337
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,009,635 $ 1,400,455
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 230,988 $ 884,927
============== ==============
Cash paid for taxes $ 774,600 $ 300,000
============== ==============
Equipment acquired under capital leases $ -- $ 488,505
============== ==============
Debt assumed through acquisitions $ 936,288 $ 1,128,000
============== ==============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE> 7
MONARCH DENTAL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Monarch Dental Corporation ("Monarch"), a Delaware corporation, and
subsidiaries (collectively, the "Company"), manages dental group
practices in selected markets including Dallas-Fort Worth, Houston, San
Antonio, Midland-Odessa and Austin, Texas; Wisconsin; Arkansas;
Indiana; Colorado; Ohio and New Mexico. As of June 30, 1998, the
Company managed 125 dental group practices in Texas, Wisconsin,
Arkansas, Indiana, Colorado, Ohio and New Mexico.
2. BASIS OF PRESENTATION
The financial statements for the three and six months ended June 30,
1998 and 1997, have been prepared by the Company, without audit,
pursuant to Accounting Principles Board (APB) Opinion No. 28, "Interim
Financial Reporting." Certain information and footnote disclosures
normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to APB Opinion No. 28; nevertheless, management of the
Company believes that the disclosures herein are adequate to prevent
the information presented from being misleading. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the results of its operations
for the three and six months ended June 30, 1998 and 1997, have been
included herein. The results of operations for the three- and six-month
periods are not necessarily indicative of the results for the full
year.
Other Liabilities. Other liabilities consist primarily of reserves
related to acquisitions accounted for as purchases and deferred rent
for the Company's facilities.
3. BUSINESS COMBINATIONS
Effective February 2, 1998 and March 1, 1998, the Company acquired
certain assets and assumed certain liabilities of E. Harrison Cole,
D.D.S. in Indianapolis, Indiana and Dental Care One in Dayton, Ohio,
respectively, for $3.0 million consisting of $2.5 million in cash
and 38,037 shares of Common Stock in asset purchase transactions
accounted for as purchases.
Effective May 1, 1998, June 1, 1998 and June 1, 1998, the Company
acquired certain assets and assumed certain liabilities of H.T. Green,
D.D.S. in San Antonio, Texas, A. Scott Terry, D.D.S., S.C. in
Manitowoc, Wisconsin and Louis Garcia, D.D.S. in San Antonio, Texas,
respectively, for $602,000 consisting of $534,000 in cash and 4,757
shares of Common Stock in asset purchase transactions accounted for
as purchases.
Effective June 1, 1998, the Company acquired certain assets and assumed
certain liabilities of Managed Dental Care Centers, Inc. in Dallas,
Texas, for $2.2 million consisting of $2.0 million in cash and 27,686
shares of Common Stock in an asset purchase transaction accounted
for as a purchase.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21B
of the Securities and Exchange Act of 1934. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include, among others, the
constantly changing health care environment, the pace of development and
acquisition activity, the reimbursement rates for dental services, and other
risks detailed in the Company's Securities and Exchange Commission filings.
Other risk factors are listed in the Company's Prospectus dated July 17, 1997 as
filed with the U.S. Securities and Exchange Commission.
OVERVIEW
The Company manages dental group practices in selected markets. At June
30, 1998, these markets included Dallas-Fort Worth, Houston, San Antonio,
Midland-Odessa and Austin, Texas; Wisconsin; Arkansas; Indiana; Colorado; Ohio
and New Mexico. The managed dental facilities (each, a "Dental Office" and
collectively, the "Dental Offices") provide general dentistry services such as
examinations, cleanings, fillings, bonding, placing crowns and fitting and
placing fixed or removable prostheses. Many of the Dental Offices also provide
specialty dental services such as orthodontics, oral surgery, endodontics,
periodontics and pediatric dentistry. The Company focuses on fee-for-service
dentistry, supplementing this business with revenue from contracts with
capitated managed dental care plans.
The Company seeks to build geographically dense networks of dental
providers by expanding within its existing markets. The Company has generated
growth within its existing markets by increasing patient volume and fees in
existing Dental Offices, either on a per-patient or per-procedure basis, by
increasing the physical space of existing Dental Offices and by opening Dental
Offices on a de novo basis. The Company has entered selected new markets by
acquiring dental group practices, which have a significant market presence, or
which the Company believes can achieve such a presence in the near term. The
Company then seeks to use the acquired dental group practice as a "pedestal"
from which to expand within the newly entered market.
The following table sets forth the increase in the number of Dental
Offices owned and managed by the Company during each of the years indicated,
including the number of de novo Dental Offices and acquired Dental Offices in
each such year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 (1)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Offices at beginning of period 9 10 12 53 99
De novo offices 1 2 2 7 6
Acquired offices - - 39 39 22
Closed offices - - - - (2)
-- -- -- -- ---
Offices at end of period 10 12 53 99 125
== == == == ===
(1) Through June 30, 1998
</TABLE>
COMPONENTS OF REVENUE AND EXPENSES
Dental group practices revenue, net ("Revenue") represents the revenue of the
P.C.s or the Company (in states in which ownership of dental practices by the
Company is permitted), reported at estimated realizable amounts, received from
third-party payors and patients for dental services rendered at the Dental
Offices. Net revenue represents Revenue less amounts retained by the dental
group practices. The amounts retained by dental group practices represent
amounts paid by (i) the P.C.s as salary, benefits and other payments to employed
dentists and hygienists and contracted specialists and (ii) the Company as
salary, benefits and other payments to employed dentists and hygienists and
contracted specialists in states in which it operates and in which ownership of
dental practices by the Company is permitted (currently Wisconsin). The
Company's net revenue is dependent on the Revenue of the dental group practices.
Operating expenses consist of the expenses incurred by the Company in connection
with managing the Dental Offices, including salaries and benefits for personnel
other than dentists and hygienists, dental supplies, dental laboratory fees,
occupancy costs, equipment leases, management information systems and other
expenses related to dental practice
8
<PAGE> 9
operations. The Company also incurs personnel and administrative expenses in
connection with maintaining a corporate function that provides management,
administrative, marketing and development services to the Dental Offices.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Dental group practices revenue, net. Revenue increased to $25.9 million
for the three months ended June 30, 1998 from $16.2 million for the three months
ended June 30, 1997, an increase of $9.7 million, or 59.1%. This increase
resulted from the acquisitions of Dental Centers of Indiana, Inc. ("DCI"), Three
Peaks Dental Health L.P. ("Three Peaks"), Press Family Dental, Dental America,
Dental Care One and Managed Dental Care Centers, Inc. ("Managed Dental Care") in
August 1997, November 1997, November 1997, December 1997, March 1998 and June
1998, respectively, which contributed combined Revenue of $6.3 million for the
three months ended June 30, 1998. Dental offices in the Dallas-Fort Worth,
Houston, Wisconsin and Arkansas markets (the "existing markets") contributed an
additional $3.4 million of the increase in Revenue in the three months ended
June 30, 1998 resulting primarily from the opening of eight de novo Dental
Offices, the physical expansion of nine existing Dental Offices and the
acquisition of six dental practices.
Fee-for-service Revenue (i.e., Revenue derived from indemnity dental
plans, preferred provider plans and direct payments by patients not covered by
any third-party payor) increased to $16.2 million for the three months ended
June 30, 1998 from $9.8 million for the three months ended June 30, 1997, an
increase of $6.4 million, or 65.0%. This increase resulted from the acquisitions
of DCI, Three Peaks, Press Family Dental, Dental America, Dental Care One and
Managed Dental Care which contributed combined fee-for-service Revenue of $4.6
million for the three months ended June 30, 1998. In existing markets,
fee-for-service Revenue increased to $11.6 million for the three months ended
June 30, 1998 from $9.8 million for the three months ended June 30, 1997,
representing an increase of $1.8 million, or 17.9%. The increase in existing
markets resulted primarily from the opening of eight de novo Dental Offices, the
physical expansion of nine existing Dental Offices and the acquisition of six
dental practices. Managed dental care Revenue (i.e., Revenue from capitated
managed dental care plans, including capitation payments and patient
co-payments) increased to $9.7 million for the three months ended June 30, 1998
from $6.4 million for the three months ended June 30, 1997, an increase of $3.3
million, or 51.4%. This increase resulted in part from the acquisitions of DCI,
Three Peaks, Press Family Dental, Dental America, Dental Care One and Managed
Dental Care which contributed combined managed dental care Revenue of $1.7
million for the three months ended June 30, 1998. In existing markets, managed
dental care Revenue increased to $8.0 million for the three months ended June
30, 1998 from $6.4 million for the three months ended June 30, 1997, an increase
of $1.6 million or 25.6%. The increase in existing markets resulted primarily
from the opening of eight de novo Dental Offices, the physical expansion of nine
existing Dental Offices and the acquisition of six dental practices. As a
percentage of Revenue, fee-for-service Revenue increased to 62.5% from 60.5% for
the three months ended June 30, 1998 and 1997, respectively.
Amounts retained by dental group practices. Amounts retained by dental
group practices increased to $8.0 million for the three months ended June 30,
1998 from $5.5 million for the three months ended June 30, 1997, an increase of
$2.5 million, or 45.9%. The increase resulted from the acquisitions of DCI,
Three Peaks, Press Family Dental, Dental America, Dental Care One and Managed
Dental Care which together added amounts retained by dental group practices of
$1.9 million for the three months ended June 30, 1998. In existing markets,
amounts retained by dental group practices increased $593,000 resulting from an
increase in dentist and hygienist compensation due to a higher level of
production at the Dental Offices, the opening of eight de novo Dental Offices,
the physical expansion of nine existing Dental Offices and the acquisition of
six dental practices. As a percent of Revenue, amounts retained by dental group
practices decreased to 30.8% from 33.6% for the three months ended June 30, 1998
and 1997, respectively. This decrease was due to the acquisitions having lower
amounts retained by dental group practices as a percent of Revenue than the
Company's existing operations, and a reduction in the amounts retained by dental
group practices as a percent of Revenue for the Company's current markets.
Clinical salaries and benefits. Clinical salaries and benefits expense
increased to $4.7 million for the three months ended June 30, 1998 from $2.9
million for the three months ended June 30, 1997, an increase of $1.8 million,
9
<PAGE> 10
or 66.1%. The increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
added combined clinical salaries and benefits expense of $1.5 million for the
three months ended June 30,1998. In existing markets, clinical salaries and
benefits expense increased $411,000 resulting primarily from the opening of
eight de novo Dental Offices, the physical expansion of nine existing Dental
Offices and the acquisition of six dental practices. As a percent of Revenue,
clinical salaries and benefits expense increased to 18.3% from 17.6% for the
three months ended June 30, 1998 and 1997, respectively. This increase was due
principally to the acquisitions having higher clinical salaries and benefits
expense as a percent of Revenue than the Company's existing operations.
Other salaries and benefits. Other salaries and benefits expense
increased to $2.2 million for the three months ended June 30, 1998 from $1.6
million for the three months ended June 30, 1997, an increase of $603,000, or
37.1%. The increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
added combined other salaries and benefits expense of $376,000 for the three
months ended June 30,1998. In existing markets, other salaries and benefits
expense increased $227,000 primarily from the building of additional corporate
infrastructure to manage growth. As a percent of Revenue, other salaries and
benefits expense decreased to 8.6% from 10.0% for the three months ended June
30, 1998 and 1997, respectively. This decrease was due principally to leveraging
corporate expenses against additional Revenue resulting from acquisitions and
expansion in existing markets.
Dental supplies. Dental supplies expense increased to $1.5 million for
the three months ended June 30, 1998 from $1.0 million for the three months
ended June 30, 1997, an increase of $456,000, or 45.3%. This increase resulted
from the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added $414,000 of combined dental
supplies expense for the three months ended June 30, 1998. In existing markets,
dental supplies expense increased $42,000 as a result of increased production.
As a percent of Revenue, dental supplies expense decreased to 5.7% from 6.2% for
the three months ended June 30, 1998 and 1997, respectively. This decrease was
due principally to the leveraging of supply contracts with expansion in existing
markets.
Laboratory fees. Laboratory fee expense increased to $1.2 million for
the three months ended June 30, 1998 from $661,000 for the three months ended
June 30, 1997, an increase of $570,000, or 86.2%. This increase resulted from
the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added combined laboratory fee
expense of $378,000 for the three months ended June 30, 1998. In existing
markets, laboratory fee expense increased $192,000 as a result of increased
production. As a percent of Revenue, laboratory fee expense increased to 4.8%
from 4.1% for the three months ended June 30, 1998 and 1997, respectively. This
increase was due principally to the acquisitions having higher laboratory fee
expense as a percent of Revenue than the Company's existing operations.
Occupancy. Occupancy expense increased to $1.3 million for the three
months ended June 30, 1998 from $862,000 for the three months ended June 30,
1997, an increase of $481,000, or 55.8%. This increase resulted from the
acquisitions of DCI, Three Peaks, Press Family Dental, Dental America, Dental
Care One and Managed Dental Care which added a combined $327,000 to occupancy
expense for the three months ended June 30, 1998. In existing markets, occupancy
expense increased $154,000 resulting primarily from the opening of eight de novo
Dental Offices, the physical expansion of nine existing Dental Offices and the
acquisition of six dental practices. As a percent of Revenue, occupancy expense
decreased slightly to 5.2% from 5.3% for the three months ended June 30, 1998
and 1997, respectively.
Advertising. Advertising expense increased to $578,000 for the three
months ended June 30, 1998 from $421,000 for the three months ended June 30,
1997, an increase of $157,000, or 37.3%. This increase resulted from the
acquisitions of DCI, Three Peaks, Press Family Dental, Dental America, Dental
Care One and Managed Dental Care which added a combined $128,000 to advertising
expense for the three months ended June 30, 1998. There was an increase of
$29,000 in television and print advertising in existing markets for the three
months ended June 30, 1998. As a percent of Revenue, advertising expense
decreased to 2.2% from 2.6% for the three months ended June 30, 1998 and 1997,
respectively. This decrease was due to the acquisitions having lower advertising
expense as a percent of Revenue than the Company's existing operations and
leveraging advertising expense with greater market penetration in existing
markets.
10
<PAGE> 11
Depreciation and amortization. Depreciation and amortization expense
increased to $1.2 million for the three months ended June 30, 1998 from $669,000
for the three months ended June 30, 1997, an increase of $572,000, or 85.5%.
This increase resulted from the acquisitions of DCI, Three Peaks, Press Family
Dental, Dental America, Dental Care One and Managed Dental Care which added
combined depreciation and amortization expense of $334,000 for the three months
ended June 30, 1998. Depreciation and amortization expense for existing markets
increased $238,000 resulting primarily from the opening of eight de novo Dental
Offices, the physical expansion of nine existing Dental Offices and the
acquisition of six dental practices. As a percent of Revenue, depreciation and
amortization expense increased to 4.8% from 4.1% for the three months ended June
30, 1998 and 1997, respectively. This increase was due principally to the
acquisitions having higher depreciation and amortization expense as a percent of
Revenue than the Company's existing operations.
General and administrative. General and administrative expense
increased to $2.6 million for the three months ended June 30, 1998 from $1.5
million for the three months ended June 30, 1997, an increase of $1.1 million,
or 72.0%. This increase resulted from the acquisitions of DCI, Three Peaks,
Press Family Dental, Dental America, Dental Care One and Managed Dental Care
which added combined general and administrative expense of $459,000 for the
three months ended June 30, 1998. General and administrative expense for
existing markets increased $632,000 resulting from the expansion of the
Company's corporate infrastructure to manage growth. As a percent of Revenue,
general and administrative expense increased to 10.1% from 9.3% for the three
months ended June 30, 1998 and 1997, respectively. This increase was due
principally to the expansion of the Company's corporate infrastructure to manage
growth.
Operating income. Operating income increased to $2.5 million for the
three months ended June 30, 1998 from $1.2 million for the three months ended
June 30, 1997, an increase of $1.3 million, or 109.4%. This increase resulted
from the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added combined operating income of
$456,000 for the three months ended June 30, 1998. Income from the Company's
existing markets increased $1.3 million for the three months ended June 30,
1998, which was offset by increased corporate expenses of $443,000 due to the
development of corporate infrastructure. As a percent of Revenue, operating
income increased to 9.5% from 7.2% for the three months ended June 30, 1998 and
1997, respectively. This increase was due principally to the margin improvement
in amounts retained by dental group practices, other salaries and benefits
expense, dental supplies expense and advertising expense.
Interest expense, net. Interest expense, net decreased to $231,000 for
the three months ended June 30, 1998 from $645,000 for the three months ended
June 30, 1997, a decrease of $414,000, or 64.2%. This decrease is attributable
to the retirement of $24.8 million in outstanding debt under a prior credit
facility with the use of proceeds obtained from the Company's initial public
offering on July 23, 1997. This retirement was partially offset by subsequent
borrowing by the Company under a new Credit Facility (the "Credit Facility")
with a bank syndicate. Average debt outstanding for the three months ended June
30, 1998 was $14.9 million compared to average debt outstanding of $24.8 million
for the three months ended June 30, 1997.
Minority interest. Minority interest expense was $14,000 for the three
months ended June 30, 1998 as a result of the acquisitions of DCI, which owns a
fifty percent ownership in two partnerships operating four Dental Offices in
Indiana, Dental America, which owns a twenty percent interest in a group dental
practice with two offices located in Midland and Odessa, Texas, and Managed
Dental Care, which owns a thirty-five percent interest in a group dental
practice with two offices in Austin, Texas and five offices in New Mexico.
Income taxes. Income tax expense increased to $864,000 for the three
months ended June 30, 1998 from $205,000 for the three months ended June 30,
1997, an increase of $659,000, or 321.5%. This increase was the result of higher
net income before taxes, which increased to $2.2 million for the three months
ended June 30, 1998 from $530,000 for the three months ended June 30, 1997, an
increase of $1.7 million, or 318.1%.
11
<PAGE> 12
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Dental group practices revenue, net. Revenue increased to $50.1 million
for the six months ended June 30, 1998 from $30.7 million for the six months
ended June 30, 1997, an increase of $19.4 million, or 63.2%. This increase
resulted from the acquisitions of DCI, Three Peaks, Press Family Dental, Dental
America, Dental Care One and Managed Dental Care in August 1997, November 1997,
November 1997, December 1997, March 1998 and June 1998, respectively, which
contributed combined Revenue of $11.4 million for the six months ended June 30,
1998. Revenue for the Dental offices in the Dallas-Fort Worth, Houston,
Wisconsin and Arkansas markets ("existing markets") increased $8.0 million, or
26.0% for the six months ended June 30, 1998, resulting primarily from the
opening of eight de novo Dental Offices, the physical expansion of nine existing
Dental Offices, the acquisition of six dental practices and the acquisition of
United Dental Care Tom Harris D.D.S. and Associates ("United") in April 1997,
which provided three additional months of Revenue for the six months ended June
30, 1998.
Fee-for-service Revenue (i.e., Revenue derived from indemnity dental
plans, preferred provider plans and direct payments by patients not covered by
any third-party payor) increased to $31.4 million for the six months ended June
30, 1998 from $18.9 million for the six months ended June 30, 1997, an increase
of $12.5 million, or 66.0%. This increase resulted from the acquisitions of DCI,
Three Peaks, Press Family Dental, Dental America, Dental Care One and Managed
Dental Care which contributed combined fee-for-service Revenue of $8.3 million
for the six months ended June 30, 1998. In existing markets, fee-for-service
Revenue increased to $23.1 million for the six months ended June 30, 1998 from
$18.9 million for the six months ended June 30, 1997, representing an increase
of $4.2 million or 22.3%. This increase resulted primarily from the opening of
eight de novo Dental Offices, the physical expansion of nine existing Dental
Offices, the acquisition of six dental practices and the acquisition of United
in April 1997 which provided three additional months of Revenue for the six
months ended June 30, 1998. Managed dental care Revenue (i.e., Revenue from
capitated managed dental care plans, including capitation payments and patient
co-payments) increased to $18.7 million for the six months ended June 30, 1998
from $11.8 million for the six months ended June 30, 1997, an increase of $6.9
million, or 59.0%. This increase resulted in part from the acquisitions of DCI,
Three Peaks, Press Family Dental, Dental America, Dental Care One and Managed
Dental Care which contributed combined managed dental care Revenue of $3.1
million for the six months ended June 30, 1998. In existing markets, managed
dental care Revenue increased to $15.6 million for the six months ended June 30,
1998 from $11.8 million for the six months ended June 30, 1997, an increase of
$3.8 million or 32.1%. This increase resulted primarily from the opening of
eight de novo Dental Offices, the physical expansion of nine existing Dental
Offices, the acquisition of six dental practices and the acquisition of United
in April 1997 which provided three additional months of managed dental care
Revenue for the six months ended June 30, 1998. As a percentage of Revenue,
fee-for-service Revenue increased to 62.6% from 61.4% for the six months ended
June 30, 1998 and 1997, respectively.
Amounts retained by dental group practices. Amounts retained by dental
group practices increased to $15.9 million for the six months ended June 30,
1998 from $10.5 million for the six months ended June 30, 1997, an increase of
$5.4 million, or 51.5%. The increase resulted from the acquisitions of DCI,
Three Peaks, Press Family Dental, Dental America, Dental Care One and Managed
Dental Care which together added amounts retained by dental group practices of
$3.5 million for the six months ended June 30, 1998. In existing markets,
amounts retained by dental group practices increased $1.9 million, or 18.1%, as
dentist and hygienist compensation increased as a result of a higher level of
production at the Dental Offices, the opening of eight de novo Dental Offices,
the physical expansion of nine existing Dental Offices, the acquisition of six
dental practices and the acquisition of United in April 1997, which contributed
three additional months of amounts retained by dental group practices for the
six months ended June 30, 1998. As a percent of Revenue, amounts retained by
dental group practices decreased to 31.7% from 34.1% for the six months ended
June 30, 1998 and 1997, respectively. This decrease was due to the acquisitions
having lower amounts retained by dental group practices as a percent of Revenue
than the Company's existing operations, and a reduction in the amounts retained
by dental group practices as a percent of Revenue for the Company's current
markets.
Clinical salaries and benefits. Clinical salaries and benefits
increased to $9.0 million for the six months ended June 30, 1998 from $5.3
million for the six months ended June 30, 1997, an increase of $3.7 million, or
69.5%. The increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
together added combined clinical salaries and benefits expense of $2.5 million
for the six
12
<PAGE> 13
months ended June 30, 1998. In existing markets, clinical salaries and benefits
expense increased $1.2 million resulting primarily from the opening of eight de
novo Dental Offices, the physical expansion of nine existing Dental Offices, the
acquisition of six dental practices and the acquisition of United in April 1997
which provided three additional months of clinical salaries and benefits expense
for the six months ended June 30, 1998. As a percent of Revenue, clinical
salaries and benefits expense increased to 17.9% from 17.3% for the six months
ended June 30, 1998 and 1997, respectively. This increase was due principally to
the acquisitions having higher clinical salaries and benefits expense as a
percent of Revenue than the Company's existing operations.
Other salaries and benefits. Other salaries and benefits expense
increased to $4.4 million for the six months ended June 30, 1998 from $3.0
million for the six months ended June 30, 1997, an increase of $1.4 million, or
47.7%. The increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
added combined other salaries and benefits expense of $686,000 for the six
months ended June 30, 1998. In existing markets, other salaries and benefits
expense increased $749,000 primarily from the building of additional corporate
infrastructure to manage growth. As a percent of Revenue, other salaries and
benefits expense decreased to 8.9% from 9.8% for the six months ended June 30,
1998 and 1997, respectively. This decrease was due principally to leveraging
corporate expenses against additional Revenue resulting from acquisitions and
expansion in existing markets.
Dental supplies. Dental supplies expense increased to $2.9 million for
the six months ended June 30, 1998 from $1.9 million for the six months ended
June 30, 1997, an increase of $984,000, or 51.3%. This increase resulted from
the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added $727,000 of combined dental
supplies expense for the six months ended June 30, 1998. In existing markets,
dental supplies expense increased $257,000 as a result of increased production
and the acquisition of United in April 1997 which provided three additional
months of dental supplies expense for the six months ended June 30, 1998. As a
percent of Revenue, dental supplies expense decreased to 5.8% from 6.2% for the
six months ended June 30, 1998 and 1997, respectively. This decrease was due
principally to the leveraging of supply contracts with expansion in existing
markets.
Laboratory fees. Laboratory fee expense increased to $2.3 million for
the six months ended June 30, 1998 from $1.3 million for the six months ended
June 30, 1997, an increase of $1.0 million, or 82.8%. This increase resulted
from the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added combined laboratory fee
expense of $631,000 for the six months ended June 30, 1998. In existing markets,
laboratory fee expense increased $405,000 as a result of increased production.
As a percent of Revenue, laboratory fee expense increased to 4.6% from 4.1% for
the six months ended June 30, 1998 and 1997, respectively. This increase was due
principally to the acquisitions having higher laboratory fee expense as a
percent of Revenue than the Company's existing operations.
Occupancy. Occupancy expense increased to $2.7 million for the six
months ended June 30, 1998 from $1.7 million for the six months ended June 30,
1997, an increase of $1.0 million, or 60.8%. This increase resulted from the
acquisitions of DCI, Three Peaks, Press Family Dental, Dental America, Dental
Care One and Managed Dental Care which added a combined $550,000 to occupancy
expense for the six months ended June 30, 1998. In existing markets, occupancy
expense increased $460,000 resulting primarily from the opening of eight de novo
Dental Offices, the physical expansion of nine existing Dental Offices, the
acquisition of six dental practices and the acquisition of United in April 1997
which provided three additional months of occupancy expense for the six months
ended June 30, 1998. As a percent of Revenue, occupancy expense decreased
slightly to 5.3% from 5.4% for the six months ended June 30, 1998 and 1997,
respectively.
Advertising. Advertising expense increased to $1.1 million for the six
months ended June 30, 1998 from $746,000 for the six months ended June 30, 1997,
an increase of $347,000, or 46.5%. This increase resulted from the acquisitions
of DCI, Three Peaks, Press Family Dental, Dental America, Dental Care One and
Managed Dental Care which added a combined $228,000 to advertising expense for
the six months ended June 30, 1998. There was an increase of $119,000 in
television and print advertising in existing markets for the six months ended
June 30, 1998. As a percent of Revenue, advertising expense decreased slightly
to 2.2% from 2.4% for the six months ended June 30, 1998 and 1997, respectively.
13
<PAGE> 14
Depreciation and amortization. Depreciation and amortization expense
increased to $2.3 million for the six months ended June 30, 1998 from $1.2
million for the six months ended June 30, 1997, an increase of $1.1 million, or
88.8%. This increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
added combined depreciation and amortization expense of $585,000 for the six
months ended June 30, 1998. Depreciation and amortization expense for existing
markets increased $510,000 resulting primarily from the opening of eight de novo
Dental Offices, the physical expansion of nine existing Dental Offices, the
acquisition of six dental practices and the acquisition of United in April 1997
which provided three additional months of depreciation and amortization expense
for the six months ended June 30, 1998. As a percent of Revenue, depreciation
and amortization expense increased to 4.6% from 4.0% for the six months ended
June 30, 1998 and 1997, respectively. This increase was due principally to the
acquisitions having higher depreciation and amortization expense as a percent of
Revenue than the Company's existing operations.
General and administrative. General and administrative expense
increased to $4.9 million for the six months ended June 30, 1998 from $3.0
million for the six months ended June 30, 1997, an increase of $1.9 million, or
65.8%. This increase resulted from the acquisitions of DCI, Three Peaks, Press
Family Dental, Dental America, Dental Care One and Managed Dental Care which
added combined general and administrative expense of $767,000 for the six months
ended June 30, 1998. General and administrative expense for existing markets
increased $1.2 million resulting from the expansion of the Company's corporate
infrastructure to manage growth. As a percent of Revenue, general and
administrative expense increased slightly to 9.8% from 9.7% for the six months
ended June 30, 1998 and 1997, respectively.
Operating income. Operating income increased to $4.6 million for the
six months ended June 30, 1998 from $2.1 million for the six months ended June
30, 1997, an increase of $2.5 million, or 115.4%. This increase resulted from
the acquisitions of DCI, Three Peaks, Press Family Dental, Dental America,
Dental Care One and Managed Dental Care which added combined operating income of
$1.2 million for the six months ended June 30, 1998. Income from the Company's
existing markets increased $2.2 million for the six months ended June 30, 1998,
which was offset by increased corporate expenses of $920,000 due to the
development of corporate infrastructure. As a percent of Revenue, operating
income increased to 9.2% from 7.0% for the six months ended June 30, 1998 and
1997, respectively. This increase was due principally to the acquisitions
experiencing higher operating margins than the Company's existing operations and
margin improvement in amounts retained by dental group practices, other salaries
and benefits expense and dental supplies expense.
Interest expense, net. Interest expense, net decreased to $514,000 for
the six months ended June 30, 1998 from $1.2 million for the six months ended
June 30, 1997, a decrease of $711,000, or 58.0%. This decrease is attributable
to the retirement of $24.8 million in outstanding debt under a prior credit
facility with the use of proceeds obtained from the Company's initial public
offering on July 23, 1997. This retirement was partially offset by subsequent
borrowing by the Company under a new Credit Facility. Average debt outstanding
for the six months ended June 30, 1998 was $12.7 million compared to average
debt outstanding of $24.0 million for the six months ended June 30, 1997.
Minority interest. Minority interest expense was $64,000 for the six
months ended June 30, 1998 as a result of the acquisitions of DCI, which owns a
fifty percent ownership in two partnerships operating four Dental Offices in
Indiana, Dental America, which owns a twenty percent interest in a group dental
practice with two offices located in Midland and Odessa, Texas, and Managed
Dental Care, which owns a thirty-five percent interest in a group dental
practice with two offices in Austin, Texas and five offices in New Mexico.
Income taxes. Income tax expense increased to $1.6 million for the six
months ended June 30, 1998 from $355,000 for the six months ended June 30, 1997,
an increase of $1.2 million, or 342.5%. This increase was the result of higher
net income before taxes, which increased to $4.0 million for the six months
ended June 30, 1998 from $913,000 for the six months ended June 30, 1997, an
increase of $3.1 million, or 341.1%.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had a $1.8 million working capital
surplus, representing an increase of $465,000 from the working capital surplus
of $1.3 million at December 31, 1997. This working capital surplus included
$12.0 million in current assets, consisting primarily of $4.0 million in cash
and cash equivalents and $7.3 million in accounts receivable, net of allowances.
Current assets were partially offset by current liabilities of $10.2 million,
consisting of $2.6 million in accounts payable, $3.3 million in accrued
liabilities, $1.1 million in income taxes payable, $2.5 million in amounts
payable to dental group practices as consideration for accounts receivable
acquired from such group practices and $653,000 in current maturities of notes
payable and capital lease obligations. The Company's principal sources of
liquidity as of June 30, 1998 consisted of cash and cash equivalents, net
accounts receivable and borrowing capacity under the Credit Facility. There can
be no assurance the Company will not have working capital deficits in the
future, particularly if additional indebtedness requires current amortization of
principal.
For the six months ended June 30, 1998 and 1997, cash provided by
operations was $4.5 million and $2.0 million, respectively.
Cash used in investing activities was $10.0 million for the six months
ended June 30, 1998 and $6.2 million for the six months ended June 30, 1997. In
the six months ended June 30, 1998, $6.3 million was utilized for acquisitions
and $3.7 million was invested in the purchase of additional property and
equipment. In the six months ended June 30, 1997, $5.5 million was utilized for
acquisitions and $752,000 was invested in the purchase of additional property
and equipment.
For the six months ended June 30, 1998 and 1997, cash provided by
financing activities was $6.5 million and $4.6 million, respectively. In the six
months ended June 30, 1998, the cash provided was comprised of $6.5 million in
net borrowings and $46,000 in proceeds from the issuance of stock offset by
$66,000 in partnership distributions. In the six months ended June 30, 1997, the
cash provided was comprised of $2.9 million in net borrowings and $1.7 million
in proceeds from the issuance of stock.
The Company has a Credit Facility, which expires November 4, 2002, with
a bank syndicate. Under the Credit Facility, the Company may borrow up to $30.0
million. As of June 30, 1998, the Company had outstanding borrowings of $17.1
million under the Credit Facility. The amounts outstanding under the Credit
Facility bear interest at variable rates which are based upon either the
lender's base rate or LIBOR, plus, in either case, a margin which varies
according to the ratio of the Company's funded debt to EBITDA, each as defined
in the Credit Facility. The Credit Facility prohibits the Company from incurring
indebtedness, incurring liens, disposing of assets, making investments or making
acquisitions above a predetermined consideration level without bank approval,
and requires the Company to maintain certain financial ratios on an ongoing
basis. The Credit Facility is secured by pledges of all of the outstanding
capital stock of, or other equity interests in, the Company's subsidiaries, and
a lien on substantially all of the assets of the Company.
The Company believes that the cash generated from operations will be
sufficient to fund its anticipated working capital needs and capital
expenditures (other than financing necessary to complete future acquisitions)
for at least the next three months. The Company expects to fund future
acquisitions with cash from operations and borrowings under the Credit Facility.
YEAR 2000 ISSUE
The Company has reviewed its computer programs and systems at each of
the Company's facilities to ensure that the programs and systems will function
properly and be Year 2000 compliant. In this process, the Company expects to
upgrade some systems. The Company presently believes that, with such upgrades,
the Year 2000 problem will not pose significant operational problems for the
Company's computer systems. The estimated costs of these efforts are not
expected to be material to the Company's financial position or any year's
results of operations.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) In April 1998, the Company issued 55,131 shares of Common
Stock to James W. Willis, Mark R. Johnson and Thurman H.
Brown, II as consideration for achieving specified financial
performance goals contained in the Stock Purchase Agreement in
reliance upon the exemption from registration under Regulation
D promulgated under the Securities Act.
In April 1998, pursuant to an Asset Purchase Agreement, the
Company issued 34,781 shares of Common Stock to Marc B.
Sternberg, D.D.S. and Steven H. Harlan, D.D.S. in partial
consideration for the sale of certain assets and assumption of
certain liabilities of Dental Care One in reliance upon the
exemption from registration under Regulation D promulgated
under the Securities Act.
In June 1998, pursuant to an Asset Purchase Agreement, the
Company issued 2,257 shares of Common Stock to Louis Garcia,
D.D.S. in partial consideration for the sale of certain assets
and assumption of certain liabilities of Louis Garcia, D.D.S
in reliance upon the exemption from registration under
Regulation D promulgated under the Securities Act.
In June 1998, pursuant to an Asset Purchase Agreement, the
Company issued 2,500 shares of Common Stock to A. Scott Terry,
D.D.S. in partial consideration for the sale of certain assets
and assumption of certain liabilities of A. Scott Terry,
D.D.S., S.C. in reliance upon the exemption from registration
under Regulation D promulgated under the Securities Act.
In June 1998, pursuant to an Asset Purchase Agreement, the
Company issued 27,686 shares of Common Stock to certain
shareholders of Managed Dental Care Centers, Inc. in partial
consideration for the sale of certain assets and assumption of
certain liabilities of Managed Dental Care Centers, Inc. in
reliance upon the exemption from registration under Regulation
D promulgated under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
16
<PAGE> 17
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY-HOLDERS
At the Annual Meeting of Stockholders of the Company held on
May 14, 1998, the stockholders of the Company approved the
election of John E. Maupin, Jr., the Board of Directors'
nominee, as a Class I Director of the Company to hold office
until the 2001 Annual Meeting of Stockholders and until his
successor is duly elected and qualified. No other nominations
were made. The total number of votes cast for the election of
the Class I Director was 8,568,328. Set forth below is a
tabulation of the vote:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
John E. Maupin, Jr. 8,550,743 17,585
</TABLE>
There were no broker non-votes on this matter.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits.
11 Statement re: Computation of per share earnings data
27 Financial Data Schedules
(b) Reports on Form 8-K.
Not applicable.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MONARCH DENTAL CORPORATION
Date: August 14, 1998 By: /s/ Gary W. Cage
---------------------------------------
Gary W. Cage
Chief Executive Officer
Date: August 14, 1998 By: /s/ Steven G. Peterson
----------------------------------------
Steven G. Peterson
Chief Financial Officer
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 Statement re: Computation of per share earnings data
27 Financial Data Schedules
</TABLE>
19
<PAGE> 1
EXHIBIT 11
MONARCH DENTAL CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Net income $ 1,352 $ 325 $ 2,456 $ 558
---------- ---------- ---------- ----------
Weighted average common shares outstanding 10,324 3,281 10,280 3,249
---------- ---------- ---------- ----------
Net income per share $ 0.13 $ 0.10 $ 0.24 $ 0.17
========== ========== ========== ==========
FULLY DILUTED:
Net income $ 1,352 $ 325 $ 2,456 $ 558
---------- ---------- ---------- ----------
Weighted average common and common equivalent shares outstanding:
Weighted average common shares outstanding 10,324 3,281 10,280 3,249
Weighted average common equivalent shares outstanding 142 3,463 117 3,344
---------- ---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 10,466 6,744 10,397 6,593
---------- ---------- ---------- ----------
Net income per share $ 0.13 $ 0.05 $ 0.24 $ 0.08
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 0 4,009,635
<SECURITIES> 0 0
<RECEIVABLES> 0 10,739,160
<ALLOWANCES> 0 (3,398,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 12,014,365
<PP&E> 0 17,380,829
<DEPRECIATION> 0 (5,773,000)
<TOTAL-ASSETS> 0 78,230,184
<CURRENT-LIABILITIES> 0 10,211,952
<BONDS> 0 0
0 0
0 0
<COMMON> 0 103,582
<OTHER-SE> 0 46,183,315
<TOTAL-LIABILITY-AND-EQUITY> 0 78,230,184
<SALES> 0 0
<TOTAL-REVENUES> 25,852,996 50,132,522
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 15,425,975 29,643,555
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 231,274 513,915
<INCOME-PRETAX> 2,216,340 4,026,887
<INCOME-TAX> 864,000 1,571,000
<INCOME-CONTINUING> 1,352,340 2,455,887
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,352,340 2,455,887
<EPS-PRIMARY> 0.13 0.24
<EPS-DILUTED> 0.13 0.24
</TABLE>
