<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(An amendment to Form 8-K filed on April 16, 1997)
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event
reported):
June 16, 1997
COAST DENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-21501 59-3136131
- -------- --------- ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
6200 Courtney Campbell Causeway, Suite 690
Tampa, Florida 33607
- -------------- -----
(Address of principal executive offices) (zip code)
Registrant's Telephone number: (813) 288-1999
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following financial statements of West Coast Dental,
P.A. are filed with amendment to Coast Dental Services, Inc.'s
(the "Company") Form 8-K which was previously filed on
April 16, 1997:
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report ............................................. 3
Balance Sheet - March 31, 1997............................................ 4
Statement of Income - Year Ended March 31, 1997........................... 5
Statement of Shareholder's Equity - Year Ended March 31, 1997............. 6
Statement of Cash Flows - Year Ended March 31, 1997....................... 7
Notes to Financial Statements............................................. 8
</TABLE>
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Coast Dental Services, Inc.
We have audited the accompanying balance sheet of West Coast Dental, P.A. (the
"Practice") as of March 31, 1997, and the related statement of income,
shareholder's equity and of cash flows for the year ended March 31, 1997. The
financial statements are the responsibility of the Practice's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Practice as of March 31, 1997, and the
results of its operations and its cash flows for the year ended March 31, 1997,
in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Tampa, Florida
May 23, 1997
3
<PAGE> 4
WEST COAST DENTAL, P.A.
BALANCE SHEET AS OF MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 69,720
Trade receivables, net of allowance for bad debts of $34,550 34,553
---------
Total current assets 104,273
Property and equipment, net 225,177
Other assets 30,481
---------
Total $ 359,931
=========
LIABILITIES AND EQUITY
Liabilities
Accounts payable $ 4,260
Accrued payroll and related taxes 5,440
Notes payable 204,602
Shareholder loan 2,700
---------
Total current liabilities 217,002
Shareholder's equity
Common stock - $1.00 par value, 10,000 shares issued
and outstanding, 10,000 shares authorized 10,000
Additional paid in capital 75,100
Retained earnings 57,829
---------
Total shareholder's equity 142,929
---------
Total $ 359,931
=========
</TABLE>
See notes to the financial statements.
4
<PAGE> 5
WEST COAST DENTAL, P.A.
STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Revenue $1,829,256
Dental center expenses:
Payroll and benefits 1,122,919
Dental supplies and lab fees 247,903
Rent 74,184
Advertising 2,857
Depreciation and amortization 51,110
Bad debt expense 34,550
----------
Total dental center expenses 1,533,523
Total general and administrative expenses 205,225
----------
Operating income 90,508
Interest expense 8,951
----------
Net income $ 81,557
==========
</TABLE>
See notes to the financial statements.
5
<PAGE> 6
WEST COAST DENTAL, P.A.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
-------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
Balance, April 1, 1996 $20,000 $65,100 $ (12,200) $ 72,900
Net earnings 81,557 81,557
Distributions (11,528) (11,528)
------- ------- --------- --------
Balance, March 31, 1997 $20,000 $65,100 $ 57,829 $142,929
------- ------- --------- --------
</TABLE>
See notes to financial statements.
6
<PAGE> 7
WEST COAST DENTAL, P.A.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ 81,557
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 51,110
Allowance for bad debts 17,275
Increase in prepaid and other assets (20,000)
Decrease in accounts payable and accrued payroll and related taxes (44,649)
----------
Net cash provided by operating activities 85,293
----------
Cash flows from investing activities:
Property additions (22,837)
----------
Net cash used in investing activities (22,837)
----------
Cash flows from financing activities:
Partner and shareholder distributions (11,528)
Proceeds from notes payable 94,000
Repayments of notes payable (126,408)
----------
Net cash used in financing activities (43,936)
----------
Increase in cash 18,520
Cash at beginning of period 51,200
----------
Cash at end of period $ 69,720
==========
</TABLE>
See notes to the financial statements.
7
<PAGE> 8
WEST COAST DENTAL, P.A.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
West Coast Dental, P.A., (the "Practice") is a professional
association of dentists doing business through two dental centers in
Southwest Florida. The Practice entities are owned by Dr. Lawrence E.
Fendrich, DMD.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The accompanying financial statements have been
prepared on the accrual basis of accounting.
Supplies - Supplies are stated at the lower of cost determined under
the first-in, first-out method, or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation of property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets,
which range from 6 to 7 years. Leasehold improvements are amortized on
a straight-line basis over the shorter of the lease term or the
estimated useful life of the assets.
When assets are retired or otherwise disposed of, the costs and
related accumulated depreciation are removed from the accounts. The
difference between the net book value of the assets and proceeds from
disposition is recognized as gain or loss. Routine maintenance and
repairs are charged to expenses as incurred, while costs of
improvements and renewals are capitalized.
Other Assets - The Practice was established by acquisition of the two
dental centers in October 1993 whereby certain intangible assets,
including a non-compete agreement, goodwill and patient records were
acquired. The original cost assigned to these assets was approximately
$12,000, net of approximately $1,800 of amortization through March 31,
1997. All intangibles are being amortized over their estimated useful
lives on a straight-line basis. The goodwill and patient records are
being amortized over 25 years, and the non-compete agreement is being
amortized over three to nine years.
Use of Estimates--The preparation of financial statements in
conformity with general accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimated.
3. INCOME TAXES
West Coast Dental, P.A. has elected to be treated as an S corporation
for federal income tax purposes, with profits and losses generally
reportable by the sole stockholder in his individual tax return.
Accordingly, no income taxes are reflected in the financial
statements.
8
<PAGE> 9
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1997
<S> <C>
Medical equipment $ 338,822
Office furniture and equipment 25,721
Leasehold improvements 78,029
----------
442,572
Less accumulated depreciation 217,395
----------
Total $ 225,177
==========
</TABLE>
5. NOTES PAYABLE
Notes payable in the amount of $204,602 as of March 31, 1997 consist
of capital lease obligations, totaling approximately $136,000, and a
note payable to the previous owner of the Practice. The carrying
amounts of these capital leases approximate fair value.
6. COMMITMENTS AND CONTINGENCIES
The Company primarily leases space for operation of its clinics under
two noncancelable operating leases expiring over the next 5 to 10
years. Rental expense for the year ended March 31, 1997 was
approximately $74,000. These leases have renewal clauses of five
years. Future minimum annual lease payments under these agreements as
of March 31, 1997 are:
<TABLE>
<S> <C>
1998 $ 71,363
1999 74,580
2000 77,340
2001 80,217
2002 83,206
Thereafter 182,406
--------
Total $569,112
========
</TABLE>
7. SUBSEQUENT EVENTS
Certain assets of the Practice were purchased as of April 1, 1997 by
Coast Dental Services, Inc. and the Coast Florida P.A. In connection
with this purchase, Coast Dental Services, Inc. and the Coast Florida
P.A. paid the outstanding notes payable totaling $204,602 and obtained
ownership of the related dental equipment that had been under capital
leases.
* * * * * *
9
<PAGE> 10
(b) Pro Forma Financial Information.
The following unaudited Pro Forma financial information
required pursuant to Article 11 of Regulation S-X are filed with
this amendment to the Company's Form 8-K which was previously
filed on April 16, 1997:
<TABLE>
<CAPTION>
Page
<S> <C>
Basis of Presentation .................................................... 11
Pro Forma Combined Balance Sheet - March 31, 1997 (Unaudited)............. 12
Pro Forma Combined Statement of Income - Year Ended
December 31, 1996 (Unaudited).......................................... 13
Pro Forma Combined Statement of Income - Three Months Ended
March 31, 1997 (Unaudited)............................................. 13
Notes to Pro Forma Combined Financial Information (Unaudited)............. 14
</TABLE>
10
<PAGE> 11
COAST DENTAL SERVICES, INC.
BASIS OF PRESENTATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Statements of Income for the year ended
December 31, 1996 and the three months ended March 31, 1997 gives effect to the
acquisition of West Coast Dental, P.A. ("West Coast") including the entering
into of the Services and Support Agreement with Coast Florida P.A., as if it
had occurred on January 1, 1996, and the sale of 2,200,000 shares of Common
Stock in the Initial Public Offering at the initial public offering price of
$8.00 per share and the estimated net proceeds therefrom. The unaudited Pro
Forma Combined Balance Sheet as of March 31, 1997 gives effect to the
acquisition of West Coast on April 1, 1997 as if it had occurred at March 31,
1997. The West Coast acquisition has been accounted for using the purchase
method of accounting, so that the Company's historical statement of operations
data include results of operations of the acquired Dental Center from the
acquisition date.
The unaudited Pro Forma Combined Financial Information has been prepared by the
Company based on the Company's audited Statement of Operations for the year
ended December 31, 1996, the unaudited Statement of Operations for the three
months ended March 31, 1997, the unaudited Balance Sheet as of March 31, 1997,
and the audited financial statements of West Coast for the year ended March 31,
1997. The Audited Historical Financial Statements of West Coast, the seller of
the assets in the West Coast acquisition, are included elsewhere in this Form
8-K/A. The Pro Forma Combined Financial Information should be read in
conjunction with the complete historical Financial Statements of Coast Dental
Services, Inc., and the notes thereto as filed by the Company on Form 10-K, and
the historical financial statements of West Coast included as a part of this
Form 8-K/A. The Pro Forma combined Financial Information does not purport to
be indicative of the combined results of operations that actually would have
occurred if the transactions described above had been effected at the dates
indicated or to project future results of operations for any period.
11
<PAGE> 12
<TABLE>
<CAPTION>
Coast Dental Services, INC. UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
MARCH 31, 1997
----------------------------------------------
HISTORICAL WEST COAST PRO FORMA
COMPANY ACQUISITION COMBINED
ASSETS:
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents: 12,782 (756) A 12,026
Management fee receivable from P.A. 1,169 1,169
Notes Receivable from Manrique and
advances to P.A. 221 221
Supplies 110 110
Prepaid expenses and other assets 264 264
------- --- ------
TOTAL CURRENT ASSETS 14,546 (756) 13,790
Property and equipment, net 1,990 200 A 2,190
Notes Receivable from stockholders 0 0
Non-Compete Agreement, net of amortization
of $113,646 998 998
Dental Service Agreement, net of amortization
of $40,355 2,627 686 A 3,313
Capitalized offering costs 0 0
Other assets 92 92
------ --- ------
TOTAL ASSETS 20,253 130 20,383
====== === ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable 386 386
Accrued offering costs 338 338
Other accrued expenses 1,141 1,141
Current maturities of long-term debt 1,428 18 A 1,446
Current portion of capital lease obligations 127 127
------- --- -------
TOTAL CURRENT LIABILITIES 3,420 18 3,438
Long-term debt, excluding current maturities 255 112 A 367
Capital lease obligations, excluding current portion 0 0
------ --- ------
TOTAL LIABILITIES 3,675 130 3,805
STOCKHOLDERS EQUITY:
Common Stock, $.001 par value; 50,000,000
authorized, 3,500,000 shares issued and
outstanding 6 6
Additional Paid in Capital 16,264 16,264
Retained Earnings 308 308
------ --- ------
TOTAL STOCKHOLDERS EQUITY 16,578 0 16,578
------ --- ------
------ --- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 20,253 130 20,383
====== === ======
</TABLE>
12
<PAGE> 13
Coast Dental Services, Inc.
Unaudited Pro Forma Condensed Combined Statements of Income
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-----------------------------------------------------------------------------------
Pro Forma
After
West Coast Pro Forma Acquisitions
Historical Dental Acquisition After Offering and
Company Acquisition Adjustments Acquisition Adjustments Offering
---------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenue $ 8,128 1,829 $ (503) C $ 9,518 $ 9,518
64 B
Dental Center Expenses
Dentist and hygienist salaries 503 (503) C 0 0
Staff Salaries 2,324 620 0 2,944 2,944
Dental supplies and lab fees 1,203 248 0 1,451 1,451
Other 1,925 163 (22) D 2,066 2,066
------- ----- ----- ----------- -----------
Total Dental Center expenses: 5,452 1,534 (525) 6,461 6,461
------- ----- ----- ----------- -----------
Gross Profit 2,676 295 86 3,057 3,057
------- ----- ----- ----------- -----------
General and administrative expenses: 1,089 205 27 E 1,321 1,321
------- ----- ----- ----------- -----------
Operating Income 1,587 90 59 1,736 1,736
Interest (income) expense 184 9 0 F 193 (136) 57
------- ----- ----- ----------- -----------
Income before income taxes 1,403 81 59 1,543 136 1,679
Pro Forma income tax (547) (32) (23) G (602) (53) (655)
------- ----- ----- ----------- -------- -----------
Pro Forma net income $ 856 49 $ 36 941 $ 83 $ 1,024
======= ===== ===== =========== ======== ===========
Pro Forma earnings per share 0.27 0.25
=========== ===========
Pro Forma weighted average shares 3,500,000 4,028,875
outstanding =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1997
-------------------------------------------------------
Pro Forma
West Coast Acquisition After
Company Acquisition Adjustments Acquisition
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Revenue $ 3,520 456 $ (125) C $ 3,867
16 B
Dental Center Expenses
Dentist and hygienist salaries 125 (125) C -
Staff Salaries 1,041 155 0 1,196
Dental supplies and lab fees 575 62 0 637
Other 685 41 (5) D 721
------- ----- ----- -----------
Total Dental Center expenses: 2,301 383 (130) 2,554
------- ----- ----- -----------
Gross Profit 1,219 73 21 1,313
------- ----- ----- -----------
General and administrative expenses: 390 51 7 E 448
------- ----- ----- -----------
Operating Income 829 22 14 865
Interest (income) expense 6 (2) 0 F (4)
------- ----- ----- -----------
Income before income taxes 835 20 14 869
Pro Forma income tax (326) (8) (5) G (339)
------- ----- ----- -----------
Pro Forma net income $ (509) 12 $ 9 $ 530
======= ===== ===== ===========
Pro Forma earnings per share 0.11
===========
Pro Forma weighted average shares 4,697,778
outstanding ===========
</TABLE>
13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying pro forma combined financial information presents the pro
forma financial position of Coast Dental Services, Inc. as of March 31, 1997 and
the pro forma results of its operations for the year ended December 31, 1996
and the three months ended March 31, 1997.
On April 1, 1997, the Company acquired the assets of West Coast. The
accompanying pro forma combined balance sheet includes the acquired assets,
assumed liabilities and effects of financing the West Coast acquisition as if
the acquisition had taken place on March 31, 1997. The accompanying pro forma
combined statements of income reflect the pro forma results of operations of the
Company, as adjusted, as if West coast had been acquired on January 1, 1996.
PRO FORMA COMBINED BALANCE SHEET
The pro forma adjustments reflected in the pro forma combined
balance sheet are as follows:
A) Reflects the acquisition of West Coast as of March 31, 1997. West
Coast was acquired for a total cost of $1,140,000 consisting of
$750,000 cash paid by the Registrant, a Note payable by the
Registrant of $130,000 and a Note payable by Coast Florida, P.A. of
$260,000. The Registrant allocated their portion of the purchase
price as follows: $200,000 to property and equipment, $686,000 to
the dental service agreement and $6,000 to other assumed
liabilities.
PRO FORMA COMBINED STATEMENTS OF INCOME
The pro forma adjustments reflected in the pro forma combined
statements of income are as follows:
B) To reflect the impact of applying the percentage management fee 76%
to the historical gross revenue of West Coast in accordance with
the services and support agreement entered into between the Company
and the Coast Florida P.A. as of October 1, 1996, as if that
services and support agreement was in place at the beginning of
the periods presented.
C) To reflect the reclassification of historical dentist and
hygienists salaries as a reduction net revenue of the Company.
D) To reflect the decreased depreciation for fixed assets of $2000,000
over 7 years.
E) To reflect the increased amortization amounts for the costs of
acquisitions in excess of property and equipment of $686,000.
F) To reflect the decreased interest expense for notes payable to
banks not assumed by the Company offset by interest on the $130,000
Note payable to the Seller.
G) To reflect the estimated tax effect of the pro forma adjustments
(B) through (F) utilizing a 39% combined federal and state tax
rate.
14
<PAGE> 15
(c) Exhibits:
2.1 Asset Purchase Agreement dated as of April 1, 1997
by and among Coast Dental Services, Inc., Coast
Florida, P.A., West Coast Dental, Inc. and
Lawrence E. Fendrich, D.M.D. (filed previously as
Exhibit 2.1 to the Company's Form 8-K dated
April 16, 1997).
23.1 Consent of Deloitte & Touche LLP
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
COAST DENTAL SERVICES, INC.
By: /s/ Joseph R. Smith
--------------------------------
Joseph R. Smith
Chief Financial Officer
Dated: June 16, 1997
16
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference in Registration Statement
on Form S-8 of Coast Dental Services, Inc. (the "Company") of our report
relating to the financial statements of West Coast Dental, P.A. dated May 23,
1997 appearing in the Company's Form 8-K/A filed June 16, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Tampa, Florida
June 16, 1997
