<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _________ TO _________.
COMMISSION FILE NUMBER
1-13725
PENTEGRA DENTAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-045043
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2999 NORTH 44TH STREET, SUITE 650, PHOENIX, ARIZONA 85018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (602) 952-1200
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 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
[ ]
The number of shares of Common Stock of the Registrant, par value $.001
per share, outstanding at November 12, 1999, was 10,806,248.
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FORM 10-Q REPORT INDEX
<TABLE>
<CAPTION>
10-Q PART AND ITEM NO.
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1 - Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 1999 and
March 31, 1999............................................................................ 3
Consolidated Statements of Operations for the Three and Six
Months Ended September 30, 1999 and September 30, 1998.................................... 4
Consolidated Statement of Changes in Shareholders'
Equity as of September 30, 1999........................................................... 5
Consolidated Statements of Cash Flows for the Six
Months Ended September 30, 1999 and September 30, 1998.................................... 6
Notes to Consolidated Financial Statements ............................................... 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................... 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..................................................................... 14
Item 4 - Submission of Matters to a Vote of Security Holders................................... 14
Item 5 - Other Information..................................................................... 14
Item 6 - Exhibits and Reports on Form 8-K...................................................... 14
Signature...................................................................................... 14
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENTEGRA DENTAL GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 65 $ 1,047
Receivables from affiliated practices, net of
allowance for doubtful accounts of $237 and $125
at September 30, 1999 and March 31, 1999 5,967 5,659
Prepaid and other current assets 611 465
Notes receivable from affiliated practices - current 407 286
-------- --------
Total current assets 7,050 7,457
Property and equipment, net 7,280 6,171
Intangible assets, net 25,998 21,848
Notes receivable from affiliated practices, net 1,357 971
Deferred tax asset 1,901 680
-------- --------
Total assets $ 43,586 $ 37,127
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Line of credit $ 9,000 $ --
Current portion of long term debt 269 537
Accounts payable and accrued liabilities 2,337 1,756
Accrued employment agreement 820 940
-------- --------
Total current liabilities 12,426 3,233
Line of credit -- 8,000
Convertible subordinated notes 4,422 4,566
Shareholders' notes 559 568
Long term debt 1,673 --
Commitments and contingencies
Shareholders' equity
Common stock, $.001 par value 40,000,000 shares authorized,
10,670,589 and 9,102,503 shares outstanding at
September 30, 1999 and March 31, 1999 11 9
Additional paid-in capital 25,170 21,823
Accumulated deficit (378) (1,072)
Less: treasury shares, at cost, 175,083 common shares (297)
--
Total shareholders' equity 24,506 20,760
-------- --------
Total liabilities and shareholders' equity $ 43,586 $ 37,127
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
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PENTEGRA DENTAL GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 15,609 $ 8,761 $ 28,058 $ 16,173
Operating expenses:
Clinical salaries, wages and benefits 6,394 3,534 11,520 6,370
Dental supplies and lab fees 2,856 1,586 5,081 2,806
Rent 1,155 703 1,988 1,253
Advertising and marketing 388 155 657 266
General and administrative 1,424 960 2,429 1,836
Other operating expenses 2,042 1,231 3,596 1,982
Depreciation and amortization 661 225 1,192 396
-------- -------- -------- --------
Total operating expenses 14,920 8,394 26,463 14,909
-------- -------- -------- --------
Earnings from operations 689 367 1,595 1,264
Interest expense (292) -- (538) (3)
Interest income 48 39 85 82
Other income 80 -- 81 --
-------- -------- -------- --------
Income before income taxes 525 406 1,223 1,343
Income taxes 250 112 529 375
-------- -------- -------- --------
Net income $ 275 $ 294 $ 694 $ 968
======== ======== ======== ========
Basic and diluted earnings per share $ 0.03 $ 0.04 $ 0.07 $ 0.13
======== ======== ======== ========
Weighted average number of shares
outstanding - basic and diluted 10,844 7,526 9,973 7,206
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
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PENTEGRA DENTAL GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Accumulated Treasury Shareholders'
Shares Amount Capital Deficit Stock Equity
------ -------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, March 31, 1999 9,103 $ 9 $ 21,823 $ (1,072) $ -- $ 20,760
Issuance of common stock 1,743 2 3,347 -- -- 3,349
Shares repurchased -- -- -- -- (297) (297)
Net income -- -- -- 694 694
------ -------- -------- -------- -------- --------
Balances, September 30, 1999 10,846 $ 11 $ 25,170 $ (378) $ (297) $ 24,506
====== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
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PENTEGRA DENTAL GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1999 1998
------- -------
<S> <C> <C>
Net cash used by operating activities $ (532) $(4,392)
Cash flows from investing activities
Capital expenditures (207) (566)
Acquisitions of affiliated dental practices net of cash acquired (1,210) (2,925)
Issuance of notes receivable -- (1,058)
Collections of notes receivable 40 --
------- -------
Net cash used by investing activities (1,377) (4,549)
------- -------
Cash flows from financing activities
Proceeds from issuance of common stock -- 2,930
Proceeds from line of credit 1,000 --
Repayment of long term debt (73)
------- -------
Net cash provided by financing activities 927 2,930
------- -------
Net change in cash and cash equivalents (982) (6,011)
Cash and cash equivalents, beginning of period 1,047 6,708
------- -------
Cash and cash equivalents, end of period $ 65 $ 697
======= =======
Supplemental disclosures of cash flow information:
Convertible subordinated notes reduced to
offset Receivables from affiliated practices $ 144 $ --
Equipment purchased with capital leases $ 942 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements
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PENTEGRA DENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Pentegra Dental Group, Inc. (the "Company") provides practice management
services to dental practices throughout the United States. As of September 30,
1999, the Company managed 100 affiliated practices ("Affiliated Practices") in
30 states.
The unaudited consolidated financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Pursuant to such regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes the presentation and disclosures
herein are adequate to make the information not misleading, but do not purport
to be a complete presentation inasmuch as all note disclosures required by
generally accepted accounting principles are not included. In the opinion of
management, the consolidated financial statements reflect all elimination
entries and normal adjustments that are necessary for a fair presentation of the
results for the interim periods ended September 30, 1999 and 1998.
Fiscal operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements of Pentegra
Dental Group, Inc., and related notes thereto, and management's discussion and
analysis related thereto, all of which are included in the Company's annual
report on Form 10-K for the fiscal year ended March 31, 1999, as filed with the
SEC.
2. SIGNIFICANT ACCOUNTING POLICIES
EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of shares
of Common Stock and Common Stock equivalents outstanding during each period.
Diluted earnings per share are not separately presented because such amounts
would be the same as amounts computed for basic earnings per share.
Outstanding options to purchase 804,031 shares of Common Stock at exercise
prices above the market value of Common Stock were excluded from the calculation
of earnings per share for the three and six months ended September 30, 1999,
respectively, because their effect would have been antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
INCOME TAXES
Income tax expense approximated 43% and 28% of income before income taxes for
the six months ended September 30, 1999 and 1998, respectively. The Company
expects the effective tax rate for income generated during fiscal
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2000 will be 43%. The effective rate of 43% for fiscal 2000 results from
permanent differences between financial reporting of expense and deductible
expenses for income tax purposes.
3. ACQUISITION OF OMEGA ORTHODONTICS, INC.
In March 1999, the Company entered into a merger agreement with Omega
Orthodontics, Inc. ("Omega"). On July 1, 1999, this transaction closed and each
of the approximately 5.0 million outstanding shares of Omega was exchanged for
0.356 of a share of the Company (approximately 1.75 million shares).
Approximately $1.1 million of Omega debt was assumed by Pentegra. The merger was
accounted for under the purchase method of accounting.
The following unaudited pro forma summary of financial information presents the
Company's combined results of operations as if the acquisition of Omega
Orthodontics, Inc. had occurred at the beginning of the periods presented, after
including the impact of certain adjustments including: (i) the elimination of
nonrecurring merger related costs, and (ii) reduced amortization expense
reflecting the reduction in value assigned to intangible assets.
<TABLE>
<CAPTION>
Six months ended September 30
1999 1998
---- ----
Pro forma Pro forma
(in thousands, except per share amounts)
<S> <C> <C>
Revenues $ 30,075 $ 19,998
Expenses 29,479 19,114
----------- -----------
Net Income 596 874
----------- -----------
Net income per basic and diluted share .05 .10
Weighted average number of basic
and diluted share outstanding: 10,845,000 8,949,000
</TABLE>
The pro forma financial information presented does not purport to indicate what
the combined results of operations would have been had the merger occurred at
the beginning of the periods presented or the results of operations that may be
obtained in the future. Additionally, the pro forma financial information
presented does not reflect the anticipated cost savings resulting from the
integration of the Company's and Omega's operations.
4. PRACTICE AFFILIATIONS
During the six months ended September 30, 1999, the Company entered into four
new affiliation agreements. These agreements call for a reduced management
service fee (typically 7% to 8% of collections) in exchange for certain
management services. The Company also has acquired an option to purchase the
assets of these practices of these affiliation agreements.
During the quarter ended September 30, 1999, the management services agreement
and asset ownership of two affiliated dental practices ceased, due to physical
disabilities of the owner dentists as described in the management services
agreement. In exchange for the termination of the management services agreement
and the transfer of title of the assets back to the practice, Pentegra received
substantially all the stock provided to the owner dentists at the time of
acquisition and payment of all outstanding service fees. Shares returned to the
Company have been recorded as treasury stock. The net result of these two
transactions was a non-operating gain of approximately $80,000 during the
quarter ended September 30, 1999.
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5. NOTES RECEIVABLE
Notes receivable consists of notes from affiliate practices, bearing interest of
0-9% with terms ranging from one to fourteen years. The notes resulted from
advances made to certain practices to assist them in acquiring other practices
or working capital advances. As of September 30, 1999, notes receivable totaled
approximately $1.7 million. Notes totaling approximately $375,000 are due from
two affiliate dentist members on the board of directors.
6. SUBSEQUENT EVENTS
The Company finalized the merger with Liberty Dental Alliance, Inc. ("Liberty")
in October 1999. The consideration paid for the corporate entity consisted of
approximately $420,000 in cash, 150,194 shares of Pentegra common stock, and
26,302 options to purchase Pentegra common stock.
In addition to the closing of the merger with Liberty, the Company has agreed to
pay additional consideration in the form of commissions to the founders of
Liberty for additional acquisitions of practices related to Liberty through
December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE STATEMENTS ARE BASED ON CURRENT PLANS AND EXPECTATIONS OF THE
COMPANY AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE
ACTIVITIES AND RESULTS OF OPERATIONS TO BE MATERIALLY DIFFERENT FROM THAT SET
FORTH IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER INCLUDE, AMONG OTHERS, RISKS ASSOCIATED WITH
AFFILIATIONS, FLUCTUATIONS IN OPERATING RESULTS BECAUSE OF AFFILIATIONS AND
VARIATIONS IN STOCK PRICE, CHANGES IN GOVERNMENT REGULATIONS, COMPETITION, RISKS
OF OPERATIONS AND GROWTH OF EXISTING AND NEW AFFILIATED DENTAL PRACTICES, AND
RISKS DETAILED IN THE COMPANY'S SEC FILINGS.
OVERVIEW
The Company provides practice management services to fee-for-service dental
practices in the United States. On March 30, 1998, the Company acquired
simultaneously with the closing of its initial public offering ("IPO"),
substantially all of the tangible and intangible assets, and assumed the
liabilities, of 51 founding affiliated practices. The Company also began to
provide practice management services to professional corporations or
associations owned by the dentist-owners of those affiliated practices (one of
which split into two separate dental practices immediately after the IPO)
pursuant to long-term management service agreements entered into at the time of
the affiliations. Since the IPO, the Company has affiliated with 49 additional
practices.
The expenses incurred by the Company in fulfilling its obligations under the
management service agreements will be generally of the same nature as the
operating costs and expenses that would have otherwise been incurred by the
affiliated practices, including salaries, wages and benefits of practice
personnel (excluding dentists and certain other licensed dental care
professionals), dental supplies and office supplies used in administering their
practices and the office (general and administrative) expenses of their
practices. In addition to the operating costs and expenses discussed above, the
Company incurs personnel and administrative expenses in connection with
maintaining a corporate office, which provides management, practice
enhancements, administrative and business development services.
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RESULTS OF OPERATIONS (UNAUDITED)
Following completion of the IPO on March 30, 1998, the Company began operations
effective April 1, 1998. Management service fee recognition and related expenses
began April 1, 1998, and the Company began managing 51 dental practices in 18
states. On July 1, 1999, the Company completed its acquisition of Omega
Orthodontics, Inc., which included 15 orthodontic practices with annualized
practice revenue of approximately $11 million. At September 30, 1999, the
Company managed 101 practices in 30 states.
COMPONENTS OF REVENUES AND EXPENSES
Under the terms of the typical management services agreement with an affiliated
practice, the Company becomes the exclusive manager and administrator of all
non-dental services relating to the operation of an affiliated practice. The
obligations of the Company include assuming responsibility for the operating
expenses incurred in connection with managing the dental centers. These expenses
include salaries, wages and related costs of non-dental personnel, dental
supplies and laboratory fees, rental and lease expenses, promotion and marketing
costs, management information systems and other operating expenses incurred at
the affiliated practices. In addition, the Company incurs general and
administrative expenses related to the financial and administrative management
of dental operations, insurance, training and development and other typical
corporate expenditures. As compensation for its services under the typical
services agreement and subject to applicable law, the Company is paid a
management fee comprised of two components: (1) the costs incurred by it on
behalf of the affiliated practice, and (2) a management fee either fixed in
amount, usually approximating 35% of the affiliated practice's operating profit
(before dentist compensation), or 15% of the Affiliated practice's collected
gross revenue ("Service Fee"). Therefore, net revenues represent amounts earned
by the Company under the terms of its management services agreements with the
Affiliated Practices, which generally equate to the sum of the Service Fees and
the operating expenses that the affiliated practices paid to the Company under
the service agreements.
NET REVENUE
Net revenue generated for the three months ended September 30, 1999 was
approximately $15.6 million, a $6.8 increase over approximately $8.8 million
generated for the three months ended September 30, 1998. Net revenue generated
for the six months ended September 30, 1999 was approximately $28.1 million, a
$11.9 increase over approximately $16.2 million generated for the six months
ended September 30, 1998. For the three months ended September 30, 1999 and
1998, dental center revenues aggregated to approximately $19.2 million and $11.7
million, respectively. For the six months ended September 30, 1999 and 1998,
dental center revenues aggregated to approximately $35.4 million and $22.6
million, respectively. The dental center revenue and net revenue increases
resulted substantially through additional practice affiliations with 24 dental
practices since September 30, 1998.
OPERATING EXPENSES
The Company incurred operating expenses of approximately $14.9 million for the
three months ended September 30, 1999, this increase of approximately $6.5 over
approximately $8.4 million in operating expenses incurred for the three months
ended September 30, 1998. The Company incurred operating expenses of
approximately $26.5 million for the six months ended September 30, 1999, an
increase of approximately $11.6 over approximately $14.9 million in operating
expenses incurred for the six months ended September 30, 1998. Operating
expenses consisted primarily of salaries, wages and benefits, dental supplies
and laboratory fees, rent, advertising and marketing, and general and
administrative expenses. These operating expense increases were mainly due to
the affiliation of the Company with 24 additional practices since September 30,
1998.
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General and administrative expenses consist of the corporate expenses of the
Company. These corporate expenses include salaries, wages and benefits, rent,
consulting fees, travel (primarily related to practice development), office
costs and other general corporate expenses. For the three months ended September
30, 1999, general and administrative expenses were approximately $1.42, million
an increase of approximately $440,000 over approximately $960,000 in general and
administrative expenses incurred for the three months ended September 30, 1998.
General and administrative expenses represented 9.1% and 11.0% of net revenue
for the three months ended September 30, 1999 and 1998, respectively. For the
six months ended September 30, 1999, general and administrative expenses were
approximately $2.4 million, an increase of approximately $600,000 over
approximately $1.8 million in general and administrative expenses incurred for
the six months ended September 30, 1998. General and administrative expenses
represented 8.6% and 11.4% of net revenue for the six months ended September 30,
1999 and 1998, respectively.
Depreciation and amortization expenses were approximately $661,000 for the three
months ended September 30, 1999 and approximately $294,000 for the three months
ended September 30, 1998, an increase of $367,000. Depreciation and amortization
represented 4.2% and 2.6% of expenses for the three months ended September 30,
1999 and 1998, respectively. The increase is due primarily to the acquisition of
fixed assets and management services agreements in conjunction with practice
affiliations. For the six months ended September 30, 1999 and 1998, depreciation
and amortization expenses were approximately $1,192,000 and $396,000
respectively. For the six months ended September 30, 1999 and 1998, depreciation
and amortization expense represented 4.2% and 2.4% respectively, of net revenue.
INCOME TAX EXPENSE
Income tax expense for the three months ended September 30, 1999 totaled
approximately $250,000, an increase of approximately $138,000 over approximately
$112,000 in income tax expense incurred for the three months ended September 30,
1998. Income tax expense approximated 48% and 28% of income before income taxes
for the three months ended September 30, 1999 and 1998, respectively. Income tax
expense for the six months ended September 30, 1999 totaled approximately
$529,000, an increase of approximately $154,000 over approximately $375,000 in
income tax expense incurred for the six months ended September 30, 1998. Income
tax expense approximated 43% and 28% of income before income taxes for the six
months ended September 30, 1999 and 1998, respectively. The Company expects the
effective tax rate for income generated during fiscal 2000 will be 43%. The
effective rate of 43% for fiscal 2000 results from permanent differences between
financial reporting of expense and deductible expenses for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
Current assets included approximately $65,000 in cash and $6.0 million in
accounts receivable, due from affiliated practices. The day following the end of
the fiscal quarter, the Company collected approximately $1.0 million in cash
from the affiliated practices. At September 30, 1999 current liabilities
consisted of approximately $2.3 million in accounts payable and accrued
liabilities, mostly related to expenses of affiliated practices. Also included
in current liabilities is the amount drawn on the line of credit of $9 million
due June 1, 2000. The Company is in the process of refinancing the revolving
bank credit facility. The Company believes that it will be successful in
refinancing facility. The Company believes that cash on hand, together with the
availability under the current revolving line of credit and other financing
sources, will be sufficient to continue execution of its affiliation strategy.
Any significant limitation on the Company's ability to obtain financing may have
a material adverse effect on the Company.
The Company maintains a revolving line of credit of up to $15.0 million, to be
used for general corporate purposes including financing of acquisitions, capital
expenditures and working capital. The credit facility is collateralized by liens
on certain of the Company's assets, including its rights under the management
service agreements and accounts receivable. The credit facility contains
restrictions on the incurrence of additional indebtedness and payment of
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dividends on the Common Stock. Additionally, compliance with certain financial
covenants is required and the lender has approval rights with respect with
acquisitions exceeding certain limits. At September 30, 1999 $9.0 million was
outstanding under the revolving line of credit.
On July 1, 1999, the revolving bank credit facility was amended to permit the
acquisition of Omega Orthodontics, Inc. In connection with the approval by the
bank, the Company paid $100,000 as an amendment fee, and the term of the credit
facility was shortened by one year. The term of the credit facility now will
expire on June 1, 2000.
Cash used in investing activities for the six months ended September 30, 1999
and 1998 included approximately $207,000 and $566,000, respectively, for
purchases of capital equipment and approximately $1.2 million and $2.9 million,
respectively, for the purchase of intangibles associated with those new practice
affiliations, respectively.
For the six months ended September 30, 1998, notes receivable were issued
totaling approximately $1.1 million which represented payment of dental practice
affiliation debts, and will be repaid by the affiliated practices over future
years.
Cash generated from financing activities for the six-month period ended
September 30, 1999 included draws on the revolving line of credit of $1.0
million. During the six-month period ended September 30, 1998, 375,000 shares of
common stock were sold with the exercise of the underwriter's over-allotment
option that provided net proceeds to the company of approximately $2.9 million.
YEAR 2000 ISSUE
A number of computer programs and other equipment with embedded chips or
processors ("Systems") use two digits rather than four digits to define the
applicable year. Any Systems that are date sensitive may recognize a date of
"00" as the year 1900 rather than the year 2000. This could result in
miscalculations or system failures causing disruptions of operations, as well as
potentially exposing the Company to third party liability. This issue is
commonly referred to as the year 2000 ("Y2K") problem.
The Company has initiated a Y2K compliance program to ensure that all of the
critical Systems and processes that are under its direct control remain
functional. The Company completed the installation of year 2000 compliant
software for its operations prior to the IPO. Accordingly the Company does not
expect the year 2000 issue to have a material adverse effect on its financial
position, results of operations or cash flows.
Although the Company's Y2K compliance program will attempt to determine the Y2K
readiness of key third parties, there may be certain Systems or processes relied
on by the Company that are outside of its control, and there can be no assurance
that these Systems or processes will remain functional. Non-compliance by key
third parties could have a material adverse effect on the operations of the
Company. To date, the costs incurred by the Company that relate solely to the
Y2K compliance program have been minimal. In the opinion of management, the
costs to complete the Company's Y2K compliance program will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows.
The Company has received assurance that the systems implemented prior to the IPO
are Y2K compliant. In addition, the Company has inventoried all hardware and
software at the affiliated practices that process information related to
practice management. The Company has estimated it will incur approximately
$250,000 in affiliate practice computer upgrades for Y2K compliance. These
upgrades are estimated to be completed by November 1999.
The failure to correct a material year 2000 problem could possibly result in an
interruption in or failure of, certain normal business activities operations.
Such failure would materially and adversely affect the Company's financial
position, results of operations and cash flows. Due to the general uncertainty
inherent in the year 2000 problem, including uncertainty regarding the year 2000
readiness of third party suppliers and potential future acquisitions, the
Company is unable to determine at this time whether the consequences of any
possible year 2000 failures will have a
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material adverse impact on the Company's financial position, results or
operations and cash flows. The Company believes that, with the scheduled
completion of its computer system upgrades, the possibility of any material
interruption to normal operations should be significantly reduced.
The Company's plans to comply with year 2000 requirements and completion dates
are based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources and other factors. There can be no assurances; however, that the
estimates will be achieved and actual results could differ from those estimates.
Specific factors that might cause such material difference include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to identify and correct potential problems and similar uncertainties.
If during the course of the Company's assessments of its critical Systems it is
determined that the risk of Y2K disruptions is significant, contingency plans
will be developed as appropriate. Such plans might include the use of
alternative service providers or product suppliers should they incur significant
Y2K losses. Currently, the Company does not have any contingency plans in place
based on Y2K readiness assessments.
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PART II
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS - none
ITEM 3. DEFAULTS OF SENIOR SECURITIES - none
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION - none
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
3.1* Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-37633).
3.2* Bylaws (incorporated herein by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1 (Registration No.
333-37633)).
10.1* Agreement and Plan of Merger dated as of March 15, 1999 among
the Company, Omega Orthodontics, Inc. and the stockholders of
Omega Orthodontics, Inc. named therein (included as Annex to
the Proxy Statement/Prospectus that is included in the
Company's Registration Statement on Form S-4 (Registration No.
333-78335)).
10.2 $272,000 Promissory Note of Mack E. Greder, D.D.S., P.C.
issued to the Company, dated September 1, 1999.
10.3 $109,279.04 Promissory Note of David A. Little, D.D.S., P.C.
issued to the Company, dated September 30, 1999.
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
*Incorporated herein by reference as indicated.
(b) Reports of Form 8-K
Current Report on Form 8-K dated July 1, 1999 was filed on July 15,
1999 (Item 2. Acquisition or Disposition of Assets and Item 5.
Financial Statements and Exhibits), which contained the unaudited
financial statements of Omega Orthodontics, Inc. for the quarter ended
March 31, 1999.
-14-
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Pentegra Dental Group, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PENTEGRA DENTAL GROUP, INC.
Dated: 11/15/1999
---------------------
/s/ Sam H. Carr
---------------------------
By: Sam H. Carr
Sr. Vice President - Chief Financial Officer
-15-
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1* Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-37633).
3.2* Bylaws (incorporated herein by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1 (Registration No.
333-37633)).
10.1* Agreement and Plan of Merger dated as of March 15, 1999 among
the Company, Omega Orthodontics, Inc. and the stockholders of
Omega Orthodontics, Inc. named therein (included as Annex to
the Proxy Statement/Prospectus that is included in the
Company's Registration Statement on Form S-4 (Registration No.
333-78335)).
10.2 $272,000 Promissory Note of Mack E. Greder, D.D.S., P.C.
issued to the Company, dated September 1, 1999.
10.3 $109,279.04 Promissory Note of David A. Little, D.D.S., P.C.
issued to the Company, dated September 30, 1999.
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
*Incorporated herein by reference as indicated.
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
Date: September 1, 1999
Maker: Mack E. Greder, D.D.S., P.C.
Payee: Pentegra Dental Group, Inc.
Place of Payment: 2999 N. 44th Street, Suite 650, Phoenix, AZ 85018
Principal Amount: $272,000.00
For value received, the undersigned, Mack E. Greder, D.D.S., P.C.
(hereinafter referred to as the "Maker") does hereby promise to pay to the order
of Pentegra Dental Group, Inc. (hereinafter referred to as the "Payee or
Holder"), the sum of Two Hundred Seventy-two Thousand and 00/100 Dollars
($272,000.00), plus interest at the rate of Nine Percent (9%) per annum on the
unpaid principal, until fully paid. The principal and accrued interest shall be
paid by the Maker in lawful money of the United States of America. The principal
and accrued interest on this note shall be due and payable in eleven (11) equal
monthly installments of Six Thousand Dollars ($6,000). The first installment
shall be due and payable on September 15, 1999 (the "Initial Payment Date") with
each installment due on the fifteenth of each month thereafter. The note shall
mature on August 15, 2000 with a balloon payment then due of Two Hundred
Fifty-four Thousand Eight Hundred Fifty-four and 00/100 Dollars ($254,854).
Payments shall be due and payable, at the principal office of the Payee or
Holder, on the monthly anniversary date of the Initial Payment Date. Each
installment shall be applied first to the payment of accrued interest due on the
unpaid principal balance, and the remainder of each installment shall be applied
to the reduction of the principal. Payment of this Note before maturity may be
made at any time, and from time to time, in whole or in part without penalty or
premium. Any such partial pre-payment of principal shall be applied against the
principal amount outstanding and shall not postpone the due date of any
subsequent monthly installments or change the amount of such installments unless
otherwise agreed in writing by Payee or Holder.
Should default be made in the timely payment of interest or principal
due hereunder, and that default remain uncured for more than thirty (30) days
beyond its timely payment, (a "Non Payment Default") then that Non-Payment
Default shall mature the entire remaining indebtedness, without notice, at the
option of the Payee or Holder. The Maker and each Surety, endorser, and
guarantor, waives presentment for payment, all demands for payment, notice of
intent to accelerate maturity, notice of acceleration of maturity, protests, and
notices of protest. Maker consents that the Payee or Holder may extend the time
of any payment or any part of the debt at any time. Any delay on the part of the
Payee or Holder in exercising any rights granted by this Note shall not operate
as a waiver of those rights; and the acceptance of any payment after it's due
date shall not be deemed a waiver of the right to require prompt payment when
due of all other sums; and the acceptance of any payment after the Payee has
declared the entire indebtedness due and payable shall not cure any default of
the Maker nor operate as a waiver of any rights of Payee or Holder. This Note
shall be paid without claim of set off nor deduction of any nature whatsoever.
In addition to the foregoing event of default (for Non-payment), at the
option of the payee or Holder, this Note shall become immediately due and
payable with notice on the happening of any one of the following additional
events of default ("Events of Default"):
a. The Maker has sold any interest in the professional
practice of Mack E. Greder, D.D.S., P.C. or any of the assets located
at 1113 North 72nd Street, Omaha, NE 68114, or any other dental
practice owned by Maker with which Pentegra has
-16-
<PAGE> 2
executed a service agreement (collectively the "Practice") without
Pentegra's prior written consent;
b. The Maker has defaulted upon the obligations arising under
the Service Agreement, Employment Agreement, or Dentist Agreement, by
and between Maker and Pentegra Dental Group, Inc;
c. The Maker has mortgaged, pledged or encumbered the Practice
to another party; except as such encumbrance may have arisen
automatically by law or with prior written consent by the Payee or
Holder;
d. The Maker makes a general assignment for creditors, is
adjudicated bankrupt, files a voluntary petition in bankruptcy or
reorganization or effects or attempts to effect a plan or other
arrangement with creditors; or if Maker applies for a receiver,
custodian or trustee for it or for any substantial portion or its
property or assets; or if an order shall be entered by any court of
competent jurisdiction approving an involuntary petition seeking
reorganization; or if a receiver, trustee or custodian shall be
appointed for it for any substantial portion of its property or assets;
or if bankruptcy, reorganization or liquidation proceedings are
instituted against the Maker and remain for thirty (30) days; or if the
Maker becomes unable to meet its obligations as they mature; or if the
Maker shall commit any act of bankruptcy;
The events set forth in subparagraphs above (a)-(d) above shall not be
Events of Default until the Maker has been sent a notice from the Payee or
Holder of the Maker's default and Maker has not cured that Default within twenty
(20) days of such notice.
The Maker agrees that, at any time that there remains an unpaid balance
due upon this Note, that the Payee or Holder shall have the right to sell,
assign, or transfer his right, title, and interest herein to any person (the
"Holder"); and further that the Assignee (Holder) shall then acquire all rights,
title, and interest that had been granted to the Payee or Holder hereunder.
The Maker agrees that, if this Note is given to an attorney for
collection, or if suit is brought for collection, or if it is collected through
probate, bankruptcy, or other judicial proceeding, then Maker shall pay Payee or
Holder all costs of collection, including reasonable attorney's fees and court
costs, in addition to other amounts due.
Any and all past due and unpaid principal and interest shall bear
interest at the rate of twelve percent (12.0%) per annum. However, all
agreements between Maker and Payee or Holder are hereby expressly limited, so
that in no event shall the amount paid, or agreed to be paid, to Payee or
Holder, exceed the maximum amount permissible under the applicable federal and
state usury laws. It is therefore the intention of Maker and Payee or Holder to
conform strictly to said state and federal usury laws. Therefore, in this note
or in any of the documents securing payment hereof, the aggregate of all
interest and any other charges constituting interest under the applicable law
contracted for, chargeable, or receivable, under this note shall under no
circumstances exceed the maximum amount of interest permitted by law. If any
excess of interest is provided for, or be adjudicated to be so provided for, in
this note or in any of the documents securing payment hereof, then in such
event, the provisions of this paragraph shall govern and control; and neither
Maker or Maker's heirs, legal representatives, successors, assigns, or any other
party liable for the payment hereof shall be obligated to pay the amount of such
-17-
<PAGE> 3
interest to the extent that it is in excess of the maximum permitted by law; and
any excess of said interest shall be deemed a mistake and is hereby canceled
automatically and if therefore paid, shall at the option of Payee or Holder of
this note be refunded to Maker, or credited to the principal amount of said
note; and the effective rate of interest shall be automatically subject to
reduction to the maximum lawful contract rate allowed under said laws, or as is
or as they may hereafter be construed by courts of appropriate jurisdiction. To
the extent permitted by law, the determination of the rate of interest shall be
made by amortizing, prorating, allocating, and spreading in equal parts during
the period of the full stated term of this note, all interest at any time
contracted for, charged, or received from Maker in connection therewith.
THE MAKER AGREES THAT THIS WRITTEN NOTE REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES CONCERNING THE AMOUNTS BORROWED BY MAKER, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. The Maker agrees that there are no unwritten oral
agreements between the parties. When the context requires, singular nouns and
pronouns include the plural.
Executed this _________ day of _________________________, 1999.
___________________________________
Mack E. Greder, D.D.S., P.C., MAKER
President
The undersigned, Mack E. Greder, D.D.S., does hereby individually, jointly and
severally guarantee the full, complete and punctual payment of this note.
___________________________________
Mack E. Greder, D.D.S.
Individually as Guarantor
-18-
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
Date: September 30, 1999
Maker: David A. Little, D.D.S., P.C.
Payee: Pentegra Dental Group, Inc.
Place of Payment: 2999 N. 44th Street, Suite 650, Phoenix, AZ 85018
Principal Amount: $109,279.04
For value received, the undersigned David A. Little, D.D.S., P.C.,
(hereinafter referred to as the "Maker") does hereby promise to pay to the order
of Pentegra Dental Group, Inc. (hereinafter referred to as the "Payee or
Holder"), the sum of One Hundred Nine Thousand Two Hundred Seventy Nine and
04/100 Dollars ($109,279.04), plus interest at the rate of Nine Percent (9.000%)
per annum on the unpaid principal, until fully paid. The principal and accrued
interest shall be paid by the Maker in lawful money of the United States of
America. The principal and accrued interest on this note shall be due and
payable in forty-two (42) equal monthly installments of Four Thousand Fifteen
and 11/100 Dollars ($4,015.11). The first installment shall be due and payable
on October 1, 1999 (the "Initial Payment Date"). Payments shall be due and
payable, at the principal office of the Payee or Holder, on the monthly
anniversary date of the Initial Payment Date. Each installment shall be applied
first to the payment of accrued interest due on the unpaid principal balance,
and the remainder of each installment shall be applied to the reduction of the
principal. Payment of this Note before maturity may be made at any time, and
from time to time, in whole or in part without penalty or premium. Any such
partial pre-payment of principal shall be applied against the principal amount
outstanding and shall not postpone the due date of any subsequent monthly
installments or change the amount of such installments unless otherwise agreed
in writing by Payee or Holder.
Should default be made in the timely payment of interest or principal
due hereunder, and that default remain uncured for more than thirty (30) days
beyond its timely payment, (a "Non Payment Default") then that Non-Payment
Default shall mature the entire remaining indebtedness, without notice, at the
option of the Payee or Holder. The Maker and each Surety, endorser, and
guarantor, waives presentment for payment, all demands for payment, notice of
intent to accelerate maturity, notice of acceleration of maturity, protests, and
notices of protest. Maker consents that the Payee or Holder may extend the time
of any payment or any part of the debt at any time. Any delay on the part of the
Payee or Holder in exercising any rights granted by this Note shall not operate
as a waiver of those rights; and the acceptance of any payment after it's due
date shall not be deemed a waiver of the right to require prompt payment when
due of all other sums; and the acceptance of any payment after the Payee has
declared the entire indebtedness due and payable shall not cure any default of
the Maker nor operate as a waiver of any rights of Payee or Holder. This Note
shall be paid without claim of set off nor deduction of any nature whatsoever.
In addition to the foregoing event of default (for Non-payment), at the
option of the payee or Holder, this Note shall become immediately due and
payable with notice on the happening of any one of the following additional
events of default ("Events of Default"):
a. The Maker has sold any interest in the professional
practice of David A. Little, D.D.S., P.C. or any other dental practice
owned by Maker with which Pentegra has executed a service agreement
(collectively the "Practice") without Pentegra's prior written consent;
-19-
<PAGE> 2
b. The Maker has defaulted upon the obligations arising under
the Service Agreement, Employment Agreement, or Dentist Agreement, by
and between Maker and Pentegra Dental Group, Inc;
c. The Maker has mortgaged, pledged or encumbered the Practice
to another party; except as such encumbrance may have arisen
automatically by law or with prior written consent by the Payee or
Holder;
d. The Maker makes a general assignment for creditors, is
adjudicated bankrupt, files a voluntary petition in bankruptcy or
reorganization or effects or attempts to effect a plan or other
arrangement with creditors; or if Maker applies for a receiver,
custodian or trustee for it or for any substantial portion or its
property or assets; or if an order shall be entered by any court of
competent jurisdiction approving an involuntary petition seeking
reorganization; or if a receiver, trustee or custodian shall be
appointed for it for any substantial portion of its property or assets;
or if bankruptcy, reorganization or liquidation proceedings are
instituted against the Maker and remain for thirty (30) days; or if the
Maker becomes unable to meet its obligations as they mature; or if the
Maker shall commit any act of bankruptcy;
The events set forth in subparagraphs above (a)-(d) above shall not be
Events of Default until the Maker has been sent a notice from the Payee or
Holder of the Maker's default and Maker has not cured that Default within twenty
(20) days of such notice.
The Maker agrees that, at any time that there remains an unpaid balance
due upon this Note, that the Payee or Holder shall have the right to sell,
assign, or transfer his right, title, and interest herein to any person (the
"Holder"); and further that the Assignee (Holder) shall then acquire all rights,
title, and interest that had been granted to the Payee or Holder hereunder.
The Maker agrees that, if this Note is given to an attorney for
collection, or if suit is brought for collection, or if it is collected through
probate, bankruptcy, or other judicial proceeding, then Maker shall pay Payee or
Holder all costs of collection, including reasonable attorney's fees and court
costs, in addition to other amounts due.
Any and all past due and unpaid principal and interest shall bear
interest at the rate of twelve percent (12.000%) per annum. However, all
agreements between Maker and Payee or Holder are hereby expressly limited, so
that in no event shall the amount paid, or agreed to be paid, to Payee or
Holder, exceed the maximum amount permissible under the applicable federal and
state usury laws. It is therefore the intention of Maker and Payee or Holder to
conform strictly to said state and federal usury laws. Therefore, in this note
or in any of the documents securing payment hereof, the aggregate of all
interest and any other charges constituting interest under the applicable law
contracted for, chargeable, or receivable, under this note shall under no
circumstances exceed the maximum amount of interest permitted by law. If any
excess of interest is provided for, or be adjudicated to be so provided for, in
this note or in any of the documents securing payment hereof, then in such
event, the provisions of this paragraph shall govern and control; and neither
Maker or Maker's heirs, legal representatives, successors, assigns, or any other
party liable for the payment hereof shall be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum permitted by law; and
any excess of said interest shall be deemed a mistake and is hereby canceled
automatically and if therefore paid, shall at the option
-20-
<PAGE> 3
of Payee or Holder of this note be refunded to Maker, or credited to the
principal amount of said note; and the effective rate of interest shall be
automatically subject to reduction to the maximum lawful contract rate allowed
under said laws, or as is or as they may hereafter be construed by courts of
appropriate jurisdiction. To the extent permitted by law, the determination of
the rate of interest shall be made by amortizing, prorating, allocating, and
spreading in equal parts during the period of the full stated term of this note,
all interest at any time contracted for, charged, or received from Maker in
connection therewith.
THE MAKER AGREES THAT THIS WRITTEN NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES CONCERNING THE AMOUNTS BORROWED BY MAKER, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. The Maker agrees that there are no unwritten oral
agreements between the parties. When the context requires, singular nouns and
pronouns include the plural.
Executed this 30th day of September, 1999.
David A. Little, D.D.S., P.C., MAKER
By:_________________________________
David A. Little, D.D.S.,
President
-21-
<PAGE> 4
GUARANTY
BY OFFICERS AND SHAREHOLDERS
Whereas, Pentegra Dental Group, Inc. ("Lender") has Noted money to
David A. Little, D.D.S., P.C., a Professional Corporation (the "Borrower")
pursuant to a certain promissory note dated on an even date herewith in the
original principal sum of One Hundred Nine Thousand Two Hundred Seventy Nine and
04/100 Dollars ($109,279.04) (the "Note"). In consideration of, and in order to
induce Pentegra to accept the Borrower's Note, the undersigned officer and
shareholder of the Borrower (the "Guarantor"), being financially interested in
and dependent upon the economic well being of Borrower, hereby absolutely and
unconditionally guarantees to Lender the full and prompt performance by Borrower
of all obligation which Borrower presently or hereafter may have to Lender under
the Note.
Guarantor hereby expressly waives all defenses which might constitute a
legal or equitable discharge of a surety or guarantor, and agrees that this
Guaranty shall be valid and unconditionally binding upon Guarantor regardless
of: (i) the reorganization, merger, or consolidation of Borrower into or with
another entity, corporate or otherwise, or the dissolution of Borrower, or the
sale or other disposition of all or substantially all of the capital stock,
business or assets of Borrower to any other person or party, (ii) the voluntary
or involuntary bankruptcy (including reorganization in bankruptcy) of Borrower,
(iii) the release of Borrower from any of its obligations under the Note by
Lender or by operation of law or otherwise.
Guarantor further agrees that this Guaranty shall remain and continue
in full force and effect notwithstanding any renewal, modification or extension
of the Note. Guarantor hereby expressly waives all notice of and consenting to
any such renewal, modification, or extension, and to the execution by Borrower
of any documents pertaining to any such renewal, modification or extension.
Guarantor further agrees that its liability under this Guaranty shall be
absolute, primary and direct, and that lender shall not be required to pursue
any right or remedy it may have against Borrower under the Note or otherwise
(and shall not be required to first commence any action or obtain any judgement
against Borrower) before enforcing this Guaranty against Guarantor.
This guaranty is assignable by Lender, but may not be assigned by
Guarantor.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed on this
_____day of __________________, 1999.
GUARANTOR:
David A. Little, D.D.S., P.C.
By: ________________________________________
David A. Little, D.D.S.,
Individually
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS THIS
FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 65
<SECURITIES> 0
<RECEIVABLES> 5,967
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,050
<PP&E> 8,626
<DEPRECIATION> (1,346)
<TOTAL-ASSETS> 43,586
<CURRENT-LIABILITIES> 12,426
<BONDS> 6,654
0
0
<COMMON> 11
<OTHER-SE> 25,170
<TOTAL-LIABILITY-AND-EQUITY> 43,586
<SALES> 15,609
<TOTAL-REVENUES> 15,609
<CGS> 14,920
<TOTAL-COSTS> 14,920
<OTHER-EXPENSES> (81)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 453
<INCOME-PRETAX> 1,223
<INCOME-TAX> 529
<INCOME-CONTINUING> 694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 694
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
