<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 12, 1999
GENTLE DENTAL SERVICE CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 000-23673 91-1577891
- ------------------------------- ----------- ------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
222 North Sepulveda Boulevard, Suite 740, El Segundo, California 90245-4340
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(Address of principal executive offices) (Zip Code)
(310) 765-2400
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On March 12, 1999, Gentle Dental Service Corporation ("GDSC") released
its financial numbers for the fourth quarter and year ended 1998.
Additionally, InterDent, Inc. released a Supplemental Pooled Statement of
Operation for each of the quarters and year ended 1998, which includes the
combined operations of GDSC and Dental Care Alliance, accounted for as a
pooling-of-interest, for those periods. The press release containing the
financial numbers of DCA and InterDent, Inc. is attached as Exhibit 99.1 and
is incorporated herein by reference.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Dated: March 12, 1999
GENTLE DENTAL SERVICE CORPORATION
By /s/ Michael T. Fiore
----------------------------------
Michael T. Fiore
Chairman, President
and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release issued March 12, 1999
<PAGE>
[LOGO]
CONTACTS:
InterDent, Inc. Lippert/Heilshorn & Associates
Michael Fiore John Heilshorn ([email protected])
Co-Chairman and CEO (212) 838-3777
(310)765-2400 Lillian Armstrong ([email protected])
(415) 433-3777
INTERDENT, INC. ANNOUNCES RESULTS FOR GENTLE DENTAL SERVICE
CORPORATION'S FOURTH QUARTER AND 1998 FISCAL YEAR
COMPANY ALSO ANNOUNCES SUPPLEMENTAL POOLED FINANCIAL RESULTS
HIGHLIGHTED BY $50 MILLION IN PATIENT LEVEL REVENUE AND 16.5% FACILITY EBITDA
El Segundo, CA -- March 12, 1999--InterDent, Inc. today announced the results
of Gentle Dental Service Corporation's fourth quarter and 1998 fiscal year.
As of today, March 12, 1999, Gentle Dental and Dental Care Alliance are
wholly-owned subsidiaries of InterDent, Inc.
During the fourth quarter ended December 31, 1998, Gentle Dental's net
revenues increased 171% to $36,380,000 compared to revenues of $13,445,000
for the corresponding period of the previous year. Total patient-level
revenue in the fourth quarter of 1998 increased 110% to $36,839,000 from
$17,520,000 in the fourth quarter of 1997. Operating income for the fourth
quarter of 1998, excluding the merger and restructure costs, was $2,218,000,
compared with an operating loss of $421,000 in the fourth quarter of 1997
excluding merger and restructure expenses. Net income attributable to common
stock for the fourth quarter of 1998 increased to $953,000 or $0.09 per share
compared to a net loss attributable to common stock of $834,000 for the
fourth quarter of 1997, with both quarters excluding the merger and
restructure expenses.
For the year ended December 31, 1998, net revenue increased 143% to
$105,322,000 from $43,403,000. Operating income excluding merger and
restructure costs for the 1998 fiscal year improved to $4,714,000 from an
operating loss of $732,000 in 1997. Gentle Dental's 1998 net income
excluding merger and restructure costs reached $1,606,000 or $0.17 per share,
up from a loss of $2,344,000 or a loss of $0.51 per share for the 1997 fiscal
year, excluding restructure and merger costs.
The operating loss for the fourth quarter of 1998 was $1,188,000
compared to $2,230,000 in the same period in 1997. The net loss attributable
to common stock for the fourth quarter of 1998 was $2,453,000 compared to
$2,643,000 in the same period of 1997.
- more -
<PAGE>
InterDent, Inc., the combination of Gentle Dental Service Corporation
and Dental Care Alliance, Inc., also reported the following Supplemental
Pooled Financial data for the new company:
- - Patient-level revenue in the fourth quarter of 1998 was $50 million;
- - Facility EBITDA for the fourth quarter was $8.2 million or 16.5% of
patient level revenue;
- - Corporate EBITDA for the fourth quarter of 1998, excluding the combined
companies' merger and restructuring costs, was $5.8 million or 11.6% as a
percentage of patient level revenue;
- - Excluding the merger and restructuring costs, the combined companies'
fourth quarter net income attributable to common stock was $2,140,000 or
$0.10 per share; and
- - Excluding the merger and restructuring costs, the combined companies'
annual net income attributable to common stock was $5,242,000 or $0.25 per
share.
Michael Fiore, Co-Chairman and Chief Executive Officer of InterDent,
stated, "This strong financial performance is further evidence of InterDent's
leadership position in the dental management services industry. We are well
positioned to enhance our leadership through our multifaceted growth
strategy, which includes leveraging our investment in operational and
administrative infrastructure, implementing the clinical mentoring and
training program under the direction of Dr. Steve Matzkin, pursuing targeted
acquisitions in attractive new markets as well as existing markets, and
designing an innovative approach to expanding our business through the
Internet. This rigorous approach is, in our belief, the best means of
pursuing improving long-term financial performance in this exciting
industry."
"Gentle Dental's contribution to this equation is apparent in our strong
fourth quarter results. We are consistently achieving same store growth of
10% each quarter, resulting in same store growth for the 1998 fiscal year of
just over 10%. Our performance is a result of our operational strategies, as
well as the contributions of sound acquisitions," Fiore concluded.
Gentle Dental incurred merger and restructuring costs during the fourth
quarter of 1998 in the amount of $3,406,000 associated with its merger with
Dental Care Alliance to form InterDent, Inc.. During the fourth quarter of
1997, Gentle Dental incurred merger and restructuring costs in the amount of
$1,809,000 associated with its November 1997 merger with GMS Dental Group,
Inc.
- more -
<PAGE>
Including the merger and restructuring costs in both cases, Gentle
Dental's 1998 fourth quarter net loss attributable to common stock was
$2,453,000 or a loss of $0.29 per share compared to a 1997 fourth quarter net
loss of $2,643,000 or a loss of $0.41 per share. Including the above
mentioned merger and restructuring costs in both periods, the net loss
attributable to common stock for the 1998 fiscal year was $1,822,000 or a
loss of $0.23 per share compared to a net loss of $4,153,000 or a loss of
$0.91 per share for the 1997 fiscal year.
InterDent expects to record approximately $4.3 million in merger-related
expenses during first quarter of fiscal 1999 and $2.0 million over the
remainder of 1999. These expenses consist of merger transactions costs,
severance costs, and integration expenses.
At December 31, 1998 Gentle Dental managed 102 practices with annualized
net patient revenues under management in excess of $156 million.
For further information on InterDent, please refer to today's press
release entitled, "InterDent Announces Results for Dental Care Alliance's
Fourth Quarter and 1998 Fiscal Year" and "InterDent, Inc. Adds Seven Dental
Practices in Detroit, Michigan."
InterDent is the largest provider of dental management services in the
US. The company provides dental management services to 183 locations in
California, Oregon, Washington, Idaho, Nevada, Hawaii, Florida, Georgia,
Michigan, Pennsylvania and Indiana. As of March 12, 1999, InterDent has
practices with over $210 million in annualized net patient revenues under
management. The company is continuing to expand by building a fully
integrated support environment utilizing advanced information technologies to
enable dental professionals to provide patients with high quality,
comprehensive, convenient and cost effective care.
This press release contains forward-looking statements that are made pursuant
to the safe harbor provisions of The Private Securities Litigation Reform Act
of 1995. The forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements. Those risks and uncertainties include InterDent's ability to
close and absorb future acquisitions, the economic climate in the Company's
service areas, potential changes in government regulation and in the dental
insurance industry, actions by competitors, and other factors disclosed in
the Company's filings with the Securities and Exchange Commission. The
forward-looking statements should be considered in light of these risks and
uncertainties.
(Tables Follow)
<PAGE>
GENTLE DENTAL SERVICE CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1998
(unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER DECEMBER
1997 1998
---- ----
<S> <C> <C>
Current Assets
Cash and equivalents $ 302 $ 1,155
Accounts receivable, net of allowances 6,331 10,555
Receivable from affiliate 1,731 204
Supplies 1,109 2,542
Prepaid expenses and other current assets 1,726 2,748
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Total current assets 11,199 17,204
Property and equipment, net 10,084 15,779
Intangible assets, net 22,843 87,647
Other assets 282 2,808
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Total Assets $44,408 $123,438
------- --------
------- --------
Current Liabilities
Accounts payable $ 2,452 $ 3,755
Accrued payroll and payroll related costs 2,084 4,509
Other current liabilities 3,174 9,317
Current portion of long-term debt and capital lease obligations 651 3,458
------- --------
Total current liabilities 8,361 21,039
Long term liabilities
Long-term debt, net of current portion 13,842 58,225
Obligations under capital leases, net of current portion 581 814
Other long-term liabilities 115 136
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Total long-term liabilities 14,538 59,175
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Total liabilities 22,899 80,214
Redeemable common stock, no par value, 183,686 shares in 1997 and 2,130 2,102
180,712 shares in 1998, respectively
Shareholders' Equity:
Preferred stock, 30,000,000 shares authorized:
Preferred stock - Series A, no par value, 100 shares authorized and outstanding - 1
Preferred stock - Series B, no par value, 70,000 shares authorized, zero
outstanding - -
Convertible preferred stock - Series C, no par value, 100 shares authorized and
outstanding - 1
Convertible preferred stock - Series D, no par value, 2,000,000 shares authorized, - 12,089
1,628,663 shares outstanding
Common stock, no par value, 50,000,000 shares authorized, 21,784 32,481
7,530,781 and 8,842,334 shares issued and outstanding in 1997 and 1998,
respectively
Additional paid-in capital 3,165 3,961
Shareholder notes receivable (304) (323)
Retained deficit (5,266) (7,088)
------- --------
Total shareholders' equity 19,379 41,122
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Total liabilities, redeemable common stock, & shareholders' equity $44,408 $123,438
------- --------
------- --------
</TABLE>
<PAGE>
GENTLE DENTAL SERVICE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended Dec. 31, Quarter Ended Dec. 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Dental group net patient service revenue $103,136 $29,327 $35,602 $ 9,517
Support services revenue 2,186 14,076 778 3,928
-------- ------- ------- -------
Net revenues 105,322 43,403 36,380 13,445
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Costs and expenses
Clinical salaries and benefits 46,886 13,701 16,124 4,455
Practice nonclinical salaries and benefits 14,914 8,177 4,886 2,413
Dental supplies and lab expenses 12,126 6,271 4,126 1,726
Practice occupancy expenses 5,573 3,527 1,759 1,132
Practice selling, general and administrative expenses 10,359 4,912 3,925 1,743
Corporate selling, general and administrative expenses 6,356 5,700 1,825 1,832
Corporate restructure and merger costs 3,406 1,809 3,406 1,809
Depreciation and amortization 4,394 1,847 1,517 565
-------- ------- ------- -------
Total operating expenses 104,014 45,944 37,568 15,675
-------- ------- ------- -------
Operating income (loss) 1,308 (2,541) (1,188) (2,230)
-------- ------- ------- -------
Nonoperating income (expense)
Interest expense, net (3,047) (653) (1,227) (291)
Other expense, net (14) (74) (3) (93)
-------- ------- ------- -------
Nonoperating expense, net (3,061) (727) (1,230) (384)
-------- ------- ------- -------
Loss before income taxes (1,753) (3,268) (2,418) (2,614)
Provision (benefit) for income taxes 47 (81) 28 (81)
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Net loss (1,800) (3,187) (2,446) (2,533)
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Dividends on redeemable convertible preferred stock - series B - (932) - (103)
Accretion of redeemable common stock (22) (34) (7) (7)
-------- ------- ------- -------
Net loss attributable to common stock $ (1,822) $(4,153) $(2,453) $(2,643)
-------- ------- ------- -------
-------- ------- ------- -------
Weighted shares outstanding - basic and diluted 7,832 4,559 8,484 6,424
-------- ------- ------- -------
-------- ------- ------- -------
Loss per share attributed to common stock - basic and
diluted $ (0.23) $ (0.91) $ (0.29) $ (0.41)
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
<PAGE>
DENTAL CARE ALLIANCE, INC.
FINANCIAL HIGHLIGHTS (Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31, December 31,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees. . . . . . . . . . . . . . . . . . . . . . . $8,979,224 $2,895,437 $28,641,030 $7,588,193
Consulting and licensing fees, net . . . . . . . . . . . . . 230,046 74,601 695,361 290,885
- ------------------------------------------------------------------------------------------------------------------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . 9,209,270 2,970,038 29,336,391 7,879,078
Staff salaries and benefits. . . . . . . . . . . . . . . . . 2,566,245 727,051 8,015,757 2,021,497
Dental supplies. . . . . . . . . . . . . . . . . . . . . . . 645,910 259,129 2,039,687 650,444
Lab fees . . . . . . . . . . . . . . . . . . . . . . . . . . 925,452 343,414 3,101,909 971,024
Marketing .. . . . . . . . . . . . . . . . . . . . . . . . . 393,633 151,488 1,127,906 414,519
Occupancy costs. . . . . . . . . . . . . . . . . . . . . . . 1,117,964 383,161 3,310,787 998,141
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,922 266,009 1,931,947 851,631
- ------------------------------------------------------------------------------------------------------------------------
Total managed dental . . . . . . . . . . . . . . . . . . .
center expenses . . . . . . . . . . . . . . . . . . . . 6,192,126 2,130,252 19,527,993 5,907,256
- ------------------------------------------------------------------------------------------------------------------------
General and administration . . . . . . . . . . . . . . . . . 932,786 516,870 3,472,675 1,387,452
Depreciation and amortization . . . . . . . . . . . . . . . 363,819 76,619 1,062,646 163,681
Corporate restructure and merger costs . . . . . . . . . . . 587,950 -- 587,950 --
- ------------------------------------------------------------------------------------------------------------------------
1,884,555 593,489 5,123,271 1,551,133
- ------------------------------------------------------------------------------------------------------------------------
Operating income . . . . . . . . . . . . . . . . . . . . . 1,132,589 246,297 4,685,127 420,689
Interest income . . . . . . . . . . . . . . . . . . . . . . 206,328 249,604 871,727 314,710
Interest expense ... . . . . . . . . . . . . . . . . . . . . (80,278) (31,845) (231,746) (51,142)
- ------------------------------------------------------------------------------------------------------------------------
126,050 217,759 639,981 263,568
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . 1,258,639 464,056 5,325,108 684,257
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 659,715 179,010 2,227,306 263,952
- ------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $598,924 $285,046 $ 3,097,802 $420,305
- ------------------------------------------------------------------------------------------------------------------------
Adjustment to redemption value of
common and preferred securities... . . . . . . . . . . . . -- -- -- (10,500)
Cumulative preferred stock dividend... . . . . . . . . . . . -- (10,000) -- (100,000)
- ------------------------------------------------------------------------------------------------------------------------
Net income applicable
to common shares . . . . . . . . . . . . . . . . . . . . . $ 598,924 $275,046 $ 3,097,802 $ 309,805
- ------------------------------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding:
Basic .... . . . . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.05 $ 0.44 $0.07
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.08 $ 0.05 $ 0.44 $0.07
Net income per common share:
Basic .. . . . . . . . . . . . . . . . . . . . . . . . . . 7,031,107 5,919,350 6,996,842 4,610,331
Diluted .. . . . . . . . . . . . . . . . . . . . . . . . 7,079,413 6,006,828 7,080,755 4,697,809
</TABLE>
<PAGE>
INTERDENT, INC
SUPPLEMENTAL POOLED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(unaudited)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1ST QTR 98 2ND QTR 98 3RD QTR 98 4TH QTR 98 ANNUAL 1998
<S> <C> <C> <C> <C>
Dental practice net patient revenue $17,859 $20,644 $29,031 $35,602 $103,136
NET MANAGEMENT FEES/OTHER REVENUE 5,417 7,615 8,503 9,987 31,522
---------------------------------------------------------------------
TOTAL NET REVENUE 23,276 28,259 37,534 45,589 134,658
Clinical salaries and benefits 8,824 10,501 14,162 17,407 50,894
Practice nonclinical salaries and benefits 3,505 4,269 5,371 6,273 19,418
Dental supplies and lab expenses 3,048 3,643 4,879 5,697 17,267
Practice occupancy expenses 1,608 1,932 2,467 2,877 8,884
Practice selling, general and administrative expenses 2,606 2,844 3,683 5,101 14,234
Corporate selling, general and administrative expenses 1,797 1,989 2,387 2,440 8,613
Corporate restructure and merger costs - - - 3,994 3,994
Depreciation and amortization 830 1,101 1,575 1,855 5,361
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Total operating expenses 22,218 26,279 34,524 45,644 128,665
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Operating income (loss) 1,058 1,980 3,010 (55) 5,993
Interest expense/(income) 192 458 656 1,101 2,407
Other expense/(income) 18 (11) 4 3 14
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Income (loss) BEFORE INCOME TAXES 848 1,533 2,350 (1,159) 3,572
Income Taxes 322 593 699 688 2,302
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Net Income (loss) 526 940 1,651 (1,847) 1,270
Accretion of common stock 7 5 3 7 22
- - - -
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Net (loss) income attributable to common stock 519 935 1,648 (1,854) 1,248
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Equivalent common shares 20,417 21,253 22,589 22,343 21,222
Diluted earnings per share 0.03 0.04 0.07 (0.08) 0.06
</TABLE>
###
