UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
For the Quarter ended September 30, 1996 Commission File Number: 0-23092
NATIONAL DENTEX CORPORATION
Massachusetts 04-2762050
- ------------------------ ---------------------------
(State of Incorporation) (I.R.S. Identification No.)
111 Speen Street, Framingham, MA 01701
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(508) 820-4800
-------------------------------
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock outstanding as of November 8, 1996:
3,440,158.
<PAGE> 2
NATIONAL DENTEX CORPORATION
FORM 10-Q
Quarter Ended September 30, 1996
Table of Contents
<TABLE>
Page
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1995
and September 30, 1996 (Unaudited) 3
Consolidated Statements of Income for the three
months and nine months ended September 30, 1995
and September 30, 1996 (Unaudited) 4
Consolidated Statements of Stockholders' Equity
for the nine months ended September 30, 1996
(Unaudited) 5
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and
September 30, 1996 (Unaudited) 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 11
Signatures 12
</TABLE>
<PAGE> 3
NATIONAL DENTEX CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $4,193,394 $4,500,414
Accounts receivable:
Trade, less allowance of $180,000 in
1995 and $207,000 in 1996 6,024,953 6,200,658
Other 176,099 207,258
Inventories 2,519,143 2,855,890
Prepaid expenses 664,812 742,805
Deferred tax asset 367,275 442,142
---------- ----------
Total current assets 13,945,676 14,949,167
---------- ----------
PROPERTY AND EQUIPMENT:
Land and buildings 3,773,720 3,773,720
Leasehold and building 2,270,753 2,340,905
improvements
Laboratory equipment 5,360,351 5,679,367
Furniture and fixtures 1,264,513 1,575,124
Capital leases 342,819 342,819
---------- ----------
13,012,156 13,711,935
Less - Accumulated depreciation
and amortization 6,891,909 7,182,891
---------- ----------
Net property and equipment 6,120,247 6,529,044
---------- ----------
OTHER ASSETS, net:
Goodwill 5,035,911 5,299,926
Other 3,019,950 3,119,104
---------- ----------
8,055,861 8,419,030
---------- ----------
$28,121,784 $29,897,241
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 110,119 $ 199,340
Accounts payable 1,363,142 931,161
Accrued liabilities:
Payroll and employee benefits 2,558,845 2,752,373
Deferred purchase price 1,728,565 1,206,270
Other 627,847 280,150
---------- ----------
Total current liabilities 6,388,518 5,369,294
---------- ----------
LONG TERM LIABILITIES:
Deferred tax liability 452,195 333,088
Long-term obligations, less current portion 188,343 3,645
Deferred purchase price 1,137,147 1,021,979
---------- ----------
Total long-term liabilities 1,777,685 1,358,712
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
Preferred stock, $.01 par value
Authorized - 500,000 shares
None issued and outstanding --- ---
Common stock, $.01 par value
Authorized - 8,000,000 shares
Issued and outstanding - 3,271,468 shares
at December 31, 1995, and 3,440,137 shares
at September 30, 1996 32,715 34,401
Paid-in capital 13,309,336 13,678,718
Retained earnings 6,613,530 9,456,116
---------- ----------
Total stockholders' equity 19,955,581 23,169,235
---------- ----------
$28,121,784 $29,897,241
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
NATIONAL DENTEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $10,729,001 $12,987,428 $32,070,656 $39,041,261
Cost of goods sold 6,155,898 7,561,389 17,924,252 22,160,984
------------- ------------- ------------- -------------
Gross profit 4,573,103 5,426,039 14,145,404 16,880,277
Total operating expenses 3,369,969 4,124,172 10,418,760 12,378,139
------------- ------------- ------------- -------------
Operating income 1,203,134 1,301,867 3,726,644 4,502,138
Other income 14,686 27,691 119,389 112,889
Interest income 70,150 31,805 208,015 90,559
------------- ------------- ------------- -------------
Income before provision for income taxes 1,287,970 1,361,363 4,054,048 4,705,586
Provision for income taxes 515,188 525,311 1,621,619 1,863,000
------------- ------------- ------------- -------------
Net income $ 772,782 $ 836,052 $ 2,432,429 $ 2,842,586
============= ============= ============= =============
Net income per share .23 .24 .72 .81
=============== =============== =============== ===============
Weighted average shares oustanding 3,433,826 3,510,464 3,385,944 3,510,282
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
NATIONAL DENTEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Preferred Stock Common Stock
----------------------- -----------------------
Number of $.01 Par Number of $.01 Par Paid-in Retained
Shares Value Shares Value Capital Earnings Total
--------- -------- --------- --------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 --- $ --- 3,271,468 $ 32,715 $13,309,336 $6,613,530 $19,955,581
Issuance of 154,427 shares of common
stock under the stock option plan and
upon exercise of outstanding warrants --- --- 154,427 1,544 212,331 --- 213,874
Issuance of 13,634 shares of common
stock under the employee stock
purchase plan --- --- 13,634 136 145,049 --- 145,186
Issuance of 608 shares of common
stock as director's fees --- --- 608 6 12,002 --- 12,008
Net income --- --- --- --- --- 2,842,586 2,842,586
------- ------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1996 --- $ --- 3,440,137 $34,401 $13,678,718 $9,456,116 $23,169,235
======= ======= ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
NATIONAL DENTEX CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
1995 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities
Net income $2,432,429 $2,842,586
Adjustments to reconcile net
income to net cash provided by operating
activities, net of effects of acquisitions:
Depreciation and amortization 599,711 999,420
Increase in accounts receivable (192,955) (24,198)
Increase in inventories (103,744) (310,996)
Increase in prepaid expenses (113,034) (71,023)
Increase in deferred tax asset (13,576) (65,667)
Decrease in other assets 33,656 168,892
Decrease in accounts payable and
accrued liabilities (1,308,806) (796,234)
Decrease in deferred tax liability (43,233) (41,107)
----------- -----------
Net cash provided by operating activities 1,290,458 2,701,673
----------- -----------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired (2,414,559) (839,017)
Payment of deferred purchase price --- (978,629)
Additions to property and equipment, net (451,352) (852,597)
----------- -----------
Net cash used in investing activities (2,865,911) (2,670,243)
----------- -----------
Cash flows from financing activities:
Net payments of current and long-term obligations (8,851) (95,477)
Proceeds from issuance of common stock 781,104 371,067
----------- -----------
Net cash provided by financing activities 772,253 275,590
----------- -----------
Net increase (decrease) in cash (803,200) 307,020
Cash at beginning of period 6,027,104 4,193,394
----------- -----------
Cash at end of period $5,223,904 $4,500,414
----------- -----------
Supplemental disclosures of cash flow information:
Interest paid $9,832 $18,741
----------- -----------
Income taxes paid $1,422,340 $2,143,128
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 7
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(1) Interim Financial Statements
The accompanying unaudited financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for fair presentation of the results of operations for
the periods presented. Interim results are not necessarily indicative of the
results to be expected for a full year.
Certain information and footnote disclosures normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted as allowed by Form 10-Q. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements for the year
ended December 31, 1995 as filed with the Securities and Exchange Commission on
Form 10-K.
<PAGE> 8
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Working capital increased from $7,557,000 at December 31, 1995 to
$9,580,000 at September 30, 1996. Cash and equivalents increased $307,000 from
$4,193,000 at December 31, 1995. Operating activities provided $2,702,000 in
cash flow for the nine months ended September 30,1996. Cash outflows related to
dental laboratory acquisitions totaled $1,818,000 for the same period.
The Company maintains a financing agreement (the "Agreement") with State
Street Bank and Trust Company (the "Bank"). The Agreement, as amended,
includes revolving lines of credit of $4,000,000 and $8,000,000. The interest
rate on both revolving lines of credit is the prime rate or Libor rate plus 2%,
at the Company's option. The first revolving line of credit matures on June 1,
1998 and the second revolving line of credit matures on June 1, 1997. A
commitment fee of one quarter of 1% is payable on the unused amount of the
first revolving line of credit. In addition, a draw down fee equal to 3/8 of
1% of each advance under the second revolving line of credit is payable at the
time of such advance. At September 30, 1996, the full principal amount was
available to the Company under both revolving lines of credit.
Management believes that existing working capital and financing will be
sufficient to meet contemplated operating and capital requirements, including
costs associated with anticipated acquisitions, if any, in the foreseeable
future.
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
Certain factors that could affect capital expenditures, the Company's
requirements for capital and the costs associated with anticipated acquisitions
include general economic conditions, the availability of laboratories for
purchase by the Company, the ability of the Company to acquire and successfully
operate additional dental laboratories, governmental regulation of health care,
other factors affecting patient visits to the Company's clients, and other
risks indicated in filings with the Securities and Exchange Commission.
<PAGE> 9
Results of Operations
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items in the Company's Consolidated Financial
Statements:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 55.9 56.8
----- -----
Gross profit 44.1 43.2
Total operating expenses 32.5 31.7
----- -----
Operating income 11.6 11.5
Other income 0.4 0.3
Interest income 0.7 0.2
----- -----
Income before provision for
income taxes 12.7 12.1
Provision for income taxes 5.1 4.8
----- -----
Net income 7.6% 7.3%
----- -----
</TABLE>
Nine Months Ended September 30, 1996 Compared with Nine Months Ended September
30, 1995
Net Sales
Net sales increased $6,971,000 or 21.7% in the nine months ended September
30, 1996 over the corresponding period of the prior year. Approximately
$6,023,000 of this increase is attributable to businesses owned less than one
year, with the remaining increase representing unit growth at dental
laboratories owned during both the nine months ended September 30, 1996 and the
comparison nine months ended September 30, 1995.
During the three month period ended September 30, 1996, net sales increased
$2,258,000 or 21.1% over the corresponding period of the prior year.
Approximately $1,843,000 of this increase is attributable to businesses owned
less than one year, with the remaining increase representing unit growth at
dental laboratories owned during both the three months ended September 30, 1996
and the comparison three months ended September 30, 1995.
<PAGE> 10
Cost of Goods Sold
Cost of goods sold, which consists principally of labor and related
benefits, cost of materials, and laboratory overhead, increased by $4,236,000.
As a percentage of sales, cost of goods sold increased from 55.9% to 56.8%,
representing a gross margin decrease of .9%. A portion of the gross margin
decrease is attributable to the integration of laboratories acquired after
September 30, 1995 with the Company's other laboratories.
Total Operating Expenses
Total operating expenses, which consist of (i) selling expenses, the cost
of the Company's pick-up and delivery services and administrative expenses at
the dental laboratory level, and (ii) costs of operation by the Company's
corporate headquarters and field support services, increased by $1,959,000 or
18.8% during the nine months ended September 30, 1996 over the corresponding
period in 1995.
The increase is primarily attributable to the operating and amortization
expense associated with acquired dental laboratories. Operating expenses
decreased as a percentage of net sales from 32.5% to 31.7% during the nine
months ended September 30, 1996 over the corresponding period in 1995.
Operating Income
Operating income increased by $775,000 or 20.8% for the nine months ended
September 30, 1996 over the corresponding period in 1995. The increase was the
result of higher sales volume and reductions in operating expenses as a
percentage of net sales, offset by a slight increase in cost of goods sold.
Interest Income
Interest income decreased by $117,000 or 56.5% in the nine months ended
September 30, 1996 over the corresponding period in 1995. The decrease was due
to lower interest rates for short-term liquid investments and decreased
investment principal.
Provision for Income Taxes
The Company's provision for income taxes for nine months ended September
30, 1996 increased to $1,863,000 from $1,622,000 in the corresponding period in
1995. The effective tax rate decreased slighly from 40.0% to 39.6%.
Net Income
As a result of the factors discussed above, net income for the nine months
ended September 30, 1996 increased by $410,000 or 16.9% over the corresponding
period in 1995. Net income per share increased from $0.72 per share to $0.81
per share.
<PAGE> 11
PART II. Other Information
Item 1. Legal Proceedings:
No material legal proceedings are pending to which the Company is a party
or of which any of its property is subject.
Item 2. Changes in Securities:
Not applicable.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
None.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on form 8-K:
a. Exhibits: (11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
b. Reports on Form 8-K: None
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL DENTEX CORPORATION
Registrant
November 14, 1996 By:/s/ William M. Mullahy
William M. Mullahy, President
Chief Executive Officer and Director
(Principal Executive Officer)
November 14, 1996 By:/s/ David L. Brown
David L. Brown, Vice President - Finance
Chief Financial Officer, Treasurer and
Assistant Clerk
(Principal Financial Officer)
<PAGE>
EXHIBIT 11
NATIONAL DENTEX CORPORATION
<TABLE>
COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Computation of Primary Net Income per Share:
Net Income applicable to common stock $772,782 $836,052 $2,432,429 $2,842,586
----------- ----------- ----------- -----------
Shares:
Weighted average common shares outstanding 3,206,978 3,439,904 3,144,870 3,405,721
Add: Shares issuable from assumed exercise
of options and warrants (as determined by the 226,848 70,560 241,074 104,561
application of the treasury stock method)
----------- ----------- ----------- -----------
Weighted average common shares outstanding as 3,433,826 3,510,464 3,385,944 3,510,282
adjusted
----------- ----------- ----------- -----------
Primary net income per share $0.23 $0.24 $0.72 $0.81
============= ============= ============== ==============
Three Months Ended Nine Months Ended
------------------------------- ------------------------------
September 30, September 30, September 30, September 30,
1995 1996 1995 1996
------------- ------------- ------------- -------------
Computation of Fully Diluted Net Income per Share:
Net Income per primary computation above $772,782 $836,052 $2,432,429 $2,842,586
Shares:
Weighted average common shares outstanding 3,206,978 3,439,904 3,144,870 3,405,721
Add: Shares issuable from assumed exercise
of options and warrants (as determined by the
application of the treasury stock method) 248,376 70,560 290,852 104,561
Weighted average common shares outstanding as
adjusted 3,455,354 3,510,464 3,435,722 3,510,282
----------- ----------- ----------- -----------
Fully diluted net income per share $0.22 $0.24 $0.71 $0.81
============== ============= ============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
NATIONAL DENTEX CORPORATION
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheets at September 30, 1996 (Unaudited) and the
Condensed Consolidated Statement of Operations and Cash Flows for the Nine
Months Ended September 30, 1996 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,500,414
<SECURITIES> 0
<RECEIVABLES> 6,407,916
<ALLOWANCES> 207,000
<INVENTORY> 2,855,890
<CURRENT-ASSETS> 14,949,167
<PP&E> 13,711,934
<DEPRECIATION> 7,182,891
<TOTAL-ASSETS> 29,897,241
<CURRENT-LIABILITIES> 5,369,294
<BONDS> 0
<COMMON> 34,401
0
0
<OTHER-SE> 23,134,834
<TOTAL-LIABILITY-AND-EQUITY> 29,897,241
<SALES> 39,041,261
<TOTAL-REVENUES> 39,041,261
<CGS> 22,160,984
<TOTAL-COSTS> 12,378,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (90,559)
<INCOME-PRETAX> 4,705,586
<INCOME-TAX> 1,863,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,842,586
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
