<PAGE> 1
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 March 31, 1996 Commission File Number: 0-23092
NATIONAL DENTEX CORPORATION
Massachusetts 04-2762050
(State or other jurisdiction (I.R.S. Identification Number)
of incorporation or organization)
111 Speen Street, Framingham, MA 01701
(Address of Principal Executive Offices) (zip code)
(508) - 820 - 4800
(Registrant's telephone number, including area code)
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 May 10, 1996: 3,438,823.
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NATIONAL DENTEX CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Page
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and
31, 1996 (Unaudited) 3
Consolidated Statements of Income for the three months ended
March 31, 1995 and March 31, 1996 (Unaudited) 4
Consolidated Statements of Stockholders' Equity for the three
months ended March 31, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and March 31, 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>
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NATIONAL DENTEX CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31, 1996
1995 (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 4,193,394 $ 3,892,180
Accounts receivable:
Trade, less allowance of $180,000 in 6,024,953 6,101,065
1995 and $185,000 in 1996
Other 176,099 154,582
Inventories 2,519,143 2,662,489
Prepaid expenses 664,812 933,227
Deferred tax asset 367,275 369,337
Total current assets 13,945,676 14,112,880
PROPERTY AND EQUIPMENT:
Land and buildings 3,773,720 3,773,589
Leasehold and building improvements 2,270,753 2,101,763
Laboratory equipment 5,360,351 5,428,837
Furniture and fixtures 1,264,513 1,348,600
Capital leases 342,819 342,819
13,012,156 12,995,608
Less - Accumulated depreciation and 6,891,909 6,872,907
amortization
Net property and equipment 6,120,247 6,122,701
OTHER ASSETS, net:
Goodwill 5,035,911 5,052,707
Other 3,019,950 2,992,195
8,055,861 8,044,902
$ 28,121,784 $ 28,280,483
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term 110,119 112,537
obligations
Accounts payable 1,363,142 1,298,525
Accrued liabilities:
Payroll and employee benefits 2,558,845 2,125,178
Deferred purchase price 1,728,565 1,275,823
Other 627,847 1,057,121
Total current liabilities 6,388,518 5,869,184
LONG TERM LIABILITIES:
Deferred tax liability 452,195 418,793
Long-term obligations, less current 188,343 188,760
portion
Deferred purchase price 1,137,147 923,331
Total long-term liabilities 1,777,685 1,530,884
COMMITMENTS AND CONTINGENCIES (Note 7)
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, 32,715 33,964
and 3,396,405 shares at March 31,
1996
Paid-in capital 13,309,336 13,406,109
Retained earnings 6,613,530 7,440,342
Total stockholders' equity 19,955,581 20,880,415
$ 28,121,784 $ 28,280,483
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995 March 31, 1996
<S> <C> <C>
Net sales $10,284,667 $12,348,598
Cost of goods sold 5,816,762 7,024,606
Gross profit 4,467,905 5,323,992
Total operating expenses 3,402,083 4,024,087
Operating income 1,065,822 1,299,905
Other income 49,244 41,421
Interest income 63,096 36,694
Income before provision for 1,178,162 1,378,020
income taxes
Provision for income taxes 471,265 551,208
Net income $ 706,897 $ 826,812
Net income per share $ .21 $ .24
Weighted average shares 3,345,609 3,503,066
outstanding
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
# $.01 # $.01 Paid-in Retained
of Par of Par Capital Earnings Total
Shares Value Shares Value ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
Dec. 31, --- --- 3,271,468 32,715 13,309,336 6,613,530 19,955,581
1995
Issuance
of
124,937 --- --- 124,937 1,249 96,773 --- 98,022
shares
of common
stock
under
the
stock
option
plan
and
upon
exercise
of out-
standing
warrants
Net --- --- --- --- --- 826,812 826,812
income
BALANCE,
March 31, --- --- 3,396,405 33,964 13,406,109 7,440,342 20,880,415
1996
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1995 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 706,897 $ 826,812
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities, net of effects
of acquisitions:
Depreciation and amortization 187,629 321,738
Increase in accounts receivable (296,681) (54,595)
Increase in inventories (8,645) (142,578)
Increase in prepaid expenses (65,350) (268,415)
Increase in deferred tax asset (1,283) (2,062)
(Increase) decrease in other assets 46,013 (52,866)
Decrease in accounts payable and
accrued liabilities (1,312,841) (71,139)
Decrease in deferred tax liability (14,619) (33,402)
Net cash provided by operating (758,880) 523,493
activities
Cash flows from investing activities:
Payment of deferred purchase price --- (774,558)
Additions to property and (147,400) (151,006)
equipment, net
Net cash used in investing (147,400) (925,564)
activities
Cash flows from financing activities:
Net payments of current and long- (2,887) 2,835
term obligations
Proceeds from issuance of common 16,854 98,022
stock
Net cash provided by financing 13,967 100,857
activities
Net decrease in cash (892,313) (301,214)
Cash at beginning of period 6,027,104 4,193,394
Cash at end of period $ 5,134,791 $ 3,892,180
Supplemental disclosures of cash flow
information:
Interest paid $ 3,289 $ 13,205
Income taxes paid $ 427,950 $ 89,500
</TABLE>
The accompanying notes are an integral part of these consolidated financial st
atements.
<PAGE> 7
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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
$8,244,000 at March 31, 1996. Cash and equivalents declined $301,000 from
$4,193,000 at December 31, 1995. The fundamental reason for the decline in
cash was the payment of $775,000 of deferred acquisition costs. Operating
activities provided $523,000 in positive cash flow.
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 March 31, 1996, the Company had the full
principal amount available 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.
<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>
Three Months Ended
March 31, 1995 March 31, 1996
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of goods sold 56.6 56.9
Gross profit 43.4 43.1
Total operating expenses 33.0 32.6
Operating income 10.4 10.6
Other income 0.5 0.3
Interest income 0.6 0.3
Income before provision 11.5 11.2
for income taxes
Provision for income 4.6 4.5
taxes
Net Income 6.9% 6.7%
</TABLE>
Quarter Ended March 31, 1996 Compared with Quarter Ended March 31, 1995
Net Sales
Net sales increased $2,064,000 or 20.1% in the fiscal quarter ended March
31, 1996 over the corresponding period of the prior year. Approximately
1,823,000 of this increase is attributable to businesses acquired in 1995,
with the remaining increase representing unit growth at dental laboratories
operating in the fiscal quarter ended March 31, 1996 and in the comparison
quarter ended March 31, 1995.
Cost of Goods Sold
Cost of goods sold, which consists principally of labor and related
benefits, cost of materials, and laboratory overhead increased by $1,208,000.
As a percentage of sales, cost of goods sold increased from 56.6% to 56.9%,
representing a gross margin decrease of .3%. The increase was caused by higher
costs of labor and related benefits, offset by decreases in materials costs.
<PAGE> 10
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 of the Company's
corporate headquarters and field support services increased by $622,000 or
18.3% during the first fiscal quarter 1996 over the corresponding period in
1995.
The increase is primarily attributable to the operating and amortization
expense associated with the eight dental laboratories acquired in 1995.
Additionally, spending has increased in the areas of technical training and
business development to further the Company's growth and productivity goals.
Operating expenses decreased as a percentage of net sales from 33.0% to 32.6%.
during the first fiscal quarter 1996 over the corresponding period in 1995.
Operating Income
Operating income increased by $234,000 or 22.0% for the first quarter
in 1996 over the corresponding quarter 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 $26,000 or 41.8% in the first quarter in
1996 over the corresponding quarter in 1995. The decrease increase 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 fiscal quarter 1996 increased
to $551,000 from $471,000 in the corresponding period in 1995. The effective
tax rate remained constant at 40%.
Net Income
As a result of the factors discussed above, net income for the fiscal
quarter 1996 increased by $120,000 or 17.0% over the corresponding quarter in
1995. Net income per share increased from $0.21 per share to $0.24 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:
Not applicable
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits: (11) Statement Regarding Computation of Per Share Earnings
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 in its
behalf by the undersigned, thereunto duly authorized.
NATIONAL DENTEX CORPORATION
Registrant
May 14, 1996 By: /s/ William M. Mullahy
William M. Mullahy, President
Chief Executive Officer and Director
(Principal Executive Officer)
May 14, 1996 By: /s/ David L. Brown
David L. Brown, Vice President - Finance
Chief Financial Officer, Treasurer and
Assistant Clerk
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at December 31, 1995 and March 31, 1996
(unaudited) and the Consolidated Statement of Income for the three months ended
March 31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,892,180
<SECURITIES> 0
<RECEIVABLES> 6,101,065
<ALLOWANCES> 185,000
<INVENTORY> 2,662,489
<CURRENT-ASSETS> 14,112,880
<PP&E> 6,122,701
<DEPRECIATION> 6,872,907
<TOTAL-ASSETS> 28,280,483
<CURRENT-LIABILITIES> 5,869,184
<BONDS> 0
<COMMON> 33,964
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,280,483
<SALES> 12,348,598
<TOTAL-REVENUES> 12,426,713
<CGS> 7,024,606
<TOTAL-COSTS> 11,048,693
<OTHER-EXPENSES> 4,024,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,378,020
<INCOME-TAX> 551,208
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 826,812
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
EXHIBIT 11
NATIONAL DENTEX CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended
1995 1996
Computation of Primary Net Income per Share:
Net Income applicable to common stock $706,897 826,812
Shares:
Weighted average common shares outstanding 3,095,619 3,341,119
Add: Shares issuable from assumed exercise of
options and warrants (as determined by the
application of the treasury stock method) 249,990 161,947
Weighted average common shares outstanding as
adjusted 3,345,609 3,503,066
Primary net income per share $0.21 $0.24
Three Months Ended
1995 1996
Computation of Fully Diluted Net Income Per
Share:
Net income per primary computation above 706,897 $826,812
Shares:
Weighted average common shares outstanding 3,095,619 3,341,119
Add: Shares issuable from assumed exercise of
options and warrants (as determined by the
application of the treasury stock method) 261,881 161,947
Weighted average common shares outstanding as
adjusted 3,357,500 3,503,066
Fully diluted net income per share $0.21 $0.24
</TABLE>
