<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-23092
NATIONAL DENTEX CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2762050
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
111 SPEEN STREET, FRAMINGHAM, MA 01701
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(508) 820-4800
(Registrant's Telephone No., including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share
(Title of Class)
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 ______
Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 18, 1997, the aggregate market value of the 3,129,431
outstanding shares of voting stock held by non-affiliates of the registrant was
$55,156,221.
As of February 18, 1997, 3,441,321 shares of the registrant's Common Stock,
par value $.01 per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for the Registrant's Special
Meeting in Lieu of Annual Meeting of Stockholders to be held on April 8, 1997 is
incorporated by reference into Part III.
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
National Dentex Corporation (the "Company") was founded in 1982 as H&M
Laboratories Services, Inc., a Massachusetts corporation, which acquired six
full-service dental laboratories and related branch laboratories from Healthco,
Inc. In 1983, the Company changed its name to National Dentex Corporation and
acquired 20 additional full-service dental laboratories and related branch
laboratories from Lifemark Corporation. The Company today owns and operates 31
dental laboratories, consisting of 26 full-service dental laboratories and five
branch laboratories located in 21 states throughout the United States. The
Company's dental laboratories custom design and fabricate dentures, crowns and
fixed bridges, and other dental prosthetic appliances. Each dental laboratory
operates under its own business name. The Company's principal executive offices
are located at 111 Speen Street, Framingham, MA 01701, telephone number (508)
820-4800.
INFORMATION AS TO INDUSTRY SEGMENTS
The Company's business consists of only one industry segment, which is the
design, fabrication, marketing and sale of custom dental prosthetic appliances
for and to dentists.
DESCRIPTION OF BUSINESS
The Company's dental laboratories design and fabricate custom dental
prosthetic appliances such as dentures, crowns and bridges. These products are
produced by trained technicians working primarily in dental laboratories in
accordance with work orders and cases (consisting of impressions, models and
occlusal registrations of a patient's teeth) provided by the dentist. Dentists
are the direct purchasers of the Company's
products.
The Company's products are grouped into the following three main
categories:
Restorative Products. Restorative products sold by the Company's dental
laboratories consist primarily of crowns and bridges. A crown replaces the part
of a tooth which is visible, and is usually made of gold or porcelain. A bridge
is a restoration of one or more missing teeth which is permanently attached to
the natural teeth or roots. In addition to the traditional crown, the Company
also makes porcelain jackets, which are crowns constructed entirely of
porcelain; onlays, which are partial crowns which do not cover all of the
visible tooth; and precision crowns, which are restorations designed to receive
and connect a removable partial denture. The Company also makes inlays, which
are restorations made to fit a prepared tooth cavity and then cemented into
place.
Reconstructive Products. Reconstructive products sold by the Company's
dental laboratories consist primarily of partial dentures and full dentures.
Partial dentures are removable dental prostheses which replace missing teeth and
associated structures. Full dentures are dental prostheses which substitute for
the total loss of teeth and associated structures. The Company also sells
precision attachments, which connect a crown and an artificial prosthesis, and
implants, which are fixtures anchored securely in the bone of the mouth to which
a crown, partial or full denture is secured by means of screws or clips.
Cosmetic Products. Cosmetic products sold by the Company's dental
laboratories consist primarily of porcelain veneers and ceramic crowns.
Porcelain veneers are thin coverings of porcelain cemented to the front of a
tooth to enhance personal appearance. Ceramic crowns are crowns made from
ceramic materials which most closely replicate natural teeth. The Company also
sells composite inlays and onlays, which replace silver fillings for a more
natural appearance, and orthodontic appliances, which are products fabricated to
move existing teeth to enhance function and appearance.
LABORATORY AND CORPORATE OPERATIONS
The Company's full-service dental laboratories design and fabricate a full
range of custom-made dental prosthetic appliances. These custom products are
manufactured from raw materials, such as high noble, noble
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and predominantly base alloys, dental resins, composites and porcelain. There
are different production processes for the various types of prosthetic
appliances depending upon the product and the materials used in the type of
appliance being fabricated, each of which requires different skills and levels
of training. The Company's dental laboratories perform numerous quality control
checks throughout the production cycle to improve the quality of its products
and to make certain the design and appearance satisfy the needs of the dentist
and the patient. The Company's branch dental laboratories are smaller in size
and offer a limited number of products. When a branch receives an order that it
cannot fill, the branch refers the business to its affiliated full-service
dental laboratory.
The Company operates each of its dental laboratories as a stand-alone
facility under the direction of a local manager responsible for operation of the
dental laboratory, supervision of its technical and sales staff and delivery of
quality products and services. Each of the Company's dental laboratories markets
and sells its products through its own direct sales force, supported by regional
sales managers and Company-wide marketing programs. Employees at each dental
laboratory have a direct stake in the financial success of the dental laboratory
through participation in the Company's cash and stock incentive plans.
The Company's corporate management provides overall strategy, direction and
financial management for the Company and negotiates all acquisitions. Corporate
personnel also support the operations of its dental laboratories by performing
functions which are not directly related to the production and sale of dental
laboratory products, such as processing payroll and related benefit programs,
obtaining insurance and procuring financing. The Company's corporate management
provides marketing, financial and administrative services, negotiates
Company-wide purchasing arrangements, and sets quality and performance standards
for the dental laboratories.
SALES AND MARKETING
Each of the Company's local dental laboratories markets and sells its
products through its own direct sales force. The sales force interacts with
dentists within its market area, primarily through visits to dentists' offices,
to introduce the dental laboratory's services and products offered, and to
promote new products and techniques that can assist dentists in expanding their
practices. During 1996, the Company launched its customer-focused marketing and
sales program "Knowledge Based Relationships".(TM) The Company believes that
this unique approach toward assisting the dentist and his or her staff to
improve chairtime efficiencies will enhance its ability to expand its base of
business by establishing lasting professional relationships with its customers.
The Company presently has a total of 25 sales representatives and three regional
sales managers. In addition, the dental laboratories, either alone or with local
dental societies, dental schools or study clubs, sponsor technical training
clinics for dentists on topics such as advanced clinical techniques. The local
dental laboratories also exhibit at state and local dental conventions.
COMPETITION
The dental laboratory industry is highly competitive and fragmented. A
typical dental laboratory's business originates from dentists located within 50
miles of the dental laboratory. There are approximately 12,000 dental
laboratories in the United States, ranging in size from one to approximately 200
technicians. The Company estimates that presently its sales represent less than
3% of the total sales of custom-made dental prosthetic appliances in the United
States. Competition is primarily from other dental laboratories in the
respective local market areas. The vast majority of dental laboratories consist
of single units, although the Company believes there is one national chain,
Dental Services Group - Sentage Corporation, which competes with the Company in
two market areas. There is also limited competition from mail order dental
laboratories.
Most dentists use a limited number of dental laboratories, relying on those
laboratories which produce quality products delivered on a timely basis and
which carry all of the products which the dentist may need, even if a particular
item is a newer specialty product used only sporadically by the dentist. While
price is one of the competitive factors in the dental laboratory industry, the
Company believes that most dentists consider product quality and service to be
more important. The Company believes that it competes favorably with respect to
these factors. The Company considers that its ability to produce quality
products locally and to deliver such products on a timely basis, the breadth of
its product line, the use of innovative marketing
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programs, and its sponsorship of educational clinics provide a competitive
advantage over other dental laboratories in the local markets in which its
dental laboratories operate. The Company's ability to provide newer specialty
products for implantology, adult orthodontics and cosmetic dentistry, which
require highly skilled technicians, more extensive inventories, additional
working capital, and investment in both training and capital equipment, also
distinguishes it from many smaller dental laboratories which do not have
comparable resources to provide these products. While such specialty products
presently represent less than 20% of the Company's business, the Company
believes that the ability to offer these products is essential for dental
laboratories to remain competitive.
EMPLOYEES
As of December 31, 1996, the Company had 1,083 employees, 1,056 of whom
worked at individual laboratories. Corporate management and administrative staff
totaled 27 people. None of the Company's employees is covered by a collective
bargaining agreement. Management considers the Company's employee relations to
be good.
INTELLECTUAL PROPERTY
The Company's general technological know-how and experience are important
to the conduct of the Company's business. The Company has several trademarks and
licenses to use trademarks, but does not deem any of such trademarks or licenses
to be material to the conduct of its business. Each of its dental laboratories
operates under its own trade name, and the Company considers these trade names
to be important to the goodwill of its dental laboratories.
ITEM 2. PROPERTIES
The Company currently leases a total of approximately 127,000 square feet
of space. As of December 31, 1996, the aggregate minimum annual rent payable for
all of its leased real properties was approximately $865,000. The Company
considers these properties to be modern, well maintained and suitable for its
purposes and believes that its current facilities are adequate to meet its needs
for the foreseeable future. The Company also believes that suitable substitute
or replacement space is readily available. The Company's principal executive and
administrative offices occupy approximately 9,300 square feet of space in
Framingham, Massachusetts. Its 25 leased dental laboratories range in size from
1,000 to 21,000 square feet and average $35,750 in annual base rent.
The Company owns seven dental laboratory facilities, which are located in
Denver, Colorado; Metairie, Louisiana; Arlington, Texas; Dallas, Texas; Houston,
Texas; Jacksonville, Florida; and Waukesha, Wisconsin. These locations total
approximately 74,500 square feet and range in building size from 4,000 to 20,000
square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect upon the operations or financial condition of the
Company and will not disrupt the normal operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, is traded on the
over-the-counter market, on the NASDAQ National Market System, under the symbol
"NADX". The following table presents low and high bid information for the time
periods specified. The over-the-counter market quotations reflect inter-dealer
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prices, without retail markup, markdown or commission and may not necessarily
represent actual transactions. The over-the-counter market quotations have been
furnished by the NASDAQ Stock Market, Inc. Trading in the Company's Common Stock
commenced on December 21, 1993.
<TABLE>
<CAPTION>
PRICE
--------------------
QUARTER ENDING LOW BID HIGH BID
----------------------------------------------------------- ------- --------
<S> <C> <C>
03/31/95................................................. $ 9.25 $12.75
06/30/95................................................. $11.50 $14.50
09/30/95................................................. $12.25 $17.75
12/31/95................................................. $17.50 $25.00
03/31/96................................................. $19.25 $25.25
06/30/96................................................. $19.75 $24.50
09/30/96................................................. $18.75 $24.50
12/31/96................................................. $16.50 $20.25
</TABLE>
The Company has paid no cash dividends in the past and has no plans to pay
cash dividends in the foreseeable future.
As of February 18, 1997, there were approximately 320 registered record
holders of the Company's Common Stock, which the Company believes represented
approximately 1,800 beneficial holders. As of February 18, 1997, the low and
high bid prices of the Common Stock were $17.00 and $18.25, respectively.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1996 are derived from the audited consolidated financial statements of the
Company. The data should be read in conjunction with the financial statements
and the related notes included in this Report and in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME:
Net sales........................... $30,696 $33,624 $37,788 $44,283 $51,971
Cost of goods sold.................. 18,212 19,371 21,334 24,853 29,627
------- ------- ------- ------- -------
Gross profit........................ 12,484 14,253 16,454 19,430 22,344
Total operating expenses............ 10,749 11,443 12,729 14,440 16,462
------- ------- ------- ------- -------
Operating income.................... 1,735 2,810 3,725 4,990 5,882
Other income........................ 121 116 136 187 141
Interest expense (income)........... 442 323 (144) (234) (131)
------- ------- ------- ------- -------
Income before provision for income
taxes............................. 1,414 2,603 4,005 5,411 6,154
Provision for income taxes.......... 111 756 1,602 2,167 2,449
------- ------- ------- ------- -------
Net income.......................... $ 1,303 $ 1,847 $ 2,403 $ 3,244 $ 3,705
======= ======= ======= ======= =======
Net income per share................ $ 0.58 $ 0.78 $ 0.72 $ 0.95 $ 1.06
======= ======= ======= ======= =======
Weighted average shares
outstanding....................... 2,256 2,378 3,322 3,427 3,509
CONSOLIDATED BALANCE SHEET DATA:
Working capital..................... $ 2,254 $ 8,312 $ 8,742 $ 7,557 $ 9,859
Total assets........................ 11,605 17,304 21,405 28,202 30,234
Long-term obligations, including
current portion................... 4,054 49 39 298 204
Stockholders' equity................ $ 4,515 $13,576 $16,030 $19,956 $24,036
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased from $7,557,000 at December 31,
1995 to $9,859,000 at December 31, 1996. Cash and equivalents increased $766,000
from $4,193,000 at December 31, 1995 to $4,959,000 at December 31, 1996.
Operating activities provided $3,896,000 in cash flow for the year ended
December 31,1996. Inventories increased $385,000 from December 31, 1995. The
increase in inventory was
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attributable to increases in the cost of certain purchased materials, increased
sales and the acquisition of dental laboratories.
Cash outflows related to dental laboratory acquisitions totaled $2,447,000
for the year ended December 31, 1996. Capital expenditures for the same period
were $965,000. The Company expects that increases in capital expenditures, if
any, will be proportionate with increasing revenues.
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 December 31, 1996, the full principal amount was
available to the Company under both revolving lines of credit. These facilities
are secured by all of the assets, leases and contracts of the Company. The
Agreement requires compliance with certain covenants, including the maintenance
of net worth and other financial ratios. As of December 31, 1996, the Company
was in compliance with these covenants.
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.
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>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net sales.................................................. 100.0% 100.0% 100.0%
Cost of goods sold......................................... 56.5 56.1 57.0
----- ----- -----
Gross profit............................................... 43.5 43.9 43.0
Total operating expenses................................... 33.7 32.6 31.7
----- ----- -----
Operating income........................................... 9.8 11.3 11.3
Other income............................................... 0.4 0.4 0.3
Interest income............................................ 0.4 0.5 0.2
----- ----- -----
Income before provision for income taxes................... 10.6 12.2 11.8
Provision for income taxes................................. 4.2 4.9 4.7
----- ----- -----
Net income................................................. 6.4% 7.3% 7.1%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net Sales
Net sales increased $7,688,000 or 17.4% for the year ended December 31,
1996 over the year ended December 31, 1995. Approximately $6,515,000 of this
increase is attributable to sales by acquired laboratories, with the remaining
increase representing unit growth at dental laboratories operating throughout
the year ended December 31, 1996 and the comparison year ended December 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 $4,774,000,
or 19.2%. As a percentage of sales, cost of goods sold increased from 56.1% to
57.0%, representing a gross margin decrease of 0.9%. A portion of the gross
margin decrease is
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attributable to the integration of laboratories acquired in the year ended
December 31, 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 $2,022,000 or
14.0% during the year ended December 31, 1996 over 1995.
This increase is primarily attributable to the operating and amortization
expense associated with acquired dental laboratories. During this same period
operating expenses decreased as a percentage of net sales from 32.6% in 1995 to
31.7% in 1996.
Operating Income
Operating income increased by $892,000 or 17.8% for the year ended December
31, 1996 over 1995. The increase was the result of higher sales volume.
Operating income was 11.3% of sales for the years ended December 31, 1995 and
1996.
Interest Income
Interest income decreased by $103,000 or 43.9% in the year ended December
31, 1996 from 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 the year ended December 31,
1996 increased to $2,449,000 from $2,167,000 in 1995. The effective tax rate
decreased slightly from 40.0% to 39.8%.
Net Income
As a result of the factors discussed above, net income for the year ended
December 31, 1996 increased by $461,000 or 14.2% over 1995. Net income per share
increased from $0.95 per share to $1.06 per share.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Net Sales
For the year ended December 31, 1995, net sales increased $6,495,000 or
17.2% over the prior year. Of this increase approximately $2,925,000 or 7.7%
came from same laboratory sales, while approximately $3,570,000 came from
acquisitions.
Cost of Goods Sold
The Company's cost of goods sold increased by $3,519,000 or 16.5% in the
fiscal year ended December 31, 1995 over the prior fiscal year, attributable
primarily to increased unit sales. The Company continued its emphasis on
training of technical personnel at individual dental laboratories and cross
training programs, which led to a reduction of the cost of goods sold as a
percentage of sales from 56.5% in fiscal 1994 to 56.1% in fiscal 1995.
Total Operating Expenses
Operating expenses, which consist of selling, delivery and administrative
expenses both at the laboratory and corporate levels, increased by $1,710,000 or
13.4% in the year ended December 31, 1995 over 1994. During this same period
operating expenses decreased as a percentage of net sales from 33.7% in 1994 to
32.6% in 1995.
A component of the increase in operating expenses was related to incentive
compensation expense. Incentive compensation increased by $329,000 for the
laboratory incentive plan and increased by $89,000 for
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the executive and management incentive plan. These incentive plans are based on
the operating income of the individual dental laboratories and total corporate
earnings, respectively.
Operating Income
Due to the increase in net sales and improved productivity, which reduced
both the cost of goods sold and operating expenses as a percent of net sales,
operating income increased $1,265,000 or 34.0% in fiscal year 1995 over fiscal
year 1994.
Interest Income
Following its initial public offering in December 1993, the Company repaid
its full bank debt and mortgage loans, thereby eliminating substantially all of
its interest expense. This cash, net of acquisitions, and cash generated from
operations was invested and produced net interest income of $234,000 during
1995.
Provision for Income Taxes
The provision for income taxes increased to $2,167,000 in 1995 from
$1,602,000 in 1994. This $565,000 increase was the result of increased income.
The 40% effective tax rate for fiscal year 1995 remained consistent with the 40%
effective tax rate for fiscal year 1994.
Net Income
As a result of all the factors discussed above, net income increased to
$3,244,000 or $.95 per share in 1995 from $2,403,000 or $.72 per share in 1994.
GENERAL
This Form 10-K 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 adversely affect the Company's capital expenditures,
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 laboratories, governmental regulation of health care, other
factors affecting patient visits to the Company's clients, and other risks
indicated in the Company's filings with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY RESULTS
The following table sets forth certain selected financial information for
the Company for its eight most recent fiscal quarters. In the opinion of the
Company, this unaudited information has been prepared on the same basis as the
audited financial information and includes all adjustments (consisting of only
normal, recurring adjustments) necessary to present this information fairly when
reviewed in conjunction with the Company's Consolidated Financial Statements and
notes thereto contained herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $10,285 $ 11,057 $ 10,729 $ 12,212 $12,349 $ 13,705 $ 12,987 $ 12,930
Gross profit........ $ 4,468 $ 5,104 $ 4,573 $ 5,285 $ 5,324 6,130 5,426 5,464
Gross margin........ 43.4% 46.2% 42.6% 43.3% 43.1% 44.7% 41.8% 42.3%
Operating income.... $ 1,066 $ 1,458 $ 1,203 $ 1,264 $ 1,300 $ 1,900 $ 1,302 $ 1,380
Operating margin.... 10.4% 13.2% 11.2% 10.3% 10.5% 13.9% 10.0% 10.7%
Net income.......... $ 707 $ 953 $ 773 $ 811 $ 827 $ 1,180 $ 836 $ 862
Net income per
share............. $ 0.21 $ 0.28 $ 0.23 $ 0.23 $ 0.24 $ 0.34 $ 0.24 $ 0.25
</TABLE>
8
<PAGE> 9
The Company's results of operations have historically fluctuated on a
quarterly basis and are expected to be subject to quarterly fluctuations in the
future. As a result, the Company believes that the results of operations for the
interim periods are not necessarily indicative of the results to be expected for
any future period or for a full year. Quarterly results are subject to
fluctuations resulting from a number of factors, including the number of working
days in the quarter for both dentists and Company employees, the number of paid
vacation days and holidays in the period and general economic conditions.
Historically, the second quarter has generated the highest quarterly net sales
for the year and has been the most profitable for the Company due to the greater
number of working days in the quarter and more patients scheduling visits with
their dentists before departing for summer vacation.
LOCATION OF FINANCIAL STATEMENTS
The financial statements furnished in connection with this Report are
attached immediately following the Signatures.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors. The information with respect to directors required by this
item is incorporated herein by reference from the Company's Proxy Statement for
the special meeting in lieu of the annual shareholders meeting to be held on
April 8, 1997 (the "1997 Proxy Statement").
(b) Executive Officers. The information with respect to executive officers
required by this item is incorporated herein by reference from the 1997 Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
from the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
from the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
from the 1997 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a), (d) Financial Statements and Schedules.
(1) The financial statements set forth in the list below are filed as part
of this Report.
(2) The financial statement schedules set forth in the list below are filed
as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
The historical consolidated financial statements of National Dentex
Corporation included herein are as listed below:
9
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996................. F-3
Consolidated Statements of Income for the three years ended December 31,
1996....................................................................... F-4
Consolidated Statements of Stockholders' Equity for the three years ended
December 31, 1996.......................................................... F-5
Consolidated Statements of Cash Flows for the three years ended December 31,
1996....................................................................... F-6
Notes to Consolidated Financial Statements................................... F-7
</TABLE>
Certain Financial Schedules included herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the financial
statements or in the notes thereto.
(b) Reports on Form 8-K.
During the Company's fiscal quarter ended December 31, 1996, the Company
was not required to file, and did not file, any Current Report on Form 8-K.
(c) Exhibits.
(i) The following exhibits, required by Item 601 of Regulation S-K, are
filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ----------------------------------------------------------------------------------
<S> <C>
11 Computation of Net Income Per Share
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
(ii) The following exhibits were filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 and are herein
incorporated by reference:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------ ----------------------------------------------------------------------------------
<S> <C>
*10a 1992 Long Term Incentive Plan, as amended.
*10b Employment Agreement between the Company and Richard F. Becker, Jr., dated April
1, 1995.
*10c Change of Control Severance Agreement between the Company and Richard F. Becker,
Jr., dated April 1, 1995.
*10d Employment Agreement between the Company and David L. Brown, dated April 1, 1995.
*10e Change of Control Severance Agreement between the Company and David L. Brown dated
April 1, 1995.
*10f Employment Agreement between the Company and William M. Mullahy, dated April 1,
1995.
*10g Change of Control Severance Agreement between the Company and William M. Mullahy,
dated April 1, 1995.
</TABLE>
(iii) The following exhibits were filed as part of the Company's Form S-1
Registration Statement (File No. 33-70440) declared effective by the Securities
and Exchange Commission on December 21, 1993 and are herein incorporated by
reference:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ----------------------------------------------------------------------------------
<S> <C>
2a Purchase and Sale Agreement, dated June 25, 1982, between Healthco, Inc. and H & M
Laboratory Services, Inc. (now known as National Dentex Corporation).
2b Stock Purchase Agreement, dated as of December 31, 1982, between the Company and
Lifemark Corporation.
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ----------------------------------------------------------------------------------
<S> <C>
2c Agreement and Plan of Merger, dated as of February 28, 1992, and Closing
Agreement, dated as of February 28, 1992, among the Company, Dodd Dental
Laboratories, Inc., James F. Dodd, III, Robert M. Dodd, Stephen K. Dodd and Amy
Ann Dodd.
3a Restated Articles of Organization of the Company, filed with Massachusetts
Secretary of State on October 14, 1993.
3b By-Laws of the Company, as amended on December 31, 1982 and May 26, 1992.
4a Registration Agreement, dated as of February 14, 1983, among the Company, National
City Capital Corporation ("NCC"), National City Venture Corporation ("NCV") and
Rust Capital, Ltd. ("Rust"), as amended on April 11, 1983, September 30, 1985, and
February 27, 1992.
4b Inter-Investor Agreement, dated as of April 11, 1983, among Rust, NCC, NCV, and
InterFirst Venture Corporation ("InterFirst").
4c Amended and Restated Executive Agreement, made as of September 30, 1985 by and
among the Company, Mullahy, Rust, NCC, NCV, and InterFirst, as amended on October
8, 1993.
4d Amended and restated Executive Agreement, made as of September 30, 1985 by and
among the Company, Harkins, Rust, NCC, NCV, and InterFirst, terminated on October
8, 1993.
4e Exchange Agreement, dated as of September 30, 1985, among the Company, Mullahy,
Harkins, Rust, NCC, NCV, and InterFirst, as amended on October 8, 1993.
4f Exchange Agreement, dated as of September 30, between the Company and American
Medical International, Inc. ("AMI").
4g Restated Letter Agreement, dated February 22, 1993, between the Company and State
Street Bank and Trust Company (the "Bank").
4p Proposed Form of Common Stock Purchase Warrant to Advest, Inc.
*10a Salary Continuation Agreement, dated April 1, 1985, between the Company and
Mullahy.
*10b Salary Continuation Agreement, dated April 1, 1985, between the Company and Merz.
*10c National Dentex Corporation Laboratory Incentive Compensation Plan.
*10d National Dentex Corporation Corporate Executives Incentive Compensation Plan.
*10e National Dentex Corporation Group Managers Incentive Compensation Plan.
*10g National Dentex Corporation Dollars Plus Plan, as amended on January 3, 1986.
*10h National Dentex Corporation Employees' Stock Purchase Plan.
*10j Nonqualified Stock Option Agreement, dated April 24, 1991, between the Company and
Mullahy, as amended on October 14, 1993.
</TABLE>
- ---------------
* These exhibits relate to a management contract or to a compensatory plan or
arrangement.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 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
/S/ WILLIAM M. MULLAHY
By:...................................
WILLIAM M. MULLAHY, PRESIDENT
March 7, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ --------------------------------- --------------
<S> <C> <C>
/S/ WILLIAM M. MULLAHY President, Chief Executive March 7, 1997
........................................ Officer and Director (Principal
WILLIAM M. MULLAHY Executive Officer)
/S/ DAVID V. HARKINS Chairman of the Board of March 7, 1997
........................................ Directors and Director
DAVID V. HARKINS
/S/ JACK R. CROSBY Director March 7, 1997
........................................
JACK R. CROSBY
/S/ WILLIAM H. MCCLURG Director March 7, 1997
........................................
WILLIAM H. MCCLURG
/S/ DAVID L. BROWN Vice President, Treasurer & Chief March 7, 1997
........................................ Financial Officer, and
DAVID L. BROWN Assistant Clerk (Principal
Financial Officer)
/S/ RICHARD F. BECKER, JR. Vice President, Finance and March 7, 1997
........................................ Assistant Treasurer (Principal
RICHARD F. BECKER, JR. Accounting Officer)
</TABLE>
12
<PAGE> 13
NATIONAL DENTEX CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Financial Statements:
The historical consolidated financial statements of National Dentex Corporation
included herein are as listed below.
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996.............. F-3
Consolidated Statements of Income for the three years ended December 31,
1996..................................................................... F-4
Consolidated Statements of Stockholders' Equity for the three years ended
December 31, 1996........................................................ F-5
Consolidated Statements of Cash Flows for the three years ended December
31, 1996................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
Schedules:
Valuation and Qualifying Accounts......................................... Schedule II
</TABLE>
F-1
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To National Dentex Corporation:
We have audited the accompanying consolidated balance sheets of National
Dentex Corporation (a Massachusetts corporation) as of December 31, 1995 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. These consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of National
Dentex Corporation as of December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule in the index to
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of the
basic consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Boston, Massachusetts
February 6, 1997
F-2
<PAGE> 15
NATIONAL DENTEX CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents................................................ $ 4,193,394 $ 4,959,038
Accounts receivable:
Trade, less allowance of $180,000 in 1995 and $204,000 in
1996......................................................... 6,024,953 6,149,448
Other.......................................................... 176,099 198,481
Inventories......................................................... 2,519,143 2,929,898
Prepaid expenses.................................................... 664,812 668,606
Deferred tax asset.................................................. 447,275 402,703
----------- -----------
Total current assets....................................... 14,025,676 15,308,174
----------- -----------
PROPERTY AND EQUIPMENT:
Land and buildings.................................................. 3,773,720 3,773,720
Leasehold and building improvements................................. 2,270,753 2,380,010
Laboratory equipment................................................ 5,360,351 5,734,432
Furniture and fixtures.............................................. 1,264,513 1,592,657
Capital leases...................................................... 342,819 342,819
----------- -----------
13,012,156 13,823,638
Less -- Accumulated depreciation and amortization................... 6,891,909 7,352,321
----------- -----------
Net property and equipment.................................. 6,120,247 6,471,317
----------- -----------
OTHER ASSETS, net:
Goodwill............................................................ 5,035,911 5,346,757
Other............................................................... 3,019,950 3,107,873
----------- -----------
8,055,861 8,454,630
----------- -----------
$28,201,784 $30,234,121
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations............................ $ 110,119 $ 204,213
Accounts payable.................................................... 1,363,142 973,080
Accrued liabilities:
Payroll and employee benefits.................................. 2,558,845 2,604,909
Deferred purchase price........................................ 1,728,565 1,244,629
Other.......................................................... 707,847 422,693
----------- -----------
Total current liabilities.................................. 6,468,518 5,449,524
----------- -----------
LONG TERM LIABILITIES:
Deferred tax liability.............................................. 452,195 304,819
Long-term obligations, less current portion......................... 188,343 --
Deferred purchase price............................................. 1,137,147 443,300
----------- -----------
Total long-term liabilities................................ 1,777,685 748,119
----------- -----------
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, and
3,440,738 shares at December 31, 1996............................. 32,715 34,407
Paid-in capital..................................................... 13,309,336 13,683,615
Retained earnings................................................... 6,613,530 10,318,456
----------- -----------
Total stockholders' equity................................. 19,955,581 24,036,478
----------- -----------
$28,201,784 $30,234,121
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 16
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $ 37,788,355 $ 44,283,064 $ 51,971,105
Cost of goods sold.................................... 21,333,861 24,853,120 29,627,013
------------ ------------ ------------
Gross profit..................................... 16,454,494 19,429,944 22,344,092
Total operating expenses.............................. 12,729,392 14,439,562 16,462,045
------------ ------------ ------------
Operating income................................. 3,725,102 4,990,382 5,882,047
Other income.......................................... 135,337 186,128 141,000
Interest income....................................... 144,065 234,049 131,316
------------ ------------ ------------
Income before provision for income taxes......... 4,004,504 5,410,559 6,154,363
Provision for income taxes............................ 1,601,802 2,166,751 2,449,437
------------ ------------ ------------
Net income....................................... $ 2,402,702 $ 3,243,808 $ 3,704,926
============ ============ ============
Net income per share.................................. $ .72 $ .95 $ 1.06
============ ============ ============
Weighted average shares outstanding................... 3,321,542 3,427,209 3,509,231
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 17
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<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,
1993................. -- $ -- 2,998,174 $ 29,982 $12,578,750 $ 967,020 $13,575,752
Issuance of 89,152
shares of common
stock under the stock
option plan and upon
exercise of
outstanding
warrants............. -- -- 89,152 892 38,394 -- 39,286
Issuance of 1,548
shares of common
stock as director's
fees................. -- -- 1,548 15 11,981 -- 11,996
Net income............. -- -- -- -- -- 2,402,702 2,402,702
---- ---- --------- -------- ----------- ----------- -----------
BALANCE, December 31,
1994................. -- -- 3,088,874 30,889 12,629,125 3,369,722 16,029,736
Issuance of 166,971
shares of common
stock under the stock
option plans......... -- -- 166,971 1,670 555,130 -- 556,800
Issuance of 14,643
shares of common
stock under the
employee stock
purchase plan........ -- -- 14,643 146 113,086 -- 113,232
Issuance of 980 shares
of common stock as
director's fees...... -- -- 980 10 11,995 -- 12,005
Net income............. -- -- -- -- -- 3,243,808 3,243,808
---- ---- --------- -------- ----------- ----------- -----------
BALANCE, December 31,
1995................. -- -- 3,271,468 32,715 13,309,336 6,613,530 19,955,581
Issuance of 155,028
shares of common
stock under the stock
option plans......... -- -- 155,028 1,550 217,228 -- 218,778
Issuance of 13,634
shares of common
stock under the
employee stock
purchase plan........ -- -- 13,634 136 145,049 -- 145,185
Issuance of 608 shares
of common stock as
director's fees...... -- -- 608 6 12,002 -- 12,008
Net income............. -- -- -- -- -- 3,704,926 3,704,926
---- ---- --------- -------- ----------- ----------- -----------
BALANCE, December 31,
1996................. -- $ -- 3,440,738 $ 34,407 $13,683,615 $10,318,456 $24,036,478
==== ==== ========= ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 18
NATIONAL DENTEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 2,402,702 $ 3,243,808 $ 3,704,926
Adjustments to reconcile net income to net cash
provided by operating activities, net of
effects of acquisitions:
Depreciation and amortization............... 685,549 922,141 1,350,314
(Increase) decrease in accounts
receivable................................ (283,663) (388,600) 35,788
Increase in inventories..................... (163,857) (244,566) (385,004)
(Increase) decrease in prepaid expenses..... (9,095) (116,372) 3,241
Increase in deferred tax asset.............. (47,217) (21,770) (26,228)
(Increase) decrease in other assets......... 4,292 55,820 (63,973)
Increase (decrease) in accounts payable and
accrued liabilities....................... 629,370 82,970 (694,129)
Decrease in deferred tax liability.......... (49,408) (91,637) (29,277)
------------ ------------ ------------
Net cash provided by operating
activities........................... 3,168,673 3,441,794 3,895,658
------------ ------------ ------------
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired... (1,037,065) (4,019,935) (839,017)
Payment of deferred purchase price............... (324,055) (1,000,718) (1,607,826)
Additions to property and equipment, net......... (602,824) (934,641) (964,894)
------------ ------------ ------------
Net cash used in investing activities....... (1,963,944) (5,955,294) (3,411,737)
------------ ------------ ------------
Cash flows from financing activities:
Net payments of current and long-term
obligations.................................... (10,082) (2,247) (94,248)
Net proceeds from issuance of common stock....... 51,282 682,037 375,971
------------ ------------ ------------
Net cash provided by financing activities... 41,200 679,790 281,723
------------ ------------ ------------
Net increase (decrease) in cash and equivalents....... 1,245,929 (1,833,710) 765,644
Cash and equivalents at beginning of period........... 4,781,175 6,027,104 4,193,394
------------ ------------ ------------
Cash and equivalents at end of period................. $ 6,027,104 $ 4,193,394 $ 4,959,038
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Interest paid.................................... $ 28,642 $ 13,007 $ 22,098
============ ============ ============
Income taxes paid................................ $ 1,539,246 $ 1,806,795 $ 2,739,444
============ ============ ============
Supplemental schedule of noncash investing and
financing activities:
The Company purchased the operations of certain
dental laboratories in 1994, 1995 and 1996. In
conjunction with these acquisitions,
liabilities were assumed as follows:
Fair value of assets acquired.................... $ 2,438,420 $ 7,905,740 $ 1,618,000
Cash paid........................................ (1,037,065) (4,103,236) (910,000)
Deferred purchase price at date of acquisition... (1,249,185) (2,918,116) (468,000)
------------ ------------ ------------
Liabilities assumed................................... $ 152,170 $ 884,388 $ 240,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 19
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION
National Dentex Corporation (the "Company") owns and operates 26
full-service dental laboratories and five branch laboratories in 21 states
throughout the United States. Working from dentists' work orders, the Company's
dental laboratories custom design and fabricate dentures, crowns and fixed
bridges, and other dental prosthetic appliances.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all operations of the
Company. Acquisitions are reflected from the date acquired by the Company (see
Note 3) to December 31, 1996. All significant intercompany balances and
transactions have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized as the dentists' orders are shipped.
Inventories
Inventories, consisting principally of raw materials, are stated at the
lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the following
estimated depreciable lives:
<TABLE>
<S> <C>
Buildings................................................... 25 years
Furniture and fixtures...................................... 5-10 years
Automobiles and trucks...................................... 5 years
Laboratory equipment........................................ 10 years
</TABLE>
Leasehold improvements and capital leases are amortized over the lesser of
the assets' estimated useful lives or the lease terms.
Gains and losses are recognized upon the disposal of property and
equipment, and the related accumulated depreciation and amortization are removed
from the accounts. Maintenance, repairs and betterments that do not enhance the
value of or increase the life of the assets are charged to operations as
incurred.
Other Assets
Included in other assets are the costs of noncompetition agreements, which
are deferred and amortized on a straight-line basis according to the terms of
the agreements over five to ten years. Goodwill is being amortized using the
straight-line method over a period of 20 years, the estimated useful life
consistent with Statement of Financial Accounting Standards No. 121. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant revision or
that the remaining balance of goodwill may not be recoverable. When factors
indicate that goodwill should be evaluated for possible impairment, the Company
uses an estimate of the related business segment's undiscounted operating income
over the remaining life of the goodwill in measuring whether the goodwill is
recoverable. As of December 31, 1996 there have been no writedowns of goodwill.
F-7
<PAGE> 20
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Accumulated amortization on these intangible assets was approximately
$1,017,000 and $1,737,000 at December 31, 1995 and 1996, respectively.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets
and liabilities are recognized for the expected future tax consequences of
events that have been included in the financial statements or tax returns. The
amount of deferred tax asset or liability is based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Net Income per Common Share
Income per share amounts are based on the weighted average number of common
stock and common stock equivalents outstanding during each period. Common stock
equivalents consist of dilutive stock options and warrants under the treasury
stock method.
Cash and Equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
Stock-Based Compensation
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue to account for stock options
at intrinsic value with disclosure of the effects of fair value accounting on
net income and earnings per share on a pro forma basis.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Disclosures About the Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and equivalents,
accounts receivable, accounts payable, accrued liabilities and long-term
liabilities. The carrying amounts of the Company's cash and equivalents,
accounts receivable, accounts payable and accrued liabilities approximate their
fair value due to the short-term nature of these instruments. The carrying
amounts of the long-term liabilities also approximate their fair value, based on
rates available to the Company for debt with similar terms and remaining
maturities.
Reclassifications
Certain amounts in the 1995 and 1994 financial statements and notes have
been reclassified to conform with 1996 presentation.
F-8
<PAGE> 21
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
(3) ACQUISITIONS
During 1995, the Company acquired the following dental laboratory
operations:
<TABLE>
<S> <C>
Patterson Dental Laboratory................................... April 1995
Kell Tech Dental Laboratory................................... July 1995
Reed & Associates............................................. August 1995
Peterman Dental Laboratory.................................... September 1995
Elite Dental Laboratory....................................... October 1995
Gross Dental Laboratory....................................... October 1995
Oratech Dental Laboratory..................................... October 1995
Marcy Dental Laboratory....................................... November 1995
</TABLE>
During 1996, the Company acquired the following dental laboratory
operations:
<TABLE>
<S> <C>
Microfit Dental Laboratory.................................... March 1996
Flud Dental Laboratory........................................ April 1996
</TABLE>
These acquisitions, which have been reflected in the accompanying
consolidated financial statements from the dates of acquisition, have been
accounted for as purchases in accordance with Accounting Principles Board (APB)
Opinion No. 16. The excess of the total purchase price over the prior carrying
amount of the net assets acquired, based on preliminary estimates of their
related fair values (which are subject to revision), was allocated as follows as
of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Total purchase price.................................. $7,021,000 $1,378,000
Less-fair market values assigned to assets and
liabilities:
Cash............................................. 83,000 71,000
Accounts receivable.............................. 963,000 183,000
Property and equipment........................... 1,335,000 16,000
Noncompete agreements............................ 2,210,000 393,000
Inventories...................................... 217,000 26,000
Other assets..................................... 55,000 16,000
Accounts payable................................. (227,000) (37,000)
Accrued liabilities and other.................... (657,000) (203,000)
---------- ----------
Goodwill.............................................. $3,042,000 $ 913,000
========== ==========
</TABLE>
In connection with these acquisitions, the Company has incurred certain
deferred purchase costs relating to noncompete agreements with certain
individuals, ranging over periods of five to ten years and other contingent
payments provided for in the purchase agreements.
The following unaudited pro forma operating results of the Company assume
the acquisitions had been made as of January 1, 1995. Such information includes
adjustments to reflect additional depreciation, noncompete amortization,
amortization of goodwill and interest expense, and is not necessarily indicative
of the results of operations in future periods.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Net sales........................................... $ 51,139,000 $ 52,369,000
Net income.......................................... 3,644,000 3,785,000
Net income per share................................ 1.06 1.08
</TABLE>
F-9
<PAGE> 22
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
(4) INCOME TAXES
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Federal --
Current............................. $1,362,290 $1,637,345 $2,092,021
Deferred............................ (79,398) 55,863 (140,849)
---------- ---------- ----------
1,282,892 1,693,208 1,951,172
---------- ---------- ----------
State --
Current............................. 343,641 463,685 523,121
Deferred............................ (24,731) 9,858 (24,856)
---------- ---------- ----------
318,910 473,543 498,265
---------- ---------- ----------
$1,601,802 $2,166,751 $2,449,437
========== ========== ==========
</TABLE>
Deferred income taxes are comprised of the following at December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
Vacation benefits..................................... $220,900.. $ 180,566
Inventory basis differences........................... 66,477 61,290
Receivables basis differences......................... 61,472 81,247
Other reserves........................................ 98,426 79,600
--------- ---------
Total deferred tax assets........................ 447,275 402,703
--------- ---------
Deferred Tax Liabilities:
Property basis differences............................ (239,346) (277,693)
Noncompete agreements................................. (177,124) (25,637)
Other liabilities..................................... (35,725) (1,489)
--------- ---------
Total deferred tax liabilities................... (452,195) (304,819)
--------- ---------
Net deferred tax (liability) asset......................... $ (4,920) $ 97,884
========= =========
</TABLE>
A reconciliation between the provision for income taxes computed at
statutory rates and the amount reflected in the accompanying statements of
income is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Statutory federal income tax rate..... 34.0% 34.0% 34.0%
State income tax, net of federal
income tax benefit.................. 5.3 5.6 5.6
Benefit of net operating loss and
general business credit
carryforwards....................... (1.8) -- --
Other................................. 2.5 0.4 0.2
---- ---- ----
Effective income tax rate............. 40.0% 40.0% 39.8%
---- ---- ----
</TABLE>
F-10
<PAGE> 23
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
(5) LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
--------- ---------
<S> <C> <C>
Promissory note, payable $100,000 April 1, 1996 and
$200,000 July 31, 1997, including imputed interest
calculated at 8.50%................................. $ 271,350 $ 190,083
8.50% promissory note, payable in equal monthly
installments of $1,232, including interest, final
payment due December 1997........................... 27,112 14,130
--------- ---------
298,462 204,213
Less -- current maturities............................ 110,119 204,213
--------- ---------
$ 188,343 $ --
========= =========
</TABLE>
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. The revolving lines of credit are secured by all of the
assets, leases and contracts of the Company. The Agreement requires compliance
with certain covenants, including the maintenance of net worth and other
financial ratios. As of December 31, 1996, the Company was in compliance with
these covenants.
(6) BENEFIT PLANS
The Company has an employee savings plan (the "Plan") under IRS Code
Section 401(k). The Plan allows contributions of up to 8% of a participant's
salary, a portion of which is matched in cash by the Company. The Company
contributes this amount once a year, within 120 days after December 31, the
Plan's year-end. All employees are eligible to participate in the Plan after
completing one year of service with the Company and the attainment of age 21.
Participants become fully vested after six years of service or upon attaining
age 65. The Company has incurred charges to operations of approximately
$190,000, $204,000 and $240,000 to match contributions for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Company has an incentive plan, the Laboratory Plan, for dental
laboratory management and other designated key employees who could directly
influence the financial performance of an individual dental laboratory.
Eligibility is determined annually for each laboratory. Each participant is
eligible to receive an amount based on the achievement of certain earnings
levels of the participant's laboratory, as defined. The Company has incurred
charges to operations of approximately $1,376,000, $1,705,000 and $1,689,000 for
the years ended December 31, 1994, 1995 and 1996, respectively, under the
Laboratory Plan.
The Company has an executive bonus plan (the "Executive Plan") for key
executives and management of the Company, and a management bonus plan (the
"Managers Plan") for laboratory group managers. Eligibility to participate in
each plan is determined annually. Participants are eligible to receive a bonus,
based on a percentage of salary, dependent upon the achievement of earnings
targets, as defined. The bonus is distributed within 90 days after year-end. The
Company has incurred charges to operations of approximately $467,000, $602,000
and $486,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
F-11
<PAGE> 24
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
The Company has a Supplemental Executive Retirement Plan for certain key
employees providing for annual benefits payable over a period of ten years
beginning at age 65 or date of retirement or in a lump sum at date of
retirement. Benefits will be funded by insurance contracts purchased by the
Company. The cost of these benefits is being charged to expense and accrued
using a present value method over the expected terms of employment. The charges
to expense for the years ended December 31, 1995 and 1996 were approximately
$57,000 and $106,000, respectively.
(7) COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is committed under various noncancelable operating lease
agreements covering its office space and dental laboratory facilities. Certain
of these leases also require the Company to pay maintenance, repairs, insurance
and related taxes. The total rental expense for the years ended December 31,
1994, 1995 and 1996 was approximately $721,000, $760,000 and $976,000,
respectively. The approximate aggregate minimum lease commitments under these
leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------------------------------------- -----------
<S> <C>
1997......................................................... $ 865,000
1998......................................................... 632,000
1999......................................................... 562,000
2000......................................................... 477,000
2001......................................................... 435,000
Thereafter................................................... 1,443,000
-----------
$ 4,414,000
===========
</TABLE>
Employment Contracts and Change-In-Control Arrangements
In April 1995 the Company entered into employment contracts and
change-in-control arrangements with certain key executives. The employment
contracts expire April 1998 and renew automatically thereafter until termination
by the Company or the executive. The change-in-control arrangements provide
certain severance benefits in the event that the executive is terminated by the
Company without cause or the executive terminates his employment contract for
certain specified reasons.
(8) STOCK OPTIONS AND WARRANTS
Stock Option Plans
On April 24, 1991, the Board granted a nonqualified stock option to an
officer of the Company to purchase 104,399 shares of common stock of the Company
at an exercise price of $1.00 per share (representing the fair market value at
that time). The option expired five years from the date of grant and was
nontransferable. During 1995 and 1996, 95,000 and 9,399 options were exercised,
respectively.
In addition, an Incentive Stock Option Plan (the "ISO Plan") was adopted by
the Board in February 1983. An aggregate of 268,325 shares of the Company's
common stock had been reserved for issuance under the ISO Plan to employees of
the Company. The options are granted at the direction of the Board and may be
exercised by the individual as the options vest over a three-year period, but no
later than five years from the date of grant. In May 1992, the ISO Plan was
terminated. No additional options will be granted under the ISO Plan; however,
the then outstanding options remained exercisable in accordance with the ISO
Plan's provisions. At December 31, 1996 there were no remaining options
outstanding under this plan.
F-12
<PAGE> 25
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Summarized below is the option activity under the plans for the years ended
December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------------
INCENTIVE STOCK NON-QUALIFIED
OPTION PLAN STOCK OPTIONS
--------------- -------------
<S> <C> <C>
Balance, December 31, 1993...................... 218,932 104,399
Granted.................................... -- --
Exercised.................................. (38,268) --
Canceled................................... (1,225) --
-------- -------
Balance, December 31, 1994...................... 179,439 104,399
Granted.................................... -- --
Exercised.................................. (71,580) (95,000)
Canceled................................... (1,305) --
-------- -------
Balance, December 31, 1995...................... 106,554 9,399
Granted.................................... -- --
Exercised.................................. (106,640) (9,399)
Canceled................................... 86 --
-------- -------
Balance, December 31, 1996...................... -- --
======== =======
</TABLE>
In May 1992, the Company's Board of Directors (the "Board") adopted the
1992 Long-Term Incentive Plan (the "LTIP"). Under the LTIP, the Board may grant
stock options, stock appreciation rights, restricted stock, deferred stock,
stock purchase rights and other stock-based compensation to key employees,
officers and directors of the Company. In August 1995 the Board amended the LTIP
to increase the number of shares of common stock reserved for issuance under the
plan from 150,000 to 235,000. As of December 31, 1996, 209,302 options were
outstanding, at between $9.50 and $21.875 per share, the fair market value on
the dates of grant, 64,924 of which were exercisable.
The following summarizes the transactions of the Company's LTIP for the
years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year....... -- $ -- 44,000 $ 9.50 135,730 $12.35
Granted................................ 46,210 9.50 95,115 13.59 81,210 19.80
Exercised.............................. -- -- (391) 9.50 (3,183) 10.13
Canceled............................... (2,210) 9.50 (2,994) 10.16 (4,455) 13.56
------ ------ ------- ------ ------- ------
Outstanding at end of year............. 44,000 9.50 135,730 12.35 209,302 15.25
====== ====== ======= ====== ======= ======
Exercisable at end of year............. -- -- 13,487 $ 9.50 64,924 $11.79
Weighted average fair value of options
granted.............................. $1.45 $2.70 $3.97
</TABLE>
Of the 209,302 options outstanding at December 31, 1996, 111,192 have
exercise prices between $9.50 and $15.00, with a weighted average exercise price
of $11.60 and a weighted average remaining contractual life of 6.2 years. Of
these options, 48,928 are exercisable at a weighted average exercise price of
$11.08. The remaining 98,110 options have exercise prices between $16.50 and
$21.875, with a weighted average exercise price of $19.39 and a weighted average
remaining contractual life of 9.3 years. Of these options 15,996 are exercisable
at a weighted average exercise price of $20.26.
F-13
<PAGE> 26
NATIONAL DENTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Also, the Company has the 1992 Employees' Stock Purchase Plan (the "Stock
Purchase Plan") under which an aggregate of 100,000 shares of the Company's
common stock may be purchased, through a payroll deduction program, primarily at
a price equal to 85% of the fair market value of the common stock on either the
grant date or the exercise date, whichever is lower. In 1995 and 1996, 14,643
and 13,634 shares of common stock, respectively, were purchased through the
Stock Purchase Plan. The Stock Purchase Plan was renewed with a grant date of
April 3, 1996 and an exercise date of March 31, 1997.
The Company accounts for the LTIP and Stock Purchase Plan under APB Opinion
No. 25 under which no compensation cost has been recognized. Had compensation
costs for these plans been determined consistent with Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net Income:
As reported................................... $3,243,808 $3,704,926
Pro forma..................................... 3,144,633 3,446,190
Earnings per share:
As reported................................... $.95 $1.06
Pro forma..................................... .92 .99
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The fair value of each option grant under the LTIP and the Stock Purchase
Plan is estimated as of the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in 1995
and 1996, respectively: risk-free interest rates of between 4.92% and 5.76% for
the 1995 option grants and between 4.91% and 5.98% for the 1996 option grants;
no expected dividend yield for either plan year; expected lives of between one
and three years for both 1995 and 1996 option grants based on vesting periods;
expected volatility of between 26.68% and 28.27% for 1995 option grants and
between 33.19% and 35.84% for option grants in 1996.
Warrants
In February 1992, in connection with the transaction discussed in Note 5,
the Company issued warrants to purchase 50,884 shares of common stock at an
exercise price of $0.02 per share. These warrants were exercised in November
1994.
In December 1993, the Company issued warrants to the representative of the
underwriter to purchase 100,000 shares of common stock of the Company at an
exercise price of 135% of the initial offering price of $8.00, or $10.80 per
share. In January 1996, 35,806 shares of common stock of the Company were issued
in a cashless exercise of 70,000 of these warrants, leaving 30,000 outstanding.
(9) SUBSEQUENT EVENT
On January 2, 1997, the Company completed a transaction to acquire all of
the outstanding capital stock of Scrimpshire Dental Studio, Inc. of Huntsville,
Alabama.
F-14
<PAGE> 27
SCHEDULE II
NATIONAL DENTEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES WRITE-OFFS DEDUCTION PERIOD
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
December 31, 1994................... $ 108,051 $ 30,781 $ 31,733 $-- $ 107,099
December 31, 1995................... $ 107,099 $106,942 $ 34,045 $-- $ 179,996
December 31, 1996................... $ 179,996 $ 69,124 $ 44,981 $-- $ 204,139
</TABLE>
<PAGE> 1
EXHIBIT 11
NATIONAL DENTEX CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Computation of Primary Net Income per Share:
Net Income applicable to common stock.............. $ 2,402,702 $ 3,243,808 $ 3,704,926
----------- ----------- -----------
Shares:
Weighted average common shares outstanding.... 3,025,130 3,175,150 3,414,411
Add: Shares issuable from assumed exercise of
options and warrants (as determined by the
application of the treasury stock method)... 296,412 252,059 94,820
----------- ----------- -----------
Weighted average common shares outstanding as
adjusted.................................... 3,321,542 3,427,209 3,509,231
----------- ----------- -----------
Primary net income per share.................. $ 0.72 $ 0.95 $ 1.06
=========== =========== ===========
Computation of Fully Diluted Net Income per Share:
Net income per primary computation above........... $ 2,402,702 $ 3,243,808 $ 3,704,926
----------- ----------- -----------
Shares:
Weighted average common shares outstanding.... 3,025,130 3,175,150 3,414,411
Add: Shares issuable from assumed exercise of
options and warrants (as determined by the
application of the treasury stock method)... 302,218 318,405 94,820
----------- ----------- -----------
Weighted average common shares outstanding as
adjusted.................................... 3,327,348 3,493,555 3,509,231
----------- ----------- -----------
Fully diluted net income per share............ $ 0.72 $ 0.93 $ 1.06
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K into the Company's previously filed
Registration Statement File Nos. 33-77266, 33-77268 and 33-77264.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENTS
OF INCOME AND CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,959,038
<SECURITIES> 0
<RECEIVABLES> 6,347,929
<ALLOWANCES> 204,000
<INVENTORY> 2,929,898
<CURRENT-ASSETS> 15,308,174
<PP&E> 13,823,638
<DEPRECIATION> 7,352,321
<TOTAL-ASSETS> 30,234,121
<CURRENT-LIABILITIES> 5,449,524
<BONDS> 0
0
0
<COMMON> 34,407
<OTHER-SE> 24,002,071
<TOTAL-LIABILITY-AND-EQUITY> 30,234,121
<SALES> 51,971,105
<TOTAL-REVENUES> 51,971,105
<CGS> 29,627,013
<TOTAL-COSTS> 16,462,045
<OTHER-EXPENSES> (141,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (131,316)
<INCOME-PRETAX> 6,154,363
<INCOME-TAX> 2,449,437
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,704,926
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
